The Forward-looking Disclosures of Corporate Managers: Theory and Evidence
Reint E. Gropp, Rasa Karapandza, Julian Opferkuch
IWH Discussion Papers,
No. 25,
2016
Abstract
We consider an infinitely repeated game in which a privately informed, long-lived manager raises funds from short-lived investors in order to finance a project. The manager can signal project quality to investors by making a (possibly costly) forward-looking disclosure about her project’s potential for success. We find that if the manager’s disclosures are costly, she will never release forward-looking statements that do not convey information to external investors. Furthermore, managers of firms that are transparent and face significant disclosure-related costs will refrain from forward-looking disclosures. In contrast, managers of opaque and profitable firms will follow a policy of accurate disclosures. To test our findings empirically, we devise an index that captures the quantity of forward-looking disclosures in public firms’ 10-K reports, and relate it to multiple firm characteristics. For opaque firms, our index is positively correlated with a firm’s profitability and financing needs. For transparent firms, there is only a weak relation between our index and firm fundamentals. Furthermore, the overall level of forward-looking disclosures declined significantly between 2001 and 2009, possibly as a result of the 2002 Sarbanes-Oxley Act.
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Much Ado About Nothing: Sovereign Ratings and Government Bond Yields in the OECD
Makram El-Shagi
IWH Discussion Papers,
No. 22,
2016
Abstract
In this paper, we propose a new method to assess the impact of sovereign ratings on sovereign bond yields. We estimate the impulse response of the interest rate, following a change in the rating. Since ratings are ordinal and moreover extremely persistent, it proves difficult to estimate those impulse response functions using a VAR modeling ratings, yields and other macroeconomic indicators. However, given the highly stochastic nature of the precise timing of ratings, we can treat most rating adjustments as shocks. We thus no longer rely on a VAR for shock identification, making the estimation of the corresponding IRFs well suited for so called local projections – that is estimating impulse response functions through a series of separate direct forecasts over different horizons. Yet, the rare occurrence of ratings makes impulse response functions estimated through that procedure highly sensitive to individual observations, resulting in implausibly volatile impulse responses. We propose an augmentation to restrict jointly estimated local projections in a way that produces economically plausible impulse response functions.
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27.06.2016 • 27/2016
Wie können wir den Wettbewerb im Dienstleistungssektor ankurbeln?
Konferenz des Leibniz-Instituts für Wirtschaftsforschung Halle (IWH) und der Vertretung der EU-Kommission in Deutschland
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Central Bank Transparency and Cross-border Banking
Stefan Eichler, Helge Littke, Lena Tonzer
Abstract
We analyze the effect of central bank transparency on cross-border bank activities. Based on a panel gravity model for cross-border bank claims for 21 home and 47 destination countries from 1998 to 2010, we find strong empirical evidence that a rise in central bank transparency in the destination country, on average, increases cross-border claims. Using interaction models, we find that the positive effect of central bank transparency on cross-border claims is only significant if the central bank is politically independent. Central bank transparency and credibility are thus considered complements by banks investing abroad.
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Toward a Taylor Rule for Fiscal Policy
Martin Kliem, Alexander Kriwoluzky
Review of Economic Dynamics,
No. 2,
2014
Abstract
In DSGE models, fiscal policy is typically described by simple rules in which tax rates respond to the level of output. We show that there is only weak empirical evidence in favor of such specifications in US data. Instead, the cyclical movements of labor and capital income tax rates are better described by a contemporaneous response to hours worked and investment, respectively. We show that conditioning on these variables is also desirable from a normative perspective as it significantly improves welfare relative to output-based rules.
