International Review of Finance最新文献

This study examines tail risk transmission across Indian stock sectors, employing the conditional autoregressive value-at-risk (CAViaR) model and time-varying parameter vector autoregression (TVP-VAR) methodology. We uncover substantial interconnectedness, with total connectedness indices (TCIs) for both negative and positive tail risks reflecting significant inter-sectoral dependency. Analysis highlights symmetrical tail risk transmission across sectors and identifies consumer discretionary, financial services, and industrials as pivotal in risk distribution. Crude oil volatility is pinpointed as a key factor influencing negative tail risk connectedness, notably during geopolitical upheavals. The results emphasize the constrained potential for sectoral diversification in mitigating systemic risks, advocating for advanced risk management practices and diversified investment portfolios.

We examine how controlling shareholders influence corporate innovation, using trademark registration data from Chinese listed firms between 2003 and 2020. We find that the effect of control depends on the nature of the controlling entity: in state-owned enterprises (SOEs), government control is associated with significantly lower levels of innovation output, whereas in non-SOEs, greater authoritative power of the controlling shareholder is positively associated with innovation. Our findings suggest that institutional investors may help mitigate agency problems related to innovation in SOEs, although their role is limited in non-SOEs. Additional analyses reveal that trademarks are positively linked to future firm performance and that controlling shareholder authority is positively associated with innovation efficiency. Our findings underscore the importance of ownership structure in shaping firms' innovation strategies and outcomes.

Psychology research on contrast effects suggests that information from a previous decision may be compared with the information of the current task. We document a new stylized fact that an analyst's current annual earnings forecast error of one firm is negatively correlated with her latest forecast revision of another firm. We tease out contrast effects as the main driving force of this negative relationship by excluding other potential mechanisms such as firms' information environment and analyst constraints. We show that variables which may influence analysts' retrieval of past experiences have significant impacts on the magnitude of contrast effects, as predicted by the memory-based valuation model.

This study investigates the excess value implications of news about biodiversity risk for investors of diversified firms using a sample of 1019 US firms from 2001 to 2023. In a given year, more positive news about biodiversity risk increases the value of diversified firms relative to a benchmark portfolio of single-segment firms, especially for large-diversified firms. This diversification premium effect, that is, the excess value of diversified firms, in response to positive news about biodiversity risk, is non-linear, robust to several alternative specifications, and exists regardless of internal capital market efficiency, number of business segments, excess net income, and the climate change exposure of diversified firms. Our study highlights the potent role of diversified firms in exploiting biodiversity protection-related investment opportunities, as investors attach a relative premium to such firms.

Do capital market regulations improve the efficiency of allocation of capital to IPO firms? We answer this question by examining a regulation in India that allows IPO firms to seek investment from lead (anchor) institutional investors. Using a sample of 158 anchor investor-backed IPOs and 689 non-anchor IPOs from 2006 to 2020, we find that anchor-backed IPO firms are more profitable and sell at higher valuations. These IPOs raise more equity than non-anchor firms, and anchor-backed firms with higher productivity of capital raise more equity than other firms. We find that anchor-backed IPOs experience a significant improvement in profitability and Q over 4 years after the IPO. Anchor backing is associated with a lower probability of the stock being downgraded to lower categories of listing and less illiquidity. Our results suggest that capital market regulations can be effective in directing capital to firms with higher investment efficiency.

This paper delves into the influence of state ownership on green innovation in family firms using a sample of Chinese listed companies from 2008 to 2021. Our results show that state ownership significantly promotes family firms' green innovation performance. Intergenerational succession, CEO's green experience, and Confucian cultural atmosphere moderate this positive relationship significantly. Channel tests indicate that state ownership positively affects green innovation in family firms by enhancing their corporate social responsibility, facilitating their access to external resources, and improving their internal control quality. Cross-sectional analysis shows that the promoting effect of state ownership on green innovation is more prominent among family firms in non-heavily polluting industries, those with higher levels of information transparency, and those facing lower levels of market competition. These findings provide new insights into the reverse mixed-ownership reform in China and offer valuable guidance for family firms in formulating effective green innovation strategies.

Given the large variations in the evolution and the size of the responsible investing (RI) mutual fund sectors across countries, we examine factors affecting their growth. We find that the size of a country's RI fund industry, whether measured relative to the size of the conventional fund industry, total equity market capitalization, or relative to the country's GDP, is strongly related to the country's cultural norms, as measured by dimensions from Hofstede, World Values Survey, or GLOBE. The RI fund sector also increases with the country's wealth, as measured by the GDP per capita.

Studying the Chinese SEO market, we find that investors geographically closer to an SEO firm's headquarters tend to submit bids that align more closely with the final offer price and tend to win the auction with a higher likelihood, particularly for high-demand SEOs. This local advantage is especially pronounced when bidding on firms with high operational uncertainty, active earnings management, and limited visits from institutional investors and analysts. Additionally, local investors are more likely to conduct on-site visits to SEO firms before the offering process than their nonlocal counterparts. However, this local edge diminishes during the nationwide COVID-19 lockdown and with the establishment of efficient transportation links to SEO firms. Overall, the evidence suggests that proximity provides investors with a significant advantage to gain information.

Small businesses are important drivers of economic activity and job creation but face significant credit constraints. This study examines the joint impact of credit constraints and risk tolerance on a household's decision to become self-employed using data from the 2022 Survey of Consumer Finance (SCF), and in a novel way. First, it uncovers and then accounts for the large numbers of households that are truly credit constrained yet systematically overlooked with traditional measures of credit constraints based on loan rejections. Three hidden groups are identified– underfunded borrowers, discouraged borrowers, and priced-out borrowers– which collectively make up an actual majority of credit constrained borrowers. Second, the study isolates and estimates the independent impact of credit constraints and risk tolerance on self-employment, avoiding a persistent common omitted variables problem in the literature. The results show that credit constraints and risk aversion significantly limit business activities. The exclusion biases are quantified.

This paper examines the impact of CEOs' financial work experience on corporate supplier stability. We find that a firm's supplier stability decreases when it's CEO has financial work experience. The impact is more pronounced for firms with fewer local procurement and less analyst coverage, and firms with lower industry concentration and limited market power. We also find that the impact of financial work experience is weakened when the financial expert CEO is female or older. The investigation into influencing channels shows that CEOs' financial work experience decreases corporate supplier stability through an increase in corporate financial investments, a decrease in financial slack, and an increase in agency costs. Finally, we find that decreased supplier stability driven by CEOs' financial work experience increases corporate operating risk. Our findings highlight the costs of hiring financial expert CEOs from the perspective of supply chain.