Total Factor Productivity Growth at the Firm-level: The Effects of Capital Account Liberalization
Journal of International Economics,
This study provides firm-level evidence on the effect of capital account liberalization on total factor productivity (TFP) growth. We find that a one standard deviation increase in the capital account openness indicator constructed by Fernández et al. (2016) is significantly associated with a 0.18 standard deviation increase in firms’ TFP growth rates. The productivity-enhancing effects are stronger for sectors with higher external finance dependence and capital-skill complementarity, and are persistent five years after liberalization. Moreover, we show that potential transmission mechanisms include improved financing conditions, greater skilled labor utilization, and technology upgrades. Finally, we document heterogeneous effects across firm size and tradability, and threshold effects with respect to the country's institutional quality.
Offshoring, Domestic Employment and Production. Evidence from the German International Sourcing Survey
IWH Discussion Papers,
This paper analyses the effect of offshoring (i.e., the relocation of activities previously performed in-house to foreign countries) on various firm outcomes (domestic employment, production, and productivity). It uses data from the International Sourcing Survey (ISS) 2017 for Germany, linked to other firm level data such as business register and ITGS data. First, we find that offshoring is a rare event: In the sample of firms with 50 or more persons employed, only about 3% of manufacturing firms and 1% of business service firms have performed offshoring in the period 2014-2016. Second, difference-in-differences propensity score matching estimates reveal a negative effect of offshoring on domestic employment and production. Most of this negative effect is not because the offshoring firms shrink, but rather because they don’t grow as fast as the non-offshoring firms. We further decompose the underlying employment dynamics by using direct survey evidence on how many jobs the firms destroyed/created due to offshoring. Moreover, we do not find an effect on labour productivity, since the negative effect on domestic employment and production are more or less of the same size. Third, the German data confirm previous findings for Denmark that offshoring is associated with an increase in the share of ‘produced goods imports’, i.e. offshoring firms increase their imports for the same goods they continue to produce domestically. In contrast, it is not the case that offshoring firms increase the share of intermediate goods imports (a commonly used proxy for offshoring), as defined by the BEC Rev. 5 classification.
Firm-specific Forecast Errors and Asymmetric Investment Propensity
This paper analyzes how firm-specific forecast errors derived from survey data of German manufacturing firms over 2007–2011 relate to firms' investment propensity. Our findings reveal that asymmetries arise depending on the size and direction of the forecast error. The investment propensity declines if the realized situation is worse than expected. However, firms do not adjust investment if the realized situation is better than expected suggesting that the uncertainty component of the forecast error counteracts good surprises of unexpectedly favorable business conditions. This asymmetric mechanism can be one explanation behind slow recovery following crises.
On Modeling IPO Failure Risk
This paper offers a novel framework, combining firm operational risk, IPO pricing risk, and market risk, to model IPO failure risk. By analyzing nearly a thousand variables, we observe that prior IPO failure risk models have suffered from a major missing-variable problem. Evidence reveals several key new firm-level determinants, e.g., the volatility operating performance, the size of its accounts payable, pretax income to common equity, total short-term debt, and a few macroeconomic variables such as treasury bill rate, and book-to-market of the DJIA index. These findings have major economic implications. The total value loss from not predicting the imminent failure of an IPO is significantly lower with this proposed model compared to other established models. The IPO investors could have saved around $18billion over the period between 1994 and 2016 by using this model.
Global Syndicated Lending during the COVID-19 Pandemic
Journal of Banking and Finance,
This paper examines the pricing of global syndicated loans during the COVID-19 pandemic. We find that loan spreads rise by over 11 basis points in response to a one standard deviation increase in the lender's exposure to COVID-19 and over 5 basis points for an equivalent increase in the borrower's exposure. This implies excess interestof about USD 5.16 million and USD 2.37 million respectively for a loan of average size and duration. The aggravating effect of the pandemic is exacerbated with the level of government restrictions to tackle the virus's spread, with firms’ financial constraints and reliance on debt financing, whereas it is mitigated for relationship borrowers, borrowers listed in multiple exchanges or headquartered in countries that can attract institutional investors.
Stricter rules for banks can relieve real estate markets Exuberant price levels in the German real estate market could...
IWH Bankruptcy Research
IWH Bankruptcy Research The Bankruptcy Research Unit of the Halle Institute for...
Explaining Wage Losses After Job Displacement: Employer Size and Lost Firm Wage Premiums
Journal of the European Economic Association,
This paper investigates whether wage losses after job displacement are driven by lost firm wage premiums or worker productivity depreciations. We estimate losses in wages and firm wage premiums, the latter being measured as firm effects from a two-way fixed-effects wage decomposition. Using new German administrative data on displacements from small and large employers, we find that wage losses are to a large extent explained by losses in firm wage premiums and that premium losses are largely permanent. We show that losses strongly increase with pre-displacement employer size. This provides an explanation for large and persistent wage losses reported in previous displacement studies typically focusing on large employers, only.
06.10.2021 • 24/2021
IWH Bankruptcy Update: Bankruptcy Figures Remain Low; More Manufacturing Jobs Impacted
The number of corporate bankruptcies in Germany remained near to a historic low in September. However, there was a considerable increase in the share of manufacturing jobs impacted by bankruptcy. These are the key findings of the IWH Bankruptcy Update, published by the Halle Institute for Economic Research (IWH), which provides monthly statistics on corporate bankruptcies in Germany.
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