This paper examines how news items released throughout the previous quarter help investors predict and understand earnings. It focuses on how earnings aggregates transactions and how this aggregation may lead to information loss. Through the disclosure of these news items that reveal these underlying transactions, the market may be able to predict future earnings surprises more accurately. Using a novel database that allows identification of these news-items for firms, I find that these news-items decrease the reaction to earnings surprise in the earnings announcement window (-1, +1) and decrease post-earnings announcement drift (+2, +60). These results suggest that transactional-level news may help investors understand earnings through disaggregation. Moreover, this paper compares the effect of these news releases to that of Form 8-Ks and 10- Qs/10-Ks. While Form 8-Ks similarly reduce investors’ reaction to earnings in the short-term window, they are ineffective in reducing the mispricing over the longer window.
{"title":"Do News Releases Help Investors Disaggregate Earnings? An Examination of Information Lost Through Earnings Aggregation","authors":"Justin Deng","doi":"10.2139/ssrn.3520852","DOIUrl":"https://doi.org/10.2139/ssrn.3520852","url":null,"abstract":"This paper examines how news items released throughout the previous quarter help investors predict and understand earnings. It focuses on how earnings aggregates transactions and how this aggregation may lead to information loss. Through the disclosure of these news items that reveal these underlying transactions, the market may be able to predict future earnings surprises more accurately. Using a novel database that allows identification of these news-items for firms, I find that these news-items decrease the reaction to earnings surprise in the earnings announcement window (-1, +1) and decrease post-earnings announcement drift (+2, +60). These results suggest that transactional-level news may help investors understand earnings through disaggregation. Moreover, this paper compares the effect of these news releases to that of Form 8-Ks and 10- Qs/10-Ks. While Form 8-Ks similarly reduce investors’ reaction to earnings in the short-term window, they are ineffective in reducing the mispricing over the longer window.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"70 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-01-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116058074","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper shows that firms with longer debt maturities earn risk premia not explained by unconditional standard factor models. We develop a dynamic capital structure model and find that firms with long-term debt exhibit more countercyclical leverage, making them more highly levered in downturns, when the market price of risk is high. The induced covariance between risk exposure and the market price of risk generates a maturity premium which we estimate at 0.21% per month. Empirical results from a conditional CAPM as well as observed beta dynamics are consistent with the model. We also exploit exogenous variation of debt maturities at the onset of the financial crisis and find that firms with shorter debt maturities experienced a smaller increase in leverage during the crisis. Also, after an initial spike, the betas of short-maturity firms reverted to levels below those of long-maturity firms by the end of 2008.
{"title":"The Maturity Premium","authors":"Maria Chaderina, Patrick Weiß, J. Zechner","doi":"10.2139/ssrn.3283771","DOIUrl":"https://doi.org/10.2139/ssrn.3283771","url":null,"abstract":"This paper shows that firms with longer debt maturities earn risk premia not explained by unconditional standard factor models. We develop a dynamic capital structure model and find that firms with long-term debt exhibit more countercyclical leverage, making them more highly levered in downturns, when the market price of risk is high. The induced covariance between risk exposure and the market price of risk generates a maturity premium which we estimate at 0.21% per month. Empirical results from a conditional CAPM as well as observed beta dynamics are consistent with the model. We also exploit exogenous variation of debt maturities at the onset of the financial crisis and find that firms with shorter debt maturities experienced a smaller increase in leverage during the crisis. Also, after an initial spike, the betas of short-maturity firms reverted to levels below those of long-maturity firms by the end of 2008.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-01-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124388313","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-01-01DOI: 10.5089/9781513519258.001.A001
Nicola Pierri, Yannick Timmer
Motivated by the world-wide surge of FinTech lending, we analyze the implications of lenders’ information technology adoption for financial stability. We estimate bank-level intensity of IT adoption before the global financial crisis using a novel dataset that provides information on hardware used in US commercial bank branches after mapping them to their parent bank. We find that higher intensity of IT-adoption led to significantly lower non-performing loans when the crisis hit: banks with a one standard deviation higher IT-adoption experienced 10% lower non-performing loans. High-IT-adoption banks were not less exposed to the crisis through their geographical footprint, business model, funding sources, or other observable characteristics. Loan-level analysis indicates that high-IT-adoption banks originated mortgages with better performance and did not offload low-quality loans. We apply a simple text-analysis algorithm to the biographies of top executives and find that banks led by more “tech-oriented” managers adopted IT more intensively and experienced lower non-performing loans during the crisis. Our results suggest that technology adoption in lending can enhance financial stability through the production of more resilient loans.
