Pub Date : 2024-11-10DOI: 10.1016/j.frl.2024.106442
Chengyin Gao , Shujun Zhang
This paper explores the link between corporate ESG performance and financialization using a sample of publicly listed companies on the Shanghai and Shenzhen stock exchanges from 2010 to 2022. Baseline regression results indicate that engaging in ESG practices can effectively curb tendencies towards financialization, achieved through enhanced corporate risk management capabilities. Mechanism analysis reveals that value creation mitigates the restrictive effect of ESG performance on financialization. Additionally, heterogeneity analysis shows that different policies and levels of technological advancement influence the effectiveness of ESG impacts.
{"title":"ESG performance and corporate financialization: A dual perspective of risk management and value creation","authors":"Chengyin Gao , Shujun Zhang","doi":"10.1016/j.frl.2024.106442","DOIUrl":"10.1016/j.frl.2024.106442","url":null,"abstract":"<div><div>This paper explores the link between corporate ESG performance and financialization using a sample of publicly listed companies on the Shanghai and Shenzhen stock exchanges from 2010 to 2022. Baseline regression results indicate that engaging in ESG practices can effectively curb tendencies towards financialization, achieved through enhanced corporate risk management capabilities. Mechanism analysis reveals that value creation mitigates the restrictive effect of ESG performance on financialization. Additionally, heterogeneity analysis shows that different policies and levels of technological advancement influence the effectiveness of ESG impacts.</div></div>","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"71 ","pages":"Article 106442"},"PeriodicalIF":7.4,"publicationDate":"2024-11-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142660486","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-09DOI: 10.1016/j.frl.2024.106389
Tiphaine Jérôme , Cédric Poretti
This article investigates the stock market reaction to the voluntary adoption of nature-related financial disclosures (TNFD) Recommendations, which focus on nature-related dependencies, impacts, risks, and opportunities. Investors may view this adoption as either value-destroying or value-enhancing. Using an event-study methodology, we analyze a global sample of listed companies. The results reveal significant negative cumulative abnormal returns when companies announce their adoption of the TNFD Recommendations. This negative effect is stronger for firms adopting the Recommendations as of fiscal year 2025 (versus 2024) and for firms in the basic materials, real estate, and utilities industries.
{"title":"Stock market reaction to the voluntary adoption of nature-related financial disclosure: An event study","authors":"Tiphaine Jérôme , Cédric Poretti","doi":"10.1016/j.frl.2024.106389","DOIUrl":"10.1016/j.frl.2024.106389","url":null,"abstract":"<div><div>This article investigates the stock market reaction to the voluntary adoption of nature-related financial disclosures (TNFD) Recommendations, which focus on nature-related dependencies, impacts, risks, and opportunities. Investors may view this adoption as either value-destroying or value-enhancing. Using an event-study methodology, we analyze a global sample of listed companies. The results reveal significant negative cumulative abnormal returns when companies announce their adoption of the TNFD Recommendations. This negative effect is stronger for firms adopting the Recommendations as of fiscal year 2025 (versus 2024) and for firms in the basic materials, real estate, and utilities industries.</div></div>","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"71 ","pages":"Article 106389"},"PeriodicalIF":7.4,"publicationDate":"2024-11-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142660572","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-09DOI: 10.1016/j.frl.2024.106438
Zhongze Li , Qinyuan Chen , Yi Zhang
Using a sample of Chinese listed firms, we examine the effect of capital market liberalization on corporate diversification in the host country. Our findings show that after the opening of the capital market, corporate diversification significantly reduces. Moreover, we show that improving the quality of internal control is an important mechanism for capital market liberalization to reduce corporate diversification. Heterogeneity tests show that the effect of capital market liberalization on corporate diversification is more significant in firms with dual CEOs and low board diligence. Overall, capital market liberalization enhances the corporate governance of firms in a host country.
