Tracking the build-up of financial vulnerabilities is a key component of financial stability policy. Due to the complexity of the financial system, this task is daunting, and there have been several proposals on how to manage this goal. One popular way is through the creation of indices that act as a signal for the policy maker. While factor modelling in finance and economics has a rich history, most

Our purpose is to check the dynamic asymmetric volatility connectedness among the Green Finance Index and six large US technology stocks. The QVAR connectedness framework, the quantile Granger causality test, the TVP-VAR frequency connectedness framework, and the quantile-on-quantile regression (QQR) function were employed to measure the cross-frequency and quantile risk dependencies among these indices

It is rather a norm for researchers to directly use the log difference of an asset price to compute returns. Just like using lnX+1 to avoid taking the natural logarithm of zero(s). However, this log returns is but a conditional approximation of the actual returns. Nonetheless, can log difference approximations and the lnX+1 common practices produce BLUE estimates? Using the log return as an example

This study examines whether the equity lending supply strengthens or weakens corporate risk-taking behaviors. The evidence shows that ex-ante short selling can unintentionally function as an external governance mechanism to discipline self-interested, risk-averse managers. This showed an increase in long-term risk-taking among U.S. firms from 2006 to 2017. The robustness of our findings is confirmed

Growing risks and potential disruptions in global supply chains underscore the urgent need to enhance supply resilience. This research focuses on relationship-specific investments by suppliers that target resilience enhancement through performance improvements, cost efficiency, and the establishment of trust. Using a real options framework, we construct a coopetition model between suppliers and manufacturers

Our study empirically explores how public interest in biodiversity influences the financial performance of novel investment solutions that specifically promote biodiversity. We consider three distinct metrics capturing public attention to biodiversity: the daily Google Search Volume index for “biodiversity”, the daily media coverage of biodiversity, and the daily visits to the “biodiversity” page on

Employing a sample of 16,718 firms across 38 countries from 2000 to 2022, we find that ex ante attitudes in society toward dishonest behavior, instead of fraudulent acts, are adequate to provoke firm-level stock price crash risk. Specifically, we document that fraud tolerance in society is positively related to crash risk. The result implies that fraud tolerance promotes managerial opportunistic behavior

The ideal model specification for asset price volatility forecasting is still an open question. From a variable transformation perspective, existing studies arbitrarily choose between the raw volatility measure, its square root form, or its natural logarithmic form. In this paper, both the in- and out-of-sample forecasting results support the effectiveness of variable transformation compared to the

This paper aims to examine the stochastic behavior of green bond premiums that can characterize the benefits of green bonds. We propose a novel affine model of green bond pricing with mean-reverting interest rates and green bond premiums and a new model parameter estimation method using conventional and green bond prices to capture the stochastic behavior. Then, the model parameter estimation results

This study explores the relationship between macroprudential policies, inflation, and bank risk in emerging economies. Several significant findings emerge based on panel data from approximately 1400 commercial banks across 32 emerging economies over the period 2000–2018. Firstly, a positive correlation is observed between inflation rates and bank risk, suggesting that inflation increases financial

This paper firstly investigates the impact of digitalisation on bank efficiency and then analyses potential non-linearities in this relationship, as well as the possible moderating role played by bank business models, covering a sample of European banks over the period 2006–2021. Our results suggest that IT investments improve bank efficiency - more on the profit side than on the cost side – but that

This paper examines the spillover effect of economic policy uncertainty (EPU) on real effective exchange rate volatility in a sample of 23 countries. We use a multivariate quantile model to measure EPU spillovers for each country and find that EPU spillovers have a significant and positive effect on subsequent exchange rate volatility in both developed and emerging markets. The spillover effect is

This study examines the effects of failed corporate mergers and acquisitions (M&A) on the innovation activities of manufacturing firms. It analyses the mechanism behind this impact by drawing on relevant literature and theories. The analysis is conducted using panel data from 2382 A-share listed manufacturing firms between 2009 and 2022. The findings indicate that following the collapse of corporate

We present a multi-objective portfolio optimization framework that accounts for both systemic risk arising from overlapping portfolios and individual risk. To address non-convexity in the objective function, we introduce an Evolutionary Search algorithm that enables efficient exploration of the solution space. Applying our framework to EBA data on sovereign exposures, we find that minimizing systemic

We examine the effect of hurricanes on the stock market, specifically on US energy companies. Unlike in the previous literature, we identify the timing and severity of hurricane events using the attention they receive online. Using our improved measure of hurricane events, we estimate dynamic common correlated effect panel models with daily and intraday stock returns over the last two decades and find

