How Can Macroprudential Policies Transmit Within a Banking Group?
Chris Becker, Matias Ossandon Busch, Lena Tonzer
WorldBank All About Finance,
2021
Abstract
The unexpected shock represented by the COVID-19 pandemic illustrates the importance of building robust macroprudential frameworks to increase countries’ resilience against sudden disruptions in financial markets. By now, a widespread opinion among commentators and policy makers is that the macroprudential frameworks that were implemented over the past decades were effective in moderating market stress, a view supported by ample evidence on the effectiveness of macroprudential policies.
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“The Good News about Bad News”: Information about Past Organizational Failure and Its Impact on Worker Productivity
Sabrina Jeworrek, Vanessa Mertins, Michael Vlassopoulos
Leadership Quarterly,
No. 3,
2021
Abstract
Failure in organizations is very common. Little is known about whether leaders should provide information about past organizational failure to followers and how this might affect their future performance. We conducted a field experiment in which we recruited temporary workers to carry out a phone campaign to attract new volunteers and randomly assigned them to either receive or not to receive information about a failed mail campaign pursuing the same goal. We find that informed workers performed better, regardless of whether they had previously worked on the failed mail campaign or not. Evidence from a second field experiment with students asked to support voluntarily a campaign for reducing food waste corroborates the finding. We explore the role of leadership tactics behind our findings in a third online survey experiment. We conclude that information about past failure is unlikely to have a negative impact on work performance, and might even lead to performance improvement. Implications for future research on the relevance of leadership tactics when giving such information are discussed.
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Agency Cost of CEO Perquisites in Bank Loan Contracts
Chia-Ying Chan, Iftekhar Hasan, Chih-Yung Lin
Review of Quantitative Finance and Accounting,
May
2021
Abstract
This study investigates the association between CEO perquisites and bank loan spreads. We collect detailed data on CEO perquisites from the proxy statements of S&P 500 firms between 1993 and 2015 to study this issue. The empirical evidence supports the agency cost view that the lending banks demand significantly higher returns (spread), more collateral, and stricter covenants from firms with higher CEO perquisites. We further confirm that the effect of these perquisites remains after we control for various corporate governance and agency cost factors. We conclude that banks consider CEO perquisites as a type of agency cost when they make lending decisions.
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European Firm Concentration and Aggregate Productivity
Tommaso Bighelli, Filippo di Mauro, Marc Melitz, Matthias Mertens
Abstract
This article derives a European Herfindahl-Hirschman concentration index from 15 micro-aggregated country datasets. In the last decade, European concentration rose due to a reallocation of economic activity towards large and concentrated industries. Over the same period, productivity gains from reallocation accounted for 50% of European productivity growth and markups stayed constant. Using country-industry variation, we show that changes in concentration are positively associated with changes in productivity and allocative efficiency. This holds across most sectors and countries and supports the notion that rising concentration in Europe reflects a more efficient market environment rather than weak competition and rising market power.
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European Firm Concentration and Aggregate Productivity
Tommaso Bighelli, Filippo di Mauro, Marc Melitz, Matthias Mertens
Abstract
This article derives a European Herfindahl-Hirschman concentration index from 15 micro-aggregated country datasets. In the last decade, European concentration rose due to a reallocation of economic activity towards large and concentrated industries. Over the same period, productivity gains from reallocation accounted for 50% of European productivity growth and markups stayed constant. Using country-industry variation, we show that changes in concentration are positively associated with changes in productivity and allocative efficiency. This holds across most sectors and countries and supports the notion that rising concentration in Europe reflects a more efficient market environment rather than weak competition and rising market power.
