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Compliance with prevailing accounting standards is induced if the expected disadvantage due to sanctions imposed if non-compliance is detected outweighs the advantage of noncompliant accounting choices. The expected disadvantage materialises the threat potential of sanctions imposed by an enforcement agency. The capital market mechanism unfolds an important threat potential if companies expect an adverse share price reaction suite to enforcement actions. Enforcement agencies in turn can make use of this capital market related sanction by releasing information on defections to the market after the settlement of an investigation. The present contribution analyses the capital market reaction on accounting standards enforcement activities of the British Financial Reporting Review Panel (FRRP). After a brief introduction into the legal basis and working procedure of the Panel, the analysis of its activities will serve a dual purpose: firstly, the significance of capital market related sanctions for the overall enforcement regime will be elaborated upon. Secondly, the extent to which capital market related sanctions accomplish their function within the overall enforcement regime will be assessed empirically. The results of the empirical analysis suggest that the capital market related sanctioning by the FRRP may not unfold a sufficient threat potential which is a prerequisite for compliance enhancement.
Die externe Performance-Messung beurteilt auf Basis öffentlich verfügbarer Daten die Leistung des Fondsmanagements. Es wird zunächst geprüft, inwieweit die für die Beurteilung von Aktienfonds entwickelten Maße auf Rentenfonds anwendbar sind. Anschließend wird die Performance einer Stichprobe deutscher Rentenfonds untersucht. Es zeigt sich, daß die risikoadjustierte Rendite in den meisten Fällen nicht über der eines geeigneten Marktindex liegt. Einige Fonds weisen ein signifikantes Aktien-Exposure auf. Ein systematischer Zusammenhang zwischen der Nettorendite und der Gebührenhöhe kann nicht nachgewiesen werden.
This paper investigates whether firms employing IAS or US GAAP exhibit measurable differences in proxies for information asymmetry and market liquidity. Sample firms are drawn from the "New Market" at the Frankfurt Stock Exchange. All firms listed in this market segment are required to provide financial statements in accordance with either IAS or US GAAP as part of the listing agreement. The sample choice provides a market-based comparison of the two standards holding disclosure requirements and standard enforcement constant. I find that differences in the bid-ask spread and trading volume are relatively small and more likely to be driven by firm characteristics than the choice of accounting standards. In contrast, New Market firms have lower spreads and higher turnover when compared with size-matched firms in other market segments following German GAAP. The results suggests that rigid disclosure regulation of the New Market matters in terms of information asymmetry and liquidity, but that the choice between IAS and US GAAP is of second order importance.
JEL Classification: D82, G30, M41
Dieser Beitrag stellt verschiedene ökonometrische Methoden zur Bewertung und Berechnung von Kreditausfallrisiken vor und wendet diese auf einen Datensatz sechs deutscher Universalbanken an. Im Mittelpunkt stehen dabei Logit- und Probitmodelle, mit deren Hilfe die Ausfallwahrscheinlichkeit eines Kredites geschätzt werden kann. Dabei werden auch moderne Verfahren zur Analyse von Paneldaten besprochen. Beispiele undInterpretationshilfen zu den jeweils vorgestellten Methoden erleichtern den Zugang zu diesen Modellen. Es werden zahlreiche Hinweise auf weiterführende Literatur gegeben.
Information asymmetry and its implications in online purchasing behaviour: a country case study
(2020)
The objective of this study is to analyse how certain variables in the online market affect the decision-making trajectory and actions toward reducing the information asymmetry faced in online purchasing. A survey and observation are conducted in order to understand the behavior and perceptions of online buyers toward the information given in online platforms. Descriptive and correlation analysis have been employed in order to evaluate the data collected and test the correlation between variables of the research model. It results that most participants take for granted the fact that sellers have more information than them when entering into a transaction agreement and this makes them feel inferior towards the superior power sellers possess in such interactions. This makes the traditional markets more preferred for them, however multiple sources such as reviews and ratings result as an alternative way of reducing the perceived information asymmetry.
Discussions regarding the planned European Deposit Insurance Scheme (EDIS), the missing third pillar of the European Banking Union, have been ongoing since the Commission published its initial legisla-tive proposal in 2015. A breakthrough in negotiations has yet to be achieved. The gridlock on EDIS is most commonly attributed to moral hazard concerns over insufficient risk reduction harboured on the side of northern member states, particularly Germany, due to the weak state of some other member states’ banking sectors. While moral hazard based on uneven risk reduction is helpful for explaining divergent member-state preferences on the scope of necessary risk reduction, this does not explain preferences on the institutional design of EDIS. In this paper, we argue that contrary to persistent differences on necessary risk reduction, preferences regarding the institutional design of EDIS have become more closely aligned. We analyse how preferences on EDIS developed in the key member states of Germany, France, and Italy. In all sampled countries, we find path-dependent benefits con-nected to the current design of national Deposit Guarantee Schemes (DGS) that shifted preferences of the banking sector or significant subsectors in favour of retaining national DGSs. Overall, given that a compromise on risk-reduction can be accomplished, we argue that current preferences in these key member states provide an opportunity to implement EDIS in the form of a reinsurance system that maintains national DGSs in combination with a supranational fund.
