Pub Date : 2025-03-12DOI: 10.1016/j.irfa.2025.104096
Jun Duanmu , Yongjia Li , Salman Tahsin , Jiayi Xu
This paper examines the impact of natural disasters on Small Business Administration (SBA) 7(a) loan originations, highlighting how such events influence lenders' perceptions of climate and thus affect credit access for small businesses. We find a significant reduction in SBA loan originations in disaster-affected counties, suggesting a more cautious approach by lenders. This paper also explores how geographical diversification and minority ownership affect loan origination and investigates the role of public climate belief in shaping lending activities. The findings highlight the important connection between natural disasters and bank lending decisions, offering valuable insights into the challenges small businesses face in areas affected by climate change.
{"title":"Crop damage, local climate risk perceptions, and small business access to credit","authors":"Jun Duanmu , Yongjia Li , Salman Tahsin , Jiayi Xu","doi":"10.1016/j.irfa.2025.104096","DOIUrl":"10.1016/j.irfa.2025.104096","url":null,"abstract":"<div><div>This paper examines the impact of natural disasters on Small Business Administration (SBA) 7(a) loan originations, highlighting how such events influence lenders' perceptions of climate and thus affect credit access for small businesses. We find a significant reduction in SBA loan originations in disaster-affected counties, suggesting a more cautious approach by lenders. This paper also explores how geographical diversification and minority ownership affect loan origination and investigates the role of public climate belief in shaping lending activities. The findings highlight the important connection between natural disasters and bank lending decisions, offering valuable insights into the challenges small businesses face in areas affected by climate change.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104096"},"PeriodicalIF":7.5,"publicationDate":"2025-03-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143642146","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-11DOI: 10.1016/j.irfa.2025.104134
Meng Guo, Danglun Luo, Chen Liu
We investigate the tools that managers use to conceal big baths in times of crisis. Our study is based on 7623 firm-year observations of A-share listed companies in China during the COVID-19 pandemic. The empirical evidence suggests that during the COVID-19 pandemic, managers are more likely to take advantage of the crisis to engage in big baths. Specifically, managers engaging in big baths tend to convey a more negative tone regarding the pandemic and utilize the pandemic for self-serving attribution in financial reports. Moreover, managers have a heightened motivation to use COVID-19 disclosures to conceal big baths driven by stronger opportunistic intent, particularly those occurring in the fourth quarter, leading to negative earnings surprises, or those involving non-goodwill asset accounts. The correlation between big baths and a negative pandemic tone is less pronounced for firms with greater transparency in disclosure, higher analyst attention, CEO duality, and higher management ownership. Furthermore, we find that using the COVID-19 pandemic as a cover can help mitigate the stock price crash risks associated with big baths. The findings draw stakeholder attention to the opportunistic nature of earnings manipulation and discretionary disclosures during the COVID-19 pandemic.
{"title":"Opportunism in crisis: Big baths and COVID-19 disclosure","authors":"Meng Guo, Danglun Luo, Chen Liu","doi":"10.1016/j.irfa.2025.104134","DOIUrl":"10.1016/j.irfa.2025.104134","url":null,"abstract":"<div><div>We investigate the tools that managers use to conceal big baths in times of crisis. Our study is based on 7623 firm-year observations of A-share listed companies in China during the COVID-19 pandemic. The empirical evidence suggests that during the COVID-19 pandemic, managers are more likely to take advantage of the crisis to engage in big baths. Specifically, managers engaging in big baths tend to convey a more negative tone regarding the pandemic and utilize the pandemic for self-serving attribution in financial reports. Moreover, managers have a heightened motivation to use COVID-19 disclosures to conceal big baths driven by stronger opportunistic intent, particularly those occurring in the fourth quarter, leading to negative earnings surprises, or those involving non-goodwill asset accounts. The correlation between big baths and a negative pandemic tone is less pronounced for firms with greater transparency in disclosure, higher analyst attention, CEO duality, and higher management ownership. Furthermore, we find that using the COVID-19 pandemic as a cover can help mitigate the stock price crash risks associated with big baths. The findings draw stakeholder attention to the opportunistic nature of earnings manipulation and discretionary disclosures during the COVID-19 pandemic.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104134"},"PeriodicalIF":7.5,"publicationDate":"2025-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143642148","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-11DOI: 10.1016/j.irfa.2025.104098
Yu Zhou , Zihe Zhang , Zitong Guo
The emerging China Property Rights Exchange Capital Market shows distinctive features in its organizational structure compared to the existing over-the-counter (OTC) market. In order to regulate trading behavior, regulators have imposed strict rules on the trading process in this capital market. Trading institutions have standardized the process online to enhance trading efficiency. While the size and value of bids in the market are growing, there is a problem of decreasing deal closure rates. The recommendations proposed in the current study are more indicative than specific. To investigate the impact of online standardized transaction process elements on the transaction rate within China Property Rights Exchange Capital Market, this paper undertakes research using an explainable machine learning approach to online transaction analysis. Drawing on real data from the platform, this study constructs a framework for examining prediction and influencing factors of transaction results based on explainable machine learning-based standard transactions. The best prediction model is determined through metrics such as prediction accuracy, and the SHAP value is then applied to assess the model features for interpretability. To validate the modeling method's effectiveness, the analysis results are compared with traditional empirical methods utilizing the same dataset. The results indicate that the XGBoost model has higher forecast precision and is more interpretable than traditional empirical methods with the addition of SHAP values. Using the interpretable XGBoost method based on SHAP values, it is found that the four characteristics of duration, number of working days, relisting and location have the greatest impact on the transaction turnover rate. The results of the study can provide a decision-making basis for trading institutions to improve the transaction process and increase the transaction rate, which can help to enhance the resource allocation and optimization efficiency of China Property Rights Exchange Capital Market.
