This paper examines how the evolution of geopolitical risk (GPR) influences the market dynamics of weapon (WPs) and non-weapon producers (NWPs) in the United States over the period January 2014–March 2025. Adopting a Wavelet Coherence framework, we analyze the market response of a representative sample of WP and NWP to the GRP index fluctuations, as well as to its components, GPR-Acts and GPR-Threats. The empirical analyses show that WPs’ volatility is predominantly driven by GPR-Acts, while they tend to lead market co-movements when shocks stem from threats alone. When geopolitical tensions escalate from threats into acts, on the other hand, the co-movement becomes non-directional, revealing a complex and asymmetric market behavior. Furthermore, NWPs display heterogeneous responses: sectors such as consumer discretionary and healthcare amplify exposure to GPR, whereas energy and utilities provide partial hedging. Industrials display lagged but similar reactions to WPs, while the information technology sector shows even stronger co-movement with GPR than defense firms. These findings provide novel insights into the complex propagation mechanism of geopolitical shocks across industries, contribute to the literature on controversial assets and market resilience under geopolitical uncertainty, and offer insights for investors, regulators, and policymakers.
{"title":"Geopolitical risk and stock market volatility: The case of US weapon and non-weapon firms","authors":"Milena Migliavacca , Zaheer Anwer , Paola Fandella","doi":"10.1016/j.ribaf.2025.103195","DOIUrl":"10.1016/j.ribaf.2025.103195","url":null,"abstract":"<div><div>This paper examines how the evolution of geopolitical risk (GPR) influences the market dynamics of weapon (WPs) and non-weapon producers (NWPs) in the United States over the period January 2014–March 2025. Adopting a Wavelet Coherence framework, we analyze the market response of a representative sample of WP and NWP to the GRP index fluctuations, as well as to its components, GPR-Acts and GPR-Threats. The empirical analyses show that WPs’ volatility is predominantly driven by GPR-Acts, while they tend to lead market co-movements when shocks stem from threats alone. When geopolitical tensions escalate from threats into acts, on the other hand, the co-movement becomes non-directional, revealing a complex and asymmetric market behavior. Furthermore, NWPs display heterogeneous responses: sectors such as consumer discretionary and healthcare amplify exposure to GPR, whereas energy and utilities provide partial hedging. Industrials display lagged but similar reactions to WPs, while the information technology sector shows even stronger co-movement with GPR than defense firms. These findings provide novel insights into the complex propagation mechanism of geopolitical shocks across industries, contribute to the literature on controversial assets and market resilience under geopolitical uncertainty, and offer insights for investors, regulators, and policymakers.</div></div>","PeriodicalId":51430,"journal":{"name":"Research in International Business and Finance","volume":"81 ","pages":"Article 103195"},"PeriodicalIF":6.9,"publicationDate":"2025-11-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145520570","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 : 2025-11-08DOI: 10.1016/j.ribaf.2025.103200
David Veganzones , Eric Séverin , Sami Ben Jabeur
Bankruptcy prediction is a challenging task. Researchers face the problem of class imbalances, because the number of bankrupt firms is much lower than the number of non-bankrupt firms. Resampling methods, which modify data distributions, are commonly employed to deal with this problem. The authors therefore propose a new, alternate, classifier-level solution that combines the adaptive boosting (AdaBoost) algorithm and support vector machine (SVM) methods: Diverse AdaBoostSVM. A comparison of the performance of Diverse AdaBoostSVM, with resampling methods in imbalanced datasets reveal that at moderate degrees of imbalance and in large training sets Diverse AdaBoostSVM is an effective alternative method of predicting bankruptcy, particularly with regard to mid-term forecast horizons.
