Firm Subsidies, Financial Intermediation, and Bank Stability
Aleksandr Kazakov, Michael Koetter, Mirko Titze, Lena Tonzer
IWH Discussion Papers,
We use granular project-level information for the largest regional economic development program in German history to study whether government subsidies to firms affect the quantity and quality of bank lending. We combine the universe of recipient firms under the Improvement of Regional Economic Structures program (GRW) with their local banks during 1998-2019. The modalities of GRW subsidies to firms are determined at the EU level. Therefore, we use it to identify bank outcomes. Banks with relationships to more subsidized firms exhibit higher lending volumes without any significant differences in bank stability. Subsidized firms, in turn, borrow more indicating that banks facilitate regional economic development policies.
What Does Codetermination Do?
Simon Jäger, Shakked Noy, Benjamin Schoefer
The authors provide a comprehensive overview of codetermination, that is, worker representation in firms’ governance and management. The available micro evidence points to zero or small positive effects of codetermination on worker and firm outcomes and leaves room for moderate positive effects on productivity, wages, and job stability. The authors also present new country-level, general-equilibrium event studies of codetermination reforms between the 1960s and 2010s, finding no effects on aggregate economic outcomes or the quality of industrial relations. They offer three explanations for the institution’s limited impact. First, existing codetermination laws convey little authority to workers. Second, countries with codetermination laws have high baseline levels of informal worker voice. Third, codetermination laws may interact with other labor market institutions, such as union representation and collective bargaining. The article closes with a discussion of the implications for recent codetermination proposals in the United States.
Productivity: More with Less by Better Available resources are scarce. To sustain our...
Three Research Clusters ...
Tasks of the IWH Under the guiding theme "From Transition to European ...
The Effect of Foreign Institutional Ownership on Corporate Tax Avoidance: International Evidence
Iftekhar Hasan, Incheol Kim, Haimeng Teng, Qiang Wu
Journal of International Accounting, Auditing and Taxation,
We find that foreign institutional investors (FIIs) reduce their investee firms’ tax avoidance. We provide evidence that the effect is driven by the institutional distance between FIIs’ home countries/regions and host countries/regions. Specifically, we find that the effect is driven by the influence of FIIs from countries/regions with high-quality institutions (i.e., common law, high government effectiveness, and high regulatory quality) on investee firms located in countries/regions with low-quality institutions. Furthermore, we show that the effect is concentrated on FIIs with little experience in the investee countries/regions or FIIs with stronger monitoring incentives. Finally, we find that FIIs are more likely to vote against management if the firm has a higher level of tax avoidance.
Centre for Evidence-based Policy Advice
Centre for Evidence-based Policy Advice (IWH-CEP) ...
Financial Systems: The Anatomy of the Market Economy How the financial system is...
IWH FDI Micro Database
IWH FDI Micro Database The IWH FDI Micro Database (FDI = Foreign Direct...