Tobias Basse

Inflation and the dividend policy of US firms

Purpose - The purpose of this paper is to analyse the dividend policy of firms from a macroeconomic perspective. In order to do so inflation and real growth are also considered. Design/methodology/approach - The paper examines the relationship between dividends, corporate earnings, real growth and inflation in the USA by applying cointegration techniques. In this framework, impulse response analysis is used to test the two most popular theories of dividend determination. Findings - The data indicate three cointegration relations among the four-time series. Impulse response analysis then shows some interesting dynamics. Dividend smoothing seems to be a relevant phenomenon. Furthermore, inflation has a positive effect on dividends. Research limitations/implications - The most important finding of this paper is the indication of a positive relationship between inflation and dividend payments. This can be interpreted in two different ways: managers may try to follow a dividend policy, which is perceived to be optimal, believing that there is a desirable level of real dividend income to be paid to their investors. On the other hand, inflation may simply increase the nominal value of corporate earnings and therefore the dividends paid. Independently from the interpretation of the results, inflation should definitely be considered analysing dividend policy. Practical implications - Managers should also examine the inflationary environment formulating an adequate dividend policy for their firm. Originality/value - The paper provides an as of yet widely ignored link between the micro- and macroeconomic sphere examining one of the most important problems of financial economics. Neglecting the effects of inflation on dividends may, among others, be one reason for the mixed empirical findings testing theories of dividend determination.

Variable-ordering induced problems of impulse-response analysis and other difficulties: the dividend policy of Austrian firms

Orthogonalised impulses are the standard way to isolate shocks to variables in a vector error correction model. While using the Cholesky decomposition to adjust interdependencies of the shocks, the ordering of the variables on the stage of estimation has a great impact on the resulting impulse response functions. It is shown how the variable ordering affects the empirical evaluation of the dividend policy of Austrian firms examining corporate earnings, dividends and inflation. Additional problems are discussed (e.g., bootstrapped confidence intervals and seasonal adjustment procedures, missing variables). The paper has two messages: it is a fatal flaw of any economic model to omit important variables. Moreover, it is also of major importance to use appropriate econometric modelling techniques.

Oil prices and sovereign credit risk of oil producing countries: an empirical investigation

The low oil price recently has caused fears about the sustainability of public finances in some oil producing countries. We examine the relationship between oil prices and sovereign credit risk examining the CDS market. Analysing data from nine countries (Brazil, Malaysia, Norway, Qatar, Russia, Saudi Arabia, the United Kingdom, the United States of America and Venezuela) we have estimated bivariate VAR-GARCH-in-mean models. The results of our empirical investigations generally speaking do suggest that positive oil price shocks lead to lower sovereign CDS spreads. Thus, our findings support the hypothesis that higher oil prices improve the fiscal stability of oil producing countries.

Strategisches Asset-Liability Management in der Versicherungswirtschaft — Ein Ansatz zur integrierten Bilanzstrukturoptimierung

ZusammenfassungAsset-Liability Management gewinnt in der deutschen Versicherungswirtschaft zunehmend an Bedeutung. Dies ist zum einen den Entwicklungen auf den Kapitalmärken in den vergangenen Jahren geschuldet, die es Versicherern erschweren, gegebene Zinsgarantien zu erwirtschaften. Zum anderen erwachsen aus dem sich maßgeblich verändernden Regulierungsrahmen neue Anforderungen für das ALM. Solvency II wird einen Paradigmenwechsel zu einer vorwiegend ökonomischen Bertachtungsweise der Versicherungsbilanzen, insbesondere der Passiva erfordern. Herkömmliche ALM-Instrumente werden diesen neuen Anforderungen selten gerecht, weil sie die Positionen auf beiden Bilanzseiten unter risikotheoretischen Aspekten nicht simultan optimieren. In diesem Artikel wird integrierter Ansatz zur Optimierung der Bilanzstruktur in Lebensversicherungsunternehmen beschrieben, der sich der Markowitzschen Portfolio Selection bedient. Dabei werden die neuen aufsichtsrechtlichen Erfordernisse mit der modernen Kapitalmarkttheorie verbunden und so ein Instrument zu einer integrierten, strategischen Steuerung der Kapitalanlagepolitik von Versicherungsunternehmen geschaffen.AbstractAsset-Liability Management has gained increased significance within the German insurance industry. This was mainly driven by recent capital market developments. In fact, insurers have encountered challenges to earn given interest guarantees. Regulatory changes also require more sophisticated ALM-tools. Solvency II will change the underlying paradigm and shift balance sheets perception towards a market value oriented view. Especially liabilities will have to be accounted for using the fair value approach. Most ALM-tools appear to be unable to cope with these demands. To improve this current practice, in this paper a Markowitz-approach is employed in order to generate an integrated method for the optimization of assets and liabilities in the life insurance industry. This technique aims to link new regulatory requirements to the latest capital market theory and therefore delivers a procedure for an integrated asset allocation policy in the insurance industry.

Dividend policy issues in the financial crisis: the example of the German automotive industry

The global financial crisis has created some problems for car manufacturers and their suppliers. Dividend cuts and omissions have been suggested as one possibility to improve the financial strength of firms in the automotive industry. However, some observers have expressed fears that investors could interpret a reduction of dividends as a sign for future problems. This argument is quite clearly based on the dividend signalling and dividend smoothing hypotheses. Therefore, we use VAR/VECM techniques to analyse the dividend policy of the German automotive industry. The empirical evidence reported in this study does indicate that there is no support for the dividend signalling hypothesis. However, dividend smoothing seems to be a relevant economic phenomenon. As a consequence, firms in this sector of the German economy considering dividend cuts or omissions should at least communicate clearly why they plan to do so.

