Productivity, Managers’ Social Connections and the Financial Crisis
Iftekhar Hasan, Stefano Manfredonia
Journal of Banking and Finance,
August
2022
Abstract
This paper investigates whether managers’ personal connections help corporate productivity to recover after a negative economic shock. Leveraging the heterogeneity in the severity of the financial crisis across different sectors, the paper reports that (i) the financial crisis had a negative effect on within-firm productivity, (ii) the effect was long-lasting and persistent, supporting a productivity-hysteresis hypothesis, and (iii) managers’ personal connections allowed corporations to recover from this productivity slowdown. Among the possible mechanisms, we show that connected managers operating in affected sectors foster productivity recovery through higher input cost efficiency and better access to the credit market, as well as more efficient use of labour and capital.
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The Cleansing Effect of Banking Crises
Reint E. Gropp, Steven Ongena, Jörg Rocholl, Vahid Saadi
Economic Inquiry,
No. 3,
2022
Abstract
We assess the cleansing effects of the 2008–2009 financial crisis. U.S. regions with higher levels of supervisory forbearance on distressed banks see less restructuring in the real sector: fewer establishments, firms, and jobs are lost when more distressed banks remain in business. In these regions, the banking sector has been less healthy for several years after the crisis. Regions with less forbearance experience higher productivity growth after the crisis with more firm entries, job creation, and employment, wages, patents, and output growth. Forbearance is greater for state-chartered banks and in regions with weaker banking competition and more independent banks.
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A Note on the Use of Syndicated Loan Data
Isabella Müller, Felix Noth, Lena Tonzer
IWH Discussion Papers,
No. 17,
2022
Abstract
Syndicated loan data provided by DealScan has become an essential input in banking research over recent years. This data is rich enough to answer urging questions on bank lending, e.g., in the presence of financial shocks or climate change. However, many data options raise the question of how to choose the estimation sample. We employ a standard regression framework analyzing bank lending during the financial crisis to study how conventional but varying usages of DealScan affect the estimates. The key finding is that the direction of coefficients remains relatively robust. However, statistical significance seems to depend on the data and sampling choice.
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Explicit Deposit Insurance Design: International Effects on Bank Lending during the Global Financial Crisis
Iftekhar Hasan, Liuling Liu, Anthony Saunders, Gaiyan Zhang
Journal of Financial Intermediation,
July
2022
Abstract
Studies find that during the 2007–2009 global financial crisis, loan spreads rose and corporate lending tightened, especially for foreign borrowers (a flight-home effect). We find that banks in countries with explicit deposit insurance (DI) made smaller reductions in total lending and foreign lending, experienced smaller increases in loan spreads, and had quicker post-crisis recoveries. These effects are more pronounced for banks heavily relying on deposit funding. Evidence also reveals that more generous or credible DI design is associated with a stronger stabilization effect on bank lending during the crisis, confirmed by the difference-in-differences analysis based on expansion of DI coverage during the crisis. The stabilization effect is robust to the use of country-specific crisis measures and control of temporary government guarantees.
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Technical Optimum of Bank Liquidity Creation
Iftekhar Hasan, Jean-Loup Soula
Revue Economique,
No. 3,
2022
Abstract
This paper generates a technical optimum of bank liquidity creation benchmark by tracing an efficient frontier in liquidity creation (bank intermediation) and questions why some banks are more efficient than others in such activities. Evidence reveals that medium size banks are most correlated to efficient frontier. Small (large) banks—focused on traditional banking activities—are found to be the most (least) efficient in creating liquidity in on-balance sheet items whereas large banks—involved in non-traditional activities—are found to be most efficient in off-balance sheet liquidity creation. Additionally, the liquidity efficiency of small banks is more resilient during the 2007-2008 financial crisis relative to other banks.
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Stress-ridden Finance and Growth Losses: Does Financial Development Break the Link?
