Monetary Policy in an Oil-dependent Economy in the Presence of Multiple Shocks
Andrej Drygalla
Review of World Economics,
February
2023
Abstract
Russian monetary policy has been challenged by large and continuous private capital outflows and a sharp drop in oil prices during 2014. Both contributed to significant depreciation pressures on the ruble and led the central bank to give up its exchange rate management strategy. Against this background, this work estimates a small open economy model for Russia, featuring an oil price sector and extended by a specification of the foreign exchange market to correctly account for systematic central bank interventions. We find that shocks to the oil price and private capital flows substantially affect domestic variables such as inflation and output. Simulations for the estimated actual strategy and alternative regimes suggest that the vulnerability of the Russian economy to external shocks can substantially be lowered by adopting some form of inflation targeting. Strategies to target the nominal exchange rate or the ruble price of oil prove to be inferior.
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The Effect of Community Managers on Online Idea Crowdsourcing Activities
Lars Hornuf, Sabrina Jeworrek
Journal of the Association for Information Systems,
No. 1,
2023
Abstract
In this study, we investigate whether and to what extent community managers in online collaborative communities can stimulate community activities through their engagement. Using a novel data set of 22 large online idea crowdsourcing campaigns, we find that moderate but steady manager activities are adequate to enhance community participation. Moreover, we show that appreciation, motivation, and intellectual stimulation by community managers are positively associated with community participation but that the effectiveness of these communication strategies depends on the form of participation managers wish to encourage. Finally, the data reveal that community manager activities requiring more effort, such as media file uploads vs. simple written comments, have a stronger effect on community participation.
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The Disciplining Effect of Supervisory Scrutiny in the EU-wide Stress Test
Christoffer Kok, Carola Müller, Steven Ongena, Cosimo Pancaro
Journal of Financial Intermediation,
January
2023
Abstract
Relying on confidential supervisory data related to the 2016 EU-wide stress test, this paper presents novel empirical evidence that supervisory scrutiny associated to stress testing has a disciplining effect on bank risk. We find that banks that participated in the 2016 EU-wide stress test subsequently reduced their credit risk relative to banks that were not part of this exercise. Relying on new metrics for supervisory scrutiny that measure the quantity, potential impact, and duration of interactions between banks and supervisors during the stress test, we find that the disciplining effect is stronger for banks subject to more intrusive supervisory scrutiny during the exercise. We also find that a strong risk management culture is a prerequisite for the supervisory scrutiny to be effective. Finally, we show that a similar disciplining effect is not exerted neither by higher capital charges nor by more transparency and related market discipline induced by the stress test.
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Correlation Scenarios and Correlation Stress Testing
Natalie Packham, Fabian Wöbbeking
Journal of Economic Behavior and Organization,
January
2023
Abstract
We develop a general approach for stress testing correlations of financial asset portfolios. The correlation matrix of asset returns is specified in a parametric form, where correlations are represented as a function of risk factors, such as country and industry factors. A sparse factor structure linking assets and risk factors is built using Bayesian variable selection methods. Regular calibration yields a joint distribution of economically meaningful stress scenarios of the factors. As such, the method also lends itself as a reverse stress testing framework: using the Mahalanobis distance or Highest Density Regions (HDR) on the joint risk factor distribution allows to infer worst-case correlation scenarios. We give examples of stress tests on a large portfolio of European and North American stocks.
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Trading away Incentives
Stefano Colonnello, Giuliano Curatola, Shuo Xia
IWH Discussion Papers,
No. 23,
2022
Abstract
Equity pay has been the primary component of managerial compensation packages at US public firms since the early 1990s. Using a comprehensive sample of top executives from 1992-2020, we estimate to what extent they trade firm equity held in their portfolios to neutralize increments in ownership due to annual equity pay. Executives accommodate ownership increases linked to options awards. Conversely, increases in stock holdings linked to option exercises and restricted stock grants are largely neutralized through comparable sales of unrestricted shares. Variation in stock trading responses across executives hardly appears to respond to diversification motives. From a theoretical standpoint, these results challenge (i) the common, generally implicit assumption that managers cannot undo their incentive packages, (ii) the standard modeling practice of treating different equity pay items homogeneously, and (iii) the often taken for granted crucial role of diversification motives in managers’ portfolio choices.