Krisenfrühaufklärung durch Frühwarnindikatoren

Risiko steht ganz eindeutig im Zentrum der Geschaftstatigkeit von Banken und anderen Finanzdienstleistern, welche als Dienstleistungsunternehmen mit ganz besonderem Charakter auf unterschiedliche Weise eng mit den Vorgangen in einer Volkswirtschaft verflochten sind (Kreditvergabe, Lebensversicherungsgeschaft etc.) und als wichtige Intermediare den Umgang der verschiedenen Wirtschaftssubjekte mit zentralen Risiken steuern und abwickeln. Dies gilt zum Beispiel fur Banken, Versicherungen und Fondsgesellschaften. Der Bankwirtschaft ist durch die Geschaftstatigkeit ein branchenspezifisches Risiko inharent, welches eng mit den entscheidenden makrookonomischen Variablen (Wirtschaftswachstum, Inflation etc.) verbunden ist und sich vor allem im Zinsanderungs- und im Kreditrisiko manifestiert. Bankrisikomanagement hat somit in Theorie und Praxis immer auch eine makrookonomische Komponente, die im Folgenden in den Vordergrund geruckt werden soll.

Government bond yields in Germany and Spain—empirical evidence from better days

This paper tries to link the uncovered interest rate parity condition to the discussion about interest rate convergence in currency unions. Techniques of fractional cointegration analysis are used to examine the relationship between German and Spanish government bond yields with maturities of two, five, seven and ten years in the period 05 January 2001 to 29 December 2006. Back then (in the good times of the currency union) financial markets did not have to fear exchange rate risk and sovereign credit risk. Thus, the risk premia to be observed were small and driven by liquidity risk. Economic theory suggests that a cointegration vector of between the interest rates can only exist when markets do not expect exchange rate movements and the risk premium is not interest rate sensitive (or practically speaking the sensitivity is low). Given the data set examined here, it is probably no surprise that the interest rates of the two countries are cointegrated and that the cointegration vector of German and Spanish government bond yields with maturities of two, five and seven years seems to be . We then have also examined the degree of interest rate sensitivity of the yield spread between Spain and Germany. The differential between the yields of the two countries in all maturity brackets do not react to the level of interest rates in the currency union. This fits perfectly to our results with regard to the cointegration vector.

Mapping interest rate projections using neural networks under cointegration: an application from stress testing approaches

This paper discusses the application of techniques of business analytics in the banking industry examining stress tests in the context of financial risk management. We focus on the use of neural networks in combination with techniques of cointegration analysis to map swap rate projections derived from given scenarios (e.g., a certain stress scenario from the EBA/ECB 2016 EU-wide stress test) on other relevant interest rates in order to ensure that contingent projections for these time series are produced and used in the process of stress testing.

Interest rate convergence, sovereign credit risk and the European debt crisis: a survey

Purpose This paper aims to briefly review the literature on interest rate convergence and the European debt crisis with a special focus on the current fiscal problems of some governments in Europe. Design/methodology/approach Relevant empirical papers are identified and reviewed focusing on time series analysis techniques. Findings The introduction of the euro has caused interest rate convergence among European Monetary Union (EMU) government bond yields. However, now sovereign credit risk and possibly even redenomination risk have caused divergences in European bond markets. Research limitations/implications A major limitation is that a relatively new field of the literature is surveyed. However, there are enough papers of relevance. This review paper could therefore be helpful in finding new approaches for additional empirical research examining the EMU bond market. Originality/value The results of empirical studies in a relatively new field of the literature are summarized. There meanwhile are some relevant papers. A brief survey of the results of these papers is provided. Important empirical findings with regard to interest rate convergence, sovereign credit risk and redenomination risk in the EMU are discussed and evaluated. The review is especially helpful for researchers and practitioners in the field of managerial finance and risk managers in the financial services industry.

Staatsschuldenkrise und europäisches Bankensystem: Deutschland vs. Spanien

Die Einfuhrung des Euro hatte fur die Finanzmarkte Europas eine kaum zu uberschatzende Bedeutung. Die EZB wurde im Jahr 1999 gegrundet. Die neue Zentralbank ubernahm die Verantwortung fur die Geldpolitik in der gesamten Euro-Zone. Die Wechselkurse der nationalen Wahrungen der Mitgliedstaaten zum Euro wurden endgultig fixiert, die neuen Banknoten und Munzen kamen dann im Jahr 2002 in Umlauf. Den Weg Europas hin zum Euro beschreibt zum Beispiel Geigant (Geigant, Stationen und Strukturen: Europas Weg zum Europa, Wahrungsunionen, Hamburg, 2002). Allein von der Zahl der Mitgliedslander her betrachtet ist der Euro unzweifelhaft ein Erfolgsmodell; Euroland ist im Zeitablauf immer weiter gewachsen. Im Jahr 1999 hatte die Euro-Zone nur elf Mitglieder. Griechenland trat dann zwei Jahre spater bei. Inzwischen gibt es 18 Mitgliedslander – Lettland hat den Euro im Januar 2014 eingefuhrt.