Drilling and Debt
Erik P. Gilje, Elena Loutskina, Daniel Murphy
Journal of Finance,
No. 3,
2020
Abstract
This paper documents a previously unrecognized debt‐related investment distortion. Using detailed project‐level data for 69 firms in the oil and gas industry, we find that highly levered firms pull forward investment, completing projects early at the expense of long‐run project returns and project value. This behavior is particularly pronounced prior to debt renegotiations. We test several channels that could explain this behavior and find evidence consistent with equity holders sacrificing long‐run project returns to enhance collateral values and, by extension, mitigate lending frictions at debt renegotiations.
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Zu den betrieblichen Effekten der Investitionsförderung im Rahmen der deutschen Regionalpolitik
Matthias Brachert, Eva Dettmann, Mirko Titze
Wirtschaft im Wandel,
No. 1,
2020
Abstract
Die Wirtschaft in den Industrieländern unterliegt einem ständigen Anpassungsdruck. Wichtige aktuelle Treiber des Strukturwandels sind vor allem die Globalisierung, der technologische Fortschritt (insbesondere durch Digitalisierung und Automatisierung), die Demographie (durch Alterung und Schrumpfung der Bevölkerung) und der Klimawandel. Von diesem Anpassungsdruck sind jedoch die Regionen in Deutschland sehr unterschiedlich betroffen. Regionalpolitik verfolgt das Ziel, Regionen bei der Bewältigung des Strukturwandels zu unterstützen. Ein besonderer Fokus liegt dabei auf Regionen, die ohnehin durch Strukturschwächen gekennzeichnet sind. Die aktuelle Regionalförderung in Deutschland basiert im Wesentlichen auf der Förderung von Investitionen von Betrieben und Kommunen. Die Evaluierung dieser Programme muss integraler Bestandteil der Regionalpolitik sein – schließlich stellt sich immer die Frage nach einer alternativen Verwendung knapper öffentlicher Mittel. Eine Pilotstudie für Sachsen-Anhalt zeigt, dass die im Rahmen der Regionalpolitik gewährten Investitionszuschüsse einen positiven Effekt auf Beschäftigung und Investitionen der geförderten Betriebe haben; bei den Investitionen allerdings nur für die Dauer des Projekts. Effekte der Förderung auf Umsatz und Produktivität von Betrieben in Sachsen-Anhalt waren nicht nachweisbar.
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Asymmetric Investment Responses to Firm-specific Forecast Errors
Julian Berner, Manuel Buchholz, Lena Tonzer
Abstract
This paper analyses how firm-specific forecast errors derived from survey data of German manufacturing firms over 2007–2011 affect firms’ investment propensity. Understanding how forecast errors affect firm investment behaviour is key to mitigate economic downturns during and after crisis periods in which forecast errors tend to increase. Our findings reveal a negative impact of absolute forecast errors on investment. Strikingly, asymmetries arise depending on the size and direction of the forecast error. The investment propensity declines if the realised situation is worse than expected. However, firms do not adjust investment if the realised situation is better than expected suggesting that the uncertainty component of the forecast error counteracts positive effects of unexpectedly favorable business conditions. Given that the fraction of firms making positive forecast errors is higher after the peak of the recent financial crisis, this mechanism can be one explanation behind staggered economic growth and slow recovery following crises.
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The Effects of Graduating from High School in a Recession: College Investments, Skill Formation, and Labor-Market Outcomes
Franziska Hampf, Marc Piopiunik, Simon Wiederhold
CESifo Working Paper,
No. 8252,
2020
Abstract
We investigate the short- and long-term effects of economic conditions at high-school graduation as a source of exogenous variation in the labor-market opportunities of potential college entrants. Exploiting business cycle fluctuations across birth cohorts for 28 developed countries, we find that bad economic conditions at high-school graduation increase college enrollment and graduation. They also affect outcomes in later life, increasing cognitive skills and improving labor-market success. Outcomes are affected only by the economic conditions at high-school graduation, but not by those during earlier or later years. Recessions at high-school graduation narrow the gender gaps in numeracy skills and labor-market success.
