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Firm Networks and Asset Returns Rev. Financ. Stud. (IF 6.8) Pub Date : 2024-06-28 Carlos A Ramírez
Changes in the propagation of shocks along firm networks are important to understanding aggregate and cross-sectional features of stock returns. When calibrated to match key characteristics of supplier–customer networks in the United States, a model in which firms are interlinked via enduring relationships generates long-run consumption risks, high and volatile risk premiums, and a small and stable
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Price elasticity of demand and risk-bearing capacity in sovereign bond auctions Rev. Financ. Stud. (IF 6.8) Pub Date : 2024-06-28 Rui Albuquerque, José Miguel Cardoso-Costa, José Afonso Faias
The paper uses bids submitted by primary dealer banks at auctions of sovereign bonds to quantify the price elasticity of demand. The price elasticity of demand correlates strongly with the volatility of returns of the same bonds traded in the secondary market but only weakly with their bid-ask spread. It predicts same-bond post-auction returns in the secondary market, even after controlling for pre-auction
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Policy synergy on stock price crash risk: An intergovernmental perspective Finance Research Letters (IF 7.4) Pub Date : 2024-06-27 Yinchao Liao, Jun Wang, Lei Liao, Xiaoyang Shu, Tao Peng
Both central and local government policies present implications for companies and investors. While several studies evidence that government policies shape corporate behaviors, few studies have explored them from an intergovernmental view. This research constructs a new measurement of intergovernmental policy synergy with text-based tools and reveals an inverted U-shaped relation between central-local
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The asymmetric effects of upside and downside risks in cryptocurrency markets: Insights from the LUNA and FTX crises Finance Research Letters (IF 7.4) Pub Date : 2024-06-26 Abuduwali Aibai, Jiansuer Julaiti, Shangde Gou
Unlike conventional studies on the risk dynamics of cryptocurrency markets, this paper innovatively distinguishes between good and bad volatility to more accurately measure the market's risk spillover under both good and bad shocks. By constructing a network of cryptocurrency market risk spillovers, we delve into the asymmetry between good and bad volatility in the context of risk spillover. Specifically
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Borrow now, pay even later: A quantitative analysis of student debt payment plans J. Financ. Econ. (IF 10.4) Pub Date : 2024-06-25 Michael Boutros, Nuno Clara, Francisco Gomes
In the U.S., student debt is currently the second largest component of consumer debt. Households are required to repay these loans early in their lifecycle, when marginal utility is particularly high. We study alternative contracts that offer partial or full payment deferral until later in life. We calibrate an economy with the current contracts, and then solve for counterfactual equilibria. The alternative
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Meeting Targets in Competitive Product Markets J. Financ. (IF 7.6) Pub Date : 2024-06-25 EMILIO BISETTI, STEPHEN A. KAROLYI
We show that public banks face negative stock return jumps after missing their earnings per share (EPS) targets, and theoretically and quantitatively link these jumps to bunching behavior in the EPS surprise distribution. Bunching banks cut deposit rates to meet their targets, but do so at the expense of deposit outflows and franchise value losses. Local competitors, including private banks unexposed
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Did Banks Pay Fair Returns to Taxpayers on TARP? J. Financ. (IF 7.6) Pub Date : 2024-06-25 THOMAS FLANAGAN, AMIYATOSH PURNANANDAM
Financial institutions received investments under the Troubled Asset Relief Program in a bad state of the world but repaid them in a relatively good state. We show that the recipients paid considerably lower returns to taxpayers compared to private‐market securities with similar risk over the same investment horizon, resulting in a subsidy of over $50 billion on the preferred equity investment by the
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News Diffusion in Social Networks and Stock Market Reactions Rev. Financ. Stud. (IF 6.8) Pub Date : 2024-06-25 David Hirshleifer, Lin Peng, Qiguang Wang
We study how the social transmission of public news influences investors' beliefs and the securities markets. Using data on social networks, we find that earnings announcements from firms in higher-centrality counties generate a stronger immediate price, volatility, and trading volume reactions. Post-announcement, such firms experience weaker price drift and faster volatility decay but higher and more
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Price discovery share: An order invariant measure of price discovery Finance Research Letters (IF 7.4) Pub Date : 2024-06-22 Shulin Shen, Syed Galib Sultan, Eric Zivot
