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Abstract: Measuring how balanced the trading activity is in the cross-section via the skewness of individual stock turnover, we show that the relationship between beta and expected return is linear and significantly positive when trading is more balanced. This effect is robust to a variety of test portfolios as well as different sub-samples. It is not driven by the positive beta-return relationship on macroeconomic announcement days, leading earnings announcement days, or Fridays. We explore and discuss two plausible explanations that are related to risk-based and behavioural models.

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Abstract: This paper studies how the performance of corporate bond mutual funds varies with the liquidity of their bond holdings. I show that funds holding relatively illiquid corporate bonds on average underperform funds that hold more liquid portfolios on a risk-adjusted basis over the period 2010-2022. The relation between portfolio liquidity and fund performance is strongest within the set of high-yield funds, consistent with these funds' large exposure to redemption risk. Moreover, the underperformance of less liquid funds is driven by periods in which market liquidity drops, i.e., when flow-induced asset sales are most costly. My findings suggest a reduced ability of mutual funds to harvest illiquidity premia in corporate bonds, which might be caused by a structural liquidity mismatch arising from open-ended structures.

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Abstract: We propose a simple approach to synthesize presumably information-driven insider trading signals for the cross-section of stocks. We find that the resulting composite strategy can predict returns, predominantly in equal-weighted portfolios, in our global sample. The results indicate that the benefits of our composite strategy reflect a short-term informational advantage of insiders. Finally, cross-country analysis reveals that varying insider trading restrictions between countries have limited explanatory power for the benefits of the composite strategy.

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Abstract: While passively managed financial instruments do not require intervention from their investors, some investors actively manage them anyway. To understand why and how, we use a novel micro-level dataset of 6,247 robo-advisor clients who made 9,250 changes to their investment portfolios between 2015 and 2022. Micro-level demographic and financial variables as well as macro-level market returns and volatility are factors in the decision to change one’s passively managed portfolio. In addition, how these changes affected investors’ returns are studied. A counterfactual test showed that on average accounts which adjusted their portfolio allocation outperformed identical hypothetical accounts in which no changes were made, but this result was not replicated in the field using a more constrained dataset including only realized gains (i.e., closed accounts).

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Abstract: This paper investigates the role of financial elites in one of the worst colonial regimes in history. An analysis of director interlocks between firms operating in the Congo Free State (CFS) and Belgian firms listed on the Brussels Stock Exchange (BSE) reveals that the Belgian financial establishment was a crucial contributor to CFS entrepreneurship from the start, contradicting the idea that business in the CFS was driven by a few rogue financiers.While the number of CFS firms was small and their economic importance was limited, 40% of listed Belgian firms, accounting for more than half of the BSE stock market capitalization, had at least one CFS firm director on their board by 1900. Most of these directors also held a directorship at a Belgian bank. Almost all the large banks, including the Société Générale de Belgique, had two or more CFS firm directors on their board.

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Abstract: Social ties between directors and the CEO weaken the board’s monitoring effectiveness and may have detrimental consequences. In this study, we hypothesize that these ties negatively affect corporate disclosures since they create incentives for the CEO to increase the firm’s opacity, behind which private benefits might be extracted. We focus on education ties among the French business elites and exploit the fact that graduates of a tiny group of prestigious colleges form small but highly influential networks. Our results show that information flow decreases with CEO-board social ties. This effect is stronger when firms have a powerful CEO and fewer growth opportunities. However, financial discipline, resulting from the use of debt and greater analyst coverage, can mitigate these negative effects. Overall, our study highlights the impact of CEO-board social ties on corporate transparency and implies that investors and regulators should require firms to fully explain their reasons for appointing CEO-connected directors.

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Abstract: This study re-examines the relationship between women on corporate boards (WOCB) and environ-mental performance (EP) for a sample of firms from the Fortune 1000 2020 list over the period 2004-2020 (17 years). To account for the nonlinearity between WOCB and EP and the endogeneity issues associated to this relationship, we consider semiparametric specifica-tions, and specifically generalized additive models (GAM; Wood, 2006). Specifically, we use Marra and Radice’s (2011) two-stage generalized additive model (2SGAM). We find that the effects of WOCB on EP depend significantly on their numerical representation, thereby sug-gesting a nonlinear relationship be-tween WOCB and EP. This is consistent with Kanter’s (1977) regarding token and critical mass theories. Our findings challenge the existing theoret-ical empirical studies on this matter.

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Abstract: We document that firms engage in opportunistic short-term ROA enhancing when they conduct business in an environment with a low probability of detection of financial misconduct. To proxy for a lax monitoring environment, we compute the percentage of local Securities and Exchange Commission (SEC) employees earning the exogenously imposed maximum salary, as these employees lack the monetary incentives to increase their monitoring efforts. We find that the percentage of local SEC employees at the salary cap correlates negatively with the detection rate of financial misconduct, and positively with the attrition rate of SEC employees. We also show that in environments with apparent lax SEC monitoring, firms engage in short-term ROA enhancements, principally by increasing their discretionary accruals, and the magnitude of the effect increases when peers of the focal firms also engage in financial misconduct.

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Abstract: This research paper investigates the risks associated with Environmental, Social, and Governance (ESG) funds, aiming to clarify common misconceptions. We conduct an empirical study comparing the Value at Risk (VaR) and Downside-to-Upside Volatility (DUVOL) for ESG and non-ESG funds (the control sample). First, we establish that although VaR and DUVOL are both interpreted as downside risk measures, they exhibit different behaviors because one is an absolute measure and the other captures asymmetric volatility behavior, thus the results differ. Our results show that ESG funds have a higher VaR and ESG scores. However, no statistically significant relationship is found between ESG funds (or ESG risk scores) and DUVOL. This finding is consistent across a range of methods, including adding category and time effects, using instrumental variables, and matching methods. Finally, we investigate the predictability of downside risk using random forests methods. The results suggest that ESG risk scores are relatively more important in predicting downside risk than being an ESG fund. The overall findings are supportive of a link between ESG risk scores and downside risk, challenging the conventional belief that ESG funds inherently carry higher risks. These insights aim to enrich our understanding of the role of ESG investing in modern portfolio management strategies.

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Abstract: Relying on the Refinitiv ESG database, we calculate ESG transparency(ESGT) scores at different levels. Based on a US sample from 2010 to 2019, we find that ESGT increases liquidity by more than 4.2% on average. This finding is robust to various model specifications, the inclusion of firm, industry, state and year fixed-effects, and alternative measures of liquidity. We also mitigate the endogeneity concerns by using change regressions, 2SLS estimation, and an event study with various treatment effect estimators. Further analyses show that the positive effect of ESGT on stock liquidity is more pronounced for firms experiencing lower ESG ratings, higher shareholder awareness, and enhanced financial disclosure quality. This is consistent with the assumption that greater ESG disclosure may reduce information asymmetry and improve stock market liquidity.

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Abstract: The aim of this article is to test the relevance of the carbon indicator based on its impact on the cost of equity capital. We use the Fama and French 3-factor model extended to the industry effect, to which we add the carbon factor, adjusted using different approaches. Overall, our results tend to demonstrate the significant influence of emission levels on the cost of equity capital. This effect varies according to the approaches used, helping to explain the diversity of research findings on the subject. In the absence of consensus and universal regulation on the definition of a carbon indicator, researchers and professionals are facing difficulties in measuring its real effect.

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Abstract: We propose generative artificial intelligence to measure systemic risk in the global markets of sovereign debt and foreign exchange. We compare three previously unexplored models in economics literature and integrate them with traditional factor models from econometrics. These models are Time Variational Autoencoders, Time Generative Adversarial Networks, and Transformer-based Time-series Generative Adversarial Networks. We provide empirical evidence that favors the Variational Autoencoder. Our findings indicate that the credit default swaps and foreign exchange markets are susceptible to systemic risk, with an observed historically high probability of distress by the end of 2022 according to both the Joint Probability of Distress and the Expected Proportion of Markets in Distress. Our results provide crucial insights for governments in both developed and developing countries, as our models generate realistic counterfactual scenarios that are yet to occur in global markets. These worst-case scenarios are likely to occur if systemic risk materializes, emphasizing the importance of considering them when implementing macroprudential policies aimed at preserving financial stability.

