Does IFRS Information on Tax Loss Carryforwards and Negative Performance Improve Predictions of Earnings and Cash Flows?
Sandra Dreher, Sebastian Eichfelder, Felix Noth
Journal of Business Economics,
January
2024
Abstract
We analyze the usefulness of accounting information on tax loss carryforwards and negative performance to predict earnings and cash flows. We use hand-collected information on tax loss carryforwards and corresponding deferred taxes from the International Financial Reporting Standards tax footnotes for listed firms from Germany. Our out-of-sample tests show that considering accounting information on tax loss carryforwards does not enhance performance forecasts and typically even worsens predictions. The most likely explanation is model overfitting. Besides, common forecasting approaches that deal with negative performance are prone to prediction errors. We provide a simple empirical specification to account for that problem.
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Searching where Ideas Are Harder to Find – The Productivity Slowdown as a Result of Firms Hindering Disruptive Innovation
Richard Bräuer
IWH Discussion Papers,
No. 22,
2023
Abstract
This paper proposes to explain the productivity growth slowdown with the poaching of disruptive inventors by firms these inventors threaten with their research. I build an endogenous growth model with incremental and disruptive innovation and an inventor labor market where this defensive poaching takes place. Incremental firms poach more as they grow, which lowers the probability of disruption and makes large incremental firms even more prevalent. I perform an event study around disruptive innovations to confirm the main features of the model: Disruptions increase future research productivity, hurt incumbent inventors and raise the probability of future disruption. Without disruption, technology classes slowly trend even further towards incrementalism. I calibrate the model to the global patent landscape in 1990 and show that the model predicts 52% of the decline of disruptive innovation until 2010.
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Internships
Internship at Halle Institute for Economic Research (IWH) Interested in gaining an authentic insight in the interesting daily business and the variable tasks of an institute for…
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Conditional Macroeconomic Survey Forecasts: Revisions and Errors
Alexander Glas, Katja Heinisch
Journal of International Money and Finance,
November
2023
Abstract
Using data from the European Central Bank's Survey of Professional Forecasters and ECB/Eurosystem staff projections, we analyze the role of ex-ante conditioning variables for macroeconomic forecasts. In particular, we test to which extent the updating and ex-post performance of predictions for inflation, real GDP growth and unemployment are related to beliefs about future oil prices, exchange rates, interest rates and wage growth. While oil price and exchange rate predictions are updated more frequently than macroeconomic forecasts, the opposite is true for interest rate and wage growth expectations. Beliefs about future inflation are closely associated with oil price expectations, whereas expected interest rates are related to predictions of output growth and unemployment. Exchange rate predictions also matter for macroeconomic forecasts, albeit less so than the other variables. With regard to forecast errors, wage growth and GDP growth closely comove, but only during the period when interest rates are at the effective zero lower bound.
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Climate Stress Tests, Bank Lending, and the Transition to the Carbon-Neutral Economy
Larissa Fuchs, Huyen Nguyen, Trang Nguyen, Klaus Schaeck
SSRN Working Papers,
No. 4427729,
2023
Abstract
Does banking supervision affect borrowers’ transition to the carbon-neutral economy? We use a unique identification strategy that combines the French bank climate pilot exercise with borrowers’ carbon emissions to present two novel findings. First, climate stress tests actively facilitate borrowers’ transition to a low-carbon economy through a lending channel. Stress-tested banks increase loan volumes but simultaneously charge higher interest rates for brown borrowers. Second, additional lending is associated with some improvements in environmental performance. While borrowers commit more to reduce carbon emissions and are more likely to evaluate environmental effects of their projects, they neither reduce direct carbon emissions, nor terminate relationships with environmentally unfriendly suppliers. Our findings establish a causal link between bank climate stress tests and borrowers’ reductions in transition risk.
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East Germany
The Nasty Gap 30 years after unification: Why East Germany is still 20% poorer than the West Dossier In a nutshell The East German economic convergence process is hardly…
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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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Compensation Regulation in Banking: Executive Director Behavior and Bank Performance after the EU Bonus Cap
Stefano Colonnello, Michael Koetter, Konstantin Wagner
Journal of Accounting and Economics,
No. 1,
2023
Abstract
The regulation that caps executives’ variable compensation, as part of the Capital Requirements Directive IV of 2013, likely affected executive turnover, compensation design, and risk-taking in EU banking. The current study identifies significantly higher average turnover rates but also finds that they are driven by CEOs at poorly performing banks. Banks indemnified their executives by off-setting the bonus cap with higher fixed compensation. Although our evidence is only suggestive, we do not find any reduction in risk-taking at the bank level, one purported aim of the regulation.
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Charts
Info Graphs Sometimes pictures say more than a thousand words. Therefore, we selected a few graphs to present our main topics visually. If you should have any questions or would…
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IWH Forecasting Dashboard
IWH Forecasting Dashboard The objective of the IWH Forecasting Dashboard (ForDas) is to provide a platform for macroeconomic forecasts from various institutions for the German…
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