Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting
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204
This paper investigates the impact of IT standardization on bank performance based on a panel of 457 German savings banks over the period from 1996 to 2006. We measure IT standardization as the fraction of IT expenses for centralized services over banks' total IT expenses. Bank efficiency, in turn, is measured by traditional accounting performance indicators as well as by cost and profit efficiencies that are estimated by a stochastic frontier approach. Our results suggest that IT standardization is conducive to cost efficiency. The relation is positive and robust for small and medium-sized banks but vanishes for very large banks. Furthermore, our study confirms the often cited computer paradox by showing that total IT expenditures negatively impact cost efficiency and have no influence on bank profits. To the best of our knowledge, this paper is first to empirically explore whether IT standardization enhances efficiency by employing genuine data of banks' IT expenditures. JEL Classification: C23, G21 Keywords: IT standardization, cost and profit efficiency, savings banks
201
In this paper, we analyze economies of scale for German mutual fund complexes. Using 2002-2005 data of 41 investment management companies, we specify a hedonic translog cost function. Applying a fixed effects regression on a one-way error component model there is clear evidence of significant overall economies of scale. On the level of individual mutual fund complexes we find significant economies of scale for all of the companies in our sample. With regard to cost efficiency, we find that the average mutual fund complexes in all size quartiles deviate considerably from the best practice cost frontier. JEL Classification: G2, L25 Keywords: mutual fund complex, investment management company, cost efficiency, economies of scale, hedonic translog cost function, fixed effects regression, one-way error component model
100
Untersuchungsgegenstand ist der empirische Gehalt der ökonomischen Theorie eines Hedgings auf Unternehmensebene. In den USA wurde die Hedging-Theorie in einer Reihe von empirischen Studien aufgegriffen. Die Befunde sind zumeist konsistent mit dem Erklärungsansatz von Froot/Scharfstein/Stein (1993), wonach eine Verringerung der Cashflow-Volatilität – unter der Annahme steigender Außenfinanzierungskosten – zu einer Reduzierung von Unterinvestitionskosten führt. Bei deutschen Unternehmen besitzt dieser Ansatz bemerkenswerterweise jedoch nur einen geringen Erklärungsgehalt. Die Ergebnisunterschiede können auf unterschiedliche Kapitalmarktverhältnisse zurückgeführt werden: Die unterstellten steigenden Kosten der Außenfinanzierung besitzen für deutsche Unternehmen aufgrund der Dominanz des Bezugsrechtsverfahrens sowie der Rolle der Hausbank als Mechanismus zur Überwindung von Informationsproblemen eine vergleichsweise geringere Bedeutung. Die Managerinteressen erweisen sich bei deutschen Unternehmen als eine wesentliche Hedging-Determinante. Zwischen der Höhe des gebundenen Managervermögens und der Hedging-Wahrscheinlichkeit besteht entsprechend der Hedging-Theorie ein signifikanter positiver Zusammenhang. Entgegen den amerikanischen Befunden kann jedoch eine disziplinierende Wirkung von Großaktionären auf die Hedging-Entscheidung nicht beobachtet werden. Zur Berücksichtigung der spezifischen deutschen Kapitalmarktverhältnisse wird der Einfluss von Bankenbeteiligungen und Familienunternehmen auf die Hedging-Entscheidung untersucht. Ein Bankeneinfluss auf die Derivateeinsatz-Entscheidung kann jedoch nicht festgestellt werden. Entgegen Diversifikations- und Kapitalmarktüberlegungen besteht bei Familienunternehmen interessanterweise eine signifikant geringere Hedging-Wahrscheinlichkeit.
124
In this study, we develop a technique for estimating a firm’s expected cost of equity capital derived from analyst consensus forecasts and stock prices. Building on the work of Gebhardt/Lee/-Swaminathan (2001) and Easton/Taylor/Shroff/Sougiannis (2002), our approach allows daily estimation, using only publicly available information at that date. We then estimate the expected cost of equity capital at the market, industry and individual firm level using historical German data from 1989-2002 and examine firm characteristics which are systematically related to these estimates. Finally, we demonstrate the applicability of the concept in a contemporary case study for DaimlerChrysler and the European automobile industry.