Using data from A-share listed companies from 2011 to 2022, this paper uses the two-way fixed effects technique to investigate the relationship between social trust and corporate financialization. The finding shows that implementing regional social trust can help the business financialization process faster. Reducing cash dividends, improving managers' incentive to seek remuneration, and easing financing

This article uses market volatility effects to answer the question of which leaders matter to financial markets. We use a unique large dataset of over 22,000 management change announcements from S&P 500 companies together with an augmented Fama and French 5-factor model. Rolling ARCH panel regressions identify how idiosyncratic changes in daily stock price volatility are associated with changes in

Drawing upon city-level data spanning from 2011 to 2021, this paper delves into the implications of digital financial inclusion's development on mitigating urban environmental pollution. Our findings underscore the efficacy of digital inclusive finance in significantly reducing urban pollution. This effect is primarily attributed to digital inclusive finance's ability to foster urban innovation capacity

In accordance with stakeholders' theory and the reputation-building hypothesis, environmental, social and governance (ESG) disclosure and voluntary earnings guidance are important ways of enhancing a firm's transparency. Using data of U.S. publicly listed companies from 2002 to 2021, we find that the level of ESG disclosure (measured with Bloomberg and machine learning (ML) ESG disclosure scores) is

This study examines the aggressiveness of orders submitted by retail investors trading on the same exchange but from different time zones. Individuals located to the west of the exchange's time zone and, therefore, behind in time are less aggressive in their order submission than investors located in the exchange's time zone. We attribute this observation to the difference in time available for processing

Faced with the increasing risk of supply chain disruption, more firms are using mergers and acquisitions or investments to expand their core business's upstream and downstream supply chain and improve their vertical integration. In this vertical integration trend, the cost of capital for core firms is crucial to coordinating the entire supply chain. We manually collected input-output matrix data of

We investigate the introduction effect of ProShares bitcoin strategy ETF (BITO) on investor structure and market quality in Chicago Mercantile Exchange bitcoin futures. We find that the BITO introduction significantly changes the investor structure in bitcoin futures, with ETF asset managers being the major long-side participants against the short-side hedge funds. Furthermore, market participants

We investigate interaction effects in cryptocurrency markets by constructing and evaluating double-sorted portfolios based on 40 different characteristics. Using a dataset of over 500 major coins and tokens from 2017 to 2023, we identify numerous significant interactions. The most pronounced effects arise from the interplay of liquidity, risk, and past return measures. An out-of-sample long-short strategy

We developed EmTract, an open-source tool designed to extract investor emotions from financial social media data. We contribute a novel dataset of 10,000 financial social media messages annotated with emotion labels and improve the DistilBERT model by incorporating 4861 tokens, including emojis and emoticons. This augmentation improved the model’s accuracy by over 3 percentage points compared to the

Utilizing data from non-financial listed companies in Shanghai and Shenzhen A-share markets spanning from 2008 to 2021, and with a particular emphasis on the issuance of the Green Credit Guidelines in 2012, this study delves into the actual ramifications of the green credit policy on enterprises' environmental protection investments through the application of the difference-in-differences method. The

Climate considerations are rising on the agenda of central banks worldwide. Given the importance of the general public's trust for the success of central bank policy, the objective of our study is to examine how this trust may change in response to green central bank measures. We rely on an independently conducted survey of 1000 Hungarian adults and apply multinomial and ordered logistic regressions

Given evidence of low abnormal returns to ESG stock investment, growth in ESG focused stock investment suggests a wider utility from holding higher ESG performance stocks. We add detail and granularity through a double-sorted portfolio approach across two ESG measures and 24 anomalies. Traditional anomaly factor sort strategies may be enhanced by ESG information to produce an annualised ESG tilted

Conventional risk proxies are measured assuming that investors have symmetric risk preferences, with upside and downside deviations from the expectation being equivalently undesirable. Responsible investors, however, have dual financial aims of enhancing upside potential while reducing downside risk by actively incorporating environmental, social, and governance (ESG) aspects into the investment process

This study aims to empirically investigate the impact of establishing bankruptcy courts on corporate bankruptcy risk using a difference-in-differences model. The findings reveal that the establishment of these courts significantly reduces corporate bankruptcy risk. Additionally, the study explores the underlying mechanism through which bankruptcy courts affect this risk, suggesting that they effectively

