Pub Date : 2025-10-10DOI: 10.1016/j.jbankfin.2025.107576
Jiapin Deng , Xiaoxia Li , Yanchu Liu
Marshalling a large and novel dataset of cell towers and using the purchase of Yu’E Bao as a proxy for Chinese households’ investment in money market funds, this paper investigates how broadband infrastructure affects the welfare of households in wealth management. We find that with the improvement in broadband infrastructure, Internet service becomes more available to households and they tend to convert bank deposits with suppressed rates of interest into money market funds that provide less regulated and hence higher rates of return. Further analyses show that the effect of broadband infrastructure on the conversion of bank deposits into money market funds is more pronounced in counties with lower density of bank branches and among less educated people. Our empirical findings suggest that by alleviating the policy distortions imposed on the traditional banking sector, online financial products and service are powerful tools in the promotion of financial inclusion.
{"title":"Does broadband infrastructure promote households’ welfare in wealth management? Evidence from the construction of cell towers and the purchase of Yu’E Bao in China","authors":"Jiapin Deng , Xiaoxia Li , Yanchu Liu","doi":"10.1016/j.jbankfin.2025.107576","DOIUrl":"10.1016/j.jbankfin.2025.107576","url":null,"abstract":"<div><div>Marshalling a large and novel dataset of cell towers and using the purchase of Yu’E Bao as a proxy for Chinese households’ investment in money market funds, this paper investigates how broadband infrastructure affects the welfare of households in wealth management. We find that with the improvement in broadband infrastructure, Internet service becomes more available to households and they tend to convert bank deposits with suppressed rates of interest into money market funds that provide less regulated and hence higher rates of return. Further analyses show that the effect of broadband infrastructure on the conversion of bank deposits into money market funds is more pronounced in counties with lower density of bank branches and among less educated people. Our empirical findings suggest that by alleviating the policy distortions imposed on the traditional banking sector, online financial products and service are powerful tools in the promotion of financial inclusion.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"181 ","pages":"Article 107576"},"PeriodicalIF":3.8,"publicationDate":"2025-10-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145325862","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 : 2025-10-10DOI: 10.1016/j.jbankfin.2025.107552
Yufeng Han , Xi Nancy Mo , Jian Yang
This study investigates the performance of trend factors across different markets around the world and demonstrates that the trend factors perform well across most of developed markets and many emerging markets, outperforming the market portfolio, short-term reversal, momentum, and long-term reversal. We further examine how cultural and legal differences influence the performance of the trend factor trading strategy and find it is more profitable in countries where the individualism is higher and securities laws are better enforced. Finally, the global trend factor aggregating individual market trend factors performs well and explains various global portfolios’ returns. The findings suggest that the trend factors present a challenge to traditional risk-based asset pricing theories, and trend factor trading strategies may deserve more attention in international portfolio management.
{"title":"Trend factors around the world: Performance and determinants","authors":"Yufeng Han , Xi Nancy Mo , Jian Yang","doi":"10.1016/j.jbankfin.2025.107552","DOIUrl":"10.1016/j.jbankfin.2025.107552","url":null,"abstract":"<div><div>This study investigates the performance of trend factors across different markets around the world and demonstrates that the trend factors perform well across most of developed markets and many emerging markets, outperforming the market portfolio, short-term reversal, momentum, and long-term reversal. We further examine how cultural and legal differences influence the performance of the trend factor trading strategy and find it is more profitable in countries where the individualism is higher and securities laws are better enforced. Finally, the global trend factor aggregating individual market trend factors performs well and explains various global portfolios’ returns. The findings suggest that the trend factors present a challenge to traditional risk-based asset pricing theories, and trend factor trading strategies may deserve more attention in international portfolio management.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"181 ","pages":"Article 107552"},"PeriodicalIF":3.8,"publicationDate":"2025-10-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145325865","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 : 2025-10-10DOI: 10.1016/j.jbankfin.2025.107568
Jacob Oded
Firms are commonly assumed to engage in repurchase programs in order to take advantage of mispricing and buy their shares when they are underpriced. However, recent empirical evidence indicates these programs are often executed when shares are overpriced. We characterize the situations in which repurchase of overpriced shares is likely to occur and show it can actually be value enhancing. In the model, informed insiders trade-off private benefits from free cash waste against common benefits from waste prevention. Since private benefits from waste are negatively related to governance quality, our findings highlight the importance of having good governance in place when boards approve repurchase programs.
