Lawrenz

Univ.Prof. Dr. Jochen Lawrenz

Chair in Risk Management

Department of Banking and Finance
Universitätsstraße 15, 6020 Innsbruck, Austria

Tel.:++43-512-507-73110
e-mail: Jochen.Lawrenz[at]uibk.ac.at

Office hours: by appointment
Office: Room w.4.03

 

Short Bio
  • Since 2015 – Univ.Prof. at LF-Universität Innsbruck
  • 2013 – Leibniz-Universität Hannover (Lehrstuhlvertretung, ‚interim professor‘)
  • 2012 – Habilitation and appointment as associate Professor (LF-Universität Innsbruck)
  • 2009/10 – Visiting Assistant Professor and Guest Lecturer, HEC Lausanne
  • 2005 – Doctoral thesis
Research interests
  • Risk management & Corporate Finance
    Predominantly theoretical contributions on financing decisions of corporations: What influences optimal capital structure, what kind of incentive problems come along with various financing instruments, how do financing decisions change the financial risk of a company?

  • Asset pricing
    Agent-based simulation models for return predictability. Empirical analysis in international asset allocation.
Working papers
  • Contingent Convertible Bonds in a General Equilibrium Model
    EFA 2015 meeting paper.
    Model of CoCo bonds with a feedback loop of capital structure on asset quality. Shows that CoCo bonds can mitigate debt overhang problems. However, a pure private sector restructuring is not sustainable. Furthermore, a CoCo bond program creates incentives for high risk banks to overinvest and induces higher redistributions as equivalent programs.
    (https://ssrn.com/abstract=3039978)

  • Evidence on the empirical relationship between forecast accuracy and recommendation profitability, (together with Klaus Schredelseker and Alex Weissensteiner)
    Empirical follow-up paper to Lawrenz/Weissensteiner (2012) where we show that contrary to conventional intuition, the most succesful financial analysts (in terms of recommendation profitability) are not the most accurate ones (in terms of earnings forecast accuracy).


Publications

Refereed journals:

  • Firm size effects in trade credit supply and demand (2018) with J. Oberndorfer,
    Journal of Banking & Finance, forthcoming.
    (https://doi.org/10.1016/j.bankfin.2018.05.014)
    Using a large dataset of German companies, we identify a genuine firm size effect with respect to the role of trade credit as inter-firm liquidity redistribution as well as substitute to bank financing. We show that the size effect is not entirely explained by either financial constraints, external finance dependence or creditworthiness.

  • Decomposing the predictive power of local and global financial valuation ratios (2018) with J.Zorn,
    Quarterly Review of Economics and Finance, forthcoming.
    (https://doi.org/10.1016/j.qref.2018.04.012)
    Empirical stock return predictability paper. We orthogonalize valuation ratios on the global and local level and decompose them into discount-rate and cash-flow driven components. We show that global information is much stronger related to discount-rate news and that this explains the weaker predictive power of local ratios.

  • Predicting international stock returns with conditional price-to-fundamental ratios (2017) with J.Zorn,
    Journal of Empirical Finance, 43, 159-184
    (https://doi.org/10.1016/j.jempfin.2017.06.003)
    Empirical stock return predictability paper. We show that combining cross-sectional and time-series information in international asset allocation improves in-sample as well as out-of-sample evidence substantially and can be exploited in a Bayesian investment strategy.

  • The Issuance of German SME Bonds and its Impact on Operating Performance (2017) with P.Freihle,
    Schmalenbach Business Review, 18, 3, 227-259
    (https://link.springer.com/article/10.1007/s41464-017-0036-9)
    Empirical analysis of  Post-Issuance Operating Performance. Using propensity score matching to avoid hindsight bias, we document a decline in operating performance for companies after having issued SME Bonds.

  • Time-series properties of the dividend-price ratio with social dynamics (2013) 
    Applied Economics, 45, 5, 569-579
    (https://doi.org/10.1080/00036846.2011.607134)
    Follow-up paper to 'Return predictability and social dynamics' (Lawrenz/Hule, 2013), which focuses on the cointegration relationship between simulated price and dividend time series. We show that the simulated economy with locally interacting agents produces a persistent pd-ratio which closely resembles empirical data.