{"title":"Explainable-machine-learning-based online transaction analysis of China property rights exchange capital market","authors":"Yu Zhou , Zihe Zhang , Zitong Guo","doi":"10.1016/j.irfa.2025.104098","DOIUrl":"10.1016/j.irfa.2025.104098","url":null,"abstract":"<div><div>The emerging China Property Rights Exchange Capital Market shows distinctive features in its organizational structure compared to the existing over-the-counter (OTC) market. In order to regulate trading behavior, regulators have imposed strict rules on the trading process in this capital market. Trading institutions have standardized the process online to enhance trading efficiency. While the size and value of bids in the market are growing, there is a problem of decreasing deal closure rates. The recommendations proposed in the current study are more indicative than specific. To investigate the impact of online standardized transaction process elements on the transaction rate within China Property Rights Exchange Capital Market, this paper undertakes research using an explainable machine learning approach to online transaction analysis. Drawing on real data from the platform, this study constructs a framework for examining prediction and influencing factors of transaction results based on explainable machine learning-based standard transactions. The best prediction model is determined through metrics such as prediction accuracy, and the SHAP value is then applied to assess the model features for interpretability. To validate the modeling method's effectiveness, the analysis results are compared with traditional empirical methods utilizing the same dataset. The results indicate that the XGBoost model has higher forecast precision and is more interpretable than traditional empirical methods with the addition of SHAP values. Using the interpretable XGBoost method based on SHAP values, it is found that the four characteristics of duration, number of working days, relisting and location have the greatest impact on the transaction turnover rate. The results of the study can provide a decision-making basis for trading institutions to improve the transaction process and increase the transaction rate, which can help to enhance the resource allocation and optimization efficiency of China Property Rights Exchange Capital Market.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104098"},"PeriodicalIF":7.5,"publicationDate":"2025-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143636640","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-11DOI: 10.1016/j.irfa.2025.104103
Mohamed A. Ayadi, Walid Ben Omrane, Pari Gholi Panah
This paper examines the dynamics of the foreign exchange market, focusing on the impact of macroeconomic, climate risk, and COVID-19 pandemic-related news on currency returns and volatility. Our findings show that prior to the pandemic, currency returns were mainly driven by macroeconomic news, but the onset of COVID-19 shifted attention to pandemic-related news. Vaccine-related announcements consistently increased volatility across markets, reflecting heightened uncertainty. Additionally, climate risk was found to strengthen the four major currencies relative to the US dollar. Finally, the study highlights context-specific effects, with certain indicators losing relevance while others gained prominence during the pandemic.