To address the order-dependence issue in Hasbrouck’s (1995) Information Share (IS) measure, which assesses a market’s contribution to price discovery, we propose a new metric called the Price Discovery Share (PDS). The PDS is straightforward to compute, easy to interpret, order invariant, and unique. Our measure is inspired by a commonly used method in portfolio risk management that decomposes portfolio
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The reserve supply channel of unconventional monetary policy J. Financ. Econ. (IF 10.4) Pub Date : 2024-06-21 William Diamond, Zhengyang Jiang, Yiming Ma
We find that central bank reserves injected by QE crowd out bank lending. We estimate a structural model with cross-sectional instrumental variables for deposit and loan demand. Our results are determined by the elasticity of loan demand and the impact of reserve holdings on the cost of supplying loans. The reserves injected by QE raise loan rates by 7.4 basis points, and each dollar of reserves reduces
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Institutional Brokerage Networks: Facilitating Liquidity Provision Rev. Financ. Stud. (IF 6.8) Pub Date : 2024-06-21 Munhee Han, Sanghyun (Hugh) Kim, Vikram K Nanda
We argue that institutional brokerage networks facilitate liquidity provision and mitigate the price impact of large non-information-motivated trades. Using commissions, we map trading networks of mutual funds (institutions) and their brokers. Central funds (institutions) tend to outperform their peripheral counterparts in terms of return gap (execution shortfall). This outperformance is more pronounced
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Computational Reproducibility in Finance: Evidence from 1,000 Tests Rev. Financ. Stud. (IF 6.8) Pub Date : 2024-06-21 Christophe Pérignon, Olivier Akmansoy, Christophe Hurin, Anna Dreber, Felix Holzmeister, Jürgen Huber, Magnus Johannesson, Michael Kirchler, Albert J Menkveld, Michael Razen, Utz Weitzel
We analyze the computational reproducibility of more than 1,000 empirical answers to 6 research questions in finance provided by 168 research teams. Running the researchers’ code on the same raw data regenerates exactly the same results only 52% of the time. Reproducibility is higher for researchers with better coding skills and those exerting more effort. It is lower for more technical research questions
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Discretionary tone in reward-based crowdfunding: Do project owners talk their way to success? The British Accounting Review (IF 5.5) Pub Date : 2024-06-21 Douglas Cumming, Yihui Lan, Yuan George Shan, Junru Zhang
This study examines the relationship between abnormal tone and project performance of reward-based crowdfunding (RBC) using the Kickstarter data from 2009 to 2020. We document a negative relationship between abnormal tone and the success of a project in the RBC campaign section, while a positive impact in the Risks and Challenges section. This outcome remains robust to a variety of sensitivity tests
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Political sentiment and credit ratings The British Accounting Review (IF 5.5) Pub Date : 2024-06-21 Mostafa Monzur Hasan, Ashrafee Hossain, Haiyan Jiang
This study examines the relationship between firms’ political sentiment (PSENT) and their credit ratings. Using US public firms as the sample, we reveal that PSENT is positively associated with corporate credit ratings. Furthermore, we find evidence indicating that a positive PSENT leads to higher credit ratings, while a negative PSENT results in lower credit ratings. We also demonstrate that PSENT
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Insensitive Investors J. Financ. (IF 7.6) Pub Date : 2024-06-18 CONSTANTIN CHARLES, CARY FRYDMAN, METE KILIC
We experimentally study the transmission of subjective expectations into actions. Subjects in our experiment report valuations that are far too insensitive to their expectations, relative to the prediction from a frictionless model. We propose that the insensitivity is driven by a noisy cognitive process that prevents subjects from precisely computing asset valuations. The empirical link between subjective
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Half Banked: The Economic Impact of Cash Management in the Marijuana Industry J. Financ. (IF 7.6) Pub Date : 2024-06-20 ELIZABETH A. BERGER, NATHAN SEEGERT
We investigate the economic value of cash management. In the legal marijuana industry, where only half of businesses have access to cash management services from a financial institution, we examine dispensary profitability using administrative and survey data. Our results show that businesses with cash management charge higher retail prices (8.3%), pay lower wholesale prices (7.3%), and have higher
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Energy finance research: What happens beneath the literature? International Review of Financial Analysis (IF 7.5) Pub Date : 2024-06-20 Mingting Kou, Menglin Zhang, Yuanqi Yang, Hanqing Shao
