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Um eine grüne Transformation der Volkswirtschaft zu erreichen, werden Finanzmärkte und die mit ihnen verbundenen Banken eine wichtige Rolle einnehmen müssen. Aber allein vermögen Banken und Kapitalmärkte wenig, wenn sie nicht im Kontext einer klugen, politischen Rahmensetzung und einer transparenten Erfassung der verursachten Schäden auf Unternehmensebene gesehen werden. Diese drei Pfeiler stellen bildlich den tragenden Unterbau für eine Brücke hin zu einer klimaneutralen Wirt-schaftsverfassung dar. Ihr Zusammenwirken ist eine Voraussetzung dafür, dass die Finanzwirtschaft die benötigten Finanzmittel für die grüne Transformation bereitstellen kann.
We analyze the performance of marketplace lending using loan cash flow data from the largest platform, Lending Club. We find substantial risk-adjusted performance of about 40 basis points per month for the entire loan portfolio. Other loan portfolios grouped by risk category have similar risk-adjusted performance. We show that characteristics of the local bank sector for each loan, such as concentration of deposits and the presence of national banks, are related to the performance of loans. Thus, marketplace lending has the potential to finance a growing share of the consumer credit market in the absence of a competitive response from the traditional incumbents.
We examine whether the uncertainty related to environmental, social, and governance (ESG) regulation developments is reflected in asset prices. We proxy the sensitivity of firms to ESG regulation uncertainty by the disparity across the components of their ESG ratings. Firms with high ESG disparity have a higher option-implied cost of protection against downside tail risk. The impact of the misalignment across the different dimensions of the ESG score is distinct from that of ESG score level itself. Aggregate downside risk bears a negative price for firms with low ESG disparity.
The discount control mechanisms that closed-end funds often choose to adopt before IPO are supposedly implemented to narrow the difference between share price and net asset value. We find evidence that non-discretionary discount control mechanisms such as mandatory continuation votes serve as costly signals of information to reveal higher fund quality to investors. Rents of the skill signaled through the announcement of such policies accrue to managers rather than investors as differences in skill are revealed through growing assets under management rather than risk- adjusted performance.
Der Beitrag führt in das sozialpsychologische Phänomen des Gruppendenkens ein. Kennzeichen und Gegenstrategien werden anhand von Zeugenaussagen vor dem Wirecard-Untersuchungsausschuss am Beispiel des Aufsichtsrats illustriert. Normative Implikationen de lege ferenda schließen sich an. Sie betreffen unabhängige Mitglieder (auch auf der Arbeitnehmerbank), Direktinformationsrechte im Unternehmen (unter Einschluss von Hinweisgebern) und den Investorendialog (auch mit Leerverkäufern).
Die Erklärung von Intelligenz fasziniert Menschen seit Jahrtausenden, scheint sich doch mit ihr die menschliche Singularität gegenüber Natur und Tier zu manifestieren. Zugleich betonen nicht nur philosophische Strömungen, sondern auch die Mathematik, die Neuro- und die Computerwissenschaften die Abhängigkeit menschlicher Intelligenz von mechanistischen Prozessen. Ob damit eine Verwandtschaft beider Formen der Informationsverarbeitung verbunden ist oder genau umgekehrt fundamentale Unterschiede bestehen, ist seit knapp hundert Jahren Gegenstand wissenschaftlicher Kontroversen. Fest steht allerdings, dass Maschinen jedenfalls in manchen Bereichen die menschliche Leistungsfähigkeit in Schnelligkeit und Präzision übertreffen können. Nähert man sich dieser Vorstellung, drängt sich die Frage auf, ob es sich empfiehlt, bestimmte Entscheidungen besser von Maschinen treffen, jedenfalls aber unterstützen zu lassen. Neben Ärzten, Rechtsanwälten und Börsenhändlern betrifft das auch Leitungsentscheidungen von Unternehmensführern.
Vor diesem Hintergrund wird im Folgenden ein Überblick über Formen künstlicher Intelligenz (KI) gegeben. Im Anschluss fokussiert der Beitrag auf die Rolle von KI im Kontext von Vorstandsentscheidungen. Dazu zählen allgemeine Sorgfaltspflichten, wenn über den Einsatz von KI im Unternehmen zu entscheiden ist. Geht es um die Unterstützung gerade von Vorstandsentscheidungen stellen sich zusätzlich Fragen der Kooperation von Mensch und Maschine, der Delegation des Kernbestands von Leitungsentscheidungen und der Einstandspflicht für KI.
This paper investigates stock market reaction to greenwashing by analyzing a new channel whereby companies change their names to green-related ones (i.e., names that evoke green and sustainable sentiments) to persuade the public that their activities are green. The findings reveal a striking positive stock price reaction to the announcement of corporate name changes to green-related names only for companies not involved in green activities at the time of the announcement. However, over an extended period of time, companies unrelated to green activities experience substantial negative abnormal returns if they fail to align their operational focus with the new name after the change.
