Thomas Rauter

Assistant Professor of Accounting &
IBM Corporation Faculty Scholar

SSRN Author Page Google Scholar GitHub


Publication

Procyclicality of U.S. Bank Leverage

In light of the current debate about the link between accounting and financial stability, we investigate the determinants of procyclical book leverage for US commercial and savings banks. We find that total asset growth and GDP growth are both positively related to book leverage growth. Our evidence is not consistent with the notion that fair value accounting contributes to procyclical leverage or that historical cost accounting reduces procyclicality. Overall, the business model of banks is more important for procyclical leverage than accounting or regulatory risk weights.

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Presented at: JAR Conference 2016 | EAA 2015 | OEFG Workshop 2015 | Bundesbank-SAFE-ZEW-CEPR Joint Conference 2016 | Basel Committee and Deutsche Bundesbank Joint Conference 2014 | EFA 2014 | Barcelona Summer Forum 2014 | Goethe University Frankfurt | WU Vienna

Working Papers

Disclosure Regulation, Corruption, and Investment: Evidence from Natural Resource Extraction

  • Single Authored, Job Market Paper
  • Latest Draft: February 2019
  • Used by the European Commission to Evaluate Public Country-by-Country Reporting

I examine how mandatory disclosure of fiscal payment information in developed countries affects fiscal revenue contributions and investments by multinational firms in less developed countries. In Europe and Canada, extractive firms have to publicly disclose their payments to foreign host governments in a granular report on their corporate website to discourage the bribery of foreign public officials and other illicit payment avoidance practices. Using data on firms' extractive activities abroad and exploiting the staggered adoption of extraction payment reports across developed countries, I find that disclosing companies increase their payments to host governments and that public officials book a higher fraction of these payments into government ledgers, particularly in corrupt countries. However, the higher government revenue comes at a cost - disclosing firms decrease and reallocate investments relative to non-disclosing competitors. Additional cross-sectional evidence indicates that the increased threat of public shaming and legal enforcement are two important mechanisms through which these disclosures generate real effects. Overall, my evidence suggests that extraction payment disclosures improve fiscal revenue collection but have unintended investment consequences for multinational firms.

Presented at: Chicago Booth | MIT Sloan | Stanford | Wharton | Harvard | IMF | Dartmouth | CMU | FARS 2019 | UNC/Duke Fall Camp 2018 | EAA 2018 | INSEAD | IESE | Bocconi | Mannheim | LMU Munich | Frankfurt School | WU Vienna


Policeman for the World: U.S. Enforcement of Foreign Corruption Regulation and Corporate Investment Policies

We provide evidence on the determinants, targets, and consequences of U.S. enforcement of the Foreign Corrupt Practices Act (FCPA). Both U.S. companies and foreign companies under U.S. jurisdiction headquartered in countries that agree to increase cooperation with U.S. regulators (“FCR” firms) experience an increase in FCPA prosecutions in the mid-2000s, particularly for violations of the Act’s accounting provision. Following this increase in enforcement, FCR firms reduce direct investment in corrupt countries; additionally, there is no evidence that non-FCR firms offset this reduction. When acquiring a firm in a corrupt country, FCR firms increase the length of their due diligence and the likelihood of disclosing an accounting advisor. Overall, our evidence highlights (i) the central role of the U.S. in the worldwide enforcement of foreign corruption regulation, (ii) the importance of regulatory cooperation and accounting controls in detecting corrupt practices and facilitating enforcement actions, and (iii) the significant impact of U.S. anti-corruption regulation on corporate investment in corrupt countries.

Presented at: FARS 2019 | Chicago Booth | HU Berlin | Boston University | Global Issues in Accounting Conference 2018


Perceived Precautionary Savings Motives: Evidence from FinTech

We study the consumption response to the introduction of a mobile overdraft facility on a FinTech app. Users react to the availability of the overdraft by increasing their consumption spending permanently and reallocating consumption from non-discretionary to discretionary goods and services. For identification, we exploit sharp discontinuities in the size of the overdraft limit based on an income rounding rule the app uses to assign credit limits. In the cross section, we find similar responses for young and old users, users with high and low income volatility, and users with steep and flat income paths. The most liquid users - those with high ratios of deposits to income inflows - drive the consumption spending response. These results are not fully consistent with models of financial constraints, buffer stock models with and without durables, present-bias preferences, or the canonical life-cycle permanent income model. We discuss a new channel, the perceived precautionary savings channel, which appears consistent with all our results. Under this channel, households with higher liquid wealth behave as if they faced strong precautionary savings motives even though no observables suggests they should do so.

Work in Progress

Reversing the Resource Curse: The Effect of Foreign Corruption Regulation on Economic and Political Conditions in Corrupt Countries


Financial Information Characteristics and Consumption Behavior: Evidence from a Randomized Field Experiment


The Effect of Open Data on Competition and Corruption in Public Procurement


Bank Governance and Financial Stability