{"title":"Forecasting corporate bankruptcy in imbalanced datasets using a new hybrid machine learning approach","authors":"David Veganzones , Eric Séverin , Sami Ben Jabeur","doi":"10.1016/j.ribaf.2025.103200","DOIUrl":"10.1016/j.ribaf.2025.103200","url":null,"abstract":"<div><div>Bankruptcy prediction is a challenging task. Researchers face the problem of class imbalances, because the number of bankrupt firms is much lower than the number of non-bankrupt firms. Resampling methods, which modify data distributions, are commonly employed to deal with this problem. The authors therefore propose a new, alternate, classifier-level solution that combines the adaptive boosting (AdaBoost) algorithm and support vector machine (SVM) methods: Diverse AdaBoostSVM. A comparison of the performance of Diverse AdaBoostSVM, with resampling methods in imbalanced datasets reveal that at moderate degrees of imbalance and in large training sets Diverse AdaBoostSVM is an effective alternative method of predicting bankruptcy, particularly with regard to mid-term forecast horizons.</div></div>","PeriodicalId":51430,"journal":{"name":"Research in International Business and Finance","volume":"81 ","pages":"Article 103200"},"PeriodicalIF":6.9,"publicationDate":"2025-11-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145520498","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 : 2025-11-07DOI: 10.1016/j.ribaf.2025.103191
Aifan Ling , Huihua Guan , Nannan Zhang
This paper develops an investment-based capital asset pricing model that incorporates brand capital, and conducts both theoretical and empirical investigations into how corporate brand capital influences a firm’s stock risks. The key findings are as follows: First, brand capital can reduce corporate stock risks including market beta risk, idiosyncratic volatility, and total volatility risk. Second, the heterogeneity analysis reveals that the impact of brand capital on stock risks is more pronounced for companies in highly competitive industries, non-high-tech sectors, and those with low financing constraints. Similar effects are also observed during periods of low market risk. Third, the mechanism analysis shows that brand capital investment can lead to an increase in the external oversight and total factor productivity, as well as a decrease in tax avoidance. It is through these channels that brand capital reduces corporate stock risks. Finally, it is found that brand capital investment can also enhance corporate value and performance. This study provides both theoretical and empirical support for companies focusing on brand development, and offers policy recommendations for regulators to strengthen oversight of corporate information disclosure.
{"title":"Brand capital and corporate stock risk: A theoretical and empirical analysis","authors":"Aifan Ling , Huihua Guan , Nannan Zhang","doi":"10.1016/j.ribaf.2025.103191","DOIUrl":"10.1016/j.ribaf.2025.103191","url":null,"abstract":"<div><div>This paper develops an investment-based capital asset pricing model that incorporates brand capital, and conducts both theoretical and empirical investigations into how corporate brand capital influences a firm’s stock risks. The key findings are as follows: First, brand capital can reduce corporate stock risks including market beta risk, idiosyncratic volatility, and total volatility risk. Second, the heterogeneity analysis reveals that the impact of brand capital on stock risks is more pronounced for companies in highly competitive industries, non-high-tech sectors, and those with low financing constraints. Similar effects are also observed during periods of low market risk. Third, the mechanism analysis shows that brand capital investment can lead to an increase in the external oversight and total factor productivity, as well as a decrease in tax avoidance. It is through these channels that brand capital reduces corporate stock risks. Finally, it is found that brand capital investment can also enhance corporate value and performance. This study provides both theoretical and empirical support for companies focusing on brand development, and offers policy recommendations for regulators to strengthen oversight of corporate information disclosure.</div></div>","PeriodicalId":51430,"journal":{"name":"Research in International Business and Finance","volume":"81 ","pages":"Article 103191"},"PeriodicalIF":6.9,"publicationDate":"2025-11-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145520501","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 : 2025-11-07DOI: 10.1016/j.ribaf.2025.103199
Changchun Pan , Xiangwei Meng , Yuzhe Huang
The swift progress of digital technologies has greatly broadened the spectrum of financial services, enabling FinTech innovations to support the long-term growth of businesses. This paper explores how these innovations influence corporate sustainable development performance (CSDP), highlighting their significant role in enhancing corporate sustainability efforts and overall economic impact. This research reveals that FinTech significantly promotes Corporate Sustainable Development Performance (CSDP) among Chinese A-share listed companies from 2011 to 2022, based on panel data analysis. This article discusses mechanisms to improve financing accessibility, enhance resource allocation efficiency, and stimulate green technological innovation. The effects are particularly salient among low-growth and non-heavily polluting industries, regions with low financial development, and areas under strict financial regulation. The results highlight the crucial contribution of FinTech to advancing corporate sustainable development and provide guidance for policies aimed at enhancing CSDP.
