Reaching for Yield in the ABS Market: Evidence from German Bank Investments (Internet Appendix)
Review of Finance
, 24, 2020, 929-959
. Previous title: Arbitraging the Basel Securitization Framework: Evidence from German ABS Investments
(Joint winner of the ESRB Research Prize in Memory of Ieke van den Burg 2016, finalist to the IQAM Award 2021 of the Review of Finance, Swiss Finance Institute best paper doctoral award 2015)

Shareholder Bargaining Power and the Emergence of Empty Creditors (Internet Appendix)
Journal of Financial Economics, 134, 2019, 297-317, with Stefano Colonnello and Francesca Zucchi. Previous title: Empty Creditors and Strong Shareholders: The Real Effects of Credit Risk Trading

Structured Debt Ratings: Evidence on Conflicts of Interest
Journal of Financial Economics, 116, 2015, 46-60, with Harald Hau. (Award for best paper on financial markets at Paris December 2013 Finance Meeting)

Incentive Pay and Bank Risk-Taking: Evidence from Austrian, German, and Swiss Banks
Journal of International Economics, 96, 2015, 123-140, with Harald Hau, Patrick Kampkötter, and Johannes Steinbrecher.


Freeze! Financial Sanctions and Bank Responses
R&R The Review of Financial Studies, with Stefan Goldbach and Volker Nitsch
(SFS Cavalcade Award 2019 for the Best Paper in CF)
When the UN or another political body impose financial sanctions on a country, banks are typically required to end business relations with targeted counterparties. Based on German regulatory data for years 2002-15, we show that parent institutions of multinational banking groups reduce their positions in sanctioned countries by -38%. However, their branches and subsidiaries in countries with weak policies against financial crime increase lending by +66% after sanctions are imposed. These branches and subsidiaries receive additional intra-group credit from their parent banks. The evidence suggests that credit is rerouted to sanctioned countries through bank branches and subsidiaries in offshore locations.

Bank Bonus Pay as a Risk Sharing Contract
R&R The Review of Financial Studies, with Harald Hau, Patrick Kampkötter, and Jean-Charles Rochet.
(Best Paper Award at Paris December Finance Meeting 2019)
We argue that risk sharing motivates the bank-wide structure of bonus pay. In the presence of financial frictions that make external financing costly, the optimal contract between shareholders and employees involves some degree of risk sharing whereby bonus pay partially absorbs negative earnings shocks. Using payroll data for 1.26 million employee-years in all functional divisions of Austrian, German, and Swiss banks, we uncover several empirical patterns in bonus pay that are difficult to rationalize exclusively with incentive theories of bonus pay—but support an important risk sharing motive.

How Do Investors and Firms React to an Unexpected Currency Appreciation Shock?
R&R The Review of Corporate Finance Studies, with Rüdiger Fahlenbrach, Christoph Herpfer, and Philipp Krüger.
Past research suggests that firms can significantly reduce their exposure to moderate exchange rate fluctuations by means of pass-through and hedging. Studying the appreciation of the Swiss franc by 17 percent on January 15, 2015, we show that firms remain exposed to extreme currency events. Pass-through, a way to share the costs of exchange rate risk with foreign customers, fails after extreme exchange rate shocks, in particular in competitive industries. Firms’ exposure to currency tail risk has real consequences for their investment. The decrease in investment is explained by a reduction in profitable investment opportunities and not by financial constraints.

Risk Managers in Banks
HEC Working Paper, with Patrick Kampkötter.
How do banks remunerate risk managers? Studying 127 banks during the years 2003 to 2007, we show that the performance pay of risk managers is positively aligned with the performance pay of traders and loan officers. A risk manager receives a 13.6 to 33.5 Cents higher bonus when the average bonus paid in front offices increases by one Euro. Labor markets or risk sharing among employees do not fully explain this finding. Risk managers whose remuneration is strongly aligned with performance pay in front offices work for banks that did better in the crisis of 2008-2009. These findings are consistent with predictions derived from a model of efficient risk manager compensation.

Bank Capital Regulation with an Opportunistic Rating Agency
SFI Working Paper.
(Distinguished CESifo Affiliate Award 2013, Swiss Finance Institute best paper doctoral award 2012)
This paper models the strategic interaction between a rating agency, a bank and a bank regulator who lacks information about bank asset risk. The regulator can either (1) make bank capital requirements contingent on credit ratings; or (2) set rating-independent capital requirements. Truthful ratings provide efficiency gains because they allow the regulator to constrain high risk bank investment without simultaneously reducing overall investment volume. However, if collusion between the rating agency and the bank corrupts rating quality, rating-independent regulation enhances welfare. The welfare benefits are largest if regulators maintain rating-contingent capital requirements and discipline rating agencies.


What does a bank’s payroll reveal about its risk-taking?
International Banker, April 10, 2017, with Harald Hau and Patrick Kampkötter

Optimale Vergütungsstrukturen in Banken
Die Bank, 2015(3), 65-69, with Harald Hau, Patrick Kampkötter and Johannes Steinbrecher

Die Dosis macht das Gift – eine Analyse zum Einfluss von Bonuszahlungen auf die Profitabilität und das Risiko von Banken
ifo Schnelldienst 68 (03), 2015, 23‐31, with Harald Hau, Patrick Kampkötter and Johannes Steinbrecher.

Bankers’ Bonuses and Performance Sensitivity, November 13, 2014, with Harald Hau, Patrick Kampkötter and Johannes Steinbrecher.

Corrupted Credit Ratings: Standard & Poor’s Lawsuit and the Evidence, June 18, 2013, with Harald Hau