We employ a representative sample of 80,972 Italian firms to forecast the drop in profits and the equity shortfall triggered by the COVID-19 lockdown. A 3-month lockdown generates an aggregate yearly drop in profits of about 10% of GDP, and 17% of sample firms, which employ 8.8% of the sample’s employees, become financially distressed. Distress is more frequent for small and medium-sized enterprises, for firms with high pre-COVID-19 leverage, and for firms belonging to the Manufacturing and Wholesale Trading sectors. Listed companies are less likely to enter distress, whereas the correlation between distress rates and family firm ownership is unclear.
(JEL G01, G32, G33)
We analyze the ESG rating criteria used by prominent agencies and show that there is a lack of a commonality in the definition of ESG (i) characteristics, (ii) attributes and (iii) standards in defining E, S and G components. We provide evidence that heterogeneity in rating criteria can lead agencies to have opposite opinions on the same evaluated companies and that agreement across those providers is substantially low. Those alternative definitions of ESG also a↵ect sustainable investments leading to the identification of di↵erent investment universes and consequently to the creation of di↵erent benchmarks. This implies that in the asset management industry it is extremely dicult to measure the ability of a fund manager if financial performances are strongly conditioned by the chosen ESG benchmark. Finally, we find that the disagreement in the scores provided by the rating agencies disperses the e↵ect of preferences of ESG investors on asset prices, to the point that even when there is agreement, it has no impact on financial performances.
With the rapid growth of technology in recent years, we are surrounded by or even dependent on the use of technological devices such as smartphones as they are now an indispensable part of our life. Smartphone applications (apps) provide a wide range of utilities such as navigation, entertainment, fitness, etc. To provide such context-sensitive services to users, apps need to access users' data including sensitive ones, which in turn, can potentially lead to privacy invasions. To protect users against potential privacy invasions in such a vulnerable ecosystem, legislation such as the European Union General Data Protection Regulation (EU GDPR) demands best privacy practices. Therefore, app developers are required to make their apps compatible with legal privacy principles enforced by law. However, this is not an easy task for app developers to comprehend purely legal principles to understand what needs to be implemented. Similarly, bridging the gap between legal principles and technical implementations to understand how legal principles need to be implemented is another barrier to develop privacy-friendly apps. To this end, this paper proposes a privacy and security design guide catalog for app developers to assist them in understanding and adopting the most relevant privacy and security principles in the context of smartphone apps. The presented catalog is aimed at mapping the identified legal principles to practical privacy and security solutions that can be implemented by developers to ensure enhanced privacy aligned with existing legislation. Through conducting a case study, it is confirmed that there is a significant gap between what developers are doing in reality and what they promise to do. This paper provides researchers and developers of privacy-related technicalities an overview of the characteristics of existing privacy requirements needed to be implemented in smartphone ecosystems, on which they can base their work.
One striking observation in Parkinson’s disease (PD) is the remarkable gender difference in incidence and prevalence of the disease. Data on gender differences with regard to disease onset, motor and non-motor symptoms, and dopaminergic medication are limited. Furthermore, whether estrogen status affects disease onset and progression of PD is controversially discussed. In this retrospective single center study, we extracted clinical data of 226 ambulatory PD patients and compared age of disease onset, disease stage, motor impairment, non-motor symptoms, and dopaminergic medication between genders. We applied a matched-pairs design to adjust for age and disease duration. To determine the effect of estrogen-related reproductive factors including number of children, age at menarche, and menopause on the age of onset, we applied a standardized questionnaire and performed a regression analysis. The male to female ratio in the present PD cohort was 1.9:1 (147 men vs. 79 women). Male patients showed increased motor impairment than female patients. The levodopa equivalent daily dose was increased by 18.9% in male patients compared to female patients. Matched-pairs analysis confirmed the increased dose of dopaminergic medication in male patients. No differences were observed in age of onset, type of medication, and non-motor symptoms between both groups. Female reproductive factors including number of children, age at menarche, and age at menopause were positively associated with a delay of disease onset up to 30 months. The disease-modifying role of estrogen-related outcome measures warrants further clinical and experimental studies targeting gender differences, specifically hormone-dependent pathways in PD.
Advertising arbitrage
(2020)
Arbitrageurs with a short investment horizon gain from accelerating price discovery by advertising their private information. However, advertising many assets may overload investors' attention, reducing the number of informed traders per asset and slowing price discovery. So arbitrageurs optimally concentrate advertising on just a few assets, which they overweight in their portfolios. Unlike classic insiders, advertisers prefer assets with the least noise trading. If several arbitrageurs share information about the same assets, inefficient equilibria can arise, where investors' attention is overloaded and substantial mispricing persists. When they do not share, the overloading of investors' attention is maximal.
