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Bank diversification and performance: Empirical evidence from Japan International Review of Finance (IF 2.175) Pub Date : 2024-03-21 Yichang Wu
This article examines the relationship between bank diversification and performance in the Japanese banking sector. We use panel data from 141 banks over the period 2000–2022 to investigate whether banks can improve profitability and reduce risk through diversification strategies. Our evidence shows that diversification can improve bank profitability at the cost of a decline in net interest margins
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Reversal evidence from investor sentiment in international stock markets International Review of Finance (IF 2.175) Pub Date : 2024-03-07 Keunbae Ahn, Gerhard Hambusch
This research investigates the effect of sentiment on the time‐series and cross‐section of mean, variance and correlation of asset returns to examine how investor sentiment creates predictable variations in financial markets. Based on the method proposed by Baker and Wurgler (2007, Investor sentiment in the stock market, Journal of Economic Perspectives 21, 129‐152), we build composite sentiment indexes
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Political protection: The case of large-scale oil spills and the stock prices of energy firms International Review of Finance (IF 2.175) Pub Date : 2024-02-17 Ahmed S. Baig, Benjamin M. Blau, Todd G. Griffith, Ryan J. Whitby
In this study, we utilize a sample of publicly traded US energy firms to investigate the stock market responses to 40 large-scale oil spills. Our findings reveal that the stock prices of extraction and refining firms experience significant declines during the periods surrounding these oil spill incidents, and energy pipeline firms exhibit a relatively smaller decrease. These results underscore the
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Economic policy uncertainty, ownership structure, and R&D investment: Evidence from Japan International Review of Finance (IF 2.175) Pub Date : 2024-02-11 Po-Lin Chen
Using listed Japanese firms, we examine changes in R&D investment decisions during periods of high economic policy uncertainty and politics uncertainty (EPU). We find that under high EPU, firms are more persistent in their previous R&D investment and reduce their responsiveness to sales growth, while the mechanism of EPU occurs mainly through fiscal policy. We also identify heterogeneities in ownership
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Seasonal variation in risk and return trade-off International Review of Finance (IF 2.175) Pub Date : 2024-01-30 Deok-Hyeon Lee, Byoung-Kyu Min
Existing studies show that firms with large macroeconomic risk do not earn higher returns, incompatible with the theoretical predictions of standard economic models. Using a broad set of macro-related factors, we find the January seasonality of the macroeconomic risk–return relation. Firms with high macro risk deliver higher returns than firms with low risk in January, that is, the positive risk–return
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Information intensity and pricing of systematic earnings announcement risk International Review of Finance (IF 2.175) Pub Date : 2023-12-26 Jingjing Chen, Linda H. Chen, George J. Jiang
Earnings announcement (EA) poses a non-diversifiable risk to investors. This study examines whether investors demand higher returns for stocks with high systematic EA risk. We find evidence that systematic EA risk is priced, however, the premium is realized only during periods with intensified cash-flow news. Specifically, we construct an ex-ante measure of expected information intensity (EII) and
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Individualistic culture and firm default risk: Cross-country evidence International Review of Finance (IF 2.175) Pub Date : 2023-12-20 Sivathaasan Nadarajah, Benjamin Liu, Muhammad Atif, Grant Richardson
This study examines the association between individualistic culture and firm default risk across countries. Using a sample of 15,225 firms across 32 countries over the 2005–2018 period (115,464 firm-year observations), we find that firms based in countries with high levels of individualism are associated with greater default risk. Our results are robust to a battery of endogeneity and other robustness
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Shedding light on the dynamics of the secured overnight financing rate (SOFR) International Review of Finance (IF 2.175) Pub Date : 2023-12-12 Lior David-Pur, Koresh Galil, Mosi Rosenboim, Offer Moshe Shapir
Investigating the transition from the London interbank offered rate (LIBOR) to the secured overnight financing rate (SOFR) and considering the documented volatility of SOFR, this study examines the dynamic nature and potential drivers of the SOFR by analyzing both the SOFR–EFFR (effective Federal Funds rate) and SOFR–IOER (interest on excess reserves) spreads. The results reveal noteworthy correlations
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Unpacking the black box of investor sentiment: Structured sentiment and unstructured sentiment International Review of Finance (IF 2.175) Pub Date : 2023-12-02 Lan Xiang, Yong Ma, Zhiyu Liu
This paper dissects investor sentiment into two distinct components: structured sentiment and unstructured sentiment, based on their underlying driving factors. Employing an extension of the classic noise trader model, our analysis reveals a negative relationship between market returns and both types of sentiment—structured and unstructured. Additionally, we find a positive association between market