115
Under a new Basel capital accord, bank regulators might use quantitative measures when evaluating the eligibility of internal credit rating systems for the internal ratings based approach. Based on data from Deutsche Bundesbank and using a simulation approach, we find that it is possible to identify strongly inferior rating systems out-of time based on statistics that measure either the quality of ranking borrowers from good to bad, or the quality of individual default probability forecasts. Banks do not significantly improve system quality if they use credit scores instead of ratings, or logistic regression default probability estimates instead of historical data. Banks that are not able to discriminate between high- and low-risk borrowers increase their average capital requirements due to the concavity of the capital requirements function.
108
Past research suggests that international real estate markets show return characteristics and interrelationships with other asset classes, which probably qualify them as an interesting component of national and international asset allocation decisions. However, the special characteristics of real estate assets are quite distinct from that of financial assets, such as stocks and bonds. This is also the case for real estate return distributions. Therefore, the proper integration of real estate markets into asset allocation decisions requires profound understanding of real estate returns' distributional characteristics .
Because of the particular characteristics of real estate, representing real estate markets through reliable a time-series is a complex task. Consequently, reliable real estate indices with a sufficiently long history in major international real estate markets are only scarcely available. Most of the research that has been done on real estate returns was done for the U.K. and U.S., where eligible indices exist. On the other hand, in other important real estate markets, such as Germany, either little or no research has been perfoimed.
In this analysis, the methodology of Maurer, Sebastian and Stephan (2000) for indirectly deriving an appraisal-based index for the German commercial real estate market will be applied. This approach is solely based on publicly available data from German open-ended real estate investment trusts. It could also provide a solution to deriving a reliable real estate time-series for other markets.
We will extend previous analyses for the U.K. and U.S. to provide additional fundamental insights into the return characteristics of the German commercial real estate market. Despite univariate considerations, the main focus is the interrelationships between various international real estate markets, as well as between those respective markets and the international stock and bond markets.
185
The introduction of a common currency as well as the harmonization of rules and regulations in Europe has significantly reduced distance in all its guises. With reduced costs of overcoming space, this emphasizes centripetal forces and it should foster consolidation of financial activity. In a national context, as a rule, this led to the emergence of one financial center. Hence, Europeanization of financial and monetary affairs could foretell the relegation of some European financial hubs such as Frankfurt and Paris to third-rank status. Frankfurt’s financial history is interesting insofar as it has lost (in the 1870s) and regained (mainly in the 1980s) its preeminent place in the German context. Because Europe is still characterized by local pockets of information-sensitive assets as well as a demand for variety the national analogy probably does not hold. There is room in Europe for a number of financial hubs of an international dimension, including Frankfurt.
125
A widely recognized paper by Colin Mayer (1988) has led to a profound revision of academic thinking about financing patterns of corporations in different countries. Using flow-of-funds data instead of balance sheet data, Mayer and others who followed his lead found that internal financing is the dominant mode of financing in all countries, that financing patterns do not differ very much between countries and that those differences which still seem to exist are not at all consistent with the common conviction that financial systems can be classified as being either bank-based or capital market-based. This leads to a puzzle insofar as it calls into question the empirical foundation of the widely held belief that there is a correspondence between the financing patterns of corporations on the one side, and the structure of the financial sector and the prevailing corporate governance system in a given country on the other side. The present paper addresses this puzzle on a methodological and an empirical basis. It starts by comparing and analyzing various ways of measuring financial structure and financing patterns and by demonstrating that the surprising empirical results found by studies that relied on net flows are due to a hidden assumption. It then derives an alternative method of measuring financing patterns, which also uses flow-of-funds data, but avoids the questionable assumption. This measurement concept is then applied to patterns of corporate financing in Germany, Japan and the United States. The empirical results, which use an estimation technique for determining gross flows of funds in those cases in which empirical data are not available, are very much in line with the commonly held belief prior to Mayer’s influential contribution and indicate that the financial systems of the three countries do indeed differ from one another in a substantial way, and moreover in a way which is largely in line with the general view of the differences between the financial systems of the countries covered in the present paper.
