Article
Business, Finance
Tamer Elshandidy, Hany Kamel
Summary: This study investigates the relationship between the tone of narrative disclosures and engagement in earnings management activities, finding a significant association between the tone and the prevalence of earnings management. The study also reveals that manipulating firms tend to use less negative tone to hide fraudulent practices, while non-manipulating firms tend to use more positive tone to mask their involvement in managing earnings. Furthermore, the study shows a positive association between earnings management and net tone with abnormal market returns for non-manipulating firms.
ADVANCES IN ACCOUNTING
(2024)
Article
Business, Finance
Nopparat Wongsinhirun, Pattanaporn Chatjuthamard, Pornsit Jiraporn, Sang Mook Lee
Summary: This study examines the influence of exogenous reduction in litigation risk on customer concentration, using a unique ruling by the Ninth Circuit Court of Appeals. The findings suggest that a decline in litigation risk leads to a more concentrated customer base, as firms with lower vulnerability to litigation risk strategically allocate resources to cater to major customers more effectively.
JOURNAL OF BEHAVIORAL AND EXPERIMENTAL FINANCE
(2024)
Article
Business, Finance
Jiaqi Li, Hee-Joon Ahn
Summary: This research examines the influence of individual investor sentiment derived from social networks on stock market returns. The study finds that individual investor sentiment has an independent impact on Chinese financial markets, and negative sentiment has a stronger effect on stock returns. Additionally, there is an asymmetric pattern in the relationship between sentiment and returns across different industry types.
JOURNAL OF BEHAVIORAL AND EXPERIMENTAL FINANCE
(2024)
Article
Business, Finance
Frank J. Fabozzi, Dashan Huang, Fuwei Jiang, Jiexun Wang
Summary: This paper compares the Hou-Xue-Zhang four-factor model with the Fama-French five-factor model from an investing perspective in both in-and out-of-sample settings. The study finds that without margin requirements and model uncertainty, the Hou-Xue-Zhang model outperforms the Fama-French model. However, the difference becomes negligible if an investor is subject to margin requirements and model uncertainty. The study also highlights that both models have similar capabilities in describing the covariance matrix of asset returns, suggesting that they do not make a significant difference in a realistic investing setting.
JOURNAL OF INTERNATIONAL MONEY AND FINANCE
(2024)
Article
Business, Finance
Jeffrey Tzuhao Tsai, Chien-Ling Lo
Summary: This article proposes a method to evaluate underwriting risks for U.S. property-casualty insurance company using a byline multivariate framework. The proposed regression system with copula structure estimates the dynamics and dependences of by-line loss ratio changes. The choice of copula structure and marginal estimation method affects the model's performance in stress testing of catastrophic events. These findings help insurers and regulators evaluate their capital requirements more precisely and reduce liability-side risk.
PACIFIC-BASIN FINANCE JOURNAL
(2024)
Article
Business, Finance
Robert Blotevogel, Gergely Hudecz, Elisabetta Vangelista
Summary: This study analyzes the impact of ECB asset purchases on sovereign bond spreads during the Covid-19 pandemic. It finds that there were significant announcement effects, as well as variations in expectations and implementation effects across different countries. Overall, the ECB's asset purchases were highly effective in preventing financial fragmentation risks in the euro area during the pandemic.
JOURNAL OF INTERNATIONAL MONEY AND FINANCE
(2024)
Article
Business, Finance
Tianlong Liao, Bingxuan Lin, Jianhua Liu, Rui Lu
Summary: This study examines how firms adjust executive pay-for-performance sensitivity in response to changes in environmental risks. Findings from a natural experiment involving the 2017 Environmental Regulation in China show that firms decrease pay-for-performance sensitivity without changing overall compensation levels when the central government imposes stricter environmental policies. This effect is more pronounced in non-state-owned enterprises (SOEs) and firms facing higher accounting performance pressure, worse environmental performance, and stricter legal environments.
PACIFIC-BASIN FINANCE JOURNAL
(2024)
Article
Business, Finance
Vidya Kamate, Abhishek Kumar
Summary: Using a new regulatory transaction-level dataset, this study analyzes the determinants of pricing in the over-the-counter currency derivatives market for both dealer-to-dealer and dealer-to-client segments. The results show that there is a core-periphery structure in the interdealer network, with core dealers charging centrality premia in both segments. In the dealer-to-client segment, experienced clients experience a reduction in centrality premium, indicating an interplay between client bargaining power and dealer centrality in pricing.
