Pub Date : 2026-01-17DOI: 10.1016/j.gfj.2026.101236
Junming Zhuang , Tianyu Zhang , Jingshi He
Nonfinancial firms have increasingly engaged in shadow banking activities. Using data from Chinese A-share nonfinancial firms, we empirically examine how such activities affect equity mispricing. The results indicate that shadow banking by nonfinancial firms is positively associated with equity mispricing. This finding still holds when we address potential endogeneity problems and use alternative proxies. This relationship is less pronounced among firms with higher levels of digitalization, stronger corporate governance, more market development business environments, and state-ownership structure, suggesting that information asymmetry, agency problems, and regulatory uncertainty are key underlying mechanisms. Further analysis shows that increased shadow banking activity raises stock price volatility, heightens crash risk, and increases the cost of equity, with these effects operating in part through equity mispricing. Our study extends the literature on equity mispricing and highlights the consequences of nonfinancial firms' engagement in shadow banking activities in the capital market.
{"title":"Impact of shadow banking of nonfinancial firms on equity mispricing","authors":"Junming Zhuang , Tianyu Zhang , Jingshi He","doi":"10.1016/j.gfj.2026.101236","DOIUrl":"10.1016/j.gfj.2026.101236","url":null,"abstract":"<div><div>Nonfinancial firms have increasingly engaged in shadow banking activities. Using data from Chinese A-share nonfinancial firms, we empirically examine how such activities affect equity mispricing. The results indicate that shadow banking by nonfinancial firms is positively associated with equity mispricing. This finding still holds when we address potential endogeneity problems and use alternative proxies. This relationship is less pronounced among firms with higher levels of digitalization, stronger corporate governance, more market development business environments, and state-ownership structure, suggesting that information asymmetry, agency problems, and regulatory uncertainty are key underlying mechanisms. Further analysis shows that increased shadow banking activity raises stock price volatility, heightens crash risk, and increases the cost of equity, with these effects operating in part through equity mispricing. Our study extends the literature on equity mispricing and highlights the consequences of nonfinancial firms' engagement in shadow banking activities in the capital market.</div></div>","PeriodicalId":46907,"journal":{"name":"Global Finance Journal","volume":"69 ","pages":"Article 101236"},"PeriodicalIF":5.5,"publicationDate":"2026-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146023060","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-17DOI: 10.1016/j.gfj.2026.101237
Solmaz Batebi, Ahmed Elnahas
This study examines whether machine learning (ML) techniques can improve the prediction of insider trading behaviour compared with traditional linear approaches. Using a comprehensive sample of U.S. insider trading data from 2000 to 2022, we compare ensemble learning methods—random forest and extreme gradient boosting—to logistic regression and least absolute shrinkage and selection operator (LASSO). We implement Bayesian hyperparameter optimisation to improve model tuning and employ Shapley additive explanations (SHAP) values to maintain interpretability and identify the principal economic determinants of insider trading decisions. Additionally, we apply Gaussian Thompson sampling to evaluate competing hypotheses about insiders' market-timing motives. The results demonstrate that ML methods substantially outperform linear models in predicting both the likelihood and magnitude of insider sales, with predictive gains particularly pronounced among female insiders. SHAP analysis indicates that incentive structures play a stronger role for male insiders, whereas female trading behaviour appears more closely associated with private information about future firm performance.