33
A widely recognized paper by Colin Mayer (1988) has led to a profound revision of academic thinking about financing patterns of corporations in different countries. Using flow-of-funds data instead of balance sheet data, Mayer and others who followed his lead found that internal financing is the dominant mode of financing in all countries, that therefore financial patterns do not differ very much between countries and that those differences which still seem to exist are not at all consistent with the common conviction that financial systems can be classified as being either bank-based or capital market-based. This leads to a puzzle insofar as it calls into question the empirical foundation of the widely held belief that there is a correspondence between the financing patterns of corporations on the one side, and the structure of the financial sector and the prevailing corporate governance system in a given country on the other side. The present paper addresses this puzzle on a methodological and an empirical basis. It starts by demonstrating that the surprising empirical results found by Mayer et al. are due to a hidden assumption underlying their methodology. It then derives an alternative method of measuring financing patterns, which also uses flow-of-funds data, but avoids the questionable assumption. This measurement concept is then applied to patterns of corporate financing in Germany, Japan and the United States. The empirical results are very much in line with the commonly held belief prior to Mayer’s influential contribution and indicate that the financial systems of the three countries do indeed differ from one another in a substantial way.
50
Wenn man untersuchen möchte, ob sich die Finanzsysteme verschiedener Länder im Verlauf der letzten Jahre aneinander angeglichen haben oder demnächst angleichen werden, braucht man ein Konzept zur Beschreibung von Finanzsystemen, durch das wesentliche Strukturen, deren Unterschiede und Veränderungen erkennbar werden, ohne dabei in "Systemgeschwafel" (D. Schneider) abzugleiten. Wir haben dafür das Konzept der Komplementarität als nützlich identifiziert. Der Beitrag stellt dieses Konzept vor und soll und seine Eignung belegen. Letztlich geht es dabei auch um die Frage, ob reale Finanzsysteme konsistente Systeme mit komplementären Elementen darstellen. Nach der Vorstellung der formalen Konzepte der Komplementarität und der Konsistenz wird "das Finanzsystem" auf seine Komple mentarität untersucht. Dazu wird ein Finanzsystem aus der Sicht von Unternehmen des nichtfinanziellen Sektors als ein System gekennzeichnet, das aus drei Teilsystemen besteht. Das erste Teilsystem ist das Finanzierungssystem einschließlich Finanzsektor und Mustern der Unternehmensfinanzierung, das zweite das Corporate Governance-System und das dritte das Unternehmens-Strategie-System. Für alle drei Teilsysteme wird – allgemein und mit Bezug auf die Finanzsysteme Deutschlands, Japans und der USA - gezeigt, inwieweit die Elemente der betreffenden Teilsysteme untereinander komplementär sind, und geprüft, ob sie in ihren Ausprägungen auch konsistent sind, d.h. wirklich "zueinander passen". Untersucht wird auch die Komplementarität und Konsistenz zwischen den Teilsystemen selbst. Der Beitrag endet mit Überlegungen über die Anwendung des Komplementaritätskonzepts. Dass ein Finanzsystem die Eigenschaft der Komplementarität aufweist, hat nicht nur weitreichende Implikationen für die Methodik der Analyse von Finanzsystemen, sondern auch für die Vorhersehbarkeit der Entwicklung von Finanzsystemen und damit für die Wahrscheinlichkeit einer Konvergenz von Finanzsystemen, für deren Effizienzeigenschaften und für die Möglichkeiten, Finanzsysteme durch gestaltende Eingriffe zu verbessern.
177
This paper traces the location of foreign banks in Germany from 1949 to 2006. As suggested by new economic geography models we find a ‘u’-shaped concentration of foreign banks in Germany. Only after a competition between several cities, Frankfurt has emerged as the pre-eminent financial centre, triggered by the ‘historical event’ of setting up the German central bank in Frankfurt. After a strong increase, Frankfurt’s share in the location of foreign banks in Germany decreases slowly but significantly since the mid 1980’s. We conclude that there will be a lesser role in Europe for secondtier financial centres in the future.
