Pub Date : 2026-01-12DOI: 10.1016/j.pacfin.2026.103066
Jing Chen, Haoran Fu, Yushan Xue, Yifeng Zhu
This paper analyzes the impact of monthly stock recommendations by securities companies on investor sentiment; it then creates a quantitative stock selection investment strategy based on the developed sentiment indicators and Rainbow algorithm, named the Rainbow Algorithm Strategy with Integrated Technical and Sentiment Indicators (TS-RA Strategy). Results show that the stock recommendation factor exhibits good and stable stock selection ability, and the TS-RA Strategy constructed on this basis demonstrates high profitability. During the testing period, the annualized return reached 25.58%, with a maximum drawdown of 7.41%, indicating high returns and manageable risks. Furthermore, the TS-RA Strategy is superior to the investment strategy constructed using deep Q-learning methods and has performed well in different market environments.
{"title":"Rainbow deep reinforcement learning in the Chinese stock market","authors":"Jing Chen, Haoran Fu, Yushan Xue, Yifeng Zhu","doi":"10.1016/j.pacfin.2026.103066","DOIUrl":"10.1016/j.pacfin.2026.103066","url":null,"abstract":"<div><div>This paper analyzes the impact of monthly stock recommendations by securities companies on investor sentiment; it then creates a quantitative stock selection investment strategy based on the developed sentiment indicators and Rainbow algorithm, named the Rainbow Algorithm Strategy with Integrated Technical and Sentiment Indicators (TS-RA Strategy). Results show that the stock recommendation factor exhibits good and stable stock selection ability, and the TS-RA Strategy constructed on this basis demonstrates high profitability. During the testing period, the annualized return reached 25.58%, with a maximum drawdown of 7.41%, indicating high returns and manageable risks. Furthermore, the TS-RA Strategy is superior to the investment strategy constructed using deep Q-learning methods and has performed well in different market environments.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"96 ","pages":"Article 103066"},"PeriodicalIF":5.3,"publicationDate":"2026-01-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145976869","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-12DOI: 10.1016/j.pacfin.2026.103058
Xueliang Lv , Hua Zhang
Constructing a Relative Deprivation Index of household consumption using data from the China Household Finance Survey (CHFS), we examine the impact of local government debt on household consumption inequality and its underlying mechanisms. We find that explicit local government debt significantly exacerbates household consumption inequality, whereas implicit local government debt has a considerably mitigating effect. The mechanisms through which local government debt affects consumption inequality are analyzed from the perspectives of income inequality, liquidity constraints, and household leverage ratios. In terms of the debt formation process and the structure and efficiency of fund utilization, several factors, such as the government's intervention capacity, will have differentiated impacts on the economic effects of local government debt.
{"title":"The impact of local government debt on household consumption inequality","authors":"Xueliang Lv , Hua Zhang","doi":"10.1016/j.pacfin.2026.103058","DOIUrl":"10.1016/j.pacfin.2026.103058","url":null,"abstract":"<div><div>Constructing a Relative Deprivation Index of household consumption using data from the China Household Finance Survey (CHFS), we examine the impact of local government debt on household consumption inequality and its underlying mechanisms. We find that explicit local government debt significantly exacerbates household consumption inequality, whereas implicit local government debt has a considerably mitigating effect. The mechanisms through which local government debt affects consumption inequality are analyzed from the perspectives of income inequality, liquidity constraints, and household leverage ratios. In terms of the debt formation process and the structure and efficiency of fund utilization, several factors, such as the government's intervention capacity, will have differentiated impacts on the economic effects of local government debt.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"97 ","pages":"Article 103058"},"PeriodicalIF":5.3,"publicationDate":"2026-01-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146190849","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-09DOI: 10.1016/j.pacfin.2026.103059
Praveena Musunuru, Mohammad Shameem Jawed, Kaveri Krishnan
This study examines the relationship between board independence and share-pledging behavior by controlling shareholders (promoters) in Indian listed firms from 2010 to 2020 using a balanced panel. Further, we examine the interplay between the independence of the board and the presence of the promoter as an executive director on the board and its impact on the share pledging by promoters. Our findings reveal that independent boards serve as a deterrent to share pledging by promoters, especially when independent directors actively participate. However, this deterrent effect diminishes when promoters hold executive positions on the board. Moreover, unlike business group firms, board independence fails to deter share pledging in concentrated standalone firms. Furthermore, we examine whether independent boards encourage promoters to provide fair reasons for share pledging following a regulation in 2019. Our analysis confirms that independent boards incentivize promoters to provide transparent and justifiable reasons for engaging in share pledging. However, promoters on board reduce this effect.
