How Do Mortgage Rate Resets Affect Consumer Spending and Debt Repayment? Evidence from Canadian Consumers

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Abstract

One of the most important channels through which monetary policy affects the real economy is changes in mortgage rates. This paper studies the effects of mortgage rate changes resulting from monetary policy shifts on homeowners' spending, debt repayment, and defaults. The Canadian institutional setting facilitates the design of identification strategies for causal inference, since the vast majority of mortgages in the country experience predetermined, periodic, and automatic contract renewals with the mortgage rate reset based on the prevailing market rate. This allows us to exploit quasi-random variation in the timing of the rate reset and to present causal evidence for both rate declines and increases using detailed, representative consumer credit panel data. We find asymmetric effects of rate changes on spending, debt repayment, and defaults. Our results can be rationalized by the conventional cash-flow effect in conjunction with changes in consumer expectations about future interest rates upon the reset. Given the pervasiveness of Canadian-type mortgages in many other OECD countries, our findings have broader implications for the transmission of monetary policy to the household sector.

Acquisition Relatedness in Family Firms: Do the Environment and the Institutional Context Matter?

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Abstract

Research on the acquisition behaviour of family firms has produced conflicting theoretical arguments and mixed empirical findings on their propensity to acquire related or unrelated targets. While previous work has mainly focused on firm-level variables, this study examines the environment in which family firms operate and the institutional context where acquisitions take place. Drawing on the mixed gambles logic of the behavioural agency model, we theorize that family firms are more likely than nonfamily firms to undertake related acquisitions when they operate in uncertain environments to avoid losses to the family's current socioemotional wealth. However, family firms are more likely to undertake unrelated acquisitions, when the environment is uncertain but the target operates in a similar and more developed institutional context where prospective financial gains are more predictable. Overall, building on a sample of 1014 international acquisitions, our study offers important contributions to the literature on family firms and acquisitions.

The effects of risk-taking tendency and achievement needs on the entrepreneurial potential of the Syrian refugees in Turkey

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The International Journal of Entrepreneurship and Innovation, Ahead of Print.
The main purpose of this study is to examine the effects of the risk-taking tendency and achievement needs of Syrian refugee entrepreneurs on their entrepreneurship potential. In the measurement tool designed for this purpose, the risk-taking scale, the achievement needs scale, and the entrepreneurship potential scale, which has been created from the study of Oren and Bickes, has been used. The study is carried out in Gaziantep, which is one of the provinces where Syrian refugees live most intensely in Turkey. The data obtained from 395 Syrian refugee entrepreneurs who set up businesses in Gaziantep by the survey method have been evaluated with explanatory and confirmatory factor analysis, descriptive statistics, correlation, and structural equation modeling. As a result of the correlation analysis, positive and significant relationships were determined between their risk-taking tendency, achievement need, and entrepreneurship potential. Besides that, in the structural equation model created to test the research hypotheses, it has been found that the effects of both the risk-taking tendency and the achievement need on entrepreneurship potential were positive and significant.

Do start-up ecosystems foster start-up performance? The moderating role of network learning capability

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The International Journal of Entrepreneurship and Innovation, Ahead of Print.
This study investigates the relationship between start-up ecosystem (SE) and start-up performance (SP) in two distinct environments. It analyses SE as a critical antecedent of SP by considering the underlying effects of network learning capability (NLC). We test the hypothesized relationships by a study of 221 start-ups in Colombia and 203 start-ups in Australia and validate the theoretical model using survey information. We apply a structural equation modelling partial least squares structural equation modelling and multi-group approaches. The results verify the positive influence of SE on SP independently of NLC development. Nevertheless, network learning as a capability acts as a moderator by establishing the impact of the SE on SP. The moderating is determined by a strong NLC linking the SE's government, financial and organisational support. The findings contribute to the literature on entrepreneurship and innovation with relevant management implications by providing new evidence regarding the benefits of SE in terms of SP effectiveness.

Board Connections and Dividend Policy

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We examine the role of firm board connectedness in shaping a firm's dividend policy. We show that firms with well-connected boards not only have a higher likelihood of paying dividends in the pooled sample of both dividend payers and non-payers but also pay more dividends in the sample of dividend payers, compared with those with poorly connected boards. Further analysis reveals that the relation between board connectedness and dividend-paying behaviour tends to be economically stronger in firms pre-identified to have more severe agency conflicts, suggesting that well-connected boards tend to use dividends to mitigate agency problems in these firms. These findings are robust to different measures of board connectedness, different dividend payout measures, alternative estimation methods, and tests that account for endogeneity.