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Den Menschen als vernunftbegabtes Wesen, als animal rationale, zu begreifen heißt, ihn als rechtfertigendes Wesen anzusehen. Die Vernunft ist die Fähigkeit, sich anhand rechtfertigender Gründe in der Welt zu orientieren. Denn „ratio, raison, reason bedeutet“, wie Tugendhat hervorhebt, „ebenso sehr ‚Grund‘ wie ‚Vernunft‘. Das Vermögen der Vernunft ist die Fähigkeit, für seine Meinungen und für seine Handlungen Rede und Antwort stehen zu können; lat. rationem reddere, griech. logon didonai.“ Dieses Rede-und-Antwort-Stehen ist eine soziale Praxis kulturell und historisch situierter Wesen, die einerseits frei sind, ihre Gründe zu wählen und zu prüfen, andererseits aber daran gebunden, welche Gründe ihnen zur Verfügung stehen und welche als gut oder rechtfertigend gelten. Der Raum der Gründe ist ein Raum der Rechtfertigungen, die nicht nur Einzelhandlungen, sondern auch komplexe Handlungsordnungen, also soziale Verhältnisse und politische Institutionen, legitimieren.
Menschen sind aber auch erzählende Wesen. Der Raum der Gründe, in dem sie sich orientieren, ist kein nackter Raum einzelner Sätze oder gar Normen, sondern bevölkert von Narrativen.
Der vorliegende Beitrag zeigt auf, dass die zunehmende Komplexität der Aufgaben von Zentralbanken zu einer strukturellen Überforderung führen kann. Aufgrund der funktionellen Komplexität einer makroprudenziellen Prozesspolitik auf der Ziel- und Instrumentenebene sollte eher nach einer Reduktion als nach einer Ausweitung des makroprudenziellen Werkzeugkastens Ausschau gehalten werden. Weiterhin steht die sich derzeit teilweise noch vergrößernde institutionelle Komplexität der makroprudenziellen Politik ihrer funktionellen Komplexität um nichts nach. Bei entsprechenden Vorkehrungen können die bereits eingetretenen und die potenziellen Überforderungen jedoch zumindest teilweise in verkraftbare Herausforderungen überführt werden. Der Aufsatz schließt mit Empfehlungen für entsprechende Maßnahmen.
There is mounting evidence that retail investors make predictable, costly investment mistakes, including underinvestment, naïve diversification, and payment of excessive fund fees. Over the past thirty-five years, however, participant-directed 401(k) plans have largely replaced professionally managed pension plans, requiring unsophisticated retail investors to navigate the financial markets themselves. Policy-makers have struggled with regulatory interventions designed to improve the quality of investment decisions without a clear understanding of the reasons for investor mistakes. Absent such an understanding, it is difficult to design effective regulatory responses. This article offers a first step in understanding the investor decision-making process. We use an internet-based experiment to disentangle possible explanations for inefficient investment decisions. The experiment employs a simplified construct of an employee’s allocation among the options in a retirement plan coupled with technology that enables us to collect data on the specific information that investors choose to view. In addition to collecting general information about the process by which investors choose among mutual fund options, we employ an experimental manipulation to test the effect of an instruction on the importance of mutual fund fees. Pairing this instruction with simplified fee disclosure allows us to distinguish between motivation-limits and cognition-limits as explanations for the widespread findings that investors ignore fees in their investment decisions. Our results offer partial but limited grounds for optimism. On the one hand, within our simplified experimental construct, our subjects allocated more money, on average, to higher-value funds. Furthermore, subjects who received the fees instruction paid closer attention to mutual fund fees and allocated their investments into funds with lower fees. On the other hand, the effects of even a blunt fees instruction were limited, and investors were unable to identify and avoid clearly inferior fund options. In addition, our results suggest that excessive, naïve diversification strategies are driving many investment decisions. Although our findings are preliminary, they suggest valuable avenues for future research and important implications for regulation of retail investing.
Homestead exemptions to personal bankruptcy allow households to retain their home equity up to a limit determined at the state level. Households that may experience bankruptcy thus have an incentive to bias their portfolios towards home equity. Using US household data for the period 1996 to 2006, we find that household demand for real estate is relatively high if the marginal investment in home equity is covered by the exemption. The home equity bias is more pronounced for younger households that face more financial uncertainty and therefore have a higher ex ante probability of bankruptcy.
We consider the continuous-time portfolio optimization problem of an investor with constant relative risk aversion who maximizes expected utility of terminal wealth. The risky asset follows a jump-diffusion model with a diffusion state variable. We propose an approximation method that replaces the jumps by a diffusion and solve the resulting problem analytically. Furthermore, we provide explicit bounds on the true optimal strategy and the relative wealth equivalent loss that do not rely on results from the true model. We apply our method to a calibrated affine model and fine that relative wealth equivalent losses are below 1.16% if the jump size is stochastic and below 1% if the jump size is constant and γ ≥ 5. We perform robustness checks for various levels of risk-aversion, expected jump size, and jump intensity.
What happened in Cyprus
(2013)
This policy letter sheds light on the economic and political backround in Cyprus and provides an analyses of the factors which lead to an intensification of the crisis there. It discusses the severe consequences of the errors made in the recent establishment of an adjustment program for Cyprus by the Europroup for European economic management as a whole.
Empirical evidence suggests that asset returns correlate more strongly in bear markets than conventional correlation estimates imply. We propose a method for determining complete tail correlation matrices based on Value-at-Risk (VaR) estimates. We demonstrate how to obtain more efficient tail-correlation estimates by use of overidentification strategies and how to guarantee positive semidefiniteness, a property required for valid risk aggregation and Markowitz{type portfolio optimization. An empirical application to a 30-asset universe illustrates the practical applicability and relevance of the approach in portfolio management.
We present a thought-provoking study of two monetary models: the cash-in-advance and the Lagos and Wright (2005) models. We report that the different approach to modeling money — reduced-form vs. explicit role — neither induces theoretical nor quantitative differences in results. Given conformity of preferences, technologies and shocks, both models reduce to one difference equation. The equations do not coincide only if price distortions are differentially imposed across models. To illustrate, when cash prices are equally distorted in both models equally large welfare costs of inflation are obtained in each model. Our insight is that if results differ, then this is due to differential assumptions about the pricing mechanism that governs cash transactions, not the explicit microfoundation of money.
This paper investigates risk-taking in the liquid portfolios held by a large panel of Swedish twins. We document that the portfolio share invested in risky assets is an increasing and concave function of financial wealth, leading to different risk sensitivities across investors. Human capital, which we estimate directly from individual labor income, also drives risk-taking positively, while internal habit and expenditure commitments tend to reduce it. Our micro findings lend strong support to decreasing relative risk aversion and habit formation preferences. Furthermore, heterogeneous risk sensitivities across investors help reconcile individual preferences with representative-agent models.
In the aftermath of the financial crisis, the ECB has experienced an unprecedented deterioration in the level of trust. This raises the question as to what factors determine trust in central banking. We use a unique cross-country dataset which includes a rich set of socio-economic characteristics and supplement it with variables meant to reflect a country’s macroeconomic condition. We find that besides individual socio-economic characteristics, macroeconomic conditions play a crucial role in the trust-building process. Our results suggest that agents are boundedly rational in the trust-building process and that current ECB market operations may even be beneficial for trust in the ECB in the long-run.
The efficacy of monetary authority actions depends primarily on the ability of the monetary authority to affect inflation expectations, which ultimately depend on agents' trust. We propose a model embedding trust cycles, as emerging from sequential coordination games between atomistic agents and the policy maker, in a monetary model. Trust affects agents' stochastic discount factor, namely the price of future risk, and their expectation formation process: these effects in turn interact with the monetary transmission mechanism. Using data from the Eurobarometer survey we analyze the link between trust on the one side and the transmission mechanism of shocks and of the policy rate on the other: data show that the two interact significantly and in a way comparable to the obtained in our model.
The paper looks at the determinants of fiscal adjustments as reflected in the primary surplus of countries. Our conjecture is that governments will usually find it more attractive to pursue fiscal adjustments in a situation of relatively high growth, but based on a simple stylized model of government behavior the expectation is that mainly high trust governments will be in a position to defer consolidation to years with higher growth. Overall, our analysis of a panel of European countries provides support for this expectation. The difference in fiscal policies depending on government trust levels may help explaining why better governed countries have been found to have less severe business cycles. It suggests that trust and credibility play an important role not only in monetary policy, but also in fiscal policy.
We investigate the theoretical impact of including two empirically-grounded insights in a dynamic life cycle portfolio choice model. The first is to recognize that, when managing their own financial wealth, investors incur opportunity costs in terms of current and future human capital accumulation, particularly if human capital is acquired via learning by doing. The second is that we incorporate age-varying efficiency patterns in financial decisionmaking. Both enhancements produce inactivity in portfolio adjustment patterns consistent with empirical evidence. We also analyze individuals’ optimal choice between self-managing their wealth versus delegating the task to a financial advisor. Delegation proves most valuable to the young and the old. Our calibrated model quantifies welfare gains from including investment time and money costs, as well as delegation, in a life cycle setting.
This paper analyzes the evolving architecture for the prudential supervision of banks in the euro area. It is primarily concerned with the likely effectiveness of the SSM as a regime that intends to bolster financial stability in the steady state.
