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Unsägliche Industriepolitik und ein übergriffiger StaatReint GroppThe Pioneer, 1. März 2025
How do firms invest when financial constraints are relaxed? We document that firms affected by a large positive credit supply shock predominantly increase borrowing for transaction-based purposes. These treated firms have larger asset and employment growth rates; however, growth entirely stems from the increased takeover activity. Announcement returns indicate a low quality of the credit-supply-induced takeover activity. These results offer the possibility that credit-driven growth can simply reflect redistribution, rather than net gains in assets or employment.
This paper analyzes if lenders resolve managerial agency problems in loan contracts using sweep covenants. Sweeps require a (partial) prepayment when triggered and are included in many contracts. Exploiting exogenous reductions in analyst coverage due to brokerage house mergers and closures, we find that increased borrower opacity significantly increases sweep use. The effect is strongest for borrowers with higher levels of managerial entrenchment and if lenders hold both debt and equity in the firm. Overall, our results suggest that lenders implement sweep covenants to mitigate managerial agency problems by limiting contingencies of wealth expropriation.
Why are children with lower socioeconomic status (SES) substantially less likely to be enrolled in child care? We study whether barriers in the application process work against lower-SES children — the group known to benefit strongest from child care enrollment. In an RCT in Germany with highly subsidized child care (N = 607), we offer treated families information and personal assistance for applications. We find substantial, equity-enhancing effects of the treatment, closing half of the large SES gap in child care enrollment. Increased enrollment for lower-SES families is likely driven by altered application knowledge and behavior. We discuss scalability of our intervention and derive policy implications for the design of universal child care programs.