{"title":"Why do firms repurchase their shares when they are overpriced?","authors":"Jacob Oded","doi":"10.1016/j.jbankfin.2025.107568","DOIUrl":"10.1016/j.jbankfin.2025.107568","url":null,"abstract":"<div><div>Firms are commonly assumed to engage in repurchase programs in order to take advantage of mispricing and buy their shares when they are underpriced. However, recent empirical evidence indicates these programs are often executed when shares are overpriced. We characterize the situations in which repurchase of overpriced shares is likely to occur and show it can actually be value enhancing. In the model, informed insiders trade-off private benefits from free cash waste against common benefits from waste prevention. Since private benefits from waste are negatively related to governance quality, our findings highlight the importance of having good governance in place when boards approve repurchase programs.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"182 ","pages":"Article 107568"},"PeriodicalIF":3.8,"publicationDate":"2025-10-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145371139","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 : 2025-10-09DOI: 10.1016/j.jbankfin.2025.107563
Christine Jiang , Yiyin Wu , John Qi Zhu
An initial public offering (IPO) can have diverse impacts on incumbent firms. We identify a valuation channel using a pairwise measure of technological proximity between the new entrant and incumbent firms. By analyzing the patent data of firms listed on the Shanghai Stock Exchange’s STAR Board, we find a significant increase in the valuation of the incumbent firm when its patent portfolio exhibits a higher degree of similarity to the IPO firm. This positive spillover effect differs from other well-documented peer effects of IPO shocks, suggesting a novel mechanism that operates through technological linkages, particularly among technology-intensive firms.
{"title":"A revisit to the IPO spillover effect: On the importance of technological proximity","authors":"Christine Jiang , Yiyin Wu , John Qi Zhu","doi":"10.1016/j.jbankfin.2025.107563","DOIUrl":"10.1016/j.jbankfin.2025.107563","url":null,"abstract":"<div><div>An initial public offering (IPO) can have diverse impacts on incumbent firms. We identify a valuation channel using a pairwise measure of technological proximity between the new entrant and incumbent firms. By analyzing the patent data of firms listed on the Shanghai Stock Exchange’s STAR Board, we find a significant increase in the valuation of the incumbent firm when its patent portfolio exhibits a higher degree of similarity to the IPO firm. This positive spillover effect differs from other well-documented peer effects of IPO shocks, suggesting a novel mechanism that operates through technological linkages, particularly among technology-intensive firms.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"181 ","pages":"Article 107563"},"PeriodicalIF":3.8,"publicationDate":"2025-10-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145325864","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}
This research proposes a novel firm-based model for pricing cyber insurance. Our model considers two types of cyber risk: virus attacks and data breaches. Virus attacks deliver adverse shocks to the firm’s productivity, while data breaches cause premium customer departures that worsen the prospect of the firm’s product demand. We derive the endogenous structural form of cyber losses in firms and utilize it to solve the formula for cyber insurance premiums. Our quantitative results show that the consensus prediction about a strictly positive premium-risk nexus is no longer valid. Asymmetries in the sub-premium’s sensitivity to cyber risks from different sources and the premium customer loss rates jointly shape the complexity of the relation between cyber insurance premiums and cyber risks. Improvements in the product demand conditions enhance firms’ incentives to hedge cyber losses and push premiums higher. Lastly, we discuss the influence of product price competition on premiums.
{"title":"Cyber insurance valuation with endogenous cyber loss","authors":"Chang-Chih Chen , Chia-Chien Chang , Ying Rui , Min-Teh Yu","doi":"10.1016/j.jbankfin.2025.107564","DOIUrl":"10.1016/j.jbankfin.2025.107564","url":null,"abstract":"<div><div>This research proposes a novel firm-based model for pricing cyber insurance. Our model considers two types of cyber risk: virus attacks and data breaches. Virus attacks deliver adverse shocks to the firm’s productivity, while data breaches cause premium customer departures that worsen the prospect of the firm’s product demand. We derive the endogenous structural form of cyber losses in firms and utilize it to solve the formula for cyber insurance premiums. Our quantitative results show that the consensus prediction about a strictly positive premium-risk nexus is no longer valid. Asymmetries in the sub-premium’s sensitivity to cyber risks from different sources and the premium customer loss rates jointly shape the complexity of the relation between cyber insurance premiums and cyber risks. Improvements in the product demand conditions enhance firms’ incentives to hedge cyber losses and push premiums higher. Lastly, we discuss the influence of product price competition on premiums.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"181 ","pages":"Article 107564"},"PeriodicalIF":3.8,"publicationDate":"2025-10-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145325863","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 : 2025-10-09DOI: 10.1016/j.jbankfin.2025.107566
Luis Fernández Lafuerza, Jorge E. Galán
We provide compelling evidence of the association between credit standards at loan origination in the corporate sector and default risk. While this relationship has been extensively studied in the mortgage market, it remains underexplored in corporate lending. Using a comprehensive dataset from the Spanish credit register merged with firm-level balance sheet information over a full financial cycle, we show that debt-to-assets and interest coverage ratios at loan origination are significant predictors of future corporate loan defaults. The strength of this association varies across the financial cycle, sectors, firm size and age, and prior banking relationships. Real estate firms and small and medium-sized enterprises exhibit the strongest link between initial credit conditions and future default outcomes. Our findings suggest that limits in corporate credit standards, similar to those widely used in mortgage markets, could enhance firms’ resilience to adverse shocks and complement capital-based instruments within the macroprudential toolkit. However, the effectiveness and potential side effects of such measures depend critically on firm-specific characteristics and sectoral heterogeneity, underscoring the need for a targeted and flexible policy design.
