This paper reconciles the two explanations of a financial crisis, the self-fulfilling prophecy and the fundamental causes, in an empirically-relevant framework, by explicitly modeling the costly voluntary acquisition of information about fundamentals in a variant of Diamond and Dybvig (1983). In...

Does restrictive bank lending cause lower employment growth at the firm-level or does it reflect firm characteristics that drive the deterioration of employment figures? Applying propensity score matching, we estimate the treatment effect of restrictive bank lending on employment growth....

This paper examines one of the major problems in credit risk models widely used in the financial industry to forecast future defaults and bankruptcies. We find that even after proper calibration, a representative credit risk model can severely underestimate default correlation. We further find...

Social capital theory predicts individuals establish social ties based on homophily, i.e., affinities for similar others. We exploit a unique sample to analyze how similarities and social ties affect career outcomes in banking based on age, education, gender, and employment history to examine if...

Social capital theory predicts individuals establish social ties based on homophily, i.e., affinities for similar others. We exploit a unique sample to analyze how similarities and social ties affect career outcomes in banking based on age, education, gender, and employment history to examine if...

We exploit a unique sample to analyze how homophily (affinity for similar others) and social ties affect career outcomes in banking. We test if these factors increase the probability that the appointee to an executive board is an outsider without previous employment at the bank compared to being...

In the wake of the recent financial crisis, many governments extended public guarantees to banks. We take advantage of a natural experiment, in which long-standing public guarantees were removed for a set of German banks following a lawsuit, to identify the real effects of these guarantees on...

We study how the consequences of violations of covenants associated with bank lines of credit to firms vary with the financial health of lenders. Following a violation banks restrict usage of lines of credit by raising spreads, shortening maturities, tightening covenants, or cancelling the line...

The Relationship of the Norddeutsche Wollkämmerei und Kammgarnspinnerei (Nordwolle Group) with the Banks: Research into the relationship between banking and industry has long held the view that banks had dominated their clientele from industry, trade and retailing and they had established a...

We use a unique sample of self-employed and corporate clients provided by a universal bank in Germany to investigate how recall risk of recallable bank lines of credit impact cash holdings and line usage. While the bank does not require an upfront fee for providing a line of credit, which may...