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Islamic Finance in Europe
Pierluigi Caristi, Stéphane Couderc, Angela di Maria, Filippo di Mauro, Beljeet Kaur Grewal, Lauren Ho, Sergio Masciantonio, Steven Ongena, Sajjad Zaher
ECB Occasional Paper,
No. 146,
2013
Abstract
Islamic finance is based on ethical principles in line with Islamic religious law. Despite its low share of the global financial market, Islamic finance has been one of this sector's fastest growing components over the last decades and has gained further momentum in the wake of the financial crisis. The paper examines the development of and possible prospects for Islamic finance, with a special focus on Europe. It compares Islamic and conventional finance, particularly as concerns risks associated with the operations of respective institutions, as well as corporate governance. The paper also analyses empirical evidence comparing Islamic and conventional financial institutions with regard to their: (i) efficiency and profitability; and (ii) stability and resilience. Finally, the paper considers the conduct of monetary policy in an Islamic banking context. This is not uncomplicated given the fact that interest rates - normally a cornerstone of monetary policy - are prohibited under Islamic finance. Liquidity management issues are thus discussed here, with particular reference to the euro area.
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Payment Defaults and Interfirm Liquidity Provision
F. Boissay, Reint E. Gropp
Review of Finance,
No. 6,
2013
Abstract
Using a unique data set on French firms, we show that credit constrained firms that face liquidity shocks are more likely to default on their payments to suppliers. Credit constrained firms pass on a sizeable fraction of such shocks to their suppliers. This is consistent with the idea that firms provide liquidity insurance to each other and that this mechanism is able to alleviate credit constraints. We show that the chain of defaults stops when it reaches unconstrained firms. Liquidity appears to be allocated from firms with access to outside finance to credit constrained firms along supply chains.
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Efficiency in the UK Commercial Property Market: A Long-run Perspective
Steven Devaney, Oliver Holtemöller, R. Schulz
IWH Discussion Papers,
No. 15,
2012
Abstract
Informationally efficient prices are a necessary requirement for optimal resource allocation in the real estate market. Prices are informationally efficient if they reflect buildings’ benefit to marginal buyers, thereby taking account of all available information on future market development. Prices that do not reflect available information may lead to over- or undersupply if developers react to these inefficient prices. In this study, we examine the efficiency of the UK commercial property market and the interaction between prices, construction costs, and new supply. We collated a unique data set covering the years 1920 onwards, which we employ in our study. First, we assess if real estate prices were in accordance with present values, thereby testing for informational efficiency. By comparing prices and estimated present values, we can measure informational inefficiency. Second, we assess if developers reacted correctly to price signals. Development (or the lack thereof) should be triggered by deviations between present values and cost; if prices do not reflect present values, then they should have no impact on development decisions.
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The Impact of Banking and Sovereign Debt Crisis Risk in the Eurozone on the Euro/US Dollar Exchange Rate
Stefan Eichler
Applied Financial Economics,
No. 15,
2012
Abstract
I study the impact of financial crisis risk in the eurozone on the euro/US dollar exchange rate. Using daily data from 3 July 2006 to 30 September 2010, I find that the euro depreciates against the US dollar when banking or sovereign debt crisis risk increases in the eurozone. While the external value of the euro is more sensitive to changes in sovereign debt crisis risk in vulnerable member countries than in stable member countries, the impact of banking crisis risk is similar for both country blocs. Moreover, rising default risk of medium and large eurozone banks leads to a depreciation of the euro while small banks’ default risk has no significant impact, showing the relevance of systemically important banks with regards to the exchange rate.
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Vigorous upswing continues
Wirtschaft im Wandel,
No. 3,
2011
Abstract
Das preisbereinigte Bruttoinlandsprodukt in Deutschland wird 2011 um 3% zunehmen. Die Beschäftigung wird weiter kräftig ausgeweitet und die Arbeitslosenquote auf 6,6% sinken. Die positive Entwicklung auf dem Arbeitsmarkt kräftigt die Binnennachfrage. Der Beitrag des Außenhandels ist nach wie vor positiv, wird aber kleiner werden; die wesentlichen Risiken für die deutsche Konjunktur kommen von außenwirtschaftlicher Seite.
