Pricing Sin Stocks: Ethical Preference vs. Risk Aversion
Stefano Colonnello, Giuliano Curatola, Alessandro Gioffré
European Economic Review,
2019
Abstract
We develop an ethical preference-based model that reproduces the average return and volatility spread between sin and non-sin stocks. Our investors do not necessarily boycott sin companies. Rather, they are open to invest in any company while trading off dividends against ethicalness. When dividends and ethicalness are complementary goods and investors are sufficiently risk averse, the model predicts that the dividend share of sin companies exhibits a positive relation with the future return and volatility spreads. An empirical analysis supports the model’s predictions. Taken together, our results point to the importance of ethical preferences for investors’ portfolio choices and asset prices.
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A Capital Structure Channel of Monetary Policy
Benjamin Grosse-Rueschkamp, Sascha Steffen, Daniel Streitz
Journal of Financial Economics,
No. 2,
2019
Abstract
We study the transmission channels from central banks’ quantitative easing programs via the banking sector when central banks start purchasing corporate bonds. We find evidence consistent with a “capital structure channel” of monetary policy. The announcement of central bank purchases reduces the bond yields of firms whose bonds are eligible for central bank purchases. These firms substitute bank term loans with bond debt, thereby relaxing banks’ lending constraints: banks with low tier-1 ratios and high nonperforming loans increase lending to private (and profitable) firms, which experience a growth in investment. The credit reallocation increases banks’ risk-taking in corporate credit.
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CEO Investment of Deferred Compensation Plans and Firm Performance
Domenico Rocco Cambrea, Stefano Colonnello, Giuliano Curatola, Giulia Fantini
Journal of Business Finance and Accounting,
No. 7,
2019
Abstract
We study how US chief executive officers (CEOs) invest their deferred compensation plans depending on the firm's profitability. By looking at the correlation between the CEO's return on these plans and the firm's stock return, we show that deferred compensation is to a large extent invested in the company equity in good times and divested from it in bad times. The divestment from company equity in bad times arguably reflects CEOs' incentive to abandon the firm and to invest in alternative instruments to preserve the value of their deferred compensation plans. This result suggests that the incentive alignment effects of deferred compensation crucially depend on the firm's health status.
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Kommentar: Die Krise von 2008/2009 ist noch nicht vorbei
Reint E. Gropp
Wirtschaft im Wandel,
No. 2,
2019
Abstract
Kurzfristig war die Finanzkrise, ursprünglich ausgelöst durch exzessive Vergabe von Hypotheken an weniger kreditwürdige Haushalte, verbunden mit der weitverbreiteten Verbriefung dieser Hypotheken, mit schweren realwirtschaftlichen Konsequenzen verbunden. Die Volkswirtschaften aller Industrieländer schrumpften stark, die Arbeitslosigkeit stieg kräftig an. Firmen waren nicht in der Lage, neue Investitionen zu finanzieren, da es für Banken in vielen Ländern nicht möglich war, Kredite zu vergeben. Gleichzeitig führten die Rettungsaktionen der Regierungen zu einer starken Erhöhung der Schuldenstände und zu einer Nullzinspolitik, verbunden mit Anleihekäufen, der wichtigsten Zentralbanken.
Wo stehen wir heute, über zehn Jahre nach der Pleite von Lehman, die symbolisch noch immer eng mit der Krise verbunden ist? Und gibt es langfristige Auswirkungen auf die Wirtschaft – Auswirkungen, die wir noch heute spüren und möglicherweise noch viele Jahre spüren werden?
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Private Equity and Financial Fragility During the Crisis
Shai B. Bernstein, Josh Lerner, Filippo Mezzanotti
Review of Financial Studies,
No. 4,
2019
Abstract
Does private equity (PE) contribute to financial fragility during economic crises? The proliferation of poorly structured transactions during booms may increase the vulnerability of the economy to downturns. During the 2008 crisis, PE-backed companies decreased investments less than did their peers and experienced greater equity and debt inflows, higher asset growth, and increased market share. These effects are especially strong among financially constrained companies and those whose PE investors had more resources at the crisis onset. In a survey, PE firms report being active investors during the crisis and spending more time working with their portfolio companies.
