Global Finance Journal最新文献

This paper investigates the complex relationship between monetary policy and bank profitability by analyzing yearly data from 903 credit institutions across 36 European nations throughout the period of 2005 to 2021, utilizing the two-step system GMM technique. We undertake a comparative analysis to investigate the effects of monetary policy on both developed European and Central, Eastern, and Southeastern European (CESEE) countries. Additionally, we examine the impacts of negative interest rate policies (NIRPs) using a comprehensive dataset that incorporates the latest available information, to observe heterogeneities among time periods and countries. We find that the influence of monetary policies on profits and margins is generally insignificant or moderate, with the exception of ROA in CESEE countries. This highlights the potential benefits for banks in the CESEE region in an environment where there is a significant difference between short-term and long-term interest rates. However, it also raises doubts about the effectiveness of NIRPs that have been adopted in recent years. The remaining results of our analysis indicate that loan loss provisions and cost-to-income are the primary determinants of bank profitability across all scenarios. This underscores the significance of effective provisioning practices and operational efficiency.

This study examined the impact of CSR regulation on the working capital management of Indian firms, using the mandatory 2% CSR spending regulation implemented in India in 2015 as a quasi-natural experiment setup. We used the cash conversion cycle (CC_Cycle) as a proxy to measure working capital management, determining that CSR regulation positively impacted the CC_Cycle. Furthermore, cheaper debt from institutional sources replaced the costly trade credit, which drives this relationship. Our results remained robust for various model specifications, estimators, and sample selection procedures. They were consistent with the views of the financial access hypothesis, suggesting that CSR activities increase firms' access to finance from institutional sources, allowing firms to replace costly trade credits with cheaper institutional capital.

Fintech, a fusion of finance and technology, is changing the global financial landscape. The fast-evolving industry is fostering financial inclusion, enabling cost-effective and efficient financial intermediation. The entrepreneurial ecosystem of an economy is pivotal in shaping the prospects of innovations in an economy. This study is an initiative in that direction, evaluating the Fintech entrepreneurial ecosystem in India using a novel firm-level dataset of Indian Fintech startups. The study builds upon a theoretical framework, investigating the influence and interconnectedness of social and founder capital signals on Fintech startup funding in India. Incubator and/or accelerator engagement is considered for social capital signaling. Ordinary least squares and propensity score matching methods are employed for this study. Findings suggest a significant signaling effect from social capital factors: incubator or accelerator support. Sources of founders' entrepreneurial signals, founder network, and experience, have also been evidenced to influence funding received by Indian Fintech startups.

We develop formulae for earnings growth rates in business valuation models that justify the timing of reinvestment. First, we show that the cross-reference in the calculation between the reinvestment rate (RIR) and return on invested capital (ROIC; i.e., the weighted average of invested capital) introduces valuation errors. We then explain the formulae of earnings growth rates to avoid errors in two situations: reinvestment at the end of each year and at any time. The study also shows the timing of capital reinvestment, where the false growth rate occurring due to cross-referencing will match the actual growth rate. We also study the case where the false growth rate is always higher or lower than the actual growth rate. We use numerical examples to show that our models are correct and highlight arising from cross-referencing. We provide a practitioner's guide for two scenarios: valuers directly estimate earnings growth rates and clients provide future earnings and related information. Finally, and most importantly, our results imply the principle of impossible quaternity for estimating earnings growth in the discounted cash flow (DCF) framework. More specifically, a business valuation cannot have an available expected growth rate, a fixed change in ROIC, an independent reinvestment timing, and a fixed level of actual reinvestment.

This study examines relative performance evaluation (RPE) for CEO compensation in business groups called “chaebols” in Korea. We find strong evidence of RPE when peers are member firms within the same business group, particularly when a firm has an established compensation committee or is run by a professional CEO (rather than a family CEO). This result is consistent with the argument that the affiliated firms within a business group may face significant common shocks affecting their performance. Therefore, aggregate group performance may be an excellent RPE benchmark for filtering out common risks from CEO compensation measurement.

Using a sample of publicly traded nonfinancial firms in Germany from 2000 to 2020, we empirically test whether the share of foreign investments positively affects firm risk and the cost of debt. Although the share of foreign investments is positively related to operating risk, it is not related to systematic risk, idiosyncratic risk, or industry-adjusted operating risk. Furthermore, the share of foreign investments is unrelated to the cost of debt or firm performance. If the realized firm risk adequately represents the expected firm risk, our results suggest no relationship between the degree of foreign investments and the expected firm risk. As expected, we find a positive relationship between firm risk and the cost of debt.

This study examines the role of a country's position as a tax haven and its corruption level in the information asymmetry of non-United States (U.S.) stocks listed on the New York Stock Exchange. Based on the findings, non-U.S. stocks from countries with more pronounced attributes of tax havens and corruption levels have a higher probability of information-based trading and lower market liquidity. Meanwhile, a deeper analysis into the individual attributes of tax havens reveals that the main drivers of these effects include weak anti-avoidance measures and legal complexities, with lesser effects from double tax treaties. In addition, the influence of a country's corruption level on information asymmetry primarily depends on its position as a tax haven, with the highest levels of information asymmetry occurring in jurisdictions that possess strong tax haven attributes and high corruption levels. The implication of the findings is that reducing the influence of global tax havens, especially in regions with high corruption levels, can enhance market liquidity, ultimately benefiting investors and contributing to the overall stability and efficiency of financial markets.

In this paper, we explore the association between property crime rate and lottery demand anomalies. Motivated by criminology literature that suggests a positive relation between crime and risk-taking, we conjecture that gambling propensity in the stock market is stronger (weaker) in regions with higher (lower) property crime rate. Consistent with our conjecture, we show that underperformance of lottery stocks, proxied by MAX, is more pronounced in the US regions with higher property crime rates compared to regions with lower property crime rates. Our results are robust to alternative proxies for lottery demand, such as alternative constructions of MAX and skewness measures, and various empirical tests. Our findings suggest variation in crime-induced gambling propensity affects financial market outcomes.

It is puzzling that few undervalued firms in China make repurchase announcements despite the value-adding motive of share repurchases. Inspired by this conundrum, this study explores the market-timing effect of repurchase signaling. Our sample consists of A-share listed firms that made stock repurchase announcements in China between 2005 and 2019, as well as their comparable peers obtained through the Mahalanobis distance matching. Changes in market indices before and after the repurchase announcements are used to measure overall market timing, followed by regression analyses. We find a positive relationship between post-announcement price reactions and market performance measures, suggesting that firms time repurchase announcements based on historical pricing information as well as overall market trends. We further propose that firms' timing capabilities are honed through attention to the capital market, which significantly increases the willingness to announce repurchase plans. Our findings help to explain why firms in China with undervalued shares make repurchase announcements.

We measure US commercial banks' exposure to and materiality of physical climate risk by examining branch-level data. Our location-specific climate risk measure is pos- itively associated with banks' ESG performance and negatively associated with stake- holders' sentiment regarding ESG issues. Furthermore, banks that experience climate risk shocks, as proxied by NOAA billion-dollar disasters, improve ESG performance and receive positive ESG sentiment accordingly compared with matched banks. While negative sentiment due to climate risk exposure is associated with worsened financial performance, stronger ESG engagement mitigates this adverse effect.