By using insights from the political economy of bureaucracy it finds that the SSM is overly focused on sharp tools to discipline captured national supervisors and thus under-incentives their top-level personnel to voluntarily contribute to rigid supervision. The success of the SSM in this regard will hinge on establishing a common supervisory culture that provides positive incentives for national supervisors. In this regard, the internal decision making structure of the ECB in supervisory matters provides some integrative elements. Yet, the complex procedures also impede swift decision making and do not solve the problem adequately. Ultimately, a careful design and animation of the ECB-defined supervisory framework and the development of inter-agency career opportunities will be critical.
The ECB will become a de facto standard setter that competes with the EBA. A likely standoff in the EBA’s Board of Supervisors will lead to a growing gap in regulatory integration between SSM-participants and other EU Member States.
Joining the SSM as a non-euro area Member State is unattractive because the cur-rent legal framework grants no voting rights in the ECB’s ultimate decision making body. It also does not supply a credible commitment opportunity for Member States who seek to bond to high quality supervision.
This paper analyzes the evolving architecture for the prudential supervision of banks in the euro area. It is primarily concerned with the likely effectiveness of the SSM as a regime that intends to bolster financial stability in the steady state. By using insights from the political economy of bureaucracy it finds that the SSM is overly focused on sharp tools to discipline captured national supervisors and thus underincentives their top-level personnel to voluntarily contribute to rigid supervision. The success of the SSM in this regard will hinge on establishing a common supervisory culture that provides positive incentives for national supervisors. In this regard, the internal decision making structure of the ECB in supervisory matters provides some integrative elements. Yet, the complex procedures also impede swift decision making and do not solve the problem adequately. Ultimately, a careful design and animation of the ECB-defined supervisory framework and the development of inter-agency career opportunities will be critical.
The ECB will become a de facto standard setter that competes with the EBA. A likely standoff in the EBA’s Board of Supervisors will lead to a growing gap in regulatory integration between SSM-participants and other EU Member States.
Joining the SSM as a non-euro area Member State is unattractive because the current legal framework grants no voting rights in the ECB’s ultimate decision making body. It also does not supply a credible commitment opportunity for Member States who seek to bond to high quality supervision.
Insurance guarantee schemes aim to protect policyholders from the costs of insurer insolvencies. However, guarantee schemes can also reduce insurers’ incentives to conduct appropriate risk management. We investigate stock insurers’ risk-shifting behavior for insurance guarantee schemes under the two different financing alternatives: a flat-rate premium assessment versus a risk-based premium assessment. We identify which guarantee scheme maximizes policyholders’ welfare, measured by their expected utility. We find that the risk-based insurance guarantee scheme can only mitigate the insurer’s risk-shifting behavior if a substantial premium loading is present. Furthermore, the risk-based guarantee scheme is superior for improving policyholders’ welfare compared to the flat-rate scheme when the mitigating effect occurs.
The article makes two points regarding the fundamental rights dimensions of intellectual property (IP). First, it explains why the prevailing approach to balancing the fundamental right to intellectual property with conflicting fundamental freedoms as if they were of equal rank is conceptually flawed and should be replaced by a justification paradigm. Second, it highlights the pre-eminent role of the legislature and the much more limited role of the judiciary in developing IP law. The arguments are based on an analysis of the jurisprudence of the European Court of Human Rights (ECHR), the Court of Justice of the European Union (CJEU) and last but not least the German Constitutional Court, the Bundesverfassungsgericht, regarding the respective inter-/supra-/national fundamental-rights regimes.
This note reviews the legal issues and concerns that are likely to play an important role in the ongoing deliberations of the Federal Constitutional Court of Germany concerning the legality of ECB government bond purchases such as those conducted in the context of its earlier Securities Market Programme or potential future Outright Monetary Transactions.
This note reviews the legal issues and concerns that are likely to play an important role in the ongoing deliberations of the Federal Constitutional Court of Germany concerning the legality of ECB government bond purchases such as those conducted in the context of its earlier Securities Market Programme or potential future Outright Monetary Transactions.
This study contains articles based on speeches and presentations at the 14th CFS-IMFS Conference "The ECB and its Watchers" on June 15, 2012 by Mario Draghi, John Vickers, Peter Praet, Lucrezia Reichlin, Vitor Gaspar, Lucio Pench and Stefan Gerlach and a post-conference outlook by Helmut Siekmann and Volker Wieland.
We provide an assessment of the determinants of the risk remia paid by non-financial corporations on long-term bonds. By looking at 5,500 issues over the period 2005-2012, we find that in recent years the sovereign debt market turbulence has been a major driver of corporate risk. Compared with the three-year period 2005-07 before the global financial crisis, in the years 2010-12 Italian, Spanish and Portuguese firms paid on average between 70 and 120 basis points of additional premium due to the negative spillovers from the sovereign debt crisis, while German firms got a discount of 40 basis points.
This study presents an empirical analysis of capital and liability management in eight cases of bank restructurings and resolutions from eight different European countries. It can be read as a companion piece to an earlier study by the author covering the specific bank restructuring programs of Greece, Spain and Cyprus during 2012/13.
The study portrays for each case the timelines between the initial credit event and the (last) restructuring. It proceeds to discuss the capital and liability management activity before restructuring and the restructuring itself, launches an attempt to calibrate the extent of creditor participation as well as expected loss by government, and engages in a counterfactual discussion of what could have been a least cost restructuring approach.
Four of the eight cases are resolutions, i.e. the original bank is unwound (Anglo Irish Bank, Amagerbanken, Dexia, Laiki), while the four other banks have de-facto or de-jure become nationalized and are awaiting re-privatization after the restructuring (Deutsche Pfandbriefbank/Hypo Real Estate, Bankia, SNS Reaal, Alpha Bank). The case selection follows considerations of their model character for the European bank restructuring and resolution policy discussion while straddling both the U.S. (2007 - 2010) and the European (2010 - ) legs of the financial crisis, which each saw very different policy responses....
The 2011 European short sale ban on financial stocks: a cure or a curse? : [version 31 july 2013]
(2013)
Did the August 2011 European short sale bans on financial stocks accomplish their goals? In order to answer this question, we use stock options’ implied volatility skews to proxy for investors’ risk aversion. We find that on ban announcement day, risk aversion levels rose for all stocks but more so for the banned financial stocks. The banned stocks’ volatility skews remained elevated during the ban but dropped for the other unbanned stocks. We show that it is the imposition of the ban itself that led to the increase in risk aversion rather than other causes such as information flow, options trading volumes, or stock specific factors. Substitution effects were minimal, as banned stocks’ put trading volumes and put-call ratios declined during the ban. We argue that although the ban succeeded in curbing further selling pressure on financial stocks by redirecting trading activity towards index options, this result came at the cost of increased risk aversion and some degree of market failure.
In this note, a new concept for a European deposit guarantee scheme is proposed, which takes account of the strong political reservations against a mutualization of the liability for bank deposits. The three-stage model for deposit insurance outlined in the text builds on existing national deposit guarantee schemes, offering loss compensation on a European level and at the same time preventing excessive risk and moral hazard taking by individual banks.
We introduce a new measure of systemic risk, the change in the conditional joint probability of default, which assesses the effects of the interdependence in the financial system on the general default risk of sovereign debtors. We apply our measure to examine the fragility of the European financial system during the ongoing sovereign debt crisis. Our analysis documents an increase in systemic risk contributions in the euro area during the post-Lehman global recession and especially after the beginning of the euro area sovereign debt crisis. We also find a considerable potential for cascade effects from small to large euro area sovereigns. When we investigate the effect of sovereign default on the European Union banking system, we find that bigger banks, banks with riskier activities, with poor asset quality, and funding and liquidity constraints tend to be more vulnerable to a sovereign default. Surprisingly, an increase in leverage does not seem to influence systemic vulnerability.
A natural experiment in which customer-owned mutual companies converted to publicly listed firms created a plausibly exogenous shock to the stock market participation status of tens of thousands of people. We find the shock changed the way people vote in the affected areas, with a 10% increase in share-ownership rate being followed by a 1.3%–3.1% increase in right-of-center vote share. The institutional details and additional tests suggest that wealth, liquidity, and tax-related incentives cannot fully explain the results. A plausible explanation is that the associated increase in the salience of stock ownership causes a shift in voters’ attention.
Mittels des Gesetzes zur zusätzlichen Aufsicht über beaufsichtigte Unternehmen eines Finanzkonglomerats (Konglomerate, die aus mehreren Unternehmen aus verschiedenen Finanzmarktsektoren bestehen, beispielsweise aus dem Bankensektor und dem Versicherungssektor) sollen Regelungslücken geschlossen werden, die insbesondere die Gefahr betreffen, die sich aus der „Ansteckung“ einzelner Finanzkonglomerats-Unternehmen ergeben. Die vorliegende Stellungnahme weist auf eine Inkonsistenz in der beabsichtigten Ansiedlung der Aufsichtskompetenz hin und bietet einen Vorschlag zur Präzisierung der Eigenmittelvorschriften.
Die Stellungnahme bezieht sich auf die aktuellen Formulierungsvorschläge für Änderungen am DCGK für börsennotierte deutsche Aktiengesellschaften aus den Plenarsitzungen der Regierungskommission vom 9. Januar und 31. Januar 2013. Der Text enthält zudem Anmerkungen zur Aufsichtsratvergütung, zur Besetzung des Prüfungsausschusses mit Financial Experts, zu Fragen der Mitbestimmung und zu Möglichkeiten der Bündelung der Corporate Governance Berichterstattung.
