Alumni
IWH Alumni The IWH maintains contact with its former employees worldwide. We involve our alumni in our work and keep them informed, for example, with a newsletter. We also plan…
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Predicting Free-riding in a Public Goods Game – Analysis of Content and Dynamic Facial Expressions in Face-to-Face Communication
Dmitri Bershadskyy, Ehsan Othman, Frerk Saxen
IWH Discussion Papers,
No. 9,
2019
Abstract
This paper illustrates how audio-visual data from pre-play face-to-face communication can be used to identify groups which contain free-riders in a public goods experiment. It focuses on two channels over which face-to-face communication influences contributions to a public good. Firstly, the contents of the face-to-face communication are investigated by categorising specific strategic information and using simple meta-data. Secondly, a machine-learning approach to analyse facial expressions of the subjects during their communications is implemented. These approaches constitute the first of their kind, analysing content and facial expressions in face-to-face communication aiming to predict the behaviour of the subjects in a public goods game. The analysis shows that verbally mentioning to fully contribute to the public good until the very end and communicating through facial clues reduce the commonly observed end-game behaviour. The length of the face-to-face communication quantified in number of words is further a good measure to predict cooperation behaviour towards the end of the game. The obtained findings provide first insights how a priori available information can be utilised to predict free-riding behaviour in public goods games.
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Suppliers as Liquidity Insurers
Reint E. Gropp, Daniel Corsten, Panos Markou
IWH Discussion Papers,
No. 8,
2017
Abstract
We examine how financial constraints in portfolios of suppliers affect cash holdings at the level of the customer. Utilizing a data set of private and public French companies and their suppliers, we show that customers rely on their financially unconstrained suppliers to provide them with backup liquidity, and that they stockpile approximately 10% less cash than customers with constrained suppliers. This effect persisted during the global financial crisis, highlighting that suppliers may be viable insurers of liquidity even when financing from banks and other external channels is unavailable. We further show that customers with unconstrained suppliers also simultaneously receive more trade credit; that the reduction in cash holdings is greater for firms with stronger ties to their unconstrained suppliers; and that customers reduce their cash holdings following a significant relaxation in their suppliers’ financial constraints through an IPO. Taken together, the results provide important nuance regarding the implications of supplier portfolios and financial constraints on firm liquidity management.
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Banks Credit and Productivity Growth
Fadi Hassan, Filippo di Mauro, Gianmarco Ottaviano
ECB Working Paper,
No. 2008,
2017
Abstract
Financial institutions are key to allocate capital to its most productive uses. In order to examine the relationship between productivity and bank credit in the context of different financial market set-ups, we introduce a model of overlapping generations of entrepreneurs under complete and incomplete credit markets. Then, we exploit firm-level data for France, Germany and Italy to explore the relation between bank credit and productivity following the main derivations of the model. We estimate an extended set of elasticities of bank credit with respect to a series of productivity measures of firms. We focus not only on the elasticity between bank credit and productivity during the same year, but also on the elasticity between credit and future realised productivity. Our estimates show a clear Eurozone core-periphery divide, the elasticities between credit and productivity estimated in France and Germany are consistent with complete markets, whereas in Italy they are consistent with incomplete markets. The implication is that in Italy firms turn to be constrained in their long-term investments and bank credit is allocated less efficiently than in France and Germany. Hence capital misallocation by banks can be a key driver of the long-standing slow productivity growth that characterises Italy and other periphery countries.
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The Role of Information in Innovation and Competition
Ufuk Akcigit, Qingmin Liu
Journal of the European Economic Association,
No. 4,
2016
Abstract
Innovation is typically a trial‐and‐error process. While some research paths lead to the innovation sought, others result in dead ends. Because firms benefit from their competitors working in the wrong direction, they do not reveal their dead‐end findings. Time and resources are wasted on projects that other firms have already found to be fruitless. We offer a simple model with two firms and two research lines to study this prevalent problem. We characterize the equilibrium in a decentralized environment that necessarily entails significant efficiency losses due to wasteful dead‐end replication and an information externality that leads to an early abandonment of the risky project. We show that different types of firms follow different innovation strategies and create different kinds of welfare losses. In an extension of the core model, we also study a centralized mechanism whereby firms are incentivized to disclose their actions and share their private information in a timely manner.
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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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