The Impact of Risk Attitudes on Financial Investments
Walter Hyll, Maike Irrek
IWH Discussion Papers,
No. 10,
2015
Abstract
Several scholars analyze the relationship between individuals’ willingness to take risks and financial investment decisions. We add to this literature in using data from the German Socio-Economic Panel which allow ruling out that investments in risky assets itself impact on risk attitudes. We show that individuals with a higher willingness to take risks are more likely to hold bonds, stocks, and company assets. When grouping individuals into risk groups, our results reveal that high risk takers are also less likely to own a life insurance. If endogenous adaption of risk attitudes from holding assets in previous years is not taken into account, the impact of risk attitudes on holding risky assets is upward biased.
Read article
The Age of Global Value Chains: Maps and Policy Issues
Joao Amador, Filippo di Mauro
CEPR Press,
2015
Abstract
Global value chains (GVCs) - referring to the cross-border flows of goods, investment, services, know-how and people associated with international production networks - have transformed the world. Their emergence has resulted in a complete reconfiguration of world trade, bearing a strong impact on the assessment of competitiveness and economic policy. The contributions to this eBook are based on research carried out within the scope of the Eurosystem Competitiveness Research Network (CompNet), bringing together participants from EU national central banks, universities and international organisations interested in competitiveness issues. The mapping of GVCs and full awareness about their implications are essential to informed public debate and improved economic policy.
Read article
Public Bank Guarantees and Allocative Efficiency
Reint E. Gropp, Andre Guettler, Vahid Saadi
Abstract
In the wake of the recent financial crisis, many governments extended public guarantees to banks. We take advantage of a natural experiment, in which long-standing public guarantees were removed for a set of German banks following a lawsuit, to identify the real effects of these guarantees on the allocation of credit (“allocative efficiency”). Using matched bank/firm data, we find that public guarantees reduce allocative efficiency. With guarantees in place, poorly performing firms invest more and maintain higher rates of sales growth. Moreover, firms produce less efficiently in the presence of public guarantees. Consistently, we show that guarantees reduce the likelihood that firms exit the market. These findings suggest that public guarantees hinder restructuring activities and prevent resources to flow to the most productive uses.
Read article
Assessing European Competitiveness: the Contribution of CompNet Research
Filippo di Mauro, Maddalena Ronchi
CompNet Report,
June
2015
Abstract
Restoring competitiveness is broadly acknowledged as the critical building block for achieving sustainable growth, but defining competitiveness, both in terms of tools as well as objectives, is a matter of debate. The Competitiveness Research Network (CompNet) adopts a pragmatic approach, defining “a competitive economy [as] one in which institutional and macroeconomic conditions allow productive firms to thrive… [thus supporting] the expansion of employment, investment and trade” (Draghi, 2012). This approach requires handling (i) firm-level features, most notably productivity, (ii) macroeconomic factors, and (iii) cross-border aspects related to the operation of global value chains (GVCs). While at first concentrating solely on the original mandate of explaining export competitiveness, the Network has extended the scope of its research to broader aspects related to productivity drivers.
Read article
Do Manufacturing Firms Benefit from Services FDI? – Evidence from Six New EU Member States
J. Damijan, Crt Kostevc, Philipp Marek, Matija Rojec
IWH Discussion Papers,
No. 5,
2015
Abstract
This paper focuses on the effect of foreign presence in the services sector on the productivity growth of downstream customers in the manufacturing sector in six EU new member countries in the course of their accession to the European Union. For this purpose, the analysis combines firm-level information, data on economic structures and annual national input-output tables. The findings suggest that services FDI may enhance productivity of manufacturing firms in Central and Eastern European (CEE) countries through vertical forward spillovers, and thereby contribute to their competitiveness. The consideration of firm characteristics shows that the magnitude of spillover effects depends on size, ownership structure, and initial productivity level of downstream firms as well as on the diverging technological intensity across sector on the supply and demand side. The results suggest that services FDI foster productivity of domestic rather than foreign controlled firms in the host economy. For the period between 2003 and 2008, the findings suggest that the increasing share of services provided by foreign affiliates enhanced the productivity growth of domestic firms in manufacturing by 0.16%. Furthermore, the firms’ absorptive capability and the size reduce the spillover effect of services FDI on the productivity of manufacturing firms. A sectoral distinction shows that firms at the end of the value chain experience a larger productivity growth through services FDI, whereas the aggregate positive effect seems to be driven by FDI in energy supply. This does not hold for science-based industries, which are spurred by foreign presence in knowledge-intensive business services.
Read article
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.
Read article
Corporate Governance Structures and Financial Constraints in Multinational Enterprises – An Analysis in Selected European Transition Economies on the Basis of the IWH FDI Micro Database 2013 –
Andrea Gauselmann, Felix Noth
IWH Discussion Papers,
No. 3,
2015
Abstract
In our analysis, we consider the distribution of decision power over financing and investment between MNEs’ headquarters and foreign subsidiaries and its influence on the foreign affiliates’ financial restrictions. Our research results show that headquarters of multinational enterprises have not (yet) moved much decision power to their foreign subsidiaries at all. We use data from the IWH FDI Micro Database which contains information on corporate governance structures and financial restrictions of 609 enterprises with a foreign investor in Hungary, Poland, the Czech Republic, Slovakia, Romania and East Germany. We match data from Bureau van Dijk’s AMADEUS database on financial characteristics. We find that a high concentration of decision power within the MNE’s headquarter implicates high financial restrictions within the subsidiary. Square term results show, however, that the effect of financial constraints within the subsidiary decreases and finally turns insignificant when decision power moves from headquarter to subsidiary. Thus, economic policy should encourage foreign investors in the case of foreign acquisition of local enterprises to leave decision power within the enterprise and in the case of Greenfield investment to provide the newly established subsidiaries with as much power over corporate governance structures as possible.
Read article
Investitionsbedarfe und finanzielle Handlungsspielräume in Ostdeutschland
Martin Altemeyer-Bartscher
Einzelveröffentlichungen,
2015
Abstract
In seinem Vortrag anlässlich der Tagung „Stärkung der Investitionsfähigkeit in Thüringen – Investitionstätigkeit des Landes und der Kommunen“ am Ministerium für Wirtschaft, Wissenschaft und digitale Gesellschaft stellt Martin Altemeyer-Bartscher die finanziellen Spielräume zur Finanzierung von öffentlichen Investitionen in den deutschen Bundesländern und Gemeinden dar. Besondere Herausforderungen ergeben sich für die ostdeutschen Länder durch das Auslaufen der Zuweisung aus dem Solidarpakt II und dem Inkrafttreten der Schuldenbremse im Jahr 2020.
Read article
