Pub Date : 2024-11-01DOI: 10.1016/j.iref.2024.103701
Tao Li , Hao Li , Jin Di Zheng
Cooperation among group members is the ultimate pursuit in any collective actions. Despite the presence of well-documented theories and experimental evidence in the collective action problem, the empirical evidence on promoting cooperation in the problem is scarce. We examine the collective tasks of using reserve funds for maintenance in urban residential areas using a unique administrative data that covers approximately 5,000 maintenance projects in Nanjing, China. Applying an instrumental variable approach, we show that a 1,000 yuan increase in extra cash payment increases the consent rates of implementing a maintenance plan by approximately 1 percentage point. Our results suggest that additional information revealed by uncovered maintenance costs could serve as a non-monetary tool to promote cooperation in making collective-action decisions. We confirm the conjecture by surveying 112 householders involved in the maintenance projects.
{"title":"Promoting cooperation in collective actions: Evidence from the reserve fund for maintenance in China","authors":"Tao Li , Hao Li , Jin Di Zheng","doi":"10.1016/j.iref.2024.103701","DOIUrl":"10.1016/j.iref.2024.103701","url":null,"abstract":"<div><div>Cooperation among group members is the ultimate pursuit in any collective actions. Despite the presence of well-documented theories and experimental evidence in the collective action problem, the empirical evidence on promoting cooperation in the problem is scarce. We examine the collective tasks of using reserve funds for maintenance in urban residential areas using a unique administrative data that covers approximately 5,000 maintenance projects in Nanjing, China. Applying an instrumental variable approach, we show that a 1,000 yuan increase in extra cash payment increases the consent rates of implementing a maintenance plan by approximately 1 percentage point. Our results suggest that additional information revealed by uncovered maintenance costs could serve as a non-monetary tool to promote cooperation in making collective-action decisions. We confirm the conjecture by surveying 112 householders involved in the maintenance projects.</div></div>","PeriodicalId":14444,"journal":{"name":"International Review of Economics & Finance","volume":"96 ","pages":"Article 103701"},"PeriodicalIF":4.8,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142663082","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 : 2024-11-01DOI: 10.1016/j.iref.2024.103726
Hua Zhang, Jie Lai
Environmental, social, and governance (ESG) ratings matter for corporate green development as they can shape companies' sustainable efforts. However, the influence of third-party ESG ratings as an emerging informal environmental regulation on corporate environmental performance (CEP) remains understudied in China. To identify this causality, we exploit the exogenous variation of SynTao Green Finance's ESG ratings and conduct a difference-in-differences (DID) estimation. Utilizing panel data of Chinese A-share listed companies from 2008 to 2023, we find that ESG ratings can induce improvements in CEP, along with increased positive environmental scores and decreased negative environmental scores. We document three feasible mechanisms for this CEP impact: alleviated financial constraints, heightened media attention, and enhanced green innovation. We further investigate the heterogeneous effects and find that ESG ratings significantly improve CEP for companies with high executive shareholding and more female directors, companies in low-competitive industries, and those located in cities with high levels of economic development. Our findings contribute to existing studies on the determinants of CEP and offer novel evidence of the efficacy of ESG ratings as an informal institution in promoting corporate green development.