Promoting energy efficiency optimization and upgrading the energy structure is a crucial pathway for energy companies to achieve a green and low-carbon transformation. This paper first constructs an endogenous growth E-DSGE model to analyze the impact of environmental regulation policy on energy efficiency optimization and carbon reduction. It further investigates the role of targeted monetary policy

Stock-related YouTube views and videos have significantly increased during and after COVID-19. Our empirical research shows that YouTube view count has a significantly positive impact on retail investor buying behavior, and short-term stock return. During and after COVID-19, the 15-day average Buy-and-Hold Abnormal Returns (BHAR) remained positive for firms with more YouTube views. This empirical result

This paper undertakes a horse races style comparison of the efficacy of a range of multifactor asset pricing models in explaining the cross section of stock returns in African securities markets. Valuation factors used include size, book-to-market value, momentum, operating profit, asset growth or investment, liquidity and investor protection. Using monthly returns of 375 blue chip firms from 8 African

This study investigates whether the corporate culture of a firm affects its tax shelter behavior. We use a novel machine learning methodology to measure the corporate culture of a firm. Our results show that firms with stronger corporate culture are more likely to have material operations in tax haven countries and the extent of such operations is greater in these firms. The findings also suggest that

Provisions involve a high degree of judgment by corporate managers and substantially affect companies’ reported performance, arguably making them prone to earnings management. To analyze the strategic use of provisions under International Accounting Standard (IAS) 37, we examine the notes disclosures of large European companies that provide detailed information about yearly additions and utilized and

Extant research emphasizes that corporate governance (CG) significantly influences environmental, social, and governance (ESG) outcomes. This paper undertakes a content analysis and reviews 91 academic articles published in 41 journals over the past 14 years (2010-2023). We examine the role of CG in ESG outcomes by focusing on CG themes, ESG indicators, theories, countries, and empirical methodologies

This study investigates the effects of the delay of revenue generation on a firm’s investment timing and size decisions. Time-to-build and regulation are considered as internal and external factors that impede the firm’s instant revenue generation, respectively. We show that in the absence of regulation, uncertainty in time-to-build always advances the timing of investment; however, the capacity size

In this paper, we reveal an overlooked but important role of corporate governance on investment efficiency: non-CEO executives. Internal governance, measured as the fraction of independent executives appointed before the current CEO, leads to a better investment efficiency. The governance effect is pronounced when executives have stronger incentives, such as a longer horizon or a higher shareholding

This study introduces the ESG-washing Severity Index (ESGSI) for quantitatively assessing discrepancies between portrayed and actual sustainability practices in corporate disclosures. Using advanced Natural Language Processing (NLP) techniques, we analyze sustainability reports from 749 listed companies, integrating sentiment analysis with the frequency of sustainability terms to calculate the ESGSI

By modelling the whole U.S. syndicated loan market as a financial network from 2000 to 2022, we find that highly connected institutions hold significant shares of leveraged and covenant-lite loans. Our analysis indicates that the size of leveraged and covenant-lite syndicated loan portfolios increases financial institutions' systemic risk, particularly during recession periods. Although banks commonly

This paper explores the relationship between carbon emissions reduction and corporate financial performance, leveraging a rich dataset of 14,866 observations from 2768 companies across 36 countries and regions, and 35 industries over the period 2002–2022. We find that carbon emissions reductions improve company financial performance, as measured by return on assets and return on equity, with this effect

Polytope Fraud Theory (PFT) extends the existing triangle and diamond theories of accounting fraud with ten abnormal financial practice alarms that a fraudulent firm might trigger. These warning signals are identified through evaluation of the shorting behavior of sophisticated activist short sellers, which are used to train several supervised machine learning methods in detecting financial statement

In this study, we argue that successful exit outcomes (Trade Sales (TS) or IPO) from VCs' cross-border investments are influenced by time-since-first-funding-received (TSFFR) by the venture. As TSFFR increases, the venture reveals more information about its potential, influencing the value that trade and IPO buyers place on it. This, in turn, influences whether VCs exit via a TS or an IPO. Analyzing

The financial inclusion paradigm is increasingly considered a veritable development model. Therefore, we argue that a deeper understanding of it is necessary for enabling policies and strategies that would yield positive development outcomes (successful financial inclusion). We explore this argument by first, defining “effective financial inclusion” along the lines of identifiable population groups