{"title":"Are machines better predictors of insider trading?","authors":"Solmaz Batebi, Ahmed Elnahas","doi":"10.1016/j.gfj.2026.101237","DOIUrl":"10.1016/j.gfj.2026.101237","url":null,"abstract":"<div><div>This study examines whether machine learning (ML) techniques can improve the prediction of insider trading behaviour compared with traditional linear approaches. Using a comprehensive sample of U.S. insider trading data from 2000 to 2022, we compare ensemble learning methods—random forest and extreme gradient boosting—to logistic regression and least absolute shrinkage and selection operator (LASSO). We implement Bayesian hyperparameter optimisation to improve model tuning and employ Shapley additive explanations (SHAP) values to maintain interpretability and identify the principal economic determinants of insider trading decisions. Additionally, we apply Gaussian Thompson sampling to evaluate competing hypotheses about insiders' market-timing motives. The results demonstrate that ML methods substantially outperform linear models in predicting both the likelihood and magnitude of insider sales, with predictive gains particularly pronounced among female insiders. SHAP analysis indicates that incentive structures play a stronger role for male insiders, whereas female trading behaviour appears more closely associated with private information about future firm performance.</div></div>","PeriodicalId":46907,"journal":{"name":"Global Finance Journal","volume":"69 ","pages":"Article 101237"},"PeriodicalIF":5.5,"publicationDate":"2026-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146023061","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-15DOI: 10.1016/j.gfj.2026.101235
Zimo Tao , Yi Zhang , Yongjian Huang
This study explores the effect of zero-cost employee stock ownership plans (zero-cost ESOPs) on corporate innovation. Based on staggered Difference-in-Differences (DID) method, the empirical results demonstrate that zero-cost ESOPs significantly promote corporate innovation, and the result is validated by a series of robustness and endogeneity tests. Mechanism analysis reveals that zero-cost ESOPs enhance corporate innovation by improving the human capital structure through attracting more highly educated and technically skilled employees, which widens the salary gap. Furthermore, the positive effect is more pronounced for firms with lower average salaries, industry competition, and executive shareholding. Most importantly, compared with traditional ESOPs, zero-cost ESOPs exhibit a stronger positive influence on corporate innovation, particularly in fostering independent innovation rather than collaborative innovation with external firms.
{"title":"Zero-cost employee stock ownership incentive and corporate innovation","authors":"Zimo Tao , Yi Zhang , Yongjian Huang","doi":"10.1016/j.gfj.2026.101235","DOIUrl":"10.1016/j.gfj.2026.101235","url":null,"abstract":"<div><div>This study explores the effect of zero-cost employee stock ownership plans (zero-cost ESOPs) on corporate innovation. Based on staggered Difference-in-Differences (DID) method, the empirical results demonstrate that zero-cost ESOPs significantly promote corporate innovation, and the result is validated by a series of robustness and endogeneity tests. Mechanism analysis reveals that zero-cost ESOPs enhance corporate innovation by improving the human capital structure through attracting more highly educated and technically skilled employees, which widens the salary gap. Furthermore, the positive effect is more pronounced for firms with lower average salaries, industry competition, and executive shareholding. Most importantly, compared with traditional ESOPs, zero-cost ESOPs exhibit a stronger positive influence on corporate innovation, particularly in fostering independent innovation rather than collaborative innovation with external firms.</div></div>","PeriodicalId":46907,"journal":{"name":"Global Finance Journal","volume":"69 ","pages":"Article 101235"},"PeriodicalIF":5.5,"publicationDate":"2026-01-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146023062","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-03DOI: 10.1016/j.gfj.2026.101233
Tom Aabo , Viktor Raaby Jensen
CEOs matter, and beauty matters. Based on social identity theory, we argue that women and men are likely to be held to different beauty standards by the boards of directors when these boards select the new CEO. Our empirical results support our arguments. Specifically, we investigate 959 CEO turnovers in non-financial S&P 1500 firms in the period from 2008 to 2022. We find that newly appointed female CEOs are significantly more attractive than their male peers. Thus, the median female CEO is more attractive than a male CEO at the 75th percentile level. We find no indication of an economic rationale for such a biased beauty preference. When investors are informed of the new CEO, they value CEO beauty equally across the two genders (i.e., no gender bias). The discrimination by the boards of directors seems to be related to women's minority status (i.e., we get similar results for non-white candidates) rather than the sexualization of women although we cannot rule out that both may coincide. Our findings are robust and economically significant. Thus, they are important in understanding the lack of gender equality and the avenues through which women face (beauty) discrimination in the upper echelons.