{"title":"The impact of fintech on corporate sustainable development performance: Evidence from Chinese listed companies","authors":"Changchun Pan , Xiangwei Meng , Yuzhe Huang","doi":"10.1016/j.ribaf.2025.103199","DOIUrl":"10.1016/j.ribaf.2025.103199","url":null,"abstract":"<div><div>The swift progress of digital technologies has greatly broadened the spectrum of financial services, enabling FinTech innovations to support the long-term growth of businesses. This paper explores how these innovations influence corporate sustainable development performance (CSDP), highlighting their significant role in enhancing corporate sustainability efforts and overall economic impact. This research reveals that FinTech significantly promotes Corporate Sustainable Development Performance (CSDP) among Chinese A-share listed companies from 2011 to 2022, based on panel data analysis. This article discusses mechanisms to improve financing accessibility, enhance resource allocation efficiency, and stimulate green technological innovation. The effects are particularly salient among low-growth and non-heavily polluting industries, regions with low financial development, and areas under strict financial regulation. The results highlight the crucial contribution of FinTech to advancing corporate sustainable development and provide guidance for policies aimed at enhancing CSDP.</div></div>","PeriodicalId":51430,"journal":{"name":"Research in International Business and Finance","volume":"81 ","pages":"Article 103199"},"PeriodicalIF":6.9,"publicationDate":"2025-11-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145520568","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}
The prudential regulation on interest rate risk in the banking book (IRRBB) is experiencing an important evolution following the publication of the new Basel Committee on Banking Supervision (BCBS) standards in 2016. Based on a sample of 30 small and medium size Italian commercial banks over the period 2006–2023, we examine the main regulatory innovations and the related criteria for determining the appropriate amount of internal capital to cover IRRBB. Our results show that the new rules are more prudential than past rules because they specifically remove some distorting effects, such as the risk neutrality phenomenon and can lead to a higher average measure of risk exposure. However, when compared to more sophisticated methodologies based on simulation techniques, the new rules lead to an ex-ante risk exposure that is less consistent with that actually observed ex post. Noteworthy implications in terms of a proper definition of internal capital to set aside against IRRBB are discussed.
{"title":"Interest rate risk supervision and bank capital management: What can the new prudential standards tell us?","authors":"Domenico Curcio , Igor Gianfrancesco , Antonia Patrizia Iannuzzi , Grazia Onorato","doi":"10.1016/j.ribaf.2025.103198","DOIUrl":"10.1016/j.ribaf.2025.103198","url":null,"abstract":"<div><div>The prudential regulation on interest rate risk in the banking book (IRRBB) is experiencing an important evolution following the publication of the new Basel Committee on Banking Supervision (BCBS) standards in 2016. Based on a sample of 30 small and medium size Italian commercial banks over the period 2006–2023, we examine the main regulatory innovations and the related criteria for determining the appropriate amount of internal capital to cover IRRBB. Our results show that the new rules are more prudential than past rules because they specifically remove some distorting effects, such as the risk neutrality phenomenon and can lead to a higher average measure of risk exposure. However, when compared to more sophisticated methodologies based on simulation techniques, the new rules lead to an ex-ante risk exposure that is less consistent with that actually observed ex post. Noteworthy implications in terms of a proper definition of internal capital to set aside against IRRBB are discussed.</div></div>","PeriodicalId":51430,"journal":{"name":"Research in International Business and Finance","volume":"82 ","pages":"Article 103198"},"PeriodicalIF":6.9,"publicationDate":"2025-11-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145618671","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 : 2025-11-07DOI: 10.1016/j.ribaf.2025.103194
Kai Yao , Thanaset Chevapatrakul , Thach Vu Hong Nguyen , Shiyan Yin
This paper investigates the impact of the uncertainty tone in a firm’s annual report on stock price informativeness. We show that firms with a higher proportion of uncertainty words in 10-Ks have lower stock idiosyncratic risk. Our results suggest that the uncertainty tone of a firm’s financial disclosures results in information uncertainty that deteriorates its stock price informativeness. While the tone dispersion amplifies the relation between uncertainty tone and firm-specific risk, the use of causation and discrepancy words attenuates this effect. Furthermore, external oversight mechanisms including analysts following, institutional holdings, audit quality and more frequent access to 10-Ks undermine the impact of uncertainty tone. Our findings highlight the influence that managers can exert on corporate transparency with the use of linguistic tone in financial reports.