Energy finance has grown rapidly and attracted considerable attention for the increasing interactions between energy and financial industries. However, the scope and boundary of energy finance are still unclear due to the diversity of emerging research topics. Therefore, this paper provides a profile of energy finance conducting bibliometric analysis from four dimensions: the intellectual base, research
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Market-oriented debt-to-equity swap and enterprise financial performance Finance Research Letters (IF 7.4) Pub Date : 2024-06-20 Honglan Jiang
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The impact of loosening regulatory requirements on firm innovation: Evidence from SEC rule 12h-6 The British Accounting Review (IF 5.5) Pub Date : 2024-06-20 Nathan Zhenghang Zhu, Kun Tracy Wang
The US Securities and Exchange Commission implemented Exchange Act Rule 12h-6 in 2007, which made it considerably easier for cross-listed firms in the US market to deregister and terminate their regulatory obligations as US exchange listings. Using a difference-in-differences research design, we predict and find that in the period after the implementation of Rule 12h-6, cross-listed firms have significantly
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Strategic forward-looking nonearnings disclosure and overinvestment The British Accounting Review (IF 5.5) Pub Date : 2024-06-20 Jean Jinghan Chen, Peiyang Song, Fai Lim Loi
We examine whether tone management in different aspects of forward-looking statements (FLSs) is related to managers' self-serving overinvestments. Using data for U.S.-listed firms between 2003 and 2019, we provide novel evidence that the abnormal tone of nonearnings-related qualitative FLSs' is significantly and positively related to firms' overinvestments but that other aspects of FLSs are insignificant
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News Bias in Financial Journalists’ Social Networks Journal of Accounting Research (IF 4.9) Pub Date : 2024-06-18 GUOSONG XU
Connected financial journalists—those with working relationships, common school ties, or social media connections to company management—introduce a marked media slant into their news coverage. Using a comprehensive set of newspaper articles covering mergers and acquisition (M&A) transactions from 1997 to 2016, I find that connected journalists use significantly fewer negative words in their coverage
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Importance of transaction costs for asset allocation in foreign exchange markets J. Financ. Econ. (IF 10.4) Pub Date : 2024-06-19 Ilias Filippou, Thomas A. Maurer, Luca Pezzo, Mark P. Taylor
Transaction costs have a first-order effect on the performance of currency portfolios. Proportional costs based on quoted bid–ask spread are relatively small, but when a fund is large, costs due to the trading volume price impact are sizable and quickly erode returns, leaving many popular strategies unprofitable. A mean–variance-transaction-cost optimized approach (MVTC) that accounts for costs in
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Industry and regional peer effects on company innovation Finance Research Letters (IF 7.4) Pub Date : 2024-06-19 Xingquan Yang, Feng Li, Ying Liu
Innovation is crucial for business development and economic growth. This study examines the significance of industry and regional peer effects on company innovation, the underlying motivations, and their economic consequences. We find industry and regional peer significantly affects company innovation. Instrumental variables method is used to confirm the robustness of the findings. We also find that
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Capitalised development costs and future cash flows: The effect of CEO overconfidence and board gender diversity The British Accounting Review (IF 5.5) Pub Date : 2024-06-17 Khadija S. Almaghrabi, Richard Slack, Ioannis Tsalavoutas, Fanis Tsoligkas
Capitalisation of development costs mandated under IAS 38 is an important accounting issue conveying a signal to users of accounting information regarding future economic benefits. Using a longitudinal sample of UK firms, firstly, we examine the adverse effect of CEO overconfidence levels on the association between capitalised development costs and future economic benefits, proxied by cash flows. Secondly
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Linking quality of accounting information system and financial reporting to non-financial performance: The role women managers Int. J. Account. Inf. Syst. (IF 4.1) Pub Date : 2024-06-16 Albertina Paula Monteiro, Joana Vale, Eduardo Leite, Marcin Lis
This study aims to analyze whether non-financial (NF) performance is influenced by the quality of accounting information system (AIS) and the quality/usefulness of financial information (FI) and whether this influence is more pronounced in companies managed by women. Data of 381 Portuguese companies were subjected to structural equations model analysis. The results reveal that (1) companies managed
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The effects of policy interventions to limit illegal money lending J. Financ. Econ. (IF 10.4) Pub Date : 2024-06-15 Kaiwen Leong, Huailu Li, Nicola Pavanini, Christoph Walsh