{"title":"Only attractive women are welcome: Board bias and CEO selection","authors":"Tom Aabo , Viktor Raaby Jensen","doi":"10.1016/j.gfj.2026.101233","DOIUrl":"10.1016/j.gfj.2026.101233","url":null,"abstract":"<div><div>CEOs matter, and beauty matters. Based on social identity theory, we argue that women and men are likely to be held to different beauty standards by the boards of directors when these boards select the new CEO. Our empirical results support our arguments. Specifically, we investigate 959 CEO turnovers in non-financial S&P 1500 firms in the period from 2008 to 2022. We find that newly appointed female CEOs are significantly more attractive than their male peers. Thus, the median female CEO is more attractive than a male CEO at the 75th percentile level. We find no indication of an economic rationale for such a biased beauty preference. When investors are informed of the new CEO, they value CEO beauty equally across the two genders (i.e., no gender bias). The discrimination by the boards of directors seems to be related to women's minority status (i.e., we get similar results for non-white candidates) rather than the sexualization of women although we cannot rule out that both may coincide. Our findings are robust and economically significant. Thus, they are important in understanding the lack of gender equality and the avenues through which women face (beauty) discrimination in the upper echelons.</div></div>","PeriodicalId":46907,"journal":{"name":"Global Finance Journal","volume":"69 ","pages":"Article 101233"},"PeriodicalIF":5.5,"publicationDate":"2026-01-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145977096","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-03DOI: 10.1016/j.gfj.2026.101234
Guangrui Liu , Ying Fang , Jiani Yan , Ming Zhou , Zixin He
Industrial policies generate both positive and negative information effects. Existing research largely emphasizes their signaling benefits while overlooking potential adverse impacts. Using the High-Tech Enterprise Identification Policy (HTEP) as a quasi-natural experiment, this study applies a staggered difference-in-differences model to examine how industrial policy influences stock price crash risk. The findings reveal that HTEP produces an information concealment effect that heightens crash risk. This effect is most pronounced among nonstate-owned and pseudo high-tech enterprises, where controlling shareholders conceal negative information for tax arbitrage and equity transfer, further increasing risk. Channel analysis indicates that HTEP intensifies information asymmetry among external investors, amplifying market instability. Grounded in Type II agency theory, the study identifies research and development information manipulation as a new mechanism linking industrial policy to crash risk, thereby expanding the theoretical framework of stock price dynamics. These results provide empirical evidence on the information effects of industrial policy and offer policy insights to improve the design and execution of innovation-driven industrial strategies worldwide.
{"title":"Information concealment effects or signaling effect of industrial policy: Evidence from stock price crash risk","authors":"Guangrui Liu , Ying Fang , Jiani Yan , Ming Zhou , Zixin He","doi":"10.1016/j.gfj.2026.101234","DOIUrl":"10.1016/j.gfj.2026.101234","url":null,"abstract":"<div><div>Industrial policies generate both positive and negative information effects. Existing research largely emphasizes their signaling benefits while overlooking potential adverse impacts. Using the <em>High-Tech Enterprise Identification Policy</em> (HTEP) as a quasi-natural experiment, this study applies a staggered difference-in-differences model to examine how industrial policy influences stock price crash risk. The findings reveal that HTEP produces an information concealment effect that heightens crash risk. This effect is most pronounced among nonstate-owned and pseudo high-tech enterprises, where controlling shareholders conceal negative information for tax arbitrage and equity transfer, further increasing risk. Channel analysis indicates that HTEP intensifies information asymmetry among external investors, amplifying market instability. Grounded in Type II agency theory, the study identifies research and development information manipulation as a new mechanism linking industrial policy to crash risk, thereby expanding the theoretical framework of stock price dynamics. These results provide empirical evidence on the information effects of industrial policy and offer policy insights to improve the design and execution of innovation-driven industrial strategies worldwide.</div></div>","PeriodicalId":46907,"journal":{"name":"Global Finance Journal","volume":"69 ","pages":"Article 101234"},"PeriodicalIF":5.5,"publicationDate":"2026-01-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145925163","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-02DOI: 10.1016/j.gfj.2025.101232
Shi-jie Jiang , Lehang Zeng , Mei-Chih Wang
This research delves into the cash flow underwriting in the U.S. property-casualty insurance market, a strategic approach in which insurance companies trade off underwriting profits in hopes of higher investment returns. Spanning from 1954 to 2023, this study utilizes nonlinear autoregressive distributed lag (NARDL) and multiple threshold NARDL (MTNARDL) models to uncover how interest rate fluctuations affect underwriting profits and investment income ratios. We discovered compelling differences: while the short-tail line aligns with rational market behavior, the long-tail line reacts significantly, echoing the nature of cash flow underwriting. At the aggregate industry level, the dominance of cash flow underwriting in the long run is primarily driven by these long-tail business lines, which account for a substantial share of underwriting exposure. Furthermore, a pattern of long-run asymmetric adjustment is also observed between investment income ratios and interest rates, indicating that while underwriting profits decline with rising interest rates, investment income can offset these losses to a certain extent. Through asymmetric causality tests, we further illustrate how positive and negative interest rate shocks uniquely influence profitability across various business lines. This study not only bridges conflicting theories of rational markets and strategic underwriting but also equips industry stakeholders with critical insights to navigate the complex rhythms of the insurance market.
