Asset Allocation in Bankruptcy
Shai B. Bernstein, Emanuele Colonnelli, Benjamin Iverson
Journal of Finance,
No. 1,
2019
Abstract
This paper investigates the consequences of liquidation and reorganization on the allocation and subsequent utilization of assets in bankruptcy. Using the random assignment of judges to bankruptcy cases as a natural experiment that forces some firms into liquidation, we find that the long-run utilization of assets of liquidated firms is lower relative to assets of reorganized firms. These effects are concentrated in thin markets with few potential users and in areas with low access to finance. These findings suggest that when search frictions are large, liquidation can lead to inefficient allocation of assets in bankruptcy.
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The Joint Dynamics of Sovereign Ratings and Government Bond Yields
Makram El-Shagi, Gregor von Schweinitz
Journal of Banking and Finance,
2018
Abstract
Can a negative shock to sovereign ratings invoke a vicious cycle of increasing government bond yields and further downgrades, ultimately pushing a country toward default? The narratives of public and political discussions, as well as of some widely cited papers, suggest this possibility. In this paper, we will investigate the possible existence of such a vicious cycle. We find no evidence of a bad long-run equilibrium and cannot confirm a feedback loop leading into default as a transitory state for all but the very worst ratings. We use a bivariate semiparametric dynamic panel model to reproduce the joint dynamics of sovereign ratings and government bond yields. The individual equations resemble Pesaran-type cointegration models, which allow for valid interference regardless of whether the employed variables display unit-root behavior. To incorporate most of the empirical features previously documented (separately) in the literature, we allow for different long-run relationships in both equations, nonlinearities in the level effects of ratings, and asymmetric effects in changes of ratings and yields. Our finding of a single good equilibrium implies the slow convergence of ratings and yields toward this equilibrium. However, the persistence of ratings is sufficiently high that a rating shock can have substantial costs if it occurs at a highly speculative rating or lower. Rating shocks that drive the rating below this threshold can increase the interest rate sharply, and for a long time. Yet, simulation studies based on our estimations show that it is highly improbable that rating agencies can be made responsible for the most dramatic spikes in interest rates.
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Should Banks Diversify or Focus? Know Thyself: The Role of Abilities
Bill Francis, Iftekhar Hasan, A. Melih Küllü, Mingming Zhou
Economic Systems,
No. 1,
2018
Abstract
The paper investigates whether diversification/focus across assets, industries and borrowers affects bank performance when banks’ abilities (screening and monitoring) are considered. The initial results show that diversification (focus) at the asset, industry and borrower levels is expected to decrease (increase) returns. However, once banks’ screening and monitoring abilities are controlled for, the effect of diversification/focus either gets weaker or disappears. Further, in some cases, these abilities enhance banks’ long-run performance, but in others they prove to be costly, at least, in the short run. Thus, the level of monitoring and screening abilities should be taken into consideration in understanding, planning and implementing diversification/focus strategies.
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Financial Transaction Taxes: Announcement Effects, Short-run Effects, and Long-run Effects
Sebastian Eichfelder, Mona Noack, Felix Noth
Abstract
We analyze the impact of the French 2012 financial transaction tax (FTT) on trading volumes, stock prices, liquidity, and volatility. We extend the empirical research by identifying FTT announcement and short-run treatment effects, which can distort difference-in-differences estimates. In addition, we consider long-run volatility measures that better fit the French FTT’s legislative design. While we find strong evidence of a positive FTT announcement effect on trading volumes, there is almost no statistically significant evidence of a long-run treatment effect. Thus, evidence of a strong reduction of trading volumes resulting from the French FTT might be driven by announcement effects and short-term treatment effects. We find evidence of an increase of intraday volatilities in the announcement period and a significant reduction of weekly and monthly volatilities in the treatment period. Our findings support theoretical considerations suggesting a stabilizing impact of FTTs on financial markets.
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Paternal Unemployment During Childhood: Causal Effects on Youth Worklessness and Educational Attainment
Steffen Müller, Regina T. Riphahn, Caroline Schwientek
Oxford Economic Papers,
No. 1,
2017
Abstract
Using long-running data from the German Socio-Economic Panel (1984–2012), we investigate the impact of paternal unemployment on child labour market and education outcomes. We first describe correlation patterns and then use sibling fixed effects and the Gottschalk (1996) method to identify the causal effects of paternal unemployment. We find different patterns for sons and daughters. Paternal unemployment does not seem to causally affect the outcomes of sons. In contrast, it increases both daughters’ worklessness and educational attainment. We test the robustness of the results and explore potential explanations.
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The Macroeconomic Risks of Undesirably Low Inflation
Jonas Arias, Christopher J. Erceg, Mathias Trabandt
European Economic Review,
2016
Abstract
This paper investigates the macroeconomic risks associated with undesirably low inflation using a medium-sized New Keynesian model. We consider different causes of persistently low inflation, including a downward shift in long-run inflation expectations, a fall in nominal wage growth, and a favorable supply-side shock. We show that the macroeconomic effects of persistently low inflation depend crucially on its underlying cause, as well as on the extent to which monetary policy is constrained by the zero lower bound. Finally, we discuss policy options to mitigate these effects.
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Losing Work, Moving Away? Regional Mobility After Job Loss
Daniel Fackler, Lisa Rippe
Abstract
Using German survey data, we investigate the relationship between involuntary job loss and regional mobility. Our results show that job loss has a strong positive effect on the propensity to relocate. We also analyze whether the high and persistent earnings losses of displaced workers can in part be explained by limited regional mobility. Our findings do not support this conjecture as we find substantial long lasting earnings losses for both movers and stayers. In the short run, movers even face slightly higher losses, but the differences between the two groups of displaced workers are never statistically significant. This challenges whether migration is a beneficial strategy in case of involuntary job loss.
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Paternal Unemployment During Childhood: Causal Effects on Youth Worklessness and Educational Attainment
Steffen Müller, Regina T. Riphahn, Caroline Schwientek
Abstract
Using long-running data from the German Socio-Economic Panel (1984-2012), we investigate the impact of paternal unemployment on child labor market and education outcomes. We first describe correlation patterns and then use sibling fixed effects and the Gottschalk (1996) method to identify the causal effects of paternal unemployment. We find different patterns for sons and daughters. Paternal unemployment does not seem to causally affect the outcomes of sons. In contrast, it increases both daughters‘ worklessness and educational attainment. We test the robustness of the results and explore potential explanations.
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03.12.2015 • 44/2015
Migration Affects Labour Market in Eastern Germany
Migration increasingly affects the labour market in Eastern Germany, having effects on employment and unemployment figures as well as the number of recipients of social assistance benefits under the SGB II regulations. Particularly with countries in Middle and Eastern Europe, countries affected by the European debt and confidence crisis and with people seeking asylum, there are large increases meeting the dimensions in Western Germany. However, migrants overall still form a significantly smaller percentage of the population and other labour market parameters in Eastern Germany, since migration was a lot stronger in Western Germany during the last decades. While on the short run negative effects on unemployment have to be expected, there are also chances, in the medium- and long-term, to soften the expectable demographic problems, if integration and qualification are supported.
Oliver Holtemöller
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