Stability maintenance at the grassroots: China’s weiwen apparatus as a form of conflict resolution
(2013)
This working paper explores the history and potential of “stability maintenance” (weiwen) as a form of conflict resolution in China. Its emphasis on conflict resolution is novel. Previous examinations of the weiwen apparatus have concentrated on its political function, namely to manage resistance within society and maintain the authority of the party-state. This avenue of investigation has proved fruitful as a means of characterising the political motivation and the higher-level strategies involved in stability maintenance. Nonetheless, there remain significant conceptual and empirical gaps relating to how stability maintenance offices and processes actually function, particularly out of larger cities and at local levels. The research described in this paper aims to consider the effectiveness of stability maintenance as a part of the “market” for conflict resolution in local China, and to test the hypothesis that conflict resolution as facilitated by weiwen is the most pragmatic and effective means of actually resolving conflicts in the current Chinese political context, notwithstanding the closeness of the stability maintenance discourse to state authority and its relative distance from rule of law-based methods of dispute resolution...
Sovereign bond risk premiums
(2013)
Credit risk has become an important factor driving government bond returns. We therefore introduce an asset pricing model which exploits information contained in both forward interest rates and forward CDS spreads. Our empirical analysis covers euro-zone countries with German government bonds as credit risk-free assets. We construct a market factor from the first three principal components of the German forward curve as well as a common and a country-specific credit factor from the principal components of the forward CDS curves. We find that predictability of risk premiums of sovereign euro-zone bonds improves substantially if the market factor is augmented by a common and an orthogonal country-specific credit factor. While the common credit factor is significant for most countries in the sample, the country-specific factor is significant mainly for peripheral euro-zone countries. Finally, we find that during the current crisis period, market and credit risk premiums of government bonds are negative over long subintervals, a finding that we attribute to the presence of financial repression in euro-zone countries.
This paper shows equivalence of applicative similarity and contextual approximation, and hence also of bisimilarity and contextual equivalence, in LR, the deterministic call-by-need lambda calculus with letrec extended by data constructors, case-expressions and Haskell's seqoperator. LR models an untyped version of the core language of Haskell. Bisimilarity simplifies equivalence proofs in the calculus and opens a way for more convenient correctness proofs for program transformations.
The proof is by a fully abstract and surjective transfer of the contextual approximation into a call-by-name calculus, which is an extension of Abramsky's lazy lambda calculus. In the latter calculus equivalence of similarity and contextual approximation can be shown by Howe's method. Using an equivalent but inductive definition of behavioral preorder we then transfer similarity back to the calculus LR.
The translation from the call-by-need letrec calculus into the extended call-by-name lambda calculus is the composition of two translations. The first translation replaces the call-by-need strategy by a call-by-name strategy and its correctness is shown by exploiting infinite tress, which emerge by unfolding the letrec expressions. The second translation encodes letrec-expressions by using multi-fixpoint combinators and its correctness is shown syntactically by comparing reductions of both calculi. A further result of this paper is an isomorphism between the mentioned calculi, and also with a call-by-need letrec calculus with a less complex definition of reduction than LR.
Seit einigen Jahren wird in wissenschaftlichen und politischen Kontexten immer häufiger der Begriff der 'Kultur' mit dem der 'Sicherheit' in Zusammenhang gebracht. Diesem Trend liegt offenbar die Vermutung zugrunde, mit dem Kulturbegriff ließen sich ungleichzeitige Veränderungen von objektiver und subjektiver, nationaler und internationaler, sozialer und militärischer Sicherheit beschreiben und das Verhältnis von sicherheitspolitischen Diskursen und sicherheitspolitischer Praxis analysieren. Noch freilich wird der Begriff der 'Sicherheitskultur' so unterschiedlich und unbestimmt verwendet, dass Erkenntnisse aus der einen Disziplin nicht einfach in eine andere übertragen werden können und der politische Sprachgebrauch uneinheitlich bleibt.
The recent wave of randomized trials in development economics has provoked criticisms regarding external validity. We investigate two concerns—heterogeneity across beneficiaries and implementers—in a randomized trial of contract teachers in Kenyan schools. The intervention, previously shown to raise test scores in NGO- led trials in Western Kenya and parts of India, was replicated across all Kenyan provinces by an NGO and the government. Strong effects of shortterm contracts produced in controlled experimental settings are lost in weak public institutions: NGO implementation produces a positive effect on test scores across diverse contexts, while government implementation yields zero effect. The data suggests that the stark contrast in success between the government and NGO arm can be traced back to implementation constraints and political economy forces put in motion as the program went to scale.
Until about 25 years ago, almost all European countries had a so-called “three pillar” banking system comprising private banks, (public) savings banks and (mutual) cooperative banks. Since that time, several European countries have implemented far-reaching changes in their banking systems, which have more than anything else affected the two “pillars” of the savings and cooperative banks. The article describes the most important changes in Germany, Austria, France, Italy and Spain and characterizes the former and the current roles of savings banks and cooperative banks in these countries. A particular focus is placed on the German case, which is almost unique in so far as the German savings banks and cooperative banks have maintained most of their traditional features. The article concludes with a plea for diversity of institutional forms of banks and argues that it is important to safeguard the strengths of those types of banks that do not conform to the model of a large shareholder-oriented commercial bank.
There is a prevalent view outside Greece that promotion of competitiveness is tantamount with price reductions for Greek goods and services. Massive horizontal salary cuts appear, at first, to promote competitiveness by reducing unit labor costs and to reduce fiscal deficits by reducing the wage bill of the public sector. Upon closer look, however, horizontal salary cuts have been much greater than needed for Greek competitiveness, providing an alibi vis a vis the Troika for reforms that are still to be implemented, but at the same time undermining both competitiveness and the potential to reduce public debt through sustainable development.
This paper employs stochastic simulations of the New Area-Wide Model—a microfounded open-economy model developed at the ECB—to investigate the consequences of the zero lower bound on nominal interest rates for the evolution of risks to price stability in the euro area during the recent financial crisis. Using a formal measure of the balance of risks, which is derived from policy-makers’ preferences about inflation outcomes, we first show that downside risks to price stability were considerably greater than upside risks during the first half of 2009, followed by a gradual rebalancing of these risks until mid-2011 and a renewed deterioration thereafter. We find that the lower bound has induced a noticeable downward bias in the risk balance throughout our evaluation period because of the implied amplification of deflation risks. We then illustrate that, with nominal interest rates close to zero, forward guidance in the form of a time-based conditional commitment to keep interest rates low for longer can be successful in mitigating downside risks to price stability. However, we find that the provision of time-based forward guidance may give rise to upside risks over the medium term if extended too far into the future. By contrast, time-based forward guidance complemented with a threshold condition concerning tolerable future inflation can provide insurance against the materialisation of such upside risks.
Ausgehend von einer Erläuterung der Kriseninterpretation (crisis narrative), wie sie in dem Bericht der Liikanen-Kommission zugrunde liegt, werden die nach Ansicht des Verfassers zentralen Vorschläge des Kommissionsberichts ausgewählt, vorgestellt und in den größeren Rahmen einer erneuerten Ordnungspolitik für die Finanzmärkte Europas eingeordnet. Die mit den Vorschlägen eng zusammenhängenden Reformelemente der Bankenunion werden in diesem Text bewusst ausgeklammert. Die beiden zentralen Strukturvorschläge des Liikanen-Berichts betreffen die Abspaltung der Handelsgeschäfte von dem Universalbankengeschäft für große, internationale Banken (der Trennbankenvorschlag), sowie die verpflichtende Emission nachrangigen, glaubwürdig haftenden Fremdkapitals (der strenge Bail-in Vorschlag). Glaubwürdigkeit der Haftungszusage wird durch strenge Halterestriktionen erreicht. Vorhersehbare Folgerungen einer Einführung dieser Strukturregeln für die Finanzindustrie und -märkte werden in einem abschließenden Teil angesprochen.
Ressourcen und Potenziale in Hessens Betrieben : Abschlussbericht des IAB Betriebspanels Hessen 2012
(2013)
This paper summarizes the key proposals of the report by the Liikanen Commission. It starts with an explanation of a crisis narrative underlying the Report and its proposals. The proposals aim for a revitalization of market discipline in financial markets. The two main structural proposals of the Liikanen Report are: first, for large banks, the separation of the trading business from other parts of the banking business (the "Separation Proposal"), and the mandatory issuing of subordinated bank debt thought to be liable (the strict "Bail-in Proposal"). The credibility of this commitment to private liability is achieved by strict holding restrictions. The anticipated consequences of the introduction of these structural regulations for the financial industry and markets are addressed in a concluding part.
Der vorliegende Beitrag versucht sich in einer Positionsbestimmung asienbezogener Area Studies, indem er sozial- und kulturwissenschaftliche Debatten über die sich wandelnde Rolle von Area Studies im angelsächsischen und deutschen Sprachraum sowie die jüngere internationale Diskussion verschiedener Konzepte der Region Asien bzw. Ostasien aufarbeitet und in Beziehung zueinander setzt. Ziel ist es, daraus ein möglichst produktives Verständnis von Regionalforschung einerseits und der erforschten Region andererseits abzuleiten.
Regionale Wettbewerbsfähigkeit der Metropolregionen FrankfurtRheinMain und Stuttgart im Vergleich
(2013)
Bis vor kurzem definierte das Grundgesetz die Grundstrukturen des öffentlichen Rechts in Deutschland, sei es im Bund, sei es in den Ländern. Heute wirken jedoch supranationale und internationale Institutionen machtvoll auf das soziale Zusammenleben in Deutschland ein. Zudem besteht eine neue Offenheit gegenüber Hoheitsakten anderer Staaten. Diese Europäisierung und Internationalisierung des Landes führen zur Frage, wie nunmehr die Grundstrukturen des öffentlichen Rechts in Deutschland begriffen werden sollen.
