International Review of Finance最新文献

This study explores the investment value of China's carbon market by analyzing its diversification potential and contribution. Specifically, we first assess the diversification potential from perspectives including potential identification, diversification roles, improvement on efficient frontier, and optimal weight analyses using the DCC-GARCH and dummy variable regression models. We further explore the diversification contribution by comparing the portfolio performance with and without the carbon market under various asset allocation strategies. Our results confirm the diversification potential of the carbon market and demonstrate its roles as both a hedge and a safe haven during the past decade and several periods of extreme market downturns. We also show the significant role of the carbon market in reducing portfolio risks. However, its risk-reducing capacity is weaker than that of green bonds, despite its superior return-enhancing capabilities in certain cases. Attractively, the diversification contribution of the carbon market is more pronounced in both portfolio risk reduction and return enhancement during turbulent periods compared to tranquil ones. These findings are crucial for developing effective asset allocation and risk management strategies.

This study examines how share allocation strategies during intergenerational succession affect the Environmental, Social, and Governance (ESG) performance of Chinese family businesses. Using data from 207 publicly listed Chinese family firms spanning 2009 to 2016 (totaling 1277 firm-year observations), we analyze the impact of the proportion and concentration of shares allocated to second-generation heirs on ESG outcomes. We apply a theoretical framework that integrates socioemotional wealth (SEW), agency, stewardship, and stakeholder theories to understand the role of equity allocation decisions in shaping firms' sustainability priorities. Our results indicate that increasing heirs' share proportions positively enhance ESG performance, while higher share concentration among family members negatively affects ESG outcomes. These findings remain consistent after multiple robustness checks and corrections for endogeneity. Furthermore, we demonstrate that traditional familism culture moderates these relationships, particularly influenced by founder characteristics, heirs' background, and the separation between ownership and management. This research provides new insights into the importance of internal share allocation decisions and cultural factors in promoting sustainable practices. Our findings contribute to existing literature by integrating multiple theoretical perspectives and offer practical guidance for family businesses and policymakers in China.

Value-at-Risk (VaR), the primary measure of downside risk in market risk management, relies heavily on the accuracy of volatility forecasts produced by risk models. This paper shows that, for forecasting the VaR of cryptocurrencies, the time-heterogeneous Student's t autoregressive model outperforms standard models commonly used by practitioners.

This paper investigates the impact of CEOs' university mottos on corporate innovation. We find that firms led by CEOs who graduated from universities with the word innovation in their mottos exhibit higher levels of innovation. This positive effect is more pronounced when the CEOs graduated from science and technology or national key universities, and when the firm operates in a high-tech sector or is a non-state-owned enterprise (non-SOE). Channel tests reveal that CEOs whose university mottos include the word innovation enhance corporate innovation through three crucial mechanisms: (1) increasing focus on research and development (R&D), (2) allocating more resources to R&D endeavors, and (3) cultivating a corporate culture that embraces high-risk ventures. Overall, our study illuminates the crucial role of CEOs' innovative mindsets, which are shaped by their university mottos, in driving corporate innovation.

Using a novel measure of air pollution exposure adjusted for the heterogeneity of exposures and the extent of local air pollution, we find a significant negative relationship between adjusted air pollution exposure and corporate innovation investment. This finding still holds after controlling for endogeneity and conducting a series of robustness tests. While the relationship is mediated through net operating cash flows and debt financing costs, we also find that firms with high adjusted air pollution exposure might have deteriorated productivity of R&D personnel, which ultimately hinders innovation input and output. However, state ownership appears to mitigate this adverse effect of adjusted air pollution exposure. Furthermore, the adverse effects of air pollution exposure on innovation investment are more pronounced among firms that disclose environmental information, exhibit low managerial risk tolerance, operate in non-polluting industries, or are located in developed and less polluted regions. Additionally, the negative impact is particularly evident in the subsample of firms after the signing of the 2015 Paris Agreement. This study sheds light on the importance of adjusted air pollution exposure and its influence on corporate investment in China.

