IWH Bankruptcy Research
IWH Bankruptcy Research The Bankruptcy Research Unit of the Halle Institute for...
Employee Treatment and Contracting with Bank Lenders: An Instrumental Approach for Stakeholder Management
Journal of Business Ethics,
Adopting an instrumental approach for stakeholder management, we focus on two primary stakeholder groups (employees and creditors) to investigate the relationship between employee treatment and loan contracts with banks. We find strong evidence that fair employee treatment reduces loan price and limits the use of financial covenants. In addition, we document that relationship bank lenders price both the levels and changes in the quality of employee treatment, whereas first-time bank lenders only care about the levels of fair employee treatment. Taking a contingency perspective, we find that industry competition and firm asset intangibility moderate the relationship between good human resource management and bank loan costs. The cost reduction effect of fair employee treatment is stronger for firms operating in a more competitive industry and having higher levels of intangible assets.
Centre for Evidence-based Policy Advice
Centre for Evidence-based Policy Advice (IWH-CEP) ...
Lock‐in Effects in Relationship Lending: Evidence from DIP Loans
Journal of Money, Credit and Banking,
Do prior lending relationships result in pass‐through savings (lower interest rates) for borrowers, or do they lock in higher costs for borrowers? Theoretical models suggest that when borrowers experience greater information asymmetry, higher switching costs, and limited access to capital markets, they become locked into higher costs from their existing lenders. Firms in Chapter 11 seeking debtor‐in‐possession (DIP) financing often fit this profile. We investigate the presence of lock‐in effects using a sample of 348 DIP loans. We account for endogeneity using the instrument variable (IV) approach and the Heckman selection model and find consistent evidence that prior lending relationship is associated with higher interest costs and the effect is more severe for stronger existing relationships. Our study provides direct evidence that prior lending relationships do create a lock‐in effect under certain circumstances, such as DIP financing.
Does Social Capital Matter in Corporate Decisions? Evidence from Corporate Tax Avoidance ...
Joint Economic Forecast
Joint Economic Forecast The joint economic forecast is an instrument for evaluating...
The Effect of Board Directors from Countries with Different Genetic Diversity Levels on Corporate Performance
We link genetic diversity in the country of origin of the firms’ board members with corporate performance via board members’ nationality. We hypothesize that our approach captures deep-rooted differences in cultural, institutional, social, psychological, physiological, and other traits that cannot be captured by other recently measured indices of diversity. Using a panel of firms listed in the North American and UK stock markets, we find that adding board directors from countries with different levels of genetic diversity (either higher or lower) increases firm performance. This effect prevails when we control for a number of cultural, institutional, firm-level, and board member characteristics, as well as for the nationality of the board of directors. To identify the relationship, we use—as instrumental variables for our diversity indices—the migratory distance from East Africa and the level of ultraviolet exposure in the directors’ country of nationality.
Support for Public Research Spin-offs by the Parent Organizations and the Speed of Commercialization
The Journal of Technology Transfer,
We empirically analyze whether support by the parent organization in the early (nascent and seed) stage speeds up the process of commercialization and helps spin-offs from public research organizations generate first revenues sooner. To identify the impact of support by the parent organization, we apply multivariate regression techniques as well as an instrumental variable approach. Our results show that support in the early stage by the parent organization can speed up commercialization. Moreover, we identify two distinct channels—the help in developing a business plan and in acquiring external capital—through which support by the parent organization can enable spin-offs to generate first revenues sooner.
Time-varying Volatility, Financial Intermediation and Monetary Policy
IWH Discussion Papers,
We document that expansionary monetary policy shocks are less effective at stimulating output and investment in periods of high volatility compared to periods of low volatility, using a regime-switching vector autoregression. Exogenous policy changes are identified by adapting an external instruments approach to the non-linear model. The lower effectiveness of monetary policy can be linked to weaker responses of credit costs, suggesting a financial accelerator mechanism that is weaker in high volatility periods.