Financial Intermediaries and the Real Economy

This research group aims at understanding the link between financial intermediation and real activity by exploring several potential channels, focussing both on direct effects on firms using rich microdata as well as on understanding the link between credit markets and economic activity in the aggregate.

Research Cluster
Productivity and Institutions

Your contact

Professor Dr Daniel Streitz
Professor Dr Daniel Streitz
Mitglied - Department Financial Markets
Send Message +49 345 7753-735 Personal page

Refereed Publications


Credit Supply Shocks: Financing Real Growth or Takeovers?

Tobias Berg Daniel Streitz Michael Wedow

in: Review of Corporate Finance Studies, forthcoming


How do firms invest when financial constraints are relaxed? We document that firms affected by a large positive credit supply shock predominantly increase borrowing for transaction-based purposes. These treated firms have larger asset and employment growth rates; however, growth entirely stems from the increased takeover activity. Announcement returns indicate a low quality of the credit-supply-induced takeover activity. These results offer the possibility that credit-driven growth can simply reflect redistribution, rather than net gains in assets or employment.

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Economic Preferences for Risk-Taking and Financing Costs

Manthos D. Delis Iftekhar Hasan Maria Iosifidi Chris Tsoumas

in: Journal of Corporate Finance, June 2023


We hypothesize and empirically establish that economic preferences for risk-taking in different subnational regions affect firm financing costs. We study this hypothesis by hand-matching firms' regions worldwide with the corresponding regional economic risk-taking preferences. We first show that higher regional risk-taking is positively associated with several measures of firm risk and investments. Subsequently, our baseline results show that credit and bond pricing increase when risk-taking preferences increase. For the loan of average size and maturity a one-standard-deviation increase in regional risk-taking increases interest expense by $0.54 million USD. We also find that these results are demand (firm)-driven and stronger for firms with more local shareholders.

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Spillover Effects in Empirical Corporate Finance

Tobias Berg Markus Reisinger Daniel Streitz

in: Journal of Financial Economics, No. 3, 2021


Despite their importance, the discussion of spillover effects in empirical research often misses the rigor dedicated to endogeneity concerns. We analyze a broad set of workhorse models of firm interactions and show that spillovers naturally arise in many corporate finance settings. This has important implications for the estimation of treatment effects: i) even with random treatment, spillovers lead to a complicated bias, ii) fixed effects can exacerbate the spillover-induced bias. We propose simple diagnostic tools for empirical researchers and illustrate our guidance in an application.

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Bank Concentration and Product Market Competition

Farzad Saidi Daniel Streitz

in: Review of Financial Studies, No. 10, 2021


This paper documents a link between bank concentration and markups in nonfinancial sectors. We exploit concentration-increasing bank mergers and variation in banks’ market shares across industries and show that higher credit concentration is associated with higher markups and that high-market-share lenders charge lower loan rates. We argue that this is due to the greater incidence of competing firms sharing common lenders that induce less aggressive product market behavior among their borrowers, thereby internalizing potential adverse effects of higher rates. Consistent with our conjecture, the effect is stronger in industries with competition in strategic substitutes where negative product market externalities are greatest.

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Managerial Biases and Debt Contract Design: The Case of Syndicated Loans

Tim R. Adam Valentin Burg Tobias Scheinert Daniel Streitz

in: Management Science, No. 1, 2020


We examine whether managerial overconfidence impacts the use of performance-pricing provisions in loan contracts (performance-sensitive debt [PSD]). Managers with biased views may issue PSD because they consider this form of debt to be mispriced. Our evidence shows that overconfident managers are more likely to issue rate-increasing PSD than regular debt. They choose PSD with steeper performance-pricing schedules than those chosen by rational managers. We reject the possibility that overconfident managers have (persistent) positive private information and use PSD for signaling. Finally, firms seem to benefit less from using PSD ex post if they are managed by overconfident rather than rational managers.

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Working Papers


Do Public Bank Guarantees Affect Labor Market Outcomes? Evidence from Individual Employment and Wages

Laura Baessler Georg Gebhardt Reint E. Gropp Andre Guettler Ahmet Taskin

in: IWH Discussion Papers, No. 7, 2024


We investigate whether employees in Germany benefit from public bank guarantees in terms of employment probability and wages. To that end, we exploit the removal of public bank guarantees in Germany in 2001 as a quasi-natural experiment. Our results show that bank guarantees lead to higher employment, but lower wage prospects for employees after working in affected establishments. Overall the results suggest that employees do not benefit from bank guarantees.

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Corporate Loan Spreads and Economic Activity

Anthony Saunders Alessandro Spina Sascha Steffen Daniel Streitz

in: SSRN Working Paper, 2021


We use secondary corporate loan-market prices to construct a novel loan-market-based credit spread. This measure has considerable predictive power for economic activity across macroeconomic outcomes in both the U.S. and Europe and captures unique information not contained in public market credit spreads. Loan-market borrowers are compositionally different and particularly sensitive to supply-side frictions as well as financial frictions that emanate from their own balance sheets. This evidence highlights the joint role of financial intermediary and borrower balance-sheet frictions in understanding macroeconomic developments and enriches our understanding of which type of financial frictions matter for the economy.

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Capital Misallocation and Innovation

Christian Schmidt Yannik Schneider Sascha Steffen Daniel Streitz

in: SSRN Solutions Research Paper Series, 2020


This paper documents that "zombie" lending by undercapitalized banks distorts competition and impedes corporate innovation. This misallocation of capital prevents both the exit of zombie and entry of healthy firms in affected industries adversely impacting output and competition. Worse, capital misallocation depresses patent applications, particularly in high technology- and R&D-intensive sectors, and industries with neck- and-neck competition. We strengthen our results using an IV approach to address reverse causality and innovation survey data from the European Commission. Overall, our results are consistent with externalities imposed on healthy firms through the misallocation of capital.

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