International Review of Finance最新文献

We analyze the optimal design of deferred compensation for bank executives under agency conflicts in a continuous time model with a bank liability structure. Our model demonstrates that a well-designed deferred compensation contract can effectively mitigate bank executives' asset substitution problem and significantly enhance the total value of the bank, which aligns with existing empirical studies. Moreover, we find that the motivation for bank executives to shift risk under deferred compensation is diminished when supervision is more stringent, the bank has greater market power, or the write-down ratio of debt is lower.

Retail investors are known to favor stocks with lottery-like features and trade too much. Less is known about their intertemporal demand and risk-taking behavior in lottery-type stocks. We use intraday transaction data between September 2019 and June 2020 from the Stock Exchange of Thailand to test how individual's risk attitude changes with respect to decline in their wealth prospects during the COVID-19 lockdown. The behavior of the investors supports a reference dependent preference. Confronted with lowered wealth prospects, retail investors substantially reduce their underweighting in nonlottery stocks while increasing overweighting and turnover frequency in lottery stocks resulting in deteriorating portfolio performance.

We investigate whether diversification stabilizes bank lending cyclicality on a sample of 25 conventional and 18 Islamic banks from Malaysia spanning 2008 to 2021. Our findings reveal that both bank types are nonlinearly procyclical during economic expansions, with Islamic banks also exhibiting countercyclical behavior during economic contractions. Diversification is positively associated with credit growth in conventional banks and Islamic bank subsidiaries, and it amplifies procyclicality across all Islamic bank types. Conversely, loan concentration stabilizes credit in Islamic banks. These results are robust to an alternative credit measure. Further analyses indicate that public and foreign banks are procyclical during booms and countercyclical during busts. At the same time, diversification heightens procyclicality in private, local, and foreign banks, whereas concentration mitigates it in public and local banks.

This study examines the relationship between marketization and corporate cash holdings. Using a sample of the Chinese stock market spanning from 2007 to 2020, our empirical results show that marketization negatively affects corporate cash holdings. This effect is more pronounced for firms in the eastern and central regions of China and Chinese Growth Enterprise Market (GEM). Additionally, our study finds that investment opportunities and state-owned features of firms play moderating roles in the effect of marketization on firms' cash holdings. State-owned enterprises (SOEs) are less affected by marketization; however, the more investment opportunities a firm has, the greater is the negative impact of marketization on its cash holdings. Finally, we find that marketization can affect corporate cash holdings through firms' financing constraints. These results are robust to various tests and alternative explanations.

This paper uses a sample of comment letters issued and disclosed by the Shanghai and Shenzhen Stock Exchanges in China from 2015 to 2019 and empirically investigates the impact of comment letters on the cost of equity capital. The results show that the cost of equity capital raises after firms receive comment letters. However, when repeating the analysis using comment letters issued but undisclosed between 2013 and 2014, the observed effect dissipates, indicating an information disclosure channel. Moreover, the cost of equity capital is higher when the letters include more questions and demand independent opinions from auditors. Cross-sectional tests show that this effect is influenced by investor protection, corporate information environment, and internal control quality. Additional tests show a negative association between the receipt of comment letters and both the likelihood and the amount of seasoned equity offerings, which can be attributed to the elevated cost of equity. Overall, our paper not only underscores the importance of public disclosure of government regulatory information, but also provides empirical evidence supporting the effectiveness of regulation by stock exchanges.