In fifteen European countries, China, and the US, stocks and business equity as a share of total household assets are represented by an increasing and convex function of income/wealth. A parsimonious model fitted to the data shows why background labor- income risk can explain much of this risk-taking pattern. Uncontrollable labor-income risk stresses middle-income households more because labor income is a larger fraction of their total lifetime resources compared with the rich. In response, middle-income households re-duce (controllable) financial risk. Richer households, having less pressure, can afford more risk-taking. The poor take low risk because they avoid jeopardizing their subsistence consumption.
Making agriculture sustainable is a global challenge. In the European Union (EU), the Common Agricultural Policy (CAP) is failing with respect to biodiversity, climate, soil, land degradation as well as socio‐economic challenges.
The European Commission's proposal for a CAP post‐2020 provides a scope for enhanced sustainability. However, it also allows Member States to choose low‐ambition implementation pathways. It therefore remains essential to address citizens' demands for sustainable agriculture and rectify systemic weaknesses in the CAP, using the full breadth of available scientific evidence and knowledge.
Concerned about current attempts to dilute the environmental ambition of the future CAP, and the lack of concrete proposals for improving the CAP in the draft of the European Green Deal, we call on the European Parliament, Council and Commission to adopt 10 urgent action points for delivering sustainable food production, biodiversity conservation and climate mitigation.
Knowledge is available to help moving towards evidence‐based, sustainable European agriculture that can benefit people, nature and their joint futures.
The statements made in this article have the broad support of the scientific community, as expressed by above 3,600 signatories to the preprint version of this manuscript. The list can be found here (https://doi.org/10.5281/zenodo.3685632).
A free Plain Language Summary can be found within the Supporting Information of this article.
Die durch das Zweite Corona-Steuerhilfegesetz erfolgte Ausweitung des Verlustrücktrags ist dem Grunde nach ein hochgradig geeignetes und insbesondere breitenwirksames Mittel zur Stützung der Konjunktur. Das vorliegende Policy White Paper legt dar, dass allerdings Art und Umfang der gewählten Ausweitung unzureichend sind. Hierzu analysieren die Verfasser, wie sich die Ausweitung auf Unternehmen unterschiedlicher Größe und Rechtsform auswirkt. Auf Basis dieser Analyse zei-gen sie sodann, dass gemessen an den verfolgten konjunkturpolitischen Zielen es geboten gewesen wäre und weiterhin geboten ist, den Verlustrücktrag auf die Gewerbesteuer zu erstrecken.
The Wirecard scandal is a wake-up call alerting German politics to the importance of securities market integrity. The role of market supervision is to ensure the smooth functioning of capital markets and their integrity, creating trust among and acceptance by investors locally and globally. The existing patchwork of national supervisory practice in Europe is under discussion today, in the wake of Brexit that will end the role of London as a de-facto lead supervisor in stock and bond markets. A fundamental overhaul of a fragmented securities markets supervisory regime in Europe would offer the potential to lead to the establishment of an independent European Single Market Supervisor (ESMS). Endowed with strong enforcement powers, and supported by the existing national agencies, the ESMS would be entrusted with ensuring a uniform market standard as to transparency and other issues of market integrity across Europe. This would not rule out maintaining a variety of market organization structures at the national level. The ESMS would need executive powers in the world of markets (i.e. securities and trading), much like the SSM in the world of banking. To fill this new role, ESMS would have to be established as a new, independent institution, including an enormously scaled up staff if compared, e.g., to ESMA.
Accounting for financial stability: Bank disclosure and loss recognition in the financial crisis
(2020)
This paper examines banks’ disclosures and loss recognition in the financial crisis and identifies several core issues for the link between accounting and financial stability. Our analysis suggests that, going into the financial crisis, banks’ disclosures about relevant risk exposures were relatively sparse. Such disclosures came later after major concerns about banks’ exposures had arisen in markets. Similarly, the recognition of loan losses was relatively slow and delayed relative to prevailing market expectations. Among the possible explanations for this evidence, our analysis suggests that banks’ reporting incentives played a key role, which has important implications for bank supervision and the new expected loss model for loan accounting. We also provide evidence that shielding regulatory capital from accounting losses through prudential filters can dampen banks’ incentives for corrective actions. Overall, our analysis reveals several important challenges if accounting and financial reporting are to contribute to financial stability.