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The Influence of Bondholder Concentration and Temporal Orientation on Investments in R&D
Pengfei Ye, Jonathan O’Brien, Christina Matz Carnes, Iftekhar Hasan
Journal of Management,
No. 3,
2021
Abstract
Although innovation can be a critical source of competitive advantage, research has found that debt can erode management’s willingness to invest in R&D. In this article, we employ a stakeholder bargaining power perspective to argue that this effect is most pronounced when the firm’s bonds are concentrated in the hands of bond blockholders. Furthermore, we contend that the temporal orientation of bondholders influences this relationship. Specifically, while it is commonly assumed that bondholders have a limited temporal orientation that induces them to focus on short-term value appropriation, we argue that some bond blockholders adopt a long-term temporal orientation. This orientation, in turn, makes them more inclined to support long-term value creation for the firm in the form of enhanced investments in R&D. Moreover, while agency theory suggests that there is an inherent conflict of interest between shareholders and bondholders, our results suggest that the temporal orientation of investors (i.e., both shareholders and bondholders) matters much more than whether they invested in the firm’s equity or its debt.
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Can Mentoring Alleviate Family Disadvantage in Adolescence? A Field Experiment to Improve Labor-Market Prospects
Sven Resnjanskij, Jens Ruhose, Simon Wiederhold, Ludger Woessmann
Abstract
We study a mentoring program that aims to improve the labor-market prospects of school-attending adolescents from disadvantaged families by offering them a university-student mentor. Our RCT investigates program effectiveness on three outcome dimensions that are highly predictive of adolescents later labor-market success: math grades, patience-social skills, and labor-market orientation. For low-SES adolescents, the one-to-one mentoring increases a combined index of the outcomes by half a standard deviation after one year, with significant increases in each dimension. Part of the treatment effect is mediated by establishing mentors as attachment figures who provide guidance for the future. The mentoring is not effective for higher-SES adolescents. The results show that substituting lacking family support by other adults can help disadvantaged children at adolescent age.
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16.12.2020 • 26/2020
New wave of infections delays economic recovery in Germany
The lockdown is causing production in Germany to decline at the end of the year. When restrictions will be relaxed again, the recovery is likely to pick up pace only slowly, partly because the temporary reduction in value-added taxes is expiring. In spring, milder temperatures and an increasing portion of the population being vaccinated are likely to support the German economy to expand more strongly. The Halle Institute for Economic Research (IWH) forecasts that gross domestic product will increase by 4.4% in 2021, following a 5% decline in 2020. In East Germany, both the decline and the recovery will be significantly less pronounced.
Oliver Holtemöller
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Switching to Good Policy? The Case of Central and Eastern European Inflation Targeters
Andrej Drygalla
Macroeconomic Dynamics,
No. 8,
2020
Abstract
The paper analyzes how actual monetary policy changed following the official adoption of inflation targeting in the Czech Republic, Hungary, and Poland and how it affected the volatilities of important macroeconomic variables in the years thereafter. To disentangle the effects of the policy shift from exogenous changes in the volatilities of these variables, a Markov-switching dynamic stochastic general equilibrium model is estimated that allows for regime switches in the policy parameters and the volatilities of shocks hitting the economies. Whereas estimation results reveal periods of high and low volatility for all three economies, the presence of different policy regimes is supported by the underlying data for the Czech Republic and Poland, only. In both economies, monetary policy switched from weak and unsystematic to strong and systematic responses to inflation dynamics. Simulation results suggest that the policy shifts of both central banks successfully reduced inflation volatility in the following years. The observed reduction in output volatility, on the other hand, is attributed more to a reduction in the size of external shocks.
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Wages and the Value of Nonemployment
Simon Jäger, Benjamin Schoefer, Samuel Young, Josef Zweimüller
Quarterly Journal of Economics,
No. 4,
2020
Abstract
Nonemployment is often posited as a worker’s outside option in wage-setting models such as bargaining and wage posting. The value of nonemployment is therefore a key determinant of wages. We measure the wage effect of changes in the value of nonemployment among initially employed workers. Our quasi-experimental variation in the value of nonemployment arises from four large reforms of unemployment insurance (UI) benefit levels in Austria. We document that wages are insensitive to UI benefit changes: point estimates imply a wage response of less than $0.01 per $1.00 UI benefit increase, and we can reject sensitivities larger than $0.03. The insensitivity holds even among workers with low wages and high predicted unemployment duration, and among job switchers hired out of unemployment. The insensitivity of wages to the nonemployment value presents a puzzle to the widely used Nash bargaining model, which predicts a sensitivity of $0.24–$0.48. Our evidence supports wage-setting models that insulate wages from the value of nonemployment.
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