Finance Research Letters最新文献

The digital development of finance has positive implications for improving income inequality. As one of the mainstream research findings, the view that digital inclusive finance could alleviate the urban-rural income gap has been reaffirmed. Further empirical evidence reveals that digital inclusive finance bridges the urban-rural income gap by enhancing deposit behavior and promoting innovation activities. Compared with large population scale cities, the development of digital inclusive finance in small ones has a more significant reduction effect on the urban-rural income gap.

We analyze an insider trading strategy and market professionals’ information acquisition strategies, and explore their impact on market liquidity and price efficiency in endogenous noise trading. Our findings highlight the negative precision effect on market professionals’ information acquisition. With an increase in market professionals, two opposing effects emerge on market liquidity and price efficiency: the strategic complementarity effect and the precision effect. However, the negative precision effect predominates, which impairs market liquidity and price efficiency. Furthermore, enhancing the ex-ante precision of the risky asset or adjusting liquidity compensation reduces market professionals’ involvement in information acquisition, leading to diminished price efficiency.

Approximating arbitrage or a perfect hedge in a limit implies approximation in utility (formally, expected utilities are continuous in $L^2$), if and only if the utility function is bounded above and below by quadratics. We characterize when some special utility functions are continuous for all random consumptions with a common lower bound. Only linear, quadratic, and, in some cases, translated SAHARA utilities are continuous if there is no lower bound. We also characterize when a utility function defined on a convex subset can be extended to an $L^2$-continuous nondecreasing and concave utility function on all of $R$.

This paper investigates whether traditional media still influences investors’ behaviors amid the rise of social media. Using a dataset of corporate violations by Chinese listed companies from 2005 to 2023, the study assesses the role of news reports in shaping investor reactions to these negative events. The results show that news coverage, even when unrelated to violations and carrying positive sentiment, amplifies the initial impact of corporate violations on stock prices. This effect is increasingly pronounced, particularly for firms with low transparency. The results indicate that traditional media attracts investors’ attention despite the proliferation of diverse information sources.

This study finds that digital transformation has a significant negative impact on firms’ earnings aggressiveness, earnings smoothing and earnings opacity mainly by strengthening constraints on management’s power and private information. Further analysis reveals that in firms operating internationally, the top ten audited firms, and non-state-owned firms, the role of digital transformation in reducing earnings opacity is significant and greater, while in non-top ten audited companies, the main effect is not significant, and digital transformation can only reduce the earnings smoothing for state-owned firms. This study hence suggests an important new determinant of earnings opacity.

Entrepreneurship activities play an important role in economic growth and job creation. Based on China Family Panel Studies (CFPS) survey data in 2014, 2016, 2018 and 2020, and combing it with the financial technology (FinTech) Index, this study explores the impact of FinTech on rural household entrepreneurship using the Logit and IV estimations. The empirical findings highlight the significant role of FinTech in promoting rural household entrepreneurship. The mechanism analysis shows that FinTech positively modulates the relationship between formal finance and rural credit constraints, thereby fostering rural entrepreneurship. Notably, the impact of FinTech on entrepreneurship is particularly pronounced in areas with lower urbanization levels, indicating a greater potential for promoting entrepreneurship in less economically developed regions. Therefore, this study recommends expanding the coverage of FinTech to encourage rural household entrepreneurship and accelerate efforts towards rural revitalization.

High-order theory indicates that management characteristics determine strategic decision-making and enterprise performance. As developers of strategic directions of enterprises, managers are essential senior human capital. They are vital in strategic planning and adjustment based on external environmental changes impacting enterprise production and operation. China's current managerial context suggests a lack of long-term vision. Guided by sustainable development, long-term visioning is paramount for enterprises to resist external environmental threats and maintain sustainability. Thus, this study uses sample data of A-share non-financial listed companies from 2009 to 2020 to examine whether management's short-sighted behavior impacts enterprises’ environmental, social, and governance (ESG) performance and its impact mechanism using a measurement index of management's short-sighted behavior that includes “qualitative + quantitative” methods. The heterogeneity of this impact based on managers with different backgrounds and senior management team structure is discussed. Our research indicates that management's myopic behavior can significantly inhibit ESG performance. This conclusion is still robust after considering endogeneity and multiple robustness tests. The inhibitory effect is markedly evident in enterprises with no background of poverty and with no overseas experiences; at the same time, this negative effect is more obvious in the executive team with low gender heterogeneity and no professional background in management. Mechanism analysis indicates that management's shortsighted behavior inhibits enterprises’ ESG performance by reducing capital expenditure and green innovation performance. This study provides empirical support and theoretical evidence for enterprises to improve their ESG performance while offering insights for enterprises in developing countries to implement ESG practices.

This study explores the impact of expansionary monetary policy (EMP) on both income and wealth inequality in China using data from a national-level survey, with a particular focus on the discernible trend of wealth inequality surpassing income inequality since the beginning of the 21st century. Our findings unveil a non-uniform relationship between EMP and income inequality. While it serves to mitigate disparities between middle and low-income groups, it simultaneously exacerbates gaps between middle and high-income groups. In terms of the impact on wealth inequality, EMP exacerbates disparities by amplifying the wealth of low, middle, and high-wealth strata, with the effect escalating from lower to higher wealth groups. Moreover, this study identifies the burgeoning real estate market as the pivotal factor amplifying the policy's influence on wealth inequality. By elucidating the varied effects of EMP on income and wealth inequality, this study provides policymakers in transitioning economies with valuable insights to address inequality issues.

The recent April 2024 Israel-Iran conflict had a notable impact on global energy markets. Returns on the top ten global energy stocks indicate investor apprehension up to 10 days before the event started on April 13, 2024. Energy stocks had significant negative returns on the event day itself, with positive CAARs pre-event and negative CAARs post-event. The dynamic market response highlights the heightened uncertainty for energy firms due to regional instability and potential supply chain interruptions, emphasizing the critical role of geopolitical events in shaping investor sentiment and the financial performance of energy firms.

This study empirically investigates the role of judicial independence in facilitating the entry of foreign-invested enterprises in China. Utilizing the judicial independence reform since 2014 in China as a quasi-experiment, we conduct a difference-in-difference (DID) strategy to estimate the effects of judicial independence on the influx of foreign investment and the underlying mechanisms. The findings suggest that bolstering judicial independence can significantly promote the entry of foreign investment. The yearly numbers of newly-registered foreign-invested enterprises increase by around 17.8 % in pilot cities. Judicial independence enhances the quality of adjudication that amplifying the protection of corporate property rights, consequently attracting foreign investment. Further analysis shows that bolstering judicial independence also causes structural change of foreign investment, including an increase in the proportion of small and medium-sized, sole proprietorship, high-tech enterprises, and enterprises from developed countries.