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flexpaneldid: A Stata Command for Causal Analysis with Varying Treatment Time and Duration
Eva Dettmann, Alexander Giebler, Antje Weyh
Abstract
>>A completely revised version of this paper has been published as: Dettmann, Eva; Giebler, Alexander; Weyh, Antje: flexpaneldid. A Stata Toolbox for Causal Analysis with Varying Treatment Time and Duration. IWH Discussion Paper 3/2020. Halle (Saale) 2020.<<
The paper presents a modification of the matching and difference-in-differences approach of Heckman et al. (1998) and its Stata implementation, the command flexpaneldid. The approach is particularly useful for causal analysis of treatments with varying start dates and varying treatment durations (like investment grants or other subsidy schemes). Introducing more flexibility enables the user to consider individual treatment and outcome periods for the treated observations. The flexpaneldid command for panel data implements the developed flexible difference-in-differences approach and commonly used alternatives like CEM Matching and difference-in-differences models. The novelty of this tool is an extensive data preprocessing to include time information into the matching approach and the treatment effect estimation. The core of the paper gives two comprehensive examples to explain the use of flexpaneldid and its options on the basis of a publicly accessible data set.
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Benign Neglect of Covenant Violations: Blissful Banking or Ignorant Monitoring?
Stefano Colonnello, Michael Koetter, Moritz Stieglitz
Abstract
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.
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Mindestlohnbeschäftigte: Dienstleister für den privaten Konsum oder Teilhaber am Exporterfolg? Ergebnisse einer Input-Output-Analyse
Hans-Ulrich Brautzsch, Birgit Schultz
Wirtschaftsdienst,
No. 1,
2019
Abstract
Im Jahr 2014 waren mehr als 38 Mio. Personen in Deutschland als Arbeitnehmer beschäftigt. Sie produzierten vor allem Güter für den Konsum, für Investitionen in Ausrüstungen und Bauten sowie den Export, aber auch Vorleistungsgüter, die als Bestandteil der Wertschöpfungsketten indirekt in deren Entstehung eingingen. Hier ist wirtschafts- und lohnpolitisch interessant, in welchen quantitativen Verhältnissen der Einsatz der Beschäftigten in der Vorleistungsgüterproduktion zur Endverwendung im Wirtschaftskreislauf steht. Dieses Interesse richtet sich nicht nur auf die Personenzahl, sondern im Besonderen auch auf deren Entlohnung. Ein Augenmerk liegt dabei bei den Beschäftigten, deren Löhne 2014 dem Mindestlohn 2015 (8,50 Euro) entsprachen.
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Banks Response to Higher Capital Requirements: Evidence from a Quasi-natural Experiment
Reint E. Gropp, Thomas Mosk, Steven Ongena, Carlo Wix
Review of Financial Studies,
No. 1,
2019
Abstract
We study the impact of higher capital requirements on banks’ balance sheets and their transmission to the real economy. The 2011 EBA capital exercise is an almost ideal quasi-natural experiment to identify this impact with a difference-in-differences matching estimator. We find that treated banks increase their capital ratios by reducing their risk-weighted assets, not by raising their levels of equity, consistent with debt overhang. Banks reduce lending to corporate and retail customers, resulting in lower asset, investment, and sales growth for firms obtaining a larger share of their bank credit from the treated banks.
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Spatial Development Patterns in East Germany and the Policy to Maintain “Industrial Cores”
Gerhard Heimpold
H.-G. Jeong, G. Heimpold (Hrsg.), Economic Development after German Unification and Implications for Korea. Policy References 18-08. Sejong: Korea Institute for International Economic Policy,
2018
Abstract
This paper investigates the intra-regional development patterns in East Germany with particular reference to the manufacturing sector. When East Germany’s economy was ruled by the central planning regime, the share of industrial workforce in total employment was the greatest in entire Europe. It exceeded the respective value in the Soviet Union at that time. When the transition from a centrally planned economy to a market economy occurred, the East German manufacturing sector faced the greatest challenges.
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