106
This paper is a draft for the chapter German banks and banking structure of the forthcoming book The German financial system . As such, the paper starts out with a description of past and present structural features of the German banking industry. Given the presented empirical evidence it then argues that great care has to be taken when generalising structural trends from one financial system to another. Whilst conventio nal commercial banking is clearly in decline in the US, it is far from clear whether the dominance of banks in the German financial system has been significantly eroded over the last decades. We interpret the immense stability in intermediation ratios and financing patterns of firms between 1970 and 2000 as strong evidence for our view that the way in which and the extent to which German banks fulfil the central functions for the financial system are still consistent with the overall logic of the German financial system. In spite of the current dire business environment for financial intermediaries we do not expect the German financial system and its banking industry as an integral part of this system to converge to the institutional arrangements typical for a market-oriented financial system. This Version: March 25, 2003
156
This article presents an overview of the contemporary German insurance market, its structure, players, and development trends. First, brief information about the history of the insurance industry in Germany is provided. Second, the contemporary market is analyzed in terms of its legal and economic structure, with statistics on the number of companies, insurance density and penetration, the role of insurers in the capital markets, premiums split, and main market players and their market shares. Furthermore, the three biggest insurance lines—life, health, and property and casualty—are considered in more detail, such as product range, country specifics, and insurance and investment results. A section on regulation outlines its implementation in the insurance sector, offering information on the underlying legislative basis, supervisory body, technical procedures, expected developments, and sources of more detailed information.
172
Wir untersuchen, in welchem Ausmaß die Aktien deutscher Unternehmen im Zeitverlauf an ausländischen Börsen gehandelt werden. Es zeigt sich – nach anfänglich bedeutsamer Handelsaktivität im Ausland – ein ausgeprägter Rückfluss-Effekt nach Deutschland. Zweitnotierungen an ausländischen Börsen dienen der Verbreiterung der Aktionärsbasis und somit der Senkung der Kapitalkosten und letztendlich der Steigerung des Unternehmenswertes. Dazu ist ein ausreichendes Handelsvolumen an der ausländischen Börse unabdinglich. Daran gemessen sind die Auslandsnotierungen deutscher Unternehmen nicht erfolgreich. Dies ist jedoch nicht im gleichen Ausmaß für alle Unternehmen der Fall. Kleinere, wachsende Unternehmen und Unternehmen mit höherem Anteil des Auslandsumsatzes am Gesamtumsatz werden relativ stärker im Ausland gehandelt.
60
Initiated by the seminal work of Diamond/Dybvig (1983) and Diamond (1984), advances in the theory of financial intermediation have sharpened our understanding of the theoretical foundations of banks as special financial institutions. What makes them "unique" is the combination of accepting deposits and issuing loans. However, in recent years the notion of "disintermediation" has gained tremendous popularity, especially among American observers. These observers argue that deregulation, globalisation and advances in information technology have been eroding the role of banks as intermediaries and thus their alleged uniqueness. It is even assumed that ever more efficiently organised capital markets and specialised financial institutions that take advantage of these markets, such as mutual funds or finance companies, will lead to the demise of banks. Using a novel measurement concept based on intermediation and securitisation ratios, the present article provides evidence which shows that banking disintermediation is indeed a reality for the US financial system. This seems to indicate that American banks are not all that "unique"; they can be replaced to a considerable extent. Moreover, many observers seem to believe that what has happened in the US reflects a universal trend. However, empirical results reported in this paper indicate that such a trend has not manifested itself in other financial systems, and in particular, not in Germany or Japan. Evidence on the enormous structural differences between financial systems and the lack of unequivocal signs of convergence render any inferences from the American experience to other financial systems very problematic.