We estimate a structural model of borrowing and lending in the illegal money lending market using a unique panel survey of 1,090 borrowers taking out 11,032 loans from loan sharks. We use the model to evaluate the effects of interventions aimed at limiting this market. We find that an enforcement crackdown that occurred during our sample period increased lenders’ unit cost of harassment and interest
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Management control systems, business financial literacy and financial leverage in business-incubated start-ups The British Accounting Review (IF 5.5) Pub Date : 2024-06-15 Roberto Graña-Alvarez, Jacobo Gomez-Conde, Ernesto Lopez-Valeiras, Miguel González-Loureiro
Entrepreneurs manage the capital structure of their start-ups to align the assumption of financial risk with their risk appetite. We focus on the ways in which management control systems (MCS), categorized as financial and non-financial MCS, serve as determinants of financial leverage in start-ups. Of particular interest is the influence of entrepreneurs' financial literacy on this relationship. We
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A global study of climate uncertainty and carbon assurance The British Accounting Review (IF 5.5) Pub Date : 2024-06-15 Le Luo, Junru Zhang
Measurement, verification, and reporting of carbon emissions is essential for climate management. However, research on carbon assurance is limited. To address this gap, we investigate the association between climate uncertainty and voluntary carbon assurance. We conceptualize and operationalize four dimensions of micro-level climate uncertainty: innovation, management and performance, supply chain
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Using and Interpreting Fixed Effects Models Journal of Accounting Research (IF 4.9) Pub Date : 2024-06-13 MATTHIAS BREUER, ED DEHAAN
Fixed effects (FE) have emerged as a ubiquitous and powerful tool for eliminating unwanted variation in observational accounting studies. Unwanted variation is plentiful in accounting research because we often use rich data to test precise hypotheses derived from abstract theories. By eliminating unwanted variation, FE reduce concerns that omitted variables bias our estimates or weaken test power.
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The short-termism trap: Catering to informed investors with limited horizons J. Financ. Econ. (IF 10.4) Pub Date : 2024-06-14 James Dow, Jungsuk Han, Francesco Sangiorgi
Does the stock market exert short-term pressure on listed firms, do they respond, and is this response value reducing? We show that limited investor horizons indeed have those consequences, as follows. First, informative stock prices increase firm value; in our model, they reduce the agency cost of incentivizing managers. Second, short project maturity improves stock price informativeness by catering
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Financial market concentration and misallocation J. Financ. Econ. (IF 10.4) Pub Date : 2024-06-14 Daniel Neuhann, Michael Sockin
How does financial market concentration affect capital allocation? We propose a complete-markets model in which real investment and financial price impact are jointly determined in general equilibrium. We identify a two-way feedback mechanism whereby price impact induces misallocation and misallocation raises price impact. The mechanism is stronger if productivity is low or productivity dispersion
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What Drives Variation in the U.S. Debt-to-Output Ratio? The Dogs that Did not Bark J. Financ. (IF 7.6) Pub Date : 2024-06-11 ZHENGYANG JIANG, HANNO LUSTIG, STIJN VAN NIEUWERBURGH, MINDY Z. XIAOLAN
A higher U.S. government debt-to-output (D-O) ratio does not forecast higher surpluses or lower returns on Treasurys in the future. Neither future cash flows nor discount rates account for the variation in the current D-O ratio. The market valuation of Treasurys is surprisingly insensitive to macro fundamentals. Instead, the future D-O ratio accounts for most of the variation because the D-O ratio
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Does central bank transparency converge across the world? Evidence from a club convergence perspective Finance Research Letters (IF 7.4) Pub Date : 2024-06-13 Dinabandhu Sethi, Ujjwal Sharma, Alekha Meher
We study whether there is any evidence of convergence of central bank transparency in 112 countries from 1998 to 2019 using Phillips and Sul panel club convergence technique. The results don't find evidence of a single club convergence of central bank transparency. Instead, our result reveals four clubs converging to their unique transition path. Further, we found that countries with high financial
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Green innovation and firms’ financial and environmental performance: The roles of pollution prevention versus control J. Account. Econ. (IF 5.4) Pub Date : 2024-06-13 Qiang Cheng, An-Ping Lin, Mengjie Yang
