Countdown for the New Basle Capital Accord : are German banks ready for the internal ratings-based approach?

This paper uses a unique data set from credit files of six leading German banks to provide some empirical insights into their rating systems used to classify corporate borrowers. On the basis of the New Basle Capital Accord, which allows banks to use their internal rating systems to compute their minimum capital requirements, the relations between potential risk factors, rating decisions and the default probabilities are analysed to answer the question whether German banks are ready for the internal ratings-based approach. The results suggests that the answer is not affirmative at this stage. We find internal rating systems not comparable over banks and furthermore we reveal differences between credit rating determining and default probability determining factors respectively. Klassifikation: G21, G33, G3

Limited Liability, Asymmetric Taxation, and Risk Taking - Why Partial Tax Neutralities can be Harmful

We examine the combined effects of asymmetric taxation and limited liability on optimal risk taking of investors. Given an optimal risk level in the pre-tax case under full liability, loss-offset restrictions reduce, and limited liability enhances the incentives for taking risk. For every degree of limited liability we can find corresponding loss-offset limitations inducing the same optimal risk level as in the reference case. Thereby we get tax neutrality with respect to risk taking. We show that tax neutrality with respect to risk taking is incompatible with tax neutrality with respect to the choice of the legal form. In our model, full liability requires symmetric taxation and limited liability requires asymmetric taxation of profits and losses.limited liability, loss-offset, tax neutrality, risk taking

Determinants of bank lending performance

During the last years the lending business has come under considerable competitive pressure and bank managers often express concern regarding its profitability vis-a-vis other activities. This paper tries to empirically identify factors that are able to explain the financial performance of bank lending activities. The analysis is based on the CFS-data-set that has been collected in 1997 from 200 medium-sized firms. Two regressions are performed: The first is directed towards relationships between the interest rate premiums and various determining factors, the second aims at detecting relationships between those factors and the occurrence of several types of problems during the course of a credit engagement. Furthermore, the results of both regressions are used to test theoretical hypotheses regarding the impact of certain parameters on credit terms and distress probabilities. The findings are somewhat “puzzling“: First, the rating is not as significant as expected. Second, credit contracts seem to be priced lower for situations with greater risks. Finally, the results do not fully support any of three hypotheses that are often advanced to describe the role of collateral and covenants in credit contracts

Limited liability, asymmetric taxation, and risk taking: Why partial tax neutralities can be harmful

We examine the combined effects of asymmetric taxation and limited liability on optimal risk taking of investors. Given an optimal risk level in the pre-tax case under full liability, loss-offset restrictions reduce, and limited liability enhances the incentives for taking risk. For every degree of limited liability we can find corresponding loss-offset limitations inducing the same optimal risk level as in the reference case. Thereby we get tax neutrality with respect to risk taking. We show that tax neutrality with respect to risk taking is incompatible with tax neutrality with respect to the choice of the legal form. In our model, full liability requires symmetric taxation and limited liability requires asymmetric taxation of profits and losses

Steuern in Agency-Modellen: Mehrperioden- und Multi-Task-Strukturen

In diesem Beitrag werden sowohl persönliche Steuern des Agenten als auch die vom Prinzipal zu tragende Unternehmenssteuer in ein Agency-Modell des LEN-Typs integriert. Wir analysieren die Auswirkungen dieser Steuern auf die optimale Anreizgestaltung. Für das Grundmodell mit nur einer operativen Aktion des Agenten ergeben sich nur wenig qualitative Änderungen gegenüber einem Ansatz ohne Steuern. Wenn der Agent neben operativen Tätigkeiten auch Maßnahmen zur Steuervermeidung setzen kann, treten unerwartete Resultate auf. Wir zeigen verschiedene Steuerparadoxa auf, so z.B. den Effekt, dass sich die Zielerreichung des Prinzipals mit höheren Unternehmenssteuern auch verbessern kann oder dass steuerplanungsbedingte Maßnahmen nicht streng monoton steigend in der Höhe der Unternehmenssteuersätze sind. Die Resultate lassen sich aus den Wechselwirkungen von Motivation, Risikoteilung und dem Einfluß der Unternehmensbesteuerung auf die Varianz von Nachsteuer-Cash-Flows erklären. Paradoxe Steuerwirkungen können auch in einem Ansatz, in dem der Agent mit differenzierten Bonusparametern gesteuert werden kann, gezeigt werden.We analyze the effects of taxation on optimal incentive schemes by integrating individual income taxation at the agent's level and corporate taxation at the principal's level into a principal-agent model of the LEN type. The basic model with only operative managerial effort is very similar to the model in a world without taxes. If the agent can also provide tax planning effort, however, unexpected results emerge. We show various paradoxical tax effects. For instance, the principal's net profit can increase with increasing corporate tax rate. As another example of paradoxical tax effects, tax planning effort can be non-monotonous with respect to the corporate tax rate. These results can be explained by the interplay of motivation, risk sharing, and the impact of the tax rate on the variance of after-tax cash flows. Similar paradoxical tax effects can be derived in models with one or two bonus coefficients

A Theory of Tax Avoidance - Managerial Incentives for Tax Planning in a Multi-Task Principal-Agent Model