{"title":"Tech in Fin Before FinTech: Blessing or Curse for Financial Stability?","authors":"Nicola Pierri, Yannick Timmer","doi":"10.5089/9781513519258.001.A001","DOIUrl":"https://doi.org/10.5089/9781513519258.001.A001","url":null,"abstract":"Motivated by the world-wide surge of FinTech lending, we analyze the implications of lenders’ information technology adoption for financial stability. We estimate bank-level intensity of IT adoption before the global financial crisis using a novel dataset that provides information on hardware used in US commercial bank branches after mapping them to their parent bank. We find that higher intensity of IT-adoption led to significantly lower non-performing loans when the crisis hit: banks with a one standard deviation higher IT-adoption experienced 10% lower non-performing loans. High-IT-adoption banks were not less exposed to the crisis through their geographical footprint, business model, funding sources, or other observable characteristics. Loan-level analysis indicates that high-IT-adoption banks originated mortgages with better performance and did not offload low-quality loans. We apply a simple text-analysis algorithm to the biographies of top executives and find that banks led by more “tech-oriented” managers adopted IT more intensively and experienced lower non-performing loans during the crisis. Our results suggest that technology adoption in lending can enhance financial stability through the production of more resilient loans.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124068144","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Kristian D. Allee, L. Anderson, Michael J. Crawley
Using a sample of 75 countries, we show that foreigners invest less in U.S. stocks when they are from countries with greater linguistic distances and when U.S. financial reports are more difficult to read. Our results suggest that linguistic distance and linguistic complexity in financial reports act as information processing frictions for foreign investors, even in the U.S. market where foreign investors should have the greatest ability, resources, and incentives to overcome language translation and readability issues. Additionally, we show that foreigners invest more in U.S. Treasuries and consume more when facing greater linguistic distance and financial reporting readability difficulties. These results are consistent with a “substitution effect” where foreigners increase their consumption and holdings of U.S. Treasuries because these alternatives avoid the linguistic distance and readability frictions associated with analyzing financial statements and investing in U.S. equities.
{"title":"The Impact of Linguistic Distance and Financial Reporting Readability on Foreign Holdings of U.S. Stocks","authors":"Kristian D. Allee, L. Anderson, Michael J. Crawley","doi":"10.2139/ssrn.3254396","DOIUrl":"https://doi.org/10.2139/ssrn.3254396","url":null,"abstract":"Using a sample of 75 countries, we show that foreigners invest less in U.S. stocks when they are from countries with greater linguistic distances and when U.S. financial reports are more difficult to read. Our results suggest that linguistic distance and linguistic complexity in financial reports act as information processing frictions for foreign investors, even in the U.S. market where foreign investors should have the greatest ability, resources, and incentives to overcome language translation and readability issues. Additionally, we show that foreigners invest more in U.S. Treasuries and consume more when facing greater linguistic distance and financial reporting readability difficulties. These results are consistent with a “substitution effect” where foreigners increase their consumption and holdings of U.S. Treasuries because these alternatives avoid the linguistic distance and readability frictions associated with analyzing financial statements and investing in U.S. equities.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134163417","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We find that US public firms spread out their debt more across different sources in recession quarters, making measures of debt concentration move pro-cyclically. There is substantial cross-sectional variation in these dynamics. Firms with less leverage and higher debt concentration further decrease leverage and increase debt concentration in recessions. The opposite is true for firms with higher leverage and lower debt concentration. The latter (former) group consists of firms that are larger (smaller), less risky (riskier), have fewer (more) growth options and lower (higher) cash levels. While the fraction of total assets funded by bank debt increases in the recession by approximately 18% of its average non-recession level, the equivalent measure for market debt drops by approximately 7%. Bank debt, in particular, term loans, appears to become more attractive during recession quarters, especially for borrowers characterized by high profitability while firm size, in contrast, has a positive effect on the use of market debt in recessions. A cluster analysis shows that a substantial fraction of firms changes its debt policy over the business cycle. For example, 12% of the firms that exclusively use bond-financing pre-recession switch to bank-financing during recessions.
