Pub Date : 2025-06-18DOI: 10.1016/j.qref.2025.102027
Sha Lin , Xuanmeng Lin , Xin-Jiang He
This study utilizes the Hawkes process as an alternative to the Poisson distribution assumption in the jump-diffusion KMV (JD-KMV) model, thereby enhancing the assumption of the expected asset jump size and deriving the Hawkes jump-diffusion KMV (HJD-KMV) model. Subsequently, a regression analysis is conducted on the default distance calculated by the model using bond spreads as a proxy variable for credit risk. The findings reveal that the enhanced jump frequency assumption in the HJD-KMV model enriches its representation of asset information, leading to an improved ability in identifying credit risk. In terms of heterogeneity research, we find that the enhancement of the jump frequency assumption consistently grants the HJD-KMV model superior capacity in identifying credit risk. Moreover, relaxing rigid payment structures proves beneficial to the model's ability in identifying credit risk, while the implementation of financial "deleveraging" policies and the occurrence of epidemics tend to diminish the model's effectiveness in credit risk identification.
{"title":"Credit risk identification with Hawkes processes: Theory and evidence","authors":"Sha Lin , Xuanmeng Lin , Xin-Jiang He","doi":"10.1016/j.qref.2025.102027","DOIUrl":"10.1016/j.qref.2025.102027","url":null,"abstract":"<div><div>This study utilizes the Hawkes process as an alternative to the Poisson distribution assumption in the jump-diffusion KMV (JD-KMV) model, thereby enhancing the assumption of the expected asset jump size and deriving the Hawkes jump-diffusion KMV (HJD-KMV) model. Subsequently, a regression analysis is conducted on the default distance calculated by the model using bond spreads as a proxy variable for credit risk. The findings reveal that the enhanced jump frequency assumption in the HJD-KMV model enriches its representation of asset information, leading to an improved ability in identifying credit risk. In terms of heterogeneity research, we find that the enhancement of the jump frequency assumption consistently grants the HJD-KMV model superior capacity in identifying credit risk. Moreover, relaxing rigid payment structures proves beneficial to the model's ability in identifying credit risk, while the implementation of financial \"deleveraging\" policies and the occurrence of epidemics tend to diminish the model's effectiveness in credit risk identification.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"103 ","pages":"Article 102027"},"PeriodicalIF":2.9,"publicationDate":"2025-06-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144514218","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-06-06DOI: 10.1016/j.qref.2025.102025
Yang Jiao , Gemma Renart , Laura Serra
This paper examines the impact of China’s fiscal policy on macroeconomic performance during the 2008–2009 global financial crisis, focusing on whether government spending affected output and inflation dynamics. Using monthly data from 2001 to 2010, we apply a vector autoregression (VAR) framework with Johansen cointegration and impulse response analysis to evaluate the short- and long-term relationships between fiscal expenditure, GDP, the Consumer Price Index (CPI), and the Producer Price Index (PPI). The findings indicate that fiscal policy had a limited effect on short-term GDP growth but significantly influenced inflation, with government spending acting as a stabilizing tool for both consumer and producer prices. These results highlight the role of fiscal instruments in price stabilization when monetary policy is constrained. The study offers relevant policy insights for emerging economies seeking to maintain macroeconomic stability during global shocks through inflation-sensitive fiscal strategies.
{"title":"The dynamics of fiscal policy: Insights from China's macroeconomic indicators","authors":"Yang Jiao , Gemma Renart , Laura Serra","doi":"10.1016/j.qref.2025.102025","DOIUrl":"10.1016/j.qref.2025.102025","url":null,"abstract":"<div><div>This paper examines the impact of China’s fiscal policy on macroeconomic performance during the 2008–2009 global financial crisis, focusing on whether government spending affected output and inflation dynamics. Using monthly data from 2001 to 2010, we apply a vector autoregression (VAR) framework with Johansen cointegration and impulse response analysis to evaluate the short- and long-term relationships between fiscal expenditure, GDP, the Consumer Price Index (CPI), and the Producer Price Index (PPI). The findings indicate that fiscal policy had a limited effect on short-term GDP growth but significantly influenced inflation, with government spending acting as a stabilizing tool for both consumer and producer prices. These results highlight the role of fiscal instruments in price stabilization when monetary policy is constrained. The study offers relevant policy insights for emerging economies seeking to maintain macroeconomic stability during global shocks through inflation-sensitive fiscal strategies.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"103 ","pages":"Article 102025"},"PeriodicalIF":2.9,"publicationDate":"2025-06-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144263327","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-06-04DOI: 10.1016/j.qref.2025.102012
Lorenzo Castellani , Francesco Decarolis , Gabriele Rovigatti
This paper analyzes how local public authorities in Italy responded to recent procurement centralization reforms. Using detailed data on all Italian public contracts awarded between 2015 and 2017, we document three types of strategic behavior aimed at retaining local autonomy. First, authorities anticipating the reforms accelerated purchases to avoid central oversight. Second, they manipulated contract values to remain below monetary thresholds. Third, when required to centralize, they often chose the least centralized forms of coordination. These findings highlight how institutional design and local incentives can blunt the intended effects of centralization policies, offering broader lessons for procurement reform across the EU.
