- Credit risk transfer, real sector productivity, and financial deepening (2005)
- We derive the effects of credit risk transfer (CRT) markets on real sector productivity and on the volume of financial intermediation in a model where banks choose their optimal degree of CRT and monitoring. We find that CRT increases productivity in the up-market real sector but decreases it in the low-end segment. If optimal, CRT unambiguously fosters financial deepening, i.e., it reduces credit-rationing in the economy. These effects rely upon the ability of banks to commit to the optimal CRT at the funding stage. The optimal degree of CRT depends on the combination of moral hazard, general riskiness, and the cost of monitoring in non-monotonic ways.
- Ein allgemeines Pfandbriefgesetz bietet Investoren mehr Chancen als Risiken (2003)
- Kommt das neue allgemeine Pfandbriefgesetz, werden die Refinanzierungskosten und damit auch die Pfandbriefrenditen stärker streuen. Das ist gut für Investoren. So können sie sich höhere Renditen einkaufen, ohne gegen ihre Investitionsrichtlinien zu verstoßen.
- Does the stock market react to unsolicited ratings? (2006)
- This paper investigates whether the stock market reacts to unsolicited ratings for a sample of S&P rated firms from January 1996 to December 2005. We first analyze the stock market reaction associated with the assignment of an initial unsolicited rating. We find evidence that this reaction is negative and particularly accentuated for Japanese firms. A comparison between S&P’s initial unsolicited ratings with previously published ratings of two Japanese rating agencies for a Japanese subsample shows that ratings assigned by S&P are systematically worse. Further, we find that the stock market does not react to the transition from an unsolicited to a solicited rating. Comparison of the upgrades in the sample with a matched-sample of upgrades of solicited ratings reveals that the price reactions are no different. In addition, abnormal returns are worse for firms whose rating remained unchanged after the solicitation compared to those for upgraded firms. Finally, we find that Japanese firms are less likely to receive an upgrade. Our findings suggest that unsolicited ratings are biased downwards, that the capital market therefore expects upgrades of formerly unsolicited ratings and punishes firms whose ratings remain unchanged. All these effects seem to be more pronounced for Japanese firms.
- Der deutsche Hypothekenbankenmarkt : Ergebnisse einer empirischen Untersuchung (2003)
- Das Firmenkundensegment und die Präsenz auf den internationalen Märkten für gewerblichen Hypothekarkredit und der Finanzierung öffentlicher Haushalte gewinnen für die deutschen Hypothekenbanken bis zum Jahr 2007 erheblich an Bedeutung, so das Ergebnis eines Forschungsprojekts der Goethe-Universität Frankfurt. Die Immobilienfinanziers werden ihre Geschäftsbeziehungen zu Unternehmen in den nächsten fünf Jahren sowohl qualitativ als auch räumlich ausbauen. Real Estate Investment Banking und Expansion ins Ausland stehen auf der strategischen Agenda der Hypothekenbanken ganz oben.
- Market structure, capital regulation and bank risk taking (2008)
- This paper discusses the effect of capital regulation on the risk taking behavior of commercial banks. We first theoretically show that capital regulation works differently in different market structures of banking sectors. In lowly concentrated markets, capital regulation is effective in mitigating risk taking behavior because banks' franchise values are low and banks have incentives to pursue risky strategies in order to increase their franchise values. If franchise values are high, on the other hand, the effect of capital regulation on bank risk taking is ambiguous as banks lack those incentives. We then test the model predictions on a cross-country sample including 421 commercial banks from 61 countries. We find that capital regulation is effective in mitigating risk taking only in markets with a low degree of concentration. The results remain robust after accounting for financial sector development, legal system effciency, and for other country and bank-specific characteristics. Keywords: Banks, market structure, risk shifting, franchise value, capital regulation
- Financial incentives and loan officer behavior: multitasking and allocation of effort under an incomplete contract : [version: July 04, 2014] (2014)
- In this paper we investigate the implications of providing loan officers with a compensation structure that rewards loan volume and penalizes poor performance versus a fixed wage unrelated to performance. We study detailed transaction information for more than 45,000 loans issued by 240 loan officers of a large commercial bank in Europe. We examine the three main activities that loan officers perform: monitoring, originating, and screening. We find that when the performance of their portfolio deteriorates, loan officers increase their effort to monitor existing borrowers, reduce loan origination, and approve a higher fraction of loan applications. These loans, however, are of above-average quality. Consistent with the theoretical literature on multitasking in incomplete contracts, we show that loan officers neglect activities that are not directly rewarded under the contract, but are in the interest of the bank. In addition, while the response by loan officers constitutes a rational response to a time allocation problem, their reaction to incentives appears myopic in other dimensions.
- Financial incentives and loan officer behavior (2013)
- In this paper, we investigate the implications of providing loan officers with a compensation structure that rewards loan volume and penalizes poor performance. We study detailed transactional information of more than 45,000 loans issued by 240 loan officers of a large commercial bank in Europe. We find that when the performance of their portfolio deteriorates, loan officers shift their efforts towards monitoring poorly-performing borrowers and issue fewer loans. However, these new loans are of above-average quality, which suggests that loan officers have a pecking order and process loans only for the very best clients when they are under time constraints.