International Review of Finance最新文献

Using Australian national-level survey data and applying Poisson regressions, we show that property investors who have more trust in the retirement system tend to own fewer investment properties. This finding is robust to various estimation methods, sample sizes, and periods.

This paper examines the impact of passive investors on Corporate Social Responsibility (CSR) through the lens of a risk-management view of CSR, which emphasizes its insurance-like effects in adverse corporate events. Since passive investors have diversified away most idiosyncratic risks, we predict that they demand less CSR as a strategic approach to manage risks. Using the annual Russell 1000/2000 index reconstitution as an instrument for passive investor ownership, we document evidence consistent with our prediction. The negative effect is more pronounced among better-diversified passive investors and firms that are not in CSR-sensitive industries. We further show that passive investors hold back CSR activities through the channel of “voice” by reducing the number of socially responsible investment (SRI) proposals.

As climate issues gain increasing attention, climate-related risks now appear to have the potential to be transmitted to the financial system. This paper utilizes a bootstrap rolling window Granger causality test to explore the dynamic correlation between climate transition risk (CTR), climate physical risk (CPR), and financial systemic risk. Empirical findings reveal that, during periods of intensive climate policy transformation, CTR exhibits a significant enhancing effect on systemic financial risk. However, no such phenomenon is observed for CPR. This research indicates that the uncertainty brought about by transitions in climate policy can significantly influence financial systemic risk.

We investigate the empirical relationship between a country's democracy level, measured using the Democracy Index's five categories (electoral process and pluralism, the functioning of government, political participation, political culture, and civil liberties), and market liquidity for non-US stocks listed on the New York Stock Exchange (NYSE) from 2014 to 2019. Our analysis shows that non-US stocks from countries with stronger democratic institutions have narrower spreads, a higher market quality index, smaller price impacts of trades, and lower probabilities of information-based trading. We also find a significant correlation between changes in our liquidity measures and variations in a country's overall democracy level over time. Our results suggest that improving a country's level of democracy can enhance the market liquidity and quality of non-US stocks, thus benefiting investors and promoting the overall stability and efficiency of financial markets.

We investigate the impact of cross ownership on corporate resilience around the COVID-19 pandemic in the Chinese financial market. We show that firms with greater cross ownership experience higher corporate resilience, evidenced by a milder reduction in revenue during the COVID-19 pandemic and a faster recovery in revenue afterwards. This effect is more pronounced for firms in high-tech industries and large firms, firms in regions severely hit by the pandemic, and regions with better commercial credit environments. We argue that cross ownership improves the financing resources, corporate governance, and information acquisition, which enhances corporate resilience in the presence of the pandemic. Consistent with this notion, we find that firms with greater cross ownership have higher financing flexibility, fewer agency problems, and less information asymmetry during the COVID-19 pandemic.

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.

This paper examines whether the inception of credit default swaps (CDS) trading curbs corporate employment. We show that firms with CDS trading have significantly lower employment growth. Our baseline results are robust to alternative measures of corporate employment growth, various approaches that mitigate endogeneity concerns due to omitted variables and reverse causality, and additional control variables. The decrease in firms' employment growth after CDS trading is more pronounced in firms with larger financial constraints and lower CEO risk-taking. In addition, we find that the inception of CDS trading affects employment growth through the financial distress channel. Further analysis finds that the inception of CDS trading could mitigate the labor over-investment problem, stimulating employment efficiency. Our evidence suggests that corporate employment growth is reduced after the initiation of CDS trading due to the heightened cost of defaults.

Nearly one-third of asset sale announcements are preceded by a public statement of the intent to sell. These voluntary disclosures generate significant average returns of 1.1%. Pre-announcements bias returns around the actual asset sales toward zero. Due to opportunistic managerial behavior, pre-announcements occur after poor stock performance and CEO turnover. Managers also opportunistically exercise options around the pre-announcements and receive potential benefits from the uptick in stock prices. Although we find no effect of pre-announcements on long-term operational performance, we do observe a negative effect on stock returns using three and four-factor models.

Using a sample of Chinese listed firms during 2007–2020, we find that non-controlling blockholders (NCBs) with common ownership can exert effective monitoring on dominant owners' self-dealing behaviors captured by financial misconducts related to controlling shareholders. This effect is concentrated among state-owned enterprises (SOEs), especially for the common NCBs holding only SOEs. Finally, the monitoring effect is particularly evident when firms have more peer firms, when common NCBs hold more firms within the same industry, when common NCBs exert stronger exit threats, or when common NCBs hold long investment horizons, indicating that common ownership enhances NCBs' incentives and abilities to identify and curb controlling shareholders' misbehaviors.