{"title":"Local government responses to procurement centralization: Evidence from Italy","authors":"Lorenzo Castellani , Francesco Decarolis , Gabriele Rovigatti","doi":"10.1016/j.qref.2025.102012","DOIUrl":"10.1016/j.qref.2025.102012","url":null,"abstract":"<div><div>This paper analyzes how local public authorities in Italy responded to recent procurement centralization reforms. Using detailed data on all Italian public contracts awarded between 2015 and 2017, we document three types of strategic behavior aimed at retaining local autonomy. First, authorities anticipating the reforms accelerated purchases to avoid central oversight. Second, they manipulated contract values to remain below monetary thresholds. Third, when required to centralize, they often chose the least centralized forms of coordination. These findings highlight how institutional design and local incentives can blunt the intended effects of centralization policies, offering broader lessons for procurement reform across the EU.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"103 ","pages":"Article 102012"},"PeriodicalIF":2.9,"publicationDate":"2025-06-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144313076","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-06-01DOI: 10.1016/j.qref.2025.102014
Shuo Liang , Fernando Moreira , Joosung Lee
We investigate the effect of geographic diversification on competition, proposing new bank-level competition indicators to capture the degree of competition in individual banks’ markets. By using the gravity-deregulation model to construct an instrument for geographic diversification, we find that geographic diversification increases the degree of competition in specific banking markets. Mechanism analyses suggest that geographic diversification spurs market competition through changing two elements of the banking market structure, namely, concentration level in the market and banks’ market shares. Our findings imply that banks’ geographic diversification could lead to an unintended effect on market competitiveness and the market structure could be endogenous to banks’ behaviours.
{"title":"Bank geographic diversification and market competition","authors":"Shuo Liang , Fernando Moreira , Joosung Lee","doi":"10.1016/j.qref.2025.102014","DOIUrl":"10.1016/j.qref.2025.102014","url":null,"abstract":"<div><div>We investigate the effect of geographic diversification on competition, proposing new bank-level competition indicators to capture the degree of competition in individual banks’ markets. By using the gravity-deregulation model to construct an instrument for geographic diversification, we find that geographic diversification increases the degree of competition in specific banking markets. Mechanism analyses suggest that geographic diversification spurs market competition through changing two elements of the banking market structure, namely, concentration level in the market and banks’ market shares. Our findings imply that banks’ geographic diversification could lead to an unintended effect on market competitiveness and the market structure could be endogenous to banks’ behaviours.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"102 ","pages":"Article 102014"},"PeriodicalIF":2.9,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144185727","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the benefits of adding Bitcoin in a portfolio framework that also includes the five Fama-French risk factor portfolios in periods of low versus high US economic policy uncertainty (EPU). The empirical investigation utilizes data spanning from 2015 to 2023 and follows a two-step methodological approach. First, the US EPU monthly time series is segmented in sub-periods characterized by high and low EPU, determined using the Bai-Perron structural breaks test. Secondly, we employ the mean-CVaR portfolio optimization approach that seeks to maximize risk-adjusted expected returns on portfolios that are formed with and without Bitcoin. We find that the optimal weight of Bitcoin asset increases and subsequently the risk-adjusted performance of the Bitcoin portfolio improves in periods of high EPU, as opposed to periods of low EPU. Our results are robust to rolling estimation windows, different rebalance frequencies and alternative portfolio construction techniques. This asymmetric impact is critical and should be incorporated in portfolio decisions, as it shows that Bitcoin is most useful as a diversifier in periods where the economic uncertainty is relatively high. The obtained results also reinforce the idea that crypto assets are independent from the existing financial system.
