Shareholder Democracy in Play: Career Consequences of Proxy Contests
Vyacheslav Fos, Margarita Tsoutsoura
Journal of Financial Economics,
No. 2,
2014
Abstract
This paper shows that proxy contests have a significant adverse effect on careers of incumbent directors. Following a proxy contest, directors experience a significant decline in the number of directorships not only in the targeted company, but also in other nontargeted companies. The results are established using the universe of all proxy contests during 1996–2010. To isolate the effect of the proxy contest, our empirical strategy uses within-firm variation in directors׳ exposure to the possibility of being voted out and exploits the predetermined schedule of staggered boards that allows only a fraction of directors to be nominated for election every year. We find that nominated directors relative to non-nominated ones lose 58% more seats on other boards. The evidence suggests the proxy-contest mechanism imposes a significant career cost on incumbent directors.
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The Effect of Succession Taxes on Family Firm Investment: Evidence From a Natural Experiment
Margarita Tsoutsoura
Journal of Finance,
No. 2,
2015
Abstract
This paper provides causal evidence on the impact of succession taxes on firm investment decisions and transfer of control. Using a 2002 policy change in Greece that substantially reduced the tax on intrafamily transfers of businesses, I show that succession taxes lead to a more than 40% decline in investment around family successions, slow sales growth, and a depletion of cash reserves. Furthermore, succession taxes strongly affect the decision to sell or retain the firm within the family. I conclude by discussing implications of my findings for firms in the United States and Europe.
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Measuring Income Tax Evasion Using Bank Credit: Evidence from Greece
Nikolaos Artavanis, Adair Morse, Margarita Tsoutsoura
Quarterly Journal of Economics,
No. 2,
2016
Abstract
We document that in semiformal economies, banks lend to tax-evading individuals based on the bank’s assessment of the individual’s true income. This observation leads to a novel approach to estimate tax evasion. We use microdata on household credit from a Greek bank and replicate the bank underwriting model to infer the banks estimate of individuals’ true income. We estimate that 43–45% of self-employed income goes unreported and thus untaxed. For 2009, this implies €28.2 billion of unreported income, implying forgone tax revenues of over €11 billion or 30% of the deficit. Our method innovation allows for estimating the industry distribution of tax evasion in settings where uncovering the incidence of hidden cash transactions is difficult using other methods. Primary tax-evading industries are professional services—medicine, law, engineering, education, and media. We conclude with evidence that contemplates the importance of institutions, paper trail, and political willpower for the persistence of tax evasion.
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Stubborn Core Inflation – Time for Supply Side Policies
Oliver Holtemöller, Stefan Kooths, Torsten Schmidt, Timo Wollmershäuser
Wirtschaftsdienst,
No. 4,
2023
Abstract
Die Projektgruppe Gemeinschaftsdiagnose hat ihre Prognose für den Anstieg der Wirtschaftsleistung im laufenden Jahr auf 0,3 % angehoben. Im Herbst 2022 hatte sie noch mit einem Rückgang um 0,4 % gerechnet. Der konjunkturelle Rückschlag im Winterhalbjahr 2022/2023 ist glimpflicher ausgefallen als im Herbst befürchtet, weil die Energiepreise schneller wieder gesunken sind als erwartet. Dennoch wird die Inflationsrate nur langsam zurückgehen, von 6,9 % im vergangenen Jahr auf 6,0 % im Jahr 2023.
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Do Director Elections Matter?
Vyacheslav Fos, Kai Li, Margarita Tsoutsoura
Review of Financial Studies,
No. 4,
2018
Abstract
Using a hand-collected sample of election nominations for more than 30,000 directors over the period 2001–2010, we construct a novel measure of director proximity to elections called Years-to-election. We find that the closer directors of a board are to their next elections, the higher CEO turnover-performance sensitivity is. A series of tests, including one that exploits variation in Years-to-election that comes from other boards, supports a causal interpretation. Further analyses show that other governance mechanisms do not drive the relation between board Years-to-election and CEO turnover-performance sensitivity. We conclude that director elections have important implications for corporate governance.