Perspectives on participation in continuous vocational education training - an interview study
(2020)
In European industrialized countries, a large number of companies in the healthcare, hotel, and catering sectors, as well as in the technology sector, are affected by demographic, political, and technological developments resulting in a greater need of skilled workers with a simultaneous shortage of skilled workers (CEDEFOP, 2015, 2016). Consequently, employers have to address workers who have not been taken into account such as low-skilled workers, workers returning from a career break, people with a migrant background, older people, and jobseekers and train them, in order to guarantee the professionalization of this workforce (Festing and Harsch, 2018). Continuing vocational education and training (CVET) is seen as an indispensable tool; because CVET has advantages for both employers and employees, it helps to increase the productivity of companies (Barrett and O’Connell, 2001), to prevent the widening of socioeconomic disparities (Dieckhoff, 2007), and to open up career opportunities for the workforce (Rubenson and Desjardins, 2009). However, participation rate on CVET seems to differ, depending on institutional factors (such as sector and size of the company) and individual characteristics (such as qualification level, migration background, age and time of absence from work) (e.g., Rubenson and Desjardins, 2009; Wiseman and Parry, 2017). In contrast to previous research, our study aims to provide a holistic view of reasons for and against CVET, combining the different perspectives of employers and (potential) employees. The analysis of reasons and barriers was carried out based on semi-structured interviews. Fifty-seven employers, 73 employees, and 42 jobseekers (potential employees) from the sectors retail, healthcare and social services, hotels and catering, and technology were interviewed. Results point to considerable differences in the reasons and barriers mentioned by the disadvantaged groups. These differences are particularly significant between employees on the one side and employers, as well as jobseekers, on the other side, while the reasons to attend CVET of jobseekers are more similar to those of employers. The results can be used to tailor CVET more closely to the needs of (potential) employees and thus strengthen both the qualification and career opportunities of (potential) employees and the competitiveness and productivity of companies.
Diversity and psychological health issues at the workplace are pressing issues in today’s organizations. However, research linking two fields is scant. To bridge this gap, drawing from team faultline research, social categorization theory, and the job-demands resources model, we propose that perceiving one’s team as fragmented into subgroups increases strain. We further argue that this relationship is mediated by task conflict and relationship conflict and that it is moderated by psychological empowerment and task interdependence. Multilevel structural equation models on a two-wave sample consisting of 536 participants from 107 work teams across various industries and work contexts partially supported the hypotheses: task conflict did indeed mediate the positive relationships between perceived subgroups and emotional exhaustion while relationship conflict did not; effects on stress symptoms were absent. Moreover, contrary to our expectations, neither empowerment, nor task interdependence moderated the mediation. Results indicate that team diversity can constitute a job demand that can affect psychological health. Focusing on the mediating role of task conflict, we offer a preliminary process model to guide future research at the crossroads of diversity and psychological health at work.
Using a nonlinear Bayesian likelihood approach that fully accounts for the zero lower bound on nominal interest rates, the authors analyze US post-crisis business cycle dynamics and provide reference parameter estimates. They find that neither the inclusion of financial frictions nor that of household heterogeneity improve the empirical fit of the standard model, or its ability to provide a joint explanation for the post-2007 dynamics. Associated financial shocks mis-predict an increase in consumption. The common practice of omitting the ZLB period in the estimation severely distorts the analysis of the more recent economic dynamics.
Do current levels of bank capital in Europe suffice to support a swift recovery from the COVID-19 crisis? Recent research shows that a well-capitalized banking sector is a major factor driving the speed and breadth of recoveries from economic downturns. In particular, loan supply is negatively affected by low levels of capital. We estimate a capital shortfall in European banks of up to 600 billion euro in a severe scenario, and around 143 billion euro in a moderate scenario. We propose a precautionary recapitalization on the European level that puts the European Stability Mechanism (ESM) center stage. This proposal would cut through the sovereign-bank nexus, safeguard financial stability, and position the Eurozone for a quick recovery from the pandemic.
This article provides a proposal to use IMF Article VIII, Section 2 (b) to establish a binding mechanism on private creditors for a sovereign debt standstill. The proposal builds on the original idea by Whitney Deveboise (1984). Using arguments brought forward by confidential IMF staff papers (1988, 1996) and the IMF General Counsel (1988), this paper shows how an authoritative interpretation of Article VIII, Section 2 (b) can provide protection from litigation to countries at risk of debt distress.
The envisaged mechanism presents several advantages over recent proposals for a binding standstill mechanism, such as the International Developing Country Debt Authority (IDCDA) by UNCTAD and a Central Credit Facility (CFF) by the Bolton Committee. First, this approach would not require the creation of new intergovernmental mechanisms or facilities. Second, the activation of the standstill mechanism can be set in motion by any IMF member country and does not require a modification of its Articles of Agreement. Third, debtor countries acting in good faith under an IMF program would be protected from aggressive litigation strategies from holdout creditors in numerous jurisdictions, including the US and the UK. Fourth, courts in key jurisdictions would avoid becoming overburdened by a cascade of sovereign debt litigation covering creditors and debtors across the globe. Fifth, private creditors would receive uniform treatment and ensure intercreditor equality. Sixth and last, the mechanism would provide additional safeguards to protect emergency multilateral financing provided to tackle Covid-19.
