How to Talk Down Your Stock Performance
Andreas Barth, Sasan Mansouri, Fabian Wöbbeking, Severin Zörgiebel
SSRN Discussion Papers,
2020
Abstract
We process the natural language of verbal firm disclosures in order to study the use of context specific language or jargon and its impact on financial performance. We observe that, within the Q&A of earnings conference calls, managers use less jargon in responses to tougher questions, and after a quarter of bad economic success. Moreover, markets interpret the lack of precise information as a bad signal: we find lower cumulative abnormal returns and a higher implied volatility following earnings calls where managers use less jargon. These results support the argument that context specific language or jargon helps to efficiently and precisely transfer information.
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12.03.2020 • 4/2020
Global economy under the spell of the coronavirus epidemic
The epidemic is obstructing the economic recovery in Germany. Foreign demand is falling, private households forgo domestic consumption if it comes with infection risk, and investments are postponed. Assuming that the spread of the disease can be contained in short time, GDP growth in 2020 is expected to be 0.6% according to IWH spring economic forecast. Growth in East Germany is expected to be 0.9% and thus higher than in West Germany. If the number of new infections cannot be decreased in short time, we expect a recession in Germany.
Oliver Holtemöller
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Labor Market Power and the Distorting Effects of International Trade
Matthias Mertens
International Journal of Industrial Organization,
January
2020
Abstract
This article examines how final product trade with China shapes and interacts with labor market imperfections that create market power in labor markets and prevent an efficient market outcome. I develop a framework for measuring such labor market power distortions in monetary terms and document large degrees of these distortions in Germany's manufacturing sector. Import competition only exerts labor market disciplining effects if firms, rather than employees, possess labor market power. Otherwise, increasing export demand and import competition both fortify existing distortions, which decreases labor market efficiency. This widens the gap between potential and realized output and thus diminishes classical gains from trade.
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IWH-Tarif-Check: Kräftige Reale Netto-Tariflohnzuwächse für Beschäftigte in der Chemischen Industrie: Neue Gehaltsbestandteile in der Chemischen Industrie erhöhen reale Netto-Tariflohnzuwächse deutlich
Oliver Holtemöller, Birgit Schultz
IWH Tarif-Check,
No. 2,
2019
Abstract
Ende November 2019 wurde ein neuer Tarifvertrag für die Chemische Industrie abgeschlossen. Dementsprechend steigen die tabellenwirksamen Tariflöhne zum Juli 2020 um 1,5% und ein Jahr später nochmals um 1,3%. Hinzu kommen Einmalzahlungen in Höhe von 4,0% – 6,0% eines Monatsentgelts für die Zeit bis zur ersten Tariferhöhung im Juli 2020. Zusätzlich wurde erstmalig ein tarifliches Zukunftskonto im Gegenwert von zwei Tagen im Jahr 2020, drei Tagen im Jahr 2021 und danach jeweils fünf Tagen je Jahr vereinbart, die als Freizeit genommen, angespart oder ausgezahlt werden können. Dies entspricht einem Plus von 1,8 %. Hinzu kommt eine tarifliche Pflegezusatzversicherung und die Anhebung des Weihnachtsgeldes. Durch diese Zusatzvereinbarungen werden die eher niedrigen tabellenwirksamen Tariflohnsteigerungen erheblich aufgewertet. Insgesamt umfasst der Tariflohnabschluss ein Plus von mehr als 6% für eine Laufzeit von bis zu 29 Monaten.
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Foreign Ownership, Bank Information Environments, and the International Mobility of Corporate Governance
Yiwei Fang, Iftekhar Hasan, Woon Sau Leung, Qingwei Wang
Journal of International Business Studies,
No. 9,
2019
Abstract
This paper investigates how foreign ownership shapes bank information environments. Using a sample of listed banks from 60 countries over 1997–2012, we show that foreign ownership is significantly associated with greater (lower) informativeness (synchronicity) in bank stock prices. We also find that stock returns of foreign-owned banks reflect more information about future earnings. In addition, the positive association between price informativeness and foreign ownership is stronger for foreign-owned banks in countries with stronger governance, stronger banking supervision, and lower monitoring costs. Overall, our evidence suggests that foreign ownership reduces bank opacity by exporting governance, yielding important implications for regulators and governments.