Serafín Martínez-Jaramillo, Ricardo Montañez-Enríquez, Matias Ossandon Busch, Manuel Ramos-Francia, Anahí Rodríguez-Martínez, José Manuel Sánchez-Martínez
IWH Discussion Papers,
No. 3,
2022
Abstract
Does financial development shield countries from the pass-through of financial shocks to real outcomes? We evaluate this question by characterising the probability density of expected GDP growth conditional on financial stability indicators in a panel of 28 countries. Our robust results unveil a non-linear nexus between financial stability and expected GDP growth, depending on countries’ degree of financial development. While both domestic and global financial factors affect expected growth, the effect of global factors is moderated by financial development. This result highlights a previously unexplored channel trough which financial development can break the link between financial (in)stability and GDP growth.
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Protecting Our People and Economy in the Long Term
Kai Konrad, Mareike Kunter, Lena Tonzer
Covid-19 Lessons Learned - Preparing for Future Pandemics. Spanish National Research Council,
2021
Abstract
While taking measures to prevent the infection was an acute necessity, the impact on other areas of life should always be considered, both, in the short- and long term. The pandemic and the mitigation measures have directly or indirectly affected people’s well-being, their general health, education or the economy. In order to learn for the future, it is of utmost importance to monitor and understand these side effects, in particular regarding long-term developments.
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Konjunktur aktuell: Deutsche Wirtschaft noch nicht immun gegen COVID 19 – Ausblick erneut eingetrübt
Konjunktur aktuell,
No. 4,
2021
Abstract
Ende 2021 belastet eine neue Infektionswelle die wirtschaftliche Aktivität in Europa. Die Stimmung im Dienstleistungsbereich ist im Herbst weltweit gestiegen, doch das Verarbeitende Gewerbe leidet weiter überall unter Knappheiten. Im Sommerhalbjahr 2022 gewinnt die Weltkonjunktur wieder etwas an Schwung, aber der ungewisse Fortgang der Pandemie bleibt ein Risiko. Pandemiewelle und Lieferengpässe lassen auch die deutsche Wirtschaft im Winter stagnieren. Der private Konsum wird ab Frühjahr deutlich zulegen, und die Konjunktur wird wieder kräftig in Schwung kommen. Das BIP wird 2022 um 3,5% zunehmen, nach 2,7% im Jahr 2021. Die Inflation dürfte nur langsam zurückgehen.
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Dilemma and Global Financial Cycle: Evidence from Capital Account Liberalisation Episodes
Xiang Li
IWH Discussion Papers,
No. 13,
2021
Abstract
By focusing on the episodes of substantial capital account liberalisation and adopting a new methodology, this paper provides new evidence on the dilemma and global financial cycle theory. I first identify the capital account liberalisation episodes for 95 countries from 1970 to 2016, and then employ an augmented inverse propensity score weighted (AIPW) estimator to calculate the average treatment effect (ATE) of opening capital account on the interest rate comovements with the core country. Results show that opening capital account causes a country to lose its monetary policy independence, and a floating exchange rate regime cannot shield this effect. Moreover, the impact is stronger when liberalising outward and banking flows.
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Global Syndicated Lending during the COVID-19 Pandemic
Iftekhar Hasan, Panagiotis Politsidis, Zenu Sharma
Journal of Banking and Finance,
December
2021
Abstract
This paper examines the pricing of global syndicated loans during the COVID-19 pandemic. We find that loan spreads rise by over 11 basis points in response to a one standard deviation increase in the lender's exposure to COVID-19 and over 5 basis points for an equivalent increase in the borrower's exposure. This implies excess interestof about USD 5.16 million and USD 2.37 million respectively for a loan of average size and duration. The aggravating effect of the pandemic is exacerbated with the level of government restrictions to tackle the virus's spread, with firms’ financial constraints and reliance on debt financing, whereas it is mitigated for relationship borrowers, borrowers listed in multiple exchanges or headquartered in countries that can attract institutional investors.
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