Does It Pay to Have Friends? Social Ties and Executive Appointments in Banking
Allen N. Berger, Thomas Kick, Michael Koetter, Klaus Schaeck
Journal of Banking and Finance,
Nr. 6,
2013
Abstract
We exploit a unique sample to analyze how homophily (affinity for similar others) and social ties affect career outcomes in banking. We test if these factors increase the probability that the appointee to an executive board is an outsider without previous employment at the bank compared to being an insider. Homophily based on age and gender increase the chances of the outsider appointments. Similar educational backgrounds, in contrast, reduce the chance that the appointee is an outsider. Greater social ties also increase the probability of an outside appointment. Results from a duration model show that larger age differences shorten tenure significantly, whereas gender similarities barely affect tenure. Differences in educational backgrounds affect tenure differently across the banking sectors. Maintaining more contacts to the executive board reduces tenure. We also find weak evidence that social ties are associated with reduced profitability, consistent with cronyism in banking.
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Hidden Gems and Borrowers with Dirty Little Secrets: Investment in Soft Information, Borrower Self-Selection and Competition
Reint E. Gropp, C. Gruendl, Andre Guettler
Abstract
This paper empirically examines the role of soft information in the competitive interaction between relationship and transaction banks. Soft information can be interpreted as a private signal about the quality of a firm that is observable to a relationship bank, but not to a transaction bank. We show that borrowers self-select to relationship banks depending on whether their privately observed soft information is positive or negative. Competition affects the investment in learning the private signal from firms by relationship banks and transaction banks asymmetrically. Relationship banks invest more; transaction banks invest less in soft information, exacerbating the selection effect. Finally, we show that firms where soft information was important in the lending decision were no more likely to default compared to firms where only financial information was used.
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Efficiency in the UK Commercial Property Market: A Long-run Perspective
Steven Devaney, Oliver Holtemöller, R. Schulz
IWH Discussion Papers,
Nr. 15,
2012
Abstract
Informationally efficient prices are a necessary requirement for optimal resource allocation in the real estate market. Prices are informationally efficient if they reflect buildings’ benefit to marginal buyers, thereby taking account of all available information on future market development. Prices that do not reflect available information may lead to over- or undersupply if developers react to these inefficient prices. In this study, we examine the efficiency of the UK commercial property market and the interaction between prices, construction costs, and new supply. We collated a unique data set covering the years 1920 onwards, which we employ in our study. First, we assess if real estate prices were in accordance with present values, thereby testing for informational efficiency. By comparing prices and estimated present values, we can measure informational inefficiency. Second, we assess if developers reacted correctly to price signals. Development (or the lack thereof) should be triggered by deviations between present values and cost; if prices do not reflect present values, then they should have no impact on development decisions.
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The Impact of Firm and Industry Characteristics on Small Firms’ Capital Structure
Hans Degryse, Peter de Goeij, Peter Kappert
Small Business Economics,
Nr. 4,
2012
Abstract
We study the impact of firm and industry characteristics on small firms’ capital structure, employing a proprietary database containing financial statements of Dutch small and medium-sized enterprises (SMEs) from 2003 to 2005. The firm characteristics suggest that the capital structure decision is consistent with the pecking-order theory: Dutch SMEs use profits to reduce their debt level, and growing firms increase their debt position since they need more funds. We further document that profits reduce in particular short-term debt, whereas growth increases long-term debt. We also find that inter- and intra-industry effects are important in explaining small firms’ capital structure. Industries exhibit different average debt levels, which is in line with the trade-off theory. Furthermore, there is substantial intra-industry heterogeneity, showing that the degree of industry competition, the degree of agency conflicts, and the heterogeneity in employed technology are also important drivers of capital structure.
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Fiscal Policy and the Great Recession in the Euro Area
Mathias Trabandt, Günter Coenen, Roland Straub
American Economic Review: Papers and Proceedings,
Nr. 3,
2012
Abstract
How much did fiscal policy contribute to euro area real GDP growth during the Great Recession? We estimate that discretionary fiscal measures have increased annualized quarterly real GDP growth during the crisis by up to 1.6 percentage points. We obtain our result by using an extended version of the European Central Bank's New Area-Wide Model with a rich specification of the fiscal sector. A detailed modeling of the fiscal sector and the incorporation of as many as eight fiscal time series appear pivotal for our result.
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Emissionsrechtemanagement mit dem „CO2-Navigator“
Wilfried Ehrenfeld
IWH Discussion Papers,
Nr. 19,
2011
Abstract
Das Modul „Emissionsrechtemanagement“ des Softwarepaketes „CO2-Navigator“ ist ein Instrument zum unternehmensinternen Management von Emissionsrechten im Rahmen des europäischen Emissionshandels. Es liefert zu jedem Zeitpunkt eines Kalenderjahres einen Überblick über den tagesaktuellen Bestand an Emissionszertifikaten sowie Transaktionen von CO2-Emissionszertifikaten wie Zuteilung, Kauf- und Verkaufsaktivitäten. Dabei werden die relevanten Zeitpunkte, Mengen und Preise erfasst.
