Section 340f of the German Commercial Code allows banks to provision against the special risks inherent to the banking business by building hidden reserves. Beyond risk provisioning, these reserves are implicitly accepted as an earnings management device. By analyzing financial statements of...

The German Commercial Code ('HGB') allows banks to build visible reserves for general banking risks according to section 340g HGB. These 'GBR reserves' may, in addition to their risk provisioning function, be used to enhance capital endowment, for internal financing, signaling or earnings...

Do banks change their portfolio allocation when facing fiscal reforms that increase the relative cost of their debt? Studying various fiscal reforms across Europe with bank- and loan-level data, we find that both the introduction of an equity subsidy and of a tax on bank liabilities lead banks...

How does bank distress impact their customers' probability of default and trade credit availability? We address this question by looking at a unique sample of German firms from 2000 to 2011. We follow their firm-bank relationships through times of distress and crisis, featuring the different...

This study investigates the development of income-decreasing discretionary expenses surrounding CEO turnovers at banks. We expect incoming CEOs to take an earnings bath during the initial stage of their tenure. For a sample of German banks over the period 1993-2012, we document that (1) incoming...

We investigate financial intermediaries' interest rate risk management as the simultaneous decision of on-balance-sheet exposure and interest rate swap use. Our findings show that both decisions are substitute risk management strategies. A higher likelihood of bank distress makes banks reduce...

We employ a unique sample of 5000 outside directorships held by German executive bank directors over 1993-2015 to examine whether these directorships proxy reputational capital and/or bankers' private information. We exploit various circumstances of executive directors' appointments and bank...

Excessive credit creation by banks was at the root of the recent financial crisis. Nevertheless, micro-prudential regulation lacks a clear methodology to identify these banks. Combining arguments from banking and auction theory, we show that overoptimism causes excessive lending, subsequently...

We investigate financial intermediaries' interest rate risk management as the simultaneous decision of on-balance-sheet exposure and interest rate swap use. Our findings show that both decisions are substitute risk management strategies. A higher likelihood of bank distress makes banks reduce...

This study investigates the development of income-decreasing discretionary expenses surrounding CEO turnovers at banks. We expect incoming CEOs to take an earnings bath during the initial stage of their tenure. For a sample of German banks over the period 1993-2012, we document that (1) incoming...