Long-run Competitive Spillovers of the Credit Crunch
William McShane
IWH Discussion Papers,
No. 10,
2023
Abstract
Competition in the U.S. appears to have declined. One contributing factor may have been heterogeneity in the availability of credit during the financial crisis. I examine the impact of product market peer credit constraints on long-run competitive outcomes and behavior among non-financial firms. I use measures of lender exposure to the financial crisis to create a plausibly exogenous instrument for product market credit availability. I find that credit constraints of product market peers positively predict growth in sales, market share, profitability, and markups. This is consistent with the notion that firms gained at the expense of their credit constrained peers. The relationship is robust to accounting for other sources of inter-firm spillovers, namely credit access of technology network and supply chain peers. Further, I find evidence of strategic investment, i.e. the idea that firms increase investment in response to peer credit constraints to commit to deter entry mobility. This behavior may explain why temporary heterogeneity in the availability of credit appears to have resulted in a persistent redistribution of output across firms.
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23.05.2023 • 14/2023
Analysis of earnings calls: Blathering managers harm their company
If a senior executive refuses to give information to professional investors, the company's stock market value drops afterwards. This is shown in a study by the Halle Institute for Economic Research (IWH) after evaluating
1.2 million answers from tele-phone conferences.
Fabian Wöbbeking
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Intuit QuickBooks Small Business Index: A New Employment Series for the US, Canada, and the UK
Ufuk Akcigit, Raman Chhina, Seyit Cilasun, Javier Miranda, Eren Ocakverdi, Nicolas Serrano-Velarde
IWH Discussion Papers,
No. 9,
2023
Abstract
Small and young businesses are essential for job creation, innovation, and economic growth. Even most of the superstar firms start their business life small and then grow over time. Small firms have less internal resources, which makes them more fragile and sensitive to macroeconomic conditions. This suggests the need for frequent and real-time monitoring of the small business sector’s health. Previously this was difficult due to a lack of appropriate data. This paper fills this important gap by developing a new Intuit QuickBooks Small Business Index that focuses on the smallest of small businesses with at most 9 workers in the US and the UK and at most 19 workers in Canada. The Index aggregates a sample of anonymous Quick- Books Online Payroll subscriber data (QBO Payroll sample) from 333,000 businesses in the US, 66,000 in Canada, and 25,000 in the UK. After comparing the QBO Payroll sample data to the official statistics, we remove the seasonal components and use a Flexible Least Squares method to calibrate the QBO Payroll sample data against official statistics. Finally, we use the estimated model and the QBO Payroll sample data to generate a near real-time index of economic activity. We show that the estimated model performs well both in-sample and out-of-sample. Additionally, we use this analysis for different regions and industries. Keywords:
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Shareholder Democracy in Play: Career Consequences of Proxy Contests
Vyacheslav Fos, Margarita Tsoutsoura
Journal of Financial Economics,
No. 2,
2014
Abstract
This paper shows that proxy contests have a significant adverse effect on careers of incumbent directors. Following a proxy contest, directors experience a significant decline in the number of directorships not only in the targeted company, but also in other nontargeted companies. The results are established using the universe of all proxy contests during 1996–2010. To isolate the effect of the proxy contest, our empirical strategy uses within-firm variation in directors׳ exposure to the possibility of being voted out and exploits the predetermined schedule of staggered boards that allows only a fraction of directors to be nominated for election every year. We find that nominated directors relative to non-nominated ones lose 58% more seats on other boards. The evidence suggests the proxy-contest mechanism imposes a significant career cost on incumbent directors.
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Hollywood, Wall Street, and Mistrusting Individual Investors
Guido Lenz, Maximilian Mayer
Journal of Economic Behavior and Organization,
June
2023
Abstract
Individual investors reduce their trading activity in financial markets after the release of negatively biased Hollywood movies related to financial markets. These movies regularly depict financial markets and professionals active in them as marked by greed and corruption (Lichter et al. 1997). This decline in trading activity at the extensive margin comes together with depressed investor sentiment marked by higher likelihoods and volumes of selling than of buying transactions by those investors still active. Their avoidance of investing in and tendency to trade out of stocks related to companies in the financial industry, as well as their shift from actively managed mutual funds to passive vehicles (ETFs), provide evidence for the deterioration of investors’ trust in the financial industry and its managers. This channel is in line with existing literature on subjective beliefs in investment decisions and the impact of biased media coverage, such as the negative depiction of financial markets, shareholders, and managers in Hollywood movies.
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