The Role of Investment Banking for the German Economy

The Role of Investment Banking for the German Economy Final Report for Deutsche Bank AG, Frankfurt/Main Michael Schröder, Mariela Borell, Reint Gropp, Zwetelina Iliewa, Lena Jaroszek, Gunnar Lang, Sandra Schmidt, and Karl Trela Dokumentation Nr. 12-01 ISSN 1611-681X The Role of Investment Banking for the German Economy Final Report for Deutsche Bank AG, Frankfurt/Main Michael Schröder, Mariela Borell, Reint Gropp, Zwetelina Iliewa, Lena Jaroszek, Gunnar Lang, Sandra Schmidt, and Karl Trela Dokumentation Nr. 12-01 Laden Sie diese ZEW Dokumentation von unserem ftp-Server: http://ftp.zew.de/pub/zew-docs/docus/dokumentation1201.pdf © Zentrum für Europäische Wirtschaftsforschung GmbH (ZEW), Mannheim The Role of Investment Banking for the German Economy Final Report for Deutsche Bank AG, Frankfurt/Main Michael Schröder, Mariela Borell, Reint Gropp, Zwetelina Iliewa, Lena Jaroszek, Gunnar Lang, Sandra

Schmidt, and Karl Trela Mannheim, October 14, 2011 Zentrum für Europäische Wirtschaftsforschung (ZEW) © ZEW 2012 Contact: Prof. Dr. Michael Schröder Centre for European Economic Research (ZEW) Research Department International Finance and Financial Management L 7, 1 · 68161 Mannheim · Germany www.zew.de · www.zew.eu Tel.: +49-621-1235-140 Fax: +49-621-1235-223 E-mail: schroeder@zew.de Project Team: Prof. Dr. Michael Schröder, ZEW (Project Coordinator) Dr. Mariela Borell, ZEW Prof. Reint Gropp, PhD, European Business School and ZEW Zwetelina Iliewa, ZEW Lena Jaroszek, ZEW Gunnar Lang, ZEW Dr. Sandra Schmidt, ZEW Karl Trela, ZEW Research Assistance: Thorsten Franz, Thomas Wolf ISSN 1611-681X The Role of Investment Banking for the German Economy i CONTENT FIGURES ....................................................................................................................... III TABLES ......................................................................................................................... VI 1 INTRODUCTION AND EXECUTIVE SUMMARY ......................................................... 8 1.1 MOTIVATION AND SCOPE OF THE STUDY ....................................................................... 8 1.2 OUTLINE OF THE STUDY ............................................................................................. 8 2 INVESTMENT BANKING AND GROWTH ................................................................. 11 2.1 INVESTMENT BANKING DEFINITION ............................................................................ 11 2.2 FINANCE AND GROWTH LITERATURE .......................................................................... 16 2.2.1 Theoretical Literature ................................................................................... 16 2.2.2 Empirical Literature ...................................................................................... 18 3 EMPIRICAL ANALYSIS OF THE CONTRIBUTIONS OF INVESTMENT BANKING TO THE ECONOMY .................................................................................................................... 24 3.1 FINANCIAL ADVISORY WITH FOCUS ON M&A ADVISORY ................................................. 25 3.1.1 The M&A Market in Germany ....................................................................... 26 3.1.2 Company Survey on the Corporate Use of M&A Advisory ............................ 30 3.1.3 Impact of M&A on profitability and productivity .......................................... 42 3.1.3.1 Literature Review ..................................................................................... 42 3.1.3.2 Descriptive analysis .................................................................................. 47 3.1.3.3 Empirical analysis ..................................................................................... 50 3.1.3.4 Conclusion ................................................................................................ 51 3.2 PRIMARY MARKET .................................................................................................. 52 3.2.1 Empirical results on the relationhip between credit and GDP ...................... 52 3.2.2 Securitized products and their relationship to credit and GDP growth ........ 57 3.2.3 Equity and Debt Financing ............................................................................ 61 3.2.4 Company Survey on Capital Market Access .................................................. 64 3.3 DERIVATIVES ......................................................................................................... 72 3.3.1 Descriptive Analysis of the Derivatives Market ............................................ 72 3.3.2 Literature Review on Role of Derivatives for the Economy ........................... 80 3.3.3 Literature Review on Exchange Rate Uncertainty and Trade ....................... 83 3.3.4 Company Survey on Corporate Usage of Derivatives ................................... 89 3.4 INVESTMENT BANKS AND SYSTEMIC RISK SPILLOVERS .................................................. 106 3.4.1 Methodology .............................................................................................. 107 3.4.2 Data ............................................................................................................ 109 3.4.3 Results ........................................................................................................ 110 3.4.4 Concluding Remarks................................................................................... 121 The Role of Investment Banking for the German Economy ii 4 IMPLICATIONS OF REGULATORY CHANGES ON INVESTMENT BANKS .................. 123 4.1 INTRODUCTION .................................................................................................... 123 4.2 EXPERT ESTIMATES ON THE IMPACT OF REGULATORY MEASURES ..................................... 124 4.3 FROM BASEL II TO BASEL III AND...

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