Publications

All
Series
Department
Topic
Author
Year
Refresh

Bank Concentration and Retail Interest Rates

S. Corvoisier, Reint E. Gropp
Journal of Banking & Finance, No. 11, 2002
Abstract
The recent wave of mergers in the euro area raises the question whether the increase in concentration has offset the increase in competition in European banking through deregulation. We test this question by estimating a simple Cournot model of bank pricing. We construct country and product specific measures of bank concentration and find that for loans and demand deposits increasing concentration may have resulted in less competitive pricing by banks, whereas for savings and time deposits, the model is rejected, suggesting increases in contestability and/or efficiency in these markets. Finally, the paper discusses some implications for tests of the effect of concentration on monetary policy transmission.
Read article

Local Taxes and Capital Structure Choice

Reint E. Gropp
International Tax and Public Finance, No. 1, 2002
Abstract
This paper investigates the question of taxation and capital structure choice in Germany. Germany represents an excellent case study for investigating the question of whether and to what extent taxes influence the debt-equity decision of firms, because the relative tax burdens on debt and equity vary greatly across communities. German communities levy local taxes on profits and long-term debt payments in addition to personal and corporate taxes on the federal level. A stylized model is presented incorporating these taxes. The model shows that local taxes create substantial incentives for firms to use debt financing. Furthermore, the paper empirically investigates the effect of local business taxes on the share of debt used to finance incremental investments by German firms. I find that local taxes significantly influence the capital structure choice of firms, controlling for a large number of other factors. In an extensive sensitivity analysis the tax effect are found to be robust across several different specifications.
Read article

Analysing UDROP: An instrument for stabilizing the international financial architecture

Axel Lindner
International Finance, No. 1, 2001
Abstract
This paper analyses implications of a proposal, called UDROP, to reform the standards of international debt contracts. The idea is to give borrowers a roll-over option at maturity for a specified length of time. Using recently developed models of financial crises, the paper shows for which type of crisis UDROP is beneficial. Moral hazard of the borrower is one of the problems UDROP faces which can be addressed by appropriately designing the debt contract.
Read article

Rating Agency Actions and the Pricing of Debt and Equity of European Banks: What Can we Infer About Private Sector Monitoring of Bank Soundness?

Reint E. Gropp, A. J. Richards
Economic Notes, No. 3, 2001
Abstract
The recent consultative papers by the Basel Committee on Banking Supervision has raised the possibility of an explicit role for external rating agencies in the assessment of the credit risk of banks’ assets, including interbank claims. Any judgement on the merits of this proposal calls for an assessment of the information contained in credit ratings and its relationship to other publicly available information on the financial health of banks and borrowers. We assess this issue via an event study of rating change announcements by leading international rating agencies, focusing on rating changes for European banks for which data on bond and equity prices are available. We find little evidence of announcement effects on bond prices, which may reflect the lack of liquidity in bond markets in Europe during much of our sample period. For equity prices, we find strong effects of ratings changes, although some of our results may suffer from contamination by contemporaneous news events. We also test for pre-announcement and post-announcement effects, but find little evidence of either. Overall, our results suggest that ratings agencies may perform a useful role in summarizing and obtaining non-public information on banks and that monitoring of banks’ risk through bond holders appears to be relatively limited in Europe. The relatively weak monitoring by bondholders casts some doubt on the effectiveness of a subordinated debt requirement as a supervisory tool in the European context, at least until bond markets are more developed.
Read article

Attribute Dependence and the Provision of Quality

Hans Degryse, Andreas Irmen
Regional Science and Urban Economics, No. 5, 2001
Abstract
Often a quality improvement necessitates modifications of varietal product features. This paper studies firms’ incentives to provide quality when this decision affects the goods’ degree of perceived horizontal differentiation. We find that the quality level hinges crucially on the interaction between the quality and the varietal product attribute. We examine the outcome of a game where firms decide on quality and price relative to what a social planner would desire. If the interaction between quality and perceived horizontal differentiation is sufficiently positive, we find for the sequential game ‘quality then price’ that the private incentives to provide quality are excessive relative to the social optimum. As a result the level and the direction of interaction between the attributes determines whether there is excessive or insufficient provision of quality.
Read article

The Effect of a Reduction in Working Hours on Employment: Empirical Evidence for West-Germany

Christian Dreger, Olaf Fuchs, Jürgen Kolb
Journal of Economics (MVEA), 2001
Abstract
Read article

Trade Structure and Trade Liberalization: The emerging pattern between the EU and Transition Economies

Hubert Gabrisch, Maria Luigia Segnana
MOCT-MOST 11, 2001
Abstract
Read article

Religion and Economic Growth: Was Weber Right?

Ulrich Blum, Leonard Dudley
Journal of Evolutionary Economics, No. 2, 2001
Abstract
Read article

Regional Disparities in Transition Economies: a Typology for East Germany and Poland

Franz Barjak
Post-Communist Economies, 2001
Abstract
Read article

On the Incentives to Provide Fuel-Efficient Automobiles

Hans Degryse, Andreas Irmen
Journal of Economics, No. 2, 2001
Abstract
We argue that the provision of more fuel-efficient cars necessitates specific aerodynamic shapes. We show that the presence of this technological constraint may reduce the incentives to provide fuel efficiency. In equilibrium, cars become more similar and aerodynamic as fuel prices increase. However, the provided level of fuel efficiency falls short of the social optimal one such that a fuel-economy standard is welfare-enhancing.
Read article
Mitglied der Leibniz-Gemeinschaft LogoTotal-Equality-LogoWeltoffen Logo