Research Interests
Financial Services, Payments, Banking, Corporate Finance, Sustainability
Working Papers
We analyze the effect of a major central bank digital currency (CBDC) – the digital euro – on the payment industry. Stock prices of U.S. payment firms decrease, while stock prices of European payment firms increase in response to positive announcements on the digital euro. Bank stocks do not react. We estimate a loss in market capitalization of USD 127 billion for U.S. payment firms, compared to a gain of USD 23 billion for European payment firms. Our results emphasize the medium-of-exchange function of CBDCs and point to a novel geopolitical dimension of CBDCs: enhanced autonomy in payments.
R&R Journal of Finance
Climate Transition Risks of Banks: Evidence from Syndicated Loan Books
with Zacharias Sautner, Sascha Steffen, Carola Theunisz
We examine how U.S. banks adjust lending in response to changes in climate transition risk. We quantify each bank's exposure to the risk based on its borrowers' carbon footprints. The exposure measure correlates with banks’ return sensitivities to stranded asset values and with total financed emissions. Banks' exposures have declined over time, driven by a shift of credit toward low emitters, not by stopping lending to high emitters. Banks with growing exposures lobby to forestall stricter climate regulation. Our results suggest that banks have become sensitive to climate transition risk, though their overall contribution to the economy's decarbonization remains limited.
Work in Progress
Payment Processing Costs and Retail Prices: Evidence from Credit Card Surcharges
Job Market Paper
I study how legalizing credit card surcharges affects retail prices. Surcharges allow merchants to price discriminate against credit card users, whose transactions generate high payment processing costs. I focus on gasoline prices and exploit the staggered removal of surcharge restrictions across U.S. states. I find that, after the legalization of surcharges, cash prices fall by approximately 2 percent (6 cent per gallon). Wholesale prices do not respond. Hand-collected data from Google Street View show that bundled prices lie between cash and credit prices, consistent with merchants using surcharges to shift payment processing costs from cash payers to credit card users. Legalizing surcharges also reduces credit card use. My findings suggest that relaxing price coherence can mitigate the implicit subsidy from cash payers to credit card users. They also provide causal evidence on the pass-through of platform intermediation costs into retail prices, a central assumption in models of two-sided markets..
Corporate Sustainability-Linked Bonds
I study corporate sustainability-linked bonds (SLBs), an innovative but controversial financial instrument that links economic outcomes to borrowers’ future ESG performance. Despite the rapid growth of the SLB market over the past years, I find no evidence that issuing SLBs instead of conventional bonds has tangible financial benefits. I show that there is no significant stock market reaction to announcements of SLB transactions, casting doubt on the value of SLBs as signaling devices. I also analyze the new issue pricing of SLBs but find no significant pricing difference relative to conventional bonds. Overall, my analyses raise questions regarding the rationale for corporates to raise financing in the form of SLBs.
Corporate Hybrid Bonds
Frankfurt School of Finance & Management
Finance Department
Adickesallee 32-34 60322 Frankfurt am Main (Germany)
f.martini@fs.de