{"title":"Greening through ESG: Do ESG ratings improve corporate environmental performance in China?","authors":"Hua Zhang, Jie Lai","doi":"10.1016/j.iref.2024.103726","DOIUrl":"10.1016/j.iref.2024.103726","url":null,"abstract":"<div><div>Environmental, social, and governance (ESG) ratings matter for corporate green development as they can shape companies' sustainable efforts. However, the influence of third-party ESG ratings as an emerging informal environmental regulation on corporate environmental performance (CEP) remains understudied in China. To identify this causality, we exploit the exogenous variation of SynTao Green Finance's ESG ratings and conduct a difference-in-differences (DID) estimation. Utilizing panel data of Chinese A-share listed companies from 2008 to 2023, we find that ESG ratings can induce improvements in CEP, along with increased positive environmental scores and decreased negative environmental scores. We document three feasible mechanisms for this CEP impact: alleviated financial constraints, heightened media attention, and enhanced green innovation. We further investigate the heterogeneous effects and find that ESG ratings significantly improve CEP for companies with high executive shareholding and more female directors, companies in low-competitive industries, and those located in cities with high levels of economic development. Our findings contribute to existing studies on the determinants of CEP and offer novel evidence of the efficacy of ESG ratings as an informal institution in promoting corporate green development.</div></div>","PeriodicalId":14444,"journal":{"name":"International Review of Economics & Finance","volume":"96 ","pages":"Article 103726"},"PeriodicalIF":4.8,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142698471","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 : 2024-11-01DOI: 10.1016/j.iref.2024.103704
Akhilesh Kumar Kamalakant Yadav, Ajaya Kumar Panda
A country's monetary policy influences a firm's economic decisions by influencing the cost of external debt offered to firms by commercial banks. However, research on the effect of monetary policy on the capital structure of firms located in bank credit-driven developing economies is limited. This research paper tries to fill that gap by examining the effects of monetary policy impulses on the short- and long-term capital structure of firms in an emerging economy. Using quadratic econometric equation and GMM regression model study analyzes annual financial data of 2575 non-financial firms belonging to 8 manufacturing sectors covering the duration of 13 years ranging from 2009 to 2021. The results show a curvilinear relationship between monetary policy impulses and firms' capital structure in different manufacturing industry sectors. Monetary policy was found to have a different impact on short-term and long-term borrowings of financially flexible and inflexible manufacturing firms.
{"title":"Transmission of monetary policy impulses on the capital structure of manufacturing firms: Evidence from an emerging economy","authors":"Akhilesh Kumar Kamalakant Yadav, Ajaya Kumar Panda","doi":"10.1016/j.iref.2024.103704","DOIUrl":"10.1016/j.iref.2024.103704","url":null,"abstract":"<div><div>A country's monetary policy influences a firm's economic decisions by influencing the cost of external debt offered to firms by commercial banks. However, research on the effect of monetary policy on the capital structure of firms located in bank credit-driven developing economies is limited. This research paper tries to fill that gap by examining the effects of monetary policy impulses on the short- and long-term capital structure of firms in an emerging economy. Using quadratic econometric equation and GMM regression model study analyzes annual financial data of 2575 non-financial firms belonging to 8 manufacturing sectors covering the duration of 13 years ranging from 2009 to 2021. The results show a curvilinear relationship between monetary policy impulses and firms' capital structure in different manufacturing industry sectors. Monetary policy was found to have a different impact on short-term and long-term borrowings of financially flexible and inflexible manufacturing firms.</div></div>","PeriodicalId":14444,"journal":{"name":"International Review of Economics & Finance","volume":"96 ","pages":"Article 103704"},"PeriodicalIF":4.8,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142723266","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 : 2024-11-01DOI: 10.1016/j.iref.2024.103712
Chunpei Shi , Yu Wei , Yihe Zheng , Zhuo Wang , Qian Wang
The question of whether ESG investment is rewarding is a key determinant of its attractiveness to investors. Despite extensive research, a consensus remains elusive. This paper delves into the potential costs and benefits of ESG preferences in the Chinese stock market by constructing three-dimensional portfolios that integrate risk, return, and investor ESG preference. Instead of providing a binary answer of whether ESG investment is rewarding, we offer a glide path of costs to investors for achieving their ESG goals. Furthermore, given the potential market cap bias, we examine the differences in costs between portfolios composed of large-cap and small-cap stocks. Our empirical findings are twofold: first, if investors have a relatively low preference for companies' ESG performance, their investment is as rewarding as those with no ESG preference. However, if they have a high level of preference for ESG performance, their investment may be just doing good. This means that if the level of ESG preference is below a certain threshold, the costs of ESG preference are minimal or even zero. However, when the threshold is crossed, the costs rise sharply. Second, these costs vary significantly between portfolios with different market capitalizations. Specifically, incorporating ESG factors into small-cap portfolios often results in higher financial sacrifices compared to large-cap portfolios. These insights are crucial for investors seeking to balance financial and non-pecuniary objectives, providing guidance for optimizing ESG integration strategies in their investments.