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Abstract: This article examines the impact of competition on labor investment efficiency in an international context. Using panel data on antitrust laws across 33 countries, we find that competition leads to improved efficiency in hiring decisions through reductions in both over- and under-investment in labor. This competitive effect appears to be driven by the fundamental rules governing competition rather than by regulations focused on law enforcement. We further find that this relationship strengthens in the presence of higher labor adjustment costs and more effective governance. Specifically, when employee protection laws are more potent, collectivism is more prevalent, and amidst elevated political stability, intensified government effectiveness, and heightened rule of law. We interpret our results as evidence that competition prompts active managers to seek improved labor investment efficiency, particularly when faced with efficiency-reducing labor adjustment costs or stricter governance. These results are the opposite when we focus solely on North America.

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Abstract: In November 2015, the IMF included the Chinese Renminbi in its SDR basket, which helps internationalize this currency. This study investigates the Renminbi-denominated bond issuances around this event. This inclusion event has a certification effect that creates a boom in issuance of RMB-denominated offshore bonds (Dim-Sum bonds). The increase in issuance volume of Dim-Sum bonds is driven primarily by firms from countries that are less friendly with China diplomatically, which suggests that the certification event is more effective on these issuers. The inclusion of Renminbi in the IMF SDR also reduces the valuation disparity between onshore and offshore Renminbi, which further promotes the proliferation of Renminbi bonds globally.

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Abstract: We examine the impact of host-country institutions on subsidiary location decisions made by European multinational companies (MNCs). Our analyses occur at the firm-level. We find that better protection of property rights, higher regulatory quality, and more developed financial markets attract more investment from MNCs. In line with our hypotheses, we document a stronger impact of institutions on foreign investment when (i) entry and trade barriers of the host country are higher, (ii) geographic distance between home and host country is larger, and (iii) MNCs are more financially constrained. This study expands our understanding of how institutions affect foreign expansion and which factors moderate their effects.

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Abstract: Macroprudential policies are frequently put into action to control and alleviate systemic risks, encompassing those with the potential to impact bank revenue. Banks’ non-interest income is among the many factors blamed for the risk-taking that led to the 2007–2008 financial crisis. We test whether and how macroprudential policies such as tightening and loosening influence non-interest income for listed and unlisted banks across 45 countries between 1998 and 2019. We find strong evidence that the adoption of macroprudential policies in the form of loosening are associated with a greater change in non-interest income, particularly during crisis period, indicating that loosening policies might provide banks relief, enabling them to generate more non-interest income due to increased flexibility in lending or investment activities. Further the supply and demand targeted macro prudential policies exhibit mixed results. Our results are robust to several specifications.

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Abstract: We examine whether overconfident bank CEOs mitigate or amplify risk amid increasing Economic Policy Uncertainty (EPU). Our findings indicate the latter—a risk-aggressive behavioral response to the rise in credit demand during EPU. Cross-sectional analyses reveal that overconfident top bank managers contribute to high loan impairments during EPU through excessive credit extension and under-provision of loan reserves. Therefore, we identify overconfident CEOs as a transmission channel that propagates a vicious cycle of risky credit extension, which, interestingly, enhances bank performance. In light of our findings, boards, and regulators, while acknowledging the value of overconfident CEOs during EPU, should be mindful of the systemic implications of their policies.

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Abstract: We study the vulnerability of different styles of the U.S. domestic equity mutual funds over the period 2003 - 2018. We first perform a macroprudential stress-test by following the framework developed by Fricke and Fricke [2021] in order to assess the resilience of these styles when faced to shocks. Unlike previous studies in this literature, we consider two market conditions and granular asset price impacts, which makes our empirical framework closer to real market situations. We then conduct a contagion analysis by using the Diebold and Yilmaz [2009, 2012, 2014]’s spillover approach to identify the styles which are more vulnerable than others and those which are more likely to spread distress to other funds. Our results show that in turbulent times, fund styles’ vulnerability is much higher than tranquil times and can not be neglected. Large Cap are likely to be the most vulnerable, especially during the subprime crisis. They could exert a strong impact on the system. In contrast, the other styles appear to absorb more information from the system than transmit distress to the system.

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Abstract: This article investigates the impact of Economic Policy Uncertainty (EPU), Geopolitical Risk (GPR), and our custom French Google Trends Uncertainty (FGTU) indices on ensemble-based bankruptcy prediction models. We assess their potential to enhance the predictive accuracy of XGBoost, LightGBM, NGBoost, and Random Forest models within the Construction and Manufacturing sectors in France. Our findings demonstrate that the inclusion of these factors significantly enhances the models' predictive capabilities. This study provides compelling evidence for the informative nature of these supplementary factors in bankruptcy prediction. Furthermore, the FGTU index, a novel addition to the analysis, shows promise in further enhancing the precision of these models. These findings hold relevance for businesses, financial institutions, and policymakers seeking to improve their bankruptcy risk assessment strategies.

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Abstract: This study delves into the interplay between corporate political activity, gender, and borrower discouragement in credit markets, focusing on women-led firms worldwide. Employing data from 22,822 firms across various countries, it challenges the conventional belief that political connections invariably facilitate credit access. Surprisingly, women-led firms with political ties exhibit increased discouragement, primarily due to heightened awareness of gender biases and structural barriers in the credit market—a consequence of the "know-how" aspect of political connections. The study also uncovers the conditional nature of these connections; in environments with strong legal protections and lower gender inequality, the discouragement effect diminishes, whereas it intensifies in less supportive socio-legal contexts.

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Abstract: Using detailed employee-employer administrative data, we analyze the impact of the gender pay gap on the performance of firms. When the firm is not unionized, the gender pay gap reduces profitability. In contrast, when unions are present, the gender gap has no effect on profitability in male-dominated firms and increases profitability in female-dominated firms. Our evidence suggests that when there is no union, giving priority to cohesion and pay equality is value-enhancing. In highly feminized firms, unions provide employees with the option of nonpecuniary benefits, with females opting for better work-life balance and males opting for higher salaries. Our findings indicate that in these firms, the gender pay gap may reflect the divergent interests of female and male employees and can positively affect firm value.

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Abstract: This study investigates whether employee satisfaction varies between white-collar and blue-collar employees and how this affects financial and non-financial organizational performance In doing so, the study analyzes more than two million Glassdoor employee reviews from 2010 to 2022 for US-listed companies. The findings have several main implications. First, white-collar employees demonstrate a higher level of satisfaction compared to their blue-collar counterparts. Second, both white-collar and blue-collar employees respond similarly to factors motivating and satisfying them. The consistency is derived from the fact that new technologies have transformed work in such a manner that conventional differences between white- and blue-collar workers are no longer relevant. Management strategies such as empowerment and self-directed teams have provided decision-making authority to even the most basic physical workers, while information technology has made knowledge work an integral part of almost every job. Third, employee satisfaction has a positive and statistically significant relationship with financial performance, as assessed by Tobin's Q and ROA. These findings support human capital theories that highlight the importance of employee well-being in achieving corporate success. In particular, white-collar employees have a greater relationship between employee happiness and financial success than blue-collar workers. Finally, both groups demonstrate a significant and positive relationship with non-financial performance. Employees from diverse positions within the company, regardless of the color of the collar, play integral roles in shaping and enhancing non-financial performance.

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Abstract: This paper evaluates the effects of unionization on profitability, labor productivity and wages, using panel data at the firm-level. Using firm-level fixed-effects models, I show that profitability decreases when firms get unionized. When firms are already unionized, profitability also decreases when a second labor union becomes certified, suggesting that labor unions diversity allows employees to gain even more power, for the same union coverage. The union wage premium increases as the number of certified labor unions rises while the labor productivity of the firm does not increase enough to compensate for this increasing wage premium, leading to lower profitability. I also give evidence that the negative (positive) effect of unionization on profitability (wages) happens rapidly after unionization. Labor unions’ seniority within the firm has no effect on profitability, labor productivity, or wages. Moreover, these estimates from firm-level fixed-effects models are only approximatively one third of the pooled OLS estimates. I give evidence that these quantitatively large differences come from strong bias of pooled OLS estimates.

