Professor Dr Vahid Saadi

Professor Dr Vahid Saadi
Current Position

since 5/18

Research Affiliate

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

since 9/17

Assistant Professor of Finance

IE Business School

Research Interests

  • banking
  • real estate markets
  • corporate finance

Vahid Saadi joined the institute as a Research Affiliate in May 2018. His research focuses on the effects of financial intermediation on the real economy.

Vahid Saadi holds the position of Assistant Professor at IE Business School in Madrid. Prior to that, he was working at IWH.

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Professor Dr Vahid Saadi
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Publications

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Public Bank Guarantees and Allocative Efficiency

Reint E. Gropp Andre Guettler Vahid Saadi

in: Journal of Monetary Economics, forthcoming

Abstract

A natural experiment and matched bank/firm data are used to identify the effects of bank guarantees on allocative efficiency. We find that with guarantees in place unproductive firms receive larger loans, invest more, and maintain higher rates of sales and wage growth. Moreover, firms produce less productively. Firms also survive longer in banks’ portfolios and those that enter guaranteed banks’ portfolios are less profitable and productive. Finally, we observe fewer economy-wide firm exits and bankruptcy filings in the presence of guarantees. Overall, the results are consistent with the idea that guaranteed banks keep unproductive firms in business for too long.

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Working Papers

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The Cleansing Effect of Banking Crises

Reint E. Gropp Steven Ongena Jörg Rocholl Vahid Saadi

in: IWH Discussion Papers, No. 12, 2020

Abstract

We assess the cleansing effects of the recent banking crisis. In U.S. regions with higher levels of supervisory forbearance on distressed banks during the crisis, there is less restructuring in the real sector and the banking sector remains less healthy for several years after the crisis. Regions with less supervisory forbearance experience higher productivity growth after the crisis with more firm entries, job creation, and employment, wages, patents, and output growth. Supervisory forbearance is greater for state-chartered banks and in regions with weaker banking competition and more independent banks, while recapitalisation of distressed banks through TARP does not facilitate cleansing.

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The Cleansing Effect of Banking Crises

Reint E. Gropp Steven Ongena Jörg Rocholl Vahid Saadi

in: Centre for Economic Policy Research-Discussion Paper, forthcoming

Abstract

We assess the cleansing effects of the recent banking crisis. In U.S. regions with higher levels of supervisory forbearance on distressed banks during the crisis, there is less restructuring in the real sector and the banking sector remains less healthy for several years after the crisis. Regions with less supervisory forbearance experience higher productivity growth after the crisis with more firm entries, job creation, and employment, wages, patents, and output growth. Supervisory forbearance is greater for state-chartered banks and in regions with weaker banking competition and more independent banks, while recapitalization of distressed banks through TARP does not facilitate cleansing.

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Mortgage Supply and the US Housing Boom: The Role of the Community Reinvestment Act

Vahid Saadi

in: IWH Discussion Papers, No. 32, 2016

Abstract

This paper studies the role of the Community Reinvestment Act (CRA) in the recent US housing boom-bust cycle. Using a difference-in-differences matching estimation, I find that the enhancement of CRA enforcement in 1998 caused a 7.7 percentage points increase in annual growth rate of mortgage lending by CRA-regulated banks to CRA-eligible census tracts relative to a group of similar-income CRA-ineligible census tracts within the same state. Financial institutions which are not subject to the CRA, however, do not show any change in their mortgage supply between these two types of census tracts after 1998. I take advantage of this exogenous shift in mortgage supply within an instrumental variable framework to identify the causal effect of mortgage supply on housing prices. I find that every 1 percentage point higher annual growth rate of mortgage supply leads to 0.3 percentage points higher annual growth rate of housing prices. Reduced form regressions show that CRA-eligible neighborhoods experienced higher house price growth during the boom and sharper decline during the bust period. I use placebo tests to confirm that this effect is in fact channeled through the shift in mortgage supply by CRA-regulated banks and not by unobserved demand factors. Furthermore, my results indicate that CRA-induced mortgages went to borrowers with lower FICO scores, carried higher interest rates, and encountered more frequent delinquencies.

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