14.10.2020 • 21/2020
Recovery Loses Momentum ‒ Economy and Politics Still Shaped by the Pandemic
The corona pandemic leaves substantial marks in the German economy and its impact is more persistent than assumed in spring. In their autumn report, the leading German economic research institutes have revised their economic outlook downwards by roughly one percentage point for both this and next year. They now expect gross domestic product to fall by 5.4% in 2020 (previously -4.2%) and to grow by 4.7% (5.8%) in 2021 and 2.7% in 2022.
Oliver Holtemöller
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17.06.2020 • 10/2020
High risk of corporate bankruptcy due to the corona shutdown
The Corona shutdown increases the probability of corporate bankruptcy. An analysis based on corporate financial statements from 2014 to 2018 reveals that in the United Kingdom, 73% of shutdown firms are not able to cover interest expenses from earnings before interest and taxes if they lose one twelfth of annual turnover. In Germany, the fraction amounts to 81%.
Oliver Holtemöller
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Is Social Capital Associated with Corporate Innovation? Evidence from Publicly Listed Firms in the U.S.
Iftekhar Hasan, Chun-Keung (Stan) Hoi, Qiang Wu, Hao Zhang
Journal of Corporate Finance,
June
2020
Abstract
We find that social capital in U.S. counties, as captured by strength of social norms and density of social networks, is positively associated with innovation of firms headquartered in the county, as captured by patents and citations. This relation is robust in fixed-effect regressions, instrumental variable regressions with a Bartik instrument, propensity score matching regressions, and a difference-in-differences design that isolates the effects of over time variations in social capital due to corporate headquarter relocations. Strength of social norms plays a more dominant role than density of social networks in producing these empirical regularities. Cross-sectional evidence indicates the prominence of the contracting channel through which social capital relates to innovation. Additionally, we find that social capital is also positively associated with trademarks and effectiveness of corporate R&D expenditures.
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08.04.2020 • 5/2020
Economy in Shock – Fiscal Policy to Counteract
The coronavirus pandemic is triggering a severe recession in Germany. Economic output will shrink by 4.2% this year. This is what the leading economics research institutes expect in their spring report. For next year, they are forecasting a recovery and growth of 5.8%.
Oliver Holtemöller
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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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Entrenchment through Corporate Social Responsibility: Evidence from CEO Network Centrality
Salim Chahine, Yiwei Fang, Iftekhar Hasan, Mohamad Mazboudi
International Review of Financial Analysis,
2019
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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Gift-exchange in Society and the Social Integration of Refugees: Evidence from a Field, a Laboratory, and a Survey Experiment
Sabrina Jeworrek, Vanessa Mertins, Bernd Josef Leisen
Abstract
Refugee integration requires broad support from the host society, but only a minority of the host population is actively engaged. Given that most individuals reciprocate kind behaviour, we examine the idea that the proportion of supporters will increase as a reciprocal response to refugees’ contributions to society through volunteering. Our nationwide survey experiment shows that citizens’ intentions to contribute time and money rise significantly when they learn about refugees’ pro-social activities. Importantly, this result holds for individuals who have not been in contact with refugees. We complement this investigation with experiments in the lab and the field that confirm our findings for actual behaviour.
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Banks Response to Higher Capital Requirements: Evidence from a Quasi-natural Experiment
Reint E. Gropp, Thomas Mosk, Steven Ongena, Carlo Wix
Review of Financial Studies,
No. 1,
2019
Abstract
We study the impact of higher capital requirements on banks’ balance sheets and their transmission to the real economy. The 2011 EBA capital exercise is an almost ideal quasi-natural experiment to identify this impact with a difference-in-differences matching estimator. We find that treated banks increase their capital ratios by reducing their risk-weighted assets, not by raising their levels of equity, consistent with debt overhang. Banks reduce lending to corporate and retail customers, resulting in lower asset, investment, and sales growth for firms obtaining a larger share of their bank credit from the treated banks.
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18.12.2018 • 22/2018
IWH leads large scale EU research project on productivity
Is productivity growth slowing in industrialised countries? And if so, why? From the start of 2019, the Halle Institute for Economic Research (IWH) will be addressing these questions as the coordinator of a new EU project. Economists and statistics experts from nine European partners will collaborate on the three-year project, entitled MICROPROD. With a total budget of just under three million euros, it is the IWH’s largest EU project to date.
Steffen Müller
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Taken by Storm: Business Financing and Survival in the Aftermath of Hurricane Katrina
Emek Basker, Javier Miranda
Journal of Economic Geography,
No. 6,
2018
Abstract
We use Hurricane Katrina’s damage to the Mississippi coast in 2005 as a natural experiment to study business survival in the aftermath of a capital-destruction shock. We find very low survival rates for businesses that incurred physical damage, particularly for small firms and less-productive establishments. Conditional on survival, larger and more-productive businesses that rebuilt their operations hired more workers than their smaller and less-productive counterparts. Auxiliary evidence from the Survey of Business Owners suggests that the differential size effect is tied to the presence of financial constraints, pointing to a socially inefficient level of exits and to distortions of allocative efficiency in response to this negative shock. Over time, the size advantage disappeared and market mechanisms seem to prevail.
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