European Financial Management最新文献

This study investigates the impact of media sentiment on firms' investment efficiency in the Chinese market during 2007–2017. We find that increased media sentiment can lead to overinvestment and thus distort investment efficiency, but it has no significant effect on underinvestment. Further, mediation analysis shows that financing constraints mediates the media sentiment effects on overinvestment. To mitigate potential endogenous problems, we employ instrumental variable approach and propensity score matching method. The main findings hold after a battery of robustness tests. Further tests show that corporate governance factors can ameliorate the adverse effect of news sentiment on corporate investment efficiency.

We study how a CFO's risk-taking incentives affect corporate hedging by utilising hand-collected data from 2009 to 2019 on corporate hedging and managerial compensation for a sample of US oil and gas firms. The relative convexity of CFO equity compensation negatively affects the likelihood and extent of hedging. When the CFO and CEO have diverging risk-taking incentives, the relative convexity of the CFO's equity payoff prevails over that of the CEO. This evidence underscores the primary role of the CFO in steering a firm's hedging strategy.

Online mutual aid (MA) is a novel form of ex-post risk sharing empowered by InsurTech to provide critical illness coverage without involving an insurer. In this paper, we first provide a rigorous examination of the underpinning theory and analyze MA model's cost-effectiveness. In addition, we theoretically investigate the condition for MA's actuarial fairness among all participants. Our numerical illustration also shows that current MA plans lack the consideration of actuarial fairness as they differentiate members only by gender and age group of large bandwidths. Last, our empirical analysis confirms the existence of adverse selection due to the lack of actuarial fairness.

This study explores the relationship between economic, social, and governance (ESG) activities and initial public offering (IPO) price stabilisation actions using IPOs listed on the Hong Kong stock exchange between 2004 and 2021 as samples. We find that IPO issuers that actively conduct ESG activities have higher ESG scores, which enhances price stabilisation. Furthermore, ex-ante volatility serves as a potential channel through which ESG activities affect price stabilisation. Providing ethical and economic implications for companies, policymakers, and investors, our findings suggest that ESG activities are vital drivers of price stabilisation.

We examine the structural characteristics of special purpose acquisition companies (SPACs) focused on green causes. We explain their ecosystem, primary determinants of initial public offering (IPO) size, and speed of going public, and we calculate their returns around merger announcements and subsequent acquisition. Green SPAC size depends on CEO characteristics, choice of exchange and specialisation of respective stakeholders. The speed to IPO is related to the respective concentration of legal counsel. Green SPACs exhibit cumulative market-adjusted returns in the range 6%–12% around the merger announcement. Merger returns are positive at the merger date but quickly become negative (−1% to −9%) and decline further with time.

This paper shows that coordinated monitoring by institutional investors affects how firms behave in the M&A market. We employ the spatial dimension of geographic links between major institutions as a proxy for interaction and information exchange—a process that determines the effectiveness of investor monitoring over firm management. Using data over the last 30 years, we show that the returns to acquiring shareholders are significantly higher, and M&A activity is significantly more intense when institutions coordinate better their monitoring efforts. Our results are robust to series of tests to gauge their sensitivity to different model specifications and estimation procedures.

This paper investigates the factors and effects of trade credit, as an alternative source of capital, by employing a generalized method of moments instrumenting for endogeneity based on a panel data set of public maritime shipping companies and compatible companies in other industries. Our study shows that the magnitude of trade credit is affected by profitability, financial leverage, company size, cost of capital, financial distress, institutional ownership, corporate power, corporate liquidity, asset intensity, and corporate growth. It also suggests that trade credit affects financial performance, equity value, and risk. These empirical findings yield important implications for principal financial officers, as discussed herein.

This paper investigates the impact of environmental, social and governance (ESG) disclosure on corporate risk-taking and how this impact is further affected by chief executive officer (CEO) power and incentives within US companies. We find that ESG disclosure decreases corporate risk-taking based on both accounting-based and market-based returns. Further, we find that ESG disclosure is more effective in mitigating market-based risk-taking than accounting-based risk-taking in a firm with a powerful CEO. In contrast, CEO's ESG-incentivized engagement bonuses weaken ESG disclosure impacts in reducing both types of risk-taking. Our analysis helps understanding of different trade-offs of ESG disclosure in aligning all stakeholders' benefits under different managerial-related factors.

We show that in a setting with a strong concern for controlling shareholder entrenchment, firms with multiple large shareholders (MLS) are more likely to experience stock price crashes. As a result, when anticipating future revelations of bad news concerning corporate misconduct on information disclosure, large shareholders can exploit their information advantage and initiate their sales ex ante as far as eight quarters ahead. The positive association between MLS and crashes is more pronounced in the presence of noncontrolling shareholders' sales. Also, the positive predictive power of MLS on crash risk is more potent in firms with weak internal or external governance.

Using an international data set that quantifies corporate environmental costs, we analyze the influence of institutional investor ownership, particularly investment horizon and investor origin, on the monetized environmental impact generated by their investee firms. Institutional investor ownership is negatively related to corporate environmental costs. This effect is driven by long-term foreign institutional investors, especially investors from advanced economies. Corporate environmental costs are negatively correlated with firm valuation and positively correlated with the cost of equity. Since corporate environmental costs are not reflected in environmental, social and governance ratings, our results shed new light on the role of institutional investors in shaping corporate environmental impact.