{"title":"Board independence, promoter influence, and share pledging behavior","authors":"Praveena Musunuru, Mohammad Shameem Jawed, Kaveri Krishnan","doi":"10.1016/j.pacfin.2026.103059","DOIUrl":"10.1016/j.pacfin.2026.103059","url":null,"abstract":"<div><div>This study examines the relationship between board independence and share-pledging behavior by controlling shareholders (promoters) in Indian listed firms from 2010 to 2020 using a balanced panel. Further, we examine the interplay between the independence of the board and the presence of the promoter as an executive director on the board and its impact on the share pledging by promoters. Our findings reveal that independent boards serve as a deterrent to share pledging by promoters, especially when independent directors actively participate. However, this deterrent effect diminishes when promoters hold executive positions on the board. Moreover, unlike business group firms, board independence fails to deter share pledging in concentrated standalone firms. Furthermore, we examine whether independent boards encourage promoters to provide fair reasons for share pledging following a regulation in 2019. Our analysis confirms that independent boards incentivize promoters to provide transparent and justifiable reasons for engaging in share pledging. However, promoters on board reduce this effect.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"96 ","pages":"Article 103059"},"PeriodicalIF":5.3,"publicationDate":"2026-01-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145976927","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-05DOI: 10.1016/j.pacfin.2026.103055
Feng Hu , Huijie Yang , Shaobin Wei , Haiyan Zhou , Yufeng Chen , Hao Hu
On the basis of green patent transfer data from 41 cities in the Yangtze River Delta (YRD) region and green credit data from five major state-owned banks from 2015 to 2023, this study employs social network analysis and a geographical detector model to examine the spatiotemporal dynamics and systemic coupling between green technology diffusion and green finance development. We document the following key findings: (1) the green technology transfer network has expanded, with Hefei surpassing Shanghai as the core hub, and intensive green technology flows being concentrated in Shanghai, Hangzhou, Suzhou, Nanjing, and Hefei; (2) while green finance has grown substantially, it remains spatially concentrated around Shanghai, leading to a persistent core–periphery divide; (3) the coordination between cities' positions in the technology network and their green finance levels has declined, except in Shanghai, indicating a growing structural mismatch; and (4) factor detection results from the geographical detector indicate that green finance policies act as an independent driving force for the green technology transfer network. Furthermore, interaction detection demonstrates that green finance exerts a stronger influence when it is jointly driven by the urban financial scale and market vitality.
{"title":"Urban green technology transfer networks and green finance development: Evidence from the Yangtze River Delta, China","authors":"Feng Hu , Huijie Yang , Shaobin Wei , Haiyan Zhou , Yufeng Chen , Hao Hu","doi":"10.1016/j.pacfin.2026.103055","DOIUrl":"10.1016/j.pacfin.2026.103055","url":null,"abstract":"<div><div>On the basis of green patent transfer data from 41 cities in the Yangtze River Delta (YRD) region and green credit data from five major state-owned banks from 2015 to 2023, this study employs social network analysis and a geographical detector model to examine the spatiotemporal dynamics and systemic coupling between green technology diffusion and green finance development. We document the following key findings: (1) the green technology transfer network has expanded, with Hefei surpassing Shanghai as the core hub, and intensive green technology flows being concentrated in Shanghai, Hangzhou, Suzhou, Nanjing, and Hefei; (2) while green finance has grown substantially, it remains spatially concentrated around Shanghai, leading to a persistent core–periphery divide; (3) the coordination between cities' positions in the technology network and their green finance levels has declined, except in Shanghai, indicating a growing structural mismatch; and (4) factor detection results from the geographical detector indicate that green finance policies act as an independent driving force for the green technology transfer network. Furthermore, interaction detection demonstrates that green finance exerts a stronger influence when it is jointly driven by the urban financial scale and market vitality.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"96 ","pages":"Article 103055"},"PeriodicalIF":5.3,"publicationDate":"2026-01-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145925439","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-03DOI: 10.1016/j.pacfin.2026.103057
Jia Guo , Kemin Wang , Guanglong Zhang
We leverage the 2015 managerial pay reform in Chinese state-owned enterprises (SOEs) as a quasi-natural experiment to examine whether managerial pay caps intensify corporate agency conflicts. Our results show that affected SOEs opportunistically increase cash holdings, as managers seek to self-compensate for the pay reduction. This cash-hoarding effect is stronger for firms facing more severe agency problems and weaker external oversight. Consequently, firms that hoard more cash due to the pay cap suffer a lower marginal value of cash, decreased operational efficiency, and reduced profitability. Our findings suggest that a “one-size-fits-all” mandatory pay cap may unintentionally exacerbate agency conflicts and hinder economic efficiency.