Diese Grundstrukturen sind Gegenstand dieses Beitrags, und zwar im Sinne von Grundprinzipien, welche alle in Deutschland wirksame öffentliche Gewalt einbinden. Der Beitrag kann dabei, entsprechend dem Stand der Erkenntnis, nur wenig gesichertes Wissen unterbreiten. Eine systematische, praxisleitende und vor allem prinzipiengesteuerte Dogmatik eines Rechts der Menschheit, eines kosmopolitischen Rechts, eines globalen Rechts, eines Weltrechts, eines Weltinnenrechts, eines transnationalen Rechts, ja selbst des Völkerrechts oder auch nur des öffentlichen Rechts im europäischen Rechtsraums, also etwas in Ansätzen dem deutschen Staatsrecht Vergleichbares, erscheint jenseits der Möglichkeiten, jedenfalls des Horizonts unserer Zeit. Vor diesem Hintergrund unterbreitet dieser Beitrag sein Verständnis des neuen Forschungsfeldes (I.), verankert die relevanten Prinzipien positivrechtlich und skizziert sie in ihrem Gestaltungsanspruch (II.), und erörtert ihr gegenseitiges Verhältnis, um dadurch die Gesamtkonstellation zu beleuchten (III.).
This study investigates the transition from being a listed company with a dispersed ownership structure to being a privately held company with a concentrated ownership structure. We consider a sample of private equity backed portfolio companies to evaluate the consequences of the corporate governance changes on operational performance. Our analysis shows significant positive abnormal growth in several performance ratios for the private period of our sample companies relative to comparable public companies. These performance differences come from the increase in ownership concentration after the leveraged buyout transaction.
This paper compares two classes of models that allow for additional channels of correlation between asset returns: regime switching models with jumps and models with contagious jumps. Both classes of models involve a hidden Markov chain that captures good and bad economic states. The distinctive feature of a model with contagious jumps is that large negative returns and unobservable transitions of the economy into a bad state can occur simultaneously. We show that in this framework the filtered loss intensities have dynamics similar to self-exciting processes. Besides, we study the impact of unobservable contagious jumps on optimal portfolio strategies and filtering.
Pursuant to art. 45 of the Solvency II Framework Directive, all insurance undertakings will be obliged to conduct an “Own Risk and Solvency Assessment” (ORSA). ORSA’s relevance is not limited only to the second pillar of Solvency II, where mainly qualitative requirements are to be found. ORSA rather exhibits strong interlinks with the first pillar and its quantitative requirements and may also serve as a trigger for transparency duties which form Solvency II’s third pillar. ORSA may thus be described in some respects as the glue that binds together all three pillars of Solvency II. ORSA is one of the most obvious examples of the supervisory shift from a rules-based to a principles-based approach. As such, ORSA has hitherto been only very roughly defined. Since it is for the undertaking to determine its own specific risk profile and to evaluate whether this risk profile deviates significantly from the assumptions underlying the standard formula, it seems only natural that the supervisor must specify in greater detail what these underlying assumptions are. The most practicable way to do so would be for EIOPA to establish a “standard insurer”, which implies a translation of the assumptions concerning the underlying probability distributions into directly observable characteristics. The creation of the standard insurer would be an important step towards relaxing the insurers’ fear of what ORSA might bring about.
We study whether prices of traded options contain information about future extreme market events. Our option-implied conditional expectation of market loss due to tail events, or tail loss measure, predicts future market returns, magnitude, and probability of the market crashes, beyond and above other option-implied variables. Stock-specific tail loss measure predicts individual expected returns and magnitude of realized stock-specific crashes in the cross-section of stocks. An investor that cares about the left tail of her wealth distribution benefits from using the tail loss measure as an information variable to construct managed portfolios of a risk-free asset and market index.
We examine whether the robustifying nature of Taylor rule cross-checking under model uncertainty carries over to the case of parameter uncertainty. Adjusting monetary policy based on this kind of cross-checking can improve the outcome for the monetary authority. This, however, crucially depends on the relative welfare weight that is attached to the output gap and also the degree of monetary policy commitment. We find that Taylor rule cross-checking is on average able to improve losses when the monetary authority only moderately cares about output stabilization and when policy is set in a discretionary way.
Die vorstehenden Überlegungen führen zu folgenden Ergebnissen:
1. Das SchVG erlaubt den Gläubigern sämtlicher vor Inkrafttreten des Gesetzes begebenen Anleihen, einschließlich solcher die nicht dem SchVG 1899 unterliegen, einen Beschluss über die Anwendbarkeit des SchVG zu fassen (Opt-in).
2. Der Anwendbarkeit des SchVG und damit insbesondere auch der Opt-in-Regelung steht eine Teilrechtswahl ausländischen Rechts in den Anleihebedingungen nicht entgegen, solange die Substanz der verbrieften Forderung deutschem Recht unterliegt.
Dies ergibt sich bereits aus dem gültigen Gesetz. Aufgrund entgegenstehender instanzgerichtlicher Rechtsprechung besteht allerdings Klarstellungsbedarf. Dies insbesondere auch deshalb, weil hiermit Fragen angesprochen sind, welche die Funktionsfähigkeit und Marktakzeptanz des neuen Gesetzes in wesentlichen Anwendungsbereichen berühren. Im Rahmen der Reform des Schuldverschreibungsrechts hat die Bundesregierung angekündigt, laufend zu prüfen, ob beabsichtigten Wirkungen dieses Gesetzes erreicht worden sind, und, soweit erforderlich, rechtzeitig die hieraus resultierenden erforderlichen Maßnahmen zu ergreifen.48 Nachdem unlängst bereits die Straffung des Freigabeverfahrens erfolgte49 ist zu hoffen, dass auch der hier identifizierte gesetzliche Klarstellungsbedarf zügig in Angriff genommen wird.
We propose a new classification of consumption goods into nondurable goods, durable goods and a new class which we call “memorable” goods. A good is memorable if a consumer can draw current utility from its past consumption experience through memory. We construct a novel consumption-savings model in which a consumer has a well-defined preference ordering over both nondurable goods and memorable goods. Memorable goods consumption differs from nondurable goods consumption in that current memorable goods consumption may also impact future utility through the accumulation process of the stock of memory. In our model, households optimally choose a lumpy profile of memorable goods consumption even in a frictionless world. Using Consumer Expenditure Survey data, we then document levels and volatilities of different groups of consumption goods expenditures, as well as their expenditure patterns, and show that the expenditure patterns on memorable goods indeed differ significantly from those on nondurable and durable goods. Finally, we empirically evaluate our model’s predictions with respect to the welfare cost of consumption fluctuations and conduct an excess-sensitivity test of the consumption response to predictable income changes. We find that (i) the welfare cost of household-level consumption fluctuations may be overstated by 1.7 percentage points (11.9% points as opposed to 13.6% points of permanent consumption) if memorable goods are not appropriately accounted for; (ii) the finding of excess sensitivity of consumption documented in important papers of the literature might be entirely due to the presence of memorable goods.
Motivated by our experience in analyzing properties of translations between programming languages with observational semantics, this paper clarifies the notions, the relevant questions, and the methods, constructs a general framework, and provides several tools for proving various correctness properties of translations like adequacy and full abstractness. The presented framework can directly be applied to the observational equivalences derived from the operational semantics of programming calculi, and also to other situations, and thus has a wide range of applications.
Die Frage nach den Zusammenhängen zwischen Normanerkennung und ökonomischem Verhalten lassen sich anhand der Wirkung von Corporate Governance Kodizes schlaglichtartig beleuchten. Der vorliegende Beitrag liefert erste theoretische Bausteine zum Zusammenwirken von Corporate Governance Kodizes und verbindlichen gesetzlichen Normen auf der Grundlage des Comply or Explain-Grundsatzes, indem er zunächst die Wirkungsweise des Kapitalmarktes, wie sie von der ökonomisch fundierten Gesellschaftsrechtstheorie vorausgesetzt wird, dem Mechanismus des Comply or Explain gegenüberstellt. Die empirischen Studien zur Wirksamkeit des Kapitalmarktes bei der Durchsetzung des Deutschen Corporate Governance Kodex im Wege des Comply or Explain lassen Raum für weitere Normanerkennungs- und –befolgungsmechanismen, die sich in Parallele zur Diskussion im Bereich der Corporate Social Responsibility und den sogenannten „business cases“ hierfür verdeutlichen lassen. Die dabei aufscheinenden Berührungspunkte ökonomischer Motivation mit sozialen Interessen geben Gelegenheit, auf Fairnessnormen als Grenzen des traditionellen Rationalmodells einzugehen. Ein ähnliches Nebeneinander und Ineinandergreifen von Eigennutzinteresse und intrinsischer Motivation lässt sich anhand der Anreizwirkung bei der Managervergütung veranschaulichen. Ihre gesetzliche Regelung im VorstAG lässt zum Teil eine empirische Absicherung vermissen. Damit schließt sich der Kreis der Analyse der Verbindlichkeitsstrukturen im Wirtschaftsrecht, nach der sich diese einem einheitlichen theoretischen Modell entziehen und deren empirische Grundlagen noch nicht zweifelsfrei geklärt sind.