Using an aggregate measure of corporate culture, we find that firms with stronger corporate culture encounter lower investment inefficiency. We show that reducing information asymmetry or engaging in tax avoidance are two potential channels through which corporate culture reduces investment inefficiency. Further analyses reveal that the aforementioned relationship is more pronounced for firms with

The volatility of cross-border capital flow (CF) has become higher in the last two decades. We use a sample of advanced and emerging market economies in the last two decades, with a focus on portfolio fund flows (equities and bonds). We find that the impact of portfolio CF volatility on exchange rate (FX) volatility is diminished in the short-term if specific economic fundamentals of the country are

This paper studies the influence of Reddit social media attention on investor risk-taking and welfare using individual trading data from a large trading platform. We show that attention generated on the subreddit r/wallstreetbets (WSB) spurs uninformed trading, also in short positions. WSB attention increases overall risk levels as investors trade riskier stocks and allocate larger portfolio shares

Based on a sample of pre-sale crowdfunding projects launched on the Kickstarter platform between 2009 and 2021, we find that using promotional words in project descriptions positively affects crowdfunding performance and the effect becomes stronger over time. We also find that, when lying cost is high, when the proportion of naïve investors is high, or when there exists a contemporaneous signal, the

This paper investigates optimal reinsurance under the consideration of contagious catastrophe claims and secondary claims, and the intensity of the latter is modeled as a shot noise process impacted by the former. Also, an α-maxmin mean–variance (MV) criterion is adopted to allow the insurer to have different levels of ambiguity aversion attitudes, and the general mean–variance premium principle is

This study examines the relationships between the individual components of environmental, social, and governance (ESG) performance and future stock returns of US Real Estate Investment Trusts (REITs). The findings demonstrate a negative association between environmental performance and expected returns, while social performance shows a positive relationship with future returns. Moreover, the study

We assess how climate transition risk, through its effects on asset prices, could impact financial stability. Using copula functions, we characterize the conditional distribution of financial firm returns under different climate-related market scenarios. We account for average and tail effects of climate transition scenarios on the value of financial firms using three systemic risk metrics: climate

Successfully achieving an integration strategy with a target depends on various factors. This paper examines how investor sentiment might influence the Merger and Acquisition (M&A) completion process. Using an international sample, the results indicate that a high level of investor sentiment significantly decreases the likelihood of a deal withdrawal and may lead bidders to make non-rational M&A decisions

We examine the comprehensive causal impact of interbank deposits on bank systemic risk by using an international sample of Group of Twenty (G20) listed banks. Using the global wage direct deposit policy as an exogenous shock to interbank deposits, we find that higher interbank deposits result in greater bank systemic risk. A series of instrumental variable approaches, entropy-balanced method, and persistence

This paper investigates whether financial inclusion affects life satisfaction. We perform regressions at the individual level on a large dataset of 59,209 individuals from 29 countries. We find evidence that financial inclusion improves life satisfaction. We further establish that the beneficial effect of financial inclusion takes place through a better health, education and to a lesser extent through

This study examines the impact of WTO climate-related Trade Policy Reviews (TPR) on corporate efforts towards going green, specifically focusing on green technology adoption. Utilising a longitudinal sample comprising 30 countries from 2009 to 2019, the study provides original evidence that companies in countries with more frequent TPRs tend to adopt more green technologies. Channel analysis reveals

This study aims to investigate the role of investor sentiment in the emerging metaverse market, a novel entrepreneurship model. Empirical analyses are conducted through various causality tests to reveal the predictive power of investor sentiment on the price developments of the metaverse market. The Nonlinear Granger causality test indicates causal effects running from BTC (Bitcoin), GT (Google Trend)

We explore the tail risk spillover in the stock and foreign exchange (forex) markets along the G20 countries based on the tail-event driven network (TENET) method. To effectively capture the risk spillover mechanism from the tail-dependence perspective, we analyze the network connectedness in four aspects (namely system, market, region, and country) and explore it at the major emergencies. We find

This study comprehensively investigates stock market volatility based on over one hundred monthly macroeconomic variables, applying machine learning models. Methodological contribution integrating the random forest (RF) with the least absolute shrinkage and selection operator methods (LASSO). Importantly, the RF-LASSO model can robustly achieve the best forecasting performance under different circumstances

We examine the stock market effects of the announcement and issuance of convertible bonds by European companies, conditional on the extent to which the issuers are covered by equity analysts. While there is no significant market reaction to the issue itself, its first announcement is associated with significant negative abnormal returns. However, we find that abnormal returns are less negative for