{"title":"Do managerial pay caps intensify agency conflicts? Evidence from corporate cash holdings","authors":"Jia Guo , Kemin Wang , Guanglong Zhang","doi":"10.1016/j.pacfin.2026.103057","DOIUrl":"10.1016/j.pacfin.2026.103057","url":null,"abstract":"<div><div>We leverage the 2015 managerial pay reform in Chinese state-owned enterprises (SOEs) as a quasi-natural experiment to examine whether managerial pay caps intensify corporate agency conflicts. Our results show that affected SOEs opportunistically increase cash holdings, as managers seek to self-compensate for the pay reduction. This cash-hoarding effect is stronger for firms facing more severe agency problems and weaker external oversight. Consequently, firms that hoard more cash due to the pay cap suffer a lower marginal value of cash, decreased operational efficiency, and reduced profitability. Our findings suggest that a “one-size-fits-all” mandatory pay cap may unintentionally exacerbate agency conflicts and hinder economic efficiency.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"96 ","pages":"Article 103057"},"PeriodicalIF":5.3,"publicationDate":"2026-01-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145925441","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-03DOI: 10.1016/j.pacfin.2026.103056
Shiqi Yao , Limin Song , Junkang Zhang
This study examines whether strengthened financial regulation can improve resource allocation efficiency and mitigate the labor market monopsony power of superstar firms. Utilizing China's New Asset Management Regulation (NAMR) as a quasi-natural experiment and panel data from Chinese listed firms (2007–2022), we employ a triple difference model to assess the impact of this heightened financial oversight. The results indicate that the regulation significantly curtails the monopsony power of superstar firms, an effect particularly pronounced for those characterized by high labor intensity, substantial R&D investment, and intense market competition. Mechanism analysis reveals that the policy operates by increasing labor input, boosting R&D spending, and improving the human capital structure, which collectively diminish firms' dominance in the labor market. These findings highlight the potential of financial regulation to enhance equity in income distribution.
{"title":"Can strengthened financial regulation reduce monopsony power in superstar firms? Evidence from China's asset management reform","authors":"Shiqi Yao , Limin Song , Junkang Zhang","doi":"10.1016/j.pacfin.2026.103056","DOIUrl":"10.1016/j.pacfin.2026.103056","url":null,"abstract":"<div><div>This study examines whether strengthened financial regulation can improve resource allocation efficiency and mitigate the labor market monopsony power of superstar firms. Utilizing China's New Asset Management Regulation (NAMR) as a quasi-natural experiment and panel data from Chinese listed firms (2007–2022), we employ a triple difference model to assess the impact of this heightened financial oversight. The results indicate that the regulation significantly curtails the monopsony power of superstar firms, an effect particularly pronounced for those characterized by high labor intensity, substantial R&D investment, and intense market competition. Mechanism analysis reveals that the policy operates by increasing labor input, boosting R&D spending, and improving the human capital structure, which collectively diminish firms' dominance in the labor market. These findings highlight the potential of financial regulation to enhance equity in income distribution.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"96 ","pages":"Article 103056"},"PeriodicalIF":5.3,"publicationDate":"2026-01-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145925442","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-02DOI: 10.1016/j.pacfin.2025.103054
Junbiao Yu
This study examines the impact of corporate headquarters location on firm innovation from the perspective of inventors. Utilizing a sample of Chinese publicly listed firms—a setting characterized by highly concentrated corporate R&D activities and the hukou-related labor frictions—we find that firms located near a higher density of local inventors achieve superior innovation output, as measured by patent counts and forward citations. The positive effect is more pronounced for younger, high-tech firms and those in less developed regions, supporting the local skilled labor supply mechanism. This talent supply also incentivizes firms to reallocate innovation efforts toward exploitative activities and accelerate human capital accumulation. Instrumental variable analysis using the Ming-Qing jinshi density supports a causal interpretation. Our findings provide novel evidence on the value of proximity to specialized human capital and inform policy discussions on mobility constraints.
