Financial Stability
Financial Systems: The Anatomy of the Market Economy How the financial system is constructed, how it works, how to keep it fit and what good a bit of chocolate can do. Dossier In…
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Data Protection Policy We take the protection of your personal data very seriously and treat your personal data with confidentiality and in compliance with the provisions of law…
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Loose (Interview)
When there were almost no flats in Halle yet ... Brigitte Loose about IWH's foundation and development Ms Loose, how did you experience the early days of IWH? Looking back, it was…
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Department Profiles
Research Profiles of the IWH Departments All doctoral students are allocated to one of the four research departments (Financial Markets – Laws, Regulations and Factor Markets –…
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Intuit QuickBooks Small Business Index: A New Employment Series for the US, Canada, and the UK
Ufuk Akcigit, Raman Chhina, Seyit Cilasun, Javier Miranda, Eren Ocakverdi, Nicolas Serrano-Velarde
IWH Discussion Papers,
No. 9,
2023
Abstract
Small and young businesses are essential for job creation, innovation, and economic growth. Even most of the superstar firms start their business life small and then grow over time. Small firms have less internal resources, which makes them more fragile and sensitive to macroeconomic conditions. This suggests the need for frequent and real-time monitoring of the small business sector’s health. Previously this was difficult due to a lack of appropriate data. This paper fills this important gap by developing a new Intuit QuickBooks Small Business Index that focuses on the smallest of small businesses with at most 9 workers in the US and the UK and at most 19 workers in Canada. The Index aggregates a sample of anonymous Quick- Books Online Payroll subscriber data (QBO Payroll sample) from 333,000 businesses in the US, 66,000 in Canada, and 25,000 in the UK. After comparing the QBO Payroll sample data to the official statistics, we remove the seasonal components and use a Flexible Least Squares method to calibrate the QBO Payroll sample data against official statistics. Finally, we use the estimated model and the QBO Payroll sample data to generate a near real-time index of economic activity. We show that the estimated model performs well both in-sample and out-of-sample. Additionally, we use this analysis for different regions and industries. Keywords:
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The Impact of Delay: Evidence from Formal out-of-Court Restructuring
Stjepan Srhoj, Dejan Kovač, Jacob N. Shapiro, Randall K. Filer
Journal of Corporate Finance,
February
2023
Abstract
Different types of bankruptcy restructuring procedures are used in most legal systems to decide the fate of businesses facing financial hardship. We study how bargaining failures in an under-researched type of restructuring procedure, a formal out-of-the court procedure impacts the economic performance of participating firms. Croatia introduced a “pre-bankruptcy settlement” (PBS) process in the wake of the Great Recession of 2007–2009. A novel dataset provides us with annual financial statements for both sides of more than 180,000 debtor–creditor pairs, enabling us to address selection into failed negotiations by matching a rich set of creditor and debtor characteristics. Failures to settle at the PBS stage due to idiosyncratic bargaining problems, which effectively delay entry into the standard bankruptcy procedure, lead to a lower rate of survival among debtors as well as reduced employment, revenue, and profits. We are the first study to track how bargaining failures diffuse through the network of creditors, finding a significant negative effect on small creditors, but not others. Our results highlight the impact of delay and the importance of structuring bankruptcy procedures, to rapidly resolve uncertainty about firms’ future prospects.
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Energy Markets and Global Economic Conditions
Christiane Baumeister, Dimitris Korobilis, Thomas K. Lee
Review of Economics and Statistics,
No. 4,
2022
Abstract
We evaluate alternative indicators of global economic activity and other market funda-mentals in terms of their usefulness for forecasting real oil prices and global petroleum consumption. World industrial production is one of the most useful indicators. However, by combining measures from several different sources we can do even better. Our analysis results in a new index of global economic conditions and measures for assessing future energy demand and oil price pressures. We illustrate their usefulness for quantifying the main factors behind the severe contraction of the global economy and the price risks faced by shale oil producers in early 2020.
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The (Heterogenous) Economic Effects of Private Equity Buyouts
Steven J. Davis, John Haltiwanger, Kyle Handley, Josh Lerner, Ben Lipsius, Javier Miranda
Abstract
The effects of private equity buyouts on employment, productivity, and job reallocation vary tremendously with macroeconomic and credit conditions, across private equity groups, and by type of buyout. We reach this conclusion by examining the most extensive database of U.S. buyouts ever compiled, encompassing thousands of buyout targets from 1980 to 2013 and millions of control firms. Employment shrinks 13% over two years after buyouts of publicly listed firms – on average, and relative to control firms – but expands 13% after buyouts of privately held firms. Post-buyout productivity gains at target firms are large on average and much larger yet for deals executed amidst tight credit conditions. A post-buyout tightening of credit conditions or slowing of GDP growth curtails employment growth and intra-firm job reallocation at target firms. We also show that buyout effects differ across the private equity groups that sponsor buyouts, and these differences persist over time at the group level. Rapid upscaling in deal flow at the group level brings lower employment growth at target 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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Energy Markets and Global Economic Conditions
Christiane Baumeister, Dimitris Korobilis, Thomas K. Lee
Abstract
This paper evaluates alternative indicators of global economic activity and other market fundamentals in terms of their usefulness for forecasting real oil prices and global petroleum consumption. We find that world industrial production is one of the most useful indicators that has been proposed in the literature. However, by combining measures from a number of different sources we can do even better. Our analysis results in a new index of global economic conditions and new measures for assessing future tightness of energy demand and expected oil price pressures.
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