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Analyzing time-varying tail dependence between leveraged loan and debt markets in the U.S. economy International Review of Finance (IF 2.175) Pub Date : 2023-11-30 Aviral Kumar Tiwari, Nader Trabelsi, Emmanuel Joel Aikins Abakah, Chi-Chuan Lee
This study analyzes the time-varying dependence between U.S. leveraged loan and debt markets within a highly linked financial system using a quantile-based time-varying connectedness framework to determine the hedging benefits of leveraged loans for financial investors at various quantiles. Based on daily closing price data from November 28, 2008 to October 3, 2023, the evidence demonstrates considerable
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Estimation and test of a simple model of robust capital asset pricing: An info-metrics approach International Review of Finance (IF 2.175) Pub Date : 2023-11-14 Luis García-Feijóo, Ariel M. Viale
We introduce the info-metrics approach to empirical asset pricing under ambiguity. We apply relative entropy as a pseudo-metric of model discrepancy, and generalized maximum entropy as a principle of statistical inference, to cross-sectional asset pricing tests. We show that a single-factor market representation of the CAPM under ambiguity can explain the cross-section of U.S. stock returns without
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Different demands for almost the same assets? Demographic structure's different effect on direct and indirect equity purchase International Review of Finance (IF 2.175) Pub Date : 2023-11-02 Sei-Wan Kim, Namwon Hyung
This study is motivated by the improved empirical framework of the Fourier flexible form estimation to investigate how the demographic structure leads to asymmetric effects on direct and indirect (mutual fund) equity demands. We find that, first, the demographic structure has asymmetric effects between direct and indirect equity purchases. Second, those in early old age create a stronger demand for
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Rare disaster, economic growth, and disaster risk management with preferences for liquidity International Review of Finance (IF 2.175) Pub Date : 2023-10-26 Ting Lu, Pengfei Luo
This paper examines the effect of preferences for liquidity on the relationship between disasters and growth along with disaster risk management. It further demonstrates that preferences for liquidity lead to less consumption. Moreover, from preferences for liquidity perspective, our model can potentially reconcile the conflicting predictions on the interaction between disasters and growth in the empirical
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Risk-taking in pension and crashes: Firm-level evidence International Review of Finance (IF 2.175) Pub Date : 2023-10-02 Heejin Park, Jung-Hee Noh
Our study, using a large sample of U.S. firms between 1990 and 2013, found a positive association between pension risk-taking and future stock price crash risk. The impact of pension risk-taking on future crash risk is particularly significant in firms with low funding ratios and high default risks. Overall, our findings provide robust evidence that risk-taking in defined benefit (DB) pension asset
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The price of the slow lane: Traffic congestion and stock block trading premium International Review of Finance (IF 2.175) Pub Date : 2023-08-21 Tingqiu Cao, Xianhang Qian, Le Zhang
Using data on city-level daily traffic congestion and stock block trading, we investigate the impact of trader cities' traffic congestion on the stock block trading price. We find that higher level of traffic congestion in the traders' cities is associated with lower stock block trading premium, particularly when the information asymmetry between the trading parties is high. We also find that the buyers
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Climate risks and forecastability of the weekly state-level economic conditions of the United States International Review of Finance (IF 2.175) Pub Date : 2023-08-13 Oguzhan Cepni, Rangan Gupta, Wenting Liao, Jun Ma
In this paper, we first utilize a dynamic factor model with stochastic volatility (DFM-SV) to filter out the national factor from the local components of weekly state-level economic conditions indexes of the United States (US) over the period of April 1987 to August 2021. In the second step, we forecast the state-level factors in a panel data set-up based on the information content of corresponding
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In family we trust—In good and bad times International Review of Finance (IF 2.175) Pub Date : 2023-08-16 Philippe Masset, Cédric Poretti, Jean-Philippe Weisskopf
This short report investigates the stock market behavior of Swiss companies during the COVID-19 pandemic. Results suggest that family firms performed better during the outbreak and post-lockdown periods than widely-held firms. Family firms also displayed a larger abnormal trading volume drop than widely-held companies. In size-sorted subsamples, the volume difference appears more pronounced for smaller
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A novel approach to portfolio selection using news volume and sentiment International Review of Finance (IF 2.175) Pub Date : 2023-08-08 Kin-Yip Ho, Kun Tracy Wang, Wanbin Walter Wang
