Using a rich dataset on individual firms in selected EU countries between 2005 and 2012, we document a surprisingly high share of assets tied in highly inefficient firms. Moreover, we discuss different channels through which institutions may affect firm financial developments and thus the long-run growth. Using Bayesian model averaging analysis, we discuss the importance of different types of economic, financial and political institutions. We show that high institutional quality improves the financial conditions of firms. However, too lax business regulations may worsen firms? performance possibly due to excessive risk taking behavior.
Healthy banks are crucially important for smooth lending. Correspondingly, bank regulations including Basel III intend to create a strong financial sector. However, the higher capital requirements may also worsen the access to finance especially during the transition period. Using data on firm-bank relationships in Germany between 2005 and 2007, we show that the debt ratio of banks is related to the bank loan risk. In order to assess the potential effect of tighter capital requirements due to regulatory changes, we analyze industry specific responses of loan conditions to bank debt levels. Our findings imply that manufacturing, and to a lesser extent wholesale and retail trade, will potentially face a more restricted access to bank loans after the tightening of capital requirements.
We analyze the period of a managed floating exchange rate policy in China between June 2010 and November 2014. We estimate a time-varying structure of a hypothetical currency basket using the Kalman filter. We show that the exchange rate policy continues to focus on the US dollar. However, its weight has been gradually declining, while this decline has moderated in 2014. The euro played some role before summer 2011, but became negligible after the outbreak of the European sovereign debt crisis. Finally, the Thai baht has positive implicit weights.
We focus on the determinants and potential benefits of relationship banking. Based on the existing literature and the unique role intangible assets play regarding firms'capital structure, we test two hypotheses using rich data on firm-bank relationships in Germany. We show that firstly, a high share of intangible assets does not worsen the access of firms to debt financing compared to matched firms with a low share of intangible assets. And secondly, firms' share of intangible assets statistically signicantly determines firms' choice of an exclusive and persistent bank relation.
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