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Abstract: This study examines the impact of climate risk disclosures on merger and acquisition (M&A) activities in US public firms from 2001 to 2020. Leveraging the 2010 Securities and Exchange Commission (SEC) interpretive guidance as an exogenous shock, we analyze 10-K filings to understand how enhanced climate risk disclosure influences corporate takeovers. By adopting a difference-in-difference (DID) framework, we find a significant reduction in the takeover likelihood for firms beginning climate risk disclosures after the SEC 2010 interpretive guidance. The study also observes a shift in acquisition payment structures for deals acquiring these firms, with acquirers favoring stock components over cash, and identifies a decrease in synergy gains and extended deal completion times. Our analysis also reveals that transparent information environments, low environmental negative spillover potential and strong operational characteristics in policy-driven disclosing firms further decrease their attractiveness in the corporate control market. Overall, our research underscores the critical role of climate risk disclosure in shaping acquirers' decision-making processes in M&A transactions.

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Abstract: This paper investigates the effects of physical climate risk on firm valuation, introducing the distinction between acute and chronic physical risks. Since acute risks are more salient and already experienced compared to chronic risks, we expect them to be more priced by investors. Drawing on an international dataset of 1,293 firms during the 2009-2020 period, we empirically find that acute physical risk has a negative and significant direct association with firm value, while chronic physical risk is not significant on the 2050 horizon. When considering the transmission channels that may explain the influence of physical risks on firm value, both acute and chronic risk have similar effects on ROA, leverage, R&D, and capex. However, compared to chronic risk, the acute risk is shown to indirectly significantly impact more firm value by reducing sales growth and dividends. Finally, we find that acute and overall physical risks are only linked in the most recent period of the sample, showing that investor attention on these issues has evolved over time and that chronic risks become significantly linked when considering long-term horizons. Overall, we document that physical risk should not be taken only as a global issue, since acute and chronic risks are considered and priced differently by investors.

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Abstract: We investigate the impact of climate change on the pricing of corporate liabilities and on the capital structure of firms. In our model, the transmission channel through which global warming has an impact is the stranding of assets upon liquidation. Our model can generate a number of empirical predictions consistent with recent evidence. We find the firm’s exposure to global warming has a profound effect on decision making and traditional financing choices. We examine how it affects debt capacity and optimal capital structure and we are the first to document a possible disciplinary effect. Typically, the higher the exposure, the lower the debt financing and the higher the equity financing. Interestingly, such lower leverage does not necessarily lead to lower credit spreads. We also examine a range of credit risk management metrics, including the specific compensation investors require for climate credit risk, to disentangle the direct and indirect effects of global warming on credit risk and illustrate how these effects conflict with each other, which ones dominate and when.

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Abstract: We show how investors with pro-environmental preferences and who penalize revelations of past environmental controversies impact corporate greenwashing practices. Through a dynamic equilibrium model with information asymmetry, we characterize firms’ optimal environmental communication, emissions reduction, and greenwashing policies, and we explain the forces driving them. Notably, under a condition that we explicitly characterize, companies greenwash to inflate their environmental score above their fundamental environmental value, with an effort and impact increasing with investors’ pro-environmental preferences. However, investment decisions that penalize greenwashing, policies increasing transparency, and environment-related technological innovation contribute to mitigating corporate greenwashing. We provide empirical support for our results.

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Abstract: A large body of research documents an increased acquisition activity among credit rated firms. We examine whether firms seek an initial credit rating to conduct acquisitions, and whether this acquisition activity is driven by empire building or value creation motives. First, we find that acquisitions are a credible motive for seeking a credit rating, initially rated firms are associated with 8.9pp greater acquisition likelihood and these transactions are more likely to be settled by cash. Second, to recoup the costs of becoming rated, firms conduct large-scale high-quality acquisitions associated with 0.97pp higher announcement returns, where the higher CARs are concentrated among large deals made by firms obtaining a speculative grade initial rating. Third, following the initial rating year, acquisition activity dampens to pre-rating levels. In sum our findings lend support to the notion that previously financial constrained firms enter the bond markets to conduct large value enhancing acquisitions.

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Abstract: We find incumbent firms react strategically to reductions in U.S. import tariffs by favoring alliances over acquisitions, a trend more pronounced for firms with less financial or operational flexibility. This shift in external growth strategies is stronger for firms less protected by barriers to entry or in a weaker competitive position. Further, incumbents tend to partner with firms operating in the same industry, high-tech, B2C, or differentiated industries. In the long term, firms opting for alliances exhibit higher R&D intensity and more patents granted. Our study sheds light on how firms redefine their boundaries in response to increased foreign competition.

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Abstract: Motivated by the seminal findings of Baker et al. (2012) and Ma et al. (2019), we examine the effects of stocks’ 52-week highs on mergers and acquisitions (M&A) in a global sample across 34 countries. First, we confirm that the targets’ past stock price peaks serve as a reference point in merger negotiations, impacting both offer premia and the likelihood of deal acceptance. Second, we confirm that acquirers trading far below their 52-week high experience more positive market reactions. However, economic magnitude and statistical significance substantially differ across regions. In sum, the 52-week high plays a smaller role for M&A deals internationally compared to in the United States.

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Abstract: This study investigates the effect of capital on asset and liability-liquidity risk measures and the impact of periods of stability and crises. Using an unbalanced panel of 18,670 commercial banks in the USA from 1993Q1-2021Q2, we find some variation across our measures of liquidity risk. For instance, on the asset side of the balance sheet, capital tends to worsen banks’ liquidity position in terms of cash and near cash assets, at all times. By contrast, on the liability-side of the balance sheet, capital enhances liquidity positions (demand deposit and federal funds purchased) during normal and market crisis periods. We document mixed evidence in relation to unused commitments and derivatives over crisis periods. During the Covid-19 period, we observe that bank capital enhances cash, federal funds purchased and demand deposits but worsens federal funds sold. Although an increase in money market deposits and a decrease in derivatives reflects the impact of the liquidity coverage ratio, we find no appreciable evidence of such an effect for an increase (decrease) in demand deposits (cash and near cash assets). Our results are affirmed by several robustness checks.

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Abstract: This study examines the interplay between banks’ political connection and lending to brown borrowers, i.e. borrowers with poor environmental performance. A bank’s political connection is captured based on whether a bank is headquartered in the state with a member from the U.S. Senate Banking, Housing, and Urban Affairs Committee. Using data from DealScan from 1995-2020, we show that banks headquartered in states with a Banking Committee senator provide cheaper loans to brown borrowers than banks without a Banking Committee senator in their headquarters state. This finding suggests that politically connected banks can play a significant role in delaying the green transition as they extend loans to brown firms at a low rate. In addition, we show that the effect of a bank’s political connection on the cost of lending to brown borrowers is more pronounced when the senator is senior or when borrowers, lenders, and banking committee senators are in the same state. Overall, we provide novel evidence on how the political connections of banks influence their lending to brown firms.

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Abstract: Research widely documents the interplay between lending standards, house prices, and risk, both at the micro (defaults) and macro (financial stability) levels. Nonetheless, in France, origination was until recently based on informal debt-service-to-income (DSTI) norms, allowing for the widespread origination of risky housing loans without down payment. Analyzing two millions loans originated from 2000 to 2016, we show that lenders specifically adjust the DSTI of no down payment loans in order to contain their risk, although at a higher level than loans with a down payment. However, this weakens the capacity of income-based lending standards to identify risk and cannot prevent the building-up of pockets of risk over the cycle. We contribute to the literature showing the limitations of lending standards, here DSTI, as risk indicators, suggesting that the design of macroprudential regulations may require more than a single measure.

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Abstract: I study a sequential entry game in a “winner-take-all” market where success depends on relative ability and some (but not all) entrepreneurs overestimate their own ability. For a potential early entrant, overestimating one’s ability (i.e., individual optimism) can have both negative and positive consequences: it fosters her incentive to enter, which can lead to excess entry but can also limit under-entry (in markets where realistic entrepreneurs stay out); it can also help deter rivals. I show that the net gain of individual optimism (i) depends on market potential (the market’s capacity to provide positive payoffs for one or two firms) and group-level optimism (the fraction of optimists vs. realists among entrepreneurs), (ii) is in general positive in low-potential markets where optimism helps deterring stronger rivals, and (iii) decreases with group-level optimism in high-potential markets and is maximized at moderate levels of group-level optimism in low-potential markets. Finally, I show that overoptimistic beliefs are often persistent, particularly in low-potential markets, and optimism (in comparison with realism) can facilitate learning.