{"title":"Is ESG investment rewarded or just doing good? Evidence from China","authors":"Chunpei Shi , Yu Wei , Yihe Zheng , Zhuo Wang , Qian Wang","doi":"10.1016/j.iref.2024.103712","DOIUrl":"10.1016/j.iref.2024.103712","url":null,"abstract":"<div><div>The question of whether ESG investment is rewarding is a key determinant of its attractiveness to investors. Despite extensive research, a consensus remains elusive. This paper delves into the potential costs and benefits of ESG preferences in the Chinese stock market by constructing three-dimensional portfolios that integrate risk, return, and investor ESG preference. Instead of providing a binary answer of whether ESG investment is rewarding, we offer a glide path of costs to investors for achieving their ESG goals. Furthermore, given the potential market cap bias, we examine the differences in costs between portfolios composed of large-cap and small-cap stocks. Our empirical findings are twofold: first, if investors have a relatively low preference for companies' ESG performance, their investment is as rewarding as those with no ESG preference. However, if they have a high level of preference for ESG performance, their investment may be just doing good. This means that if the level of ESG preference is below a certain threshold, the costs of ESG preference are minimal or even zero. However, when the threshold is crossed, the costs rise sharply. Second, these costs vary significantly between portfolios with different market capitalizations. Specifically, incorporating ESG factors into small-cap portfolios often results in higher financial sacrifices compared to large-cap portfolios. These insights are crucial for investors seeking to balance financial and non-pecuniary objectives, providing guidance for optimizing ESG integration strategies in their investments.</div></div>","PeriodicalId":14444,"journal":{"name":"International Review of Economics & Finance","volume":"96 ","pages":"Article 103712"},"PeriodicalIF":4.8,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142663032","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 : 2024-11-01DOI: 10.1016/j.iref.2024.103703
Yuya Liu , Zhaoyang Wang , Sheng Mai
This study used a sample of data from 3314 firms listed in the manufacturing industry from 2011 to 2022. We analyzed these companies’ annual reports using panel regression analysis to explore the relationship between big data utilization and corporate green innovation. Findings reveal that green innovation is driven by big data development. Research and development (R&D) investment has emerged as a key mediator in the relationship between big data and green innovation among firms. Furthermore, this study identifies disparities in the effect of big data development on green innovation between profit-making and loss-making entities. Moreover, it emphasizes the differences in the effects of environmental innovation between state owned and non–state-owned enterprises. This study offers tangible evidence that companies should use big data to promote environmental innovation, which is a crucial strategy for achieving sustainable growth.
{"title":"Big data development and enterprise green innovation: Text analysis of listed companies’ annual reports","authors":"Yuya Liu , Zhaoyang Wang , Sheng Mai","doi":"10.1016/j.iref.2024.103703","DOIUrl":"10.1016/j.iref.2024.103703","url":null,"abstract":"<div><div>This study used a sample of data from 3314 firms listed in the manufacturing industry from 2011 to 2022. We analyzed these companies’ annual reports using panel regression analysis to explore the relationship between big data utilization and corporate green innovation. Findings reveal that green innovation is driven by big data development. Research and development (R&D) investment has emerged as a key mediator in the relationship between big data and green innovation among firms. Furthermore, this study identifies disparities in the effect of big data development on green innovation between profit-making and loss-making entities. Moreover, it emphasizes the differences in the effects of environmental innovation between state owned and non–state-owned enterprises. This study offers tangible evidence that companies should use big data to promote environmental innovation, which is a crucial strategy for achieving sustainable growth.</div></div>","PeriodicalId":14444,"journal":{"name":"International Review of Economics & Finance","volume":"96 ","pages":"Article 103703"},"PeriodicalIF":4.8,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142577459","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 : 2024-11-01DOI: 10.1016/j.iref.2024.103632
Jehu Mette , Guoyu Lin , Atika Benaddi
Childhood immigrants arrive in the United States (U.S.) at different ages, each with a distinct set of skills. Previous research emphasizes the importance of early immigration in language acquisition and its subsequent effect on education and labor market outcomes. This study investigates whether migration timing has differential effects when considering other skills, specifically initial education quality. Using U.S. data of 322,328 childhood immigrants prior to 2018, we find that delayed childhood immigration from top-scoring countries in academic testing can mitigate the disadvantages associated with language acquisition. Our results suggest that children from topscoring, non-English-speaking countries appear to benefit most from later migration. Specifically, male immigrants gain an additional 2.57 years of U.S. education, while females gain 0.33 years. These additional years of education correspond to subsequent higher wages. Our study suggests a revaluation of policies, particularly regarding “late child immigrants” arriving from high-PISAscoring countries, as those individuals may achieve higher educational and income levels than previously anticipated.
