Working Papers
Koetter, M., Noth, F., and Wöbbeking, F. (2025). Illusive Compliance and Elusive Risk-shifting after Macroprudential Tightening: Evidence from EU Banking (No. 4/2025). IWH Discussion Papers
Abstract: We study whether and how EU banks comply with tighter macroprudential policy (MPP). Observing contractual details for more than one million securitized loans, we document an elusive risk-shifting response by EU banks in reaction to tighter loan-to-value (LTV) restrictions between 2009 and 2022. Our staggered difference-in-differences reveals that banks respond to these MPP measures at the portfolio level by issuing new loans after LTV shocks that are smaller, have shorter maturities, and show a higher collateral valuation while holding constant interest rates. Instead of contracting aggregate lending as intended by tighter MPP, banks increase the number and total volume of newly issued loans. Importantly, new loans finance especially properties in less liquid markets identified by a new European Real Estate Index (EREI), which we interpret as a novel, elusive form of risk-shifting.
Koetter, M., and Noth, F. (2025). Ecological Preferences and the Carbon Intensity of Corporate Investment (No. 2/2025). IWH Discussion Papers
Abstract: Lowering carbon intensity in manufacturing is necessary to transform current production technologies. We test if local agents’ preferences, revealed by vote shares for the Green party during local elections in Germany, relate to the carbon intensity of investments in production technologies. Our sample comprises all investment choices made by manufacturing establishments from 2005-2017. Our results suggest that ecological preferences correlate with significantly fewer carbon-intensive investment projects while investments stimulating growth and reducing carbon emissions increase by 14 percentage points. Both results are more distinct in federal states where the Green Party enjoys political power and local ecological preferences are high.
Emmens, J., Hutschenreiter, D., Manfredonia, S., Noth, F., and Santini, T. (2024). From Shares to Machines: How Common Ownership Drives Automation (No. 23/2024). IWH Discussion Papers
Abstract: Does increasing common ownership influence firms' automation strategies? We develop and empirically test a theory indicating that institutional investors' common ownership drives firms that employ workers in the same local labor markets to boost automation-related innovation. First, we present a model integrating task-based production and common ownership, demonstrating that greater ownership overlap drives firms to internalize the impact of their automation decisions on the wage bills of local labor market competitors, leading to more automation and reduced employment. Second, we empirically validate the model's predictions. Based on patent texts, the geographic distribution of firms' labor forces at the establishment level, and exogenous increases in common ownership due to institutional investor mergers, we analyze the effects of rising common ownership on automation innovation within and across labor markets. Our findings reveal that firms experiencing a positive shock to common ownership with labor market rivals exhibit increased automation and decreased employment growth. Conversely, similar ownership shocks do not affect automation innovation if firms do not share local labor markets.
Hasan, I., Krause, T., Manfredonia, S., and Noth, F. (2022). Banking market deregulation and mortality inequality (No. 14/2022). Bank of Finland Research Discussion Papers. Submitted: AEJ: Economic Policy
Abstract: This paper tests whether and how local banking market conditions affect mortality rates in the United States. Exploiting the staggered relaxation of branching restrictions in the 1990s across states, we find that banking deregulation decreases local mortality rates. This effect is driven by a decrease in the mortality rate of black residents, implying a decrease in the black-white mortality gap. Additional results suggest that a synergistic interplay between wage augmentation, access to private health insurance, and heightened healthcare supply holds the key to explaining our main finding.
Müller, I., Noth, F., and Tonzer, L. (2022). A note on the use of syndicated loan data (No. 17/2022). IWH Discussion Papers. Submitted: Journal of Financial Service Research
Abstract: Syndicated loan data provided by DealScan is an essential input in banking research. This data is rich enough to answer urging questions on bank lending, e.g., in the presence of financial or geopolitical shocks or climate change. However, many data options raise the question of how to choose the estimation sample. We employ a standard regression framework analyzing bank lending during the financial crisis of 2007/08 to study how conventional but varying usages of DealScan affect the estimates. The key finding is that the direction of coefficients remains relatively robust. However, statistical significance depends on the data and sampling choice, and we provide guidelines for applied research.
Koetter, M., Müller, C., Noth, F., and Fritz, B. May the force be with you: Do political consolidation barriers depress bank profitability? Revise and resubmit: Journal of Money, Credit and Banking.
Abstract: We test whether the removal of implicit political consolidation barriers causally enhances bank profitability. We exploit an exogenous shock through which selected regional banks in Germany are forced to merge: the unification of counties. County mergers legally force government-owned, but not privately owned banks to merge. Forced bank mergers cause profitability to hike relative to voluntary mergers while bank risk responds only mildly. Corporate borrowers exposed to forced bank mergers borrow more at lower cost, increase investment, and exhibit higher employment. The removal of implicit bank consolidation barriers thus seems to spark profit dynamics and enhance corporate performance, too.
Gropp, R. E., Noth, F., and Schüwer, U. (2019). What Drives Banks' Geographic Expansion? The Role of Locally Non-Diversifiable Risk (No. 6/2019). IWH Discussion Papers.
Abstract: We show that banks that are facing relatively high locally non-diversifiable risks in their home region expand more across states than banks that do not face such risks following branching deregulation in the 1990s and 2000s. These banks with high locally non-diversifiable risks also benefit relatively more from deregulation in terms of higher bank stability. Further, these banks expand more into counties where risks are relatively high and positively correlated with risks in their home region, suggesting that they do not only diversify but also build on their expertise in local risks when they expand into new regions.
Bremus, F., Krause, T., and Noth, F. (2017). Bank-specific shocks and house price growth in the US (No. 3/2017). IWH Discussion Papers: Submitted: European Economic Review
Abstract: This paper investigates the link between mortgage supply shocks at the bank level and regional house price growth in the U.S. using micro-level data on mortgage markets from the Home Mortgage Disclosure Act for the 1990-2014 period. Our results suggest that bank-specific mortgage supply shocks indeed affect house price growth at the regional level. The larger the idiosyncratic shocks to newly issued mortgages, the stronger is house price growth. We show that the positive link between idiosyncratic mortgage shocks and regional house price growth is very robust and economically meaningful, however not very persistent since it fades out after two years.