current projects
Working papers: [T]=Theory,
[E]=Empirical[E] Bank equity and small-firm risk taking: Evidence from firms exposed to climate change, 2019, with Simon Baumgartner, Thomas Schober and Rudi Winter-Ebmer.
We show that banks' equity capital buffers change the risk-taking of firms in the banks' vicinity. The analysis is based on a sample of small firms exposed to weather risk as a risk affecting the productivity of the firms' employees. By using highly granular data, we can cleanly identify the baseline effect of the risk on the firms' employment, as well as modulating effects. We find that, if local banks lack equity capital, the firms respond more strongly to exogenous labor productivity risk by cutting their employment. Our results also highlight that banks' equity capital buffers matter for economic adaptation to climate change and increased weather variability.
[E] Babylonian risk aversion, 2019, with Juliusz Radwanski.
The effects of risk on market prices depend on the risk aversion of market participants. We estimate this risk aversion based on crop prices recorded more than 2000 years ago in Seleucid Babylon. In these data, we find evidence that market participants were risk averse, revealing a degree of risk aversion comparable to today. The evidence suggests that generations in the far future will also price risk as we do in our markets.
Further information about our data work and research strategy, as well as further results can all be found in the paper's internet appendix.
[E/T] The
stability of dividends and wages: Effects of competitor
inflexibility, 2019, with Daniel Rettl and Josef
Zechner.
We analyze how industry-wide risks are shared between
firms' employees and their owners. Focusing on the
electricity generation industry, we study firms which are
subject to similar risks but use different production
technologies. We document that firms are more exposed to
industry shocks when their competitors use lower-cost
production technologies, since this mitigates their response
to negative demand shocks. This "competitor inflexibility"
destabilizes payouts to equityholders, but there is no
evidence that it compromises wage stability. Firms do not
share systematic risk due to competitor inflexibility with
their employees and set wages as if their shareholders' risk
preferences were given.