Using a novel experimental design, I test how the exposure to information about a group’s relative performance causally affects the members’ level of identification and thereby their propensity to harm affiliates of comparison groups. I find that both, being informed about a high and poor relative performance of the ingroup similarly fosters identification. Stronger ingroup identification creates increased hostility against the group of comparison. In cases where participants learn about poor relative performance, there appears to be a direct level effect additionally elevating hostile discrimination. My findings shed light on a specific channel through which social media may contribute to intergroup fragmentation and polarization.
Did the Federal Reserves’ Quantitative Easing (QE) in the aftermath of the financial crisis have macroeconomic effects? To answer this question, the authors estimate a large-scale DSGE model over the sample from 1998 to 2020, including data of the Fed’s balance sheet. The authors allow for QE to affect the economy via multiple channels that arise from several financial frictions. Their nonlinear Bayesian likelihood approach fully accounts for the zero lower bound on nominal interest rates. They find that between 2009 to 2015, QE increased output by about 1.2 percent. This reflects a net increase in investment of nearly 9 percent, that was accompanied by a 0.7 percent drop in aggregate consumption. Both, government bond and capital asset purchases were effective in improving financing conditions. Especially capital asset purchases significantly facilitated new investment and increased the production capacity. Against the backdrop of a fall in consumption, supply side effects dominated which led to a mild disinflationary effect of about 0.25 percent annually.
Angesichts des kürzlich von der Bundesregierung verabschiedeten Konjunkturpakets, stellen sich die Autoren des Policy Letters die Frage, ob und inwieweit die angekündigte Mehrwertsteuersenkung sowie der Kinderbonus zur substantiellen Ankurbelung des Binnenkonsums führt. Aus den für das Haushaltskrisenbarometer erhobenen Daten zu Einkommensänderungen sowie Einkommens- und Kündigungserwartungen, können die Ökonomen keine zu erwartende Schwächung der Binnennachfrage ableiten. Der überwiegende Teil der deutschen Wohnbevölkerung scheint kurzfristig nicht davon auszugehen, finanzielle Einbußen aufgrund der Pandemie zu erleiden. Die Erwartungen hinsichtlich der künftigen Einkommensentwicklung haben sich gar über die letzten vier Umfragewellen graduell verbessert. Ferner kann dargelegt werden, dass weder die Konsum- noch die Sparneigung durch die Corona-Krise zum gegenwärtigen Zeitpunkt langfristig stark beeinflusst wird. So geben derzeit lediglich 10 Prozent der Befragten an, größere Anschaffungen angesichts der Pandemie vollständig gestrichen zu haben. Anfang April 2020 lag dieser Wert noch bei 16 Prozent. Die Befragten berichteten in 71 Prozent der Fälle ihre Konsumpläne und in 78 Prozent der Fälle ihre Sparverhalten nicht geändert zu haben. Im Lichte dieser Ergebnisse lassen sich Maßnahmen, die auf eine unspezifische Stimulierung der Binnennachfrage abzielen, nicht substantiell begründen und rechtfertigen.
Security has become one of the primary factors that cloud customers consider when they select a cloud provider for migrating their data and applications into the Cloud. To this end, the Cloud Security Alliance (CSA) has provided the Consensus Assessment Questionnaire (CAIQ), which consists of a set of questions that providers should answer to document which security controls their cloud offerings support. In this paper, we adopted an empirical approach to investigate whether the CAIQ facilitates the comparison and ranking of the security offered by competitive cloud providers. We conducted an empirical study to investigate if comparing and ranking the security posture of a cloud provider based on CAIQ’s answers is feasible in practice. Since the study revealed that manually comparing and ranking cloud providers based on the CAIQ is too time-consuming, we designed an approach that semi-automates the selection of cloud providers based on CAIQ. The approach uses the providers’ answers to the CAIQ to assign a value to the different security capabilities of cloud providers. Tenants have to prioritize their security requirements. With that input, our approach uses an Analytical Hierarchy Process (AHP) to rank the providers’ security based on their capabilities and the tenants’ requirements. Our implementation shows that this approach is computationally feasible and once the providers’ answers to the CAIQ are assessed, they can be used for multiple CSP selections. To the best of our knowledge this is the first approach for cloud provider selection that provides a way to assess the security posture of a cloud provider in practice.
Mit einem um die Behandlungskapazität des Gesundheitssystems erweiterten epidemiologischen SIRD-Modell werden Mechanismen und Dynamik einer Virusepidemie wie Corona anhand von stilisierten politischen Reaktionsmustern (Ignore, Shutdown, Ignore-Shutdown-Relax) simuliert. Ferner werden aus dem Modell Lehren für die statistische Analyse von Corona gezogen, wie die Aussagekraft publizierter Verdopplungszeiten und Reproduktionszahlen. Die Dunkelziffer unbestätigter Fälle und die im Epidemieverlauf variable Genauigkeit von medizinischen Infektionstests werden diskutiert. Zur Messung der medizinischen Kosten von Corona sowie für regionale und internationale Vergleiche wird ein Schadensindex der verlorenen Lebenszeit vorgeschlagen. Zuletzt geht die Arbeit kurz auf die ökonomischen Kosten von Corona in Deutschland ein.