{"title":"Does cash flow underwriting work? Evidence from the U.S. insurance markets","authors":"Shi-jie Jiang , Lehang Zeng , Mei-Chih Wang","doi":"10.1016/j.gfj.2025.101232","DOIUrl":"10.1016/j.gfj.2025.101232","url":null,"abstract":"<div><div>This research delves into the cash flow underwriting in the U.S. property-casualty insurance market, a strategic approach in which insurance companies trade off underwriting profits in hopes of higher investment returns. Spanning from 1954 to 2023, this study utilizes nonlinear autoregressive distributed lag (NARDL) and multiple threshold NARDL (MTNARDL) models to uncover how interest rate fluctuations affect underwriting profits and investment income ratios. We discovered compelling differences: while the short-tail line aligns with rational market behavior, the long-tail line reacts significantly, echoing the nature of cash flow underwriting. At the aggregate industry level, the dominance of cash flow underwriting in the long run is primarily driven by these long-tail business lines, which account for a substantial share of underwriting exposure. Furthermore, a pattern of long-run asymmetric adjustment is also observed between investment income ratios and interest rates, indicating that while underwriting profits decline with rising interest rates, investment income can offset these losses to a certain extent. Through asymmetric causality tests, we further illustrate how positive and negative interest rate shocks uniquely influence profitability across various business lines. This study not only bridges conflicting theories of rational markets and strategic underwriting but also equips industry stakeholders with critical insights to navigate the complex rhythms of the insurance market.</div></div>","PeriodicalId":46907,"journal":{"name":"Global Finance Journal","volume":"69 ","pages":"Article 101232"},"PeriodicalIF":5.5,"publicationDate":"2026-01-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146023063","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-30DOI: 10.1016/j.gfj.2025.101231
Haneen Abedalqader , Shao-Chi Chang
This paper aims to examine how trade policy uncertainty (TPU) affects firm-specific stock price crash risk and the extent to which corporate disclosures and governance can mitigate this vulnerability. Using a global panel database of publicly listed firms from 17 countries over the period 2010–2023, we find a positive and significant relationship between TPU and stock price crash risk, suggesting that firms exposed to trade policy shocks are more vulnerable to sudden negative price movements. As a result of opacity, firms with less transparent geographical segment disclosure tend to hoard bad news, suggesting that opacity compounds this tendency. Furthermore, we investigate how segment reporting complexity, supply chain concentration, and governance mechanisms serve as moderating factors. We find that high segment reporting complexity and supply chain concentration exacerbate the TPU-crash risk relationship by increasing operational and informational opacity. The TPU-induced crash risk decreases with strong institutional ownership and enhanced analyst coverage, but increases with high information asymmetry. In light of rising global trade policy uncertainty, geographical segment disclosure, operational structure, and governance are crucial to moderating firm-level financial fragility.