{"title":"Inventors and firm innovation: Does location matter?","authors":"Junbiao Yu","doi":"10.1016/j.pacfin.2025.103054","DOIUrl":"10.1016/j.pacfin.2025.103054","url":null,"abstract":"<div><div>This study examines the impact of corporate headquarters location on firm innovation from the perspective of inventors. Utilizing a sample of Chinese publicly listed firms—a setting characterized by highly concentrated corporate R&D activities and the <em>hukou</em>-related labor frictions—we find that firms located near a higher density of local inventors achieve superior innovation output, as measured by patent counts and forward citations. The positive effect is more pronounced for younger, high-tech firms and those in less developed regions, supporting the local skilled labor supply mechanism. This talent supply also incentivizes firms to reallocate innovation efforts toward exploitative activities and accelerate human capital accumulation. Instrumental variable analysis using the Ming-Qing <em>jinshi</em> density supports a causal interpretation. Our findings provide novel evidence on the value of proximity to specialized human capital and inform policy discussions on mobility constraints.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"96 ","pages":"Article 103054"},"PeriodicalIF":5.3,"publicationDate":"2026-01-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145976836","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-31DOI: 10.1016/j.pacfin.2025.103052
Lei Zhu , Jiong Wu , Shanshan Xiao
Intergenerational succession in family firms raises a basic question: when control passes to the next generation, do firms take more risk, and why? Using a panel of Chinese A-share listed family firms, we develop a composite index of successor maturity—capturing the successor's business capability and willingness to lead—and examine its association with corporate risk-taking. We find that firms led by more mature successors exhibit higher risk-taking. This relation operates through an external relational mechanism: successor maturity is linked to how the firm co-operates and competes with external stakeholders over resources; we proxy these dynamics using supplier and customer concentration. The effect is stronger when financing constraints are weaker and product-market competition is more intense. Overall, our findings suggest that post-succession risk-taking is shaped not only by the successor, but also by the family firm's position in the broader network of resource coopetition in which it is embedded.
{"title":"The resource coopetition effect in family business succession: Successor maturity and corporate risk-taking","authors":"Lei Zhu , Jiong Wu , Shanshan Xiao","doi":"10.1016/j.pacfin.2025.103052","DOIUrl":"10.1016/j.pacfin.2025.103052","url":null,"abstract":"<div><div>Intergenerational succession in family firms raises a basic question: when control passes to the next generation, do firms take more risk, and why? Using a panel of Chinese A-share listed family firms, we develop a composite index of successor maturity—capturing the successor's business capability and willingness to lead—and examine its association with corporate risk-taking. We find that firms led by more mature successors exhibit higher risk-taking. This relation operates through an external relational mechanism: successor maturity is linked to how the firm co-operates and competes with external stakeholders over resources; we proxy these dynamics using supplier and customer concentration. The effect is stronger when financing constraints are weaker and product-market competition is more intense. Overall, our findings suggest that post-succession risk-taking is shaped not only by the successor, but also by the family firm's position in the broader network of resource coopetition in which it is embedded.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"96 ","pages":"Article 103052"},"PeriodicalIF":5.3,"publicationDate":"2025-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145884180","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-31DOI: 10.1016/j.pacfin.2025.103053
Wenlian Lin , Jingchen Pan
Using insider sales data from China's A-share market during 2010–2023, we find that insiders exhibit significant anchoring biases. Insider sales rise when stock prices approach their 52-week high while such trades yield lower profits than those made farther from this point. Anchoring-induced insider sales are more pronounced in stocks with low price informativeness where insiders find it difficult to assess whether their private information has been fully incorporated into stock prices. This behavior is attenuated following earnings announcements, and is also reduced by China's capital market liberalization reforms that enhance stock price informativeness. It is stronger among non-core insiders, who rely more on market signals to evaluate their private information. Beyond selling, the 52-week high also affects insider buying. In addition to the stock-level anchor, the market's 52-week high acts as an anchor in insider selling. Anchoring-induced sales are more pronounced among male insiders but are not significant among insiders with a financial background. Our findings highlight the role of anchoring bias in insider trading and the potential of capital market reforms to curb such behavioral distortions.