  • Deposit Finance as a Commitment Device and the Optimal Debt Structure of Commercial Banks (2013) with M. Bank,
    European Financial Management, 19, 1, 14-44
    (https://doi.org/10.1111/j.1468-036X.2010.00566.x)
    Theoretical corporate finance capital structure model applied to the debt structure (bonds vs deposits) of commercial banks. In the spirit of Diamond/Rajan (2000), we show that the mix between bond and deposit financing balances off
    the benefit from the commitment feature against the threat from regulatory interventions.

  • Return predictability and social dynamics (2013) with R. Hule, 
    Review of Managerial Science, 7, 159-189
    (https://doi.org/10.1007/s11846-013-0099-z)
    Asset pricing. We simulate an economy with a finite number of agents which have heterogenous beliefs and which interact locally in the sense of social dynamics. We determine prices from a Lucas tree environment and run predictive regressions on lagged pd ratios. The simulated economy matches a variety of empirical facts.

  • Contingent Convertibles. Solving or Seeding the Next Banking Crisis? (2012) with C. Koziol,
    Journal of Banking and Finance, 35, 1, 90-104
    (https://doi.org/10.1016/j.jbankfin.2011.06.009)
    One of the first papers to analyze CoCo bonds in a theoretical corporate finance capital structure model. We show that CoCo bonds provide risk-shifting incentives. Although CoCo bond issues increase the bank value, the probability of financial distress rises, implying that CoCos are not unambiguously beneficial for banking stability.

  • Correlated Errors. Why a monoton relationship between forecast precision and trading profitability may not hold (2012) with A. Weissensteiner,
    Journal of Business Finance and Accounting, 39, 5, 675-699
    (https://doi.org/10.1111/j.1468-5957.2012.02291.x)
    Theoretical model which suggests that better forecasting abilities do not necessarily translate into better trading profitability. In a market environment, the key is to recognize the commonality (or correlation) of forecasting errors made by all market participants.

  • Optimal Design of Rating-Trigger Step-Up Bonds: Agency Conflicts Versus Asymmetric Information (2010) with C. Koziol,
    Journal of Corporate Finance, 16, 2, 182-204
    (https://doi.org/10.1016/j.jcorpfin.2009.12.002)
    Theoretical corporate finance capital structure model applied to rating-trigger step-up bonds. We analyze two competing economic explanations for this bond design: Signalling and Asset substitution. We solve the optimal contract under both scenarios and show that only asset substition is consistent with empirical data.

  • What makes a bank risky? Insights from the optimal capital structure of banks (2009) with C.Koziol,
    Journal of Banking & Finance, 33, 5, 861-873
    (https://doi.org/10.1016/j.jbankfin.2008.09.022)
    Theoretical corporate finance capital structure model applied to commercial banks. By modelling the asset value as a jump-diffusion process, we show that the risk coming from the diffusion part can be accommodated by endogenous financing decisions while the jump component exposes banks to the possibility of sudden defaults.

  • Assessing the estimation uncertainty in default probabilities (2008)
    Kredit und Kapital, 41, 2

  • Why Simple, When It Can Be Difficult. Some Remarks on the Basel IRB Approach (2003) with M.Bank,
    Kredit und Kapital, 4/2003

  • Sind Ratingurteile kulturell beeinflusst? (2003) with M. Bank,
    Kredit&Rating Praxis, 3/2003

  • Basel II: Quantitative Impact Study für Österreich (2002) with W. Schwaiger,
    Zeitschrift für das gesamte Bank- und Börsewesen, 50, Februar 2002

  • Bank Deutschland: Aktualisierung der Quantitative Impact Study (QIS2) von Basel II (2002) with W. Schwaiger,
    RiskNews, www.risknews.de, 02.2002

  • Standard- versus IRB-Ansatz. Auswirkungen auf die Bank Deutschland (2002) with W. Schwaiger,
    Zeitschrift für das gesamte Kreditwesen, Februar 2002

 

Book contributions:

  • Local interaction, incomplete information and properties of asset prices. (2008) with R.Hule,
    in: Schredelseker, K. and F.Hauser (2008) "Complexity and Artificial Markets", Lecture Notes in Economics and Mathematical Systems, Springer Verlag, Berlin

  • Understanding the non-monotonic payoffs for heterogenously informed agents. (2008) in: Hanke, M. and J.Huber,
    "Information, Interaction and (In)Efficiency in Financial Markets", Linde Verlag, Wien

  • The value of information. Some clarifications and some new results for the Schredelseker-Game. (2008) with R.Hule,
    in: Hanke, M. and J.Huber (2008) "Information, Interaction and (In)Efficiency in Financial Markets", Linde Verlag, Wien