International Review of Finance最新文献

Literature suggests that a volatility-timing strategy improves the performance of factor portfolios in the stock market and currency carry trade. This paper shows that the performance of this strategy is mixed when applied to mutual fund portfolios. More specifically, its performance not only depends on the investment style of the mutual funds but also the time periods when it is applied.

This study examines financing behavior during financial crises in an international sample of corporate firms including 85 countries from 1987 to 2017. Measuring “financial cyclicality” as the difference between financing levels during normal times and financial crisis times, we document counter-cyclicality in leverage and pro-cyclicality in security issuances and debt maturity. Financial crises discourage both debt and equity issuances, with a greater decline in equity, leverage increases, and debt maturity decreases. Public debt markets partially act as spare tire during crises when bank loan supply contracts significantly. Leverage financial counter-cyclicality is more pronounced in countries with weaker banking regulations.

We find that cumulative abnormal returns adjusted by size, book-to-market, and momentum around the earnings announcement date (DGTW_CAR3 hereafter) significantly and positively predict stock returns in the 6-month period from May 2005 to October 2020 in the China's A-shares market. The monthly equally-weighted DGTW_CAR3 premiums are 0.47% and 0.67% after risk adjustment. Although stock price delay fails to fully account for the DGTW_CAR3 premium, we find that the DGTW_CAR3 premium is more significant for illiquid stocks and during periods with high investor sentiment. This result suggests that market inefficiency explains the DGTW_CAR3 premium. Further analysis shows that, in addition to earnings information, the optimism reflected in the management discussion and analysis section of the annual or half-year report also contributes to the DGTW_CAR3 premium. This finding implies that DGTW_CAR3 may contain new fundamental information that correlates significantly and positively with future stock performance. Finally, we find that the institutional ownership change of a stock associated with DGTW_CAR3 also significantly and positively predicts the stock's return, suggesting that institutional investors adjust their holdings according to DGTW_CAR3 and consequently influence the demand for the stock in the China's A-shares market.

To improve the performance of a large portfolio selection, we consider the effect of tail network and propose a novel tail network-augmented parametric mean-conditional value-at-risk (CVaR) portfolio selection model labeled as TNA-PMC. First, we adopt the least absolute shrinkage and selection operator-quantile vector autoregression (LASSO-QVAR) approach to construct a tail network. Second, we parameterize the weights of the mean-CVaR model as a function of asset characteristics. Third, we incorporate the effect of the tail network topological characteristic, namely eigenvector centrality (EC), on the weights to construct the TNA-PMC model. After that, we apply the model to the empirical analysis on the Shanghai Stock Exchange 50 (SSE50) Index of China from January 2010 to September 2020. Our empirical results illustrate the effectiveness of the TNA-PMC model in two aspects. First, the TNA-PMC model clarifies the economic interpretation of the characteristics, such as the negative effective of EC on the portfolio weights. Second, the TNA-PMC model performs well in terms of achieving diversification and attractive risk-adjusted return.

The stakeholder theory predicts that corporate social responsibility (CSR) activities reduce the morale hazard problem between creditors and corporate firms and decrease the requirement of collaterals in debt transactions. Consistent with this theory, our analysis shows that there is a negative relationship between CSR and secured debt in a cross-section of firms. Further, by using the mandatory CSR regulation implemented in India as a quasi-natural experiment setting, we observe the same negative relationship across periods in firms that were impacted by the regulation. These results suggest that CSR activities may substitute collaterals for obtaining debt from financial institutions, especially banks.

This study examines the relationship between stock liquidity and corporate cash holdings and explores a new economic mechanism driving this relationship. Using a regression discontinuity design approach based on the annual reconstitution of the Russell 1000/2000 indices, we find that stock liquidity has a positive causal effect on corporate cash holdings. This effect is more pronounced for firms with more investment opportunities. These results suggest that enhanced stock liquidity increases corporate cash holdings by expanding the set of investment opportunities. Our evidence supports the real investment motive over the repurchase motive.

This paper empirically examines the effect of weekly options introduction on the benchmark index of Indian stock market, NIFTY50. The paper evaluates the possible stabilizing or destabilizing nature of impact on underlying volatility focusing on the relation between information and volatility using GARCH framework. The results indicate that the onset of weekly index options has improved the information assimilation and reduced the persistence of old information on volatility. Further, similar changes are not evident on a control index, NIFTY NEXT50. Overall, the results indicate an increase in market efficiency with weekly index options trading.

This study investigates the impact of government ownership on payout policies, cash holdings, capital expenditures, and borrowing costs for firms in Vietnam. Using the central hypothesis that state-owned firms (SOEs) are less financially constrained than privately-owned firms, we provide several main findings. First, we reveal that SOEs typically pay higher dividends, have higher total payouts, but undertake lower repurchases than privately-owned firms. Second, we find that SOEs have less need to hoard cash and spend less of their cash flow on capital expenditures than non-state-owned firms. Finally, our research indicates that SOEs have lower borrowing costs than privately owned firms. These findings support the view that, in frontier markets, firms with non-state ownership can mitigate the adverse effects of financial constraints by decreasing total payouts to shareholders and instead using their cash flow to increase cash holdings or capital spending.

We examine how the market valuation of firms varies on account of their operational fragility that makes them vulnerable to the COVID-19 pandemic. Using the data on plant location that uniquely identifies the vulnerability of firms to operational disruptions, we find that firms with plants located in zones susceptible to higher infections earn significantly lower returns. For firms with high operational fragility, the marginal value of financial flexibility and operating flexibility is higher. The adverse impact of the operational fragility is lower for firms affiliated with the larger business groups. The paper identifies unique channels associated with the pandemic that impact firm value.

When planning production, a firm must consider internal factors and factors related to their competitors as well. We examine whether the disclosure of customer identity by competitors is associated with a firm's production efficiency. Using a sample of Chinese firms, we find that a firm's total factor productivity is positively related to the disclosure, suggesting that a firm benefits from knowing the identity of its competitors' customers. The effect is more salient when a firm belongs to a competitive industry or is a market leader, suggesting a firm may be able to optimize its productivity when the information is more critical to its business.