Did the Swiss Exchange Rate Shock Shock the Market?
Manuel Buchholz, Gregor von Schweinitz, Lena Tonzer
Abstract
The Swiss National Bank abolished the exchange rate floor versus the Euro in January 2015. Based on a synthetic matching framework, we analyse the impact of this unexpected (and therefore exogenous) shock on the stock market. The results reveal a significant level shift (decline) in asset prices in Switzerland following the discontinuation of the minimum exchange rate. While adjustments in stock market returns were most pronounced directly after the news announcement, the variance was elevated for some weeks, indicating signs of increased uncertainty and potentially negative consequences for the real economy.
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Corporate Social Responsibility and Firm Financial Performance: The Mediating Role of Productivity
Iftekhar Hasan, Nada Kobeissi, Liuling Liu, Haizhi Wang
Journal of Business Ethics,
No. 3,
2018
Abstract
This study treats firm productivity as an accumulation of productive intangibles and posits that stakeholder engagement associated with better corporate social performance helps develop such intangibles. We hypothesize that because shareholders factor improved productive efficiency into stock price, productivity mediates the relationship between corporate social and financial performance. Furthermore, we argue that key stakeholders’ social considerations are more valuable for firms with higher levels of discretionary cash and income stream uncertainty. Therefore, we hypothesize that those two contingencies moderate the mediated process of corporate social performance with financial performance. Our analysis, based on a comprehensive longitudinal dataset of the U.S. manufacturing firms from 1992 to 2009, lends strong support for these hypotheses. In short, this paper uncovers a productivity-based, context-dependent mechanism underlying the relationship between corporate social performance and financial performance.
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Private Benefits of Control and Bank Loan Contracts
Chih-Yung Lin, Wei-Che Tsai, Iftekhar Hasan, Le Quoc Tuan
Journal of Corporate Finance,
2018
Abstract
This paper investigates whether or not private benefits of control by managers and large shareholders influence the financing cost of firms. Evidence shows that lending banks demand a significantly higher loan spread, higher fees, shorter loan maturity, smaller loan size, stricter covenants, and greater collateral on firms with greater private benefits of control. Results are stronger for firms with weak corporate governance quality, supporting the agency cost viewpoint. Such evidence implies that banks consider higher private benefits of control as a type of agency problem when they make lending decisions.
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Can Lenders Discern Managerial Ability from Luck? Evidence from Bank Loan Contracts
Dien Giau Bui, Yan-Shing Chen, Iftekhar Hasan, Chih-Yung Lin
Journal of Banking and Finance,
2018
Abstract
We investigate the effect of managerial ability versus luck on bank loan contracting. Borrowers showing a persistently superior managerial ability over previous years (more likely due to ability) enjoy a lower loan spread, while borrowers showing a temporary superior managerial ability (more likely due to luck) do not enjoy any spread reduction. This finding suggests that banks can discern ability from luck when pricing a loan. Firms with high-ability managers are more likely to continue their prior lower loan spread. The spread-reduction effect of managerial ability is stronger for firms with weak governance structures or poor stakeholder relationships, corroborating the notion that better managerial ability alleviates borrowers’ agency and information risks. We also find that well governed banks are better able to price governance into their borrowers’ loans, which helps explain why good governance enhances bank value.
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The Minimum Wage Effects on Skilled Crafts Sector in Saxony-Anhalt
Hans-Ulrich Brautzsch, Birgit Schultz
IWH Discussion Papers,
No. 31,
2017
Abstract
This paper examines the effects of the minimum wage introduction in Germany in 2015 on the skilled crafts sector in Saxony-Anhalt. Using novel survey data on the skilled crafts sector in Saxony-Anhalt, we examine three questions: (1) How many employees are affected by the minimum wage introduction in the skilled crafts sector in Saxony- Anhalt? (2) What are the effects of the minimum wage introduction? (3) How have firms reacted to wage increase? We find that about 8% of all employees in the skilled crafts sector in Saxony-Anhalt are directly affected by the minimum wage introduction. A difference-in-difference estimation reveals no significant employment effects of the minimum wage introduction. We test for alternative adjustment strategies and observe a significant increase of output prices.
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Measuring Indirect Effects of Unfair Employer Behavior on Worker Productivity – A Field Experiment
Matthias Heinz, Sabrina Jeworrek, Vanessa Mertins, Heiner Schumacher, Matthias Sutter
Abstract
We present a field experiment in which we set up a call-center to study how the productivity of workers is affected if managers treat their co-workers in an unfair way. This question cannot be studied in long-lived organizations since workers may change their career expectations (and hence effort) when managers behave unfairly towards co-workers. In order to rule out such confounds and to measure productivity changes of unaffected workers in a clean way, we create an environment where employees work for two shifts. In one treatment, we lay off parts of the workforce before the second shift. Compared to two different control treatments, we find that, in the layoff treatment, the productivity of the remaining, unaffected workers drops by 12 percent. We show that this result is not driven by peer effects or altered beliefs about the job or the managers’ competence, but rather related to the workers’ perception of unfair behavior of employers towards co-workers. The latter interpretation is confirmed in a survey among professional HR managers. We also show that the effect of unfair behavior on the productivity of unaffected workers is close to the upper bound of the direct effects of wage cuts on the productivity of affected workers. This suggests that the price of an employer’s unfair behavior goes well beyond the potential tit-for-tat of directly affected workers.
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14.12.2017 • 39/2017
Cyclical upswing in Germany and in the world
At the turn of the year, the cyclical upswing in Germany continues. Gross domestic product is expected to increase by 2.2% in 2017, and because this year has seen significantly fewer working days than before, the rate of change amounts, adjusted for calendar effects, to even 2.5%. “The upswing is broad-based”, says Oliver Holtemöller, head of the Department Macroeconomics and IWH vice president. “For quite a long time now, significant increases in employment have been driving private incomes, consumption and housing construction. The latter was, in addition, stimulated by low interest rates.” Currently, German exports are benefiting from the vivid international economy. Not least since monetary policy in the euro area remains expansionary for the time being, we expect the upturn to continue in 2018 and production to increase again by 2.2%. Consumer price inflation is, with 1.7%, still moderate in both 2017 and 2018. Although domestic price pressures are on the rise, the effects of the energy price increase in 2017 expire in 2018, and the appreciation of the euro in the summer of 2017 will dampen price dynamics.
Oliver Holtemöller
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Central Bank Transparency and the Volatility of Exchange Rates
Stefan Eichler, Helge Littke
Abstract
We analyze the effect of monetary policy transparency on bilateral exchange rate volatility. We test the theoretical predictions of a stylized model using panel data for 62 currencies from 1998 to 2010. We find strong empirical evidence that an increase in the availability of information about monetary policy objectives decreases exchange rate volatility. Using interaction models, we find that this effect is more pronounced for countries with a lower flexibility of goods prices, a lower level of central bank conservatism, and a higher interest rate sensitivity of money demand.
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