We assess the effects of monetary policy on bank risk to verify the existence of a risk-taking channel - monetary expansions inducing banks to assume more risk. We first present VAR evidence confirming that this channel exists and tends to concentrate on the bank funding side. Then, to rationalize this evidence we build a macro model where banks subject to runs endogenously choose their funding structure (deposits vs. capital) and risk level. A monetary expansion increases bank leverage and risk. In turn, higher bank risk in steady state increases asset price volatility and reduces equilibrium output.
Mobilität älterer Menschen : State of the Art und Schlussfolgerungen für das Projekt COMPAGNO
(2013)
Mobil zu sein ist ein menschliches Grundbedürfnis und gleichzeitig Bedingung sozialer Teilhabe in der Gesellschaft. Das Ziel von COMPAGNO ist es, Menschen bis ins hohe Alter in ihrer selbstständigen Mobilität zu unterstützen. Dieses Diskussionspapier gibt einen Überblick über den aktuellen Stand der Forschung zur Mobilität älterer Menschen. Es fasst zentrale Mobilitätskenngrößen älterer Menschen aus verschiedenen Studien zusammen. Anhand gerontologischer Theorien und Ansätze werden Zusammenhänge zwischen Prozessen des Alterns und Veränderungen der Mobilität hergestellt. Zentrales Thema dieses Diskussionspapiers ist außerdem der komplexe Entstehungsprozess von Mobilitätsbarrieren im Alter. Zudem wird ein bestehendes Zielgruppenmodell älterer Menschen für COMPAGNO adaptiert. Im abschließenden Kapitel werden Rückschlüsse für das weitere Vorgehen im Projekt COMPAGNO gezogen.
Mindfully Resisting the Bandwagon – IT Implementation and Its Consequences in the Financial Crisis
(2013)
Although the ”financial meltdown” between 2007 and 2009 can be substantially attributed to herding behaviour in the subprime market for credit default swaps, a “mindless” IT implementation of participating financial services providers played a major role in the facilitation of the underlying bandwagon. The problem was a discrepancy between two core complementary capabilities: (1.) the (economic-rationalistic) ability to execute financial transactions (to comply with the herd) in milliseconds and (2.) the required contextualized mindfulness capabilities to comprehend the implications of the transactions being executed and the associated IT innovation decisions that enabled these transactions.
Recht und die Vorstellung von dem, was Recht ist, sind nicht allein an Territorien oder Herrschaften gebunden, sondern wandern mit den Menschen mit. Treffen mehrere möglicherweise anwendbare Rechte aufeinander, steht für heutige Gerichte ein Kollisionsrecht wie das Internationale Privatrecht bereit, dass über den Umgang mit diesem Konflikt entscheidet , indem es den Fall einer bestimmten nationalstaatlichen Regelung unterstellt. Andere Lösungen sind jedoch ebenfalls denkbar und wurden in der Vergangenheit auch praktiziert, was heute schwer nachzuvollziehen ist. Um die Denkstruktur und Grenzen der modernen Herangehensweise deutlich werden zu lassen, sollen in diesem Beitrag die Schwierigkeiten erläutert werden, das Konzept des Internationalen Privatrechts auf das Neben- und Miteinander verschiedener rechtlicher Traditionen im hellenistischen Ägypten zu übertragen. Ziel ist es, auch Nichtjuristen damit einen Einstieg und eine Übersicht über die Diskussion innerhalb der antiken Rechtsgeschichte zu ermöglichen.
The paper focuses on the problems of a juridical classification and evaluation of Ancient Near Eastern treaties with regard to the question if there existed an Ancient Near Eastern International Law or not. Alternatively treaties and their content are looked at uncommitted as mechanisms of conflict and dispute resolution. Main aspects are preliminary and prophylactic conflict resolution in treaties and the procedural context and efficiency of treaties.
This paper takes a novel approach to estimating bankruptcy costs by inference from market prices of equity and put options using a dynamic structural model of capital structure. This approach avoids the selection bias of looking at firms in or near default and therefore permits theories of ex ante capital structure determination to be tested. We identify significant cross sectional variation in bankruptcy costs across industries and relate these to specific firm characteristics. We find that asset volatility and growth options have significant positive impacts, while tangibility and size have negative impacts. Our bankruptcy cost variable estimate significantly negatively impacts leverage ratios. This negative impact is in addition to that of other firm characteristics such as asset intangibility and asset volatility. The results provide strong support for the tradeoff theory of capital structure.
Prior research suggests that those who rely on intuition rather than effortful reasoning when making decisions are less averse to risk and ambiguity. The evidence is largely correlational, however, leaving open the question of the direction of causality. In this paper, we present experimental evidence of causation running from reliance on intuition to risk and ambiguity preferences. We directly manipulate participants’ predilection to rely on intuition and find that enhancing reliance on intuition lowers the probability of being ambiguity averse by 30 percentage points and increases risk tolerance by about 30 percent in the experimental sub-population where we would a priori expect the manipulation to be successful(males).
Außerhalb Griechenlands herrscht die Ansicht vor, dass eine höhere Wettbewerbsfähigkeit gleichbedeutend ist mit Preissenkungen für Güter und Dienstleistungen. Angesichts der begrenzten Bereitschaft in Griechenland, Reformen umzusetzen, fordern die Gläubiger drastische Lohnkürzungen, um die Produktivität zu erhöhen und die öffentlichen Ausgaben zu senken. Doch mit einer Kürzungsrunde nach der anderen lässt sich Wettbewerbsfähigkeit nicht erreichen. Umfangreiche flächendeckende Lohnkürzungen reduzieren vielmehr die erwartete Produktivität, da sie die besten Arbeitnehmer vertreiben, dem Rest Anreize zur Produktivität nehmen und neue gute Leute fernhalten.
The German corporate governance code includes a recommendation as to diversity on corporate boards. Two draft bills on gender quotas are currently under way in legislative proceedings. However, the ruling coalition rejects those, advocating a “flexible quota”. The present study provides an overview on legislative proposals currently presented and on academic scholarship on the issue. Legal obstacles to the introduction of a “fix” quota under German law are discussed and the “soft” version of “flexible” quotas is advocated.
La investigación sobre el desarrollo y la vida del derecho canónico en la América hispánica se ha visto enriquecida por la edición de los documentos de trabajo del Tercer Concilio Provincial Mexicano, celebrado en 1585. Esta monografía presenta las líneas de investigación que el autor está llevando a cabo en su tesis doctoral, confrontando los decretos promulgados con su iter redaccional de acuerdo a la información suministrada por los manuscritos editados. Los pedidos y memoriales presentados al concilio provincial pueden ser analizados, junto con la misma tarea legislativa, como un modo de resolución de conflictos por parte de la autoridad eclesiástica y su potestad de acuerdo con el derecho canónico entonces vigente.
Das Banken- und Versicherungsaufsichtsrecht benennt an mehreren Stellen ausdrücklich gruppenbezogene Pflichten des übergeordneten Unternehmens. Deren Realisierbarkeit hängt von gesellschafts-, insbesondere konzernrechtlichen Schranken ab, die für die Einflussnahme auf nachgeordnete Gruppenunternehmen bestehen. Der vorliegende Beitrag betrachtet das Zusammenspiel von Aufsichts- und Gesellschaftsrecht unter besonderer Berücksichtigung der regelungstragenden Ziele des ersteren. Die Gruppenverantwortung ist in dieser Sicht ein Institut, das zur Verwirklichung eines klar umrissenen, öffentlichen Interesses an der Befolgung bestimmter Normen das übergeordnete Unternehmen als interne Kontrollinstanz in die Pflicht nimmt und mit gruppendimensionalen Handlungspflichten belegt. Zur Gewährleistung der Effektivität dieses Instituts ist ein sektoral begrenzter Vorrang der aufsichtsrechtlichen Vorgaben anzuerkennen. Dieser ist durch die angemessene Berücksichtigung des mit dem Aufsichtsrecht verfolgten, öffentlichen Interesses als normativer Determinante der Leitungstätigkeit aller gruppenangehörigen Institute zu verwirklichen.
Am 6. Februar 2013 hat die Bundesregierung den "Entwurf eines Gesetzes zur Abschirmung von Risiken und zur Planung der Sanierung und Abwicklung von Kreditinstituten und Finanzgruppen” veröffentlicht. Artikel 2 des Gesetzesentwurfs sieht vor bei systemrelevanten Finanzinstitutionen das Einlagen- und Kreditgeschäft vom Handelsgeschäft abzutrennen. Die Zielsetzung des Gesetzentwurfs, Kapitalkosten wieder in direkte Abhängigkeit des Risikos von Geschäftsfeldern zu setzen und eine Abwicklung zu erleichtern, die ohne den Einsatz von Steuermitteln gelingen kann, ist begrüßenswert. In seiner derzeitigen Ausgestaltung läuft der Gesetzesentwurf jedoch Gefahr, zwar symbolträchtig zu sein, aber in der Zielerreichung hinsichtlich Stabilität des Finanzmarktes und Schutz von Einlegern und Steuerzahlern hinter den Erwartungen zurückzubleiben.
Gerichte können einem Täter, der wegen Straftaten verurteilt wurde, die auf seinen Suchtmittelkonsum zurückgehen, die Weisung erteilen, jeglichen Alkoholkonsum zu unterlassen und sich entsprechenden Kontrollen zu unterziehen. Die Kontrolle der Weisungen stößt jedoch bislang an enge Grenzen. Bisher kann deren Einhaltung nur stichprobenartig überprüft werden. Einen neuen Ansatz bietet eine kontinuierliche (transdermale) Alkoholüberwachung mittels eines am Fußgelenk getragenen Messgerätes. Ein Blick in die USA zeigt, dass die elektronische Überwachung des Alkoholkonsums erprobt wurde und sich durchgesetzt hat. Der Beitrag untersucht die Bedeutung einer kontinuierlichen transdermalen Alkoholüberwachung für die Abstinenzkontrolle und inwieweit diese Methode im deutschen System verankert werden kann.