{"title":"Hedging uncertainty: Bitcoin's asymmetric diversification benefits in factor-based portfolios","authors":"Ion-Iulian Marinescu , Nawazish Mirza , Alexandra Horobet , Lucian Belascu","doi":"10.1016/j.qref.2025.102015","DOIUrl":"10.1016/j.qref.2025.102015","url":null,"abstract":"<div><div>This paper examines the benefits of adding Bitcoin in a portfolio framework that also includes the five Fama-French risk factor portfolios in periods of low versus high US economic policy uncertainty (EPU). The empirical investigation utilizes data spanning from 2015 to 2023 and follows a two-step methodological approach. First, the US EPU monthly time series is segmented in sub-periods characterized by high and low EPU, determined using the Bai-Perron structural breaks test. Secondly, we employ the mean-CVaR portfolio optimization approach that seeks to maximize risk-adjusted expected returns on portfolios that are formed with and without Bitcoin. We find that the optimal weight of Bitcoin asset increases and subsequently the risk-adjusted performance of the Bitcoin portfolio improves in periods of high EPU, as opposed to periods of low EPU. Our results are robust to rolling estimation windows, different rebalance frequencies and alternative portfolio construction techniques. This asymmetric impact is critical and should be incorporated in portfolio decisions, as it shows that Bitcoin is most useful as a diversifier in periods where the economic uncertainty is relatively high. The obtained results also reinforce the idea that crypto assets are independent from the existing financial system.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"102 ","pages":"Article 102015"},"PeriodicalIF":2.9,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144204745","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-05-31DOI: 10.1016/j.qref.2025.102011
Klenio Barbosa , Eduardo Fiuza
This paper empirically investigates the impact of pooled procurement arrangements on acquisition prices of pharmaceuticals and health products. Pooled procurement involves a collaborative agreement among organizations aiming to procure products from suppliers jointly. Pooled arrangements can decrease acquisition prices by aggregating demand but may raise the price paid by buyers with lower payment risk when they jointly acquire products with high-risk ones. We examine these two different channels through which pooled procurement affects prices in the context of public health procurement in Brazil. We find that pooled procurement allows public entities to obtain lower prices. However, we also find evidence that the price paid by low payment risk buyers increases when they associate with high payment risk buyers in pooled arrangements. These two results together indicate that pooled procurement must be properly designed to achieve its potential gains for buyers, which can lead to suboptimal creation of bulk procurement arrangements.
{"title":"Demand aggregation and payment risk effects on pooled procurement: Evidence from the public healthcare sector","authors":"Klenio Barbosa , Eduardo Fiuza","doi":"10.1016/j.qref.2025.102011","DOIUrl":"10.1016/j.qref.2025.102011","url":null,"abstract":"<div><div>This paper empirically investigates the impact of pooled procurement arrangements on acquisition prices of pharmaceuticals and health products. Pooled procurement involves a collaborative agreement among organizations aiming to procure products from suppliers jointly. Pooled arrangements can decrease acquisition prices by aggregating demand but may raise the price paid by buyers with lower payment risk when they jointly acquire products with high-risk ones. We examine these two different channels through which pooled procurement affects prices in the context of public health procurement in Brazil. We find that pooled procurement allows public entities to obtain lower prices. However, we also find evidence that the price paid by low payment risk buyers increases when they associate with high payment risk buyers in pooled arrangements. These two results together indicate that pooled procurement must be properly designed to achieve its potential gains for buyers, which can lead to suboptimal creation of bulk procurement arrangements.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"103 ","pages":"Article 102011"},"PeriodicalIF":2.9,"publicationDate":"2025-05-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144231462","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-05-22DOI: 10.1016/j.qref.2025.102017
Xiaohui Chen , Hongwei Zhang , Xiang Cheng
Promoting the decarbonization of the economy and society is an integral component of achieving high-quality development. While the rapid advancement of financial technology (FinTech) has played a crucial role in shaping the economic and social development model, its impact on decarbonization has received limited attention in previous studies. To address this gap, this study establishes a partial theoretical equilibrium analysis framework and computes provincial FinTech development indices for Chinese provinces spanning from 2008 to 2022. Subsequently, we empirically examine the impact of FinTech on power consumption intensity. This study observes that FinTech possesses the capacity to diminish power consumption intensity, with this intensity progressively declining as FinTech advancements occur. Notably, FinTech’s impact on loan growth serves as a pivotal intermediary in reducing power consumption intensity. By fostering a risk-friendly environment for banks, FinTech stimulates increased loan growth, thereby alleviating the financial strain on electricity providers and subsequently reducing power usage intensity. This study not only contributes to practical applications but also enriches our understanding of the intricate interplay between FinTech and power consumption, shedding light on the potential for decarbonization within the economy and society.