{"title":"A Latecomer's advantage: The attainments of older child immigrants","authors":"Jehu Mette , Guoyu Lin , Atika Benaddi","doi":"10.1016/j.iref.2024.103632","DOIUrl":"10.1016/j.iref.2024.103632","url":null,"abstract":"<div><div>Childhood immigrants arrive in the United States (U.S.) at different ages, each with a distinct set of skills. Previous research emphasizes the importance of early immigration in language acquisition and its subsequent effect on education and labor market outcomes. This study investigates whether migration timing has differential effects when considering other skills, specifically initial education quality. Using U.S. data of 322,328 childhood immigrants prior to 2018, we find that delayed childhood immigration from top-scoring countries in academic testing can mitigate the disadvantages associated with language acquisition. Our results suggest that children from topscoring, non-English-speaking countries appear to benefit most from later migration. Specifically, male immigrants gain an additional 2.57 years of U.S. education, while females gain 0.33 years. These additional years of education correspond to subsequent higher wages. Our study suggests a revaluation of policies, particularly regarding “late child immigrants” arriving from high-PISAscoring countries, as those individuals may achieve higher educational and income levels than previously anticipated.</div></div>","PeriodicalId":14444,"journal":{"name":"International Review of Economics & Finance","volume":"96 ","pages":"Article 103632"},"PeriodicalIF":4.8,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142663083","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 : 2024-11-01DOI: 10.1016/j.iref.2024.103735
Danying Bao , Jialun Zhang , Zhixiong Huang , Lan Lv , Qi Fu
Based on panel data for 284 cities in China from 2014 to 2020, this paper empirically examines the policy effect of the demonstration bases for mass entrepreneurship and innovation (DBEI). The results show that the construction of DBEI improves the level of innovation and entrepreneurship (IE) of the pilot cities. Moreover, this promotion effect is not the result of capturing a large number of IE resources from neighboring cities but has a coordinated nature, which can contribute to the regional IE coordinated development. In the heterogeneity analysis, the effect is greater in peripheral cities than in central and eastern regions than in the west. In addition, further analysis shows the policy promotes regional IE coordinated development mainly through two paths: rural revitalization and intellectual property protection.