{"title":"The Dynamics of Corporate Debt Structure","authors":"M. Halling, Jin Yu, J. Zechner","doi":"10.2139/ssrn.3488471","DOIUrl":"https://doi.org/10.2139/ssrn.3488471","url":null,"abstract":"We find that US public firms spread out their debt more across different sources in recession quarters, making measures of debt concentration move pro-cyclically. There is substantial cross-sectional variation in these dynamics. Firms with less leverage and higher debt concentration further decrease leverage and increase debt concentration in recessions. The opposite is true for firms with higher leverage and lower debt concentration. The latter (former) group consists of firms that are larger (smaller), less risky (riskier), have fewer (more) growth options and lower (higher) cash levels. While the fraction of total assets funded by bank debt increases in the recession by approximately 18% of its average non-recession level, the equivalent measure for market debt drops by approximately 7%. Bank debt, in particular, term loans, appears to become more attractive during recession quarters, especially for borrowers characterized by high profitability while firm size, in contrast, has a positive effect on the use of market debt in recessions. A cluster analysis shows that a substantial fraction of firms changes its debt policy over the business cycle. For example, 12% of the firms that exclusively use bond-financing pre-recession switch to bank-financing during recessions.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125388422","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Martien Lamers, Thomas Present, Rudi Vander Vennet
We investigate whether sovereign bond holdings of European banks are determined by a risk–return trade-off. Using data between 2011 and 2018 for 75 European banks, we confirm that banks exhibited risk-taking behavior during the sovereign debt crisis, e.g., due to moral suasion. In the period 2015–2018, however, banks’ investments in sovereign bonds are characterized by sound risk–return considerations, suggesting a lessening of the doom loop. This result is mainly driven by banks in the core European countries, as banks in the GIPS countries do not exhibit such behavior, nor do they avoid riskier bonds following the sovereign debt crisis.
{"title":"Sovereign Exposures of European Banks: It Is Not All Doom","authors":"Martien Lamers, Thomas Present, Rudi Vander Vennet","doi":"10.2139/ssrn.3519136","DOIUrl":"https://doi.org/10.2139/ssrn.3519136","url":null,"abstract":"We investigate whether sovereign bond holdings of European banks are determined by a risk–return trade-off. Using data between 2011 and 2018 for 75 European banks, we confirm that banks exhibited risk-taking behavior during the sovereign debt crisis, e.g., due to moral suasion. In the period 2015–2018, however, banks’ investments in sovereign bonds are characterized by sound risk–return considerations, suggesting a lessening of the doom loop. This result is mainly driven by banks in the core European countries, as banks in the GIPS countries do not exhibit such behavior, nor do they avoid riskier bonds following the sovereign debt crisis.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"215 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123357880","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
E. Barucci, D. Brigo, Marco Francischello, D. Marazzina
In this paper, we analyze Sovereign Bond-Backed Securities in the Euro area, concentrating our attention on the return of the different tranches and on their riskiness. We show that as the correlation level among States increases, the yield rate of senior tranches increases while the yield rate of junior tranches decreases. A similar effect is observed when introducing a block dependence structure with high correlation among States belonging to the same block. Introducing a nonzero recovery rate, as opposed to a null recovery rate, decreases the yield rate of senior tranches and increases the yield rate of junior tranches. We compute the loss distribution and the Value at Risk (VaR) associated with the market risk of retaining the different tranches of the bond. We also analyze the possibility of reaching a safe asset through pooling tranches of government bonds of different States. In summary, we show that the issue in reaching a comprehensive and safe offering through the securitization of government bonds is not the safety of senior tranches but the risk of the junior ones.
