25 Years IWH

25 Jahre IWH
  1. About the IWH
  2. Team
  3. President

Professor Reint E. Gropp, PhD

Professor Reint E. Gropp, PhD
Current Position

since 11/14

President

Halle Institute for Economic Research (IWH) – Member of the Leibniz Association

since 10/14

Professor of Economics

Otto von Guericke University Magdeburg


since 10/08

Fellow

Center for Financial Studies (CFS), Frankfurt

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Research Interests
  • financial economics
  • macroeconomics
  • corporate finance
  • money and banking

Since November 2014, Reint E. Gropp has been President at the Halle Institute for Economic Research (IWH) and has been Professor of Economics at the Otto von Guericke University Magdeburg. He is Fellow of the Center for Financial Studies, Frankfurt, and serves as a consultant for the Bank of Canada and the Federal Reserve Bank of San Francisco.

Reint E. Gropp studied Economics at the Universities of Freiburg and Wisconsin, where he obtained his PhD in Economics from the University of Wisconsin, Madison, in 1994. Prior to his appointment at the IWH, he held the position of chair for Sustainable Banking and Finance at the Goethe-University Frankfurt am Main and worked for the International Monetary Fund (IMF) as well as the European Central Bank (ECB), where he was Deputy Head of the Financial Research Division.

Your contact

Professor Reint E. Gropp, PhD
Professor Reint E. Gropp, PhD
Mitglied - Department Präsidialbereich
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Publications

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Bank Response To Higher Capital Requirements: Evidence From A Quasi-natural Experiment

Reint E. Gropp Thomas Mosk Steven Ongena Carlo Wix

in: Review of Financial Studies, forthcoming

Abstract

We study the impact of higher capital requirements on banks’ balance sheets and its transmission to the real economy. The 2011 EBA capital exercise provides an almost ideal quasi-natural experiment, which allows us to identify the effect of higher capital requirements using a difference-in-differences matching estimator. We find that treated banks increase their capital ratios not by raising their levels of equity, but by reducing their credit supply. We also show that this reduction in credit supply results in lower firm-, investment-, and sales growth for firms which obtain a larger share of their bank credit from the treated banks.

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Deleveraging and Consumer Credit Supply in the Wake of the 2008-2009 Financial Crisis

Reint E. Gropp J. Krainer E. Laderman

in: International Journal of Central Banking, forthcoming

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Hidden Gems and Borrowers with Dirty Little Secrets: Investment in Soft Information, Borrower Self-selection and Competition

Reint E. Gropp Andre Guettler

in: Journal of Banking & Finance, No. 2, 2018

Abstract

This paper empirically examines the role of soft information in the competitive interaction between relationship and transaction banks. Soft information can be interpreted as a valuable signal about the quality of a firm that is observable to a relationship bank, but not to a transaction bank. We show that borrowers self-select to relationship banks depending on whether their observed soft information is positive or negative. Competition affects the investment in learning the soft information from firms by relationship banks and transaction banks asymmetrically. Relationship banks invest more; transaction banks invest less in soft information, exacerbating the selection effect.

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Working Papers

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Suppliers as Liquidity Insurers

Reint E. Gropp Daniel Corsten Panos Markou

in: IWH Discussion Papers, No. 8, 2017

Abstract

We examine how financial constraints in portfolios of suppliers affect cash holdings at the level of the customer. Utilizing a data set of private and public French companies and their suppliers, we show that customers rely on their financially unconstrained suppliers to provide them with backup liquidity, and that they stockpile approximately 10% less cash than customers with constrained suppliers. This effect persisted during the global financial crisis, highlighting that suppliers may be viable insurers of liquidity even when financing from banks and other external channels is unavailable. We further show that customers with unconstrained suppliers also simultaneously receive more trade credit; that the reduction in cash holdings is greater for firms with stronger ties to their unconstrained suppliers; and that customers reduce their cash holdings following a significant relaxation in their suppliers’ financial constraints through an IPO. Taken together, the results provide important nuance regarding the implications of supplier portfolios and financial constraints on firm liquidity management.

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Bank Response To Higher Capital Requirements: Evidence From A Quasi-natural Experiment

Reint E. Gropp Thomas Mosk Steven Ongena Carlo Wix

in: IWH Discussion Papers, No. 33, 2016
published in: Review of Financial Studies

Abstract

We study the impact of higher capital requirements on banks’ balance sheets and its transmission to the real economy. The 2011 EBA capital exercise provides an almost ideal quasi-natural experiment, which allows us to identify the effect of higher capital requirements using a difference-in-differences matching estimator. We find that treated banks increase their capital ratios not by raising their levels of equity, but by reducing their credit supply. We also show that this reduction in credit supply results in lower firm-, investment-, and sales growth for firms which obtain a larger share of their bank credit from the treated banks.

read publication
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The Forward-looking Disclosures of Corporate Managers: Theory and Evidence

Reint E. Gropp Rasa Karapandza Julian Opferkuch

in: IWH Discussion Papers, No. 25, 2016

Abstract

We consider an infinitely repeated game in which a privately informed, long-lived manager raises funds from short-lived investors in order to finance a project. The manager can signal project quality to investors by making a (possibly costly) forward-looking disclosure about her project’s potential for success. We find that if the manager’s disclosures are costly, she will never release forward-looking statements that do not convey information to external investors. Furthermore, managers of firms that are transparent and face significant disclosure-related costs will refrain from forward-looking disclosures. In contrast, managers of opaque and profitable firms will follow a policy of accurate disclosures. To test our findings empirically, we devise an index that captures the quantity of forward-looking disclosures in public firms’ 10-K reports, and relate it to multiple firm characteristics. For opaque firms, our index is positively correlated with a firm’s profitability and financing needs. For transparent firms, there is only a weak relation between our index and firm fundamentals. Furthermore, the overall level of forward-looking disclosures declined significantly between 2001 and 2009, possibly as a result of the 2002 Sarbanes-Oxley Act.

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