Die Weltwirtschaft befindet sich im Aufschwung. Im Winterhalbjahr 2010/2011 expandieren Produktion und Handel weltweit stark, und die Frühindikatoren auf der Basis von Auftragseingängen und Stimmungsumfragen sprechen dafür, dass sich das Tempo des Produktionsanstiegs in den kommenden Monaten beschleunigen dürfte. Hintergrund des Aufschwungs ist eine seit Ausbruch der Finanzkrise ausgesprochen expansive Geldpolitik rund um den Globus.
Die deutsche Wirtschaft profitiert vom globalen Aufschwung, verleiht ihm aber auch Impulse. Mit dem Anstieg des preisbereinigten Bruttoinlandsprodukts um 3,6% belegte Deutschland bezüglich des Produktionszuwachses im Jahr 2010 unter den Industrieländern einen Spitzenplatz; freilich war das reale Bruttoinlandsprodukt im Zuge der Krise hier auch besonders stark gesunken. Mittlerweile hat es sein Niveau vom vierten Quartal 2007, also kurz vor Ausbruch der Finanz- und Wirtschaftskrise, wieder erreicht.
Frühindikatoren deuten darauf hin, dass sich der Aufschwung in Deutschland kraftvoll fortsetzen dürfte. Dafür sprechen auch die weiterhin expansive Ausrichtung der Geldpolitik, die Dynamik in den Schwellenländern und die guten Investitionsbedingungen. Für das Jahr 2011 erwarten wir einen Anstieg des Bruttoinlandsproduktes um real 3,0% (vgl. Tabelle);das 66% Prognoseintervall unter Ausschluss von Extremrisiken reicht von 2,5% bis 3,5%. Die Beschäftigung wird weiter kräftig ausgeweitet; die Anzahl der Erwerbstätigen wird um etwa eine halbe Million zunehmen und die Arbeitslosenquote auf 6,6% sinken. Im Jahr 2012 wird sich das konjunkturelle Tempo etwas verlangsamen und das reale Bruttoinlandsprodukt um 1,9% zulegen. Die Arbeitslosenquote dürfte weiter auf 5,8% sinken. Die zunehmende Knappheit auf dem Arbeitsmarkt führt zu stärker steigenden Löhnen und Preisen. Der Anstieg der Verbraucherpreise wird 2011, auch wegen des Ölpreissprungs Anfang des Jahres, voraussichtlich 2,3% und 2012 anschließend 1,8% betragen. Der Aufschwung führt dazu, dass das Defizit der öffentlichen Haushalte wieder deutlich unter das Maastricht-Kriterium sinkt, und zwar auf 1,4% in Relation zum Bruttoinlandsprodukt im Jahr 2011 und auf 0,4% im Jahr darauf.
Risiken für die deutsche Konjunktur bestehen vor allem auf außenwirtschaftlicher Seite: Das Basisszenario der vorliegenden Prognose geht von einer raschen Beruhigung der Lage in den arabischen Ländern aus, die aktuelle Gefahr einer neuen Ölkrise besteht jedoch. Weitere Risiken ergeben sich aus der außerordentlichen Liquiditätsversorgung durch die Zentralbanken der fortgeschrittenen Volkswirtschaften. Einerseits könnte es durch diese in den Schwellenländern, die durch höhere Zinsen Kapital attrahieren, zu einer Überhitzung kommen, die kurzfristig auch hierzulande stimulierend wirken könnte. Andererseits führen die Inflationsrisiken zunehmend zu Unsicherheit, die bereits im Prognosezeitraum belastend wirken könnte. Außerdem bestehen in den fortgeschrittenen Volkswirtschaften weiterhin Risiken aus den Nachwirkungen der Finanz- und Wirtschaftskrise. Vielerorts sind die Strukturprobleme der Finanzpolitik und der Bankenaufsicht nicht gelöst.
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