{"title":"How does FinTech affect power consumption intensity in China?","authors":"Xiaohui Chen , Hongwei Zhang , Xiang Cheng","doi":"10.1016/j.qref.2025.102017","DOIUrl":"10.1016/j.qref.2025.102017","url":null,"abstract":"<div><div>Promoting the decarbonization of the economy and society is an integral component of achieving high-quality development. While the rapid advancement of financial technology (FinTech) has played a crucial role in shaping the economic and social development model, its impact on decarbonization has received limited attention in previous studies. To address this gap, this study establishes a partial theoretical equilibrium analysis framework and computes provincial FinTech development indices for Chinese provinces spanning from 2008 to 2022. Subsequently, we empirically examine the impact of FinTech on power consumption intensity. This study observes that FinTech possesses the capacity to diminish power consumption intensity, with this intensity progressively declining as FinTech advancements occur. Notably, FinTech’s impact on loan growth serves as a pivotal intermediary in reducing power consumption intensity. By fostering a risk-friendly environment for banks, FinTech stimulates increased loan growth, thereby alleviating the financial strain on electricity providers and subsequently reducing power usage intensity. This study not only contributes to practical applications but also enriches our understanding of the intricate interplay between FinTech and power consumption, shedding light on the potential for decarbonization within the economy and society.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"102 ","pages":"Article 102017"},"PeriodicalIF":2.9,"publicationDate":"2025-05-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144134002","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study minimizes the extreme risk of the NASDAQ index by optimizing two six-asset portfolios with developed and emerging Asian stock indices in the pre-crisis and crisis periods. The existing papers in this area usually use the normal VaR model to estimate extreme risk. In the parametric VaR estimation, we try to improve the analysis by using three non-normal distribution functions – logistic, hyper-secant and Laplace, while the normal VaR is a benchmark. CVaR is also used to evaluate its performance relative to heavier-tailed non-normal VaR models. Different VaR models do not affect the multivariate portfolio structure, but the downside risk measures differ. Applying the Kupiec test and visual inspection of probability density functions, it is determined that two fatter tail functions – logistic and hyper-secant, best fit the realized returns in both portfolios and subsamples. From the aspect of hedge effectiveness, the portfolio with emerging Asian indices better mitigates extreme risk because emerging markets are less integrated. In the optimal portfolios, in most cases, NASDAQ is the only asset in the portfolio due to the highest Sharpe ratio in both pre-crisis and crisis periods. The paper points out the need to find the best VaR model because the effectiveness of hedging and the reliability of results depend on it.
{"title":"How do non-normal parametric VaR models perform in risk-minimizing portfolios?","authors":"Dejan Živkov , Sanja Lončar , Jasmina Đurašković , Suzana Balaban","doi":"10.1016/j.qref.2025.102016","DOIUrl":"10.1016/j.qref.2025.102016","url":null,"abstract":"<div><div>This study minimizes the extreme risk of the NASDAQ index by optimizing two six-asset portfolios with developed and emerging Asian stock indices in the pre-crisis and crisis periods. The existing papers in this area usually use the normal VaR model to estimate extreme risk. In the parametric VaR estimation, we try to improve the analysis by using three non-normal distribution functions – logistic, hyper-secant and Laplace, while the normal VaR is a benchmark. CVaR is also used to evaluate its performance relative to heavier-tailed non-normal VaR models. Different VaR models do not affect the multivariate portfolio structure, but the downside risk measures differ. Applying the Kupiec test and visual inspection of probability density functions, it is determined that two fatter tail functions – logistic and hyper-secant, best fit the realized returns in both portfolios and subsamples. From the aspect of hedge effectiveness, the portfolio with emerging Asian indices better mitigates extreme risk because emerging markets are less integrated. In the optimal portfolios, in most cases, NASDAQ is the only asset in the portfolio due to the highest Sharpe ratio in both pre-crisis and crisis periods. The paper points out the need to find the best VaR model because the effectiveness of hedging and the reliability of results depend on it.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"102 ","pages":"Article 102016"},"PeriodicalIF":2.9,"publicationDate":"2025-05-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144134077","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-05-15DOI: 10.1016/j.qref.2025.102013
Chenguang Fan, Seongho Bae, Yu Liu
We explore the impact of corporate tax redistribution on investment efficiency in the context of the common prosperity policy. Utilizing data from Chinese public companies (2011–2022), we empirically examine whether corporate tax redistribution significantly impacts investment efficiency, particularly underinvestment. We find that corporate tax redistribution affects investment efficiency through two channels: reducing corporate cash flow and lowering investment returns. This relationship is stronger in non-state-owned enterprises. It is also pronounced in firms with changes in share capital structure, CEO duality, directors and supervisors who do not hold positions in shareholder units, and the same beneficial owner who does not control multiple listed firms. The study offers new perspectives on the influence of corporate tax redistribution on investment decisions under the common prosperity strategy.