{"title":"Impacts of business environment on regional development: Evidence from a natural experiment","authors":"Danying Bao , Jialun Zhang , Zhixiong Huang , Lan Lv , Qi Fu","doi":"10.1016/j.iref.2024.103735","DOIUrl":"10.1016/j.iref.2024.103735","url":null,"abstract":"<div><div>Based on panel data for 284 cities in China from 2014 to 2020, this paper empirically examines the policy effect of the demonstration bases for mass entrepreneurship and innovation (DBEI). The results show that the construction of DBEI improves the level of innovation and entrepreneurship (IE) of the pilot cities. Moreover, this promotion effect is not the result of capturing a large number of IE resources from neighboring cities but has a coordinated nature, which can contribute to the regional IE coordinated development. In the heterogeneity analysis, the effect is greater in peripheral cities than in central and eastern regions than in the west. In addition, further analysis shows the policy promotes regional IE coordinated development mainly through two paths: rural revitalization and intellectual property protection.</div></div>","PeriodicalId":14444,"journal":{"name":"International Review of Economics & Finance","volume":"96 ","pages":"Article 103735"},"PeriodicalIF":4.8,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142699109","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 : 2024-11-01DOI: 10.1016/j.iref.2024.103693
Hanyu Zhang , Hang Zhou , Huaigang Long , Wenyu Zhou , Adam Zaremba
Investors often cover a limited number of stocks, leading to a certain level of correlation in their information sets. Despite its importance, the role of this correlation in determining the return comovement between stock pairs has been less explored. In this study, we introduce a novel measure of common investor coverage, calculated using the number of co-commentators normalized by the geometric average number of commentators for each stock pair on Seeking Alpha. This measure aims to capture the underlying correlation in investors’ information sets. Our findings reveal a positive relationship between common investor coverage and excess comovement, which cannot be explained by traditional asset pricing models. Moreover, we observe a stronger relationship between common investor coverage and excess return comovement for stocks favored by retail investors, particularly after the implementation of the reward policy in 2011. This suggests that retail investors may play a crucial role in driving this relationship.
{"title":"Common investor coverage and excess return comovement: Evidence from Seeking Alpha","authors":"Hanyu Zhang , Hang Zhou , Huaigang Long , Wenyu Zhou , Adam Zaremba","doi":"10.1016/j.iref.2024.103693","DOIUrl":"10.1016/j.iref.2024.103693","url":null,"abstract":"<div><div>Investors often cover a limited number of stocks, leading to a certain level of correlation in their information sets. Despite its importance, the role of this correlation in determining the return comovement between stock pairs has been less explored. In this study, we introduce a novel measure of common investor coverage, calculated using the number of co-commentators normalized by the geometric average number of commentators for each stock pair on Seeking Alpha. This measure aims to capture the underlying correlation in investors’ information sets. Our findings reveal a positive relationship between common investor coverage and excess comovement, which cannot be explained by traditional asset pricing models. Moreover, we observe a stronger relationship between common investor coverage and excess return comovement for stocks favored by retail investors, particularly after the implementation of the reward policy in 2011. This suggests that retail investors may play a crucial role in driving this relationship.</div></div>","PeriodicalId":14444,"journal":{"name":"International Review of Economics & Finance","volume":"96 ","pages":"Article 103693"},"PeriodicalIF":4.8,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142698472","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 : 2024-11-01DOI: 10.1016/j.iref.2024.103731
Hongbing Ouyang, Xiaojun Liu, Kang Huang
This study examines how analyst cliques influence firm leverage adjustment by investigating the potential echo chamber effect within complex analyst networks. Using a multilayer network framework based on information exchanges—such as teammate cooperation, cross-team communication, and stock co-coverage—we apply the Louvain algorithm to identify analyst cliques, where analysts are likely to have similar perspectives. Our findings indicate that firms covered by a higher number of analyst cliques experience slower leverage adjustment. This result remains consistent after addressing potential endogeneity concerns. The delay in leverage adjustment is attributed to the echo chamber effect within cliques, where analysts share homogeneous views that significantly diverge from those of other cliques, creating a chaotic information environment. Furthermore, from the perspective of moderating effect, we find that the negative effects of analyst cliques on leverage adjustment become more pronounced in firms with weaker governance structures and higher financing constraints. This research offers new insights into the relationship between the information environment and leverage adjustment within the dynamic trade-off model, providing valuable implications for regulators and investors in understanding the role of analyst networks in emerging financial markets.