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Drivers of Effort: Evidence from Employee Absenteeism
Morten Bennedsen, Margarita Tsoutsoura, Daniel Wolfenzon
Journal of Financial Economics,
No. 3,
2019
Abstract
We use detailed information on individual absent spells of all employees in 4140 firms in Denmark to show large differences in average absenteeism across firms. Using employees who switch firms, we decompose days absent into an individual component (e.g., motivation, work ethic) and a firm component (e.g., incentives, corporate culture). We find the firm component explains 50%–60% of the difference in absenteeism across firms, with the individual component explaining the rest. We present suggestive evidence of the mechanisms behind the firm effect with family firm status and concentrated ownership strongly correlated with decreases in absenteeism. We also analyze the firm characteristics that correlate with the individual effect and find that firms with stronger career incentives attract lower-absenteeism employees.
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Tail-risk Protection Trading Strategies
Natalie Packham, Jochen Papenbrock, Peter Schwendner, Fabian Wöbbeking
Quantitative Finance,
No. 5,
2017
Abstract
Starting from well-known empirical stylized facts of financial time series, we develop dynamic portfolio protection trading strategies based on econometric methods. As a criterion for riskiness, we consider the evolution of the value-at-risk spread from a GARCH model with normal innovations relative to a GARCH model with generalized innovations. These generalized innovations may for example follow a Student t, a generalized hyperbolic, an alpha-stable or a Generalized Pareto distribution (GPD). Our results indicate that the GPD distribution provides the strongest signals for avoiding tail risks. This is not surprising as the GPD distribution arises as a limit of tail behaviour in extreme value theory and therefore is especially suited to deal with tail risks. Out-of-sample backtests on 11 years of DAX futures data, indicate that the dynamic tail-risk protection strategy effectively reduces the tail risk while outperforming traditional portfolio protection strategies. The results are further validated by calculating the statistical significance of the results obtained using bootstrap methods. A number of robustness tests including application to other assets further underline the effectiveness of the strategy. Finally, by empirically testing for second-order stochastic dominance, we find that risk averse investors would be willing to pay a positive premium to move from a static buy-and-hold investment in the DAX future to the tail-risk protection strategy.
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Cryptocurrency Volatility Markets
Fabian Wöbbeking
Digital Finance,
No. 3,
2021
Abstract
By computing a volatility index (CVX) from cryptocurrency option prices, we analyze this market’s expectation of future volatility. Our method addresses the challenging liquidity environment of this young asset class and allows us to extract stable market implied volatilities. Two alternative methods are considered to compute volatilities from granular intra-day cryptocurrency options data, which spans over the COVID-19 pandemic period. CVX data therefore capture ‘normal’ market dynamics as well as distress and recovery periods. The methods yield two cointegrated index series, where the corresponding error correction model can be used as an indicator for market implied tail-risk. Comparing our CVX to existing volatility benchmarks for traditional asset classes, such as VIX (equity) or GVX (gold), confirms that cryptocurrency volatility dynamics are often disconnected from traditional markets, yet, share common shocks.
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Debatte um Intel-Ansiedlung: IWH veröffentlicht umstrittene Zitate im Volltext
Oliver Holtemöller
Einzelveröffentlichungen,
2023
Abstract
In einer öffentlichen Kontroverse über die Ansiedelung einer Chipfabrik in Magdeburg wurden Einschätzungen des Leibniz-Instituts für Wirtschaftsforschung Halle (IWH) teils stark kritisiert. Die Kritik bezieht sich auf einzelne Zitate aus einem Medienbericht. Nach Ansicht des IWH ergeben die Aussagen in ihrem ursprünglichen Zusammenhang ein anderes Bild, weshalb sie hier vollständig wiedergegeben werden.
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A Factor-model Approach for Correlation Scenarios and Correlation Stress Testing
Natalie Packham, Fabian Wöbbeking
Journal of Banking and Finance,
April
2019
Abstract
In 2012, JPMorgan accumulated a USD 6.2 billion loss on a credit derivatives portfolio, the so-called “London Whale”, partly as a consequence of de-correlations of non-perfectly correlated positions that were supposed to hedge each other. Motivated by this case, we devise a factor model for correlations that allows for scenario-based stress testing of correlations. We derive a number of analytical results related to a portfolio of homogeneous assets. Using the concept of Mahalanobis distance, we show how to identify adverse scenarios of correlation risk. In addition, we demonstrate how correlation and volatility stress tests can be combined. As an example, we apply the factor-model approach to the “London Whale” portfolio and determine the value-at-risk impact from correlation changes. Since our findings are particularly relevant for large portfolios, where even small correlation changes can have a large impact, a further application would be to stress test portfolios of central counterparties, which are of systemically relevant size.
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