Review of Quantitative Finance and Accounting最新文献

This article introduces a two-stage real option approach with a learning effect to examine the optimal timing and proportion of investment for a firm entering a new market. Numerical findings illustrate that firms with different learning speeds exhibit distinct investment strategies: those with slower learning speeds tend to invest large proportion in the early time of first stage and invest the rest of small proportion in the later time of second stage, whereas firms with faster learning speeds invest small proportion in the early time of first stage and invest the rest of large proportion in the later time of second stage, compared to traditional one-stage investments. Leveraging the flexibility provided by two-stage learning investment, firms can effectively utilize timing and scale options, as emphasized in previous research. Furthermore, the proposed model addresses instances of learning investments with losses that cannot be accounted for by one-stage approaches.

Contrary to the findings of prior research that focuses on private loans and bank debt, we find that greater CEO social capital is positively associated with a firm’s cost of public debt. This effect is particularly pronounced for firms in financial distress and firms with a higher probability of default that increase dividends. Examining the channel, we demonstrate that social capital is associated with a reduced use of restrictive covenants, which subsequently amplifies the firm's cost of debt. Collectively, the results support the risk-shifting perspective as a plausible mechanism. Our findings remain robust when considering alternative proxies for social capital, alternative model specifications, and tests for endogeneity.

Digital assets (DAs) are a unique asset class that presents investors with opportunities and risks that are contingent upon their particular characteristics such as volatility, type, and profile, among other factors. Among DAs, cryptocurrencies (CCs) have emerged as the most liquid asset class, holding this distinction for almost a decade. However, while CCs offer a high level of liquidity, investors must be aware of the potential risks and rewards associated with investing in this asset class, and should conduct a thorough evaluation before making any investment decisions. Our study examines the risk profile of CCs through portfolio analysis, utilizing Spectral Risk Measures (SRMs) as the commonly applied method. In this study, we investigate the application of SRMs in assessing the risk structure of CC portfolios, and their alignment with investors’ risk preferences. We employ SRMs to evaluate the CC index CRIX and portfolios constructed from the most liquid 10 CCs from the Blockchain Research Center (BRC), optimizing different SRMs.Our empirical findings suggest that various optimal portfolio allocations can be formulated to meet the unique risk appetites of individual investors. All Quantlets (macros, code snippets) are available via quantlet.com and instructive educational element are available on quantinar.com.

When equity markets open to foreign investors, firms in these markets have significant opportunities for attracting foreign capital. Using a set of economies that opened their equity markets, I find a significant degree of income-increasing earnings management in the year of opening. This positive effect is more pronounced in industries that are more dependent on external financing and for financially constrained firms, suggesting that firms’ need for equity finance contributes the earnings management. The effect is weaker when a firm is constrained from earnings management by a Big N auditor and by being in an economy with stronger legal enforcement. Overall, my results suggest that equity market liberalization fosters firms’ upward earnings management behaviors around the world.

Using a sample of 83 Canadian property-casualty insurance companies from 1996 to 2010, we examine the impact of underwriting and investment choices on the insurers’ capital level and adjustment speed. An aggressive investment policy (risky equity investments) and a heavy reliance on reinsurance underwriting activities have the opposite effect on insurers’ capital level, though both lead to a slower capital adjustment speed. Meanwhile, insurers reshuffling their underwriting and investments significantly change their capital. With an integrated framework that considers underwriting cycles and regulatory pressure, insurers are slower in their capital adjustments in hard markets of the underwriting cycle, and higher regulatory pressure for an insurer moderates the positive relationship between capital level and adjustment speed.

We investigate the puzzle of banks contracting the services of external advisors for deals they can self-manage and the role of financial advisors in mergers and acquisitions among European banking firms. We also study the determinants of the choice by bank acquirers and bank targets to either appoint external advisors or manage in-house, as well as between appointing either top or lower tier advisors. Top tier advisors are more likely to be employed in debt financed and cross-border deals. We also find that most European bank mergers are managed in-house, contrary to prior findings reporting mostly externally managed deals attributed to the certification effect. Targets fail to benefit from deals where they do not match acquirer’s decision to appoint external advisors. However, there is an overall propensity to match the counter party’s tier of advisor.

This study examines the role of growth opportunities on stock buybacks and provides evidence on the importance of signaling and agency theories in explaining stock buybacks. Both theories are required to fully explain stock buybacks. As per the signaling theory, we find that the announcement period returns are positive for stock buybacks, which indicates that the buyback firms’ stock is undervalued. Furthermore, consistent with agency theory, we also find that the announcement period returns are higher for firms with low growth opportunities and high free cash flow. We also examine buyback firms' long-run stock price performance for 12 months, 24 months, and 36 months following the buyback. We use the Fama–French five-factor model to study the long-run stock performance of buyback firms because of its better explanatory power than the three-factor model. Low growth-high free cash flow firms tend to outperform their benchmark portfolios during this period. Recent regulations such as the Stock Buyback Tax can discourage low growth firms from conducting stock buybacks, which could increase agency costs.

The call for greener and more sustainable corporate practices triggered a surge in corporate restructuring. In this study, we investigate the impact of carbon emissions on the market reaction to announcements of corporate restructuring activities. Using a sample of US firms, we find that investors discount the value of corporate restructuring announcements when firms have higher levels of carbon emissions. Our results indicate that emissions are negatively associated with cumulative abnormal returns (CAR), cumulative total returns (CTR), and buy and hold abnormal returns (BHAR) around announcements. This effect is more pronounced for firms with a lower risk of bankruptcy, those financially constrained, and those with lower growth opportunities. We also find that high emissions at announcements are negatively associated with post-restructuring financial and market performance. Overall, our results highlight the growing implications of firm-level carbon emissions for corporate market valuations, especially amongst firms undertaking restructuring.

This research examines the effects of information disclosure ratings (IDR) on firm-specific stock price crash risk. We present evidence that there is a statistically significant negative relationship between stock price crash risk and IDR. Specifically, effective information disclosure attracts greater investor attention and leads to more liquidity, which mitigates the stock price crash risk. Our findings remain robust after controlling for relevant variables and addressing the issue of endogeneity. This research proves that high IDR mitigates the stock price crash risk by eliciting market reaction, which not only introduces a novel perspective for investors in their analysis of corporate risks but also offers valuable directions for policy formulation to guide the market.

Prior literature documents a positive (negative) relation between past (future) stock returns and both external financing and capital expenditures. In this study, we examine whether managers’ financing and capital expenditure decisions are associated with firm-level investor favoritism (neglect) and, therefore, whether managers exploit investor mispricing by issuing more (less) capital and investing more (less) in capital expenditures when firm-level investor sentiment is high (low), which leads to more negative future stock returns. We employ both a stock’s extreme return momentum and extreme trading volume to capture firm-level investor favoritism (neglect), which reflects firm-level investor overpricing (underpricing) due to investor sentiment. We find that both external financing and capital expenditure decisions are positively (negatively) associated with favoritism (neglect) and that the previously documented negative association between future stock returns and external financing is more pronounced in periods of favoritism. However, we find no association between future stock returns and capital expenditures after controlling for external financing. These findings suggest that managers’ financing and capital expenditure decisions are associated with firm-level investor favoritism/neglect, and that managers exploit investor mispricing in making financing decisions, resulting in lower future stock returns.