This study examines the effects of firms' green innovation on their future financial and environmental performance. If pollution is primarily a manifestation of wasted resources, then investments in pollution technologies can both reduce the environmental impact of production and improve financial performance. In contrast, investments in pollution technologies likely reduce the environmental impact
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How graphical vividness and interactivity in non-financial presentations influence nonprofessional investors Int. J. Account. Inf. Syst. (IF 4.1) Pub Date : 2024-06-13 Yibo James Zhang, Uday Murthy
We investigate how graphical vividness and interactivity in displays of non-financial information following poor financial performance affect the judgments of nonprofessional investors. Leveraging the Hamilton and Winchel (2019) model of dual-process theories of persuasion in financial reporting, we hypothesize and find that graphical vividness and interactivity jointly influence nonprofessional investors
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Exploring market efficiency levels: A powerful approach based on a gamma distribution Finance Research Letters (IF 7.4) Pub Date : 2024-06-12 Abolfazl Askari, Ehsan Hajizadeh
We introduce a novel measure to assess market inefficiency levels and examine their evolution over time using robust statistical principles. Our innovative approach not only facilitates a comprehensive exploration of market efficiency and its economic impacts but also allows for effortless comparisons across various assets, timeframes, regions, and data frequencies. Our findings reveal that during
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Climate change uncertainty and supply chain financing The British Accounting Review (IF 5.5) Pub Date : 2024-06-12 Zhangfan Cao, Steven Xianglong Chen, Ting Dong, Edward Lee
We examine the impact of climate change uncertainty on supply chain financing. We find that firms significantly curtail trade credit provision during periods of high climate change uncertainty. The cross-sectional variations of this effect with firm-specific factors such as vulnerability to climate change, asset redeployability, and pollution severity suggest that it is primarily driven by managerial
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Using data-driven methods to detect financial statement fraud in the real scenario Int. J. Account. Inf. Syst. (IF 4.1) Pub Date : 2024-06-12 Ying Zhou, Zhi Xiao, Ruize Gao, Chang Wang
This study seeks to explore the potential of data-driven methods for developing a financial statement fraud prediction model. We emphasize that building a fraud prediction model that can be used to detect fraud in real-world applications should receive attention from researchers. However, the severe class imbalance issue and the complex nature of fraudulent activities make it a rather challenging task
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Information Aggregation with Asymmetric Asset Payoffs J. Financ. (IF 7.6) Pub Date : 2024-06-11 ELIAS ALBAGLI, CHRISTIAN HELLWIG, ALEH TSYVINSKI
We study noisy aggregation of dispersed information in financial markets without imposing parametric restrictions on preferences, information, and return distributions. We provide a general characterization of asset returns by means of a risk-neutral probability measure that features excess weight on tail risks. Moreover, we link excess weight on tail risks to observable moments such as forecast dispersion
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Inside and Outside Information J. Financ. (IF 7.6) Pub Date : 2024-06-10 DANIEL QUIGLEY, ANSGAR WALTHER
We study an economy with financial frictions in which a regulator designs a test that reveals outside information about a firm's quality to investors. The firm can also disclose verifiable inside information about its quality. We show that the regulator optimally aims for “public speech and private silence,” which is achieved with tests that give insiders an incentive to stay quiet. We fully characterize
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Does digital literacy reduce intergenerational income dependency? International Review of Financial Analysis (IF 7.5) Pub Date : 2024-06-11 Haijun Wang, Chen Ge, Xiance Du, Yiqiang Feng, Weicheng Wang
Smoothing upward mobility channels and reducing intergenerational income dependence are important prerequisites for realizing the sustainable development of all humankind. Starting from the impact of digital economy on micro individuals, this paper explores the mechanisms of digital literacy on families' dependence on intergenerational income. The paper revealed the following findings: First, the improvement
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Quantum and AI-based uncertainties for impact-relation map of multidimensional NFT investment decisions Finance Research Letters (IF 7.4) Pub Date : 2024-06-11 Hasan Dinçer, Serhat Yüksel, Jaehyung An, Alexey Mikhaylov
