European Financial Management最新文献

This study examines how the removal of political ties—through China's Regulation 18—affects green innovation. Adopting a contingent theoretical framework that integrates legitimacy and resource curse theories, we show that the impact of de-politicisation depends on ownership structure and institutional context. Using a difference-in-differences design, we find that green innovation declined (increased) amongst non-SOEs (SOEs) in high-pollution industries. Mechanism analysis reveals that leverage and financial performance mediate these effects, while firm age and the presence of Qualified Foreign Institutional Investors (QFII) significantly moderate firm-level responses. The findings have important implications for ESG governance, sustainability policy, and climate-related investment strategies.

Using public UK firm data for 2006–2015, I examine whether a government policy can unintentionally promote earnings management. The Plan for Growth 2011 aims to reduce the overall burden of regulation on businesses to help them grow faster. Motivated by such higher growth expectations, opportunistic executives can manage earnings to hit those growth targets. Consistent with this view, I find that firms increase abnormal accruals after the reforms, while the firm-level growth expectations rise. Regarding the economic impact, these firms experience lower cashflows, higher equity cost, and tax avoidance. I also provide suggestive evidence for corporate fraud after the reform.

Overconfident CEOs significantly reduce their acquisition activity when facing a higher risk of a credit rating downgrade, possibly because credit ratings impact their ability to access external financing. Investment-grade firms managed by overconfident CEOs that are placed on a negative rating outlook reduce their acquisitiveness by approximately 16 percentage points. Our findings offer a novel perspective on the role of credit rating agencies as an external control mechanism, constraining overconfident managers from pursuing value-destroying acquisitions. Our findings survive a battery of robustness checks, including endogeneity, controlling for internal control mechanisms and market reaction tests.

This paper investigates the dynamic transition of the Chinese stock market towards a just and sustainable future by examining the tail risk connectedness and frequency-quantile dependence between a series of sustainability indices and Chinese stock market sectors. Employing the novel TVP-VAR-CAViaR connectedness method and the wavelet quantile correlation (WQC) method, we capture the evolving relationship between sustainability factors and market performance. Considering the significant, far-reaching, and lasting effects of such uncertainties on the financial markets, our analysis provides essential guidance for investors and policymakers alike in navigating decisions and crafting regulations.

This study highlights the significance of incorporating environmental, social, and governance (ESG) criteria within investment strategies to strengthen risk management in volatile markets. Employing time-varying parameter vector autoregressions and dynamic conditional correlation generalized autoregressive conditional heteroskedasticity models, it explores dynamic links between green bonds, ESG indices, traditional equities, and government securities. The overall findings reveal significant volatility spillovers, with green bonds as major recipients and the S&P 500 and S&P 500 ESG indices as net transmitters across market conditions. Practical hedging insights show the effectiveness of ESG assets for portfolio stability during turbulence, offering valuable guidance for investors striving to harmonize profitability with sustainability goals while strengthening portfolio resilience and long-term stability.