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Abstract: This paper investigates the relationship between entrepreneur overconfidence and French SMEs’ performance. Using a unique dataset linking objective firm output such as financial performance to the individual characteristics and biases of their owners, we conclude that overestimation is detrimental to firm performance. The opposite effect appears when examining overplacement and overprecision, which we find to have a positive effect on firm performance. Consequently, our findings are important from an entrepreneurial education standpoint as they show that the crux of the “trouble with overconfidence” (Moore and Healy, 2008) lies in overestimation, and that finding strategies to mitigate this effect might be a key question for entrepreneurs, particularly in SMEs.

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Abstract: This paper investigates the behavior of stock prices around the ex-dividend date in Europe over the period 2018-2022. In the early months of the COVID-19 pandemic in 2020, an important fraction of firms cut, suspended or reduced their dividend payments, leading to a shortage. We find that the magnitude of abnormal returns is significantly larger during this period compared to regular times as dividend-seeking investors searched for the remaining payers. Our results are consistent with a price pressure explanation for the abnormal returns observed around the ex-date.

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Abstract: I show that public funding significantly improves the financing situation of young firms by exploiting variation in access to public funding under the largest German regional policy scheme. My results based on a shock-based difference-in-differences research design indicate that the probability of experiencing financial constraints decreases by about 10% to 19% for treatment firms relative to control firms, depending on whether the funding instrument is a subsidized loan, a public loan guarantee, or a grant. The effect is heterogeneous not only across instruments but also across capital providers. In addition, I find that public funding is associated with higher employment and revenue growth, as well as higher research and development expenditures and, for recipient firms of grants, higher investment.

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Abstract: Our paper presents a theoretical framework of double-sided asymmetric information between an entrepreneur undertaking an equity crowdfunding campaign and crowdinvestors. First, the entrepreneur is imperfectly informed about the potential supply of funds from the crowd. Second, the crowd is heterogeneously informed about the quality of the project (sophisticated and ordinary investors can co-invest in the project). We show that (i) when the attractiveness (i.e., the ex-ante probability that the potential supply of funds is large) of the project is sufficiently low or high, good projects can signal themselves to ordinary investors by appropriately combining the level of the campaign's target and the financial compensation accruing to investors; (ii) the cost incurred by good projects (in comparison to first best) is inverted-U shaped with respect to the attractiveness of the project; and (iii) on the one hand, the participation of sophisticated investors is necessary for good projects to separate from bad projects but on the other hand, by diluting ordinary investors' equity stake in good projects in comparison to bad projects, sophisticated investors also generate additional underpricing of good projects, the level of which is increasing with their relative share among the crowd.

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Abstract: Equity crowdfunding (CF) emerged as a financing source for entrepreneurs and competes with early-stage finance professionals, e.g., venture capital (VC) investors (VCs). Entrepreneurs need to decide from who to raise capital and we theorize about this fi- nancing choice. We model two financing stages where both types of investors compete. Either one has competitive advantages with respect to transaction cost, support quality, the efficiency of transaction monitoring, venture valuation, and taking the abandonment decision. Our model predicts the entrepreneur’s preferred source of funding contingent on these parameters, and the expected venture value. It provides several empirical pre- dictions, with a fierce competition in the entrepreneurial finance market being one of them: VCs will be forced to build up and to rely on strong expertise, to specialize, or to move to later financing stages.

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Abstract: This paper focuses on the impact of the initial characteristics of a crowdfunding campaign, in particular the definition of the funding goal and the previous experience of the project sponsor, on the probability of a successful campaign on the Ulule reward-crowdfunding platform. We hypothesize that these two factors have a positive influence on reaching and even exceeding the initial goal. Our results confirm these hypotheses and suggest that the project owner's previous successful experience has a greater impact than the definition of a stretch goal, particularly in terms of reducing information asymmetry. This study contributes to the ongoing debate on stretch goals through a quantitative approach based on a sample of 33,041 projects submitted to the platform between 2012 and 2018.

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Abstract: We propose a comprehensive structural analysis that generalizes and categorizes numerous existing models. Our approach is characterized by minimal assumptions, offering a flexible and fully identified model that enables economic interpretations and empirical applications. Building upon this theoretical foundation, we introduce a novel measure of price discovery: the Covariance Information Share (CovIS). Quite intuitively, the CovIS is the covariance between the shocks on observed market prices and the permanent shocks that impact the common efficient price. Our measure accommodates the investigation of low frequency data and correlated residuals. It also proves to be well-suited for both static and dynamic analyses of the price discovery process. We compare the CovIS measure with well-known information shares and connect dots between works that have hardly been related to each others up to now. This enables us to resolve some of the paradoxes raised by the conflicting findings sometimes encountered in empirical studies. Moreover, failures with known methods are reanalyzed as informative features. Finally, we apply our measure to both simulated and real data and revisit previous empirical studies.

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Abstract: In this paper, we examine the savings goals of both partners in 9,523 couples of retail bank clients using a rich database extracted from a real-life banking environment. Our findings show that while financial goals within couples are largely shared within couples, some goals are not. We build a goal dissimilarity index to quantify the degree to which spouses differ in their selected savings goals. The results show that goal dissimilarity in a couple is positively associated with household wealth allocation. Interestingly, spouses with partially dissimilar goals are significantly more likely to accumulate wealth, particularly in risky assets, and that this wealth is predominantly contributed by the husband. We show that these results are potentially driven by assimilation between spouses. Our findings suggest that having shared savings goals is necessary as to positively influence overall household wealth. These results are consistent across robustness checks.

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Abstract: How do contextual factors influence households to comply with recommended protective measures against extreme climate risks? This study examines the willingness of homeowners in flood-prone areas to undertake mandatory flood prevention measures. We extend the traditional framework of prevention motivation to include new external determinants, encompassing perceived stringency of regulation enforcement and social influence. Our results, grounded in survey data, show that perceived deterrence emerges as a significant driver of compliance intention. Social influence also has a strong impact on individual compliance decisions, which partially mediate the deterrence effect. To bolster household-level protective measures, we advocate for a two-pronged approach: strengthening the dependability of inspection and promoting prevention measures effectiveness. These strategies should have the potential to rebalance the existing incentive architecture and align individual interests with public risk mitigation objectives.

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Abstract: We examine how entrepreneur-expressed humility affects early-stage investors’ willingness to fund a new venture. While leader humility has been shown to yield positive outcomes inside organizations, little is known about its effect on external resource providers. Drawing upon social exchange theory, we propose and test a dual path moderated mediation model that posits that entrepreneur humility positively affects investors’ willingness to fund. The findings of a randomized field experiment show that early-stage investors sense stronger interpersonal affect and trust and perceive higher team-building qualities for humble entrepreneurs. They are, in turn, more willing to fund entrepreneurs who display humility.

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Abstract: This study examines the relationship between family firms and carbon emissions using a large cross-country dataset of 6,610 non-financial companies over the period 2010-2019. We document that family firms emit lower levels of carbon, both direct and indirect, compared to non-family firms. This points to a stronger commitment to environmental protection among family firms. Differences in governance structure, familial values, and higher R&D expenditures partly explain our results. Paradoxically, we find that family firms and family CEOs commit less publicly to a reduction in their carbon emissions and have lower ESG scores, although emitting less carbon. This suggests a lower participation in the public display of such an outcome and a lower tendency to greenwashing.

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Abstract: We study the extent to which nascent entrepreneurs are overoptimistic about their capacity to obtain certain sources of funding when starting a new entrepreneurial venture. We find that overoptimism has a particularly significant, negative impact on institutional sources, such as banks and venture capital, suggesting that these entities are better at identifying overoptimistic entrepreneurs. In contrast, we find no effect on informal sources such as friends & family. We obtain similar insights into the amount eventually raised, suggesting that the reduced access to funding sources also has an impact on their fundraising capacity of entrepreneurs as compared to their initial funding objective. These different results are consistent with the assumption that entrepreneurs are overoptimistic from the beginning.

