Journal of Multinational Financial Management最新文献

In this study, we analyse the effect of product differentiation on prices and client attraction in the socially responsible (SR) mutual fund industry. Using three proxies for differentiation, including a text-based indicator, a return-based indicator, and a portfolio-holding indicator, we analyse a sample of US SR equity mutual funds in the period 1999–2019. Our findings show that the text differentiation measure better explains the product differentiation impact on prices and flows than the measures based on fund characteristics. Our text differentiation results indicate that younger SR funds and funds belonging to smaller families are more differentiated. In addition, differentiation allows SR funds to charge higher fees and attract more money flows. Finally, our results indicate that SR fund investors are sensitive to differentiation regarding other funds implementing the same SR strategies, but not in relation to other funds in the same Morningstar financial style category.

This paper studies how covenants affect the speed of capital structure adjustment in Brazil, an environment with poor creditor rights. Unlike previous evidence for developed countries, we find that the existence of debt covenants increases the speed of capital structure adjustment by more than 20% for firms that are only domestically listed. For firms that are cross-listed in the US, this effect is smaller (if any), possibly because these firms “bond” to the stricter regulation and creditor protection of the US market. Our results suggest that in emerging markets with poor creditor protection, covenants are an imperfect substitute for strong creditor rights and employed as a signaling device, permitting firms to adjust their leverage towards optimal levels quicker.

We investigate whether investor-state arbitration under investment protection treaties is valuable to foreign investors, and whether international arbitration has effects on firm value that are like those seen in domestic litigation. An event study of abnormal returns when claims for arbitration are filed and adjudicated show that firms gain in market value both at the time they file for arbitration and when they receive an award. These gains in value generally exceed the size of the awards, indicating that success in arbitration provides the foreign investor not only monetary compensation but also non-monetary reputational effects that reduce costs of doing business abroad. Stock markets anticipate the outcomes of the arbitration process when claims are filed and when awards are announced. The effects on firm value of domestic litigation and investor-state arbitration differ, reflecting the institutional differences between the two methods of resolving disputes.

This paper explores potential economic mechanisms through which fluctuations in exchange rates are priced in international stock returns. Our investigation focuses on two currency risk factors – a dollar-risk factor and a carry-trade-risk factor – and their explanatory power for a variety of test assets comprised of monthly returns for over 47,000 stocks from 46 countries and over four decades. We find that currency risk is more likely to be priced among firms producing tradeable goods, and especially during periods of heightened exchange rate volatility. This finding is robust with respect to the evaluating criteria on firm internationalization, the benchmark factor models chosen, and the sub-periods examined.

This study focuses on productivity spillover effects of foreign direct investment (FDI) using firm-level panel data from Brazilian manufacturing firms. We seek to determine what attributes of foreign-invested enterprises (FIEs) and domestic firms are associated with the transfer and absorption of spillover effects, respectively. We find that when spillover effects are measured at the aggregate level only, (positive) horizontal and backward productivity spillovers can be identified. However, when FIEs are disaggregated, those horizontal and backward spillover effects are most closely associated with majority foreign ownership and high-export profiles. Moreover, we can now identify positive forward spillovers transmitted by low-importing and low-exporting FIEs exclusively to high-technology domestic firms. Finally, our investigation demonstrates that for domestic firms, low productivity levels and the absence of worker training preclude the absorption of certain types of spillover effects but still allow for the absorption of other types.

This study uses a TVP-VAR model to test whether gold is a safe haven for exchange rate risks. The five major world currencies are examined: the Chinese renminbi, euro, British pound, Japanese yen, and U.S. dollar. The empirical results show that (1) gold cannot hedge currency depreciation in the long run; (2) gold can hedge currency depreciation dynamic risk in the short run; (3) gold can act as a safe haven to hedge dynamic risk for the euro, dollar, and pound in the short run, but not for the renminbi and yen; and (4) the yen tends to appreciate significantly when international risks escalate, thus, it can be regarded as a safe haven currency.

We examine how political power, polarization, and economic policy uncertainty (EPU) in Canada and the US affect the Canadian equity market from 1985 to 2019. We document little evidence of significant liberal government return premiums and the corresponding risk for the overall market and many industry sectors. Only the IT sector witnesses the “second half effect” of election cycles. The Canadian equity market seems to outperform during strong Democratic control in the US, with mixed findings for the individual sectors. Political polarization in the two countries and trade uncertainty have little impact on Canadian equity returns except for the venture, small-cap, and IT sectors from the US polarization. The US EPU index affects the average returns of the overall Canadian equity market and the energy, industrials, retail, and transportation industries, while domestic EPU in Canada reduces the overall equity market, small-cap, and venture firm returns. The alignment of political ideology in the two countries has little impact on the equity market in Canada. Collectively, the results show that the impact of political environments on the Canadian equity market tends to be limited, dynamic, and industry-specific, suggesting that investors should not blindly mix their portfolios with their political views or affiliations.

We use data from 33 countries to study how a fund’s affiliation with large families shapes the flow–performance relationship internationally. Our results show that the effect of family size on the fund flows’ response to performance depends on the sophistication of investors in a country. While less sophisticated investors are persuaded by the great visibility and strategies of funds that are affiliated with large and established families, more sophisticated investors are not. Affiliation with a large family increases the convexity of the flow–performance relationship in countries where investors are less sophisticated, but decreases this convexity in countries with more sophisticated investors. These results are important for investors, mutual fund companies and regulators because the flow–performance sensitivity determines the assets under management, the level of fees, risk–taking, and the performance of the fund.

This paper examines the effect of geopolitical risk on corporate investment in emerging Asian countries. Using an extensive sample spanning 1995–2018, we find that geopolitical risk is negatively associated with corporate investment. Geopolitical risks in China and Russia have a greater impact on corporate investment, while a less significant influence is found in India and Turkey. Our findings are robust to using alternative measures of geopolitical risk, using alternative proxies of investment, even after controlling for endogeneity concerns by a two-stage least square estimation, a system generalized method of moments regression, and the incremental effect of geopolitical risk. The adverse impact of geopolitical risk on firm investment is more pronounced for firms with a higher degree of investment irreversibility. However, firms with greater cash holdings can better mitigate this negative impact. Overall, this paper shows that geopolitical risk is a crucial macrolevel shock influencing corporate investment.

This paper examines the alignment between initial price reaction and post-cross-listing performance for non-American firms cross-listed in the U.S. Using an event study methodology, we show that, while cross-listed firms exhibit long-term performance, short-term valuation gain is more important. We also find a significant difference between short and long-term price reactions, explained by legal investor protection considerations. Additional analysis shows that the change in the U.S. regulatory environment has no diminishing effect on cross-listing economic benefits. We also show more important short-run price reactions in crisis time, leading to more significant misalignment between short and long-term performance. Our results are robust to several control firm and country characteristics.