{"title":"Anchoring-induced insider sales in emerging markets: The role of stock price informativeness","authors":"Wenlian Lin , Jingchen Pan","doi":"10.1016/j.pacfin.2025.103053","DOIUrl":"10.1016/j.pacfin.2025.103053","url":null,"abstract":"<div><div>Using insider sales data from China's A-share market during 2010–2023, we find that insiders exhibit significant anchoring biases. Insider sales rise when stock prices approach their 52-week high while such trades yield lower profits than those made farther from this point. Anchoring-induced insider sales are more pronounced in stocks with low price informativeness where insiders find it difficult to assess whether their private information has been fully incorporated into stock prices. This behavior is attenuated following earnings announcements, and is also reduced by China's capital market liberalization reforms that enhance stock price informativeness. It is stronger among non-core insiders, who rely more on market signals to evaluate their private information. Beyond selling, the 52-week high also affects insider buying. In addition to the stock-level anchor, the market's 52-week high acts as an anchor in insider selling. Anchoring-induced sales are more pronounced among male insiders but are not significant among insiders with a financial background. Our findings highlight the role of anchoring bias in insider trading and the potential of capital market reforms to curb such behavioral distortions.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"96 ","pages":"Article 103053"},"PeriodicalIF":5.3,"publicationDate":"2025-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145884179","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-31DOI: 10.1016/j.pacfin.2025.103051
Vinod Kumar , Ganesh Kumar Nidugala
Economic theory posits that entrepreneurial finance fosters new entrepreneurs, driving technological diffusion and, ultimately, economic development. An efficient financial market influences economic growth through both qualitative and quantitative channels. As a key component of entrepreneurial finance, the primary equity market has been widely recognized for its potential role in promoting economic growth. Yet, the cross-country empirical studies on the role of the primary equity market in economic development remain scarce, largely due to data availability issues and associated methodological challenges in handling complex econometric issues. This study addresses this gap by employing a macro-panel dataset covering 97 countries over 35 years. Using instrumental variable (IV) regressions with five-year averaged data, we find robust evidence that primary equity market development significantly contributes to economic growth. Cointegration analysis using annual data further reveals a long-run cointegrating relationship between the primary equity market and economic growth. The study of short-run deviation around the long-run cointegrating relationship, using the panel-vector error correction model (VECM), confirms significant short-run interactions between the primary equity market and economic growth, while panel-vector autoregression (VAR) tests indicate that causality predominantly runs from the primary equity market to economic growth, rather than vice versa. These findings highlight the importance of primary equity market development as a strategic policy objective for sustaining economic growth. Moreover, findings suggest that firms and portfolio managers can view primary market activity as a forward-looking indicator of future economic performance.
{"title":"Entrepreneurial finance, primary equity markets, and growth: Evidence from a macro-panel of 97 economies","authors":"Vinod Kumar , Ganesh Kumar Nidugala","doi":"10.1016/j.pacfin.2025.103051","DOIUrl":"10.1016/j.pacfin.2025.103051","url":null,"abstract":"<div><div>Economic theory posits that entrepreneurial finance fosters new entrepreneurs, driving technological diffusion and, ultimately, economic development. An efficient financial market influences economic growth through both qualitative and quantitative channels. As a key component of entrepreneurial finance, the primary equity market has been widely recognized for its potential role in promoting economic growth. Yet, the cross-country empirical studies on the role of the primary equity market in economic development remain scarce, largely due to data availability issues and associated methodological challenges in handling complex econometric issues. This study addresses this gap by employing a macro-panel dataset covering 97 countries over 35 years. Using instrumental variable (IV) regressions with five-year averaged data, we find robust evidence that primary equity market development significantly contributes to economic growth. Cointegration analysis using annual data further reveals a long-run cointegrating relationship between the primary equity market and economic growth. The study of short-run deviation around the long-run cointegrating relationship, using the panel-vector error correction model (VECM), confirms significant short-run interactions between the primary equity market and economic growth, while panel-vector autoregression (VAR) tests indicate that causality predominantly runs from the primary equity market to economic growth, rather than vice versa. These findings highlight the importance of primary equity market development as a strategic policy objective for sustaining economic growth. Moreover, findings suggest that firms and portfolio managers can view primary market activity as a forward-looking indicator of future economic performance.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"96 ","pages":"Article 103051"},"PeriodicalIF":5.3,"publicationDate":"2025-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145976870","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"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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