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Abstract: I show that investors implementing a value strategy as in Fama and French (1993) inevitably exhibit a disposition effect. Value investors must hold on to "loser" stocks and sell "winner" stocks. Consequently, I find a strong disposition effect for value funds but I find no disposition effect for growth funds. Focusing on a subsample of managers who manage value and growth funds at the same time, I find that these managers show a disposition effect for their value funds but no disposition effect for their growth funds. I make similar findings when focusing on a sample of passive index funds. My findings imply that professional investors might be prone to the disposition effect because they follow specific investment styles.

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Abstract: Conventional investment wisdom advocates that investors should be well diversified, i.e., invest in as many assets as possible. We show instead that due to estimation errors in the inputs of portfolio strategies, the optimal level of diversification strikes a trade-off between accessing additional investment opportunities and limiting estimation risk, and thus is finite and can be relatively small. We also propose a set of procedures to select which assets are part of the restricted investment universe. Empirically, we show that limiting diversification with our method substantially outperforms unrestricted portfolios and makes portfolio theory valuable even in high-dimensional settings.

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Abstract: When entering into a tontine, the value of the tontine for the participant highly depends on its composition. However, participants subscribe to the scheme without any knowledge of either the composition of the tontine, or, in some cases, its exact payout scheme. Herein, we quantify the value of this information using a theoretical approach that allows us to obtain bounds on the tontine value subject to uncertainty in certain characteristics. We then propose a smart contract that offers full disclosure of information in a tontine. We discuss the practical implementation of such a tontine and present some new risks that could arise.

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Abstract: The transparency around the inclination towards sustainability of institutional investors is becoming a double edge sword. This study provides empirical evidence that the non-financial corporations which disclose the identity of the investors who subscribed their green and ESG bond issues are able, on average, to attract more shareholders than those with opaque bond holdings. It also shows that knowing the identity of a short list of large investors under the pressure of political sanctions have an impact on the decisions to trade of small-sized institutional and retail investors. I use the announcement of the governor of Florida from July 27, 2022 about its intention to ban BlackRock, as well as the subsequent anti-ESG events to identify which asset managers and financial institutions were blocked because of their environmental engagements. However, with a coverage spanning from September 2015 till the end of 2022, the empirical results reveal the shareholder base reshape of green issuers only in the early stage of the anti-ESG movement.

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Abstract: This study explores the impact of CEO compensation structure on corporate sustainability practices. Prior research shows that incorporating CSR metrics into compensation packages does not contribute to material improvements in CSR outcomes, a finding that we confirm. Our study delves deeper into which compensation attributes effectively enhance substantial sustainability strategies. By distinguishing between cash and equity components of CEO compensation, we examine their influence on CSR intentions and CSR outcomes. We argue that given the presence of information asymmetry and investor opacity, the market tends to appreciate symbolic corporate sustainability gestures, whereas significant sustainability investments may not be promptly recognized as value-enhancing. This dynamic may discourage CEOs from allocating resources to enhance the firm's substantial environmental performance. Employing an empirical approach, we discover that equity compensation is indeed negatively related to environmental outcomes. Furthermore, at a detailed level, it exhibits positive associations with environmental intentions, social intentions, social outcomes, and an ESG score, typically associated with sustainability initiatives characterized by short-term horizons and moderate costs. In contrast, cash incentives show a positive relationship with environmental outcomes, particularly concerning long-term, resource-intensive sustainability investments. These findings challenge the conventional assumption that equity compensation invariably promotes CEOs' long-term perspectives, as it appears not to hold for sustainability investments.

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Abstract: This paper examines how the leverage buyout deal and the subsequent increase in the financial distress risk (FDR) for firms under LBO affect the firm ESG commitment. A panel data analysis is applied on 182 buyouts and 500 comparable firms from USA between 2006-2022. The first result indicates that firms that are selected for buyout have a significantly higher social engagement and lower governance engagement prior to the LBO deal compared to the post-deal period. In addition, we observe a significant slowdown in the increase of the ESG commitment for buyouts compared to their peers in the post-deal period. The second result from a multivariate analysis indicates that neither the FDR nor the LBO deal (considered in isolation) affect the firm's ESG commitment. However, depending on its size and the increase of its FDR, the firm under LBO decreases its ESG commitment, i.e the bigger a firm under LBO is, the more likely the firm tends to reduce it's ESG commitment when facing with a higher financial distress risk. This result is specifically linked to firms under LBO, as when we run the same regression on comparable firms, we find no evidence of relation between the increase in the financial distress risk and ESG commitment of comparable firms depending on their size. Conversely, an increase in the risk of financial distress does not prevent comparable large firms from increasing their social commitment. Consistent with the salience theory, this study provides new empirical evidence of the wealth transfer hypothesis in buyouts.

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Abstract: We study the determinants of the loss given default (LGD) of consumer credit. Exploiting a dataset including more than 6 million of Italian consumer loans from 2007 to 2019, we find that macroeconomic and social variables significantly enhance forecasting performance both at the individual and portfolio levels, by up to 10 percentage points in terms of R2. This result is robust across forecasting exercises and model specifications. In particular, non-linear forecast combination schemes relying on neural networks are among the best performers in terms of mean absolute error, RMSE, R2, and model confidence set in every considered exercise. The relationship between the expected LGD and the macro predictors unveiled by accumulated local effects plots confirms the intuition that lower real activity, increasing cost-of-debt to GDP ratio, and greater economic uncertainty are associated with a greater LGD for consumer credit.

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Abstract: In this paper, we investigate the relationship between equity returns and illiquidity from the perspective of investor sentiment used as a proxy of noise trading risk. We rely on a novel internet-generated sentiment indicator introduced by Renault (2017) filtered from self-reported traders’ messages posted on Internet, which are collected from StockTwit platform. We find that there is a positive relationship between Amihud (2002) illiquidity measure and average daily returns of the Nasdaq Index as well as those of a selection of individual stocks belonging to the index. This positive correlation is nonlinear since it arises from high sentiment subperiods characterized by strongly significant and positive Amuhud betas while they become nonsignificant during low sentiment subperiods. In addition, the cross-sectional relationship between Amihud betas and expected stock returns becomes strongly significant during high sentiment dates supporting the idea that investors require higher risk premia to hold assets that are strongly correlated to the Amihud illiquiduity factor (i.e., characterized by higher Amihud betas). This supports the “noise trading risk” story (De Long et al., 1990; Shleifer and Vishny, 1997) implying that the unpredictability of noise traders’ mispricing and the limits of arbitrage it may induce, can explain why investors require higher average returns to hold more illiquid assets during high sentiment periods where noise traders are likely to be more active in the market.

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Abstract: Although several initiatives exist to improve financial literacy, people’s lack of financial literacy is still an unsolved problem. Financial literacy is an individual’s level of knowledge of baseline financial concepts. Among the different populations facing issues with financial literacy, students have been of primary interest in recent research. However, the issue of specific fragile populations among the student community remains unaddressed. This study aims to fill this gap by exploring the relationship between the faculty of study and students’ objective level of financial literacy, as well as students’ perceptions of their level of financial literacy. We use a sample of 7,121 university students. The results show that economics and business students overperform in terms of objective financial literacy, relative to other faculties’ students, whereas humanities students underperform. We also observe that social sciences and economics and business students are overconfident about their financial literacy.

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Abstract: We use a novel strategy to study the consequences of short investment horizons on institutional trading behavior and stock price inefficiency. Building on the previous literature that mutual funds’ holdings disclosure is important for fund managers and their investors, we show that during a stock crash, mutual funds whose next mandatory SEC-required reporting dates are closer, identified with shorter investment horizon, are more likely to divest from the stock. To rule out the possibility of funds selling and then buying the crash stock again, we leverage a comprehensive dataset from Thomson Reuters, which incorporates both public mandatory reports and non-public voluntary reports, allowing us to compare positions of funds with different upcoming mandatory reporting dates promptly following the stock crashes. We further examine the consequences of this short-termism induced by mandatory disclosures on stock prices. We find that stocks held mostly by “short-term” funds, at the time of the crash, experience a larger drop and a subsequent reversal. Our results shed light on how an exogenously extracted variation in investment horizon, associated with mandatory reporting, induces destabilizing behavior following crashes.

