International Review of Finance最新文献

We estimate the enduring momentum probabilities of past winners and losers continuing as future winners and losers by incorporating a comprehensive set of firm characteristics. Our results reveal that combining the price momentum signals and enduring momentum probabilities generates returns double those of the traditional price momentum strategy. Furthermore, the robust performance of the enduring momentum strategy cannot be fully attributed to factors such as seasonality, limits to arbitrage, and transaction costs.

We develop a dynamic investment model that incorporates agency conflicts, considering the impact of rare disaster and carbon emission reduction. This model elucidates the effects of carbon emission reduction on capital investment, asset pricing, and welfare. Our findings indicate that optimal carbon emission reduction level increases with disaster risk, volatility, and risk aversion. Furthermore, in comparison to the inaction scenario, carbon emission reduction leads to underinvestment, enhances Tobin's $��q�$, increases risk-free rate, and decreases risk premium. This introduces a non-monotonic relationship among capital investment, risk-free rate, risk premium with disaster risk. Lastly, carbon emission reduction mitigates the cost for the outside shareholder to address agency conflicts.

We compare the impact of broad-based equity incentives and government R&D subsidies on the efficiency of corporate innovation. Chinese corporations that offer broad-based incentives for employees and managers demonstrate greater R&D investment efficiency, as evidenced by a higher ratio of innovation outputs to cost allocation. Conversely, firms receiving government R&D subsidies demonstrate lower efficiency. Accounting for endogenous treatments in a multi-treatment framework, we suggest an information-sharing environment is critical for efficient capital allocation. Government agencies will likely provide subsidies based on information different from what firm headquarters might have, while broad-based incentive programs encourage employee coordination, enhancing efficiency and project quality. To signal project quality, firms with broad-based incentives capitalize a higher proportion of R&D costs than subsidized firms. We also find that combining broad-based incentives and subsidies might not create synergies.

A new measure of investor sentiment is introduced and tested in this study. Different from using search volume of certain macroeconomic terms to capture investor attention/sentiment, this new measure is crafted from analyzing and classifying the sentiment contents of textual comments of retail investors active in a major Chinese stock forum. Different from the traditional sentiment studies linking market-level sentiment to market-wide reactions, this uncomplicated measure is constructed for individual stocks and subsequently, reactions of the same stocks are tracked and examined, offering a more direct and precise correlation test. In our validation tests, we show a significantly positive correlation between investor sentiment and three stock market parameters that is, stock return, price volatility, and information efficiency. Specifically, a positive sentiment is associated with higher stock returns and a higher degree of information efficiency as well as higher price volatility. These associations seem to attenuate with improvement in the information environment, such as better investor protection.

This paper proposes a superior default-prediction model using machine-learning techniques. Traditional risk-assessment tools have fallen short, especially for foreign investors who face significant transparency issues. Using detailed financial data on Chinese bond issuers, our model provides much broader coverage than international credit-rating agencies offer. We achieve better than 90% accuracy in predicting credit-bond defaults, significantly outperforming Altman's Z-scores. This study not only advances predictive analytics in financial risk management but also serves as an early warning device and reliable default-risk detector for investors aiming to navigate the complexities of the Chinese bond market.

Exploiting account-level daily stock holding records of over 24,000 retail investors, we show that local investors increase holdings of local stocks more than the nonlocals' in the case of natural disasters. Additional tests suggest that the effect is likely driven by the local investors' information advantage about the intrinsic value of local stocks, navigating them to the underpriced ones and thus achieving superior stock returns. Our study reveals the economic reasoning underlying local biases particularly under natural disasters.

We examine intraday information flows between shares cross-listed in Hong Kong and Shanghai. The relative trading volume in Hong Kong (Shanghai) is positively related to the relative contribution to price discovery, based on Hasbrouck (1995) Information Share. Northbound trading by Hong Kong investors has a greater contribution to price discovery than southbound trading by Mainland Chinese investors. We construct a few measures of intraday market qualities: (1) probability of informed trading; (2) intraday effective spread; (3) pricing error; and (4) intraday volatility ratio. Evidence indicates that northbound trading and institutional southbound trading, but not retail southbound trading, are informed and improve pricing efficiency.

This paper investigates whether the JinHui financial education project (i.e., a large-scale financial education program in China) reduces household vulnerability to poverty. Using data from the China Family Panel Studies and the JinHui Financial Education project data from the China Foundation for Development of Financial Education, we find that the JinHui project significantly reduces household vulnerability to poverty. Our economic channel analyses find that the JinHui project alleviates household vulnerability to poverty through improving household risk management ability. Interestingly, our mechanism analyses find no evidence that increasing household income is a mechanism through which the JinHui project reduces household vulnerability to poverty.

This study examines the benefits of environmental, social, and governance (ESG) disclosure assurance (EDA) in reducing a firm's cost of equity capital. Using data on Chinese listed financial institutions from 2006 to 2022, we find a significant and negative relationship between EDA and the cost of equity capital. When an EDA is provided by an accounting firm, as well as when the auditor is a shared resource for the annual report, the cost of equity decreases significantly. Further analysis shows that the effect of EDA on the cost of equity is more pronounced for institutions with lower information transparency and higher operational risk. Additionally, the impact of EDA is amplified when these institutions choose to disclose their ESG information separately rather than integrating it within their financial reporting, when disclosures align with the Global Reporting Initiative standards, and when the content of the disclosures is more comprehensive and detailed.

This study investigates the relationship between board chairs' early-life experiences during the Great Chinese Famine and the debt maturity choices of Chinese listed firms from 2000 to 2017. The findings reveal that board chairs with famine experience demonstrate a stronger preference for long-term debt usage. Moreover, these board chairs underestimate future corporate earnings, are less prone to overinvestment, adopt more hedging strategies, and ensure higher-quality accounting information. The results are particularly pronounced in firms with lower asset redeployability, higher financial distress risk, the absence of political affiliations, non-state ownership, lower market competition, and heightened economic policy uncertainty. These findings suggest that the observed behavior stems from a risk-averse orientation rather than altruistic motivations among board chairs with famine experience.