{"title":"Analyst cliques coverage and the speed of leverage adjustment: Evidence from China","authors":"Hongbing Ouyang, Xiaojun Liu, Kang Huang","doi":"10.1016/j.iref.2024.103731","DOIUrl":"10.1016/j.iref.2024.103731","url":null,"abstract":"<div><div>This study examines how analyst cliques influence firm leverage adjustment by investigating the potential echo chamber effect within complex analyst networks. Using a multilayer network framework based on information exchanges—such as teammate cooperation, cross-team communication, and stock co-coverage—we apply the Louvain algorithm to identify analyst cliques, where analysts are likely to have similar perspectives. Our findings indicate that firms covered by a higher number of analyst cliques experience slower leverage adjustment. This result remains consistent after addressing potential endogeneity concerns. The delay in leverage adjustment is attributed to the echo chamber effect within cliques, where analysts share homogeneous views that significantly diverge from those of other cliques, creating a chaotic information environment. Furthermore, from the perspective of moderating effect, we find that the negative effects of analyst cliques on leverage adjustment become more pronounced in firms with weaker governance structures and higher financing constraints. This research offers new insights into the relationship between the information environment and leverage adjustment within the dynamic trade-off model, providing valuable implications for regulators and investors in understanding the role of analyst networks in emerging financial markets.</div></div>","PeriodicalId":14444,"journal":{"name":"International Review of Economics & Finance","volume":"96 ","pages":"Article 103731"},"PeriodicalIF":4.8,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142699110","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 : 2024-11-01DOI: 10.1016/j.iref.2024.103698
bing Li, pu Lu, yong Wang
This study examines the transmission mechanism of foreign economic policy uncertainty (FEPU) on the Chinese stock market from 1997 to 2022, using a vector autoregressive adaptation of the dividend discount model. By decomposing excess returns into cash flow (CF), excess return (ER), and risk-free rate (RF) components, we disentangle the effects of FEPU shocks on these distinct factors.
Our findings indicate that FEPU primarily leads to a significant but temporary overestimation of impacts on cash flows and excess returns, with the market typically correcting itself after an initial overreaction. This pattern suggests a complex interplay between investor sentiment and market dynamics. Notably, trade stability amplifies the impact on CF, while closer monetary policy coordination enhances the transmission to RF and ER expectations. Additionally, economic cycles play a moderating role: downturns exacerbate the negative impacts on CF and RF, while bullish conditions foster resilience. Investor sentiment emerges as a crucial factor, with negative sentiment intensifying FEPU's adverse effects during economic contractions.
This research contributes a detailed perspective on how international relations, policy harmonization, and market psychology collectively influence FEPU transmission and affect China's financial stability amidst global uncertainties. Our decomposition method illuminates the dynamic forces that drive market reactions over time, offering critical insights for refining risk management strategies and crafting policy measures that buffer the financial system against external economic shocks.
{"title":"Decomposing uncertainty: How foreign policy risks shape Chinese stock market dynamics","authors":"bing Li, pu Lu, yong Wang","doi":"10.1016/j.iref.2024.103698","DOIUrl":"10.1016/j.iref.2024.103698","url":null,"abstract":"<div><div>This study examines the transmission mechanism of foreign economic policy uncertainty (FEPU) on the Chinese stock market from 1997 to 2022, using a vector autoregressive adaptation of the dividend discount model. By decomposing excess returns into cash flow (CF), excess return (ER), and risk-free rate (RF) components, we disentangle the effects of FEPU shocks on these distinct factors.</div><div>Our findings indicate that FEPU primarily leads to a significant but temporary overestimation of impacts on cash flows and excess returns, with the market typically correcting itself after an initial overreaction. This pattern suggests a complex interplay between investor sentiment and market dynamics. Notably, trade stability amplifies the impact on CF, while closer monetary policy coordination enhances the transmission to RF and ER expectations. Additionally, economic cycles play a moderating role: downturns exacerbate the negative impacts on CF and RF, while bullish conditions foster resilience. Investor sentiment emerges as a crucial factor, with negative sentiment intensifying FEPU's adverse effects during economic contractions.</div><div>This research contributes a detailed perspective on how international relations, policy harmonization, and market psychology collectively influence FEPU transmission and affect China's financial stability amidst global uncertainties. Our decomposition method illuminates the dynamic forces that drive market reactions over time, offering critical insights for refining risk management strategies and crafting policy measures that buffer the financial system against external economic shocks.</div></div>","PeriodicalId":14444,"journal":{"name":"International Review of Economics & Finance","volume":"96 ","pages":"Article 103698"},"PeriodicalIF":4.8,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142660169","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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