KREDIT und KAPITAL - Issue 4/2007



Bethge, Jan-Alexander, and Ohr, Renate
Current-Account Matters on the Way to EMU: The Transfer Problem Re-revisited

Güttler, André, and Liedtke, Helge G.
Calibration of Internal Rating Systems: The Case of Dependent Default Events

Mußhoff, Jörg, Jahns, Christopher, und Schiereck, Dirk Wertschaffung durch feindliche M&A-Transaktionen in der europäischen Bankenindustrie? –
Das Beispiel BNP und Paribas - (Teil II)

Schröder, David
The Implied Equity Risk Premium – An Evaluation of Empirical Methods


Fries, Oliver, Junker, Simon, und Tillmann, Peter
38. Konstanzer Seminar zur Geldtheorie und Geldpolitik 2007

Book Reviews

De Grauwe, Paul (ed.)
Exchange Rate Economics: Where Do We Stand? (Michael Frömmel)


Bethge, Jan-Alexander, and Ohr, Renate
“Current-Account Matters on the Way to EMU: The Transfer Problem Re-revisited”

Concerning recommendations for early Euro adoption in EU accession countries from Central and Eastern Europe we address potential trade-offs between real and nominal convergence from a novel perspective. Specifically, we discuss the modern transfer problem as a trigger of sudden stops and bring up the concept of current-account sustainability as an approach complementary to the appraisement of stabilizing central parities and conversion rates. From a policy perspective a non-structural case-study approach seems preferable including (1) an assessment of numerical sustainability benchmarks and (2) an analysis of the sources and ef­fects of actual current-account deficits. Clearly, this amends OCA criteria with intertemporal cost-benefit considerations. (JEL F32, F34, F36)


Güttler, André, and Liedtke, Helge G.
“Calibration of Internal Rating Systems: The Case of Dependent Default Events”

We compare four different test approaches for the calibration quality of internal rating systems in the case of dependent default events. Two of them are approxi­mation approaches and two are simulation approaches of one- and multi-factor models. We find that multi-factor models generate more precise results through lower upper bound default rates and narrower confidence intervals. For confi­dence levels of 95 %, the approximation approaches overestimate the upper bound default rates. For low asset correlation, especially for less than 0.5 %, the granu­larity adjustment approach does not deliver reasonable results. For low numbers of debtors, the approximation approaches sharply overestimate the upper bound default rates. Using empirical inter-factor correlations we find that confidence in­tervals of two-factor models are much tighter compared with the one-factor model. (JEL C6, G21)


Mußhoff, Jörg, Jahns, Christopher, and Schiereck, Dirk
“Value Generation through M&A Transactionsin the European Banking Industry? - The BNP and Paribas Example -“ (Part II)

Do M&A transactions in the European banking industry generate shareholder value? Against the background of the described contradiction apparently existing - on the one hand - between strong M&A activities, on the increase again in the banking industry of late, and the lack of value generation through M&A transac­tions as documented on the basis of research (especially for the respective buying banks) on the other, the academic literature has increasingly drawn attention to the need for proceeding in a more differentiated individualised manner by using case studies extending beyond previous research approaches and taking account of the special characteristics of anyone transaction. This article, using the case study approach, therefore focuses on the analysis of value generation and, respec­tively, value destruction as a result of the amalgamation of BNP and Paribas which represents one of the most important national consolidation steps in the European banking industry in recent years. The analysis is based on a detailed evaluation of the competitive bidding process, on the manner in which the M&A strategy has been deduced as well as on a description of the integration process (part I of this article). Focusing this article on the background conditions of the transaction and the implementation of the process of integration as well as on the value generation achieved through the transaction permits an overview of the complexity of such a transaction as well as conclusions for important implications and success factors concerning the expected consolidation of the banking industry in future (especially through hostile transactions). In addition to these contentual aspects (part I), the usefulness of the case study approach for analysing the issue has been proven. The multitude of details obtained from analysing the transaction process for several years shows (on the basis of a critical comparison with the classic approaches) that the use of case studies is appropriate as a complementary method for evaluating M&A transactions in banking in addition to the previously applied cross-sectional approach of event and performance studies.


Schröder, David
“The Implied Equity Risk Premium – An Evaluation of Empirical Methods”

A new approach of estimating a forward-looking equity risk premium (ERP) is to calculate an implied risk premium using present value (PV) formulas. This paper compares implied risk premia obtained from different PV models and evalu­ates them by analyzing their underlying firm-specific cost-of-capital estimates. It is shown that specific versions of dividend discount models (DDM) and residual income models (RIM) lead to similar ERP estimates. However, cross-sectional re­gression tests of individual firm risk suggest that there are qualitative differences between both approaches. Expected firm risk obtained from the DDM is more in line with standard asset pricing models and performs better in predicting future stock returns than estimates from the RIM. (JEL G12)


Back to Previous Issues