Following the experience of the global financial crisis, central banks have been asked to undertake unprecedented responsibilities. Governments and the public appear to have high expectations that monetary policy can provide solutions to problems that do not necessarily fit in the realm of traditional monetary policy. This paper examines three broad public policy goals that may overburden monetary policy: full employment; fiscal sustainability; and financial stability. While central banks have a crucial position in public policy, the appropriate policy mix also involves other institutions, and overreliance on monetary policy to achieve these goals is bound to disappoint. Central Bank policies that facilitate postponement of needed policy actions by governments may also have longer-term adverse consequences that could outweigh more immediate benefits. Overburdening monetary policy may eventually diminish and compromise the independence and credibility of the central bank, thereby reducing its effectiveness to preserve price stability and contribute to crisis management.
The German Capital Markets Model Case Act (KapMuG) and its amendment of 2012 highlight some fundamentals of collective redress in civil law countries at the example of model case procedures in the field of investor protection. That is why a survey of the ongoing activities of the European Union in the area of collective redress and of its repercussions on the member state level forms a suitable basis for the following analysis of the 2012 amendment of the KapMuG. It clearly brings into focus a shift from sector-specific regulation with an emphasis on the cross-border aspect of protecting consumers towards a “coherent approach” strengthening the enforcement of EU law. As a result, regulatory policy and collective redress are two sides of the same coin today. With respect to the KapMuG such a development brings about some tension between its aim to aggregate small individual claims as efficiently as possible and the dominant role of individual procedural rights in German civil procedure. This conflict can be illustrated by some specific rules of the KapMuG: its scope of application, the three-tier procedure of a model case procedure, the newly introduced notification of claims and the new opt-out settlement under the amended §§ 17-19.
Model case procedures have some fundamentals in common with collective redress in civil law countries. This is particularly true in the field of investor protection which is highly regulated and marked by resulting enforcement failures, which led the German legislator to the enactment of the KapMuG and its recent amendment which highlight exemplary elements of model case procedure. A survey of the ongoing activities of the European Union in the area of collective redress and of its repercussions on the member state level therefore forms a suitable basis for the following analysis of the 2012 amendment of the KapMuG. It clearly brings into focus a shift from sector-specific regulation with an emphasis on the cross-border aspect of protecting consumers towards a “coherent approach” strengthening the enforcement of EU law. As a result, regulatory policy and collective redress are two sides of the same coin today. With respect to the KapMuG such a development brings about some tension between its aim to aggregate small individual claims as efficiently as possible and the dominant role of individual procedural rights in German civil procedure. This conflict can be illustrated by some specific rules of the KapMuG: its scope of application, the three-tier procedure of a model case procedure, the newly introduced notification of claims and the new opt-out settlement under the amended §§ 17-19.
Investment in financial literacy, social security and portfolio choice : [version may 21, 2013]
(2013)
We present an intertemporal portfolio choice model where individuals invest in financial literacy, save, allocate their wealth between a safe and a risky asset, and receive a pension when they retire. Financial literacy affects the excess return and the cost of stock market participation. Since literacy depreciates over time and has a cost related to current consumption, investors simultaneously choose how much to save, the portfolio allocation, and the optimal investment in literacy. This last depends on households' resources, its preference parameters and on how much financial literacy affects the returns on risky assets and the stock market participation cost, and the returns on social security wealth. The model implies one should observe a positive correlation between stock market participation (and risky asset share, conditional on participation) and financial literacy, and a negative correlation between the generosity of the social security system and financial literacy. The model also implies that the stock of financial literacy accumulated early in life is positively correlated with the individual's wealth and portfolio allocations later in life. Using microeconomic cross-country data, we find support for these predictions.
Vor dem Hintergrund der Kontingenz des kulturwissenschaftlichen Forschungsprogramms, also Ursache-Wirkungsrelationen, die weder notwendig noch unmöglich sind, wird in diesem Beitrag ein Konzept von Sicherheitskultur aus Sicht der Akteur-Netzwerk-Theorie vorgestellt. Aus dieser Perspektive erklärt sich der Wandel von Sicherheitskulturen nicht aus einer einzigen Variable, sondern aus vernetzten Interaktionen zwischen menschlichen und nicht-menschlichen Akteuren. Der Versuch mithilfe von nicht-menschlichen Akteuren die gesellschaftliche Ordnung zu stabilisieren produziert dabei stets neue Unschärfen und Kontingenzen, die mit weiteren Stabilisatoren eingehegt werden müssen. Ein solches Konzept von Sicherheitskultur ermöglicht es den Blick auf quasi kausale Interobjektivitäten und deren Unvorhersagbarkeiten zu richten, die mit einer auf rein menschliche Akteure gerichteten Sozialwissenschaft unsichtbar blieben.
Internationalisierung und Transnationalisierung der Rechtswissenschaft – aus deutscher Perspektive
(2013)
"In diesem working paper fasse ich einige Überlegungen zur Internationalisierung und Transnationalisierung der deutschen Rechtswissenschaft zusammen. Dabei skizziere ich die Bedeutung der nationalstaatlichen Tradition und Funktion der Rechtswissenschaft (1., 2.), konzentriere mich anschließend auf die Herausbildung Transnationalen Rechts und die damit verbundene Frage nach einer Transnationalen Rechtswissenschaft (3.). Ich versuche anzudeuten, weswegen eine solche Transnationale Rechtswissenschaft in besonderer Weise auf Transdisziplinarität angewiesen ist (4.) und schließe einige Bemerkungen zu der Frage an, wie die deutsche Rechtswissenschaft sich in einer solchen Transnationalen Rechtswissenschaft verorten könnte (5.).
Die Folgerungen, die sich für das Wissenschaftssystem, also für Forschung und Lehre, aus den mit einer Transnationalen Rechtswissenschaft verbundenen Anforderungen ergeben, sind vielfältig. Es gibt aktuellen Anlass und gute Gründe, über diese intensiver nachzudenken (6.). Am Schluss dieses einführenden, viele wichtige Fragen nur streifenden und kaum mit Nachweisen versehenen Beitrags, der gerade für das Gespräch mit anderen Disziplinen formuliert ist, steht eine knappe, thesenartig formulierte Zusammenfassung (7.)." Thomas Duve
Internationales Regulierungsgefälle und Wettbewerbsfähigkeit des Finanzplatzes Frankfurt am Main
(2013)
Enthält folgende Beiträge:
Prof. Dr. Reto Francioni: Internationales Regulierungsgefälle und Wettbewerbsfähigkeit des Finanzplatzes Frankfurt am Main
Prof. Dr. Horst Hammen: Regulierungsgefälle zu Lasten des Börsenplatzes Frankfurt – Hochfrequenzhandel, Organized Trading Facilities (OTF) und Finanztransaktionssteuer
Obgleich Staaten im Kontext asymmetrischer Konflikte prinzipiell danach streben, nicht-staatlichen Gewaltakteuren Anerkennung und Legitimität vorzuenthalten, wird dieser Doktrin des Nicht-Dialogs weltweit zunehmend zuwider gehandelt. Der Doktrin der Nicht-Anerkennung steht eine Praxis der internationalen, politischen Anerkennung solcher Gruppen entgegen. Doch welchen Einfluss haben die Nicht-Anerkennung und die von internationalen Drittparteien gewährte Anerkennung auf die Gewaltanwendung nicht-staatlicher Gewaltakteure? Die Geschichte der palästinensischen Widerstandsgruppen Fatah (1962 bis 1993) und Hamas (1987 bis 2008) eignet sich, diesen Fragen auf den Grund zu gehen, da sie durch Akte der Anerkennung und Nicht-Anerkennung einerseits und Prozesse der Eskalation und De-Eskalation andererseits geprägt ist. Es zeigt sich, dass eine Strategie der graduellen Anerkennung unter bestimmten Bedingungen zur De-Eskalation nicht-staatlicher Gewalt beitragen kann.
This paper presents a theory that explains why it is beneficial for banks to engage in circular lending activities on the interbank market. Using a simple network structure, it shows that if there is a non-zero bailout probability, banks can significantly increase the expected repayment of uninsured creditors by entering into cyclical liabilities on the interbank market before investing in loan portfolios. Therefore, banks are better able to attract funds from uninsured creditors. Our results show that implicit government guarantees incentivize banks to have large interbank exposures, to be highly interconnected, and to invest in highly correlated, risky portfolios. This can serve as an explanation for the observed high interconnectedness between banks and their investment behavior in the run-up to the subprime mortgage crisis.
Although intellectual property law is a distinctively Western, modern, and relatively young body of law, it has spread all over the world, now encompassing all but a very few outsiders such as Afghanistan, Somalia, and Vanuatu. This article presents three legal transfers that contributed to this development: first, from real property in land and movables to intellectual property in the late 18th century in Western Europe; second, from Western Europe, in particular from the United Kingdom and France to the rest of the world during the colonial era in the 19th and early 20th century; third, from the protection of new knowledge to the protection of traditional knowledge, held by indigenous communities in developing countries, on 5 August 1963. This story illuminates how legal transfers in a broad sense – including, but not limited to legal transplants - drive the evolution of law.
