working papers
Working papers: [T]=Theory,
[E]=Empirical[E] Snow and leverage, 2010, with X. Giroud, H. Mueller, and A. Westerkamp.
A paper on the causal effect of leverage on firm performance. The paper is motivated by the idea that excessive leverage (a "debt overhang") may impair borrowers' incentives to exert effort in order to improve their performance. This idea is at the core of any debate about debt restructuring, be it in the context of sovereign lending or corporate lending. We provide empirical evidence that reducing a debt overhang indeed improves performance.
Click here for a news story about this project (Financial Times Deutschland, 13.12.2010)
[E] The politics of related lending, 2010, with M. Halling and P. Pichler. We analyze the profitability of government-owned banks' lending to their owners. We find evidence that such lending is used to transfer bank profits to the governments, but only in localities where the incumbent politicians face persistent competition for reelection.
Click here for a news story about this project (Wiener Zeitung, 2.4.2011)
[T] Primary market design in the presence of when-issued markets, 2010, with P. Pichler. A paper on the optimal structure of primary markets that operate in the presence of when-issued (futures) trading of securities issues. Should the pricing of securities issues depend on the prices at which the securities trade in when-issued markets?
[T] Conditioning and updating under cumulative prospect theory, 2010, with M. L. Vierø. Here is an appendix to our paper with some further proofs. We derive conditions under which the unconditional CPT utility of a decision maker can be written as a weighted sum of conditional CPT utilities, with weights equal to weighted marginal probabilities. Under these conditions, the decision maker's choices with respect to a class of complex lotteries can be analyzed based on (weighted) marginal probabilities. The use of such marginal probabilities is a practical necessity in empirical analyses of real-world choices of decision makers since such choices are usually between complex lotteries with payoffs tied to events that are non-degenerate sets of states.