Nach den Ereignissen in Gaggenau liest und hört man allenthalben von den "rechtlichen Schwierigkeiten", die hinsichtlich Verboten von Redeauftritten ausländischer Politiker bestünden. In Gaggenau hat man originär sicherheitsrechtlich argumentiert: viel zu viele Leute, viel zu kleiner Parkplatz, Chaos vorprogrammiert. Ähnliches nun in Köln: zu großer Aufwand, zu kurzfristig, Chaos vorprogrammiert. Nehmen wir einmal an, es seien im Einzelfall tragfähige Begründungen gewesen. Dann stellt sich zugleich die Frage: Was kann man tun, wenn man den Auftritt eines ausländischen Vertreters untersagen will, obwohl der Parkplatz groß genug und die Polizei ausreichend gegen Ausschreitungen gewappnet ist? ...
This Policy White Paper assesses several main elements of ECB’s upcoming review of its monetary policy strategy, announced in January 2020. Four aspects of the review are discussed in detail: i) ECB’s definition of price stability and the arguments for and against inflation targeting; ii) the scope of ECB’s objectives, considering financial stability, employment and the sustainability of the environment; iii) an update of ECB’s economic and monetary analyses to assess the risks to price stability; iv) the ECB’s communication practice. Furthermore, an overview of the ECB’s monetary policy strategy and its last evaluation in 2003 is given.
Consuming dividends
(2020)
This paper studies why investors buy dividend-paying assets and how they time their consumption accordingly. We combine administrative bank data linking customers’ consumption transactions and income to detailed portfolio data and survey responses on financial behavior. We find that private consumption is excessively sensitive to dividend income. Investors across wealth, income, and age distributions increase spending precisely around days of dividend receipt. Importantly, the consumption response is driven by financially prudent investors who select dividend portfolios, anticipate dividend income, and plan consumption accordingly. Our results contribute to the literature on a dividend clientele and provide evidence of ‘planned’ excess sensitivity.
We survey a representative sample of US households to study how exposure to the COVID-19 stock market crash a↵ects expectations and planned behavior. Wealth shocks are associated with upward adjustments of expectations about retirement age, desired working hours, and household debt, but have only small e↵ects on expected spending. We provide correlational and experimental evidence that beliefs about the duration of the stock market recovery shape households’ expectations about their own wealth and their planned investment decisions and labor market activity. Our findings shed light on the implications of household exposure to stock market crashes for expectation formation.
This working paper suggests to analyse agencification as a double process of institutional and policy centralisation. To that end, it develops a categorisation of agencies that incorporates these two dimensions. More specifically, it is argued that mixed outcomes where the levels of institutional and policy centralisation diverge can be expected to be the rule rather than the exception, in line with the hybrid nature of EU agencies as inbetweeners. Moreover, the fiduciary setting hits important legal constraints given the limits to delegation in the EU context. Against this backdrop a process whereby institutional centralisation develops incrementally and remains limited, yet is accompanied by a process of substantial policy centralisation, appears as the most promising path for EU agencification. A fiduciary setting, where a strong agency enjoys a high degree of independence and operates in a centralised policy space, by contrast, should be the exception. The comparative study of the process of agencification in the energy and banking sector is insightful in the light of these expectations. The incremental nature of institutional change in energy exemplifies the usual path of agencification, which is conducive to a weak agency operating in a relatively centralised policy space. Agencification in banking, by contrast, has led to a rather unusual outcome where the strong agency model combines with a fragmented policy context.
This Policy Letter outlines a pandemic insurance solution through a pandemic-related “Insurance Linked Bond”. It would be originated by governments, with a principal amount to cover significant costs resulting from a pandemic. These bonds, which would be traded on a secondary market, generate a risk-adequate return for private and institutional investors that is financed through the insurance premiums paid by the public domain. In case of a pre-defined pandemic trigger event, the principal of the bond becomes available for the originating governments to cover pandemic-related costs. Through this approach, governments can insure themselves against future pandemic-related risks, while funding comes primarily from private and institutional investors.
[Tagungsbericht] Making finance sustainable: Ten years equator principles – success or letdown?
(2013)
In 2003, a number of banks adopted the Equator Principles (EPs), a voluntary Code of Conduct based on the International Finance Corporation’s (IFC) performance standards, to ensure the ecological and social sustainability of project finance. These so called Equator Principles Financial Institutions (EPFI) commit to requiring their borrowers to adopt sustainable management plans of environmental and social risks associated with their projects. The Principles apply to the project finance business segment of the banks and cover projects with a total cost of US $10 million or more. While for long developing countries relied on World Bank and other public assistance to finance infrastructure projects there has occurred a shift in recent years to private funding. The NGOs have been frustrated by this shift of project finance as they had spent their resources to exercise pressure on the public financial institutions to incorporate environmental and social standards in their project finance activities. However, after a shift of NGO pressure to private financial institutions the latter adopted the EPs for fear of reputational risks. NGOs had laid down their own more ambitious ideas about sustainable finance in the Collevecchio Declaration on Financial Institutions and Sustainability. Legally speaking, the EPs are a self-regulatory soft law instrument. However, it has a hard law dimension as the Equator Banks require their borrowers to comply with the EPs through covenants in the loan contracts that may trigger a default in a case of violation. ...