The purpose of this study is to identify the most essential determinants of NFT investments with a novel artificial intelligence based fuzzy decision-making model. First, the expert choices are prioritized with artificial intelligence methodology. Secondly, the criteria for multidimensional NFT investment decisions are weighted with Quantum picture fuzzy rough sets based DEMATEL. The findings denote
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Monetary policy and innovation in Europe: An SVAR approach Finance Research Letters (IF 7.4) Pub Date : 2024-06-11 Gianni Carvelli, Eleonora Bartoloni, Maurizio Baussola
Using quarterly data, we estimate the effects of monetary policy on innovation in the Eurozone over 2000–2021. Variations in the monetary stance may affect how firms and governments allocate resources to innovative investments. The identification of the structural shocks relies on an SVAR framework with a set of exclusion restrictions. Although characterised by the predominance of ZLB periods, conventional
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Rank-and-file employee stock options and audit pricing: Evidence from S&P 1500 firms The British Accounting Review (IF 5.5) Pub Date : 2024-06-11 Xiaoqi Chen, Maoliang Li, Emmanuel Obiri-Yeboah, Qiang Wu
In this study, we examine the impact of rank-and-file employee stock options on audit fees. We document compelling evidence that option grants to rank-and-file employees are positively related to audit fees. Further analyses show that this positive relation is more pronounced when a firm's real earnings manipulation risk is higher and when rank-and-file employees are more sensitive to monetary incentives
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Concealed carry J. Financ. Econ. (IF 10.4) Pub Date : 2024-06-08 Spencer Andrews, Riccardo Colacito, Mariano M. Croce, Federico Gavazzoni
The slope carry takes a long (short) position in the long-term bonds of countries with steeper (flatter) yield curves. The traditional carry takes a long (short) position in countries with high (low) short-term rates. We document that: (i) the slope carry return is slightly negative (strongly positive) in the pre (post) 2008 period, whereas it is concealed over longer samples; (ii) the traditional
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Foreign equity lookback options with partial monitoring Finance Research Letters (IF 7.4) Pub Date : 2024-06-08 Hangsuck Lee, Hongjun Ha, Byungdoo Kong
A lookback option on foreign equity reduces the uncertainty of foreign investment by delivering the benefit of hindsight. Despite its high marketability, purchasing the option is stalled due to the failure to meet customized demands. This paper proposes foreign equity lookback options with partial monitoring and floating strike price to control the option premiums. We establish the expected value of
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Portfolio's weighted political risk and mutual fund performance: A text-based approach Finance Research Letters (IF 7.4) Pub Date : 2024-06-08 Huong Giang Nguyen, Khanh Hoang, Quan M.P. Nguyen, Hung Xuan Do, Duc Khuong Nguyen
Using text-based measures of firm-level political risk, we find a negative impact of the portfolio's weighted political risk on U.S. mutual fund performance. This relationship is robust to a wide range of topic-specific political risks at the firm level. We, however, find that national geopolitical risk, the U.S. state-level economic policy uncertainty, and Brexit-induced risk do not affect mutual
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Customer structure and R&D investment: Based on innovative trait Finance Research Letters (IF 7.4) Pub Date : 2024-06-08 Wenxin Cui, Cuixia Qiao
This paper selects China's A-share listed companies in the manufacturing industry from 2017 to 2022 as a research sample to explore the relationship between customer structure and enterprise R&D investment. It is found that customer concentration has a significant negative impact on the R&D investment of manufacturing enterprises, and the mediating effect of enterprise financing constraints is significant;
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Director networks, accounting conservatism and director reputation: Evidence after financial reporting failure The British Accounting Review (IF 5.5) Pub Date : 2024-06-08 Chih-Liang Liu, Shu-Miao Lai, In-Mu Haw
This study examines whether connected boards of directors restore their reputation via conservative accounting after financial misstatements. Using a sample of restating firms from 2004 to 2020, we find central boards of directors are positively related to accounting conservatism in the post-restatement period. More importantly, we find accounting conservatism has positive effects on the reputation
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Fair value accounting standards and securities litigation J. Account. Econ. (IF 5.4) Pub Date : 2024-06-08 Musaib Ashraf, Dain C. Donelson, John McInnis, Richard D. Mergenthaler
We examine the effect of fair value standards on firms' litigation risk. The discretion required by fair value allows plaintiffs to “second guess” managers' judgments, potentially increasing litigation risk. Alternatively, the complexity of fair value may decrease litigation risk if it's more difficult to demonstrate scienter. Our evidence suggests firms that rely more on fair value standards are relatively