We derive determinants of tax avoidance by means of a multi-task principal-agent model. We extend prevailing models by integrating both corporate and individual income taxation as well as by including tax planning effort in the agent's action portfolio. Our model shows novel and apparently paradoxical results regarding the impact of increased tax rates on efforts, risks, and incentive schemes. First, the principal's after-tax profit can increase with a higher corporate tax rate. Second, tax planning effort can decrease in the corporate tax rate. Third, operational effort can increase with increasing corporate tax rates. We show that differences in productivities, differences in operational and tax risk and the correlations of these risks are crucial determinants for the optimal degree of tax avoidance. These determinants can explain why some firms are more tax aggressive than others and should therefore be considered in empirical studies. Related to this insight, we demonstrate that our results are consistent with recent empirical evidence

Coarse geometry and topological phases

We propose the Roe C*-algebra from coarse geometry as a model for topological phases of disordered materials. We explain the robustness of this C*-algebra and formulate the bulk-edge correspondence in this framework. We describe the map from the K-theory of the group C*-algebra of Z^d to the K-theory of the Roe C*-algebra, both for real and complex K-theory

Practical management of riociguat in patients with pulmonary arterial hypertension

Riociguat is one of several approved therapies available for patients with pulmonary arterial hypertension (PAH). Treatment should be initiated and monitored at an expert center by a physician experienced in treating PAH, and the dose adjusted in the absence of signs and symptoms of hypotension. In certain populations, including patients with hepatic or renal impairment, the elderly, and smokers, riociguat exposure may differ, and dose adjustments should therefore be made with caution according to the established scheme. Common adverse events are often easily managed, particularly if they are discussed before starting therapy. Combination therapy with riociguat and other PAH-targeted agents is feasible and generally well tolerated, although the coadministration of phosphodiesterase type 5 inhibitors (PDE5i) and riociguat is contraindicated. An open-label, randomized study is currently ongoing to assess whether patients who do not achieve treatment goals while receiving PDE5i may benefit from switching to riociguat. In this review, we provide a clinical view on the practical management of patients with PAH receiving riociguat, with a focus on the opinions and personal experience of the authors. The reviews of this paper are available via the supplemental material section

Do brachycephaly and nose size predict the severity of obstructive sleep apnea (OSA)? A sample-based geometric morphometric analysis of craniofacial variation in relation to OSA syndrome and the role of confounding factors

Obstructive sleep apnea is a common disorder that leads to sleep fragmentation and is potentially bidirectionally related to a variety of comorbidities, including an increased risk of heart failure and stroke. It is often considered a consequence of anatomical abnormalities, especially in the head and neck, but its pathophysiology is likely to be multifactorial in origin. With geometric morphometrics, and a large sample of adults from the Study for Health in Pomerania, we explore the association of craniofacial morphology to the apnea–hypopnea index used as an estimate of obstructive sleep apnea severity. We show that craniofacial size and asymmetry, an aspect of morphological variation seldom analysed in obstructive sleep apnea research, are both uncorrelated to apnea–hypopnea index. In contrast, as in previous analyses, we find evidence that brachycephaly and larger nasal proportions might be associated to obstructive sleep apnea severity. However, this correlational signal is weak and completely disappears when age-related shape variation is statistically controlled for. Our findings suggest that previous work might need to be re-evaluated, and urge researchers to take into account the role of confounders to avoid potentially spurious findings in association studies

Long-term effects of intravenous iloprost in patients with idiopathic pulmonary arterial hypertension deteriorating on non-parenteral therapy

Background: The majority of patients with idiopathic pulmonary arterial hypertension (IPAH) in functional classes II and III are currently being treated with non-parenteral therapies, including endothelin receptor antagonists (ERA), phosphodiesterase (PDE)-5 inhibitors, inhaled iloprost or combinations of these substances. If these treatments fail, current guidelines recommend the addition of parenteral prostanoid therapy. There is, however, limited evidence for the efficacy of parenteral prostanoids when added to combinations of non-parenteral therapies. Methods: In this retrospective, multicentre study we collected data from consecutive IPAH patients receiving intravenous iloprost in addition to optimized non-parenteral therapy between Jan 2002 and Dec 2009. Analyses included 6 min walk distance (6MWD), functional class, need for transplantation, and survival. Results: During the observation period, 50 patients were treated with intravenous iloprost in addition to non-parenteral therapy; 44% of the patients were on dual combination therapy and 52% on triple combination. Three months after initiation of iloprost, functional class had improved in 24% of the patients and the median 6MWD had increased from 289 m to 298 m (n.s.). During the observation period, 22 patients (44%) died and 14 (28%) underwent lung transplantation. The probabilities of LuTx-free survival at 1, 3 and 5 years following iloprost initiation were 38%, 17% and 17%, respectively. A 6MWD < 300 m and persistent functional class IV at 3 months after initiation of intravenous iloprost were predictors of an adverse outcome. Conclusion: In essence, late initiation of intravenous iloprost in IPAH patients who previously failed to respond to non-parenteral therapies appears to be of limited efficacy in the majority patients. Alternative therapeutic options are currently not available, underlying the need for the development of new drugs