Explicit Deposit Insurance Design: International Effects on Bank Lending during the Global Financial Crisis
Iftekhar Hasan, Liuling Liu, Anthony Saunders, Gaiyan Zhang
Journal of Financial Intermediation,
July
2022
Abstract
Studies find that during the 2007–2009 global financial crisis, loan spreads rose and corporate lending tightened, especially for foreign borrowers (a flight-home effect). We find that banks in countries with explicit deposit insurance (DI) made smaller reductions in total lending and foreign lending, experienced smaller increases in loan spreads, and had quicker post-crisis recoveries. These effects are more pronounced for banks heavily relying on deposit funding. Evidence also reveals that more generous or credible DI design is associated with a stronger stabilization effect on bank lending during the crisis, confirmed by the difference-in-differences analysis based on expansion of DI coverage during the crisis. The stabilization effect is robust to the use of country-specific crisis measures and control of temporary government guarantees.
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Das Potenzial von Bankkreditspreads für die Konjunkturprognose
Daniel Streitz
Wirtschaft im Wandel,
Nr. 2,
2022
Abstract
Prognosemodelle für die zukünftige wirtschaftliche Entwicklung verwenden häufig marktbasierte Indikatoren wie Spreads von Unternehmensanleihen, die den Risikoaufschlag gegenüber einem Referenzzins angeben. Anleihespreads bilden jedoch nur die Entwicklung von Risiken für Unternehmen ab, die regelmäßig Anleihen emittieren – im Durchschnitt größere, sichere Firmen. Neuartige Daten zu Bankkrediten, die im Sekundärmarkt gehandelt werden, erlauben auch die Konstruktion von Kreditspreads. Kreditmarktdaten umfassen ein breiteres Spektrum an Firmen, inklusive kleinerer Firmen, die stärker von Finanzmarktfriktionen betroffen sind. Tests zeigen, dass Kreditspreads tatsächlich mehr Informationen über wirtschaftliche Entwicklungen beinhalten als Anleihespreads und daher das Potenzial haben, Prognosemodelle zu verbessern.
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Climate Change-Related Regulatory Risks and Bank Lending
Isabella Müller, Eleonora Sfrappini
ECB Working Paper,
Nr. 2670,
2022
Abstract
We identify the effect of climate change-related regulatory risks on credit real-location. Our evidence suggests that effects depend borrower's region. Following an increase in salience of regulatory risks, banks reallocate credit to US firms that could be negatively impacted by regulatory interventions. Conversely, in Europe, banks lend more to firms that could benefit from environmental regulation. The effect is moderated by banks' own loan portfolio composition. Banks with a portfolio tilted towards firms that could be negatively a affected by environmental policies increasingly support these firms. Overall, our results indicate that financial implications of regulation associated with climate change appear to be the main drivers of banks' behavior.
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Commitment or Constraint? The Effect of Loan Covenants on Merger and Acquisition Activity
Gene Ambrocio, Gonul Colak, Iftekhar Hasan
Finance Research Letters,
June
2022
Abstract
We investigate how loan covenants associated with potential target firms affect takeover deals. We propose two possible channels. Under a discipline channel, the target firm becomes an attractive candidate for takeovers and merger deals are facilitated. Under a constraint channel, covenants hinder merger activity. We find support for the latter channel. Takeover likelihood is lower, deal failures are more common, the likelihood of price renegotiation is higher, and acquisition premium is lower when the target is bound by covenants. Covenant tightness exacerbates this effect.
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The (Heterogenous) Economic Effects of Private Equity Buyouts
Steven J. Davis, John Haltiwanger, Kyle Handley, Josh Lerner, Ben Lipsius, Javier Miranda
Abstract
The effects of private equity buyouts on employment, productivity, and job reallocation vary tremendously with macroeconomic and credit conditions, across private equity groups, and by type of buyout. We reach this conclusion by examining the most extensive database of U.S. buyouts ever compiled, encompassing thousands of buyout targets from 1980 to 2013 and millions of control firms. Employment shrinks 13% over two years after buyouts of publicly listed firms – on average, and relative to control firms – but expands 13% after buyouts of privately held firms. Post-buyout productivity gains at target firms are large on average and much larger yet for deals executed amidst tight credit conditions. A post-buyout tightening of credit conditions or slowing of GDP growth curtails employment growth and intra-firm job reallocation at target firms. We also show that buyout effects differ across the private equity groups that sponsor buyouts, and these differences persist over time at the group level. Rapid upscaling in deal flow at the group level brings lower employment growth at target firms.
