Change in firm-level wage bill measures real economic exposure to bank failure

Evidence

This table reports results for regression equation (3) with the change in the firm-level wage bill as dependent variable. The dummy Danat connection (Dresdner connection) takes on a value of one if a firm is connected to Danatbank (Dresdner Bank). Danat connection (old) is a dummy with a value of one if a firm was connected to Danatbank in 1923, Danat connection (new) is a dummy with a value of one if a firm was not connected to Danatbank in 1923, but in 1929. Firm controls include age, log assets, leverage, return on assets, and the capital-labor ratio. — Sebastian Doerr et al., Financial Crises and Political…, 282

Categorization

• QUESTION: Is the wage-bill change for new Danat connections (post-1923) cleanly exogenous to firms’ prior Nazi-leaning areas, or does it track firm distress already underway by 1929?