We are able to shed light on the black box of restructuring tools private equity investors use to improve the operational performance of their portfolio companies. By building on previous work considering performance evaluation of PE backed companies, we analyze whether private equity improves operating efficiency and which of the typical restructuring tools are the main performance drivers. Using a set of over 300 international leveraged buyout transactions of the last thirty years, we find that while there is vast improvement in operational efficiency, these gains vary considerably. Our top performing transactions are subject to strong equity incentives, frequent asset restructuring and tight control by the investor. Furthermore, investors’ experience has a positive influence while financial leverage has no influence on operational performance.
The analyses of intersectoral linkages of Leontief (1941) and Hirschman (1958) provide a natural way to study the transmission of risk among interconnected banks and to measure their systemic importance. In this paper we show how classic input-output analysis can be applied to banking and how to derive six indicators that capture different aspects of systemic importance, using a simple numerical example for illustration. We also discuss the relationship with other approaches, most notably network centrality measures, both formally and by means of a simulated network.
Der Beitrag stellt im Überblick dar, welche Bedeutung das Immaterialgüterrecht (IP) für die Entwicklung einzelner Volkswirtschaften und die globale Wissensgesellschaft hat. In einem ersten Abschnitt wird erläutert, dass in der Geschichte des Immaterialgüterrechts die Vorstellung dominierte, dass Immaterialgüterrechte technologischem und sonstigem Fortschritt zuträglich sind. Im zweiten Abschnitt wird gezeigt, dass dieses lineare Expansions-Narrativ aus ökonomischer und wirtschaftshistorischer Sicht als widerlegt gelten muss. Dazu werden die Argumente der IP-Optimisten und die Gegenargumente der IP-Pessimisten anhand empirischer Studien bewertet. Der Beitrag schließt mit sozialwissenschaftlichen und normativen Schlussfolgerungen im Hinblick auf die künftige Ausgestaltung des internationalen Immaterialgüterrechts.
Humanitäre Interventionen sind seit den neunziger Jahren wiederkehrend im Fokus öffentlicher wie wissenschaftlicher Debatten. Erklärungen, warum sich Staaten entschließen, unabhängig von geopolitischen Interessen humanitäre Interventionen zu fordern oder sich an ihnen zu beteiligen, bleiben nach wie vor umstritten. Geteilte Moralvorstellungen und die Bereitstellung eines Handlungsrahmens für die Umsetzungspraxis sind zwei zentrale Analysedimensionen einer internationalen, humanitäre Interventionen befördernden Sicherheitskultur. Eine Normentwicklung kann in diesem Sinne nur in der Kombination mit tatsächlicher Akteurspraxis und medial-öffentlicher Aufmerksamkeit verstanden und beurteilt werden.
Household decisions are profoundly shaped by a complex set of financial options due to Social Security rules determining retirement, spousal, and survivor benefits, along with benefit adjustments that vary with the age at which these are claimed. These rules influence optimal household asset allocation, insurance, and work decisions, given life cycle demographic shocks such as marriage, divorce, and children. Our model generates a wealth profile and a low and stable equity fraction consistent with empirical evidence. We also confirm predictions that wives will claim retirement benefits earlier than husbands, while life insurance is mainly purchased by younger men. Our policy simulations imply that eliminating survivor benefits would sharply reduce claiming differences by sex while dramatically increasing men’s life insurance purchases.
This paper analyzes the equilibrium pricing implications of contagion risk in a Lucas-tree economy with recursive preferences and jumps. We introduce a new economic channel allowing for the possibility that endowment shocks simultaneously trigger a regime shift to a bad economic state. We document that these contagious jumps have far-reaching asset pricing implications. The risk premium for such shocks is superadditive, i.e. it is 2.5\% larger than the sum of the risk premia for pure endowment shocks and regime switches. Moreover, contagion risk reduces the risk-free rate by around 0.5\%. We also derive semiclosed-form solutions for the wealth-consumption ratio and the price-dividend ratios in an economy with two Lucas trees and analyze cross-sectional effects of contagion risk qualitatively. We find that heterogeneity among the assets with respect to contagion risk can increase risk premia disproportionately. In particular, big assets with a large exposure to contagious shocks carry significantly higher risk premia.
This paper tests whether an increase in insured deposits causes banks to become more risky. We use variation introduced by the U.S. Emergency Economic Stabilization Act in October 2008, which increased the deposit insurance coverage from $100,000 to $250,000 per depositor and bank. For some banks, the amount of insured deposits increased significantly; for others, it was a minor change. Our analysis shows that the more affected banks increase their investments in risky commercial real estate loans and become more risky relative to unaffected banks following the change. This effect is most distinct for affected banks that are low capitalized.
Debt-induced crises, including the subprime, are usually attributed exclusively to supply-side factors. We uncover an additional factor contributing to debt culture, namely social influences emanating from the perceived average income of peers. Using unique information from a representative household survey of the Dutch population that circumvents the need to define the social circle, we consider collateralized, consumer, and informal loans. We find robust social effects on borrowing – especially among those who consider themselves poorer than their peers – and on indebtedness, suggesting a link to financial distress. We check the robustness of our results using several approaches to rule out spurious associations and handle correlated effects.
We show that the presence of high frequency trading (HFT) has significantly mitigated the frequency and severity of end-of-day price dislocation, counter to recent concerns expressed in the media. The effect of HFT is more pronounced on days when end of day price dislocation is more likely to be the result of market manipulation on days of option expiry dates and end of month. Moreover, the effect of HFT is more pronounced than the role of trading rules, surveillance, enforcement and legal conditions in curtailing the frequency and severity of end-of-day price dislocation. We show our findings are robust to different proxies of the start of HFT by trade size, cancellation of orders, and co-location.
We consider an economy where individuals privately choose effort and trade competitively priced securities that pay off with effort-determined probability. We show that if insurance against a negative shock is sufficiently incomplete, then standard functional form restrictions ensure that individual objective functions are optimized by an effort and insurance combination that is unique and satisfies first- and second-order conditions. Modeling insurance incompleteness in terms of costly production of private insurance services, we characterize the constrained inefficiency arising in general equilibrium from competitive pricing of nonexclusive financial contracts.
This paper empirically examines the role of soft information in the competitive interaction between relationship and transaction banks. Soft information can be interpreted as a private signal about the quality of a firm that is observable to a relationship bank, but not to a transaction bank. We show that borrowers self-select to relationship banks depending on whether their privately observed soft information is positive or negative. Competition affects the investment in learning the private signal from firms by relationship banks and transaction banks asymmetrically. Relationship banks invest more; transaction banks invest less in soft information, exacerbating the selection effect. Finally, we show that firms where soft information was important in the lending decision were no more likely to default compared to firms where only financial information was used.
This paper studies the relation between firm value and a firm's growth options. We find strong empirical evidence that (average) Tobin's Q increases with firm-level volatility. However, the significance mainly comes from R&D firms, which have more growth options than non-R&D firms. By decomposing firm-level volatility into its systematic and unsystematic part, we also document that only idiosyncratic volatility (ivol) has a significant effect on valuation. Second, we analyze the relation of stock returns to realized contemporaneous idiosyncratic volatility and R&D expenses. Single sorting according to the size of idiosyncratic volatility, we only find a significant ivol anomaly for non-R&D portfolios, whereas in a four-factor model the portfolio alphas of R&D portfolios are all positive. Double sorting on idiosyncratic volatility and R&D expenses also reveals these differences between R&D and non-R&D firms. To simultaneously control for several explanatory variables, we also run panel regressions of portfolio alphas which confirm the relative importance of idiosyncratic volatility that is amplified by R&D expenses.
We study to what extent firms spread out their debt maturity dates across time, which we call "granularity of corporate debt." We consider the role of debt granularity using a simple model in which a firm's inability to roll over expiring debt causes inefficiencies, such as costly asset sales or underinvestment. Since multiple small asset sales are less costly than a single large one, firms may diversify debt rollovers across maturity dates. We construct granularity measures using data on corporate bond issuers for the 1991-2011 period and establish a number of novel findings. First, there is substantial variation in granularity in that many firms have either very concentrated or highly dispersed maturity structures. Second, our model's predictions are consistent with observed variation in granularity. Corporate debt maturities are more dispersed for larger and more mature firms, for firms with better investment opportunities, with higher leverage ratios, and with lower levels of current cash flows. We also show that during the recent financial crisis especially firms with valuable investment opportunities implemented more dispersed maturity structures. Finally, granularity plays an important role for bond issuances, because we document that newly issued corporate bond maturities complement pre-existing bond maturity profiles.
Gesprächsreihe zu Strukturreformen im Europäischen Bankensektor: Managementvergütung im Bankensektor
(2013)
In der ersten Veranstaltung der „Gesprächsreihe zu Strukturreformen im europäischen Bankensektor“ diskutierten Professor Dr. Jan Krahnen und Dr. Thomas Mayer den im Liikanen-Bericht enthaltenen Vorschlag zur Managervergütung im Bankensektor. Der Vorschlag baut auf einem der Kernvorschläge der Liikanen-Kommission auf, nach dem Finanzinstitute gehalten sein sollen, einen Teil ihres Fremdkapitals so zu strukturieren, dass, bei Schieflage des Finanzinstituts, eine Inhaftungnahme der Gläubiger dieses Fremdkapitals möglich wird. Um dies zu erreichen, empfiehlt die Liikanen-Kommission für alle Banken, dass diese einen festgelegten Prozentsatz ihres Kapitals als „Bail-in Anleihen“ begeben müssen. Der Vorschlag zur Managervergütung sieht vor Bail-in Anleihen für die leistungsorientierte und anreizorientierte Entlohnung von Managern einzusetzen, um Anreize zu geben, die Risikopolitik des Unternehmens so zu verankern, dass auch längerfristig keine exorbitanten Risiken auftreten.
