Financial Stability
Financial Systems: The Anatomy of the Market Economy How the financial system is constructed, how it works, how to keep it fit and what good a bit of chocolate can do. Dossier In…
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Anniversary 2017
Anniversary 2017 25 years IWH. Highlights and turning points. A quarter of a century ago, our employees started to work for IWH. What has happened from then until now? Content 25…
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Ludwig (Interview)
About the CIA and a glass of red wine ... Professor Dr Udo Ludwig on the beginnings of our institute The core of the IWH founding team came from the Institute for Applied Economic…
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Loose (Interview)
When there were almost no flats in Halle yet ... Brigitte Loose about IWH's foundation and development Ms Loose, how did you experience the early days of IWH? Looking back, it was…
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Brown Bag Seminar
Brown Bag Seminar Financial Markets Department The seminar series "Brown Bag Seminar" was offered on a regular basis by members of the Financial Markets department and their…
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Projects
Our Projects 07.2022 ‐ 12.2026 Evaluation of the InvKG and the federal STARK programme On behalf of the Federal Ministry of Economics and Climate Protection, the IWH and the RWI…
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Kommentar: Lehren aus dem Crash von Silicon Valley Bank und Credit Suisse
Reint E. Gropp
Wirtschaft im Wandel,
No. 2,
2023
Abstract
Die „kleine“ Bankenkrise in den USA scheint vorbeizusein, und auch die Credit-Suisse-Krise ist beigelegt. Es stellt sich die Frage, was wir aus der Pleite der Silicon Valley Bank lernen können, um eine ähnliche Situation in Deutschland oder Europa zu vermeiden.
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Market-implied Ratings and Their Divergence from Credit Ratings
Iftekhar Hasan, Winnie P. H. Poon, Jianfu Shen, Gaiyan Zhang
Journal of Financial Research,
No. 2,
2023
Abstract
In this article, we investigate the divergence between credit ratings (CRs) and Moody's market-implied ratings (MIRs). Our evidence shows that rating gaps provide incremental information to the market regarding issuers' default risk over CRs alone in the short horizon and outperform CRs over extended horizons. The predictive ability of rating gaps is greater for more opaque and volatile issuers. Such predictability was more pronounced during the 2008 financial crisis but weakened in the post-Dodd-Frank Act period. This finding is consistent with credit rating agencies' efforts to improve their performance when facing regulatory pressure. Moreover, our analysis identifies rating-gap signals that do (do not) lead to subsequent Moody's actions to place issuers on negative outlook and watchlists. We find that negative signals from MIR gaps have a real economic impact on issuers' fundamentals such as profitability, leverage, investment, and default risk, thus supporting the recovery-efforts hypothesis.
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People
People Job Market Candidates Doctoral Students PhD Representatives Alumni Supervisors Lecturers Coordinators Job Market Candidates Tommaso Bighelli Job market paper: "The…
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Long-run Competitive Spillovers of the Credit Crunch
William McShane
IWH Discussion Papers,
No. 10,
2023
Abstract
Competition in the U.S. appears to have declined. One contributing factor may have been heterogeneity in the availability of credit during the financial crisis. I examine the impact of product market peer credit constraints on long-run competitive outcomes and behavior among non-financial firms. I use measures of lender exposure to the financial crisis to create a plausibly exogenous instrument for product market credit availability. I find that credit constraints of product market peers positively predict growth in sales, market share, profitability, and markups. This is consistent with the notion that firms gained at the expense of their credit constrained peers. The relationship is robust to accounting for other sources of inter-firm spillovers, namely credit access of technology network and supply chain peers. Further, I find evidence of strategic investment, i.e. the idea that firms increase investment in response to peer credit constraints to commit to deter entry mobility. This behavior may explain why temporary heterogeneity in the availability of credit appears to have resulted in a persistent redistribution of output across firms.
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