Die Abteilung „Finanzmärkte“ am IWH befasst sich mit dem institutionellen Wandel von Finanzsystemen in Europa. Die Forschung der Abteilung beschäftigt sich mit den Ursachen und Wirkungen der internationalen Tätigkeit von Banken und anderen Finanzintermediären, dem Zusammenhang zwischen Marktstrukturen im Bankensektor und gesamtwirtschaftlicher Stabilität, Ansteckungseffekten auf internationalen Finanzmärkten sowie der Rolle des Finanzsektors für die Realwirtschaft.
Hierbei spielen insbesondere Wechselwirkungen zwischen dem Finanzsektor und Wachstums- und Innovationsprozessen in der Realwirtschaft eine Rolle. Methodisch zielt die Forschung der Abteilung auf die integrierte Betrachtung von Anpassungen auf der Mikro- und Makroebene sowie die Evaluation wirtschaftspolitischer Maßnahmen zur Regulierung von Finanzmärkten.
Financial Incentives and Loan Officer Behavior: Multitasking and Allocation of Effort under an Incomplete Contract
in: Journal of Financial and Quantitative Analysis, im Erscheinen
In this paper we investigate the implications of providing loan officers with a compensation structure that rewards loan volume and penalizes poor performance versus a fixed wage unrelated to performance. We study detailed transaction information for more than 45,000 loans issued by 240 loan officers of a large commercial bank in Europe. We examine the three main activities that loan officers perform: monitoring, originating, and screening. We find that when the performance of their portfolio deteriorates, loan officers increase their effort to monitor existing borrowers, reduce loan origination, and approve a higher fraction of loan applications. These loans, however, are of above-average quality. Consistent with the theoretical literature on multitasking in incomplete contracts, we show that loan officers neglect activities that are not directly rewarded under the contract, but are in the interest of the bank. In addition, while the response by loan officers constitutes a rational response to a time allocation problem, their reaction to incentives appears myopic in other dimensions.
College Choice, Selection and Allocation Mechanisms: A Structural Empirical Analysis
in: Quantitative Economics, im Erscheinen
We use rich microeconomic data on performance and choices of students at college entry to analyze interactions between the selection mechanism, eliciting college preferences through exams, and the allocation mechanism. We set up a framework in which success probabilities and student preferences are shown to be identified from data on their choices and their exam grades under exclusion restrictions and support conditions. The counterfactuals we consider balance the severity of congestion and the quality of the match between schools and students. Moving to deferred acceptance or inverting the timing of choices and exams are shown to increase welfare. Redistribution among students and among schools is also sizeable in all counterfactual experiments.
Risk and Earnings Quality: Evidence from Bank Enforcement Actions, Contemporary
in: Journal of Banking & Finance, im ErscheinenPublikation lesen
Borrowers Under Water! Rare Disasters, Regional Banks, and Recovery Lending
in: Journal of Financial Intermediation, im Erscheinen
We show that local banks provide corporate recovery lending to firms affected by adverse regional macro shocks. Banks that reside in counties unaffected by the natural disaster that we specify as macro shock increase lending to firms inside affected counties by 3%. Firms domiciled in flooded counties, in turn, increase corporate borrowing by 16% if they are connected to banks in unaffected counties. We find no indication that recovery lending entails excessive risk-taking or rent-seeking. However, within the group of shock-exposed banks, those without access to geographically more diversified interbank markets exhibit more credit risk and less equity capital.
Delay Determinants of European Banking Union Implementation
in: European Journal of Political Economy, im Erscheinen
Most countries in the European Union (EU) delay the transposition of European Commission (EC) directives, which aim at reforming banking supervision, resolution, and deposit insurance. We compile a systematic overview of these delays to investigate if they result from strategic considerations of governments conditional on the state of their financial, regulatory, and political systems. Transposition delays pertaining to the three Banking Union directives differ considerably across the 28 EU members. Bivariate regression analyses suggest that existing national bank regulation and supervision drive delays the most. Political factors are less relevant. These results are qualitatively insensitive to alternative estimation methods and lag structures. Multivariate analyses highlight that well-stocked deposit insurance schemes speed-up the implementation of capital requirements, banking systems with many banks are slower in implementing new bank rescue and resolution rules, and countries with a more intensive sovereign-bank nexus delay the harmonization of EU deposit insurance more.
‘And Forgive Us Our Debts’: Do Christian Moralities Influence Over-indebtedness of Individuals?
in: IWH-Diskussionspapiere, Nr. 8, 2019
This paper analyses whether Christian moralities and rules formed differently by Catholics and Protestants impact the likelihood of households to become overindebted. We find that over-indebtedness is lower in regions in which Catholics outweigh Protestants, indicating that Catholics‘ forgiveness culture and a stricter enforcement of rules by Protestants serve as explanations for our results. Our results provide evidence that religion affects the financial situations of individuals and show that even 500 years after the split between Catholics and Protestants, the differences in the mind-sets of both denominations play an important role for situations of severe financial conditions.
What Drives Banks‘ Geographic Expansion? The Role of Locally Non-diversifiable Risk
in: IWH-Diskussionspapiere, Nr. 6, 2019
We show that banks that are facing relatively high locally non-diversifiable risks in their home region expand more across states than banks that do not face such risks following branching deregulation in the 1990s and 2000s. These banks with high locally non-diversifiable risks also benefit relatively more from deregulation in terms of higher bank stability. Further, these banks expand more into counties where risks are relatively high and positively correlated with risks in their home region, suggesting that they do not only diversify but also build on their expertise in local risks when they expand into new regions.
Benign Neglect of Covenant Violations: Blissful Banking or Ignorant Monitoring?
in: IWH-Diskussionspapiere, Nr. 3, 2019
Theoretically, bank‘s loan monitoring activity hinges critically on its capitalisation. 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 capitalised 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.
Politics, Banks, and Sub-sovereign Debt: Unholy Trinity or Divine Coincidence?
in: Deutsche Bundesbank Discussion Paper, Nr. 53, 2018
We exploit election-driven turnover in State and local governments in Germany to study how banks adjust their securities portfolios in response to the loss of political connections. We find that local savings banks, which are owned by their host county and supervised by local politicians, increase significantly their holdings of home-State sovereign bonds when the local government and the State government are dominated by different political parties. Banks' holdings of other securities, like federal bonds, bonds issued by other States, or stocks, are not affected by election outcomes. We argue that banks use sub-sovereign bond purchases to gain access to politically distant government authorities.
May the Force Be with You: Exit Barriers, Governance Shocks, and Profitability Sclerosis in Banking
in: Deutsche Bundesbank Discussion Paper, Nr. 49, 2018
We test whether limited market discipline imposes exit barriers and poor profitability in banking. We exploit an exogenous shock to the governance of government-owned banks: the unification of counties. County mergers lead to enforced government-owned bank mergers. We compare forced to voluntary bank exits and show that the former cause better bank profitability and efficiency at the expense of riskier financial profiles. Regarding real effects, firms exposed to forced bank mergers borrow more at lower cost, increase investment, and exhibit higher employment. Thus, reduced exit frictions in banking seem to unleash the economic potential of both banks and firms.