{"title":"Trade policy uncertainty and stock price crash risk: The role of geographic segment disclosure","authors":"Haneen Abedalqader , Shao-Chi Chang","doi":"10.1016/j.gfj.2025.101231","DOIUrl":"10.1016/j.gfj.2025.101231","url":null,"abstract":"<div><div>This paper aims to examine how trade policy uncertainty (TPU) affects firm-specific stock price crash risk and the extent to which corporate disclosures and governance can mitigate this vulnerability. Using a global panel database of publicly listed firms from 17 countries over the period 2010–2023, we find a positive and significant relationship between TPU and stock price crash risk, suggesting that firms exposed to trade policy shocks are more vulnerable to sudden negative price movements. As a result of opacity, firms with less transparent geographical segment disclosure tend to hoard bad news, suggesting that opacity compounds this tendency. Furthermore, we investigate how segment reporting complexity, supply chain concentration, and governance mechanisms serve as moderating factors. We find that high segment reporting complexity and supply chain concentration exacerbate the TPU-crash risk relationship by increasing operational and informational opacity. The TPU-induced crash risk decreases with strong institutional ownership and enhanced analyst coverage, but increases with high information asymmetry. In light of rising global trade policy uncertainty, geographical segment disclosure, operational structure, and governance are crucial to moderating firm-level financial fragility.</div></div>","PeriodicalId":46907,"journal":{"name":"Global Finance Journal","volume":"69 ","pages":"Article 101231"},"PeriodicalIF":5.5,"publicationDate":"2025-12-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145884277","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-21DOI: 10.1016/j.gfj.2025.101229
Silu Pang, Chunlin Cheng, Yihan Han, Guihong Hua
Retail investors' green interactions—their oversight and recommendations on corporate climate risks through official interactive platforms—have become a growing informal governance mechanism as climate change gains global prominence. Drawing on social exchange theory, this study examines how such interactions between retail investors and listed firms influence corporate climate risk exposure (CRE). Using data from China's investor-firm interactive platforms covering 1798 firms from 2014 to 2022, we find that green interactions significantly reduce CRE, with stronger effects among firms exhibiting higher social responsibility conformity and larger retail investor bases. Advocacy-oriented and information-oriented messages are most effective, and their impact is amplified by firms' response quality. We identify three mechanisms behind this relationship: heightened climate risk perception, lower information transmission costs, and strengthened investor trust. These findings deepen understanding of retail investor activism in corporate climate governance and offer insights for integrating grassroots engagement into climate policy and financial regulation.
{"title":"Green interactions and corporate climate risk exposure: Evidence from China's investor-firm digital interactive platforms","authors":"Silu Pang, Chunlin Cheng, Yihan Han, Guihong Hua","doi":"10.1016/j.gfj.2025.101229","DOIUrl":"10.1016/j.gfj.2025.101229","url":null,"abstract":"<div><div>Retail investors' green interactions—their oversight and recommendations on corporate climate risks through official interactive platforms—have become a growing informal governance mechanism as climate change gains global prominence. Drawing on social exchange theory, this study examines how such interactions between retail investors and listed firms influence corporate climate risk exposure (CRE). Using data from China's investor-firm interactive platforms covering 1798 firms from 2014 to 2022, we find that green interactions significantly reduce CRE, with stronger effects among firms exhibiting higher social responsibility conformity and larger retail investor bases. Advocacy-oriented and information-oriented messages are most effective, and their impact is amplified by firms' response quality. We identify three mechanisms behind this relationship: heightened climate risk perception, lower information transmission costs, and strengthened investor trust. These findings deepen understanding of retail investor activism in corporate climate governance and offer insights for integrating grassroots engagement into climate policy and financial regulation.</div></div>","PeriodicalId":46907,"journal":{"name":"Global Finance Journal","volume":"69 ","pages":"Article 101229"},"PeriodicalIF":5.5,"publicationDate":"2025-12-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145840172","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the pricing of multivariate crash risk (MCRASH), which measures the conditional probability that a stock crashes when one or more systematic risk factors crash. Using data from 48 countries between 1992 and 2021, we show that MCRASH is a robust predictor of expected stock returns. The premium is stronger in emerging markets and concentrated in cyclical industries, consistent with differences in institutional quality, earnings cyclicality, and macroeconomic exposure. We also document that cultural dimensions condition the pricing of MCRASH. Individualism and uncertainty avoidance strengthen the premium, trust dampens it, and power distance intensifies it during high-volatility states. These results highlight the state-dependent role of culture in shaping investor responses to systemic risk.