{"title":"Capital market liberalization, internal control and corporate diversification: Evidence from China","authors":"Zhongze Li , Qinyuan Chen , Yi Zhang","doi":"10.1016/j.frl.2024.106438","DOIUrl":"10.1016/j.frl.2024.106438","url":null,"abstract":"<div><div>Using a sample of Chinese listed firms, we examine the effect of capital market liberalization on corporate diversification in the host country. Our findings show that after the opening of the capital market, corporate diversification significantly reduces. Moreover, we show that improving the quality of internal control is an important mechanism for capital market liberalization to reduce corporate diversification. Heterogeneity tests show that the effect of capital market liberalization on corporate diversification is more significant in firms with dual CEOs and low board diligence. Overall, capital market liberalization enhances the corporate governance of firms in a host country.</div></div>","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"71 ","pages":"Article 106438"},"PeriodicalIF":7.4,"publicationDate":"2024-11-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142660574","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-09DOI: 10.1016/j.frl.2024.106407
Qin Yang , Xiuguo Gong , Tao Chen , Tian Xiao
Geopolitical tensions increasingly affect China’s outward foreign direct investment (OFDI); however, conventional risk models do not adequately capture these complexities. This study introduces a new quantitative index for assessing the political risks impacting Chinese OFDI along the Belt and Road Initiative, considering both host country systems and bilateral relations. Our analysis reveals an inverse relationship between the host country’s political risk and China’s OFDI, with a tendency towards developing nations. Coastal countries are more sensitive to political risks than landlocked ones. Strong US ties in host countries discourage Chinese investment, whereas market size, resources, and innovation capacity moderate the risk effects. These results provide critical insights for policymakers and business leaders to guide strategic investments and diplomatic strategies in politically volatile regions.
{"title":"Political risk impact on China’s OFDI along the belt and road initiative","authors":"Qin Yang , Xiuguo Gong , Tao Chen , Tian Xiao","doi":"10.1016/j.frl.2024.106407","DOIUrl":"10.1016/j.frl.2024.106407","url":null,"abstract":"<div><div>Geopolitical tensions increasingly affect China’s outward foreign direct investment (OFDI); however, conventional risk models do not adequately capture these complexities. This study introduces a new quantitative index for assessing the political risks impacting Chinese OFDI along the Belt and Road Initiative, considering both host country systems and bilateral relations. Our analysis reveals an inverse relationship between the host country’s political risk and China’s OFDI, with a tendency towards developing nations. Coastal countries are more sensitive to political risks than landlocked ones. Strong US ties in host countries discourage Chinese investment, whereas market size, resources, and innovation capacity moderate the risk effects. These results provide critical insights for policymakers and business leaders to guide strategic investments and diplomatic strategies in politically volatile regions.</div></div>","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"71 ","pages":"Article 106407"},"PeriodicalIF":7.4,"publicationDate":"2024-11-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142660477","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-09DOI: 10.1016/j.frl.2024.106405
Qinyi Gong, Rui Zhang
This paper uses provincial level data from 2011 to 2020 in China to analyse the role and mechanism of digital finance in the sustainable growth of China's rural economy. We find that digital finance promotes sustainable rural economic growth by accelerating China's rural energy transition. When the level of rural energy transition exceeds the threshold, the promoting effect is stronger. As the level of regional digital finance development increases, its promoting effect on energy transition and sustainable economic growth also becomes stronger. Compared to the breadth of coverage and depth of use, the degree of digitization has the greatest impact.
{"title":"Digital finance as a catalyst for energy transition and sustainable rural economic growth","authors":"Qinyi Gong, Rui Zhang","doi":"10.1016/j.frl.2024.106405","DOIUrl":"10.1016/j.frl.2024.106405","url":null,"abstract":"<div><div>This paper uses provincial level data from 2011 to 2020 in China to analyse the role and mechanism of digital finance in the sustainable growth of China's rural economy. We find that digital finance promotes sustainable rural economic growth by accelerating China's rural energy transition. When the level of rural energy transition exceeds the threshold, the promoting effect is stronger. As the level of regional digital finance development increases, its promoting effect on energy transition and sustainable economic growth also becomes stronger. Compared to the breadth of coverage and depth of use, the degree of digitization has the greatest impact.</div></div>","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"71 ","pages":"Article 106405"},"PeriodicalIF":7.4,"publicationDate":"2024-11-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142660656","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-09DOI: 10.1016/j.frl.2024.106435
Leonardo Boni, Lisa Scheitza
This paper examines the effect that the EU Action Plan on Sustainable Finance has on mobilizing private finance for sustainable-purpose companies. Our results suggest that the EU regulation has substantially augmented the influx of private financial capital into companies with sustainability purposes situated in EU countries subject to the regulation. This is valid mostly for companies whose purpose addresses environmental issues, while companies focused on social issues did not find a significant increase in financial attractions. Our findings contribute to understanding the role of policies to facilitate the transition of private finance towards sustainable development.