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The Color of Corporate Loan Securitization
Isabella Müller, Huyen Nguyen, Trang Nguyen
IWH Discussion Papers,
No. 22,
2022
Abstract
We examine whether banks manage firms’ climate transition risks via corporate loan securitization. Results show that banks are more likely to securitize loans granted to firms that become more carbon-intensive. The effect is more pronounced if banks have a lower willingness to adjust loan terms. Exploiting the election of Donald Trump as an exogenous shock that lowers transition risk, we show that banks respond by a lower securitization of loans given to firms that become more carbon-intensive. This is mainly driven by banks that have no or low preferences for sustainable lending and domestic lenders.
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Corporate Governance Benefits of Mutual Fund Cooperation
Rex Wang Renji, Patrick Verwijmeren, Shuo Xia
IWH Discussion Papers,
No. 21,
2022
Abstract
Mutual fund families increasingly hold bonds and stocks from the same firm. We study the implications of such dual holdings for corporate governance and firm decision-making. We present evidence that dual ownership allows financially distressed firms to increase investments and to refinance by issuing bonds with lower yields and fewer restrictive covenants. As such, dual ownership reduces shareholder-creditor conflicts, especially when families encourage cooperation among their managers. Overall, our results suggest that mutual fund families internalize the shareholder-creditor agency conflicts of their portfolio companies, highlighting the positive governance externalities of intra-family cooperation.
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Non-base Compensation and the Gender Pay Gap
Boris Hirsch, Philipp Lentge
LABOUR: Review of Labour Economics and Industrial Relations,
No. 3,
2022
Abstract
This paper investigates whether non-base compensation contributes to the gender pay gap (GPG). Using administrative data from Germany, we find in wage decompositions that lower bonus payments to women explain about 10 per cent of the gap at the mean and at different quantiles of the unconditional wage distribution whereas the lower prevalence of shift premia and overtime pay among women is unimportant. Among managers, the contribution of bonuses to the mean gap more than doubles and is steadily rising as one moves up the wage distribution. Our findings suggest that gender differences in bonuses are an important contributor to the GPG, particularly in top jobs.
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Management Capability and Innovation
Bill Francis, Iftekhar Hasan, Gokhan Yilmaz
Stephen P. Ferris, Kose John, Anil K. Makhija (eds): Empirical Research in Banking and Corporate Finance. Advances in Financial Economics 21, Emerald,
2022
Abstract
This chapter investigates whether core competence of managers and their expansive (vs. specialized) managerial style affects firms' innovative ability, capacity, and efficiency. Using exogenous CEO departures as a natural experiment, it establishes a causal link between managerial capability and innovation. Importantly, it reveals that firms with talented managers receive significantly more nonself citations; make significantly lower self-citations and lesser citations to the others, indicating novel and explorative innovation achievements. Also, managers with higher general (specialized) ability are cited more (less) by patents from a wider range of fields. Lastly, career concern is identified as a mechanism linking higher ability and innovation.
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BigTech Credit and Monetary Policy Transmission: Micro-level Evidence from China
Yiping Huang, Xiang Li, Han Qiu, Changhua Yu
IWH Discussion Papers,
No. 18,
2022
Abstract
This paper studies monetary policy transmission through BigTech and traditional banks. By comparing business loans made by a BigTech bank with those made by traditional banks, it finds that BigTech loans tend to be smaller, and the BigTech bank grants credit to more new borrowers compared with conventional banks in response to expansionary monetary policy. The BigTech bank‘s advantages in information, monitoring, and risk management are the potential mechanisms. The analysis also finds that BigTech and traditional bank credits to firms that have already borrowed from these banks respond similarly to changes in monetary policy. Overall, BigTech credit amplifies monetary policy transmission mainly through the extensive margin. In addition, monetary policy has a stronger impact on the real economy through BigTech lending than traditional bank loans.
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