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We study the effect of weakening creditor rights on distress risk premia via a bankruptcy reform that shifts bargaining power in financial distress toward shareholders. We find that the reform reduces risk factor loadings and returns of distressed stocks. The effect is stronger for firms with lower firm-level shareholder bargaining power. An increase in credit spreads of riskier relative to safer firms, in particular for firms with lower firm-level shareholder bargaining power, confirms a shift in bargaining power from bondholders to shareholders. Out-of-sample tests reveal that a reversal of the reform's effects leads to a reversal of factor loadings and returns.
We study the effect of weakening creditor rights on distress risk premia via a bankruptcy reform that shifts bargaining power in financial distress toward shareholders. We find that the reform reduces risk factor loadings and returns of distressed stocks. The effect is stronger for firms with lower firm-level shareholder bargaining power. An increase in credit spreads of riskier relative to safer firms, in particular for firms with lower firm-level shareholder bargaining power, confirms a shift in bargaining power from bondholders to shareholders. Out-of-sample tests reveal that a reversal of the reform's effects leads to a reversal of factor loadings and returns.
Part IV of our series "Cyberpeace: Dimensionen eines Gegenentwurfs" on cyberpeace. Matthias Schulze argues that what some perceive as cyberwar is not actually war but rather cyber conflict. The question therefore arises if this conflict will ever be solved. Ben Kamis on the other hand identifies motives in the use of language. He argues that talking about cyberpeace reinforces the impression that we are right in the middle of a cyberwar. I would not agree with that. As Johan Galtung puts it: “The use of the term ‘peace’ may in itself be peace-productive” (Galtung 1969: 167). But how do we define cyberpeace? Who should define it and how do we pursue it?...
How to abolish cyberwar
(2014)
Part III of our series "Cyberpeace: Dimensionen eines Gegenentwurfs" on cyberpeace: Cyberwar is like a discursive plague. After years and years of writing texts about it and against it, the concept is still scary, still spreading, still harmful. Its power is such that it is not simply being used in discourse – but is in fact forcing its specific discursive structures and rules on us. In short, we may keep questioning this concept, but we will never get rid of it...
“WAR IS PEACE, FREEDOM IS SLAVERY, AND IGNORANCE IS STRENGTH”. The slogan from George Orwell’s “1984” dystopia appears to capture the state of Russia’s 2014 official discourse quite accurately. This has not gone unnoticed by public and academic spectators in and outside Russia: while Bild magazine is counting Putin’s lies in his recent ARD interview, a Zeit article declares Russia itself to be a post-modern “lie”...
The impacts of climate and environmental changes on migration have gained increasing attention in recent years. Yet the role and significance of the climate as an influencing factor for migratory processes is still poorly understood. Case studies are required which consider the specific historical, socio-cultural and environmental context. The micle project examined the interactions between climate change, land degradation and migration in selected regions in the Sahelian countries Mali and Senegal.
A second Yalta
(2014)
On 11 February, the World Fought back against Mass Surveillance. See those capital letters? They denote Things that Matter – somehow. We don’t necessarily know who ‘We’ are, what the ‘World’ is, nor whether the Mass Surveillance We’re against is the big and sexy kind run by acronymized (foreign) government agencies that We all recently learned about through Edward Snowden or the everyday kind conducted by means of cookies, computer profiles and GPS data we all send to whomever is watching in the course of a normal day’s activities, like checking Facebook, leaving the house to buy some bread or sending family pictures over the holidays via email. But ‘We’ ‘Fought’ ‘Them’, or maybe ‘It’.
The bloody rebellion in Syria has aroused hostilities between Sunni and Shiite Muslims, a religious conflict that dates back to the first Muslim civilwar and the Battle of Siffin in 657 AD which took place on the banks of the Euphrates river, in what is now Ar-Raqqah, Syria. Today we see how the conflict is again spreading from Syria to the rest of the Middle East in places like Tripoli in Libanon, Falludscha in Iraq and Sad’ah in Yemen. But how did it come to this?
Trust me, I’m an expert
(2014)
Given such phenomena as the dramatic leaks of the last decade, the vibrantand inflammatory discourse about ‘cyberwar’ and the conflation of the Anti-Counterfeiting Trade Agreement with the ‘backbone of the European economy’, regulation of what the Internet is supposed to be and what people are allowed to do in it is always and everywhere about security, whether users like it or not. And that regulation comes from people, special people we like to think of as experts.
With the current conflict in Gaza going full tilt, the usual questions have popped up: Who is to blame, what is everyone’s motivation and strategy, how to stop the bloodshed, how to end the conflict. And as usual, the two-state solution, i.e. two separate, sovereign states within the borders of the 1949 armistice agreement, keeps popping up as a purported solution. This is especially prominent in the statements of politicians in countries not directly involved in the conflict. Countries that at least claim to want to help end the conflict, be it through mediation or other diplomatic measures. But for those countries, the two-state solution has become an idea to hide behind. It does not help solve the conflict, neither in the short- nor mid-term. Clinging to the idea merely prolongs the status quo. However, it does allow the rest of the world to avoid facing the facts, which would force them to reevaluate their position on who to support and actually do something about the conflict as it currently is. But it’s high time we face the music and admit it: The two-state solution is no longer a viable option when it comes to mediating this conflict...
Out of area or out of business?: the bourgeois parochialism of international studies conferences
(2014)
Most face-to-face interaction with other IR types happens at conferences, and it’s easy to break conferences down by profile and inclusiveness. The ISA annual conference is supposed to rate pretty highly on both, and almost everyone has been a few times by the end of their post-grad careers. Then there are the conferences that are high profile but less inclusive. APSA, BISA, the ISA regional conferences, and the newly constituted EISA are fairly high profile in that most IR professionals have heard of them, but they’re less inclusive in that few of us would cross broad bodies of water and long customs lines to participate...
The recent financial crisis highlighted the limits of the "originate to distribute" model of banking, but its nexus with the macroeconomy remains unexplored. I build a business cycle model with banks engaging in credit risk transfer (CRT) under informational externalities. Markets for CRT provide liquidity insurance to banks, but the emergence of a pooling equilibrium can also impair the banks’ monitoring incentives. In normal times and in face of standard macro shocks the insurance benefits of CRT prevail and the business cycle is stabilized. In face of financial/liquidity shocks the extent of informational asymmetries is larger and the business cycle is amplified. The macro model with CRT can also reproduce well a number of macro and banking statistics over the period of rapid growth of this banks’ business model.
We propose a novel approach on how to estimate systemic risk and identify its key determinants. For US financial companies with publicly traded equity options, we extract option-implied value-at-risks and measure the spillover effects between individual company value-at-risks and the option-implied value-at-risk of a financial index. First, we study the spillover effect of increasing company risks on the financial sector. Second, we analyze which companies are mostly affected if the tail risk of the financial sector increases. Key metrics such as size, leverage, market-to-book ratio and earnings have a significant influence on the systemic risk profiles of financial institutions.