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12.03.2020 • 4/2020
Global economy under the spell of the coronavirus epidemic
The epidemic is obstructing the economic recovery in Germany. Foreign demand is falling, private households forgo domestic consumption if it comes with infection risk, and investments are postponed. Assuming that the spread of the disease can be contained in short time, GDP growth in 2020 is expected to be 0.6% according to IWH spring economic forecast. Growth in East Germany is expected to be 0.9% and thus higher than in West Germany. If the number of new infections cannot be decreased in short time, we expect a recession in Germany.
Oliver Holtemöller
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Intangible Capital and Productivity. Firm-level Evidence from German Manufacturing
Wolfhard Kaus, Viktor Slavtchev, Markus Zimmermann
IWH Discussion Papers,
No. 1,
2020
Abstract
We study the importance of intangible capital (R&D, software, patents) for the measurement of productivity using firm-level panel data from German manufacturing. We first document a number of facts on the evolution of intangible investment over time, and its distribution across firms. Aggregate intangible investment increased over time. However, the distribution of intangible investment, even more so than that of physical investment, is heavily right-skewed, with many firms investing nothing or little, and a few firms having very large intensities. Intangible investment is also lumpy. Firms that invest more intensively in intangibles (per capita or as sales share) also tend to be more productive. In a second step, we estimate production functions with and without intangible capital using recent control function approaches to account for the simultaneity of input choice and unobserved productivity shocks. We find a positive output elasticity for research and development (R&D) and, to a lesser extent, software and patent investment. Moreover, the production function estimates show substantial heterogeneity in the output elasticities across industries and firms. While intangible capital has small effects for firms with low intangible intensity, there are strong positive effects for high-intensity firms. Finally, including intangibles in a gross output production function reduces productivity dispersion (measured by the 90-10 decile range) on average by 3%, in some industries as much as nearly 9%.
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Managerial Ability and Value Relevance of Earnings
Bill Francis, Iftekhar Hasan, Ibrahim Siraj, Qiang Wu
China Accounting and Finance Review,
No. 4,
2019
Abstract
We examine how management ability affects the extent to which capital markets rely on earnings to value equity. Using a measure of ability that captures a management team’s capacity for generating revenues with a given level of resources compared to other industry peers, we find a strong positive association between managerial ability and the value relevance of earnings. Additional tests show that our results are robust to controlling for earnings attributes and investment efficiency. We use propensity score matching and the 2SLS instrumental variable approach to deal with the issue of endogeneity. For further identification, we examine CEO turnover and find that newly hired CEOs with better managerial abilities than the replaced CEOs increase the value relevance of earnings. We identify weak corporate governance and product market power as the two important channels through which superior management practices play an important role in the corporate decision-making process that positively influence the value relevance of earnings. Overall, our findings suggest that better managers make accounting information significantly more relevant in the market valuation of equity.
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What Drives the Commodity-Sovereign-Risk-Dependence in Emerging Market Economies?
Hannes Böhm, Stefan Eichler, Stefan Gießler
Abstract
Using daily data for 34 emerging markets in the period 1994-2016, we find robust evidence that higher export commodity prices are associated with higher sovereign bond returns (indicating lower sovereign risk). The economic effect is especially pronounced for heavy commodity exporters. Examining the drivers, we find, first, that commodity-dependence is higher for countries that export large volumes of volatile commodities and that the effect increases in times of recessions, high inflation, and expansionary U.S. monetary policy. Second, the importance of raw material prices for sovereign financing can likely be mitigated if a country improves institutions and tax systems, attracts FDI inflows, invests in manufacturing, machinery and infrastructure, builds up reserve assets and opens capital and trade accounts. Third, the concentration of commodities within a country’s portfolio, its government indebtedness or amount of received development assistance appear to be only of secondary importance for commodity-dependence.
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