The Value of Firm Networks: A Natural Experiment on Board Connections
SAFE Working Papers,
We present causal evidence on the effect of boardroom networks on firm value and compensation policies. We exploit a ban on interlocking directorates of Italian financial and insurance companies as exogenous variation and show that firms that lose centrality in the network experience negative abnormal returns around the announcement date. The key driver of our results is the role of boardroom connections in reducing asymmetric information. The complementarities with the input-output and cross-ownership networks are consistent with this channel. Using hand-collected data, we also show that network centrality has a positive effect on directors’ compensation, providing evidence of rent sharing.
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PhD Graduates Financial Markets
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Reports of the European Forecasting Network (EFN)
Reports of the European Forecasting Network (EFN) The European Forecasting...
About the CIA and a glass of red wine ... Professor Dr Udo Ludwig on the...
Four Research Clusters ...
Income and savings
Income and savings Primary income of the private households The primary income of the private households (including private non-profit organisations) includes the income...
Gross domestic product
Gross domestic product Gross domestic product (GDP) includes the value of all goods and services produced in an economic area during a specific period of time. It is ...
Aspects of the Political Economy of the European Banking Union
The regulatory architecture of the financial system has significantly changed after the global financial crisis of 2008/09. In Europe, the introduction of the Single Rulebook has been a major change and provides the legal foundation for the European Banking Union (EBU). The Single Rulebook consists of a regulation, the Capital Requirements Regulation (CRR), and three main directives targeting capital regulation and compensation of managers, harmonization of deposit insurance schemes, as well as resolution and restructuring rules (Capital Requirements Directive (CRD IV), Deposit Guarantee Schemes Directive (DGSD), Bank Recovery and Resolution Directive (BRRD)).
Financial Incentives and Loan Officer Behavior: Multitasking and Allocation of Effort under an Incomplete Contract
Journal of Financial and Quantitative Analysis,
We investigate the implications of providing loan officers with a nonlinear compensation structure that rewards loan volume and penalizes poor performance. Using a unique data set provided by a large international commercial bank, we examine the main activities that loan officers perform: loan prospecting, screening, and monitoring. We find that when loan officers are at risk of losing their bonuses, they increase prospecting and monitoring. We further show that loan officers adjust their behavior more toward the end of the month when bonus payments are approaching. These effects are more pronounced for loan officers with longer tenures at the bank.