Zentrum für Europäische Wirtschaftsforschung

About: Zentrum für Europäische Wirtschaftsforschung is a nonprofit organization based out in Mannheim, Baden-Württemberg, Germany. It is known for research contribution in the topics: Wage & Emissions trading. The organization has 269 authors who have published 531 publications receiving 12812 citations. The organization is also known as: ZEW.

Lending relationships in Germany - Empirical evidence from survey data

Abstract: We examine empirically the role of lending relationships in determining the costs and collateral requirements for external funds. The data originate from a recently concluded survey of small and medium-sized German firms. In our descriptive analysis, we explore the borrowing patterns and the concentration of borrowing from financial institutions. Using data on L/C interest rates, collateral requirements, and the firm's use of fast payment discounts we find that relationship variables may have some bearing on the price of external funds, but much more so on loan collateralization and availability. Firms in financial distress face comparatively high L/C interest rates and reduced credit availability.

Carry Trades and Global Foreign Exchange Volatility

Abstract: We investigate the relation between global foreign exchange (FX) volatility risk and the cross-section of excess returns arising from popular strategies that borrow in low-interest rate currencies and invest in high-interest rate currencies, so-called `carry trades'. We find that high interest rate currencies are negatively related to innovations in global FX volatility and thus deliver low returns in times of unexpected high volatility, when low interest rate currencies provide a hedge by yielding positive returns. Our proxy for global FX volatility risk captures more than 90% of the cross-sectional excess returns in five carry trade portfolios. In turn, these results provide evidence that there is an economically meaningful risk-return relation in the FX market. Further analysis shows that liquidity risk also matters for expected FX returns, but to a lesser degree than volatility risk. Finally, exposure to our volatility risk proxy also performs well for pricing returns of other cross sections in foreign exchange, U.S. equity, and corporate bond markets.

Legal Form, Growth and Exit of West German Firms : Empirical Results for Manufacturing, Construction, Trade and Service Industries

Abstract: Using a sample of approximately 11000 West German firms from all major sectors of the economy, we test predictions on the relationship between legal form, firm survival and employment growth. In our tests, we distinguish between voluntary liquidation without losses to creditors and bankruptcy, that is forced liquidation. We demonstrate that in all sectors firms under limited liability have higher growth and higher insolvency rates than comparable firms under full liability. Firms whose owners are approaching retirement age are characterised by relatively high hazards of voluntary liquidation, while the propensity to declare insolvency is not affected by the owner’s age.

Estimating the Effect of Personality on Male-Female Earnings

Abstract: textThis paper uses the Five-Factor Model of personality structure as an organizing framework to explore the effects of personality on earnings. Using data from a longitudinal survey of American high school graduates, we find that extroversion, agreeableness, conscientiousness, neuroticism and openness to experience are rewarded/penalized significantly and differentially across genders. Antagonistic, emotionally stable and open men enjoy substantial earnings advantages over otherwise similar individuals. In case of women, the labor market appears to value conscientiousness and openness to experience. The positive returns to openness are very similar across genders, suggesting that being creative, unconventional and artistic is equally important for men and women working in all types of occupations. Moreover, we find significant gender differences in personality characteristics. Decomposition of personality-based earnings differentials into trait and parameter effects suggests that gender-atypical traits reduce the earnings advantage that individuals would otherwise enjoy under their own-sex wage structure. Overall, we find that the impact of personality on earnings is significant but not large --not trivial either-- and comparable to the impact of differences in cognitive ability.