Danat-connected firms cut wage bills far more than matched city and industry peers

Evidence

Table 8, column (1) shows that firms with Danat connections reduced their total wage bill by 26.9% more than firms not connected to Danat. The coefficient is significant at the 1% level. In column (2), we add pre-crisis firm controls and find a highly significant negative coefficient of -21.3%. To control for unobservable industry-level shocks, column (3) adds dummies for 20 distinct industries. The coefficient on Danat remains significant at the 1% level and basically identical to columns (1) and (2), despite the fact that R2 … In columns (4)–(5) we further add city fixed effects to control for unobservable shocks to firms within the same city. We first replicate the specification in column (3) for the sample of cities with more than one firm in column (4), which results in 194 observations. The coefficient remains identical in size and is significant at the 5% level. In column (5), we add city fixed effects. Essentially, we are now comparing Danat-connected firms to other firms in the same city and industry. Despite the demanding fixed effects estimation, the coefficient remains significant and does not change in sign or size relative to column (4), while R2 increases from 0.12 to 0.42. The fact that controlling for observable precrisis firm characteristics and unobservable shocks at the industry and city levels does not affect our coefficients in a statistically or economically meaningful way (despite a large increase in R2) suggests that unobservable differences are unlikely to be a major concern (Altonji et al., 2005; Oster, 2019). — Sebastian Doerr et al., Financial Crises and Political…, 135

Categorization

• QUESTION: The R2 text is cut mid-sentence in the paragraph (‘despite the fact that R2’) — worth flagging whether the original is truncated.
• XREF: connects to: Anti-finance sentiment alone cannot explain the Danat effect on Nazi voting — Sebastian Doerr et al., Financial Crises and Political…, 141

Related

• Both Danat and Dresdner failures cut connected firms’ wage bills. (similarity 0.81)
• Wage contraction persists comparing firms within the same city and industry. (similarity 0.80)
• Exposure to Danatbank failure raised Nazi vote shares by roughly 3 percentage points (similarity 0.79)
• Pre-1921 Danat exposure predicts identical effects to later connections. (similarity 0.79)