This study investigates the impact of firms' potential to automate routine-task labor on stock liquidity. We demonstrate that firms with a high potential for automation (AP), characterized by a significant share of displaceable labor, experience a decline in stock liquidity. Our analysis shows that this association is particularly pronounced during positive technological shocks and heightened product market competition. Using the catastrophic 2011 Thai flooding as an exogenous shock to AP, we find evidence that the relationship between AP and liquidity is likely causal. The findings withstand rigorous testing, encompassing industry-level analysis, propensity score matching, and the utilization of alternative proxies for both displaceable labor and stock liquidity. This examination is augmented by the inclusion of additional control variables. These results contribute to a deeper understanding of the interplay between automation, market dynamics, and liquidity, offering valuable insights for investors, policymakers, and firms navigating the evolving technological innovation landscape.

We highlight the importance of law and regulation using firms incorporated in offshore financial centers (OFCs) that promise an efficient institutional environment but can also enable expropriation of minority shareholders. We find SEC action is more likely for these firms, which is consistent with lower investor valuation and our model's intuition. Our identification strategy using a Cayman Islands corporate law change, a related court decision, and increases in government scrutiny confirms that easier takeover provisions benefit minority shareholders. Thus, whether these unusual jurisdictions are beneficial or destructive depends on law, regulation, and firm, home country, and listing country characteristics.

This study examines the optimal investment, consumption, and life insurance choices faced by a wage earner with recursive preferences within a finite time horizon. We posit that the financial market comprises a risk-free asset and a risky asset that follows a general stochastic volatility model. The objective of the wage earner is to identify optimal investment, consumption, and life insurance strategies that maximize the expected utility of discounted intertemporal consumption, legacy wealth, and terminal wealth throughout the uncertain lifespan. Using the dynamic programming principle, we derive the Hamilton-Jacobi-Bellman (HJB) equation to describe the optimal investment–consumption–insurance strategy and its corresponding value function. By solving the HJB equations, we derive the analytical solutions for the optimal strategy and value function in the cases of the exponential-polynomial form and the Heston's stochastic volatility model. Through numerical simulations, we investigate the impact of several parameters, providing further economic insights obtained in this study.

We study the long-run aftermarket performance of Emerging Growth Companies (EGCs), a new category of IPO issuers created by the Jumpstart Our Business Startups Act (JOBS Act). We document that, in the long run, EGCs outperform by about 25 percentage points, compared to those firms that would have qualified as EGCs had they gone public after the enactment of the JOBS Act. We further find that institutional investors play an important role in supporting the long-run performance of EGCs—not only do EGCs have greater institutional ownership, but the positive effect of institutional ownership on IPO firms' long-run performance is also more pronounced. The paper represents a first attempt to study the long-run aftermarket performance of EGCs and its determinants. Our findings contribute to the burgeoning literature on the effectiveness of the JOBS Act and evidence of the supporting role of institutional investors on IPO aftermarket performance.

While the determinants of foreign portfolio investment (FPI) flows to India have been extensively analyzed, research has largely failed to document the impact and the relative importance of domestic monetary policy shock vis-à-vis other variables in causing FPI flows to India. This study adds to the literature by empirically examining the impact of the domestic monetary policy shock on FPI flows to India using the structural VAR methodology. It further disaggregates the analysis of FPI flows into portfolio equity flows (PEF) and portfolio debt flows (PDF) to investigate whether a domestic monetary policy shock affects the two flows similarly or differently. The study finds that domestic monetary policy shock (measured through shocks to interest rate differential and domestic money supply growth) significantly influences FPI flows to India, explaining about 10.1% of the total variation in these flows. The disaggregated analysis of FPI also reveals similar results for both portfolio equity flows and portfolio debt flows; however, the impact of the domestic monetary policy shock is greater on the debt component of FPI (portfolio debt flows) than on the equity component of FPI (portfolio equity flows).