{"title":"Credit standards and corporate loan default. Insights for macroprudential policy","authors":"Luis Fernández Lafuerza, Jorge E. Galán","doi":"10.1016/j.jbankfin.2025.107566","DOIUrl":"10.1016/j.jbankfin.2025.107566","url":null,"abstract":"<div><div>We provide compelling evidence of the association between credit standards at loan origination in the corporate sector and default risk. While this relationship has been extensively studied in the mortgage market, it remains underexplored in corporate lending. Using a comprehensive dataset from the Spanish credit register merged with firm-level balance sheet information over a full financial cycle, we show that debt-to-assets and interest coverage ratios at loan origination are significant predictors of future corporate loan defaults. The strength of this association varies across the financial cycle, sectors, firm size and age, and prior banking relationships. Real estate firms and small and medium-sized enterprises exhibit the strongest link between initial credit conditions and future default outcomes. Our findings suggest that limits in corporate credit standards, similar to those widely used in mortgage markets, could enhance firms’ resilience to adverse shocks and complement capital-based instruments within the macroprudential toolkit. However, the effectiveness and potential side effects of such measures depend critically on firm-specific characteristics and sectoral heterogeneity, underscoring the need for a targeted and flexible policy design.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"181 ","pages":"Article 107566"},"PeriodicalIF":3.8,"publicationDate":"2025-10-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145270367","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 : 2025-10-07DOI: 10.1016/j.jbankfin.2025.107565
Heiner Beckmeyer, Timo Wiedemann
By flexibly weighting the information contained in past realized returns, we construct a momentum strategy that outperforms and subsumes the performance of traditional stock momentum. The strategy performs well in crises and continues to work in the most recent decades. We show that the way past returns are weighted is in line with the strategy exploiting an underreaction to the information contained in realized returns, but also investigate alternative behavioral and risk-based explanations. We find that the response to earnings announcements, market-wide jumps and large individual returns realized in the formation period are most informative about future stock returns.
{"title":"All Days Are Not Created Equal: Understanding Momentum by Learning to Weight Past Returns","authors":"Heiner Beckmeyer, Timo Wiedemann","doi":"10.1016/j.jbankfin.2025.107565","DOIUrl":"10.1016/j.jbankfin.2025.107565","url":null,"abstract":"<div><div>By flexibly weighting the information contained in past realized returns, we construct a momentum strategy that outperforms and subsumes the performance of traditional stock momentum. The strategy performs well in crises and continues to work in the most recent decades. We show that the way past returns are weighted is in line with the strategy exploiting an underreaction to the information contained in realized returns, but also investigate alternative behavioral and risk-based explanations. We find that the response to earnings announcements, market-wide jumps and large individual returns realized in the formation period are most informative about future stock returns.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"181 ","pages":"Article 107565"},"PeriodicalIF":3.8,"publicationDate":"2025-10-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145270369","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 : 2025-10-02DOI: 10.1016/j.jbankfin.2025.107567
Carl Hsin-han Shen , Hao Zhang
We examine whether insiders’ pledging of company stock as collateral for personal loans influences a company’s debt contracting. We attempt to identify causality through difference-in-differences analyses of an unexpected legislative change that exogenously reduced board directors’ pledging incentives. We find that firms with higher initial pledging levels, which subsequently experienced a significant decline in pledging ratios due to the regulation, benefited from lower loan spreads and less stringent non-price loan terms. We further hypothesize and provide evidence that the positive impact of insider pledging on corporate borrowing costs is less pronounced in closely held firms. Examining the mechanisms, we find that share pledging is positively related to earnings management, firm risk-taking behaviors, and agency problems. Overall, these findings suggest that banks perceive insider share pledging as engendering significant risks.
