Legal Theories of Financial Development

This paper examines legal theories of international differencesin financial development. The law and finance theory stressesthat legal traditions differ in terms of (i) their emphasison the rights of private property owners vis-à-vis thestate and (ii) their ability to adapt to changing commercialand financial conditions, so that historically determined legaltraditions shape financial development today. Other theoriesreject the centrality of legal tradition in accounting for cross-countrydifferences in financial development. The results are broadlyconsistent with legal theories of financial development, thoughit is difficult to identify the precise channel through whichlegal tradition influences financial development.     

Financial development and international trade: Is there a link?

This paper explores a possible link between financial development and trade in manufactures. The theoretical model focuses on the role of financial intermediaries in facilitating large-scale, high-return projects and shows that economies with better-developed financial sectors have a comparative advantage in manufacturing industries. We provide evidence for this hypothesis, first proposed by Kletzer and Bardhan (Journal of Development Economics 1987;27:57-70), using a 30-year panel for 65 countries. Controlling for country-specific effects and possible reverse causality, we show that financial development exerts a large causal impact on the level of both exports and the trade balance of manufactured goods.     

Corporate Governance und Unternehmenswerteffekte bei Leveraged Buyouts – State of the Art der empirischen Forschung

This state-of-the-art paper systematizes and discusses the results of numerous empirical studies that deal with the effects of corporate governance on the value of leveraged buyouts. Moreover, additional need for research is derived. The article shows that leveraged buyouts share three common characteristics: significant management participation, the use of debt to discipline the management, and intensive monitoring of the private equity firm. Positive wealth effects through leveraged buyouts are beneficial for both the previous owners and the private equity firm. The studies yield evidence that the specific corporate governance of leveraged buyouts contributes to these positive value effects. Studies on reverse leveraged buyouts provide further evidence for this stream of thought. Main areas for future research comprise methodological issues of measuring wealth effects, its link to corporate governance in leveraged buyouts and the different types of buyouts. Alternative explanations of the wealth development as well as macroeconomic effects constitute further avenues for future research.     

Using accounting-based and loan-related information to estimate the cure probability of a defaulted company

The cure of a defaulted company has important implications for the estimation of the loss given default. In this study, we estimate the probability of a defaulted company being cured using data on a large international sample of defaulted companies. More specifically, we examine whether historic accounting information on a defaulted company and loan-related information are associated with that company's probability of being cured. The main finding of our analysis is that both accounting-based and loan-related independent variables increase the validity of cure prediction models.     

Pricing and hedging of credit derivatives via?the?innovations approach to nonlinear filtering

In this paper, we propose a new, information-based approach for modelling the dynamic evolution of a portfolio of credit risky securities. In our setup, market prices of traded credit derivatives are given by the solution of a nonlinear filtering problem. The innovations approach to nonlinear filtering is used to solve this problem and to derive the dynamics of market prices. Moreover, the practical application of the model is discussed: we analyse calibration, the pricing of exotic credit derivatives and the computation of risk-minimizing hedging strategies. The paper closes with a few numerical case studies.     

The Two Sides of the Story: Network Investments and New Venture Creation

It is widely recognized that networks provide access to resources necessary for founding a new venture. However, they also come along with opportunity costs of time. We therefore argue that maintaining a set of network relationships is an investment that may not always pay off. More specifically, we develop detailed hypotheses on why the relationship between investing time in developing and maintaining a larger network and more intense network relationships and success in new venture creation may be best described by an inverted U. Testing our hypotheses on longitudinal data of 137 nascent entrepreneurs, we find broad support for our propositions.