This literature survey explores the potential avenues for the design of a green auto asset-backed security by focusing on the European auto securitization market. In this context, we examine the entire value chain of the securitization process to understand the incentives and interests involved at various stages of the transaction. We review recent regulatory developments, feasibility concerns, and potential designs of a sustainable securitization framework. Our study suggests that a Green Auto ABS should be based on both a green use of proceeds and a green collateral-based methodology.
This paper studies the macro-financial implications of using carbon prices to achieve ambitious greenhouse gas (GHG) emission reduction targets. My empirical evidence shows a 0.6% output loss and a rise of 0.3% in inflation in response to a 1% shock on carbon policy. Furthermore, I also observe financial instability and allocation effects between the clean and highly polluted energy sectors. To have a better prediction of medium and long-term impact, using a medium-large macro-financial DSGE model with environmental aspects, I show the recessionary effect of an ambitious carbon price implementation to achieve climate targets, a 40% reduction in GHG emission causes a 0.7% output loss while reaching a zero-emission economy in 30 years causes a 2.6% output loss. I document an amplified effect of the banking sector during the transition path. The paper also uncovers the beneficial role of pre-announcements of carbon policies in mitigating inflation volatility by 0.2% at its peak, and our results suggest well-communicated carbon policies from authorities and investing to expand the green sector. My findings also stress the use of optimal green monetary and financial policies in mitigating the effects of transition risk and assisting the transition to a zero-emission world. Utilizing a heterogeneous approach with macroprudential tools, I find that optimal macroprudential tools can mitigate the output loss by 0.1% and investment loss by 1%. Importantly, my work highlights the use of capital flow management in the green transition when a global cooperative solution is challenging.
Armstrong et al. (2022) review the empirical methods used in the accounting literature to draw causal inferences. They document a growing number of studies using quasi-experimental methods and provide a critical perspective on this trend as well as the use of these methods in the accounting literature. In this discussion, I complement their review by broadening the perspective. I argue for a design-based approach to accounting research that shifts attention from methods to the entire research design. I also discuss why studies that aim to draw causal inferences are important, how these studies fit into the scientific process, and why assessing the strength of the research design is important when evaluating studies and aggregating research findings.
Dynamics of life course family transitions in Germany: exploring patterns, process and relationships
(2023)
This paper explores dynamics of family life events in Germany using discrete time event history analysis based on SOEP data. We find that higher educational attainment, better income level, and marriage emerge as salient protective factors mitigating the risk of mortality; better education also reduces the likelihood of first marriage whereas, lower educational attainment, protracted period, and presence of children act as protective factors against divorce. Our key finding shows that disparity in mean life expectancies between individuals from low- and high-income brackets is observed to be 9 years among males and 6 years among females, thereby illustrating the mortality inequality attributed to income disparities. Our estimates show that West Germans have low risk of death, less likelihood of first marriage, and they have a high risk of divorce and remarriage compared to East Germans.
Who should hold bail-inable debt and how can regulators police holding restrictions effectively?
(2023)
This paper analyses the demand-side prerequisites for the efficient application of the bail-in tool in bank resolution, scrutinises whether the European bank crisis management and deposit insurance (CMDI) framework is apt to establish them, and proposes amendments to remedy identified shortcomings.
The first applications of the new European CMDI framework, particularly in Italy, have shown that a bail-in of debt holders is especially problematic if they are households or other types of retail investors. Such debt holders may be unable to bear losses, and the social implications of bailing them in may create incentives for decision makers to refrain from involving them in bank resolution. In turn, however, if investors can expect resolution authorities (RAs) to behave inconsistently over time and bail-out bank capital and debt holders despite earlier vows to involve them in bank rescues, the pricing and monitoring incentives that the crisis management framework seeks to invigorate would vanish. As a result, market discipline would be suboptimal and moral hazard would persist. Therefore, the policy objectives of the CMDI framework will only be achieved if critical bail-in capital is not held by retail investors without sufficient loss-bearing capacity. Currently, neither the CMDI framework nor capital market regulation suffice to assure that this precondition is met. Therefore, some amendments are necessary. In particular, debt instruments that are most likely to absorb losses in resolution should have a high minimum denomination and banks should not be allowed to self-place such securities.
Can consumption-based mechanisms generate positive and time-varying real term premia as we see in the data? I show that only models with time-varying risk aversion or models with high consumption risk can independently produce these patterns. The latter explanation has not been analysed before with respect to real term premia, and it relies on a small group of investors exposed to high consumption risk. Additionally, it can give rise to a “consumption-based arbitrageur” story of term premia. In relation to preferences, I consider models with both time-separable and recursive utility functions. Specifically for recursive utility, I introduce a novel perturbation solution method in terms of the intertemporal elasticity of substitution. This approach has not been used before in such models, it is easy to implement, and it allows a wide range of values for the parameter of intertemporal elasticity of substitution.
