Drawing upon evidence from the Chinese corporate bond market, we study how ownership structure affects the cost of debt for firms. Our results show that state, institutional and foreign ownership formats reduce the cost of debt for firms. The benefits of state ownership are accentuated when the issuer is headquartered in a province with highly developed market institutions, operates in an industry less dominated by the state or during the period after the 2012 anti-corruption reforms. Institutional ownership provides the most benefits in environments with lower levels of marketization, especially for firms with low credit quality. Our evidence sheds light on the nexus of ownership and debt cost in a political economy where state-owned enterprises (SOEs) and non-SOEs face productivity and credit frictions. It is also illustrative of how the market environment interacts with corporate ownership in affecting the cost of bond issuance.

We hypothesize and empirically establish that economic preferences for risk-taking in different subnational regions affect firm financing costs. We study this hypothesis by hand-matching firms' regions worldwide with the corresponding regional economic risk-taking preferences. We first show that higher regional risk-taking is positively associated with several measures of firm risk and investments. Subsequently, our baseline results show that credit and bond pricing increase when risk-taking preferences increase. For the loan of average size and maturity a one-standard-deviation increase in regional risk-taking increases interest expense by $0.54 million USD. We also find that these results are demand (firm)-driven and stronger for firms with more local shareholders.

Banks play a special role in the financial system. According to classical banking theory, they help reduce informational asymmetries and serve as liquidity providers. Banks can, at least partially, lower transaction costs that result from information frictions between investors and firms and thereby alleviate firms’ funding constraints (Diamond, 1984). Moreover, banks create liquidity on their balance sheets by financing comparably illiquid assets with relatively liquid liabilities (Diamond and Dybvig, 1983). Integrating credit and liquidity provision functions, banks have been the object of numerous studies on financial intermediation. A particular focus in recent years has been on banks’ behavior as well as on the con- sequences of their actions for the real economy when hit by adverse shocks. Following the global financial crisis, financial shocks that originate from within the financial sec- tor have received wide attention (Cingano et al., 2016; Chodorow-Reich, 2014; Khwaja and Mian, 2008; Paravisini, 2008; Paravisini et al., 2015; Schnabl, 2012). However, banks are also subject to numerous non-financial shocks, which are the focus of this thesis.

Seit der Finanzkrise der Jahre 2007 und 2008 diskutiert die Wissenschaft darüber, wie Kreditgeber die Verbriefung von Hypotheken nutzen, um das Kreditrisiko an Dritte weiterzugeben, und wie dies zur Finanzkrise beigetragen hat. Eine aktuelle IWH-Studie betrachtet die Entscheidungssituation des Kreditgebers zwischen Risikoaufschlag und Risikoübertragung. Sie nutzt rechtliche Unterschiede in verschiedenen US-Bundesstaaten bei der Zwangsvollstreckung von Hypotheken, um daraus unterschiedliche regionale Kreditrisiken abzuleiten. Ist dieses regionale Risiko erhöht, reagieren Kreditgeber durch vermehrte Verbriefung, wenn Hypotheken zum Verkauf an halbstaatliche Agenturen (Government Sponsored Enterprises, GSE) wie Fannie Mae und Freddie Mac zugelassen sind und so gegen Ausfall versichert werden können. Bei Hypotheken, für die kein Rückkauf durch GSE infrage kommt, erhöhen die Kreditgeber dagegen die Zinsen, da sie das Kreditrisiko nicht an die Kreditkäufer weitergeben können.

The bank recovery and resolution directive (BRRD) regulates the bail-in hierarchy to resolve distressed banks in the European Union (EU). Using the staggered BRRD implementation across 15 member states, we identify banks’ capital cost responses and subsequent pass-through to borrowers towards surprise elements due to national transposition details. Average bank capital costs increase heterogeneously across countries with strongest funding cost hikes observed for banks located in GIIPS and non-EMU countries. Only banks in core E(M)U countries that exhibit higher funding costs increase credit spreads for corporate borrowers and contract credit supply. Tighter credit conditions are only passed on to more levered and less profitable firms. On balance, the national implementation of BRRD appears to have strengthened financial system resilience without a pervasive hike in borrowing costs.

This paper provides both theoretical and empirical analyses of the differences between BigTech lenders and traditional banks in response to monetary policy changes. Our model integrates Knightian uncertainty into portfolio selection and posits that BigTech lenders possess a diminishing informational advantage with increasing firm size, resulting in reduced ambiguity when lending to smaller firms. The model suggests that the key distinction between BigTech lenders and traditional banks in response to shifts in funding costs, triggered by monetary policy changes, is more evident at the extensive margin rather than the intensive margin, particularly during periods of easing monetary policy. Using a micro-level dataset of small business loans from both types of lenders, we provide empirical support for our theoretical propositions. Our results show that BigTech lenders are more responsive in establishing new lending relationships in an easing monetary policy environment, while the differences in loan amounts are not statistically significant. We also discuss other loan terms and the implications of regulatory policies.

This paper investigates whether managers’ personal connections help corporate productivity to recover after a negative economic shock. Leveraging the heterogeneity in the severity of the financial crisis across different sectors, the paper reports that (i) the financial crisis had a negative effect on within-firm productivity, (ii) the effect was long-lasting and persistent, supporting a productivity-hysteresis hypothesis, and (iii) managers’ personal connections allowed corporations to recover from this productivity slowdown. Among the possible mechanisms, we show that connected managers operating in affected sectors foster productivity recovery through higher input cost efficiency and better access to the credit market, as well as more efficient use of labour and capital.