Do courts matter for Firm Value? Evidence from the U.S. Court System
Stefano Colonnello, Christoph Herpfer
Journal of Law and Economics,
Nr. 2,
2021
Abstract
We estimate how US state courts impact firm value by exploiting a US Supreme Court ruling that exogenously changed firms’ exposure to different courts. We find that increased exposure to more business-friendly courts is associated with positive announcement returns. We find no such association for objective court quality. Consistent with the ruling impacting firm value through the legal environment channel, we find that effects are stronger for firms with high litigation exposure. We find that the ruling led to a shift in both the geographic distribution of lawsuits and operations of firms.
Artikel Lesen
Unternehmensinsolvenzen in Deutschland im Zuge der Corona-Krise
Oliver Holtemöller
Wirtschaft im Wandel,
Nr. 1,
2021
Abstract
Die Corona-Pandemie hat die deutsche Wirtschaft in eine tiefe Rezession getrieben. In diesem Beitrag wird analysiert, wie sich die Rezession in den Unternehmensinsolvenzen niederschlägt. Prognosen auf Basis des üblichen Zusammenhangs zwischen Bruttowertschöpfung und Unternehmensinsolvenzen nach Wirtschaftsbereichen deuten auf eine kräftige Zunahme der Unternehmensinsolvenzen im zweiten Halbjahr 2020 hin. Für Unternehmensinsolvenzen gelten allerdings seit März 2020 Ausnahmeregelungen, die das Ziel haben, allein durch die Corona-Krise bedingte Unternehmensinsolvenzen zu vermeiden. Ferner erhalten die Unternehmen finanzielle Unterstützung im Rahmen der Corona-Hilfspakete. Mit zunehmender Dauer der wirtschaftlichen Beeinträchtigungen nimmt die Wahrscheinlichkeit von Unternehmensinsolvenzen gleichwohl zu, sodass nach Aufhebung der Ausnahmeregelungen Insolvenzen nachgeholt werden dürften und das übliche konjunkturelle Muster wieder greift.
Artikel Lesen
Local Banks as Difficult-to-replace SME Lenders: Evidence from Bank Corrective Programs
Iftekhar Hasan, Krzysztof Jackowicz, Robert Jagiełło, Oskar Kowalewski, Łukasz Kozłowski
Journal of Banking and Finance,
February
2021
Abstract
In this study, we assess capabilities of different types of banks to cater to the financial needs of small and medium-sized enterprises (SMEs). Using a comprehensive dataset from an emerging economy, including the information on local banks’ corrective programs, we find that local banks remain difficult-to-replace lenders for SMEs. We show that presence of healthy local banks in an SME's vicinity immunizes the SME against the deterioration of access to bank financing linked to other local banks’ corrective programs. In contrast, large banks are unable to replace the lost lending from local competitors under corrective programs.
Artikel Lesen
Benign Neglect of Covenant Violations: Blissful Banking or Ignorant Monitoring
Stefano Colonnello, Michael Koetter, Moritz Stieglitz
Economic Inquiry,
Nr. 1,
2021
Abstract
Theoretically, bank's loan monitoring activity hinges critically on its capitalization. To proxy for monitoring intensity, we use changes in borrowers' investment following loan covenant violations, when creditors can intervene in the governance of the firm. Exploiting granular bank‐firm relationships observed in the syndicated loan market, we document substantial heterogeneity in monitoring across banks and through time. Better capitalized banks are more lenient monitors that intervene less with covenant violators. Importantly, this hands‐off approach is associated with improved borrowers' performance. Beyond enhancing financial resilience, regulation that requires banks to hold more capital may thus also mitigate the tightening of credit terms when firms experience shocks.
Artikel Lesen
Financial Technologies and the Effectiveness of Monetary Policy Transmission
Iftekhar Hasan, Boreum Kwak, Xiang Li
IWH Discussion Papers,
Nr. 26,
2020
Abstract
This study investigates whether and how financial technologies (FinTech) influence the effectiveness of monetary policy transmission. We use an interacted panel vector autoregression model to explore how the effects of monetary policy shocks change with regional-level FinTech adoption. Results indicate that FinTech adoption generally mitigates monetary policy transmission to real GDP, consumer prices, bank loans, and housing prices, with the weakened transmission to bank loan growth being the most pronounced. The regulatory arbitrage and competition between FinTech and banks are the possible mechanisms underlying the mitigated transmission.
Artikel Lesen
Public Bank Guarantees and Allocative Efficiency
Reint E. Gropp, Andre Guettler, Vahid Saadi
Journal of Monetary Economics,
December
2020
Abstract
A natural experiment and matched bank/firm data are used to identify the effects of bank guarantees on allocative efficiency. We find that with guarantees in place unproductive firms receive larger loans, invest more, and maintain higher rates of sales and wage growth. Moreover, firms produce less productively. Firms also survive longer in banks’ portfolios and those that enter guaranteed banks’ portfolios are less profitable and productive. Finally, we observe fewer economy-wide firm exits and bankruptcy filings in the presence of guarantees. Overall, the results are consistent with the idea that guaranteed banks keep unproductive firms in business for too long.
Artikel Lesen
Surges and Instability: The Maturity Shortening Channel
Xiang Li, Dan Su
IWH Discussion Papers,
Nr. 23,
2020
Abstract
Capital inflow surges destabilise the economy through a maturity shortening mechanism. The underlying reason is that firms have incentives to redeem their debt on demand to accommodate the potential liquidity needs of global investors, which makes international borrowing endogenously fragile. Based on a theoretical model and empirical evidence at both the firm and macro levels, our main findings are twofold. First, a significant association exists between surges and shortened corporate debt maturity, especially for firms with foreign bank relationships and higher redeployability. Second, the probability of a crisis following surges with a flattened yield curve is significantly higher than that following surges without one. Our study suggests that debt maturity is the key to understand the financial instability consequences of capital inflow bonanzas.
Artikel Lesen
Executive Compensation, Macroeconomic Conditions, and Cash Flow Cyclicality
Stefano Colonnello
Finance Research Letters,
November
2020
Abstract
I model the joint effects of debt, macroeconomic conditions, and cash flow cyclicality on risk-shifting behavior and managerial wealth-for-performance sensitivity. The model shows that risk-shifting incentives rise during recessions and that the shareholders can eliminate such adverse incentives by reducing the equity-based compensation in managerial contracts. Moreover, this reduction should be larger in highly procyclical firms. These novel, testable predictions provide insights into optimal shareholder responses to agency costs of debt throughout the business cycle.
Artikel Lesen
Why are some Chinese Firms Failing in the US Capital Markets? A Machine Learning Approach
Gonul Colak, Mengchuan Fu, Iftekhar Hasan
Pacific-Basin Finance Journal,
June
2020
Abstract
We study the market performance of Chinese companies listed in the U.S. stock exchanges using machine learning methods. Predicting the market performance of U.S. listed Chinese firms is a challenging task due to the scarcity of data and the large set of unknown predictors involved in the process. We examine the market performance from three different angles: the underpricing (or short-term market phenomena), the post-issuance stock underperformance (or long-term market phenomena), and the regulatory delistings (IPO failure risk). Using machine learning techniques that can better handle various data problems, we improve on the predictive power of traditional estimations, such as OLS and logit. Our predictive model highlights some novel findings: failed Chinese companies have chosen unreliable U.S. intermediaries when going public, and they tend to suffer from more severe owners-related agency problems.
Artikel Lesen
