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Foreign Bank Ownership and Income Inequality: Empirical Evidence

Manthos D. Delis, Iftekhar Hasan, Nikolaos Mylonidis
Applied Economics, forthcoming
Abstract
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Investor Relations and IPO Performance

Salim Chahine, Gonul Colak, Iftekhar Hasan, Mohamad Mazboudi
Review of Accounting Studies, forthcoming
Abstract
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Public Bank Guarantees and Allocative Efficiency

Reint E. Gropp, Andre Guettler, Vahid Saadi
Journal of Monetary Economics, forthcoming
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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Identifying Cooperation for Innovation―a Comparison of Data Sources

Michael Fritsch, Mirko Titze, M. Piontek
Industry and Innovation, forthcoming
Abstract
The value of social network analysis is critically dependent on the comprehensive and reliable identification of actors and their relationships. We compare regional knowledge networks based on different types of data sources, namely, co-patents, co-publications, and publicly subsidized collaborative R&D projects. Moreover, by combining these three data sources, we construct a multilayer network that provides a comprehensive picture of intraregional interactions. By comparing the networks based on the data sources, we address the problems of coverage and selection bias. We observe that using only one data source leads to a severe underestimation of regional knowledge interactions, especially those of private sector firms and independent researchers.
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Entry into Self-employment and Individuals’ Risk-taking Propensities

Matthias Brachert, Walter Hyll, Abdolkarim Sadrieh
Small Business Economics, forthcoming
Abstract
Most of the existing empirical literature on self-employment decisions assumes that individuals’ risk-taking propensities are stable over time. We allow for endogeneity on both sides when examining the relationship between individual risk-taking propensities and entry into self-employment. We confirm that a greater risk-taking propensity is associated with a higher probability of entering self-employment. However, we also find evidence that entering self-employment is associated with a significant and substantial increase in an individual’s propensity to take risks. Our findings add to the growing evidence that risk-taking propensities are not only inborn, but also determined by environmental factors.
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Foreign Ownership, Bank Information Environments, and the International Mobility of Corporate Governance

Yiwei Fang, Iftekhar Hasan, Woon Sau Leung, Qingwei Wang
Journal of International Business Studies, forthcoming
Abstract
This paper investigates how foreign ownership shapes bank information environments. Using a sample of listed banks from 60 countries over 1997–2012, we show that foreign ownership is significantly associated with greater (lower) informativeness (synchronicity) in bank stock prices. We also find that stock returns of foreign-owned banks reflect more information about future earnings. In addition, the positive association between price informativeness and foreign ownership is stronger for foreign-owned banks in countries with stronger governance, stronger banking supervision, and lower monitoring costs. Overall, our evidence suggests that foreign ownership reduces bank opacity by exporting governance, yielding important implications for regulators and governments.
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CEO Investment of Deferred Compensation Plans and Firm Performance

Domenico Rocco Cambrea, Stefano Colonnello, Giuliano Curatola, Giulia Fantini
Journal of Business Finance & Accounting, forthcoming
Abstract
We study how US chief executive officers (CEOs) invest their deferred compensation plans depending on the firm's profitability. By looking at the correlation between the CEO's return on these plans and the firm's stock return, we show that deferred compensation is to a large extent invested in the company equity in good times and divested from it in bad times. The divestment from company equity in bad times arguably reflects CEOs' incentive to abandon the firm and to invest in alternative instruments to preserve the value of their deferred compensation plans. This result suggests that the incentive alignment effects of deferred compensation crucially depend on the firm's health status.
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Banks’ Funding Stress, Lending Supply and Consumption Expenditure

H. Evren Damar, Reint E. Gropp, A. Mordel
Journal of Money, Credit and Banking, forthcoming
Abstract
We employ a unique identification strategy linking survey data on household consumption expenditure to bank-level data to estimate the effects of bank funding stress on consumer credit and consumption expenditures. We show that households whose banks were more exposed to funding shocks report lower levels of non-mortgage liabilities. This, however, only translates into lower levels of consumption for low income households. Hence, adverse credit supply shocks are associated with significant heterogeneous effects.
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Entrenchment through Corporate Social Responsibility: Evidence from CEO Network Centrality

Salim Chahine, Yiwei Fang, Iftekhar Hasan, Mohamad Mazboudi
International Review of Financial Analysis, forthcoming
Abstract
This paper investigates whether CEOs with high network centrality entrench themselves when taking CSR decisions and how that affects firm value. Evidence portrays that CSR in firms with more central CEOs is negatively associated with firm-value, and this association is mitigated by better corporate governance mechanisms and by geographic areas of higher social capital. This negative association is lower during disasters which reflect periods of positive exogenous shocks to the societal demand for CSR. Furthermore, CSR by more central CEOs is positively associated with future increases in CEO compensation and future improvement in a CEO's network position. The findings reveal that, in general, central CEOs use CSR to entrench themselves and gain private benefits rather than increase shareholder value.
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Managerial Effect or Firm Effect: Evidence from the Private Debt Market

Bill Francis, Iftekhar Hasan, Yun Zhu
The Financial Review, forthcoming
Abstract
This paper provides evidence that the managerial effect is a key determinant of firms’ cost of capital, in the context of private debt contracting. Applying the novel empirical method developed by an earlier study to a large sample that tracks the job movement of top managers, we find that the managerial effect is a critical and significant factor that explains a large part of the variation in loan contract terms more accurately than firm fixed effects. Additional evidence shows that banks “follow” managers when they change jobs and offer loan contracts with preferential terms to their new firms.
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