This paper develops and implements a backward and forward error analysis of and condition numbers for the numerical stability of the solutions of linear dynamic stochastic general equilibrium (DSGE) models. Comparing seven different solution methods from the literature, I demonstrate an economically significant loss of accuracy specifically in standard, generalized Schur (or QZ) decomposition based solutions methods resulting from large backward errors in solving the associated matrix quadratic problem. This is illustrated in the monetary macro model of Smets and Wouters (2007) and two production-based asset pricing models, a simple model of external habits with a readily available symbolic solution and the model of Jermann (1998) that lacks such a symbolic solution - QZ-based numerical solutions miss the equity premium by up to several annualized percentage points for parameterizations that either match the chosen calibration targets or are nearby to the parameterization in the literature. While the numerical solution methods from the literature failed to give any indication of these potential errors, easily implementable backward-error metrics and condition numbers are shown to successfully warn of such potential inaccuracies. The analysis is then performed for a database of roughly 100 DSGE models from the literature and a large set of draws from the model of Smets and Wouters (2007). While economically relevant errors do not appear pervasive from these latter applications, accuracies that differ by several orders of magnitude persist.
This paper presents and compares Bernoulli iterative approaches for solving linear DSGE models. The methods are compared using nearly 100 different models from the Macroeconomic Model Data Base (MMB) and different parameterizations of the monetary policy rule in the medium-scale New Keynesian model of Smets and Wouters (2007) iteratively. I find that Bernoulli methods compare favorably in solving DSGE models to the QZ, providing similar accuracy as measured by the forward error of the solution at a comparable computation burden. The method can guarantee convergence to a particular, e.g., unique stable, solution and can be combined with other iterative methods, such as the Newton method, lending themselves especially to refining solutions.
We present determinacy bounds on monetary policy in the sticky information model. We find that these bounds are more conservative here when the long run Phillips curve is vertical than in the standard Calvo sticky price New Keynesian model. Specifically, the Taylor principle is now necessary directly - no amount of output targeting can substitute for the monetary authority’s concern for inflation. These determinacy bounds are obtained by appealing to frequency domain techniques that themselves provide novel interpretations of the Phillips curve.
We propose a model with mean-variance foreign investors who exhibit a convex disutility associated to brown bond holdings. The model predicts that bond green premia should be smaller in economies with a closer financial account and highly volatile exchange rates. This happens because foreign intermediaries invest relatively less in such economies, and this lowers the marginal disutility of investing in polluting activities. We find strong empirical evidence in favor of this hypothesis using a global bond market dataset. Exchange rate volatility and financial account openness are thus able to explain the higher financing costs of green projects in emerging markets relative to advanced economies, especially when green bonds are denominated in local currency: a disadvantage that we can call the "green sin" of emerging economies.
This paper studies the impact of banks’ dividend restrictions on the behavior of their institutional investors. Using an identification strategy that relies on the within investor variation and a difference in difference setup, I find that funds permanently decrease their ownership shares at treated banks during the 2020 dividend restrictions in the Eurozone and even exit treated banks’ stocks. Using data before the intro- duction of the ban reveals a positive relationship between fund ownership and banks’ dividend yield, highlighting again the importance of dividends for European banks’ fund investors. This reaction also has pricing implications since there is a negative relationship between the dividend restriction announcement day cumulative abnormal returns and the percentage of fund owners per bank.
The forward guidance trap
(2023)
This paper examines the policy experience of the Fed, ECB and BOJ during and after the Covid-19 pandemic and draws lessons for monetary policy strategy and ist communication. All three central banks provided appropriate accommodation during the pandemic but two failed to unwind this accommodation in a timely manner. The Fed and ECB guided real interest rates to inappropriately negative levels as the economy recovered from the pandemic, fueling high inflation. The policy error can be traced to decisions regarding forward guidance on policy rates that delayed lift-off while the two central banks continued to expand their balance sheets. The Fed and the ECB fell into the forward guidance trap. This could have been avoided if policy were guided by a forward- looking rule that properly adjusted the nominal interest rate with the evolution of the inflation outlook.
A safe core mandate
(2023)
Central banks have vastly expanded their footprint on capital markets. At a time of extraordinary pressure by many sides, a simple benchmark for the scale and scope of their core mandate of price and financial stability may be useful.
We make a case for a narrow mandate to maintain and safeguard the border between safe and quasi safe assets. This ex-ante definition minimizes ambiguity and discourages risk creation and limit panic runs, primarily by separating market demand for reliable liquidity from risk-intolerant, price-insensitive demand for a safe store of value. The central bank may be occasionally forced to intervene beyond the safe core but should not be bound by any such ex-ante mandate, unless directed to specific goals set by legislation with explicit fiscal support.
We review distinct features of liquidity and safety demand, seeking a definition of the safety border, and discuss LOLR support for borderline safe assets such as MMF or uninsured deposits.
A safe core formulation is close to the historical focus on regulated entities, collateralized lending and attention to the public debt market, but its specific framing offers some context on controversial issues such as the extent of LOLR responsibilities. It also justifies a persistently large scale for central bank liabilities (Greenwood, Hansom and Stein 2016), as safety demand is related to financial wealth rather than GDP. Finally, it is consistent with an active central bank role in supporting liquidity in government debt markets trading and clearing (Duffie 2020, 2021).