{"title":"Foreign exchange markets, climate risks and contextual news: An intraday analysis","authors":"Mohamed A. Ayadi, Walid Ben Omrane, Pari Gholi Panah","doi":"10.1016/j.irfa.2025.104103","DOIUrl":"10.1016/j.irfa.2025.104103","url":null,"abstract":"<div><div>This paper examines the dynamics of the foreign exchange market, focusing on the impact of macroeconomic, climate risk, and COVID-19 pandemic-related news on currency returns and volatility. Our findings show that prior to the pandemic, currency returns were mainly driven by macroeconomic news, but the onset of COVID-19 shifted attention to pandemic-related news. Vaccine-related announcements consistently increased volatility across markets, reflecting heightened uncertainty. Additionally, climate risk was found to strengthen the four major currencies relative to the US dollar. Finally, the study highlights context-specific effects, with certain indicators losing relevance while others gained prominence during the pandemic.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104103"},"PeriodicalIF":7.5,"publicationDate":"2025-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143642149","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-11DOI: 10.1016/j.irfa.2025.104137
Yawen Li , Yufei Xia , Zongting Sun , Naili Sun
Digital transformation (DT) has reshaped the banking industry's competition patterns and operational approaches and introduced new challenges and risks to banks. This study examines the effect of DT on systemic risk. Using panel data from 2011Q1 to 2021Q4, we empirically confirm that commercial banks' DT promotion can significantly mitigate systemic risk. A 1 % increase in the standard deviation of DT can result in a maximum 8.54 % decrease in the mean banks' systemic risk. Furthermore, DT reduces banks' systemic risk by increasing bank concentration, enhancing business diversification, optimizing cost control, and reducing charter value. We further determine the negative moderating effect of economic policy uncertainty on the DT–systemic risk nexus. The impacts of DT on commercial banks' systemic risk exhibit some heterogeneity based on different DT dimensions, systemically (un)important banks, and bank size. Our main conclusions remain robust after addressing potential endogeneity and employing alternative dependent variables, sample periods, and clustered standard errors. We also analyze the effects of DT on banks' future practices by reducing systemic risk. As DT advances, mitigating systemic risk in banks results in lower earnings and higher risk-taking in the next period. Finally, we propose some implications for banks and regulators.
{"title":"Does digital transformation affect systemic risk? Evidence from the banking sector in China","authors":"Yawen Li , Yufei Xia , Zongting Sun , Naili Sun","doi":"10.1016/j.irfa.2025.104137","DOIUrl":"10.1016/j.irfa.2025.104137","url":null,"abstract":"<div><div>Digital transformation (DT) has reshaped the banking industry's competition patterns and operational approaches and introduced new challenges and risks to banks. This study examines the effect of DT on systemic risk. Using panel data from 2011Q1 to 2021Q4, we empirically confirm that commercial banks' DT promotion can significantly mitigate systemic risk. A 1 % increase in the standard deviation of DT can result in a maximum 8.54 % decrease in the mean banks' systemic risk. Furthermore, DT reduces banks' systemic risk by increasing bank concentration, enhancing business diversification, optimizing cost control, and reducing charter value. We further determine the negative moderating effect of economic policy uncertainty on the DT–systemic risk nexus. The impacts of DT on commercial banks' systemic risk exhibit some heterogeneity based on different DT dimensions, systemically (un)important banks, and bank size. Our main conclusions remain robust after addressing potential endogeneity and employing alternative dependent variables, sample periods, and clustered standard errors. We also analyze the effects of DT on banks' future practices by reducing systemic risk. As DT advances, mitigating systemic risk in banks results in lower earnings and higher risk-taking in the next period. Finally, we propose some implications for banks and regulators.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104137"},"PeriodicalIF":7.5,"publicationDate":"2025-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143628654","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-11DOI: 10.1016/j.irfa.2025.104106
Deli Wang , Xiaoyuan Liu , Shiyang Hu , Shangrui Wu
Exploiting a quasi-natural experiment in China in which the Big Data Administration was established in various cities across different times (i.e., pilot cities), we explore the role that digital government transformation plays in curbing firms' R&D manipulation activities. We rely on a staggered difference-in-differences research design and find that firms located in pilot cities significantly reduce the magnitude of their R&D manipulation from the pre- to the post- digital government transformation period, compared to firms located in nonpilot cities during the same time frame. Our analysis shows that digital government transformation mitigates R&D manipulation by strengthening government regulatory powers and normalizing corporate R&D practices. Additionally, we find that this impact is more pronounced in non-state-owned enterprises, manufacturing companies, smaller businesses, and those with less rigorous external oversight. Moreover, we identify a regulatory effect similar to “poverty alleviation” in China, where digital governance has a more substantial impact on R&D manipulation in economically developed areas. Our results also demonstrate that digital government transformation significantly improves the efficiency of governmental R&D subsidies and the quality of firms' innovation outputs. Collectively, these findings indicate that digital transformation can amplify the effectiveness of industrial policies. Our study, therefore, contributes to the literature by offering theoretical perspectives and vital microeconomic evidence on how to optimize subsidy efficiency through the rapid development of big data and other cutting-edge digital technologies.