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Gender, Credit, and Firm Outcomes
Manthos D. Delis, Iftekhar Hasan, Maria Iosifidi, Steven Ongena
Journal of Financial and Quantitative Analysis,
Nr. 1,
2022
Abstract
Small and micro enterprises are usually majority-owned by entrepreneurs. Using a unique sample of loan applications from such firms, we study the role of owners’ gender in bank credit decisions and post-credit-decision firm outcomes. We find that, ceteris paribus, female entrepreneurs are more prudent loan applicants than are males, since they are less likely to apply for credit or to default after loan origination. The relatively more aggressive behavior of male applicants pays off, however, in terms of higher average firm performance after loan origination.
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The Role of State-owned Banks in Crises: Evidence from German Banks During COVID-19
Xiang Li
IWH Discussion Papers,
Nr. 6,
2022
Abstract
By adopting a difference-in-differences specification combined with propensity score matching, I provide evidence using the microdata of German banks that stateowned savings banks have lent less than credit cooperatives during the COVID-19 crisis. In particular, the weaker lending effects of state-owned banks are pronounced for long-term and nonrevolving loans but insignificant for short-term and revolving loans. Moreover, the negative impact of government ownership is larger for borrowers who are more exposed to the COVID-19 shock and in regions where the ruling parties are longer in office and more positioned on the right side of the political spectrum.
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The Diplomacy Discount in Global Syndicated Loans
Gene Ambrocio, Xian Gu, Iftekhar Hasan, Panagiotis Politsidis
Journal of International Money and Finance,
February
2022
Abstract
This paper investigates whether state-to-state political ties with the United States affect the pricing of global syndicated loans. We find that a one-standard-deviation improvement in state political ties between the U.S. and the government of a borrower’s home country is associated with a 14.7 basis points lower loan spread, shaving off about 11.8 million USD in interest payments over the duration of the average loan for borrowers. Results also show that the effect of political ties is stronger for narrower and more concentrated loan syndicates, when lead arrangers are U.S. banks, during periods in which the U.S. is engaged in armed conflicts, when the U.S. president belongs to the Republican Party, and for borrowers with better balance sheets and prior lending relationships. Notably, not all firms benefit equally, as cross-listed firms and firms in countries with strong institutional quality and ability to attract institutional investors are much less affected by political ties.
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Banking Deregulation and Consumption of Home Durables
H. Evren Damar, Ian Lange, Caitlin McKennie, Mirko Moro
IWH Discussion Papers,
Nr. 4,
2022
Abstract
We exploit the spatial and temporal variation of the staggered introduction of interstate banking deregulation across the U.S. to study the relationship between credit constraints and consumption of durables. Using the American Housing Survey from 1981 to 1989, we link the timing of these reforms with evidence of a credit expansion and household responses on many margins. We find evidence that low-income households are more likely to purchase new appliances after the deregulation. These durable goods allowed households to consume less natural gas and spend less time in domestic activities after the reforms.
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26.01.2022 • 2/2022
Investitionen, Auslastungsgrad und öffentliche Finanzen in der mittleren Frist: Implikationen des Zweiten Nachtragshaushalts 2021
Die Bundesregierung plant, mit dem Zweiten Nachtragshaushalt 2021 dem Energie- und Klimafonds eine Rücklage in Höhe von 60 Mrd. Euro zuzuführen. Die Mittel sollen auch die gesamtwirtschaftlichen Folgekosten der Pandemie verringern. Nach der Mittelfristprojektion des Leibniz-Instituts für Wirtschaftsforschung Halle (IWH) dürften die beabsichtigten Mehrausgaben auf dem Höhepunkt ihrer Wirksamkeit im Jahr 2024 die Produktion um etwa 0,5% steigern. „Allerdings werden die zusätzlichen Investitionen die seit Pandemiebeginn ausgebliebene Investitionstätigkeit bei Weitem nicht kompensieren“, sagt Oliver Holtemöller, Leiter der Abteilung Makroökonomik und Vizepräsident des IWH. Den positiven gesamtwirtschaftlichen Effekten steht zudem gegenüber, dass der Nachtragshaushalt das Vertrauen in die Verlässlichkeit der Schuldenbremse reduzieren dürfte.
Oliver Holtemöller
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