{"title":"Taxation and corporate investment efficiency in common prosperity","authors":"Chenguang Fan, Seongho Bae, Yu Liu","doi":"10.1016/j.qref.2025.102013","DOIUrl":"10.1016/j.qref.2025.102013","url":null,"abstract":"<div><div>We explore the impact of corporate tax redistribution on investment efficiency in the context of the common prosperity policy. Utilizing data from Chinese public companies (2011–2022), we empirically examine whether corporate tax redistribution significantly impacts investment efficiency, particularly underinvestment. We find that corporate tax redistribution affects investment efficiency through two channels: reducing corporate cash flow and lowering investment returns. This relationship is stronger in non-state-owned enterprises. It is also pronounced in firms with changes in share capital structure, CEO duality, directors and supervisors who do not hold positions in shareholder units, and the same beneficial owner who does not control multiple listed firms. The study offers new perspectives on the influence of corporate tax redistribution on investment decisions under the common prosperity strategy.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"102 ","pages":"Article 102013"},"PeriodicalIF":2.9,"publicationDate":"2025-05-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144167837","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-05-08DOI: 10.1016/j.qref.2025.102009
Chandra S. Mishra
This study examines the relationship between female directorship and CEO compensation, focusing on pay-performance sensitivity, total compensation, and equity-based pay. We address endogeneity issues, CEO compensation persistence, and unobserved heterogeneity using a multi-level fixed effects estimator, dynamic panel models, system GMM, cross-lagged structural panel models, and instrumental variables models. Our findings indicate that female directorship is positively associated with CEO pay-performance sensitivity and equity-based compensation but negatively associated with total CEO compensation. This suggests that female directors emphasize performance-based incentives over fixed pay, reinforcing a stronger alignment between CEO pay and shareholder value. Further, CEO power and managerial ability significantly moderate this relationship. When the CEO is the board chairman, female directorship is positively associated with total and equity compensation. Similarly, higher managerial ability strengthens the relation between female directorship and equity-based pay while weakening its negative association with total compensation. Our findings contribute to corporate governance, agency theory, and resource dependence theory by demonstrating that board gender diversity enhances monitoring effectiveness and alters executive compensation structures to improve firm accountability and performance alignment. These insights are important for board composition policies, gender diversity mandates, and executive pay design.
{"title":"Board gender diversity and CEO compensation: Strengthening governance and pay-performance sensitivity","authors":"Chandra S. Mishra","doi":"10.1016/j.qref.2025.102009","DOIUrl":"10.1016/j.qref.2025.102009","url":null,"abstract":"<div><div>This study examines the relationship between female directorship and CEO compensation, focusing on pay-performance sensitivity, total compensation, and equity-based pay. We address endogeneity issues, CEO compensation persistence, and unobserved heterogeneity using a multi-level fixed effects estimator, dynamic panel models, system GMM, cross-lagged structural panel models, and instrumental variables models. Our findings indicate that female directorship is positively associated with CEO pay-performance sensitivity and equity-based compensation but negatively associated with total CEO compensation. This suggests that female directors emphasize performance-based incentives over fixed pay, reinforcing a stronger alignment between CEO pay and shareholder value. Further, CEO power and managerial ability significantly moderate this relationship. When the CEO is the board chairman, female directorship is positively associated with total and equity compensation. Similarly, higher managerial ability strengthens the relation between female directorship and equity-based pay while weakening its negative association with total compensation. Our findings contribute to corporate governance, agency theory, and resource dependence theory by demonstrating that board gender diversity enhances monitoring effectiveness and alters executive compensation structures to improve firm accountability and performance alignment. These insights are important for board composition policies, gender diversity mandates, and executive pay design.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"102 ","pages":"Article 102009"},"PeriodicalIF":2.9,"publicationDate":"2025-05-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143935960","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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