{"title":"The value of digital government transformation: Evidence from R&D subsidy efficiency in China","authors":"Deli Wang , Xiaoyuan Liu , Shiyang Hu , Shangrui Wu","doi":"10.1016/j.irfa.2025.104106","DOIUrl":"10.1016/j.irfa.2025.104106","url":null,"abstract":"<div><div>Exploiting a quasi-natural experiment in China in which the Big Data Administration was established in various cities across different times (i.e., pilot cities), we explore the role that digital government transformation plays in curbing firms' R&D manipulation activities. We rely on a staggered difference-in-differences research design and find that firms located in pilot cities significantly reduce the magnitude of their R&D manipulation from the pre- to the post- digital government transformation period, compared to firms located in nonpilot cities during the same time frame. Our analysis shows that digital government transformation mitigates R&D manipulation by strengthening government regulatory powers and normalizing corporate R&D practices. Additionally, we find that this impact is more pronounced in non-state-owned enterprises, manufacturing companies, smaller businesses, and those with less rigorous external oversight. Moreover, we identify a regulatory effect similar to “poverty alleviation” in China, where digital governance has a more substantial impact on R&D manipulation in economically developed areas. Our results also demonstrate that digital government transformation significantly improves the efficiency of governmental R&D subsidies and the quality of firms' innovation outputs. Collectively, these findings indicate that digital transformation can amplify the effectiveness of industrial policies. Our study, therefore, contributes to the literature by offering theoretical perspectives and vital microeconomic evidence on how to optimize subsidy efficiency through the rapid development of big data and other cutting-edge digital technologies.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104106"},"PeriodicalIF":7.5,"publicationDate":"2025-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143619685","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-11DOI: 10.1016/j.irfa.2025.104091
Taylan Mavruk
This paper examines how local/global CSR activity induced local/remote ownership affects firm performance. The results show that local CSR activity generates positive externality to local owners, who in turn increase their ownership, and hence, also their monitoring role in local firms. Global CSR activity builds public image, and thus attract remote investors to local firms, which increases diversification and hence, liquidity of firm stock. The shift in local ownership increases firm value more for global CSR activities that target a broader group of stakeholders. Thus, some monitoring by local owners is necessary to prevent overinvestment in CSR that might lead to the manifestation of agency problems. In the short-run stock returns increase more for positive news on global CSR activities, partly, because of overreaction. In the long-run there is a return reversal, however, stock returns are still positive, indicating that CSR activities not only generate overreaction but also influence firm fundamentals.
{"title":"Local CSR, local ownership and firm value","authors":"Taylan Mavruk","doi":"10.1016/j.irfa.2025.104091","DOIUrl":"10.1016/j.irfa.2025.104091","url":null,"abstract":"<div><div>This paper examines how local/global CSR activity induced local/remote ownership affects firm performance. The results show that local CSR activity generates positive externality to local owners, who in turn increase their ownership, and hence, also their monitoring role in local firms. Global CSR activity builds public image, and thus attract remote investors to local firms, which increases diversification and hence, liquidity of firm stock. The shift in local ownership increases firm value more for global CSR activities that target a broader group of stakeholders. Thus, some monitoring by local owners is necessary to prevent overinvestment in CSR that might lead to the manifestation of agency problems. In the short-run stock returns increase more for positive news on global CSR activities, partly, because of overreaction. In the long-run there is a return reversal, however, stock returns are still positive, indicating that CSR activities not only generate overreaction but also influence firm fundamentals.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104091"},"PeriodicalIF":7.5,"publicationDate":"2025-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143619684","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-11DOI: 10.1016/j.irfa.2025.104117
Qiming Yang , Ruilin Xiang
Using sample data from all Chinese A-share manufacturing listed companies from 2017 to 2022, this study investigates the impact of interest-bearing liability structure on corporate environmental, social, and governance (ESG) performance. Findings show that a substantial negative correlation exists between the amount of interest-bearing liabilities, ratio of short-term to interest-bearing borrowings, ratio of long-term to interest-bearing borrowings, and corporate ESG performance. This implies that as corporate interest-bearing liabilities increase, their ESG performance tends to decline. Furthermore, a higher amount of interest-bearing liabilities inhibits corporate research and development investment, affecting performance in technical innovation, environmental protection, and social responsibility and thus lowering ESG performance. Furthermore, this study determines that the cash-holding ratio negatively moderates the inhibitory influence of interest-bearing liability structure on corporate ESG performance.