{"title":"Share pledging of insiders and corporate debt contracting","authors":"Carl Hsin-han Shen , Hao Zhang","doi":"10.1016/j.jbankfin.2025.107567","DOIUrl":"10.1016/j.jbankfin.2025.107567","url":null,"abstract":"<div><div>We examine whether insiders’ pledging of company stock as collateral for personal loans influences a company’s debt contracting. We attempt to identify causality through difference-in-differences analyses of an unexpected legislative change that exogenously reduced board directors’ pledging incentives. We find that firms with higher initial pledging levels, which subsequently experienced a significant decline in pledging ratios due to the regulation, benefited from lower loan spreads and less stringent non-price loan terms. We further hypothesize and provide evidence that the positive impact of insider pledging on corporate borrowing costs is less pronounced in closely held firms. Examining the mechanisms, we find that share pledging is positively related to earnings management, firm risk-taking behaviors, and agency problems. Overall, these findings suggest that banks perceive insider share pledging as engendering significant risks.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"181 ","pages":"Article 107567"},"PeriodicalIF":3.8,"publicationDate":"2025-10-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145364645","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 : 2025-10-01DOI: 10.1016/j.jbankfin.2025.107562
Na Ding , Panpan Feng , Jianjun Liu , Zhaoyue Ren , Xueyong Zhang
This study investigates how economic policy uncertainty (EPU) affects venture capital (VC) contract terms. Using a unique database of contracts between VCs and entrepreneurial firms in China, we provide evidence that EPU positively affects the presence of investor-friendly covenants in VC contracts. Our mechanism analysis shows that screening for high-quality startups and VCs’ increased bargaining power are potential channels. Furthermore, we find that including more investor-friendly covenants mitigates the negative effect of EPU on VC exit performance.
{"title":"Economic policy uncertainty and covenants in venture capital contracts","authors":"Na Ding , Panpan Feng , Jianjun Liu , Zhaoyue Ren , Xueyong Zhang","doi":"10.1016/j.jbankfin.2025.107562","DOIUrl":"10.1016/j.jbankfin.2025.107562","url":null,"abstract":"<div><div>This study investigates how economic policy uncertainty (EPU) affects venture capital (VC) contract terms. Using a unique database of contracts between VCs and entrepreneurial firms in China, we provide evidence that EPU positively affects the presence of investor-friendly covenants in VC contracts. Our mechanism analysis shows that screening for high-quality startups and VCs’ increased bargaining power are potential channels. Furthermore, we find that including more investor-friendly covenants mitigates the negative effect of EPU on VC exit performance.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"181 ","pages":"Article 107562"},"PeriodicalIF":3.8,"publicationDate":"2025-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145364160","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 : 2025-09-28DOI: 10.1016/j.jbankfin.2025.107561
Sonny Biswas , Neslihan Ozkan , Junyang Yin
We find that in the leveraged loan sector, firms borrowing from non-banks have lower profitability following loan originations, compared to firms borrowing from banks, after controlling for observable factors. As non-bank borrowers experience less intense monitoring than bank borrowers, they engage in more risk-taking, which could explain their lower profitability following loan issuance. Using the leveraged lending guidance as a plausibly exogenous shock, which resulted in the migration of borrowers from banks to non-banks, we provide causal evidence corroborating our main results. Overall, our findings suggest that macroprudential policies which exclusively target the traditional banking sector may have negative consequences.
{"title":"Non-bank lending and firm performance: Evidence from the syndicate loan market","authors":"Sonny Biswas , Neslihan Ozkan , Junyang Yin","doi":"10.1016/j.jbankfin.2025.107561","DOIUrl":"10.1016/j.jbankfin.2025.107561","url":null,"abstract":"<div><div>We find that in the leveraged loan sector, firms borrowing from non-banks have lower profitability following loan originations, compared to firms borrowing from banks, after controlling for observable factors. As non-bank borrowers experience less intense monitoring than bank borrowers, they engage in more risk-taking, which could explain their lower profitability following loan issuance. Using the leveraged lending guidance as a plausibly exogenous shock, which resulted in the migration of borrowers from banks to non-banks, we provide causal evidence corroborating our main results. Overall, our findings suggest that macroprudential policies which exclusively target the traditional banking sector may have negative consequences.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"181 ","pages":"Article 107561"},"PeriodicalIF":3.8,"publicationDate":"2025-09-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145270368","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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