In this study, we develop a novel approach to portfolio diversification by integrating information on news volume and sentiment with the k-nearest neighbors (kNN) algorithm. Our empirical analysis indicates that high news volume contributes to portfolio risk, whereas news sentiment contributes to portfolio return. Based on these findings, we propose a kNN algorithm for portfolio selection. Our in-sample
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The effect of corporate annual report quality on the relationship between institutional blockholder monitoring and firm's information environment International Review of Finance (IF 2.175) Pub Date : 2023-08-02 Chune Young Chung, Amirhossein Fard, Hong Kee Sul
Expanding on current research, this study finds that firms with better financial report readability demonstrate a stronger relationship between institutional blockholder monitoring and information asymmetry. This result supports our hypothesis that enhanced readability improves firm information and aids the institutional investor monitoring of firms, reducing information asymmetry. By demonstrating
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Topic tones of analyst reports and stock returns: A deep learning approach International Review of Finance (IF 2.175) Pub Date : 2023-07-25 Hitoshi Iwasaki, Ying Chen, Jun Tu
We present a novel approach that analyzes topics and tones of analyst reports using a deep neural network in a supervised learning approach. By letting trained classifiers evaluate topics and tones of the reports, we find that incorporation of topic tones significantly enhances the accuracy of predicting cumulative abnormal returns, increasing adjusted R 2 from 6.1% without considering textual information
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The cross-predictability of industry returns in international financial markets International Review of Finance (IF 2.175) Pub Date : 2023-07-25 Xin Wang, Haofei Zhang
This article finds evidence of return cross-predictability among trading partners in international financial markets. We show that the predictability of international customers dominates the predictability of domestic customers, and the predictability of international intra-industry customers dominates the predictability of international inter-industry customers. This return cross-predictability decreases
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The contribution of macroprudential policies to banks' resilience: Lessons from the systemic crises and the COVID-19 pandemic shock International Review of Finance (IF 2.175) Pub Date : 2023-07-15 Tiago F. A. Matos, João C. A. Teixeira, Tiago M. Dutra
This study examines the effectiveness of macroprudential policies in reducing the banks' risk during the COVID-19 pandemic and compares these results with the systemic banking crises years. Based on a sample of 624 banks across 40 countries during the period 2006–2020, we find that loosening capital-aimed macroprudential policies effectively reduced banks' risk during the COVID-19 pandemic, while this
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Political institutions and corporate risk-taking: International evidence International Review of Finance (IF 2.175) Pub Date : 2023-07-03 Helen X. H. Bao, Rohan Cardoza
Tapping into firm-level accounting data across 90 countries over a 26-year period, we find that sound political institutions are positively associated with corporate risk-taking. This result is economically significant, robust to alternative proxies for corporate risk-taking and political institutions, and continues to hold after mitigating endogeneity concerns of political institutions. We also collect
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Accumulating human capital: Corporate innovation and firm value International Review of Finance (IF 2.175) Pub Date : 2023-06-07 Xun Wang, Jingwen Yu
We empirically document that industries that are more R&D intensive exhibit disproportionately greater innovation quantity and better innovation quality in economies with more human capital. Firm-level evidence confirms that innovation is an important channel through which firm responds to labor market conditions. Further analyses show that in economies with greater human capital, firms better able
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Economic growth and labor investment efficiency International Review of Finance (IF 2.175) Pub Date : 2023-03-09 Amanjot Singh
We examine the relationship between economic growth and labor investment efficiency. Using a sample of US firms from 1991 to 2019, our findings suggest that labor investment inefficiency increases with the expansion of economic activities. Although economic growth increases labor overinvestment, it also decreases labor underinvestment. The magnitude effect of economic growth is more pronounced for
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Trade dependence and stock market reaction to the Russia-Ukraine war International Review of Finance (IF 2.175) Pub Date : 2023-03-07 Reza Tajaddini, Hassan F. Gholipour
Using data from 83 countries, we show that the decline in the value of stock market indices in response to the Russia-Ukraine war was sharper in countries that have stronger trade ties (both exports and imports) with Russia and Ukraine. We also find the relationship between trade dependency and market drop is weaker in countries with more trade openness.
