International Review of Finance最新文献

This study proposes a simple and practical approach to measure firm-level health risk by examining stock performance during a prior crisis of a similar type. Using Chinese A-share firms—the only major market significantly affected by both SARS and COVID-19—we show that SARS returns robustly predict COVID-19 returns, even after controlling for systematic risk, firm characteristics, survivorship, industry effects, and investor behavior. Further analysis indicates that both expected cash flow and discount rate channels contribute to such return predictability. By offering an easily implementable measure of health risk and providing out-of-sample evidence from a major non-U.S. market, our study highlights the persistent role of health risk in firm valuation and extends the literature on pandemic-related financial risk.

We study the relationship between corporate cash holdings and expected stock returns through the lens of precautionary savings. Building on Palazzo, which predicts that firms more exposed to aggregate risk hold more cash and earn higher returns, we introduce a forward-looking measure—Cash-to-Market Equity (Cash-to-ME). Unlike the traditional Cash-to-Assets ratio, Cash-to-ME consistently predicts cross-sectional returns. The premium is conditional, concentrated among small and R&D-intensive firms facing financing frictions. In R&D firms, it is largely subsumed by R&D-to-ME, consistent with cash serving as a buffer for innovation. In non-R&D firms, cash-to-ME overlaps with book-to-market and cash-flow-to-price, reflecting value-like precautionary savings. Empirical tests show that the premium strengthens with cash-flow betas and low profitability, and that cash-rich firms gradually deploy reserves when constrained. These findings extend Palazzo's framework by providing long-horizon empirical validation and establishing Cash-to-ME as a priced proxy for precautionary savings.

This study examines the impact of inflation uncertainty on bank stability in the context of macroprudential regulations being increasingly adopted across countries. Utilizing a dataset of over 1600 banks in 33 emerging economies from 2000 to 2018, we find a negative relationship between inflation uncertainty and bank stability, indicating that higher inflation uncertainty significantly increases bank risk. However, our analysis reveals that tightened macroprudential regulations can effectively counteract this adverse influence, enhancing bank stability during periods of inflation uncertainty. These findings are consistent across a series of robustness tests, including alternative variable measurements, sensitivity analyses, and econometric approaches. Moreover, our results highlight the differential effectiveness of various macroprudential instruments. Specifically, regulations involving reserve requirements, asset-based instruments, and capital buffers demonstrate more pronounced effects in mitigating the impact of inflation uncertainty on bank stability.

On April 10, 2023, China's Main Board stock market implemented a new quote limits rule, restricting the range of permissible order prices. Utilizing a regression discontinuity design (RDD), this study investigates the causal effect of this rule on stock market efficiency. We find that the rule leads to a significant reduction in pricing errors, indicating improved market efficiency. In addition, the rule is associated with a decrease in medium-sized orders, fewer large price jumps, and a lower probability of end-of-day manipulation, suggesting that the rule improves market efficiency primarily by constraining manipulative trading activities from financially advantaged investors (e.g., institutional investors). Consistent with this manipulation-curbing explanation, the rule's positive impact is more pronounced for small-capitalization and low-liquidity stocks, which are typically more vulnerable to price manipulation. Our findings provide robust causal evidence on the efficacy of quote limits in mitigating stock price manipulation and offer valuable regulatory insights for emerging markets.

Whether and how financial technology (Fintech) affects employment and the composition of financial firms is a crucial emerging issue. This study examines the impact of Fintech on financial firms' employee profiles in Taiwan. Based on a panel dataset of financial firms for 2012–2020, in combination with firms' granted Fintech patents, empirical estimations reveal no significant job-creating or job-destroying effect of Fintech. In addition, non-Fintech patents have no significant association with employment. Notably, separating Fintech patents into different types, high-novelty patents, and inventions alters financial firms' workforce composition. This leads financial firms to hire an increased share of postgraduate-educated workers. A battery of robustness checks confirms these findings.

This research empirically examines how dialect diversity influences corporate investment efficiency under different levels of economic policy uncertainty (EPU). Our findings reveal that local dialect diversity enhances investment efficiency during stable periods, but this advantage significantly diminishes under high EPU. This reduction primarily arises from underinvestment and overly cautious decision-making by fragmented management during periods of turmoil. Further analysis indicates that this decline is exacerbated by stronger internal governance, which emphasizes checks and balances, and mitigated by stronger external governance, which focuses on supervisory power. Our findings remain robust when adopting alternative measures of key variables and utilizing topography as an instrumental variable.