{"title":"On the Design of Sovereign Bond-Backed Securities","authors":"E. Barucci, D. Brigo, Marco Francischello, D. Marazzina","doi":"10.2139/ssrn.3496155","DOIUrl":"https://doi.org/10.2139/ssrn.3496155","url":null,"abstract":"In this paper, we analyze Sovereign Bond-Backed Securities in the Euro area, concentrating our attention on the return of the different tranches and on their riskiness. We show that as the correlation level among States increases, the yield rate of senior tranches increases while the yield rate of junior tranches decreases. A similar effect is observed when introducing a block dependence structure with high correlation among States belonging to the same block. Introducing a nonzero recovery rate, as opposed to a null recovery rate, decreases the yield rate of senior tranches and increases the yield rate of junior tranches. We compute the loss distribution and the Value at Risk (VaR) associated with the market risk of retaining the different tranches of the bond. We also analyze the possibility of reaching a safe asset through pooling tranches of government bonds of different States. In summary, we show that the issue in reaching a comprehensive and safe offering through the securitization of government bonds is not the safety of senior tranches but the risk of the junior ones.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127120241","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-11-23DOI: 10.5089/9781513528328.001
S. Beer, Ruud A. De Mooij, Shafik Hebous, M. Keen, L. Liu
Schemes of residual profit allocation (RPA) tax multinationals by allocating their ‘routine’ profits to countries in which their activities take place and sharing their remaining ‘residual’ profit across countries on some formulaic basis. They have recently and rapidly come to prominence in policy discussions, yet almost nothing is known about their impact on revenue, investment and efficiency. This paper explores these issues, conceptually and empirically. It finds residual profits to be substantial, but concentrated in a relatively few MNEs, headquartered in few countries. The impact on tax revenue of reallocating excess profits under RPA, while adverse for investment hubs, appears beneficial for lower income countries even when the formula allocates by destination-based sales. The impact on investment incentives is ambiguous and specific both to countries and MNE groups; only if the rate of tax on routine profits is low does aggregate efficiency seem likely to increase.
{"title":"Exploring Residual Profit Allocation","authors":"S. Beer, Ruud A. De Mooij, Shafik Hebous, M. Keen, L. Liu","doi":"10.5089/9781513528328.001","DOIUrl":"https://doi.org/10.5089/9781513528328.001","url":null,"abstract":"Schemes of residual profit allocation (RPA) tax multinationals by allocating their ‘routine’ profits\u0000to countries in which their activities take place and sharing their remaining ‘residual’ profit across\u0000countries on some formulaic basis. They have recently and rapidly come to prominence in policy\u0000discussions, yet almost nothing is known about their impact on revenue, investment and\u0000efficiency. This paper explores these issues, conceptually and empirically. It finds residual profits\u0000to be substantial, but concentrated in a relatively few MNEs, headquartered in few countries. The\u0000impact on tax revenue of reallocating excess profits under RPA, while adverse for investment\u0000hubs, appears beneficial for lower income countries even when the formula allocates by\u0000destination-based sales. The impact on investment incentives is ambiguous and specific both to\u0000countries and MNE groups; only if the rate of tax on routine profits is low does aggregate\u0000efficiency seem likely to increase.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126567493","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Rising concerns over climate change have increased investors’ and policymakers’ interests in environmentally friendly investments, which have led to the rapid expansion of the green equity market recently. Previous studies have focused on analyzing the green equity market at the aggregate level, thereby overlooking the heterogeneity across green equity sub-sectors. This paper contributes to the literature by investigating how interdependence between green equity markets and other financial assets varies across regions, market conditions, and investment horizons. To this end, the paper employs the recently developed cross-quantilogram framework, which measures the cross-quantile dependence across time series without any moment condition requirement. The results show that within the green equity market, movements in the U.S. market can predict movements in the Asian and European markets during all market conditions. In contrast, the Asian and European green equity markets only predict movements in the U.S. market during bearish periods. The paper also finds that regional green equity markets respond differently to movements in other financial assets, such as energy commodity and general stock returns. In addition, the interdependence among regional green equity and other assets varies across market conditions and investment horizons. These results have important implications for environmentally friendly investors and policymakers.