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Institutional investors and cross-border mergers and acquisitions: The 2000–2018 period International Review of Finance (IF 2.175) Pub Date : 2023-03-06 Jinsuk Yang, Qing Hao, Mahmut Yaşar
Using a sample of mergers and acquisitions (M&As) from 26 countries over 2000–2018, we find that domestic institutional investors facilitate both domestic and cross-border M&As. The facilitation effect is more pronounced for domestic than cross-border M&As. When the acquirer country has greater financial freedom or better investor protection than the target country, domestic institutional investors
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Robust irreversible investment strategy with ambiguity to jump and diffusion risk International Review of Finance (IF 2.175) Pub Date : 2023-02-28 Shuang Li, Haijun Wang
This paper constructs a robust and irreversible investment rule applicable to a series of adjacent models. The project value follows a jump-diffusion process and the investor exhibits complete ambiguity aversion or partial ambiguity aversion to the diffusion, jump amplitude, and jump frequency components. The impact of ambiguity aversion with respect to different components on the optimal investment
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Environmental performance and employee welfare: Evidence from health benefit costs International Review of Finance (IF 2.175) Pub Date : 2023-02-19 Yuqi Gu
This article studies whether corporate environmental performance affects its health benefit costs. I find a firm's environmental performance is negatively associated with its employee health benefit costs. Cross-sectional tests also show the effect is stronger for companies with improving employee health or located in a region with higher population health risks. In addition, the correlation only exists
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Political uncertainty and investments by private and state-owned enterprises International Review of Finance (IF 2.175) Pub Date : 2023-02-14 Neeru Chaudhry, Chris Veld
We study corporate investments around national elections in India. Investment rates drop by a nonsignificant 2.2% for state-owned enterprises (SOEs) in election years. The decrease is significantly larger for private firms, which record an investment drop of 7.4%. The decrease in investment for private firms is likely attributable to political uncertainty. SOEs balance political uncertainty with the
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Firm-level political risk and implied cost of equity capital International Review of Finance (IF 2.175) Pub Date : 2023-02-13 Dev R. Mishra
I find a strong positive association between firms' implied cost of equity capital and firm-level political risk. This effect is above and beyond the firm-level cost of equity implications of economywide political risk. Firm-level political risk contributes to elevating stock illiquidity, increases dispersion of analyst forecasts and dampens analyst coverage and these attributes, in turn, have positive
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Economic policy uncertainty and fund flow performance sensitivity: Evidence from New Zealand International Review of Finance (IF 2.175) Pub Date : 2023-01-29 Sara Ali, Ihsan Badshah, Riza Demirer, Prasad Hegde
Utilizing a large sample of actively managed equity funds and a recently developed EPU index for New Zealand, we show that fund flow performance sensitivity decreases with policy uncertainty. The role of policy uncertainty as a determinant of fund flow performance sensitivity is found to be stronger, particularly for funds with global focus, large sized funds, high momentum funds and those with high
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Co-movement among oil, stock, bond, and housing markets: An analysis of U.S., Asian, and European economies International Review of Finance (IF 2.175) Pub Date : 2022-12-20 Nafeesa Yunus
This study explores the co-movement among oil and the stock, bond, and housing markets of the U.S. and major developed countries across Europe and Asia. The results indicate that oil is long-run integrated with each asset class, and that the extent of convergence has increased after the onset of the 2007–2009 global financial crisis (GFC). Moreover, oil contributes most heavily toward the common trends
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An analysis of the evolution of global financial network of the coordinated portfolio investment survey International Review of Finance (IF 2.175) Pub Date : 2022-12-01 Sang Jin Ahn, Jae Woong Jung, Hyeng Keun Koo, Seryoong Ahn
In this study, we construct a directional global financial network using portfolio investment data from more than 200 countries during the first two decades of the 21st century and analyze the properties of the network. Through macroscopic analysis, we show that the network became denser and could be divided into central and peripheral groups. Microscopic analysis shows that, in addition to well-known
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An explosion time characterization of asset price bubbles International Review of Finance (IF 2.175) Pub Date : 2022-11-29 Robert A. Jarrow, Simon S. Kwok
In a standard continuous time asset pricing model, this paper provides an explosion time characterization of asset price bubbles that extends the existing characterization theorems in the literature from diffusion processes to general semimartingales (which can include jumps). This characterization has a nice economic interpretation, not emphasized in the existing literature.