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Abstract: We propose an averaging framework for combining minimum-variance strategies to either minimize the expected out-of-sample variance or maximize the expected out-of-sample Sharpe ratio. Our framework overcomes the problem of selecting the “best” strategy ex-ante by optimally averaging over portfolio weights. This averaging procedure has an intuitive economic interpretation because it resembles a fund-of-fund approach, where each minimum-variance strategy represents a single fund. In a range of simulations, for a set of well-established strategies, we show that optimally averaging over portfolio weights improves the out-ofsample variance and Sharpe ratio. We confirm the finding of our simulation study on empirical data.

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Abstract: Nowadays, investors are increasingly taking environmental, social and governance (ESG) considerations into account in their investment process when composing their portfolios. In doing so, they need to find the right compromise between promoting ESG while not sacrificing too much of the profitability of their investments. In addition, the use of a benchmark portfolio is now a common practice in the financial management industry. In this context, the portfolio manager seeks to beat a benchmark index. Then the relevant concept of risk is relative risk as defined by tracking-error volatility (TEV) which needs to to be controlled. The problem of minimizing the volatility of tracking error was originally solved by Roll (1992) and then extended by Jorion (2003). In this paper, we extend Jorion's model by integrating ESG scores as a new constraint in the portfolio optimization problem. We explicitly solve this optimization problem and analyze the properties of the solution. Starting with a given benchmark, we show that it is possible in most cases to improve the situation of a managed portfolio on the three dimensions considered: expected return, volatility and ESG score.

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Abstract: The idiosyncratic volatility reflects specific information related to firms. Classical theories of finance mostly present mainly the interests of shareholders but not all stakeholders. Recent studies show that the idiosyncratic volatility is priced in the cross-section of expected returns proving its significance. Corporate Social Responsibility (CSR) is considered as the self-regulating model that helps firms to be more socially engaged to the public and different categories of stakeholders. The firm’s practice of CSR by adopting and respecting environmental and social governance codes should have an impact on its idiosyncratic volatility. In this article, we are studying the relationship between the firm’s CSR performance and its idiosyncratic volatility in Europe. Using panel data models, we document that improved CSR is skeptically affecting the Idiosyncratic volatility for the period of January 2003 to June 2018.

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Abstract: The time proximity of high-frequency trades can contain a salient signal. In this paper, we propose a method to classify every trade, based on its proximity with other trades in the market within a short period of time, into five types. By means of a suitably defined normalized order imbalance associated to each type of trade, which we denote as conditional order imbalance (COI), we investigate the price impact of the decomposed trade flows. Our empirical findings indicate strong positive correlations between contemporaneous returns and COIs. In terms of predictability, we document that associations with future returns are positive for COIs of trades which are isolated from trades of stocks other than themselves, and negative otherwise. Furthermore, trading strategies which we develop using COIs achieve conspicuous returns and Sharpe ratios, in an extensive experimental setup on a universe of 457 stocks using daily data for a period of four years.

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Abstract: In August 2012, France has introduced a Security Transaction Tax (STT) that charges 20 basis points on the purchase of shares issued by French companies with a market capitalization that exceeds 1 billion euros. At the European level, there have been contradicting points of views that lead to the delay in the adoption of such tax. Recently, there has been a European tendency to adopt a tax similar to the one applied in France. As pointed out by the literature the implementation of such a tax on financial transactions in France has had a wide range of effects on the quality of financial markets. While the impact of the STT on microstructure variables has been deeply analyzed, there is still a need for research about the externality of this tax for stock prices informativeness. Do rational investors who observe market prices in order to extract some information about the future payoffs of risky stocks manage to learn more rapidly the relevant news since the implementation of the STT? The global objective of our paper is to answer this question which naturally raises since the objective of the STT was to favor informational trading over pure speculative one. We consider the Price Delay measure of Hou and Moskowitz (2005) for appraising the delay with which stock prices embed new information about global market news. Thanks to a difference-in-differences analysis considering alternatively the DAX 30 German stocks and the MIB Italian stocks as control groups, we show that the French STT has delayed the process of information incorporation into prices for taxable stocks.

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Abstract: This study investigates the efficacy of short-term circuit breakers as a regulatory instrument in financial markets. We evaluate their capacity to mitigate significant price fluctuations and mitigate panic-driven trading by examining the shifts in behavior among market participants, including pure-HFT, mix-HFT, and non-HFT entities. Our analysis focuses on tracking their liquidity provision and consumption during both calm market periods and specific turbulent episodes leading to trading halts. The dataset comprises High-Frequency data encompassing trades and orders (all messages) for the most liquid stocks within the SBF120 French index from January 4, 2016, to December 28, 2016. Our findings reveal that non-HFTs and mix-HFTs assume the role of liquidity providers, effectively leveraging trading halts to temper price movements. These protected trader categories initiate a reversal in trends. Surprisingly, HFTs cease functioning as market-makers and instead execute more aggressive trades in the direction of the prevailing trend, complicating market recovery. In summary, our results indicate that relying solely on circuit breakers may not be sufficient to dissuade all traders from following market trends and, consequently, to avert a potential market crash. Regulatory authorities should consider designing real-time tools to manage order flow toxicity. We provide evidence supporting the development of contracts based on VPIN as a viable alternative to ensure market stabilization during periods of heightened volatility.

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Abstract: This study offers novel insights into the determination of the underlying distribution of venture capital (VC) returns. Using an exhaustive dataset on VC returns from 1985-2017, we identify VC returns to be power-law distributed for our entire sample, but also across deal status, stage and region. Conventional return distributions such as student’s t or normal cannot capture any salient features of the return data. This has implications for the determination of optimal portfolio size. We are able derive optimal portfolio sizes for different return outcomes in a multi-objective optimization problem.

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Abstract: In the midst of ongoing debates about the effectiveness of the Paris Agreement (PA) in addressing climate change, this study examines its impact on the fundraising dynamics of Climate tech venture capital (VC). We conducted an interrupted time series analysis using the most comprehensive and qualitatively optimal dataset collected so far, encompassing Climate tech VC fundraising activity from January 2005 to September 2023. Climate tech funds were selected on the basis of three criteria derived from the PA and research on the potential factors contributing to the Cleantech bubble. Our findings indicate that the PA has induced a clear acceleration in the growth of the number of Climate tech VC funds and a more limited effect on fundraising amounts. However, the average size of such dedicated VC has remained stagnant, along with its contribution to the overall funding of Climate tech startups. Addressing these two issues could make climate funding consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.

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Abstract: We document a significant decrease in venture capital (VC) activity in regions hit by climate change induced natural disasters. The detected impact is robust to different empirical settings at the VC firm- and venture-level, and to alternative definitions and measures of disasters and their damage. Furthermore, disasters affected VC-backed ventures have lower patent outputs, propensity to raise follow-on funding, and survival rate s. The effect decays over time unless another catastrophe strikes. The analyses provide evidence that VC-backed ventures are substantially exposed to climate risk.

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Abstract: Including unsecured inside debt in compensation contracts of bank managers, as well as capping their bonuses, are some of the rules that regulators propose in an effort to limit risk taking of banks. I show that mandatory unsecured inside debt does not always decrease and in some cases even increases bank risk when implemented in isolation. The joint effect of bonus caps and inside debt can either lead to an increase or a decrease in bank risk, depending on the type of the bonus cap.

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Abstract: This study examines the interplay between banks’ political connection and lending to brown borrowers, i.e. borrowers with poor environmental performance. A bank’s political connection is captured based on whether a bank is headquartered in the state with a member from the U.S. Senate Banking, Housing, and Urban Affairs Committee. Using data from DealScan from 1995-2020, we show that banks headquartered in states with a Banking Committee senator provide cheaper loans to brown borrowers than banks without a Banking Committee senator in their headquarters state. This finding suggests that politically connected banks can play a significant role in delaying the green transition as they extend loans to brown firms at a low rate. In addition, we show that the effect of a bank’s political connection on the cost of lending to brown borrowers is more pronounced when the senator is senior or when borrowers, lenders, and banking committee senators are in the same state. Overall, we provide novel evidence on how the political connections of banks influence their lending to brown firms.

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Abstract: This paper introduces a new risk-on risk-off strategy for the stock market, which com- bines a financial stress indicator with a sentiment analysis done by ChatGPT reading and interpreting Bloomberg daily market summaries. Forecasts of market stress derived from volatility and credit spreads are enhanced when combined with the financial news sentiment derived from GPT4. As a result, the strategy shows improved performance, evidenced by higher Sharpe ratio and reduced maximum drawdowns. The improved performance is consistent across the NASDAQ, the S&P 500 and the six major equity markets, indicating that the method generalises across equities markets.