Ausgehend vom aktuellen Stand der Emissionen einer Anlage wird mit Hilfe eines
unternehmenstypischen Emissionsprofils eine Abschätzung der Zertifikatedeckung
zum Bilanzstichtag des aktuellen Jahres ermöglicht. Hierbei wird eine eventuelle
Zertifikateunter- oder -überdeckung quantifiziert und graphisch verdeutlicht. Das
Modul stellt somit ein nützliches Hilfsmittel im Risikomanagementprozess von emissionsintensiven Unternehmen dar. Auf den von diesem Modul gelieferten Daten baut eine eventuell anschließende Investitionsanalyse auf, beispielsweise eine stochastische Investitionsplanung. Dieses Papier veranschaulicht die Motivation und den rechtlichen Rahmen sowie die technische Konzeption des Instruments.
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Labor Demand During the Crisis: What Happened in Germany?
Claudia M. Buch
IZA. Discussion Paper No. 6074,
2011
Abstract
In Germany, the employment response to the post-2007 crisis has been muted compared to other industrialized countries. Despite a large drop in output, employment has hardly changed. In this paper, we analyze the determinants of German firms’ labor demand during the crisis using a firm-level panel dataset. Our analysis proceeds in two steps. First, we estimate a dynamic labor demand function for the years 2000-2009 accounting for the degree of working time flexibility and the presence of works councils. Second, on the basis of these
estimates, we use the difference between predicted and actual employment as a measure of labor hoarding as the dependent variable in a cross-sectional regression for 2009. Apart from total labor hoarding, we also look at the determinants of subsidized labor hoarding through short-time work. The structural characteristics of firms using these channels of adjustment differ. Product market competition has a negative impact on total labor hoarding but a positive effect on the use of short-time work. Firm covered by collective agreements hoard less labor overall; firms without financial frictions use short-time work less intensively.
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A Model for the Valuation of Carbon Price Risk
Henry Dannenberg, Wilfried Ehrenfeld
Antes, R.; Hansjürgen, B.; Letmathe, P.; Pickl, S. (Hrsg.), Emissions Trading - Institutional Design, Decision Making and Corporate Strategies (Second Edition),
2011
Abstract
Die Modellierung des CO2-Zertifikatepreisrisikos ist ein wichtiger Teilaspekt eines ganzheitlichen Managements von mit dem Emissionshandel verbundenen Unternehmensrisiken. Das Papier diskutiert ein Preisbildungsmodell, auf dessen Grundlage das Zertifikatepreisrisiko bewertet werden kann. Es wird davon ausgegangen, dass der Zertifikatepreis durch die erwarteten Grenzvermeidungskosten der Handelsperiode determiniert wird und stochastisch um dieses Niveau schwankt. Dieses Verhalten wird mit einem Mean-Reversion-Prozess modelliert. Aufgrund von Unsicherheiten bezüglich künftiger Umweltzustände ist jedoch zu vermuten, dass innerhalb einer Handelsperiode durch das Bekanntwerden neuer Informationen sprunghafte Veränderungen der erwarteten Grenzvermeidungskosten auftreten können, womit sprunghafte Verschiebungen des erwarteten Preisniveaus einhergehen. Neben der ParameterSchätzung ist es daher auch ein Ziel der Arbeit, den Mean-Reversion-Prozess so zu modifizieren, dass solche sprunghaften Veränderungen des erwarteten Reversion-Niveaus abgebildet werden können.
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Bank-specific Shocks and the Real Economy
Claudia M. Buch, Katja Neugebauer
Journal of Banking and Finance,
Nr. 8,
2011
Abstract
Governments often justify interventions into the financial system in the form of bail outs or liquidity assistance with the systemic importance of large banks for the real economy. In this paper, we analyze whether idiosyncratic shocks to loan growth at large banks have effects on real GDP growth. We employ a measure of idiosyncratic shocks which follows Gabaix (forthcoming). He shows that idiosyncratic shocks to large firms have an impact on US GDP growth. In an application to the banking sector, we find evidence that changes in lending by large banks have a significant short-run impact on GDP growth. Episodes of negative loan growth rates and the Eastern European countries in our sample drive these results.
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Central and Eastern European Countries in the Global Financial Crisis: A Typical Twin Crisis?
Diemo Dietrich, Tobias Knedlik, Axel Lindner
Post-Communist Economies,
Nr. 4,
2011
Abstract
This paper shows that during the Great Recession, banking and currency crises occurred simultaneously in Central and Eastern Europe. Events, however, differed widely from what happened during the Asian crisis that usually serves as the model case for the concept of twin crises. We look at three elements that help explaining the nature of events in Central and Eastern Europe: the problem of currency mismatches, the relation between currency and banking crises, and the importance of multinational banks for financial stability. It is shown that theoretical considerations concerning internal capital markets of multinational banks help understand what happened on capital markets and in the financial sector of the region. We discuss opposing effects of multinational banking on financial stability and find that institutional differences are the key to understand differing effects of the global financial crisis. In particular, we argue that it matters if international activities are organized by subsidiaries or by cross-border financial services, how large the share of foreign currency-denominated credit is and whether the exchange rate is fixed or flexible. Based on these three criteria we give an explanation why the pattern of the crisis in the Baltic States differed markedly from that in Poland and the Czech Republic, the two largest countries of the region.
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