International Review of Finance最新文献

We examine the informativeness of analyst stock recommendations in the presence of aggregate uncertainty. Our results suggest that a one standard deviation increase in aggregate uncertainty decreases the likelihood of influential recommendation revisions by 5.26%. Increased aggregate uncertainty leads to a small stock price impact for upgrade and downgrade recommendations. Our findings reveal consistent search for information by investors, which, support a post-recommendation price drift amidst high aggregate uncertainty. We further find that investors of firms with fewer distracted shareholders, less readable financial statements, and more informed trading seek more information when aggregate uncertainty is high. Our study highlights that investors become more cautious while responding to analysts' stock recommendations during high aggregate uncertainty.

Motivated by the rapidly emerging literature on climate change and finance, we explore the effect of corporate tax avoidance on shareholder value around the adoption of the Paris Climate Agreement. Companies engaging in greater tax avoidance experience significantly more favorable stock market reactions. Companies that achieve greater savings through tax avoidance have a larger surplus of resources that can be directed toward climate-related actions in alignment with the Paris Agreement, resulting in enhanced shareholder value. Furthermore, the advantageous impact of tax avoidance on shareholder wealth is significantly less pronounced for companies that pay out larger dividends.

This study examines the effect of the early tax-free release of the superannuation (ERS), which was introduced as a financial stimulus to counter the economic havoc created by the COVID-19 pandemic, on Australians' superannuation retirement balances. By considering 2800 scenarios based on individuals' working industries, age, withdrawal amounts, and asset allocation strategies, we find that individuals with non-aggressive asset allocation strategies may struggle to reach the minimum required superannuation balance for a comfortable lifestyle in retirement if they opt-in for the ERS. This impact is more evident for individuals employed in certain industries such as accommodation and food, and retail trade.

We examine the impact of foreign institutional ownership on firms' labor investment efficiency. Using a comprehensive global sample of firms across 37 non-U.S. countries, we find that greater ownership by foreign institutional investors is significantly associated with lower deviations of labor investment from the level justified by economic fundamentals, that is, higher labor investment efficiency. Independent, U.S.-based and common-law foreign institutional investors increase labor investment efficiency to a greater extent than their gray, non-U.S.-based and civil-law peers. We further find evidence supporting the value creation of foreign institutions through the improvement in labor investment efficiency. Overall, our results suggest that foreign institutional investors promote good corporate governance practices around the world.

In this paper, we examine the relationship between Hofstede national cultures and de jure central bank independence. We propose theoretical hypotheses to explain how cultural dimensions determine central bank independence and test these hypotheses using an international dataset. We find that two cultural dimensions, namely, individualism and uncertainty avoidance, are significantly related to central bank independence. Central bank independence is higher in collectivistic and uncertainty avoidance countries. We further reveal that these cultural dimensions affect central bank independence in different ways. Individualism and uncertainty avoidance are related to independence in policy formulation and limitations on lending to governments. Although power distance and masculinity are insignificantly related to total central bank independence, they affect independence in objectives, policy formulation and limitation on lending to governments. Our results are robust through a series of checks.

We investigate the predictive role of global economic uncertainty exposure at the firm level in the top-five developed stock markets outside the US. Applying portfolio-level sorting strategies, we find that exposure to global idiosyncratic uncertainty exhibits stronger predictive power than either total or common uncertainty. Further, the idiosyncratic uncertainty betas are negatively related to future stock returns over multiple trading horizons in the UK, Europe, and Canada, and this relationship cannot be explained by common risk factors, including market, size, value, investment, profitability, and momentum. Our findings are robust to the use of firm-level Fama–MacBeth regressions and additional trading horizons.

Empirical studies report inconclusive assessment of duration-based immunization, notably showing that more sophisticated strategies do not outperform immunization relying on Macaulay duration. This article provides a mean–variance framework to explain this puzzle. We characterize the efficient portfolio allocations for a stylized barbell strategy trading off reinvestment risk with discounting risk. We show, in a model-free setting, that barbell allocations form a convex set in the mean–variance space, and the endpoints of the efficient frontier can switch as time passes, reversing the set of efficient allocations. Consequently, duration-based immunization, which is not minimum variance, can exhibit temporary inefficiency. This result is numerically illustrated in a one-factor Gaussian and a two-factor non-Gaussian model. Using yield curve scenarios resampled from U.S. data over the 1977–2020 period, we further corroborate our conclusions non-parametrically, and find that duration-based immunization is sometimes inefficient.

This article examines the relationship between bank diversification and performance in the Japanese banking sector. We use panel data from 141 banks over the period 2000–2022 to investigate whether banks can improve profitability and reduce risk through diversification strategies. Our evidence shows that diversification can improve bank profitability at the cost of a decline in net interest margins, suggesting banks are using the interest business as a loss leader to promote other business lines. We find that asset diversification has a risk-reducing effect, which supports the portfolio hypothesis. Some evidence also implies that there is a more complex nonlinear relationship. This can be partly attributed to bank type, as the diversification effects vary across different types of banks. Furthermore, the decomposition of non-interest income reveals that fees and commissions negatively influence return on assets while simultaneously reducing bank risk.

This research investigates the effect of sentiment on the time-series and cross-section of mean, variance and correlation of asset returns to examine how investor sentiment creates predictable variations in financial markets. Based on the method proposed by Baker and Wurgler (2007, Investor sentiment in the stock market, Journal of Economic Perspectives 21, 129-152), we build composite sentiment indexes with a focus on international markets. Our time-series results show that optimistic (pessimistic) sentiment leads to overpricing (underpricing) and that variance and correlation of asset returns increase when investors are pessimistic. Our cross- section results suggest that these effects tend to become more pronounced for stocks with more exposure to sentiment or the market.

In this study, we utilize a sample of publicly traded US energy firms to investigate the stock market responses to 40 large-scale oil spills. Our findings reveal that the stock prices of extraction and refining firms experience significant declines during the periods surrounding these oil spill incidents, and energy pipeline firms exhibit a relatively smaller decrease. These results underscore the risk exposure shared by all energy firms, irrespective of their direct involvement in the oil spill incident. Furthermore, our study uncovers an intriguing dynamic—the influence of political connections established through lobbying activities. We observe that these political ties serve to significantly mitigate the negative market reactions to oil spills. Our results suggest that, from the market's perspective, firms with political connections are less vulnerable to the impending costs associated with oil spills when compared to their non-politically connected counterparts.