Creditor-control Rights and the Nonsynchronicity of Global CDS Markets
Iftekhar Hasan, Miriam Marra, Eliza Wu, Gaiyan Zhang
Review of Corporate Finance Studies,
forthcoming
Abstract
We analyze how creditor rights affect the nonsynchronicity of global corporate credit default swap spreads (CDS-NS). CDS-NS is negatively related to the country-level creditor-control rights, especially to the “restrictions on reorganization” component, where creditor-shareholder conflicts are high. The effect is concentrated in firms with high investment intensity, asset growth, information opacity, and risk. Pro-creditor bankruptcy reforms led to a decline in CDS-NS, indicating lower firm-specific idiosyncratic information being priced in credit markets. A strategic-disclosure incentive among debtors avoiding creditor intervention seems more dominant than the disciplining effect, suggesting how strengthening creditor rights affects power rebalancing between creditors and shareholders.
Read article
"Let Me Get Back to You" — A Machine Learning Approach to Measuring NonAnswers
Andreas Barth, Sasan Mansouri, Fabian Wöbbeking
Management Science,
forthcoming
Abstract
Using a supervised machine learning framework on a large training set of questions and answers, we identify 1,364 trigrams that signal nonanswers in earnings call questions and answers (Q&A). We show that this glossary has economic relevance by applying it to contemporaneous stock market reactions after earnings calls. Our findings suggest that obstructing the flow of information leads to significantly lower cumulative abnormal stock returns and higher implied volatility. As both our method and glossary are free of financial context, we believe that the measure is applicable to other fields with a Q&A setup outside the contextual domain of financial earnings conference calls.
Read article
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.
Read article
Gender Pay Gap in American CFOs: Theory and Evidence
Bill Francis, Iftekhar Hasan, Gayane Hovakimian, Zenu Sharma
Journal of Corporate Finance,
June
2023
Abstract
Studies document persistent unexplained gender-based wage gap in labor markets. At the executive level, where skill and education are similar, career interruptions and differences in risk preferences primarily explain the extant gender-based pay gap. This study focuses on CFO compensation contracts of Execucomp firms (1992–2020) and finds no gender-based pay gap. This paper offers several explanations for this phenomenon, such as novel evidence on the risk preferences of females with financial expertise and changes in the social and regulatory climate.
Read article
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
Read press release
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.
Read article
Discrimination on the Child Care Market: A Nationwide Field Experiment
Henning Hermes, Philipp Lergetporer, Fabian Mierisch, Frauke Peter, Simon Wiederhold
CESifo Working Paper,
No. 10368,
2023
Abstract
We provide the first causal evidence of discrimination against migrants seeking child care. We send emails from fictitious parents to > 18, 000 early child care centers across Germany, asking if there is a slot available and how to apply. Randomly varying names to signal migration background, we find that migrants receive 4.4 percentage points fewer responses. Responses to migrants also contain substantially fewer slot offers, are shorter, and less encouraging. Exploring channels, discrimination against migrants does not differ by the perceived educational background of the email sender. However, it does differ by regional characteristics, being stronger in areas with lower shares of migrants in child care, higher right-wing vote shares, and lower financial resources. Discrimination on the child care market likely perpetuates existing inequalities of opportunities for disadvantaged children.
Read article
IWH-Präsident: Silicon Valley Bank in Deutschland?
Reint E. Gropp
One-off Publications,
2023
Abstract
Nach dem Zusammenbruch der zahlungsunfähigen US-amerikanischen Silicon Valley Bank zieht Reint Gropp, Präsident des Leibniz-Instituts für Wirtschaftsforschung Halle (IWH), drei Lehren für die europäische Bankenaufsicht.
Read article
14.02.2023 • 4/2023
Study on Europe's top bankers: Risky business despite bonus cap
Ten years ago, the EU Parliament decided to cap the flexible remuneration of bank managers. But the cap on bonuses misses its target: Managers of systemically important European banks take high risks without changes, shows a study by the Halle Institute for Economic Research (IWH).
Michael Koetter
Read press release
20.12.2022 • 31/2022
No deep recession despite energy crisis and rise in interest rates
High energy prices and deteriorating financial conditions are weighing on the German economy. However, the period of weakness over the winter is likely to be moderate, partly because the energy price brakes are supporting private incomes. The Halle Institute for Economic Research (IWH) forecasts that due to the recovery from the pandemic in the first three quarters, gross domestic product (GDP) is estimated to have increased by 1.8% in 2022. Due to high energy prices, however, GDP will slightly decline in the winter months and stagnate on average in 2023. Inflation will fall from 7.8% in 2022 to 6.5% in 2023.
Oliver Holtemöller
Read press release
