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Axel Grossmann - Georgia Southern University. Statesboro, GA, US

Axel Grossmann Axel Grossmann

Professor | Georgia Southern University


Professor Grossmann researches international and corporate finance






Faculty Spotlight Dr. Axel Grossmann




Axel Grossmann, associate professor of finance, completed his Ph.D. in finance at the University of Texas Pan-American and holds an MBA from the University of Texas Pan-American and a Bachelor of Engineering from the University of Applied Sciences, Giessen-Friedberg, Germany. He joined Georgia Southern University in 2013 after holding positions at Radford University and at the University of Texas Pan-American.

Areas of Expertise (3)

Corporate Finance

International Finance


Accomplishments (5)

Gary M. Davis Excellence in Research Award

Parker College of Business, Georgia Southern University

VANGUARD Recognition Award


William A. Freeman Professor of the Year Award

Parker College of Business Administration, Georgia Southern University

W.A. & Emma Lou Crider Award for Excellence in Teaching

Parker College of Business Administration, Georgia Southern University

Georgia Southern University Faculty Spotlight


Education (3)

University of Texas-Pan American: Ph.D, Finance 2007

University of Texas-Pan American: M.B.A., Finance 2003

University of Applied Sciences, Giessen-Friedberg, Germany: B.Eng. 1999

Articles (5)

The Value of Restrictive Covenants in the Changing Bond market Dynamics before and after the Financial Crisis Journal of Corporate Finance,

Simpson, Marc W. and Grossmann, Axel


We examine the pricing of restrictive covenants on bond issues before and after the financial crisis. The existing literature in this area uses data from the pre-crisis period. While the results of our analysis using pre-crisis data are entirely consistent with existing literature, there are dramatic differences in the value of restrictive covenants between the two periods. Further, the differences between the coefficients on the control variables document and elucidate the very different bond market dynamics before and after the crisis. Before the financial crisis, we find a statistically significant cost reduction of around 50 basis points for the inclusion of negative pledges and restrictions on sale-and-leaseback activity. In the post-financial crisis period, however, the benefit of these types of covenants evaporates, becoming statistically insignificant. The benefits, for investment grade firms, of restrictions on investment activities survives the financial crisis; the price effect in the pre-crisis period is a statistically significant 60 to 72 basis point (depending on model) reduction in yields, while in the post-crisis period it is a statistically significant 51 to 55 basis point reduction in yields. For non-investment grade firms, we find in the pre-crisis period that the price effect of restrictions on payouts and additional debt are insignificant. After the financial crisis, however, these restrictions lead to a statistically significant 141 to 150 basis point reduction in yields.

The dynamics of exchange rate volatility: A panel VAR approach Journal of International Financial Markets, Institutions and Money

Axel Grossmann, Inessa Love, Alexei G Orlov


This paper employs a panel vector autoregressive model (PVAR) to study the dynamics of the overall exchange rate volatility. PVAR estimation results, based on panel data for 29 economies, are used in simulating impulse response functions. Since economic shocks may affect high-frequency and low-frequency components of volatility differently, using a conventional time-domain approach to study volatility may lead to spurious results. Accordingly, the paper also studies the dynamics of the most destabilizing (high-frequency) components of exchange rate volatility, which are isolated using spectral methodology. While our investigation reveals interesting dynamic interrelationships between macroeconomic as well as financial variables and exchange rate volatility, we find little evidence of significant difference in the responses of macroeconomic and financial variables to the overall volatility vis-à-vis the high-frequency components thereof. The feedback effects from exchange rate volatility to macroeconomic and financial variables are found to be much stronger for developing countries relative to developed economies. These findings are confirmed by variance decompositions and are largely immune to several robustness checks.

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Exchange rate misalignments in frequency domain International Review of Economics & Finance

Axel Grossmann, Alexei G Orlov


This research uses spectral methodology to study how the volatility of spot exchange rate misalignments changed as a result of (1) signing of the Plaza Accord and (2) introduction of the Euro. We study the deviations of Canadian Dollar/US Dollar, Japanese Yen/US Dollar and US Dollar/British Pound spot exchange rates from CPI- and TPI-based equilibrium exchange rates. The spectral density results indicate that the Plaza Accord and the introduction of the Euro helped reduce the volatility of exchange rate misalignments and excess returns for the Yen and the Pound along virtually all frequency components. On the other hand, the Canadian Dollar/US Dollar misalignments are characterized by higher volatility after the adoption of the Plaza Accord.

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The impact of deviation from relative purchasing power parity equilibrium on US foreign direct investment The Quarterly Review of Economics and Finance

Axel Grossmann, Marc W Simpson, Cynthia J Brown


Analyzing inbound and outbound foreign direct investment (FDI) between the U.S. and seven developed countries over the period from 1994 to 2004, this study provides strong evidence for a positive relationship between aggregate FDI flows and a strengthening of a home currency. Further, taking exchange rate disequilibrium into account, we find that an increase in U.S. inbound FDI is related to a strengthening of an undervalued and overvalued U.S. dollar, while an increase in U.S. outbound FDI (foreign inbound FDI) is mainly related to a strengthening of an overvalued foreign currency. Disaggregate FDI flow data show that these findings hold mainly for the manufacturing (food and machinery) and the wholesale industry. We argue that our findings may provide evidence for a co-existence of the wealth-effect hypothesis and a more profit and production oriented hypothesis, once the U.S. dollar is undervalued. Additionally, the results support the argument that the profit and production oriented hypothesis dominates the wealth effect in developed countries, especially in the manufacturing and wholesale industry. Moreover, the results support the view that foreign investors are interested in how overvalued or undervalued a currency is, rather than being interested only in the recent direction of change in the exchange rate. Finally, all findings are robust with respect to several estimation procedures.

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ADR mispricing: Do costly arbitrage and consumer sentiment explain the price deviation? Journal of International Financial Markets, Institutions and Money

Axel Grossmann, Teofilo Ozuna, Marc W Simpson


This study investigates the determinants of discounts and premiums on the prices of American depository receipts (ADR). The study examines 74 ADRs from nine countries and covers the time period between 1996 and 2003. Using a fixed-effects panel data approach, we find that ADRs with higher transactions costs and lower dividend payments are more likely to exhibit higher price disparity. Furthermore, we find that the price deviation is more severe in times of higher T-bill interest rates. Lastly, we find that both, the price of the ADRs, as well as, the price of the underlying assets are more driven by U.S. consumer sentiment rather than the consumer sentiment of the country of origin.

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