The American Inventors Protection Act: A Natural Experiment on Innovation Disclosure and the Cost of Debt
In this study, Nagihan Mimiroglu, Arvid Hoffmann, Joost Pennings and I examine the impact of innovation disclosure through patenting on firms’ cost of debt, focusing on the American Inventors Protection Act (AIPA) as an exogenous shock in innovation disclosure regulation. Post-AIPA, firms have an incentive to apply for patents only if commercial success is likely. Accordingly, we expect post-AIPA patents to be a better proxy for successful innovation activity, and thus to have a stronger effect on reducing the cost of debt than pre-AIPA patents. Indeed, we find that pre-AIPA patents reduce the cost of debt only for the most innovative firms, while post-AIPA this effect holds for all firms.
The Resurgence of Cultural Borders during the Financial Crisis: The Changing Geography of Eurozone Cross-Border Depositing
In this study, Harald Sander, Sylvia Heuchemer (Technische Hochschule Köln) and I investigate the impact of cultural borders on the geography of international finance during stable and crises times. We employ a unique data set that focuses on Eurozone cross-border depositing during the 1999-2011 period in a gravity-model framework. We find that cultural distance limits international financial integration over and above what can be expected from economic trade and transaction costs. While we provide evidence that cultural borders lost influence during a “Europhoria” phase after the introduction of Euro notes in 2002, our findings indicate that cultural borders resurge during the 2007/08 financial crisis and severely limit financial integration.
Carbon Disclosure, Emission Levels, and the Cost of Debt
In this paper, Michael Viehs (University of Oxford) and I present our latest research on the effect of carbon emission disclosure on corporations' costs of debt.
Using a unique and comprehensive database on carbon emissions from CDP (formerly 'The Carbon Disclosure Project'), we study whether companies which voluntarily participate in the CDP disclusure framework enjoy more favorable lending conditions - in the form of lower spreads on their bank loans - than their non-participating counterparts. Our empirical results reveal a significant and negative relation between disclosing carbon emission levels and the cost of bank loans. Regarding absolute emission levels, we find that firms disclosing relatively more carbon emissions pay higher spreads on their bank loans. These effects are common to all loans and not limited to loans which have been arranged by norms-constrained lenders suggesting that spread premia are driven by environmental risks rather than investor preferences.