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The trend premium around the world: Evidence from the stock market International Review of Finance (IF 2.175) Pub Date : 2022-10-31 Hai Lin, Pengfei Liu, Cheng Zhang
This paper studies the predictive power of the trend strategy in the international stock market. Using data from 49 markets, we find that a trend signal exploiting the short-, intermediate-, and long-term price information can predict stock returns cross-sectionally in the international market. The significance of the trend strategy is associated with market-level characteristics such as macroeconomic
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Climate risks and U.S. stock-market tail risks: A forecasting experiment using over a century of data International Review of Finance (IF 2.175) Pub Date : 2022-10-21 Afees A. Salisu, Christian Pierdzioch, Rangan Gupta, Reneé van Eyden
We examine the predictive value of the uncertainty associated with growth in temperature for stock-market tail risk in the United States using monthly data that cover the sample period from 1895:02 to 2021:08. To this end, we measure stock-market tail risk by means of the popular Conditional Autoregressive Value at Risk (CAViaR) model. Our results show that accounting for the predictive value of the
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The real effects of local mutual funds: Evidence from corporate innovation International Review of Finance (IF 2.175) Pub Date : 2022-10-17 Hyoseok (David) Hwang
This paper investigates whether the proximity between mutual funds and firms could explain corporate innovation. I find that local mutual funds tend to increase firms' R&D expenditures and productivity. Firms with greater local ownership produce more patents and patents with bigger impact. The positive relations are more pronounced for firms with low information quality and poor corporate governance
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Buy and buy again: The impact of unique reference points on (re)purchase decisions International Review of Finance (IF 2.175) Pub Date : 2022-10-17 Gizelle D. Willows, Daniel W. Richards
Behavioral finance has uncovered that investor engage emotionally when trading. We investigate how three psychological factors influence purchase and repurchase decisions: representativeness, the influence of prior gains, and reference points. Using trading data of 7200 UK investors we find that purchase decisions are influenced by representative heuristic and repurchase decisions are influenced by
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Quantile price convergence and spillover effects among Bitcoin, Fintech, and artificial intelligence stocks International Review of Finance (IF 2.175) Pub Date : 2022-10-17 Emmanuel Joel Aikins Abakah, Aviral Kumar Tiwari, Chi-Chuan Lee, Matthew Ntow-Gyamfi
This research explores the distributional and directional predictabilities among Fintech, Bitcoin, and artificial intelligence stocks from March 2018 to January 2021 using nonparametric causality-in-quantile and crossquantilogram approaches. We also examine connectedness across the assets using a quantile VAR approach. The results indicate the existence of bidirectional causality-in-variance between
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Average skewness in global equity markets International Review of Finance (IF 2.175) Pub Date : 2022-10-04 Yigit Atilgan, K. Ozgur Demirtas, A. Doruk Gunaydin, Imra Kirli
This paper examines the predictive power of average skewness, defined as the average of monthly skewness values across stocks, documented by the prior literature for US market returns in an international setting. First, we confirm the validity of the results in the original study and show that the intertemporal relation between average skewness and aggregate returns becomes weaker in an alternative
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Information of employee decisions and stock returns in the Korean stock market International Review of Finance (IF 2.175) Pub Date : 2022-10-04 Jaewan Bae, Jangkoo Kang
We study the role of rank-and-file employees on asset prices in the Korean stock market using monthly labor flow data from the national pension subscription descriptions. We find that firms experiencing high net labor outflows have lower future risk-adjusted returns. This return predictability is found to originate mainly from gross labor outflows. We further show that the workers' labor market decisions
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A new unique impulse response function in linear vector autoregressive models International Review of Finance (IF 2.175) Pub Date : 2022-10-03 Yanlin Shi
This article proposes a new unique impulse response function (IRF) measure, or MIRF, based on the popular vector autoregressive model to study interdependency of multivariate time series. Same as the orthogonal IRF, the estimator of MIRF has an analytical form with well-established asymptotics, and is invariant to ordering of series. Compared to alternative unique IRF measures, MIRF does not depend
