KREDIT und KAPITAL - Issue 2/2007


Policy Issues

Kotz, Hans-Helmut, and Weber; Martin
Increasing Financial Literacy: A Public Policy Challenge


Schütz, Tobias, und Schwaiger, Manfred
Der Einfluss der Unternehmensreputation auf Entscheidungen privater Anleger

Bikker, Jacob A., and Metzemakers, Paul A. J.
Is Bank Capital Procyclical? A Cross-Country Analysis

Horsch, Andreas, und Sturm, Stefan
Disintermediation durch Mikroanleihen

Stotz, Olaf
Regression Betas and Implied Betas: Their Respective Implications for the Equity Risk Premium

Book Reviews

El-Gamal, Mahmoud A.
Islamic Finance, Law, Economics and Practice (Thomas Schmidinger)


Kotz, Hans-Helmut, and Weber, Martin
„Increasing Financial Literacy: A Public Policy Challenge”

Individuals are supposed, by numerous reforms launched in particular over the last decade, to ever more provide on their own for their protection against potential mishaps or vulnerabilities. This holds true at least in a supplementary way, in particular for the provision of old age insurance. At the same time, the required level of financial literacy, enabling consumers to face those tasks, however, appears to be lacking. And this is, rightly in our eyes, perceived as an important issue of policy. Our aim is to briefly show how finance, in its applied as well as in its behavioural dimension, can usefully contribute to this task.


Schütz, Tobias, and Schwaiger, Manfred
„The Influence of Corporate Reputation on Private-Investor Decisions“

Numerous philosophical articles – as well as practice-oriented ones – have reached the conclusion that corporate reputation must be deemed to represent one of the forces driving the success of undertakings. Using a validated measuring instrument, the present article analyses whether corporate reputation influences non-institutional investor-decisions. With the help of an especially designed experiment, data have been obtained for monitoring the underlying hypotheses that have been derived from behavioural finance. It would be a fair conclusion that changes to the better in the reputation of corporations would make their stocks more attractive to private investors and result in portfolio changes. It is thus worthwhile to invest in corporate reputation management also from the point of view of investor relations.


Bikker, Jacob A., and Metzemakers, Paul A. J.
„Is Bank Capital Procyclical? A Cross-Country Analysis”

This article investigates the determinants of commercial banks’ own internal capital targets and potential sensitivity of these levels to the business cycle. World-wide results make clear that banks’ own risk is only slightly dependent on the business cycle. Banks tend to hold substantial capital buffers on top of minimum requirements, reflecting that they hold capital for other reasons than strictly meeting the capital requirements. These results suggest that actual capital levels may not become substantially more procyclical under the new risk-sensitive Basel II regime. However, a number of banks, especially smaller ones, combine a relatively risky portfolio with limited buffer capital. A more risk-sensitive capital regulation regime could force these banks to obtain higher capital levels, which would make them more procyclical. (JEL E32, G21, G28, G31)


Horsch, Andreas, and Sturm, Stefan
„Disintermediation as a Result of Microbonds”

Companies being newcomers in the capital market that seek to mobilise liquid funds by way of microbonds face substantial market resistance in the German financial system, which is characterised by traditional bank intermediation. The question whether such microbonds would lead to disintermediation depends on the reputation of the respective issuers as well as on a targeted use of the financial marketing mix. In this context, recent microbond issues suggest the pursuit of product and pricing policies focusing on nominal rates of interest. Their seemingly attractive rates of interest are meant to compensate borrowers for being exposed to substantial uncertainties that stem not so much from the risk of issuer default, but from reduced marketability and issuer-side callability. Thus, it is especially the corresponding callability spread that is calculated using models that are used for Bermudan options and explains large parts of the microbond spread compared with the risk free market interest rate. The remaining gap owes its existence both to the (missing) reputation of issuers and to overestimated market obstacles (miscalculation spread). Not only placement successes to-date, but also the innovative pricing policy approaches in the form of product-based interest generation that have been analysed to round off the picture suggest the existence of a certain potential of disintermediation as a result of microbonds.


Stotz, Olaf
„Regression Betas and Implied Betas: Their Respective Implications for the Equity Risk Premium”

This study proposes an alternative method for estimating a company’s CAPM beta. A discounted residual income model is used to deduce market implied betas. Compared to the commonly used ordinary least squares (OLS) regression beta, the market implied beta is much better suited to explaining the cross section of realized returns. The implied beta yields a positive market risk premium of about 4 percent, while the regression beta yields a flat or negative market risk premium. Thus, when the implied beta is used, the CAPM seems to be a valid model for describing the cross section of stock returns. (JEL C21, G12)