{"title":"Multivariate crash risk and worldwide stock returns","authors":"Emawtee Bissoondoyal-Bheenick, Vuong Thao Tran, Angel Zhong","doi":"10.1016/j.gfj.2025.101230","DOIUrl":"10.1016/j.gfj.2025.101230","url":null,"abstract":"<div><div>This paper examines the pricing of multivariate crash risk (MCRASH), which measures the conditional probability that a stock crashes when one or more systematic risk factors crash. Using data from 48 countries between 1992 and 2021, we show that MCRASH is a robust predictor of expected stock returns. The premium is stronger in emerging markets and concentrated in cyclical industries, consistent with differences in institutional quality, earnings cyclicality, and macroeconomic exposure. We also document that cultural dimensions condition the pricing of MCRASH. Individualism and uncertainty avoidance strengthen the premium, trust dampens it, and power distance intensifies it during high-volatility states. These results highlight the state-dependent role of culture in shaping investor responses to systemic risk.</div></div>","PeriodicalId":46907,"journal":{"name":"Global Finance Journal","volume":"69 ","pages":"Article 101230"},"PeriodicalIF":5.5,"publicationDate":"2025-12-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145836806","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-18DOI: 10.1016/j.gfj.2025.101228
Yuanqi Zhou , Ya Zhang , Zhenghua Shuai , Yu-en Lin
Share pledging is not strictly regulated in emerging markets, making it into a mechanism for controlling shareholders to cash out financing. Using data from Chinese listed companies (2008–2020), this study examines the relationship between controlling shareholder share pledging and corporate investment efficiency by incorporating the reinvestment behavior of pledged funds into an analytical framework. Results reveal a significant negative correlation between share pledging and investment efficiency by reducing information transparency, weakening corporate social responsibility(CSR), and damaging the effectiveness of internal control. However, pledged fund inflow can alleviate financing constraints and function as a reservoir to improve investment efficiency. When pledged funds flow into the enterprise, the reservoir effect becomes dominant, particularly in firms experiencing underinvestment issues. In this scenario, share pledges alleviate financing constraints, improve corporate investment efficiency. In contrast, when pledged funds flow out of the enterprise, weakened corporate governance from equity pledges triggers the tunneling effect, which exacerbates agency conflicts and reduces investment efficiency. Further analysis reveals that the tunneling effect is weaker for companies with high audit quality, strong media attention, and check-and-balance ownership. These findings, which remain robust after a series of tests including instrumental variable method(IV), propensity score matching(PSM), and alternative variable measurements, contribute to understanding share pledges' actual impact and mechanisms on firm-level resource allocation, yielding significant theoretical and practical insights for improving corporate governance and regulatory systems in emerging markets.
{"title":"Share pledging by controlling shareholders and firm investment efficiency: Evidence from China","authors":"Yuanqi Zhou , Ya Zhang , Zhenghua Shuai , Yu-en Lin","doi":"10.1016/j.gfj.2025.101228","DOIUrl":"10.1016/j.gfj.2025.101228","url":null,"abstract":"<div><div>Share pledging is not strictly regulated in emerging markets, making it into a mechanism for controlling shareholders to cash out financing. Using data from Chinese listed companies (2008–2020), this study examines the relationship between controlling shareholder share pledging and corporate investment efficiency by incorporating the reinvestment behavior of pledged funds into an analytical framework. Results reveal a significant negative correlation between share pledging and investment efficiency by reducing information transparency, weakening corporate social responsibility(CSR), and damaging the effectiveness of internal control. However, pledged fund inflow can alleviate financing constraints and function as a reservoir to improve investment efficiency. When pledged funds flow into the enterprise, the <em>reservoir effect</em> becomes dominant, particularly in firms experiencing underinvestment issues. In this scenario, share pledges alleviate financing constraints, improve corporate investment efficiency. In contrast, when pledged funds flow out of the enterprise, weakened corporate governance from equity pledges triggers the tunneling effect, which exacerbates agency conflicts and reduces investment efficiency. Further analysis reveals that the <em>tunneling effect</em> is weaker for companies with high audit quality, strong media attention, and check-and-balance ownership. These findings, which remain robust after a series of tests including instrumental variable method(IV), propensity score matching(PSM), and alternative variable measurements, contribute to understanding share pledges' actual impact and mechanisms on firm-level resource allocation, yielding significant theoretical and practical insights for improving corporate governance and regulatory systems in emerging markets.</div></div>","PeriodicalId":46907,"journal":{"name":"Global Finance Journal","volume":"69 ","pages":"Article 101228"},"PeriodicalIF":5.5,"publicationDate":"2025-12-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145840171","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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