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Abstract: Our research introduces a novel perspective for evaluating Cross-Sectional Absolute Standard Deviation (CSAD) and Cross-Sectional Standard Deviation of Returns (CSSD). We specifically focus on the gap existing between realized and expected returns on cryptocurrency markets employing the Capital Asset Pricing Model (CAPM) and informational factors for expected returns calculation. This stands in contrast to the current methodologies as much of the current literature primarily concentrates on analyzing the difference between realized returns and market returns (R_m). Our study shows interesting results when comparing methodologies on the CSSD approach. Notably, we observe significant results indicating the presence of herding behaviors during downturns in the cryptocurrency market. However, our findings are more nuanced in the context of the CSAD model as our results show a lesser degree of significance. These findings contribute to the evolving landscape of financial analysis in the cryptocurrency sector, challenging traditional methodologies and paving the way for further exploration in the crypto-herding field.

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Abstract: This study aims to investigate whether disagreement can help to forecast Bit- coin and Ethereum volatility for both intraday and daily frequency. To this end, we collected daily and hourly data over the period 2018-2022. Further, unlike the previ- ous literature, we use the standard deviation of sentiment in Reddit comments as a disagreement proxy. For Bitcoin and Ethereum and for hourly and daily frequency, we first study the relationships between our variable and the realized volatility and second, we evaluate the forecasting performance of our model. Econometri- cally, we introduced an adapted linear Heterogeneous Autoregressive (HAR-RV-X) model augmented with sentiment and disagreement variables to specify the effect of sentiment and disagreement on bitcoin volatility. Our study yielded Four main results. First, we found that disagreement can help to forecast Bitcoin volatility at daily frequency but not at hourly frequency. Second, for both cryptocurrencies, when the sentiment is separated into two components, coefficient remains positive. Third, only the negative component of the sentiment was highly significant for both daily and hourly frequency suggesting a ”negativity bias” among Bitcoin and Ethereum investors. Fourth, the effect of sentiment on realized volatility is stronger for Bitcoin than for Ethereum.

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Abstract: Natural disasters pose a significant and ever-present threat to businesses globally. These catastrophic events, ranging from hurricanes and earthquakes to floods and wildfires, can wreak havoc on firms, jeopardizing their operations, assets, and profitability. In this study, we investigate whether the accumulation of intangible assets helps mitigate the adverse effects of natural disasters on firm performance. Using a unique dataset of 378 U.S companies affected by Hurricane Sandy, and survival analysis methodology, we empirically find that firm's pre-disaster intangible assets serve to alleviate the negative impact on stock prices and firm performance. In particular, our study highlights the pivotal role of intangible assets in shielding both firms and investors from the shocks induced by Hurricane Sandy. Moreover, our results remain robust across various survival analysis models and time frames. Finally, we contribute to the growing body of firm resilience literature by emphasizing intangible assets as a means for companies to enhance their resilience in the face of natural catastrophes.

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Abstract: This paper investigates the implications of heat shocks on sovereign bonds. By extending a sovereign default model to include heat shocks, the research examines the effect of heat shocks on default risk, bond spreads and debt levels. The main finding is that heat shocks is associated with increased default risk and bond spreads. The mechanism is empirically tested on a global sample of sovereign bonds and CDS spreads, revealing that heat shocks tend to widen sovereign bonds and CDS spreads for Emerging Markets but not for Advanced Markets. The results highlights an important externality of global warming: most of the stock of $CO_2$ equivalent emissions has historically been generated by Advanced Markets but in the sovereign bond market Emerging Markets are bearing the burden.

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Abstract: This paper extends environmental research from a financial perspective, providing a better understanding of the relationship between financial inclusion and carbon emissions, as well as more explicit policy implications. The aim is to examine the impact of financial inclusion on CO2 emissions using two country samples: developing and developed countries, over the period 2004-2021. The ARDL (autoregressive distributive lag) model was used to estimate an extended STIRPAT model for long-term linkages. The multidimensional inclusion index was constructed on four dimensions using principal component analysis (PCA) based on standardized variables. The results show a rebound effect for developed countries, with financial inclusion limiting carbon emissions in the short term but increasing them in the long term. For developing countries, the results show that financial inclusion has a positive and significant effect only in the long term. In addition, our study examines the impact of CO2 in neighboring countries on a specific country's CO2 levels, underlining the crucial importance of considering the regional aspect in environmental analysis. The results of this study aim to help policy-makers integrate financial inclusion into climate change adaptation strategies at local, national and regional levels, and to integrate environmental criteria into financial policies while underlining the need to share best practices in environmental policies.

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Abstract: As financial markets have undergone a complete shift to a fully electronic format, their microstructure has transformed into an algorithmic paradigm, where the pursuit of speed is paramount for gaining a competitive edge in information acquisition. At ultra-short time scales, market activity can be decomposed into several layers of events happening on interacting exchanges, each contributing to the jumps from state to state of a global order book. We model the aggregated result as a superposition of Hawkes processes for 500 stocks traded on 14 US exchanges over a period of four years and find that, regardless of the asset, the market as a whole always diffuses information in clusters of five events on average, despite the steady increase of exogenous input over the years. We relate these findings to universal rhythmic rules and cognitive theories such as ’Miller’s law’ and the El Farol bar problem, and discuss our contribution to the literature claiming that markets operate at a near-critical state, as do all complex systems.

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Abstract: This paper shows that the aggregate U.S. equity market reverts in one month the non-informational price pressure induced by the end-of-month payment cycle. In contrast to cross-sectional evidence, the market-level reversal is robust to transaction costs and out-of-sample tests as it concentrates on liquid and high-priced stocks and during expansion periods. The findings lead to a novel interpretation of reversal: the pattern measures the liquidity not efficiently provided in the market rather than investors' cognitive bias or compensation for market-making.

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Abstract: Identifying the drivers of bond’s recovery rates is an important and topical field of research. In spite of its obvious connections with recovery rates, credit default swap (CDS) spreads received little attention for this purpose. In this paper, we introduce two novel recovery rates determinants built from CDS market data. These dynamic indices capture the level and uncertainty information embedded in CDS spreads aggregated by industry sectors, thereby forming a new family of determinants sitting in between the idiosyncratic and systematic factors identified so far. Analyzing 613 defaulted U.S. corporate bond issues from 2006 to 2019 and using a beta regression model, we find the cross-sectional mean and approximate entropy of aggregated CDS spreads to be significant to explain the mean and dispersion parameters of the beta distribution underlying recovery rates. These findings offer valuable insights for improving credit risk assessment methodologies and identifying key risk drivers of recovery rates prior to running prediction models.

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Abstract: In this article, we delve into the critical question: What happens to the retirement savings account (RSA) balance of a contributory pension scheme (CPS) when contributions are remitted partially or non-remitted during various accumulation phases? Our analysis focuses on understanding the differences in contribution remittances and their impact on the accumulated RSA balance within a CPS model. We introduce a counterfactual scenario that incorporates partial and non-remittances of contributions through adjustments in contribution rate parameters. Utilising Nigerian data, we analyse how these variations in funding scenarios affect the final RSA balance. Our findings show that non-remittance of contributions and partial contribution remittances provide less retirement income in the RSA than the statutory contributory rate. These findings highlight a significant reduction in retirement income when pension contributions are not remitted on time, underscoring the critical importance of timely remittances in securing retirees' financial futures.

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Abstract: The increasing demand for transparency in financial markets has led to a rise in the need for financial research. Due to MiFID II, financial analysts are focussing mainly on the most relevant companies. Consequently, small and medium-sized companies struggle with analysts’ coverage and have to pay for financial research. This solicited research is widely used, but credibility can be seen critical by literature. Our findings underline that smaller firms with lower market capitalization are more likely to pay for sponsored research. Paid reports are more comprehensible and exhibit higher readability. However, the textual analysis does not detect divergences in the sentiment of both paid and unpaid reports. An event study shows that textual components can affect the capital market reaction on financial reports. But again, we cannot prove any differences between sponsored and non-sponsored research. The results suggest that paid financial research does not lack credibility and can be used as a powerful tool for SMEs.