{"title":"Uncertainty words and corporate information environment","authors":"Kai Yao , Thanaset Chevapatrakul , Thach Vu Hong Nguyen , Shiyan Yin","doi":"10.1016/j.ribaf.2025.103194","DOIUrl":"10.1016/j.ribaf.2025.103194","url":null,"abstract":"<div><div>This paper investigates the impact of the uncertainty tone in a firm’s annual report on stock price informativeness. We show that firms with a higher proportion of uncertainty words in 10-Ks have lower stock idiosyncratic risk. Our results suggest that the uncertainty tone of a firm’s financial disclosures results in information uncertainty that deteriorates its stock price informativeness. While the tone dispersion amplifies the relation between uncertainty tone and firm-specific risk, the use of causation and discrepancy words attenuates this effect. Furthermore, external oversight mechanisms including analysts following, institutional holdings, audit quality and more frequent access to 10-Ks undermine the impact of uncertainty tone. Our findings highlight the influence that managers can exert on corporate transparency with the use of linguistic tone in financial reports.</div></div>","PeriodicalId":51430,"journal":{"name":"Research in International Business and Finance","volume":"81 ","pages":"Article 103194"},"PeriodicalIF":6.9,"publicationDate":"2025-11-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145520497","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 : 2025-11-07DOI: 10.1016/j.ribaf.2025.103204
Štefan Lyócsa , Jakub Tabaček
Increased interest in renewable energy sources among governments and the public lead to a question whether such an elevated interest is relevant enough to be one of the driving factors in pricing renewable energy stocks. We study the feasibility of this idea by modeling the daily price variation in renewable energy stocks in the U.S. We use 32 web search queries to create six new attention indices that capture the interest of the general public towards (i) general renewable energy, (ii) solar power, (iii) wind power, (iv) the renewable grid and utilities, (v) electric mobility, and (vi) biofuels. While controlling for stock-level price variations, interest and market uncertainty, we find in-sample and out-of-sample evidence that attention improves model fit and forecasting accuracy. Out-of-sample results reveal forecasting accuracy improvements ranging up to 12.3% on average, based on the QLIKE loss function. Forecast improvements cluster in periods of higher market uncertainty, where attention seems to matter the most.
{"title":"Attention to renewable energy: A risk-factor for stocks in the renewable energy sector","authors":"Štefan Lyócsa , Jakub Tabaček","doi":"10.1016/j.ribaf.2025.103204","DOIUrl":"10.1016/j.ribaf.2025.103204","url":null,"abstract":"<div><div>Increased interest in renewable energy sources among governments and the public lead to a question whether such an elevated interest is relevant enough to be one of the driving factors in pricing renewable energy stocks. We study the feasibility of this idea by modeling the daily price variation in renewable energy stocks in the U.S. We use 32 web search queries to create six new attention indices that capture the interest of the general public towards (i) general renewable energy, (ii) solar power, (iii) wind power, (iv) the renewable grid and utilities, (v) electric mobility, and (vi) biofuels. While controlling for stock-level price variations, interest and market uncertainty, we find in-sample and out-of-sample evidence that attention improves model fit and forecasting accuracy. Out-of-sample results reveal forecasting accuracy improvements ranging up to 12.3% on average, based on the QLIKE loss function. Forecast improvements cluster in periods of higher market uncertainty, where attention seems to matter the most.</div></div>","PeriodicalId":51430,"journal":{"name":"Research in International Business and Finance","volume":"81 ","pages":"Article 103204"},"PeriodicalIF":6.9,"publicationDate":"2025-11-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145520002","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 : 2025-11-07DOI: 10.1016/j.ribaf.2025.103192
Chenyao Tang , Adelphe Ekponon
Credit booms can lead to either financial crises or economic growth, depending on their nature. Identifying harmful credit booms and providing early warnings of financial crises remain key challenges. This paper introduces a new Credit Efficiency Indicator that can distinguish between different types of credit boom and detect early signs of a financial crisis. Based on G20 data over 30 years and using panel regression models with interaction terms, as well as probit and logistic models for binary crisis prediction, the results show that a sustained decline in credit efficiency significantly increases the likelihood of a financial crisis. The paper critiques traditional indicators such as the credit gap and leverage ratio, which focus on debt size but fail to reflect the quality and efficiency of credit allocation. The study emphasizes that credit efficiency, representing effective credit allocation and its conversion into economic output, is crucial for both economic growth and financial stability. This research also offers policymakers new perspectives and tools to improve early warning systems and systemic risk management.