52
The purpose of this paper is to compare three different index construction methodologies of commercial property investments. We examine for different European countries (i) appraisal-based indices and methods of „unsmoothing“ the corresponding return series, (ii) indices that trace average ex-post transaction prices over time, and (iii) indices based on Real Estate Investment Trust share prices.
51
Real estate is an important asset, but as a direct investment subject to several difficulties. Shares of public open end funds or of real estate stock corporations represent a possible way for an investor to avoid these problems. The focus of this paper is the analysis of inflation risk of European real estate securities. An overview of the institutional frameworks regarding these companies is given. The returns of real estate securities in France, Germany, Switzerland and the United Kingdom are examined for the period 1980:1-1998:12. Besides the classical Fama/Schwert-approach, shortfall risk measurements have been used. In this context, transaction costs in particular have been taken into account.
29
Kursänderungen auf Aktienmärkten können informationsinduziert durch neu zu verarbeitende Informationen oder liquiditätsinduziert durch kurzfristige Angebots- bzw. Nachfrageüberhänge auftreten. Diese zwei so unterschiedlich verursachten Kursreaktionen sind in empirischen Untersuchungen nur schwer zu trennen. Das Modell von Easley, Kiefer, O’Hara und Paperman (1996) bietet eine theoretische Basis zur separaten Erfassung von liquiditätsorientiertem und informationsbasiertem Handel und eröffnet darüber hinaus auch einen Weg zur empirischen Quantifizierung dieser Größen.
In der vorliegenden Untersuchung nutzen wir diesen Ansatz zur Analyse des Handels deutscher Aktien über das Computerhandelssystem IBIS. Dabei zeigt sich, daß innerhalb der DAX-Werte Informationsereignisse bei den sehr stark gehandelten Aktien nicht häufiger als bei weniger oft gehandelten Werten auftreten. Die Unterschiede im Handelsvolumen sind auf unterschiedlich starke Handelsaktivität sowohl informierter als auch uninformierter Marktteilnehmer zurückzuführen. Weiterhin zeigt sich, daß das Risiko, mit informierten Marktteilnehmern zu handeln, bei den sehr umsatzstarken Aktien am geringsten ist.
In Einklang mit dem sogenannten Montagseffekt ist die Wahrscheinlichkeit für das Auftreten von negativen Informationsereignissen zu Wochenanfang besonders groß. Dieses Ergebnis könnte durch eine Tendenz von Managern erklärt werden, negative Informationen freitags nach Börsenschluß zu veröffentlichen. Eine getrennte Untersuchung für Handelstage mit niedriger und solche mit hoher Volatilität zeigt, daß an Handelstagen mit höherer Volatilität die Handelsintensität sowohl informierter als auch uninformierter Investoren größer ist. Auch die Wahrscheinlichkeit, an solchen Tagen mit besser informierten Marktteilnehmern zu handeln, steigt. Dieser Anstieg ist allerdings nicht statistisch signifikant.
82
The present paper seeks to study the possible diversification potential by the integration of indirect real estate investments in international portfolios. To this end, monthly index-return time-series in the time-period from January 1985 till December 1998 from real estate investment companies as well as common stocks and bonds in Germany, France, Switzerland, Great Britain and the USA were used. We utilize, due to the critical normal distribution assumption, a mean/lower-partial-moment framework. In order to take into account the influence of the currency risk for international investments the analyses have been undertaken both with as well as without hedging the currency risk. We take the viewpoint of a German as well as that of a US-investor to gain insight into the dependency of the diversification potential on the reference currency of the investor.
067
In this paper we study the benefits derived from international diversification of stock portfolios from German and Hungarian point of view. In contrast to the German capital market, which is one of the largest in the world, the Hungarian Stock Exchange is an emerging market. The Hungarian stock market is highly volatile, high returns are often accompanied by extremely large risk. Therefore, there is a good potential for Hungarian investors to realize substantial benefits in terms of risk reduction by creating multi-currency portfolios. The paper gives evidence on the above me ntioned benefits for both countries by examining the performance of several ex ante portfolio strategies. In order to control the currency risk, different types of hedging approaches are implemented.