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Trade, Misallocation, and Capital Market Integration
Laszlo Tetenyi
IWH-CompNet Discussion Papers,
No. 8,
2019
Abstract
I study how cross-country capital market integration affects the gains from trade in a model with financial frictions and heterogeneous, forward-looking firms. The model predicts that misallocation among exporters increases as trade barriers fall, even as misallocation decreases in the aggregate. The reason is that financially constrained productive exporters increase their production only marginally, while unproductive exporters survive for longer and increase their size. Allowing capital inflows magnifies misallocation, because unproductive firms expand even more, leading to a decline in aggregate productivity. Nevertheless, under integrated capital markets, access to cheaper capital dominates the adverse effect on productivity, leading to higher output, consumption and welfare than under closed capital markets. Applied to the period of European integration between 1992 and 2008, I find that underdeveloped sectors experiencing higher export exposure had more misallocation of capital and a higher share of unproductive firms, thus the data is consistent with the model’s predictions. A key implication of the model is that TFP is a poor proxy for consumption growth after trade liberalisation.
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What Drives the Commodity-Sovereign-Risk-Dependence in Emerging Market Economies?
Hannes Böhm, Stefan Eichler, Stefan Gießler
Abstract
Using daily data for 34 emerging markets in the period 1994-2016, we find robust evidence that higher export commodity prices are associated with higher sovereign bond returns (indicating lower sovereign risk). The economic effect is especially pronounced for heavy commodity exporters. Examining the drivers, we find, first, that commodity-dependence is higher for countries that export large volumes of volatile commodities and that the effect increases in times of recessions, high inflation, and expansionary U.S. monetary policy. Second, the importance of raw material prices for sovereign financing can likely be mitigated if a country improves institutions and tax systems, attracts FDI inflows, invests in manufacturing, machinery and infrastructure, builds up reserve assets and opens capital and trade accounts. Third, the concentration of commodities within a country’s portfolio, its government indebtedness or amount of received development assistance appear to be only of secondary importance for commodity-dependence.
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02.10.2019 • 20/2019
Joint Economic Forecast Autumn 2019: Economy Cools Further – Industry in Recession
Berlin, October 2, 2019 – Germany’s leading economics research institutes have revised their economic forecast for Germany significantly downward. Whereas in the spring they still expected gross domestic product (GDP) to grow by 0.8% in 2019, they now expect GDP growth to be only 0.5%. Reasons for the poor performance are the falling worldwide demand for capital goods – in the exporting of which the Germany economy is specialised – as well as political uncertainty and structural changes in the automotive industry. By contrast, monetary policy is shoring up macroeconomic expansion. For the coming year, the economic researchers have also reduced their forecast of GDP growth to 1.1%, having predicted 1.8% in the spring.
Oliver Holtemöller
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05.09.2019 • 18/2019
Downturn in Germany continues
Trade disputes are causing international trade in goods to decline this year. The manufacturing industry in Germany is particularly affected by this. However, a robust labour market is supporting the economy. According to IWH autumn economic forecast, German gross domestic product (GDP) will increase by 0.5% in 2019. At 1%, output growth in East Germany is likely to be significantly higher than in West Germany.
Oliver Holtemöller
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Pricing Sin Stocks: Ethical Preference vs. Risk Aversion
Stefano Colonnello, Giuliano Curatola, Alessandro Gioffré
European Economic Review,
2019
Abstract
We develop an ethical preference-based model that reproduces the average return and volatility spread between sin and non-sin stocks. Our investors do not necessarily boycott sin companies. Rather, they are open to invest in any company while trading off dividends against ethicalness. When dividends and ethicalness are complementary goods and investors are sufficiently risk averse, the model predicts that the dividend share of sin companies exhibits a positive relation with the future return and volatility spreads. An empirical analysis supports the model’s predictions. Taken together, our results point to the importance of ethical preferences for investors’ portfolio choices and asset prices.
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