{"title":"How Integrated are Regional Green Equity Markets? Evidence from a Cross-Quantilogram Approach","authors":"L. Pham","doi":"10.2139/ssrn.3488402","DOIUrl":"https://doi.org/10.2139/ssrn.3488402","url":null,"abstract":"Rising concerns over climate change have increased investors’ and policymakers’ interests in environmentally friendly investments, which have led to the rapid expansion of the green equity market recently. Previous studies have focused on analyzing the green equity market at the aggregate level, thereby overlooking the heterogeneity across green equity sub-sectors. This paper contributes to the literature by investigating how interdependence between green equity markets and other financial assets varies across regions, market conditions, and investment horizons. To this end, the paper employs the recently developed cross-quantilogram framework, which measures the cross-quantile dependence across time series without any moment condition requirement. The results show that within the green equity market, movements in the U.S. market can predict movements in the Asian and European markets during all market conditions. In contrast, the Asian and European green equity markets only predict movements in the U.S. market during bearish periods. The paper also finds that regional green equity markets respond differently to movements in other financial assets, such as energy commodity and general stock returns. In addition, the interdependence among regional green equity and other assets varies across market conditions and investment horizons. These results have important implications for environmentally friendly investors and policymakers.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"75 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131765976","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We assess the geological and economic viability of underground natural gas storage in Saudi Arabia under different scenarios: with and without LNG imports allowed, and under low and high domestic gas production. Depleted oil fields or aquifers are best suited for gas storage in the Kingdom. Using a model of the country's energy system, we show that in the case of high gas production, storage capacity would be built to bypass the gas transport limit for use in electricity generation in the summer. In the low production case, gas storage would facilitate optimal gas use among sectors throughout the year. The net present gain – defined as the discounted sum of the annual differences in benefits and costs – is used to determine the economic viability of gas storage. Overall, gas storage in the high gas supply case would deliver a positive gain of nearly 900 million dollars throughout the energy system. With low gas supply, the cost of gas storage for the upstream sector would exceed the benefit of lower costs realized in other sectors. The results indicate that gas storage installations are only favorable in the case of high domestic gas production. If production turns out to be low, LNG imports would instead be more sensible.
{"title":"Viability of Seasonal Natural Gas Storage in the Saudi Energy System","authors":"Walid Matar, Rami Shabaneh","doi":"10.2139/ssrn.3485992","DOIUrl":"https://doi.org/10.2139/ssrn.3485992","url":null,"abstract":"Abstract We assess the geological and economic viability of underground natural gas storage in Saudi Arabia under different scenarios: with and without LNG imports allowed, and under low and high domestic gas production. Depleted oil fields or aquifers are best suited for gas storage in the Kingdom. Using a model of the country's energy system, we show that in the case of high gas production, storage capacity would be built to bypass the gas transport limit for use in electricity generation in the summer. In the low production case, gas storage would facilitate optimal gas use among sectors throughout the year. The net present gain – defined as the discounted sum of the annual differences in benefits and costs – is used to determine the economic viability of gas storage. Overall, gas storage in the high gas supply case would deliver a positive gain of nearly 900 million dollars throughout the energy system. With low gas supply, the cost of gas storage for the upstream sector would exceed the benefit of lower costs realized in other sectors. The results indicate that gas storage installations are only favorable in the case of high domestic gas production. If production turns out to be low, LNG imports would instead be more sensible.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"89 41 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129807132","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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