Journal of International Financial Markets Institutions & Money最新文献

The paper investigates whether ESG-linked managerial incentives, also known as ESG contracting, align or compete with stakeholder interests in the banking sector. The few related literature, focussed on non-financial companies, shows arguments both pro and against pay for sustainability. Using a panel data set of 595 worldwide listed banks for the period 2010–2021, the paper studies the effectiveness of ESG incentives in improving ESG performance and limiting ESG controversies. ESG contracting is shown to improve both ESG performance and ESG disputes, thus suggesting that it is more symbolic than substantial in meeting stakeholder interests. ESG strategy, ESG committee and managerial risk-taking are significant channels through which ESG incentives affect ESG performance and ESG controversies in the banking sector.

Using the 2018 US-China trade war as a quasi-natural experiment, we investigate how downstream shrinkage affects upstream employment. Utilizing a difference-in-differences (DID) approach, we reveal a negative effect of downstream shrinkage on upstream firm employment. Our mechanism analysis indicates that trade wars increase the tax burden, inventories, and accounts payable for downstream firms while reducing their employment. This shrinkage of downstream firms limits the scale of investment and operations for upstream firms through supply chain transmission, thereby decreasing employment of upstream firms. Moreover, our finding is more pronounced for specific types of firms, such as non-state-owned firms, firms operating across multiple industries. Our study provides an essential reference for firms in building resilient supply chain networks to better cope with potential negative shocks.

This study explores how shareholder activism affects the behaviors of non-target companies with the same investment portfolio. Employing a matching-DiD methodology, we find that the portfolio non-target treatment firms tend to conduct greater tax avoidance compared to the control firms. This effect is stronger for firms facing financial constraints, under experienced activist scrutiny, involved in hostile campaigns, targeting financial and M&A matters, and with higher activist shareholdings. Increased tax avoidance is attributed to improved tax planning, enhancing firm value, and reducing future targeting risks. These findings align with the threat effect, where both fortification and fire-drill channels can be at play. Overall, this study sheds light on how companies balance financial demands of shareholders with the tax obligations to the government in their tax strategy decisions, which may provide valuable insights into how businesses keep the balance between multiple stakeholders.

Liquidity regulation framework is one of the pillars of Basel III implementation. In this paper, we evaluate how Basel III liquidity regulations, namely the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR), as well as their interactions affect financial stability. Theory suggests that, in maintaining financial stability, liquidity regulations may not act as complements. If one regulation is a binding constraint, the other may become a slack. Using Indonesia, an early adopter of the LCR and the NSFR, as a testing ground, we find that the LCR significantly reduces bank systemic risk, thus acting as a binding liquidity regulation. Lower systemic risk reflects lower fire-sale spillover implications in the financial system after the implementation of the LCR. The NSFR, however, does not have a significant effect on systemic risk, confirming its role as a slack.

This study examines how politically connected CEOs moderate the relationship between ESG and financial performance in Chinese A-share listed companies from 2015 to 2022. The results demonstrate that companies with strong ESG performance tend to have better financial performance. The connection between ESG performance and financial performance is influenced by the political ties of the CEO. Specifically, companies led by highly politically connected CEOs exhibit a weaker link between ESG practices and financial performance when compared with less politically affiliated firms. Our heterogeneity tests demonstrate that companies with low technology and cross-listing, along with companies audited by firms outside the Big 4 and led by highly politically connected CEOs, show a more significant impact of ESG practices on their financial performance compared to those with fewer political connections. Further examination reveals that political connections exacerbate the adverse effect of the environmental aspect on financial performance. This study contributes to the ongoing discussions surrounding ESG issues, especially in the context of Net-Zero and climate change actions following the international Climate Change Conferences (COPs). Overall, this study contributes valuable insights and policy implications into the multifaceted dynamics of ESG factors and their impact on corporate financial decisions.

This study investigates whether state-owned enterprises (SOEs) are more responsible for carbon neutrality in the context of a country that produces the most carbon dioxide. It examines listed firms’ market reactions to carbon neutrality commitment for China that was announced first time on 22 September 2020. Using the event study method and based on 2,792 listed firms, we find that overall market reactions to the carbon neutrality commitment is significantly negative, suggesting that firms are expected to exert genuine efforts towards attaining the national goal of carbon neutrality. Furthermore, our results indicate that SOEs encounter more substantial negative market reactions compared to non-SOEs, indicative of higher expectations placed on them for realizing the carbon neutrality commitment. Further analysis reveals that negative market reactions are particularly pronounced for central SOEs as opposed to local SOEs, as the former are perceived to bear a heavier responsibility in achieving national goals. Additionally, SOEs with higher corporate social responsibility scores experience stronger negative market reactions in comparison to those with lower scores. Further analysis based on a difference-in-differences method and a firm-year sample shows that SOEs reduce firm value and carbon emissions intensity more than non-SOEs after the carbon neutrality commitment. Overall, our study supports the argument that SOEs take more responsibility than non-SOEs in achieving carbon neutrality.

Focusing on the most liquid segment of the European CDS market, this paper studies the impact of a key standardization reform, known as the CDS Small Bang. We document that the reform provided unexpected long-term consequences. Particularly, we show that the introduction of an upfront fee to standardize the cash flow of CDS contracts created an initial capital cost for traders, which acts as a friction that increases CDS prices. This relation holds after accounting for well-known determinants of spreads, suggesting a separate funding channel driven by the greater capital intensity of trading. This effect grows in magnitude for several years following the implementation of the reform, becomes stronger when dealers are likely to bear the initial capital cost and is present across all industries, except for swaps written on financials shortly after the reform was introduced.