We study the impact of stricter and more harmonized banking regulation along the income distribution using household survey data for 25 EU countries. Exploiting country-level heterogeneity in the implementation of European Banking Union directives allows us to control for confounders and identify effects. Our results show that these regulatory reforms aimed at increasing financial system resilience affect households heterogeneously and result in a widening of the income distribution. These results are dependent on a country’s ex-ante regulatory stringency, and more pronounced in countries with stronger bank dependence. Furthermore, we find that more stringent regulation reduces income growth for low-income households primarily due to exits from employment, whereas affluent households tend to experience increased growth rates for employee and self-employed income.

We study the procurement patterns of non-listed firms and examine how these often-overlooked, yet pivotal players in global supply chains adjust their sourcing when they anticipate accountability for externalities beyond their organizational boundaries. Using granular customs data and a surprise information release about the German Supply Chain Due Diligence Act, product-level regressions reveal that importing firms are 3.5 percentage points less likely to source a product from countries where the relevant production sector exhibits elevated ESG-related risks, suggesting that firms tend to cut ties with higher-risk suppliers. The effects are concentrated among firms with well-diversified supplier networks for a product and higher profitability, suggesting they have the necessary flexibility to respond quickly to anticipated regulatory pressure. Our findings suggest that mandates requiring firms to incorporate broad sustainability considerations into their operational decisions may have limits, particularly for non-listed firms.

This paper analyzes the effects of bank capital regulation on the link between bank size and volatility. Using bank-level data for 27 advanced economies over the 2000–2014 period, we estimate a power law that relates the volume of a bank’s loan portfolio to the volatility of loan growth. Our analysis reveals, first, that more stringent capital regulation weakens the size-volatility nexus. Hence, in countries with more stringent capital regulation, large banks show, ceteris paribus, lower loan portfolio volatility. Second, the effect of tighter capital requirements on the size-volatility nexus becomes stronger for the upper tail of the bank size distribution. This is in line with capitalization decreasing with bank size, such that larger banks tend to be more affected by increasing capital requirements. Third, in countries with higher sectoral capital buffers, the size-volatility nexus is weaker.

We examine whether combining factual information on inflation levels and forecasts with a narrative can persistently shape consumers’ inflation expectations. In a preregistered randomized controlled trial with a representative sample of 3,000 German consumers, participants received either numerical or textual information about inflation rates, with or without an accompanying narrative. All treatments immediately lower inflation expectations, with numerical information eliciting stronger adjustments. Adding a narrative produces no additional immediate effect, confirming that it conveys no new information. However, only the combination of numerical information with a narrative yields a lasting reduction in inflation expectations and forecast uncertainty still observable after four weeks. Our results suggest that combining precise information with a narrative enhances information retention and can lead to more persistent shifts in consumers’ beliefs. The effects are strongest when respondents perceive the narrative as relatable and emotionally engaging, and among those with low financial literacy and limited knowledge of inflation.

This paper examines the effect of CoCo bonds that qualify as additional tier 1 capital on bank stability and reporting. The results reveal a significant reduction in the distance to insolvency following the hybrid bond issuance due to increased earnings volatility. Banks report less stable net income due to more volatile loss provisions, which increases earnings opacity rather than reflects changes in asset quality. The findings are consistent with the premise that persistent uncertainty and misconceptions among investors about bail-in likelihoods limit their monitoring engagement, which results in banks becoming less transparent.