{"title":"Analyzing the role of regulation in shaping private finance for sustainability in the European Union","authors":"Leonardo Boni, Lisa Scheitza","doi":"10.1016/j.frl.2024.106435","DOIUrl":"https://doi.org/10.1016/j.frl.2024.106435","url":null,"abstract":"This paper examines the effect that the EU Action Plan on Sustainable Finance has on mobilizing private finance for sustainable-purpose companies. Our results suggest that the EU regulation has substantially augmented the influx of private financial capital into companies with sustainability purposes situated in EU countries subject to the regulation. This is valid mostly for companies whose purpose addresses environmental issues, while companies focused on social issues did not find a significant increase in financial attractions. Our findings contribute to understanding the role of policies to facilitate the transition of private finance towards sustainable development.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"1 1","pages":""},"PeriodicalIF":10.4,"publicationDate":"2024-11-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142673161","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-08DOI: 10.1016/j.frl.2024.106423
Xiaofang Guo , Sicen Chen , Chenlan Liu
The business environment is essential for enterprise survival and development. A favorable business environment promotes high-quality enterprise development; however, research on its impact and mechanism regarding corporate environmental protection investment is lacking. This study examined China's Shanghai and Shenzhen A–share listed companies from 2010 to 2020 to explore the relation between the business environment and corporate environmental protection investment. We found that a positive business environment contributes to increased corporate environmental protection investment, alleviating financing constraints and promoting digital transformation as essential mechanisms. Heterogeneity analysis demonstrates that this promotion effect was more pronounced among nonstate-owned enterprises and nonheavy-polluting industry firms. This study augments the literature concerning business environments and firms’ environmental protection investment by elucidating their impact mechanism and providing a reference for government departments in optimizing business environments.
企业生存和发展离不开营商环境。良好的营商环境能促进企业的高质量发展，但对营商环境对企业环保投资的影响及作用机制的研究却十分匮乏。本研究以 2010-2020 年中国沪深 A 股上市公司为研究对象，探讨了商业环境与企业环保投资之间的关系。我们发现，积极的商业环境有助于增加企业环保投资，缓解融资约束和促进数字化转型是其基本机制。异质性分析表明，这种促进效应在非国有企业和非重污染行业企业中更为明显。本研究阐明了营商环境与企业环保投资的影响机制，为政府部门优化营商环境提供了参考，从而丰富了有关营商环境与企业环保投资的文献。
{"title":"Business environment optimization effects on enterprise environmental protection investment","authors":"Xiaofang Guo , Sicen Chen , Chenlan Liu","doi":"10.1016/j.frl.2024.106423","DOIUrl":"10.1016/j.frl.2024.106423","url":null,"abstract":"<div><div>The business environment is essential for enterprise survival and development. A favorable business environment promotes high-quality enterprise development; however, research on its impact and mechanism regarding corporate environmental protection investment is lacking. This study examined China's Shanghai and Shenzhen A–share listed companies from 2010 to 2020 to explore the relation between the business environment and corporate environmental protection investment. We found that a positive business environment contributes to increased corporate environmental protection investment, alleviating financing constraints and promoting digital transformation as essential mechanisms. Heterogeneity analysis demonstrates that this promotion effect was more pronounced among nonstate-owned enterprises and nonheavy-polluting industry firms. This study augments the literature concerning business environments and firms’ environmental protection investment by elucidating their impact mechanism and providing a reference for government departments in optimizing business environments.</div></div>","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"71 ","pages":"Article 106423"},"PeriodicalIF":7.4,"publicationDate":"2024-11-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142660658","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-08DOI: 10.1016/j.frl.2024.106388
Fabian Herweg
We investigate firms’ incentives to adopt green technology. To cover the adoption costs, a firm needs a bank loan. The bank cannot observe firms’ adoption costs and offers a loan contract that allows it to earn an intermediation margin. The Pigouvian tax leads to optimal abatement but inefficiently low adoption. The first-best outcome is achieved via a combination of environmental tax and loan subsidy. If the regulator is restricted to an environmental tax, it faces a trade-off between optimal adoption and optimal abatement. In this case, the second-best tax rate exceeds the Pigouvian tax rate.
