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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Role of the Community Reinvestment Act in Mortgage Supply and the U.S. Housing Boom

Vahid Saadi

in: Review of Financial Studies, 2020

Abstract

This paper studies the role of the Community Reinvestment Act (CRA) in the U.S. housing boom-bust cycle. I find that enhanced CRA enforcement in 1998 increased the growth rate of mortgage lending by CRA-regulated banks to CRA-eligible census tracts. I show that during the boom period house price growth was higher in the eligible census tracts because of the shift in mortgage supply of regulated banks. Consequently, these census tracts experienced a worse housing bust. I find that CRA-induced mortgages were awarded to borrowers with lower FICO scores and were more frequently delinquent.

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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 Papers, 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 recapitalization of distressed banks through TARP does not facilitate cleansing.

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Public Bank Guarantees and Allocative Efficiency

Reint E. Gropp Andre Guettler Vahid Saadi

in: IWH Discussion Papers, No. 7, 2015

Abstract

In the wake of the recent financial crisis, many governments extended public guarantees to banks. We take advantage of a natural experiment, in which long-standing public guarantees were removed for a set of German banks following a lawsuit, to identify the real effects of these guarantees on the allocation of credit (“allocative efficiency”). Using matched bank/firm data, we find that public guarantees reduce allocative efficiency. With guarantees in place, poorly performing firms invest more and maintain higher rates of sales growth. Moreover, firms produce less efficiently in the presence of public guarantees. Consistently, we show that guarantees reduce the likelihood that firms exit the market. These findings suggest that public guarantees hinder restructuring activities and prevent resources to flow to the most productive uses.

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