The Term Structure of Sovereign Default Risk in EMU Member Countries and Its Determinants
Stefan Eichler, Dominik Maltritz
Journal of Banking and Finance,
Nr. 6,
2013
Abstract
We analyze the determinants of sovereign default risk of EMU member states using government bond yield spreads as risk indicators. We focus on default risk for different time spans indicated by spreads for different maturities. Using a panel framework we analyze whether there are different drivers of default risk for different maturities. We find that lower economic growth and larger openness increase default risk for all maturities. Higher indebtedness only increases short-term risk, whereas net lending, trade balance and interest rate costs only drive long-term default risk.
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Corporate Boards and Bank Loan Contracting
Bill Francis, Iftekhar Hasan, Michael Koetter, Qiang Wu
Journal of Financial Research,
Nr. 4,
2012
Abstract
We investigate the role of corporate boards in bank loan contracting. We find that when corporate boards are more independent, both price and nonprice loan terms (e.g., interest rates, collateral, covenants, and performance-pricing provisions) are more favorable, and syndicated loans comprise more lenders. In addition, board size, audit committee structure, and other board characteristics influence bank loan prices. However, they do not consistently affect all nonprice loan terms except for audit committee independence. Our study provides strong evidence that banks recognize the benefits of board monitoring in mitigating information risk ex ante and controlling agency risk ex post, and they reward higher quality boards with more favorable loan contract terms.
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The Impact of Firm and Industry Characteristics on Small Firms’ Capital Structure
Hans Degryse, Peter de Goeij, Peter Kappert
Small Business Economics,
Nr. 4,
2012
Abstract
We study the impact of firm and industry characteristics on small firms’ capital structure, employing a proprietary database containing financial statements of Dutch small and medium-sized enterprises (SMEs) from 2003 to 2005. The firm characteristics suggest that the capital structure decision is consistent with the pecking-order theory: Dutch SMEs use profits to reduce their debt level, and growing firms increase their debt position since they need more funds. We further document that profits reduce in particular short-term debt, whereas growth increases long-term debt. We also find that inter- and intra-industry effects are important in explaining small firms’ capital structure. Industries exhibit different average debt levels, which is in line with the trade-off theory. Furthermore, there is substantial intra-industry heterogeneity, showing that the degree of industry competition, the degree of agency conflicts, and the heterogeneity in employed technology are also important drivers of capital structure.
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Industrial Associations as a Channel of Business-Government Interactions in an Imperfect Institutional Environment: The Russian Case
A. Yakovlev, A. Govorun
IWH Discussion Papers,
Nr. 16,
2011
Abstract
International lessons from emerging economies suggest that business associations may provide an effective channel of communication between the government and the private sector. This function of business associations may become still more important in transition economies, where old mechanisms for coordinating enterprise activities have been destroyed, while the new ones have not been established yet. In this context, Russian experience is a matter of interest, because for a long time, Russia was regarded as a striking example of state failures and market failures. Consequently, the key point of our study was a description of the role and place of business associations in the presentday
Russian economy and their interaction with member companies and bodies of state
administration. Relying on the survey data of 957 manufacturing firms conducted in
2009, we found that business associations are more frequently joined by larger companies, firms located in regional capital cities, and firms active in investment and innovation. By contrast, business associations tend to be less frequently joined by business groups’ subsidiaries and firms that were non-responsive about their respective ownership structures. Our regression analysis has also confirmed that business associations are a component of what Frye (2002) calls an “elite exchange”– although only on regional and local levels. These “exchanges” imply that members of business associations, on the one hand, more actively assist regional and local authorities in social development of their regions, and on the other hand more often receive support from authorities. However, this effect is insignificant in terms of support from the federal government. In general, our results allow us to believe that at present, business associations (especially the
industry-wide and “leading” ones) consolidate the most active, advanced companies and act as collective representatives of their interests. For this reason, business associations can be regarded as interface units between the authorities and businesses and as a possible instrument for promotion of economic development.
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The Term Structure of Banking Crisis Risk in the United States: A Market Data Based Compound Option Approach
Stefan Eichler, Alexander Karmann, Dominik Maltritz
Journal of Banking and Finance,
Nr. 4,
2011
Abstract
We use a compound option-based structural credit risk model to estimate banking crisis risk for the United States based on market data on bank stocks on a daily frequency. We contribute to the literature by providing separate information on short-term, long-term and total crisis risk instead of a single-maturity risk measure usually inferred by Merton-type models or barrier models. We estimate the model by applying the Duan (1994) maximum-likelihood approach. A strongly increasing total crisis risk estimated from early July 2007 onwards is driven mainly by short-term crisis risk. Banks that defaulted or were overtaken during the crisis have a considerably higher crisis risk (especially higher long-term risk) than banks that survived the crisis.
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Deriving the Term Structure of Banking Crisis Risk with a Compound Option Approach: The Case of Kazakhstan
Stefan Eichler, Alexander Karmann, Dominik Maltritz
Discussion paper, Series 2: Banking and financial studies, No. 01/2010,
Nr. 1,
2010
Abstract
We use a compound option-based structural credit risk model to infer a term structure of banking crisis risk from market data on bank stocks in daily frequency. Considering debt service payments with different maturities this term structure assigns a separate estimator for short- and long-term default risk to each maturity. Applying the Duan (1994) maximum likelihood approach, we find for Kazakhstan that the overall crisis probability was mainly driven by short-term risk, which increased from 25% in March 2007 to 80% in December 2008. Concurrently, the long-term default risk increased from 20% to only 25% during the same period.