In der dritten Veranstaltung der „Gesprächsreihe zu Strukturreformen im europäischen Bankensektor“ diskutierten Professor Dr. Jan Krahnen und Dr. Theodor Weimer die Auswirkungen von Regulierung auf Bankverhalten und Wettbewerb, insbesondere im Hinblick auf die Vorschläge der Liikanen-Kommission. Weimer verwies auf die volkswirtschaftlichen Kosten einer zu strengen Bankenregulierung, u.a. negative Auswirkungen auf die Kreditvergabe. Weimer warnte auch davor, dass man in Europa, und gerade in Deutschland, strenger reguliere als in anderen Ländern. Krahnen erklärte, man habe durch die Liikanen-Vorschläge vor allem das Problem des systemischen Risikos im Bankensektor adressieren wollen. Außerdem sei es ein Ziel der Kommission gewesen, Banken so zu regulieren, dass der Steuerzahler im Krisenfall nicht länger für die Risiken der Banken haften müsse. Es sei notwendig, den Bankensektor zu reformieren, damit Banken abgewickelt werden könnten, auch wenn diese untereinander vernetzt sind.
In der vierten Veranstaltung der „Gesprächsreihe zu Strukturreformen im europäischen Bankensek-tor“ diskutierte Dr. Elke König, Präsidentin der Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), die Wiederherstellung privater Haftung und die zukünftige Rolle der Aufsicht, insbesondere im Hinblick auf die Vorschläge der Liikanen-Kommission.
König warnte, dass man systemische Risiken, die vor allem während der Finanzkrise zu Problemen geführt hätten, noch nicht im Griff habe. Sowohl die Bankenaufsicht als auch die Wissenschaft suche immer noch nach einer geeigneten Lösung dieses Problems. Systemische Risiken führen dazu, dass komplexe und stark vernetzte Institute von Staaten gestützt werden, wenn diese ins Straucheln gera-ten. In der Finanzkrise hatte dies zur Folge, dass Banken letztlich vom Steuerzahler gerettet wurden. Diesen Quasi-Insolvenzschutz systemrelevanter Institute müsse man aufheben, um Fehlanreize im Markt zu korrigieren, so König. Verantwortung und Haftung für unternehmerisches Handeln müssten wieder in einer Hand liegen, und zwar in der der Institute, seiner Eigner und Gläubiger.
König ist deshalb der Meinung, dass ein einheitlicher Abwicklungsmechanismus für Banken notwen-dig sei, der auch grenzüberschreitend wirke. Als einen wichtigen Bestandteil dieses Mechanismus nannte sie die Umsetzung eines breiten Bail-ins. Durch Bail-in werden Eigentümer und Gläubiger von Bankinstituten an einer Restrukturierung beteiligt. Eine Umwandlung von Fremdkapital in Eigenkapi-tal kann darüber hinaus dazu dienen, ein Brückeninstitut mit Kapital auszustatten.
Zur konkreten Ausgestaltung von Bail-in-Instrumenten gibt es unterschiedliche Ansätze: Die Liikanen-Kommission plädierte in ihrem Vorschlag für eine Schaffung konkreter Bail-in-Anleihen, vergleichbar mit den Contingent Convertible Bonds (CoCo-Bonds), die in der Schweiz bereits eingeführt wurden. Die BaFin setze dagegen, ähnlich wie die Europäische Kommission, auf einen möglichst breiten An-satz und habe sich gegen die Emission einer neuen Gattung vertraglicher Bail-in-Instrumente ausge-sprochen, sagte König. Die Höhe der bail-in-fähigen Instrumente sowie die Reihenfolge der Haftung müssten aber trotzdem für jedes Institut klar definiert sein.
König betonte, dass es wichtig sei, nun die institutsspezifischen Sanierungs- und Abwicklungspläne zu entwickeln. Die BaFin habe mit der Erstellung der Abwicklungspläne auch schon begonnen. Bail-in sei dabei nur ein Baustein in dem wesentlich umfangreicheren Instrumentenkasten der Sanierungs- und Abwicklungspläne.
In der anschließenden Diskussion sagte König, dass es eine Abwicklungsbehörde für Institute, die in Zukunft einer europäischen Aufsicht unterliegen, derzeit nur auf nationaler Ebene geben könne. An-dernfalls sei eine Änderung der europäischen Verträge notwendig, da die Mittel, die für eine Abwick-lung aufgewendet werden müssten, aus nationalen Haushalten kämen. Bei einer Abwicklungsbehör-de auf europäischer Ebene würden die Haushaltsbelastung und die Entscheidung über die Verwen-dung der Mittel auseinanderfallen.
Gesprächsreihe zu Strukturreformen im europäischen
Bankensektor : Zukunft der Universalbanken
(2013)
In der zweiten Veranstaltung der „Gesprächsreihe zu Strukturreformen im europäischen Bankensektor“ diskutierten Professor Dr. Jan Pieter Krahnen und Dr. Michael Kemmer die Zukunft der Universalbanken. Anlass war der Vorschlag der Liikanen-Kommission, dass Finanzinstitute einen Teil ihres Investmentbankings, den Eigenhandel und das Market-Making, ab einer bestimmten Größenordnung ausgliedern sollen.
Monetary theorists have advanced an intriguing notion: we exchange money to make up for a lack of enforcement, when it is difficult to monitor and sanction opportunistic behaviors. We demonstrate that, in fact, monetary equilibrium cannot generally be sustained when monitoring and punishment limitations preclude enforcement — external or not. Simply put, monetary systems cannot operate independently of institutions — formal or informal — designed to monitor behaviors and sanction undesirable ones. This fundamental result is derived by integrating monetary theory with the theory of repeated games, studying monetary equilibrium as the outcome of a matching game with private monitoring.
The U.S. Energy Information Administration (EIA) regularly publishes monthly and quarterly forecasts of the price of crude oil for horizons up to two years, which are widely used by practitioners. Traditionally, such out-of-sample forecasts have been largely judgmental, making them difficult to replicate and justify. An alternative is the use of real-time econometric oil price forecasting models. We investigate the merits of constructing combinations of six such models. Forecast combinations have received little attention in the oil price forecasting literature to date. We demonstrate that over the last 20 years suitably constructed real-time forecast combinations would have been systematically more accurate than the no-change forecast at horizons up to 6 quarters or 18 months. MSPE reduction may be as high as 12% and directional accuracy as high as 72%. The gains in accuracy are robust over time. In contrast, the EIA oil price forecasts not only tend to be less accurate than no-change forecasts, but are much less accurate than our preferred forecast combination. Moreover, including EIA forecasts in the forecast combination systematically lowers the accuracy of the combination forecast. We conclude that suitably constructed forecast combinations should replace traditional judgmental forecasts of the price of oil.
We use responses to survey questions in the 2010 Italian Survey of Household Income and Wealth that ask consumers how much of an unexpected transitory income change they would consume. We find that the marginal propensity to consume (MPC) is 48 percent on average, and that there is substantial heterogeneity in the distribution. We find that households with low cash-on-hand exhibit a much higher MPC than affluent households, which is in agreement with models with precautionary savings where income risk plays an important role. The results have important implications for the evaluation of fiscal policy, and for predicting household responses to tax reforms and redistributive policies. In particular, we find that a debt-financed increase in transfers of 1 percent of national disposable income targeted to the bottom decile of the cash-on-hand distribution would increase aggregate consumption by 0.82 percent. Furthermore, we find that redistributing 1% of national disposable income from the top to the bottom decile of the income distribution would boost aggregate consumption by 0.33%.
Recently, we evaluated a fiscal consolidation strategy for the United States that would bring the government budget into balance by gradually reducing government spending relative to GDP to the ratio that prevailed prior to the crisis (Cogan et al, JEDC 2013). Specifically, we published an analysis of the macroeconomic consequences of the 2013 Budget Resolution that was passed by the U.S. House of Representatives in March 2012. In this note, we provide an update of our research that evaluates this year’s budget reform proposal that is to be discussed and voted on in the House of Representative in March 2013. Contrary to the views voiced by critics of fiscal consolidation, we show that such a reduction in government purchases and transfer payments can increase GDP immediately and permanently relative to a policy without spending restraint. Our research makes use of a modern structural model of the economy that incorporates the long-standing essential features of economics: opportunity costs, efficiency, foresight and incentives. GDP rises because households take into account that spending restraint helps avoid future increases in tax rates. Lower taxes imply less distorted incentives for work, investment and production relative to a scenario without fiscal consolidation and lead to higher growth.
In this paper we provide new evidence that corporate financing decisions are associated with managerial incentives to report high equity earnings. Managers rely most heavily on debt to finance their asset growth when their future earnings prospects are poor, when they are under pressure due to past declines in earnings, negative past stock returns, and excessively optimistic analyst earnings forecasts, and when the earnings yield is high relative to bond yields so that from an accounting perspective equity is ‘expensive’. Managers of high debt issuing firms are more likely to be newly appointed and also more likely to be replaced in subsequent years. Abnormal returns on portfolios formed on the basis of asset growth and debt issuance are strongly positively associated with the contemporaneous changes in returns on assets and on equity as well as with earnings surprises. This may account for the finding that debt issuance forecasts negative abnormal returns, since debt issuance also forecasts negative changes in returns on assets and on equity and negative earnings surprises. Different mechanisms appear to be at work for firms that retire debt.