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The maturity-lengthening role of national development banks International Review of Finance (IF 2.175) Pub Date : 2022-09-21 Alfredo Schclarek, Jiajun Xu, Jianye Yan
We analyze why national development banks (NDBs) may provide longer-term loans to firms than private commercial banks (PCBs). If NDB bonds have higher collateral value than PCB bonds, then NDBs may lend longer-term than PCBs. NDBs may enjoy higher recapitalization willingness and capacity by the state and hence greater collateral value than PCBs. Moreover, NDBs may have advantages over state-owned
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Impact of mortgage soft information in loan pricing on default prediction using machine learning International Review of Finance (IF 2.175) Pub Date : 2022-09-18 Thi Mai Luong, Harald Scheule, Nitya Wanzare
We analyze the impact of soft information on US mortgages for default prediction and provide a new measure for lender soft information that is based on the interest rates offered to borrowers and incremental to public hard information. Hard and soft information provide for a variation in annual default probabilities of approximately 3%. Soft information has a lesser impact over time and time since
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Stock market, credit market, and heterogeneous innovations International Review of Finance (IF 2.175) Pub Date : 2022-09-06 Xun Wang
The relative importance of credit market development and stock market development in boosting innovation remains a long-standing debate issue. In this study, we document how different types of financial markets development affect heterogeneous innovations. Using a broad sample across 42 developed and emerging economies and a generalized difference-in-differences identification strategy, we find that
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Are socially responsible exchange-traded funds paying off in performance? International Review of Finance (IF 2.175) Pub Date : 2022-09-05 Ya Dai, Liang Guo, Steve Liu, Hongxian Zhang
This study examines the Socially Responsible (SR) exchange-traded funds (ETFs) by comparing their risk-adjusted performance with a matched group of conventional ETFs in the U.S. equity market. In contrast to prior studies that focus on actively managed mutual funds, we find that the risk-adjusted returns of SR ETFs are significantly lower than those of conventional ETFs during the 2005–2020 period
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How does the volatility-timing strategy perform in mutual funds portfolios International Review of Finance (IF 2.175) Pub Date : 2022-07-01 Zhida Yin, Jilin Jiang, Zongxin Qian
Literature suggests that a volatility-timing strategy improves the performance of factor portfolios in the stock market and currency carry trade. This paper shows that the performance of this strategy is mixed when applied to mutual fund portfolios. More specifically, its performance not only depends on the investment style of the mutual funds but also the time periods when it is applied.
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Financial crises, banking regulations, and corporate financing patterns around the world International Review of Finance (IF 2.175) Pub Date : 2022-05-10 Ali Gungoraydinoglu, Özde Öztekin
This study examines financing behavior during financial crises in an international sample of corporate firms including 85 countries from 1987 to 2017. Measuring “financial cyclicality” as the difference between financing levels during normal times and financial crisis times, we document counter-cyclicality in leverage and pro-cyclicality in security issuances and debt maturity. Financial crises discourage
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Social responsibility, moral hazard, and collateral requirement: Evidence from a quasi-natural experiment in India International Review of Finance (IF 2.175) Pub Date : 2022-03-14 Nemiraja Jadiyappa, Santosh Shrivastava, Avinash Ghalke
The stakeholder theory predicts that corporate social responsibility (CSR) activities reduce the morale hazard problem between creditors and corporate firms and decrease the requirement of collaterals in debt transactions. Consistent with this theory, our analysis shows that there is a negative relationship between CSR and secured debt in a cross-section of firms. Further, by using the mandatory CSR
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The effect of stock liquidity on corporate cash holdings: The real investment motive International Review of Finance (IF 2.175) Pub Date : 2022-03-09 Hyun Joong Im, Barry Oliver, Heungju Park
This study examines the relationship between stock liquidity and corporate cash holdings and explores a new economic mechanism driving this relationship. Using a regression discontinuity design approach based on the annual reconstitution of the Russell 1000/2000 indices, we find that stock liquidity has a positive causal effect on corporate cash holdings. This effect is more pronounced for firms with
