O Brother, Where Start Thou? Sibling Spillovers on College and Major Choice in Four Countries
Adam Altmejd, Andrés Barrios-Fernández, Marin Drlje, Joshua Goodman, Michael Hurwitz, Dejan Kovač, Christine Mulhern, Christopher Neilson, Jonathan Smith
Quarterly Journal of Economics,
No. 3,
2021
Abstract
Family and social networks are widely believed to influence important life decisions, but causal identification of those effects is notoriously challenging. Using data from Chile, Croatia, Sweden, and the United States, we study within-family spillovers in college and major choice across a variety of national contexts. Exploiting college-specific admissions thresholds that directly affect older but not younger siblings’ college options, we show that in all four countries a meaningful portion of younger siblings follow their older sibling to the same college or college-major combination. Older siblings are followed regardless of whether their target and counterfactual options have large, small, or even negative differences in quality. Spillover effects disappear, however, if the older sibling drops out of college, suggesting that older siblings’ college experiences matter. That siblings influence important human capital investment decisions across such varied contexts suggests that our findings are not an artifact of particular institutional detail but a more generalizable description of human behavior. Causal links between the postsecondary paths of close peers may partly explain persistent college enrollment inequalities between social groups, and this suggests that interventions to improve college access may have multiplier effects.
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Paid Vacation Use: The Role of Works Councils
Laszlo Goerke, Sabrina Jeworrek
Economic and Industrial Democracy,
No. 3,
2021
Abstract
The article investigates the relationship between codetermination at the plant level and paid vacation in Germany. From a legal perspective, works councils have no impact on vacation entitlements, but they can affect their use. Employing data from the German Socio-Economic Panel (SOEP), the study finds that male employees who work in an establishment, in which a works council exists, take almost two additional days of paid vacation annually, relative to employees in an establishment without such institution. The effect for females is much smaller, if discernible at all. The data suggest that this gender gap might be due to the fact that women exploit vacation entitlements more comprehensively than men already in the absence of a works council.
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Cultural Resilience, Religion, and Economic Recovery: Evidence from the 2005 Hurricane Season
Iftekhar Hasan, Stefano Manfredonia, Felix Noth
IWH Discussion Papers,
No. 9,
2021
Abstract
This paper investigates the critical role of religion in the economic recovery after high-impact natural disasters. Exploiting the 2005 hurricane season in the southeast United States, we document that establishments in counties with higher religious adherence rates saw a significantly stronger recovery in terms of productivity for 2005-2010. Our results further suggest that a particular religious denomination does not drive the effect. We observe that different aspects of religion, such as adherence, shared experiences from ancestors, and institutionalised features, all drive the effect on recovery. Our results matter since they underline the importance of cultural characteristics like religion during and after economic crises.
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Do courts matter for Firm Value? Evidence from the U.S. Court System
Stefano Colonnello, Christoph Herpfer
Journal of Law and Economics,
No. 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.
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Loan Syndication under Basel II: How Do Firm Credit Ratings Affect the Cost of Credit?
Iftekhar Hasan, Suk-Joong Kim, Panagiotis Politsidis, Eliza Wu
Journal of International Financial Markets, Institutions and Money,
May
2021
Abstract
This paper investigates how syndicated lenders react to borrowers’ rating changes under heterogeneous conditions and different regulatory regimes. Our findings suggest that corporate downgrades that increase capital requirements for lending banks under the Basel II framework are associated with increased loan spreads and deteriorating non-price loan terms relative to downgrades that do not affect capital requirements. Ratings exert an asymmetric impact on loan spreads, as these remain unresponsive to rating upgrades, even when the latter are associated with a reduction in risk weights for corporate loans. The increase in firm borrowing costs is mitigated in the presence of previous bank-firm lending relationships and for borrowers with relatively strong performance, high cash flows and low leverage.
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Labor in the Boardroom
Jörg Heining, Simon Jäger, Benjamin Schoefer
Quarterly Journal of Economics,
No. 2,
2021
Abstract
We estimate the wage effects of shared governance, or codetermination, in the form of a mandate of one-third of corporate board seats going to worker representatives. We study a reform in Germany that abruptly abolished this mandate for stock corporations incorporated after August 1994, while it locked the mandate for the slightly older cohorts. Our research design compares firm cohorts incorporated before the reform and after; in a robustness check we draw on the analogous difference in unaffected firm types (LLCs). We find no effects of board-level codetermination on wages and the wage structure, even in firms with particularly flexible wages. The degree of rent sharing and the labor share are also unaffected. We reject that disinvestment could have offset wage effects through the canonical hold-up channel, as shared governance, if anything, increases capital formation.
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Does Capital Account Liberalization Affect Income Inequality?
Xiang Li, Dan Su
Oxford Bulletin of Economics and Statistics,
No. 2,
2021
Abstract
By adopting an identification strategy of difference‐in‐difference estimation combined with propensity score matching between liberalized and closed countries, this paper provides robust evidence that opening the capital account is associated with an increase in income inequality in developing countries. Specifically, capital account liberalization, in the long run, is associated with a reduction in the income share of the poorest half by 2.66–3.79% points and an increase in that of the richest 10% by 5.19–8.76% points. Moreover, directions and categories of capital account liberalization matter. The relationship is more pronounced when liberalizing inward and equity capital flows.
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Consumer Defaults and Social Capital
Brian Clark, Iftekhar Hasan, Helen Lai, Feng Li, Akhtar Siddique
Journal of Financial Stability,
April
2021
Abstract
Using account level data from a credit bureau, we study the role that social capital plays in consumer default decisions. We find that borrowers in communities with greater social capital are significantly less likely to default on loans, even after adjusting for different levels of income and other characteristics such as credit scores. The results are strongest for potentially strategic defaults on mortgages; a one standard deviation increase in social capital reduces such defaults by 12.4 %. These results can be generalized to any mortgage default. Our results also indicate that the effect of social capital is most prominent among more creditworthy borrowers, suggesting that when given a choice, the social cost of defaulting is an important factor affecting default decisions. We find a similar impact of social capital on consumer defaults in other datasets with more detailed information on borrowers as well. Our results are robust to modeling and methodology choices, as well as controlling for other drivers of default such as wealth, income and amenities from homeownership. Our results suggest that increasing social capital via measures to build community cohesion such as promotion of owner-occupied home ownership may be one avenue to deter consumer default.
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Who Benefits from Mandatory CSR? Evidence from the Indian Companies Act 2013
Jitendra Aswani, N. K. Chidambaran, Iftekhar Hasan
Emerging Markets Review,
March
2021
Abstract
We examine the value impact of mandatory Corporate Social Responsibility (CSR) spending required by the Indian Companies Act of 2013 for large and profitable Indian firms. We find that the external mandate is value decreasing, even after controlling for prior voluntary CSR activity by firms affected by the mandate. We also find that there is systematic crosssectional variation across firms. Firms that are profitable and firms in the Fast Moving Consumer Goods sector that voluntarily engaged in CSR, benefit from CSR. Industrial firms and firms with high capital expenditures are negatively impacted by the mandate. We conclude that a one-size-fits-all approach to CSR is sub-optimal and value decreasing.
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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.
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