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How do Treasury dealers manage their positions? J. Financ. Econ. (IF 10.4) Pub Date : 2024-06-07 Michael Fleming, Giang Nguyen, Joshua Rosenberg
Using 31 years of data (1990–2020) on U.S. Treasury dealer positions, we find that Treasury issuance is the main driver of dealers’ weekly inventory changes. Such inventory fluctuations are only partially offset in adjacent weeks and not significantly hedged with futures. Dealers are compensated for inventory risk by means of subsequent price appreciation of their holdings. Amid increased balance sheet
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Intermediation frictions in debt relief: Evidence from CARES Act forbearance J. Financ. Econ. (IF 10.4) Pub Date : 2024-06-07 You Suk Kim, Donghoon Lee, Tess Scharlemann, James Vickery
We study how intermediaries – mortgage servicers – shaped the implementation of mortgage forbearance during the COVID-19 pandemic and use servicer-level variation to trace out the causal effects of forbearance on borrowers. Forbearance provision varied widely across servicers. Small servicers, nonbanks, and especially nonbanks with small liquidity buffers, facilitated fewer forbearances and saw a higher
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The death of a regulator: Strict supervision, bank lending, and business activity J. Financ. Econ. (IF 10.4) Pub Date : 2024-06-07 João Granja, Christian Leuz
We exploit the extinction of the thrift supervisor (OTS) to analyze the effects of supervision on bank lending and bank management. We first show that the OTS replacement resulted in stricter supervision of former OTS banks. Next, we analyze the ensuing lending effects and show that former OTS banks on average increase small business lending by roughly 10 percent. This increase is concentrated in well-capitalized
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Money and Banking with Reserves and CBDC J. Financ. (IF 7.6) Pub Date : 2024-06-05 DIRK NIEPELT
We analyze the role of retail central bank digital currency (CBDC) and reserves when banks exert deposit market power and liquidity transformation entails externalities. Optimal monetary architecture minimizes the social costs of liquidity provision, and optimal monetary policy follows modified Friedman rules. Interest rates on reserves and CBDC should differ. Calibrations robustly suggest that CBDC
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Enterprises’ internationalization, R&D investment and enterprise performance Finance Research Letters (IF 7.4) Pub Date : 2024-06-06 Yanyu Fu
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Public procurement and bank lending Finance Research Letters (IF 7.4) Pub Date : 2024-06-06 Anže Burger, Matej Marinč, Sašo Polanec, Patricia Kotnik
This article unveils that government is intertwined with banking through a hitherto underexplored channel—through public procurement. On a comprehensive firm-level dataset that combines public procurement and accounting data, we apply the difference-in-differences method to show that treated firms that secure a public procurement contract can strengthen their bank borrowing terms. Treated firms obtain
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The impact of green finance and technology on the commercial banks’ profit and risk Finance Research Letters (IF 7.4) Pub Date : 2024-06-06 Zhiyi Zhou, Jing Tong, Haoyang Lu, Shouyi Luo
This paper investigates the impact of green credit on the performance and risk of Chinese commercial banks, and also explores the impact of green technology on this mechanism. The results show that for all banks, green loan balances have a significantly negative impact on net profit. While for large, small and medium sized banks, it also reduces and increases bank insolvency risk respectively. Therefore
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The uncertainty of fluctuation correlations in global stock markets Finance Research Letters (IF 7.4) Pub Date : 2024-06-05 Faming Wang, Xueyun Rong, Lei Yin
Revealing the associations among stocks is fundamental for unveiling the underlying rules of global stock markets. In this work, we propose a combined entropy–complex network framework that detects fluctuation connections among stock prices. The results demonstrate that global stock markets show high uncertainty (high entropy). Based on our analysis of the system's symmetry and dominant correlation
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The Time-Varying Price of Financial Intermediation in the Mortgage Market J. Financ. (IF 7.6) Pub Date : 2024-06-04 ANDREAS FUSTER, STEPHANIE H. LO, PAUL S. WILLEN
We introduce a new measure of the price charged by financial intermediaries for connecting mortgage borrowers with capital market investors. Based on administrative lender pricing data, we document that the price of intermediation reacts strongly to variation in demand, reflecting capacity constraints of mortgage originators. This positive comovement of price with quantity reduced the pass-through