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Does options improve the information absorption? Evidence from the introduction of weekly index options International Review of Finance (IF 2.175) Pub Date : 2022-02-23 Prachi Jain, Kiran Kumar Kotha
This paper empirically examines the effect of weekly options introduction on the benchmark index of Indian stock market, NIFTY50. The paper evaluates the possible stabilizing or destabilizing nature of impact on underlying volatility focusing on the relation between information and volatility using GARCH framework. The results indicate that the onset of weekly index options has improved the information
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Payout policies, government ownership, and financial constraints: Evidence from Vietnam International Review of Finance (IF 2.175) Pub Date : 2022-02-16 Nha Duc Bui, Yun-Yi Wang, Jin-Ping Lee
This study investigates the impact of government ownership on payout policies, cash holdings, capital expenditures, and borrowing costs for firms in Vietnam. Using the central hypothesis that state-owned firms (SOEs) are less financially constrained than privately-owned firms, we provide several main findings. First, we reveal that SOEs typically pay higher dividends, have higher total payouts, but
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Impact of operational fragility on stock returns: Lessons from COVID-19 crisis International Review of Finance (IF 2.175) Pub Date : 2022-02-03 Avijit Bansal, Balagopal Gopalakrishnan, Joshy Jacob, Pranjal Srivastava
We examine how the market valuation of firms varies on account of their operational fragility that makes them vulnerable to the COVID-19 pandemic. Using the data on plant location that uniquely identifies the vulnerability of firms to operational disruptions, we find that firms with plants located in zones susceptible to higher infections earn significantly lower returns. For firms with high operational
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COVID-19 and hedge fund equity ownership International Review of Finance (IF 2.175) Pub Date : 2021-11-24 Laleh Samarbakhsh, Amanjot Singh
This study investigates hedge funds equity ownership in light of the COVID-19 pandemic. Using the merged dataset of Lipper TASS hedge funds and the corresponding 13F filings, we find that with the start of the pandemic, hedge funds increased their equity ownership toward firms with less financial constraints, such as larger firms, firms with lower leverage, and more profitability. Moreover, hedge funds
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Can macroprudential policies mitigate pressures from capital inflows on real exchange rates? Empirical evidence from emerging markets International Review of Finance (IF 2.175) Pub Date : 2021-11-09 Tony Cavoli, Sasidaran Gopalan, Ramkishen S. Rajan
Can macroprudential policies (MaPs) mitigate the pressures from capital inflows on real exchange rates in emerging markets? We investigate this question empirically for a large panel of emerging markets, factoring in the heterogeneity of capital inflows. Exploiting a comprehensive dataset on MaPs for a panel of 85 countries spanning the time-period 2000–2017, we empirically examine the association
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Corporate lobbying and the value of firms: The case of defense firms and the 9/11 terrorist attacks International Review of Finance (IF 2.175) Pub Date : 2021-10-29 Benjamin M. Blau, Todd G. Griffith, Derek Larsen, Ryan J. Whitby
We examine the stock prices of defense firms surrounding the reopening of markets after the September 11, 2001 terrorist attacks. The cumulative abnormal returns for defense firms increased dramatically in response to the attacks, which is arguably explained by the expectation of impending military conflict and the possibility of new defense spending. Perhaps more interestingly, a substantial amount
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Insider trading and the algorithmic trading environment International Review of Finance (IF 2.175) Pub Date : 2021-10-25 Millicent Chang, John Gould, Yuyun Huang, Sirimon Treepongkaruna, Joey Wenling Yang
We examine how algorithmic trading (AT) changes the trading environment for corporate insiders, specifically in terms of motivation to trade and timing of trade. Using SEC Form 4 insider filings and AT computed from the limit order book, we find that AT affects insiders' decisions to buy or sell, depending on whether the trades are information driven, resulting in changes in trading returns. AT reduces
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Bank risk-taking in a mixed duopoly: The role of the state-owned bank International Review of Finance (IF 2.175) Pub Date : 2021-09-08 Ping-Lun Tseng, Wen-Chung Guo
We analyze the role of a state-owned bank, whose objective is to maximize social welfare, in a credit market with a mixed duopoly. The equilibrium reveals that the state-owned bank is exposed to lower credit risk than the private bank. Furthermore, when the deposit rate is raised by the monetary authority, both banks exert socially beneficial higher monitoring efforts. In modified models, we explore