This paper summarizes key elements of the German Federal Constitutional Court’s decision on the European Central Bank’s Public Sector Asset Purchase Programme. It briefly explains how it is possible for the German Court to disagree with the ruling of the Court of Justice of the European Union. Finally, it makes suggestions concerning a practical way forward for the Governing Council of the ECB in light of these developments.
Considering the circumstance that literature dealing with the economic performance of agri-food businesses in general, or particularly with the German agricultural sector, mainly deals with strictly agricultural-related theory in order to explain the economic success of agri-food businesses, the present paper aims to extend existing discourses to further areas of thought. Consequently, the characteristics: a) increased size of agribusiness, b) pull-strategies, c) the development of new markets and d) focus on the processing industry, that all correspond to the current picture of the German agricultural sector and are considered to be significantly responsible for recently managing to outpace the French agri-food sector, will be first explained in their success against the background of mainly non-agricultural-related literature. By doing so helpful and rather unnoted perspectives can be contributed to existing discourses. Second, the paper presents scatter plots which portray correlations between a) the added value of agriculture and the regular labor force, b) the added value of agriculture and the number of agricultural holdings and c) the added value of agriculture and the number of enterprises concerning milk consumption. Corresponding scatter plots which show different developments in Germany and France can be related to the findings of the first part of the paper and allow new perspectives in existing discourses as well.
Cryptocurrencies have received growing attention from individuals, the media, and regulators. However, little is known about the investors whom these financial instruments attract. Using administrative data, we describe the investment behavior of individuals who invest in cryptocurrencies with structured retail products. We find that cryptocurrency investors are active traders, prone to investment biases, and hold risky portfolios. In line with attention effects and anticipatory utility, we find that the average cryptocurrency investor substantially increases log-in and trading activity after his or her first cryptocurrency purchase. Our results document which investors are more likely to adopt new financial products and help inform regulators about investors' vulnerability to cryptocurrency investments.
We show that FED policy announcements lead to a significant increase in international comovements in the cross-section of equity and in particular sovereign CDS markets. The relaxation of unconventionary monetary policies is felt strongly by emerging markets, and by countries that are open to the trading of goods and flows, even in the presence of floating exchange rates. It also impacts closed economies whose currencies are pegged to the dollar. This evidence is consistent with recent theories of a global financial cycle and the pricing of a FED’s put. In contrast, ECB announcements hardly affect comovements, even in the Eurozone.
Das Working Paper bietet die zusammenfassende Stellungnahme von Prof. Volker Wieland zum Ankaufprogramm der Europäischen Zentralbank für Anleihen des öffentlichen Sektors (Public Sector Purchase Programme, PSPP) am Bundesverfassungsgericht am 30.07.2019. Dabei liegt der Schwerpunkt auf der Frage der Einordnung des PSPP als monetäre, geldpolitische Maßnahme und der Verhältnismäßigkeit des Programms und seiner Umsetzung. Ebenfalls wird kurz auf die weiteren Fragen zur Umsetzung, insbesondere Ankündigung, Begrenzung und Abstand zum Primärmarkt für Staatsanleihen eingegangen.
The European Commission is trying to reboot the CMU project: The High-Level Forum on Capital Markets Union – a group of 28 selected experts from industry, academia and civil society – is expected to submit policy recommendations by the end of May 2020 which will feed into the Commission’s new CMU agenda. This contribution is largely based on a letter to the High-Level Forum that gives feedback on the Interim Report published in February. There, we introduce a comprehensive approach to distinguish, from a functional finance perspective, between the ‘game changers’ and what is nice to have. We highlight the importance of common and consistent supervisory practices across Member States and recommend building up a European Securities and Exchange Commission (E-SEC) according to the American model.
We study how the Eurosystem Collateral Framework for corporate bonds helps the European Central Bank (ECB) fulfill its policy mandate. Using the ECBs eligibility list, we identify the first inclusion date of both bonds and issuers. We find that due to the increased supply and demand for pledgeable collateral following eligibility, (i) securities lending market trading activity increases, (ii) eligible bonds have lower yields, and (iii) the liquidity of newly-issued bonds declines, whereas the liquidity of older bonds is una↵ected/improves. Corporate bond lending relaxes the constraint of limited collateral supply, thereby making the market more cohesive and complete. Following eligibility, bond-issuing firms reduce bank debt and expand corporate bond issuance, thus increasing overall debt size and extending maturity.
