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Working Papers
Working Papers
In the recent decades U.S. firms increasingly finance themselves with bonds instead of bank loans, a development with important macroeconomic implications. What causes this change in corporate debt composition? This paper finds that bank scope expansion significantly contributes to the development. Universal banking that combines lending and underwriting reduces informational frictions in the bond underwriting process. The effects are identified by exploiting a regulatory reform in context of the repeal of the Glass-Steagall Act that materially improves banks’ effectiveness in underwriting their borrowers’ securities. Affected firms increase their quarterly bond issuance by around 5 percent while reducing their bank loan uptake by around 3 percent. This substitution behavior is driven by lower underwriting fees and bond spreads, and is, consistent with theoretical predictions, stronger for more informationally-sensitive firms. The higher effectiveness of bond underwriting and the associated shift in the corporate debt structure results in increased firm investment, sales growth, and profitability.
Presentations: ESMT Berlin, Frankfurt School of Finance, Humboldt University, Munster Banking Workshop 2021, MFA Annual Meeting 2022 (scheduled)
- Best Paper Award Muenster Banking Workshop
Peer-Reviewed Publications
Peer-Reviewed Publications
"A Capital Structure Channel of Monetary Policy" (with Sascha Steffen and Daniel Streitz)
Journal of Financial Economics (2019), 133(2), 357-378.
We study the transmission channels from central banks’ quantitative easing programs via the banking sector when central banks start purchasing corporate bonds. We find evidence consistent with a “capital structure channel” of monetary policy. The announcement of central bank purchases reduces the bond yields of firms whose bonds are eligible for central bank purchases. These firms substitute bank term loans with bond debt, thereby relaxing banks’ lending constraints: banks with low tier-1 ratios and high nonperforming loans increase lending to private (and profitable) firms, which experience a growth in investment. The credit reallocation increases banks’ risk-taking in corporate credit.
Presentations: AEA 2019, Banque de France*, Copenhagen Business School*, ECB*, EEA 2018, EFA 2018*, ESMT Berlin, Frankfurt School*, Humboldt University, IWH Halle*, Lund University*, 7th MoFiR Workshop on Banking*, SAFE Annual Conference 2018, SGF Conference in Zurich, International Conference in Accounting and Finance in Jerusalem*, University of Muenster, Oxford Saïd*, University of Zurich* (* = presented by coauthor)
"Die Ursachen und Konsequenzen von Niedrigzinsen" (in German, with Joerg Rocholl)
Schmalenbach Zeitschrift für Betriebswirtschaftslehre (2020), 72 (4), 401-421
Die anhaltende Niedrigzinsphase stellt Wirtschaft und Gesellschaft vor große Herausforderungen und wird daher in Wissenschaft und Öffentlichkeit intensiv diskutiert. Dieser Beitrag zeichnet die internationale wissenschaftliche Debatte nach und fasst die verschiedenen Argumente und empirischen Erkenntnisse zusammen. Nominal- und Realzinssätze sind seit mehr als drei Jahrzehnten global rückläufig und entziehen sich damit vermeintlich einfachen geldpolitischen Erklärungsansätzen. Vielmehr ergeben sich strukturelle Erklärungsansätze als wesentlicher Treiber dieser Entwicklung. Darüber hinaus zieht dieser Beitrag Schlüsse aus den empirischen Erkenntnissen und leitet daraus potentielle Konsequenzen sowie Handlungsempfehlungen für unterschiedliche ökonomische Akteure ab. Diskutiert werden Folgen insbesondere für die Übertragungsmechanismen der Geldpolitik, für Finanzintermediäre, für die Unternehmen der Realwirtschaft sowie für Politik und Haushalte.
Work in Progress
Work in Progress
"Loan-Bond Spreads and Firms’ Debt Structure" (with Quirin Fleckenstein and Sebastian Hillebrand)
"The Holdings of Green and Brown Securities" (with Ixart Miquel-Flores)
Policy Work
Policy Work
"Financial Market Integration in the EU: A Practical Inventory of Benefits and Hurdles in the Single Market" (with Katharina Gnath, Christian Kastrop, Dominik Ponattu, and Joerg Rocholl)
Bertelsmann Stiftung/ESMT White Paper No. WP-19-01 (2019)
The first part of this policy paper analyzes the channels through which financial integration affects growth, stability, and convergence in the EU, including capital allocation, production specialization, diversification of risk, and access to investment opportunities. The second part takes stock of persisting administrative and legal hurdles that impede full market integration. In particular, this paper distinguishes between a firm-level perspective, inves-tors, and banks in its analysis. The final part provides some specific recommendations to improve the internal market for capital in the EU.
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