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Ownership Structure, Strategic Controls and Export Intensity of Foreign-invested Firms in Transition Economies
I. Filatotchev, Johannes Stephan, Björn Jindra
Journal of International Business Studies,
Nr. 7,
2008
Abstract
This paper examines the relationships between foreign ownership, managers’ independence in decision-making and exporting of foreign-invested firms in five European Union accession countries. Using a unique, hand-collected data set of 434 foreign-invested firms in Poland, Hungary, Slovenia, Slovakia and Estonia, we show that foreign investors’ ownership and control over strategic decisions are positively associated with export intensity, measured as the proportion of exports to total sales. The study also analyzes specific governance and control configurations in foreign-invested firms, showing that foreign equity and foreign control over business functions are complementary in terms of their effects on export intensity.
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Lower Firm-Specific Productivity Levels in East Germany and East European Industrial Branches: The Role of Managerial Factors
Johannes Stephan
Germany’s Economic Performance: From Unification to Euroization,
2007
Abstract
During the socialist era, companies in East Germany became much weaker than firms in West Germany in terms of technology and competitiveness. In large part, this may be rooted in the different incentive structures of the two systems: whereas in the West, the criterion for companies’ success was their ability to remain in business and generate income in a contestable market environment, firms in the East were required to fulfil a plan to which they were subjected without having their opinions considered.
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Are Botswana and Mozambique ready for CMA enlargement?
Tobias Knedlik
Botswana Journal of Economics,
Nr. 3,
2006
Abstract
The paper elaborates on the appropriateness of a potentially enlarged Common Monetary Area in Southern Africa including Botswana and Mozambique. The theory of optimum currency areas including some extensions by accounting for costs of non-integration and considering the external relations of currency areas are presented. Various indicators such as the structure of the economies, interest rates, inflation rates, exchange rates, factor mobility and trading partners are observed empirically. The paper concludes that current changes in the exchange rate policy of Botswana are expected to lead to increasing, though already high, convergence with CMA countries. Botswana is therefore an appropriate candidate for CMA enlargement. Mozambique is converging towards South Africa but still remains on a lower level. Taking into account the costs of non-integration, however, the target of integration should be formulated for the medium term.
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Determinants of employment - the macroeconomic view
Christian Dreger, Heinz P. Galler, Ulrich (eds) Walwai
Schriften des IWH,
Nr. 22,
2005
Abstract
The weak performance of the German labour market over the past years has led to a significant unemployment problem. Currently, on average 4.5 mio. people are without a job contract, and a large part of them are long-term unemployed. A longer period of unemployment reduces their employability and aggravates the problem of social exclusion.
The factors driving the evolution of employment have been recently discussed on the workshop Determinanten der Beschäftigung – die makroökonomische Sicht organized jointly by the IAB, Nuremberg, and the IWH, Halle. The present volume contains the papers and proceedings to the policy oriented workshop held in November 2004, 15-16th. The main focus of the contributions is twofold. First, macroeconomic conditions to stimulate output and employment are considered. Second, the impacts of the increasing tax wedge between labour costs and the take home pay are emphasized. In particular, the role of the contributions to the social security system is investigated.
In his introductory address, Ulrich Walwei (IAB) links the unemployment experience to the modest path of economic growth in Germany. In addition, the low employment intensity of GDP growth and the temporary standstill of the convergence process of the East German economy have contributed to the weak labour market performance. In his analysis, Gebhard Flaig (ifo Institute, München) stresses the importance of relative factor price developments. A higher rate of wage growth leads to a decrease of the employment intensity of production, and correspondingly to an increase of the threshold of employment. Christian Dreger (IWH) discusses the relevance of labour market institutions like employment protection legislation and the structure of the wage bargaining process on the labour market outcome. Compared to the current setting, policies should try to introduce more flexibility in labour markets to improve the employment record. The impact of interest rate shocks on production is examined by the paper of Boris Hofmann (Deutsche Bundesbank, Frankfurt). According to the empirical evidence, monetary policy cannot explain the modest economic performance in Germany. György Barabas and Roland Döhrn (RWI Essen) have simulated the effects of a world trade shock on output and employment. The relationships have been fairly stable over the past years, even in light of the increasing globalization. Income and employment effects of the German tax reform in 2000 are discussed by Peter Haan and Viktor Steiner (DIW Berlin). On the base of a microsimulation model, household gains are determined. Also, a positive relationship between wages and labour supply can be established. Michael Feil und Gerd Zika (IAB) have examined the employment effects of a reduction of the contribution rates to the social security system. To obtain robust results, the analysis is done under alternative financing scenarios and with different macroeconometric models. The impacts of allowances of social security contributions on the incentives to work are discussed by Wolfgang Meister and Wolfgang Ochel (ifo München). According to their study, willingness to work is expected to increase especially at the lower end of the income distribution. The implied loss of contributions could be financed by higher taxes.
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