{"title":"Structure of interest-bearing liabilities and corporate ESG performance","authors":"Qiming Yang , Ruilin Xiang","doi":"10.1016/j.irfa.2025.104117","DOIUrl":"10.1016/j.irfa.2025.104117","url":null,"abstract":"<div><div>Using sample data from all Chinese A-share manufacturing listed companies from 2017 to 2022, this study investigates the impact of interest-bearing liability structure on corporate environmental, social, and governance (ESG) performance. Findings show that a substantial negative correlation exists between the amount of interest-bearing liabilities, ratio of short-term to interest-bearing borrowings, ratio of long-term to interest-bearing borrowings, and corporate ESG performance. This implies that as corporate interest-bearing liabilities increase, their ESG performance tends to decline. Furthermore, a higher amount of interest-bearing liabilities inhibits corporate research and development investment, affecting performance in technical innovation, environmental protection, and social responsibility and thus lowering ESG performance. Furthermore, this study determines that the cash-holding ratio negatively moderates the inhibitory influence of interest-bearing liability structure on corporate ESG performance.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104117"},"PeriodicalIF":7.5,"publicationDate":"2025-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143629588","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-11DOI: 10.1016/j.irfa.2025.104139
Ning Ding , Lei Xu , Xiao Wu , Zixuan Dai
China, the largest bank-based economy, has raised concerns that its explicit deposit insurance system (DIS) may substantially increase risky assets. We examine the impact of DIS on bank efficiency from the perspective of active risk-taking. Through panel data from 107 Chinese banks from 2009 to 2020, we find explicit DIS decreases bank efficiency by boosting active risk-taking, and such a link exhibits a U-shaped pattern. Furthermore, credit risk management capabilities, capital adequacy levels, and bank franchise values can act as crucial mitigating factors, which in turn alleviate the negative effects of DIS on bank efficiency.
{"title":"Explicit deposit insurance, active risk taking, and bank efficiency in China","authors":"Ning Ding , Lei Xu , Xiao Wu , Zixuan Dai","doi":"10.1016/j.irfa.2025.104139","DOIUrl":"10.1016/j.irfa.2025.104139","url":null,"abstract":"<div><div>China, the largest bank-based economy, has raised concerns that its explicit deposit insurance system (DIS) may substantially increase risky assets. We examine the impact of DIS on bank efficiency from the perspective of active risk-taking. Through panel data from 107 Chinese banks from 2009 to 2020, we find explicit DIS decreases bank efficiency by boosting active risk-taking, and such a link exhibits a U-shaped pattern. Furthermore, credit risk management capabilities, capital adequacy levels, and bank franchise values can act as crucial mitigating factors, which in turn alleviate the negative effects of DIS on bank efficiency.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104139"},"PeriodicalIF":7.5,"publicationDate":"2025-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143628657","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-11DOI: 10.1016/j.irfa.2025.104097
Paolo Fiorillo , Antonio Meles , Antonio Ricciardi , Vincenzo Verdoliva
We study the impact of ESG performance on the cost of debt in the primary corporate bond market. Using an international sample of 25,234 bonds from 2677 ESG-rated issuers, we analyse yield spreads between bonds from high- and low-ESG-rated issuers, finding lower yields (by about 10 bps) for high-ESG firms. Our results are robust to additional tests, including controls for endogeneity, and are mainly explained by the environmental and social pillars. We also find that this result is driven by more developed financial markets, likely affected by lower information frictions, and by countries where bankruptcy rules guarantee higher protection for bondholders, making them more willing to grant ESG premia. Finally, we observe lower yield spreads for bond issues that occurred after the introduction of the SFDR, highlighting the importance of regulations promoting socially responsible investments. Overall, our results suggest that firms can benefit from superior ESG performance in the form of lower borrowing costs in the corporate bond market.
{"title":"ESG performance and the cost of debt. Evidence from the corporate bond market","authors":"Paolo Fiorillo , Antonio Meles , Antonio Ricciardi , Vincenzo Verdoliva","doi":"10.1016/j.irfa.2025.104097","DOIUrl":"10.1016/j.irfa.2025.104097","url":null,"abstract":"<div><div>We study the impact of ESG performance on the cost of debt in the primary corporate bond market. Using an international sample of 25,234 bonds from 2677 ESG-rated issuers, we analyse yield spreads between bonds from high- and low-ESG-rated issuers, finding lower yields (by about 10 bps) for high-ESG firms. Our results are robust to additional tests, including controls for endogeneity, and are mainly explained by the environmental and social pillars. We also find that this result is driven by more developed financial markets, likely affected by lower information frictions, and by countries where bankruptcy rules guarantee higher protection for bondholders, making them more willing to grant ESG premia. Finally, we observe lower yield spreads for bond issues that occurred after the introduction of the SFDR, highlighting the importance of regulations promoting socially responsible investments. Overall, our results suggest that firms can benefit from superior ESG performance in the form of lower borrowing costs in the corporate bond market.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104097"},"PeriodicalIF":7.5,"publicationDate":"2025-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143610437","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}