{"title":"Adoption of green technology with financial friction","authors":"Fabian Herweg","doi":"10.1016/j.frl.2024.106388","DOIUrl":"10.1016/j.frl.2024.106388","url":null,"abstract":"<div><div>We investigate firms’ incentives to adopt green technology. To cover the adoption costs, a firm needs a bank loan. The bank cannot observe firms’ adoption costs and offers a loan contract that allows it to earn an intermediation margin. The Pigouvian tax leads to optimal abatement but inefficiently low adoption. The first-best outcome is achieved via a combination of environmental tax and loan subsidy. If the regulator is restricted to an environmental tax, it faces a trade-off between optimal adoption and optimal abatement. In this case, the second-best tax rate exceeds the Pigouvian tax rate.</div></div>","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"71 ","pages":"Article 106388"},"PeriodicalIF":7.4,"publicationDate":"2024-11-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142660551","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-08DOI: 10.1016/j.frl.2024.106358
Tony Klein, Thomas Walther
Explainable Artificial Intelligence addresses the black box problem associated with AI, aiming to promote greater transparency, traceability, and trust in applications of AI. xAI is becoming a vital element in finance and economics in fields like risk management, credit decisions, and regulatory compliance. The need for xAI arises from the challenges in understanding, trusting, and communicating AI-generated results. While some argue for the adoption of inherently interpretable models, others critique popular xAI methods. This special issue explores xAI’s role in finance and its advances, focusing on its implications for future research, practice, and policy in FinTech.
{"title":"Advances in Explainable Artificial Intelligence (xAI) in Finance","authors":"Tony Klein, Thomas Walther","doi":"10.1016/j.frl.2024.106358","DOIUrl":"https://doi.org/10.1016/j.frl.2024.106358","url":null,"abstract":"Explainable Artificial Intelligence addresses the black box problem associated with AI, aiming to promote greater transparency, traceability, and trust in applications of AI. xAI is becoming a vital element in finance and economics in fields like risk management, credit decisions, and regulatory compliance. The need for xAI arises from the challenges in understanding, trusting, and communicating AI-generated results. While some argue for the adoption of inherently interpretable models, others critique popular xAI methods. This special issue explores xAI’s role in finance and its advances, focusing on its implications for future research, practice, and policy in FinTech.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"18 1","pages":""},"PeriodicalIF":10.4,"publicationDate":"2024-11-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142673205","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-08DOI: 10.1016/j.frl.2024.106428
Seong Jin Ahn , Changmin Lee
This paper examines the relationship between CEOs' political preferences and their post-retirement directorship opportunities, proposing that political donations may serve as signals of political influence or connections that impact career prospects in the market for corporate directors. Using data on political contributions from 1998 to 2016, we explore whether CEOs' political affiliations create a cyclical pattern in the professional labor market, favoring those aligned with the ruling party. Our analysis reveals that Republican partisan CEOs are more successful in securing directorships under Republican regimes (George Walker Bush, 2003∼2008), while the reverse holds under Democratic regimes (Barack Hussein Obama, Jr. 2009∼2014). These results remain robust after addressing potential endogeneity using presidential election outcomes as an instrumental variable.
{"title":"Who, republican or democrat CEOs, laughs last? Political cycles in the market for corporate directors","authors":"Seong Jin Ahn , Changmin Lee","doi":"10.1016/j.frl.2024.106428","DOIUrl":"10.1016/j.frl.2024.106428","url":null,"abstract":"<div><div>This paper examines the relationship between CEOs' political preferences and their post-retirement directorship opportunities, proposing that political donations may serve as signals of political influence or connections that impact career prospects in the market for corporate directors. Using data on political contributions from 1998 to 2016, we explore whether CEOs' political affiliations create a cyclical pattern in the professional labor market, favoring those aligned with the ruling party. Our analysis reveals that Republican partisan CEOs are more successful in securing directorships under Republican regimes (George Walker Bush, 2003∼2008), while the reverse holds under Democratic regimes (Barack Hussein Obama, Jr. 2009∼2014). These results remain robust after addressing potential endogeneity using presidential election outcomes as an instrumental variable.</div></div>","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"71 ","pages":"Article 106428"},"PeriodicalIF":7.4,"publicationDate":"2024-11-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142660472","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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