Articles in Refereed Journals
„Managerial Overconfidence and Bank Bailouts„
Daniel Gietl and Bernhard Kassner, 2020
Journal of Economic Behavior & Organization, vol. 179, pages 202-222.
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Abstract: Empirical evidence suggests that managerial overconfidence and government guarantees contribute substantially to excessive risk-taking in the banking industry. This paper incorporates managerial overconfidence and limited bank liability into a principal-agent model, where the bank manager unobservably chooses the level of risk. An overconfident manager overestimates the returns to risk. Our main result is that managerial overconfidence necessitates an intervention into banker pay. This is due to the bank’s exploitation of the manager’s overvaluation of bonuses, which causes excessive risk-taking in equilibrium and is amplified by government guarantees. Moreover, we show that an optimal bonus tax rises in overconfidence, if returns to risk-taking are positive. Finally, the model indicates that overconfident managers are more likely to be found in banks with large government guarantees, low bonus taxes, and lax capital requirements.
Taming Overconfident CEOs – Managerial Overconfidence, Risk-Taking, and Financial Regulation
Abstract: Managerial overconfidence influences the risk-taking behavior of financial institutions. Using detailed financial data of U.S. financial institutions, I study how changes to the regulatory environment affect the nexus between managerial overconfidence and risk-taking. I find that overconfidence-induced risk-taking decreases during periods of stronger regulatory oversight. Since this decrease is only observable for financial institutions subject to enhanced regulation, this is consistent with financial regulation mitigating the risk-increasing effect of managerial overconfidence.
The Effects of Overconfidence on the Political and Financial Behavior of a Representative Sample (joint with Ciril Bosch-Rosa and Steffen Ahrens)
Abstract: We study the relationship between overconfidence and the political and financial behavior of a nationally representative sample. To do so, we introduce a new method of directly eliciting overconfidence of individuals that is simple to understand, quick to implement, and that captures respondents’ excess confidence in their own judgment. Our results show that, in line with theoretical predictions, an excessive degree of confidence in one’s judgment is correlated with lower portfolio diversification, larger stock-price forecasting errors, and more extreme political views. Additionally, we find that overconfidence is correlated with voting absenteeism. These results show that overconfidence is a bias that permeates several aspects of peoples’ lives.
Non-standard Errors (joint with half of the profession)
Abstract: In statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in sample estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation across researchers adds uncertainty: non-standard errors. To study them, we let 164 teams test six hypotheses on the same sample. We find that non-standard errors are sizeable, on par with standard errors. Their size (i) co-varies only weakly with team merits, reproducibility, or peer rating, (ii) declines significantly after peer-feedback, and (iii) is underestimated by participants.
Work in Progress
Rational Inattention and Overconfidence in Belief Formation (joint with Ciril Bosch-Rosa and Muhammed Bulutay)
„Propagation of changes in demand through international trade: A Case study China„
Jochen Andritzky, Bernhard Kassner and Wolf Heinrich Reuter, 2019
The World Economy, vol. 42(4), pages 1259-1285.
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Abstract: China’s economy, the second largest in the world, is undergoing a fundamental transition. Its transition from a strong focus on investment and exports towards a larger share of consumption could have important ramifications for China’s trading partners. Using China as a case study, this paper deploys a sectoral input–output (IO) analysis to take into account higher‐round spillovers from a reduction of import demand or a shift in the composition of the Chinese economy. This approach demonstrates strong indirect effects that exceed by far the initial shock from direct trade links, reflecting China’s integration into a closely knit global value chain. The result suggests that the ongoing transition in China will have important effects on the global economy.
„Can consumption growth in China keep up as investment slows?“
Mali Chivakul and Bernhard Kassner, 2019
Comparative Economic Studies, vol. 61(3), pages 381-412.
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Abstract: Rebalancing away from investment to consumption has been on China’s agenda in order to keep up higher growth rates. This paper uses both national- and provincial-level data to empirically answer the question how a slowdown in investment could have an impact on household consumption. Our empirical results from both the national- and provincial-level data using Bayesian vector autoregressions and panel regression methods suggest that investment has had a signiﬁcant impact on household consumption beyond the standard household income channel. The eﬀects are particularly strong in the post-global-ﬁnancial-crisis period. Policy measures to encourage rebalancing away from investment should take the extra eﬀect it may have on consumption beyond the impact on household income into account.
„Eine Analyse des Antwortverhaltens in der ifo Industrieumfrage“
Bernhard Kassner and Klaus Wohlrabe, 2018
ifo Schnelldienst, ifo Institute – Leibniz Institute for Economic Research at the University of Munich, vol. 71(3), pages 29-34, 02
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„Aktuelle Ergebnisse der ifo Investorenrechnung: Steigende Leasingquoten vor allem bei Fahrzeuginvestitionen“
Bernhard Kassner and Stefan Sauer, 2017
ifo Schnelldienst, ifo Institute – Leibniz Institute for Economic Research at the University of Munich, vol. 70(10), pages 30-32, 05
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