Risk culture during the last 2000 years - from an aleatory society to the illusion of risk control
(2017)
The culture of risk is 2000 years old, although the term “risk” developed much later. The culture of merchants making decisions under uncertainty and taking the individual responsibility for the uncertain future started with the Roman “Aleatory Society”, continued with medieval sea merchants, who made business “ad risicum et fortunam”, and sustained to the culture of entrepreneurs in times of industrialisation and dynamic economic changes in the 18th and 19th century. For all long-term commercial relationships, the culture of honourable merchants with personal decision-making and individual responsibility worked well. The successful development of sciences, statistics and engineering within the last 100 years led to the conjecture that men can “construct” an economical system with a pre-defined “clockwork” behaviour. Since probability distributions could be calculated ex-post, an illusion to control risk ex-ante became a pattern in business and banking. Based on the recent experiences with the financial crisis, a “risk culture” should understand that human “Strength of Knowledge” is limited and the “unknown unknown” can materialise. As all decisions and all commercial agreements are made under uncertainty, the culture of honourable merchants is key to achieve trust in long-term economic relations with individual responsibility, flexibility to adapt and resilience against the unknown.
This open access book presents a unique collection of practical examples from the field of pharma business management and research. It covers a wide range of topics such as: "Brexit and its Impact on pharmaceutical Law - Implications for Global Pharma Companies", "Implementation of Measures and Sustainable Actions to Improve Employee's Engagement", "Global Medical Clinical and Regulatory Affairs (GMCRA)", and "A Quality Management System for R&D Project and Portfolio Management in a Pharmaceutical Company".
The chapters are summaries of master’s theses by "high potential" Pharma MBA students from the Goethe Business School, Frankfurt/Main, Germany, with 8-10 years of work experience and are based on scientific know-how and real-world experience. The authors applied their interdisciplinary knowledge gained in 22 months of studies in the MBA program to selected practical themes drawn from their daily business.
We study how the Eurosystem Collateral Framework for corporate bonds helps the European Central Bank (ECB) fulfill its policy mandate. Using the ECBs eligibility list, we identify the first inclusion date of both bonds and issuers. We find that due to the increased supply and demand for pledgeable collateral following eligibility, (i) securities lending market trading activity increases, (ii) eligible bonds have lower yields, and (iii) the liquidity of newly-issued bonds declines, whereas the liquidity of older bonds is unaffected/improves. Corporate bond lending relaxes the constraint of limited collateral supply, thereby making the market more cohesive and complete. Following eligibility, bond-issuing firms reduce bank debt and expand corporate bond issuance, thus increasing overall debt size and extending maturity.
WiWi news 3/2016
(2016)
WiWi news 3/2015
(2015)
WiWi news [2/2017]
(2017)
WiWi news [1/2018]
(2018)
WiWi news [1/2019]
(2019)
WiWi news [2/2019]
(2019)
WiWi news [1/2020]
(2020)
This Policy Letter presents a proposal for designing a program of government assistance for firms hurt by the Coronavirus crisis in the European Union (EU). In our recent Policy Letter 81, we introduced a new, equity-type instrument, a cash-against-tax surcharge scheme, bundled across firms and countries in a European Pandemic Equity Fund (EPEF). The present Policy Letter 84 focuses on the principles and conditions relevant for the operationalization of a EPEF. Our proposal has several desirable features. It: a) offers better risk sharing opportunities, augmenting the resilience of businesses and EU economies; b) is need-based, thereby contributing to an effective use of resources; c) builds on conditions and credible controls, addressing adverse selection and moral hazard; d) is accessible to smaller and medium-sized firms, the backbone of Europe’s economy; e) applies Europe-wide uniform eligibility criteria, strengthening support among member states; f) is a scheme of limited duration, reducing (perceived) government interference in businesses; g) creates a template for a growth-oriented public policy, aligning public and private sector interests; and h) builds on the existing institutional infrastructure and requires minimal legislative adjustments.
Use banks the right way
(2020)
Die Wettbewerbsfähigkeit der deutschen Wirtschaft steht vor gewaltigen Herausforderungen. Traditionell starke Sektoren wie die Automobilindustrie oder der Maschinenbau befinden sich angesichts disruptiver Veränderungen durch neue Technologien, den Kampf gegen den Klimawandel und veränderte regulatorische Rahmenbedingungen in einer Umbruchphase. Zahlreiche Industriezweige wandeln sich durch den Einsatz von Künstlicher Intelligenz zu „Smart Industries“. Gleichzeitig gewinnt die Kompetenz in Querschnittstechnologien wie Cloud Computing oder Cyber Security an Bedeutung, da diese den effektiven Einsatz von Künstlicher Intelligenz erst ermöglichen. Eine Analyse der Wettbewerbsposition der deutschen Wirtschaft zeigt auf, dass in manchen Zukunftsfeldern ein erheblicher Nachholbedarf besteht.
"A groundbreaking decision"
(2018)
Andreas Hackethal: Better than a pension guarantee would be to allow citizens finally more insights.