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Abstract: In this paper, I examine intrahousehold bargaining power as a potential explanation for the child penalty experienced by women and not by men. Following the birth of the first child, households are faced with the decision of selecting the primary caretaker, a choice that can result in reduced labor market participation and income. An important determinant influencing intrahousehold bargaining power is the relative income within the household. In Australia, 75% of women earn less than their partners. As a result, women with lower opportunity costs, on average, bear the cost of parenthood within the household. My results show that the child penalty for women who out-earn their partners is on average 50% smaller than for women who earn less than their partners. However, men do not even experience a child penalty when they earn less than their partners. I explore three different channels that might influence intrahousehold bargaining: conservative gender norms, paid parental leave regulations, and household responsibilities and external childcare provisions. My results highlight the importance of women’s intrahousehold bargaining power for women’s participation in the labor force.

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Abstract: This paper investigates and compares the impact of stock price informativeness and liquidity following a Seasoned Equity Offering (SEO) on the firm’s subsequent choice between equity and debt financing on the European market over the period 2000-2017. We find that stock price informativeness and liquidity affect the subsequent financing choices following SEOs differently. Greater stock price informativeness around a given SEO leads to a higher propensity for subsequent equity financing but a lower propensity for subsequent debt financing in the following three years. The preference for equity financing over debt financing supports the market feedback hypothesis. In contrast, higher stock liquidity favors both sub-sequent equity and debt financing, with the propensity for debt issuance being higher. We also find evidence that stock liquidity is more predictive of the subsequent equity financing decision than stock price informativeness.

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Abstract: In a novel examination of the Law of One Price, I investigate the transmission of market value between publicly-traded subsidiaries and their respective publicly-traded parent companies. On average, a $1 million increase in the parent's stake in a subsidiary leads to a mere $500 thousand increase in the parent company's market value. This result is obtained while holding all other stock market swings constant.

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Abstract: Momentum, one of the strongest and most comprehensively studied trading strategies, bets on the persistence of past trend. The trend is typically measured by the past cumulative returns of individual stocks and therefore the strategy is implemented by buying stocks with highest past returns and selling stocks with lowest past returns. However, the past cumulative return can be a noisy proxy for the past trend, especially for those stocks with high volatility. We apply a test to detect the presence of drift in the stock returns in the formation period eliminating the impact of volatility. We form our pure momentum portfolios based on the strength of the drift, which we argue is a more precise measure of trend. We find that our pure momentum strategies deliver significantly higher Sharpe ratio, higher Sortino ratio, lower volatility, less negative skewness, and lower kurtosis. Moreover, the strategy return is not fully spanned by the Fama-French five-factor model plus their momentum factor with abnormal returns significantly different from zero.

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Abstract: Over the last decade, the oil, gas, and mining industries have been stigmatised by climate activists, the scientific community and civil society for their contribution to global warming. But has this pressure had a significant impact on the financial and economic performance indicators of companies in these sectors? Through an empirical study carried out on a sample of 501 companies over fifteen years (2005 to 2020), we show that stigmatisation in the press has little significant impact on the financial and economic performance (ROE and ROA) of companies. However, we observe that the indicators are significantly degraded when stigmatisation increases, if the company is in a country that is highly exposed to physical climatic risks. It also appears that oil and gas companies are more sensitive to stigmatisation than mining companies. When these two conditions (oil companies and countries exposed to physical risks) are met, ROE and ROA indicators deteriorate significantly when stigmatisation increases. In this case, the diversification strategy makes it possible to deal with stigmatisation and seems to improve financial and economic returns.

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Abstract: This study breaks new ground by deploying the first Vietnamese-specific lexicon for computing ESG scores using TF-IDF methodology, a significant stride in sustainability reporting research. It investigates the effects of Vietnam's 2015 mandatory Environmental and Social disclosure regulation on ESG reporting practices of Vietnam public firms and their subsequent impacts on firms' financial performance. We find that firms with strong ESG practices prior to the regulation experienced slower growth in ESG scores, while those with lower initial scores showed a significant increase, particularly in Social scores. Furthermore, although firms with high composite ESG scores pre-regulation showed improved firm valuation, this improvement was primarily driven by the Environmental and Governance components, rather than Social reporting. On the other hand, the improvement of firms’ ESG reporting practices also exhibited a significant deceleration in the volatility of stock return, shedding the lights on how the investors on Vietnam stock exchange perceive the change in firms’ managerial practices. By addressing this crucial gap in existing literature, our study not only highlights specific outcomes of mandatory ESG reporting in Vietnam but also presents an innovative methodological approach with wide-ranging implications for economic policy and investment strategies within emerging markets. This evidence supports the need of considering the specific context and characteristics of emerging markets, such as Vietnam, when implementing ESG reporting regulations.

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Abstract: Our study examines the relationship between market signals and managerial behaviour in the context of mergers and acquisitions (M&A) through the empirical testing of two hypotheses: the signal hypothesis and the learning hypothesis. Additionally, we evaluate the market reaction with the M&A announcement and the information consequences of M&A deals. By employing event study methodology in our estimation, we provide empirical evidence supporting the idea that stock market reaction is more intense with small control deals. Moreover, if market react positively on M&A deal, it could help increase the level stock price informativeness in post-announcement period. However, empirical analysis does not confirm the signal and learning hypothesis, but the firms’ ownership plays some role on the completion of M&A deals. In conclusion, our research remarks the need to enhance the transparency and efficiency of Vietnam stock market.

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Abstract: This study investigates the stock market reaction to the announcements of corporate green bond issuance in 18 countries of Western Europe between 2014 and 2023. Using 361 green bond announcements issued by 136 unique and listed issuers, we find a negative stock market reaction to issuance. Specifically, results show negative and significant cumulative abnormal returns in a two-day window including the day of announcement and the day following it. This effect is particularly present for repeated issuances of green bonds. Furthermore, both green bond issuances and conventional bond issuances generate a negative market reaction. These results suggest that green bond issuance signals negative or unfavorable information to market investors about the issuing company.

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Abstract: This paper studies how lenders' ability to monitor collateral and mitigate frictions in collateralization affect credit outcomes. Exploiting law reforms that subject collateral monitoring to information asymmetries, I show that such reforms trigger credit reallocation from foreign to domestic lenders. Following the legal change, the moral hazard in monitoring collateral by foreign lenders increases. In response, foreign lenders decrease loan issuance and acceptance of movable collateral from treated firms, while increasing the use of covenants. The reallocation effects translate into a reduction in firms' employment and net income in the post-period. These results highlight the importance of friction associated with collateralization in shaping credit markets.

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Abstract: This paper analyses the effects of French state-guaranteed loans on financial statements and corporate default risk using a difference-in-differences method. The COVID-19 pandemic severely disrupted the global economy. As a result, most governments launched an unprecedented range of temporary credit and tax deferral programs. The French program enabled companies to benefit from these without any size or sector limitation. Prior crisis, the study shows that companies participating in the program have lower cash flow, higher debt and hold more cash. Using a unique dataset, we show one year after crisis that companies participating in the program increased their debt, cash and working capital more than others. This increase was reduced by a third a year later, indicating a partial debt repayment. We note that companies participating in the state guaranteed loan program have been more negatively affected by Covid-19 but have become more liquid as a result of the loan. Using default scores, we find that firms taking state-guaranteed loans already had a higher bankruptcy risk of default than others, and the risk of default increased after subscribing to the state-guaranteed loan.

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Abstract: The objective of this paper is to set up a credit scoring model to assess the credit risk of international SMEs. Regardless of the stakeholders of the firms, company owners, employees, commercial partners, lenders, or investors, the default prediction is a highly important matter for both internal and external company’s counterparties. However, this subject has been little addressed in academic research. Therefore, we developed a model to predict those defaults. Resulting from a multivariate logistic regression, the proposed model takes into account several risk factors (activity, liquidity, solvency, coverage, leverage) that can lead to the company’s default. It was estimated on a sample of 288291 companies and over a period from 2002 to 2018, of which 579 defaulted, i.e. a default rate of 0.20%. Its performance was evaluated on 123552 others. The originality and interest of this study lies in the recency of the data used, the large size of its sample and its specific focus on international SMEs. The discriminating power measured by the accuracy ratio of the model is 80.5%.