We analyse the relevance of losses, accounting information on tax loss carryforwards, and deferred taxes for the prediction of earnings and cash flows up to four years ahead. We use a unique hand-collected panel of German listed firms encompassing detailed information on tax loss carryforwards and deferred taxes from the tax footnote. Our out-of-sample predictions show that considering accounting information on tax loss carryforwards and deferred taxes does not enhance the accuracy of performance forecasts and can even worsen performance predictions. We find that common forecasting approaches that treat positive and negative performances equally or that use a dummy variable for negative performance can lead to biased performance forecasts, and we provide a simple empirical specification to account for that issue.

We investigate whether the levels of social capital in U.S. counties, as captured by strength of civic norms and density of social networks in the counties, are systematically related to tax avoidance activities of corporations with headquarters located in the counties. We find strong negative associations between social capital and corporate tax avoidance, as captured by effective tax rates and book-tax differences. These results are incremental to the effects of local religiosity and firm culture toward socially irresponsible activities. They are robust to using organ donation as an alternative social capital proxy and fixed effect regressions. They extend to aggressive tax avoidance practices. Additionally, we provide corroborating evidence using firms with headquarters relocation that changes the exposure to social capital. We conclude that social capital surrounding corporate headquarters provides environmental influences constraining corporate tax avoidance.

We analyze the impact of the French 2012 financial transaction tax (FTT) on trading volumes, stock prices, liquidity, and volatility. We extend the empirical research by identifying FTT announcement and short-run treatment effects, which can distort difference-in-differences estimates. In addition, we consider long-run volatility measures that better fit the French FTT’s legislative design. While we find strong evidence of a positive FTT announcement effect on trading volumes, there is almost no statistically significant evidence of a long-run treatment effect. Thus, evidence of a strong reduction of trading volumes resulting from the French FTT might be driven by announcement effects and short-term treatment effects. We find evidence of an increase of intraday volatilities in the announcement period and a significant reduction of weekly and monthly volatilities in the treatment period. Our findings support theoretical considerations suggesting a stabilizing impact of FTTs on financial markets.

We study the impact of firms’ abnormal business operations on their future crash risk in stock prices. Computed based on real earnings management (REM) models, firms’ deviation in real operations (DROs) from industry norms is shown to be positively associated with their future crash risk. This association is incremental to that between discretionary accruals (DAs) and crash risk found by prior studies. Moreover, after Sarbanes–Oxley Act (SOX) of 2002, DRO’s predictive power for crash risk strengthens substantially, while DA’s predictive power essentially dissipates. These results are consistent with the prior finding that managers shift from accrual earnings management to REM after SOX. We further develop a suspect-firm approach to capture firms’ use of DRO for REM purposes. This analysis shows that REM-firms experience a significant increase in crash risk in the following year. These findings suggest that the impact of DRO on crash risk is at least partially through REM.

Using a 50 % sample of all private sector establishments in Germany, we report that spinoffs are larger, initially employ more skilled and more experienced workers, and pay higher wages than other startups. We investigate whether spinoffs are more likely to survive than other startups, and whether spinoff survival depends on the quality and size of their parent companies, as suggested in some of the theoretical and empirical literature. Our estimated survival models confirm that spinoffs are generally less likely to exit than other startups. We also distinguish between pulled spinoffs, where the parent company continues after they are founded, and pushed spinoffs, where the parent company stops operations. Our results indicate that in western and eastern Germany and in all sectors investigated, pulled spinoffs have a higher probability of survival than pushed spinoffs. Concerning the parent connection, we find that intra-industry spinoffs and spinoffs emerging from better-performing or smaller parent companies are generally less likely to exit.

Membership in a currency union is not irreversible. Exit expectations may emerge during sovereign debt crises, because exit allows countries to reduce their liabilities through a currency redenomination. As market participants anticipate this possibility, sovereign debt crises intensify. We establish this formally within a small open economy model of changing policy regimes. The model permits explosive dynamics of debt and sovereign yields inside currency unions and allows us to distinguish between exit expectations and those of an outright default. By estimating the model on Greek data, we quantify the contribution of exit expectations to the crisis dynamics during 2009 to 2012.

Anhand umfangreicher administrativer Daten vergleicht diese Studie die Entwicklung der Überlebenschancen neu gegründeter Betriebe in West- und Ostdeutschland für die Jahre 1994 bis 2008. Eine zentrale Frage lautet dabei, ob eine Angleichung der Überlebensraten zwischen West- und Ostdeutschland zu beobachten ist. Anhand von Methoden der Verweildaueranalyse kommt die Studie zu dem Ergebnis, dass sich die Überlebenschancen neu gegründeter Betriebe zu Beginn des Beobachtungszeitraums nicht stark zwischen West- und Ostdeutschland unterscheiden. In den Jahren 1998 und 1999 steigt die Schließungswahrscheinlichkeit in Ostdeutschland stark an, in Westdeutschland jedoch nicht, was vermutlich auf eine Änderung der Subventionspolitik für Betriebe in Ostdeutschland zurückzuführen ist. Seit der Jahrtausendwende nimmt der Unterschied in den Schließungswahrscheinlichkeiten zwischen West- und Ostdeutschland ab, was auf eine Angleichung der Überlebenschancen hindeutet.

Our primary goal is to analyse the drivers of evolutionary network change processes by using a stochastic actor-based simulation approach. We contribute to the literature by combining two unique datasets, concerning the German laser and automotive industry, between 2002 and 2006 to explore whether geographical, network-related, and techno-logical determinants affect the evolution of networks, and if so, as to what extent these determinants systematically differ for science-driven industries compared to scale-intensive industries. Our results provide empirical evidence for the explanatory power of network-related determinants in both industries. The ‘experience effect’ as well as the ‘transitivity effects’ are significant for both industries but more pronounced for laser manufacturing firms. When it comes to ‘geographical effects’ and ‘technological ef-fects’ the picture changes considerably. While geographical proximity plays an important role in the automotive industry, firms in the laser industry seem to be less dependent on geographical closeness to cooperation partners; instead they rather search out for cooperation opportunities in distance. This might reflect the strong dependence of firms in science-driven industries to access diverse external knowledge, which cannot necessarily be found in the close geographical surrounding. Technological proximity negatively influences cooperation decisions for laser source manufacturers, yet has no impact for automotive firms. In other words, technological heterogeneity seems to ex-plain, at least in science-driven industries, the attractiveness of potential cooperation partners.

Using a 50 percent sample of all establishments in the German private sector, we report that spinoffs are larger and initially employ more skilled and more experienced workers than other startups. Controlling for these and other differences, we find that spinoffs are less likely to exit than other startups. We show that in West and East Germany and in all sectors investigated pulled spinoffs (where the parent company continues after they are founded) generally have the lowest exit hazards, followed by pushed spinoffs (where the parent company stops operations). The difference between both types of spinoffs is particularly pronounced in the first three years. Contrary to expectations, intra-industry spinoffs are not found to have lower exit hazards in our sample.

Greater openness for trade can have positive welfare effects in terms of higher growth. But increased openness may also increase uncertainty through a higher volatility of employment. We use regional data from Germany to test whether openness for trade has an impact on volatility. We find a downward trend in the unconditional volatility of employment, paralleling patterns for output volatility. The conditional volatility of employment, measuring idiosyncratic developments across states, in contrast, has remained fairly unchanged. In contrast to evidence for the US, we do not find a significant link between employment volatility and trade openness.