Valentin Kecht - Uni Bonn

"Labor Markets and Financial Risk - How Bankers' Outside Options Amplify Credit Cycles" with Georg Schneider 

Abstract

We study the role of labor market conditions in distorting bankers' incentives and affecting credit supply. We construct a bank-level measure of outside options, capturing labor demand shocks at connected financial institutions. Banks exposed to improved outside options increase loan volumes, shift toward riskier borrowers, take on greater financial risk, and contribute more to systemic risk. Our findings are consistent with a simple framework in which enhanced outside options exacerbate moral hazard and undermine banks' capacity to discipline their employees. We validate this mechanism by using data on financial adviser misconduct and by exploiting exogenous variation arising from stress tests. Our results document a labor mobility channel in amplifying credit cycles and highlight the importance of labor markets in shaping financial stability. 

Additional information:

  • Speaker: Valentin Kecht 
  • Time: Wednesday, 09.04.2025, 14:45 - 16:00
  • Location: Faculty Lounge, Room 0.036
  • Further links:
  • Organizer: Finance Group
  • Contact:

Links

  1. https://www.valentinkecht.com/home