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

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

Reint E. Gropp joined the Institute as President in November 2014. He is also a Professor of Economics at the Otto von Guericke University Magdeburg. He is Associate Fellow of the Centre for Economic Policy Research (CEPR) and serves as consultant for various central banks.

Reint E. Gropp studied economics at the universities of Freiburg and Wisconsin-Madison, where he obtained a PhD in 1994. Prior to his appointment at the IWH, he held the endowed Chair for Sustainable Banking and Finance at 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
Send Message +49 345 7753-700 Personal page

Publications

cover_journal-of-financial-and-Quantitative-Analysis.gif

Financial Incentives and Loan Officer Behavior: Multitasking and Allocation of Effort under an Incomplete Contract

P. Behr A. H. Drexler Reint E. Gropp Andre Guettler

in: Journal of Financial and Quantitative Analysis, forthcoming

Abstract

In this paper we investigate the implications of providing loan officers with a compensation structure that rewards loan volume and penalizes poor performance versus a fixed wage unrelated to performance. We study detailed transaction information for more than 45,000 loans issued by 240 loan officers of a large commercial bank in Europe. We examine the three main activities that loan officers perform: monitoring, originating, and screening. We find that when the performance of their portfolio deteriorates, loan officers increase their effort to monitor existing borrowers, reduce loan origination, and approve a higher fraction of loan applications. These loans, however, are of above-average quality. Consistent with the theoretical literature on multitasking in incomplete contracts, we show that loan officers neglect activities that are not directly rewarded under the contract, but are in the interest of the bank. In addition, while the response by loan officers constitutes a rational response to a time allocation problem, their reaction to incentives appears myopic in other dimensions.

read publication
cover_international-journal-of-central-banking.jpg

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

read publication
cover_review-of-financial-studies.png

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, No. 1, 2019

Abstract

We study the impact of higher capital requirements on banks’ balance sheets and their transmission to the real economy. The 2011 EBA capital exercise is an almost ideal quasi-natural experiment to identify this impact with a difference-in-differences matching estimator. We find that treated banks increase their capital ratios by reducing their risk-weighted assets, not by raising their levels of equity, consistent with debt overhang. Banks reduce lending to corporate and retail customers, resulting in lower asset, investment, and sales growth for firms obtaining a larger share of their bank credit from the treated banks.

read publication
Browse all refereed publications

Working Papers

cover_DP_2019-06.jpg

What Drives Banks‘ Geographic Expansion? The Role of Locally Non-diversifiable Risk

Reint E. Gropp Felix Noth Ulrich Schüwer

in: IWH Discussion Papers, No. 6, 2019

Abstract

We show that banks that are facing relatively high locally non-diversifiable risks in their home region expand more across states than banks that do not face such risks following branching deregulation in the 1990s and 2000s. These banks with high locally non-diversifiable risks also benefit relatively more from deregulation in terms of higher bank stability. Further, these banks expand more into counties where risks are relatively high and positively correlated with risks in their home region, suggesting that they do not only diversify but also build on their expertise in local risks when they expand into new regions.

read publication
cover_DP_2017-8.jpg

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.

read publication
cover_DP_2016-25.jpg

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.

read publication
Browse all working papers

Related Topics

Financial Markets Monetary Policy Brexit The new Europe Growth Productivity Finanzkrise Financial Stability Innovations Social Mobility Demographic Change East Germany
Mitglied der Leibniz-Gemeinschaft LogoTotal-Equality-LogoWeltoffen Logo