{"title":"Credit efficiency: Another early warning indicator for systemic risk","authors":"Chenyao Tang , Adelphe Ekponon","doi":"10.1016/j.ribaf.2025.103192","DOIUrl":"10.1016/j.ribaf.2025.103192","url":null,"abstract":"<div><div>Credit booms can lead to either financial crises or economic growth, depending on their nature. Identifying harmful credit booms and providing early warnings of financial crises remain key challenges. This paper introduces a new Credit Efficiency Indicator that can distinguish between different types of credit boom and detect early signs of a financial crisis. Based on G20 data over 30 years and using panel regression models with interaction terms, as well as probit and logistic models for binary crisis prediction, the results show that a sustained decline in credit efficiency significantly increases the likelihood of a financial crisis. The paper critiques traditional indicators such as the credit gap and leverage ratio, which focus on debt size but fail to reflect the quality and efficiency of credit allocation. The study emphasizes that credit efficiency, representing effective credit allocation and its conversion into economic output, is crucial for both economic growth and financial stability. This research also offers policymakers new perspectives and tools to improve early warning systems and systemic risk management.</div></div>","PeriodicalId":51430,"journal":{"name":"Research in International Business and Finance","volume":"81 ","pages":"Article 103192"},"PeriodicalIF":6.9,"publicationDate":"2025-11-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145520496","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}
The transition to a low-carbon economy requires carbon-pricing mechanisms that safeguard fiscal stability and sovereign creditworthiness. However, their implications for sovereign risk remain contested, with prior research yielding fragmented results. This study provides the first systematic cross-country evidence of the carbon pricing–sovereign risk nexus, accounting for policy design, economic structure, and institutional thresholds. Using quarterly data from 21 developed and emerging economies (2015Q2–2024Q1) that integrates sovereign risk, governance, and carbon pricing indicators, we employ advanced econometric approaches, including Fixed Effects with Driscoll–Kraay corrections, Dynamic Panel Threshold Regression, bootstrap bias-corrected estimators, and quadratic specifications to capture heterogeneous and nonlinear effects. Three key findings emerge. First, policy design is decisive: Emissions Trading Systems (ETS) significantly raise sovereign risk, carbon taxes are broadly neutral, and hybrid regimes consistently reduce spreads, underscoring their fiscal credibility. Second, economic structure conditions outcomes: In diversified economies, sovereign risk is shaped mainly by energy dependence and governance, whereas in fossil fuel–dependent economies, carbon pricing becomes a direct risk channel. Third, institutional capacity is a threshold. Threshold and quadratic analyses confirm an inverted U-shaped relationship between regulatory quality and sovereign risk, with cut-offs at 1.45 (ETS), 1.64 (tax), and 1.51 (hybrid). Carbon pricing lowers risk under weaker institutions but becomes destabilizing once governance exceeds these levels, whereas hybrid regimes remain stabilizing. By embedding institutional thresholds, this study reconciles prior conflicting evidence and demonstrates that hybrid carbon pricing frameworks anchored in robust governance are the most effective in enhancing climate-fiscal resilience and sustaining sovereign creditworthiness.
{"title":"Carbon pricing and sovereign credit risk: A threshold analysis of policy design and economic structure for climate-fiscal resilience","authors":"Chabi Marcellin Daki Dominique , Yixiang Tian , Huiling Huang , Haroon ur Rashid Khan","doi":"10.1016/j.ribaf.2025.103197","DOIUrl":"10.1016/j.ribaf.2025.103197","url":null,"abstract":"<div><div>The transition to a low-carbon economy requires carbon-pricing mechanisms that safeguard fiscal stability and sovereign creditworthiness. However, their implications for sovereign risk remain contested, with prior research yielding fragmented results. This study provides the first systematic cross-country evidence of the carbon pricing–sovereign risk nexus, accounting for policy design, economic structure, and institutional thresholds. Using quarterly data from 21 developed and emerging economies (2015Q2–2024Q1) that integrates sovereign risk, governance, and carbon pricing indicators, we employ advanced econometric approaches, including Fixed Effects with Driscoll–Kraay corrections, Dynamic Panel Threshold Regression, bootstrap bias-corrected estimators, and quadratic specifications to capture heterogeneous and nonlinear effects. Three key findings emerge. First, policy design is decisive: Emissions Trading Systems (ETS) significantly raise sovereign risk, carbon taxes are broadly neutral, and hybrid regimes consistently reduce spreads, underscoring their fiscal credibility. Second, economic structure conditions outcomes: In diversified economies, sovereign risk is shaped mainly by energy dependence and governance, whereas in fossil fuel–dependent economies, carbon pricing becomes a direct risk channel. Third, institutional capacity is a threshold. Threshold and quadratic analyses confirm an inverted U-shaped relationship between regulatory quality and sovereign risk, with cut-offs at 1.45 (ETS), 1.64 (tax), and 1.51 (hybrid). Carbon pricing lowers risk under weaker institutions but becomes destabilizing once governance exceeds these levels, whereas hybrid regimes remain stabilizing. By embedding institutional thresholds, this study reconciles prior conflicting evidence and demonstrates that hybrid carbon pricing frameworks anchored in robust governance are the most effective in enhancing climate-fiscal resilience and sustaining sovereign creditworthiness.</div></div>","PeriodicalId":51430,"journal":{"name":"Research in International Business and Finance","volume":"81 ","pages":"Article 103197"},"PeriodicalIF":6.9,"publicationDate":"2025-11-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145520500","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 : 2025-11-07DOI: 10.1016/j.ribaf.2025.103206
Elisa Di Febo , Eliana Angelini , Tu Le
The paper examines how climate-related risks impact credit quality in the European banking sector, utilizing fixed-effects models on a sample of 127 banks across 27 European countries from 2005 to 2023. More specifically, this research assesses the impacts of transition risk and physical risk, taking into account structural, institutional, and sustainability variables. The results indicate that transition risk has a significant impact on degrading credit quality, whereas physical risk has a minimal impact on credit risk. However, this effect is attenuated by the presence of institutional quality and the development of ESG strategies, particularly the publication of sustainability reports. Additionally, our results indicate that institutional quality mitigates the negative impact of climate-related risk on loan quality, suggesting that institutional quality plays a significant role in enhancing financial resilience. Furthermore, robustness tests with alternative proxies and samples disaggregated by bank size reveal a greater vulnerability of small banks and a more effective response in ESG-oriented banks. The work’s innovative contribution lies in integrating environmental risks, institutional indicators, and ESG practices within a single empirical framework, applied to the stability of bank credit. The results provide new evidence for prudential regulation and demonstrate that the climate transition poses an environmental challenge and a crucial lever for rethinking risk management in the European financial system.
{"title":"Climate-related risks and loan quality in Europe: Do institutional quality, environmental commitment, and bank size matter?","authors":"Elisa Di Febo , Eliana Angelini , Tu Le","doi":"10.1016/j.ribaf.2025.103206","DOIUrl":"10.1016/j.ribaf.2025.103206","url":null,"abstract":"<div><div>The paper examines how climate-related risks impact credit quality in the European banking sector, utilizing fixed-effects models on a sample of 127 banks across 27 European countries from 2005 to 2023. More specifically, this research assesses the impacts of transition risk and physical risk, taking into account structural, institutional, and sustainability variables. The results indicate that transition risk has a significant impact on degrading credit quality, whereas physical risk has a minimal impact on credit risk. However, this effect is attenuated by the presence of institutional quality and the development of ESG strategies, particularly the publication of sustainability reports. Additionally, our results indicate that institutional quality mitigates the negative impact of climate-related risk on loan quality, suggesting that institutional quality plays a significant role in enhancing financial resilience. Furthermore, robustness tests with alternative proxies and samples disaggregated by bank size reveal a greater vulnerability of small banks and a more effective response in ESG-oriented banks. The work’s innovative contribution lies in integrating environmental risks, institutional indicators, and ESG practices within a single empirical framework, applied to the stability of bank credit. The results provide new evidence for prudential regulation and demonstrate that the climate transition poses an environmental challenge and a crucial lever for rethinking risk management in the European financial system.</div></div><div><h3>EFM Code</h3><div>510</div></div><div><h3>JEL Code</h3><div>G210, Q540</div></div>","PeriodicalId":51430,"journal":{"name":"Research in International Business and Finance","volume":"81 ","pages":"Article 103206"},"PeriodicalIF":6.9,"publicationDate":"2025-11-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145520495","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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