JOURNAL OF INTERNATIONAL MONEY AND FINANCE
(2024)
Article
Business, Finance
Yongjian Lyu, Xinyu Zhang, Jin Cao, Jiatao Liu, Mo Yang
Summary: This paper examines the relationships between the oil market and other financial markets, focusing on the spillover effects at different frequencies. The study finds that these effects are driven by different frequencies and are intensified during the global financial crisis of 2007-2009. Additionally, the research provides empirical evidence for the double-edged sword effect of quantitative easing on systemic risk from a frequency perspective.
JOURNAL OF INTERNATIONAL MONEY AND FINANCE
(2024)
Article
Business, Finance
Ye Bai, Sourafel Girma, Alejandro Riano
Summary: This paper investigates the impact of acquisition announcements on the uncertainty perceived by financial markets about acquiring firms. The study finds that the geographic scope of the deal plays a crucial role, with domestic acquisitions reducing volatility and foreign acquisitions increasing volatility. Additionally, the characteristics of the deal itself mediate the effect of acquisitions on volatility.
JOURNAL OF INTERNATIONAL MONEY AND FINANCE
(2024)
Article
Business, Finance
Thomas Gehrig, Maria Chiara Iannino, Stephan Unger
Summary: This study provides strong evidence that measures of social responsibility contribute to increasing the resilience of banks, particularly variables related to the long-term perspective. Additionally, significant transatlantic differences are found in the findings of this international study.
JOURNAL OF FINANCIAL STABILITY
(2024)
Article
Business, Finance
Michael G. Arghyrou, Maria-Dolores Gadea, Alexandros Kontonikas
Summary: The study examines the relationship between macro/fiscal risk and private bank deposits relative to Germany using a panel of ten euro area member states. The findings show that this relationship is not stable over time and is influenced by the overall macro/fiscal risk conditions in the euro area. Deposits in periphery EMU countries are more responsive to macro/fiscal risk, and the unconventional monetary policy of the ECB has moderated the effect of global financial and European debt crises on the relationship between deposits and macro/fiscal risk.
JOURNAL OF INTERNATIONAL MONEY AND FINANCE
(2024)
Article
Business, Finance
Cephas Simon Peter Dak-Adzaklo, Raymond M. K. Wong
Summary: This study examines the relationship between corporate governance and trust and finds that formal corporate governance reforms have a positive impact on corporate financing and investment. The positive effect is even more pronounced in countries with lower levels of trust. The findings imply that countries can offset the negative impact of lack of trust on economic outcomes through formal regulatory reforms.
JOURNAL OF CORPORATE FINANCE
(2024)
Article
Business, Finance
Alin Marius Andries, Alexandra Maria Chiper, Steven Ongena, Nicu Sprincean
Summary: This study finds that banks can reduce their systemic risk exposure when the countries in which they are incorporated improve their net international investment positions and maintain creditor status. The reduction in risk is mainly attributed to the equity component of the net international investment position and valuation gains on the external balance sheet.
JOURNAL OF FINANCIAL STABILITY
(2024)
Article
Business, Finance
Zekun Wu, Paul Borochin, Joseph Golec
Summary: There is significant abnormal options trading before FDA drug approvals, particularly for small drug firms. These trades seem to be informed, as there are more calls (puts) purchased before approvals (rejections), and a majority have maturities covering the dates when the reports are publicly released. Therefore, securities regulators should consider monitoring these trades early.
JOURNAL OF CORPORATE FINANCE
(2024)
Article
Business, Finance
Dayong Zhang, Yalin Wu, Qiang Ji, Kun Guo, Brian Lucey
Summary: The objective of this paper is to investigate the impact of climate risk on the stability of regional commercial banks in China. The study finds that higher levels of climate risk are associated with higher levels of non-performing loans, and banks react to transitional policies by modifying their portfolios.
JOURNAL OF INTERNATIONAL MONEY AND FINANCE
(2024)
Article
Business, Finance
Deng-Kui Si, Hong-Xue Li, Debao Hu, Xiao-Lin Li
Summary: This paper investigates the causal effect of RMB exchange rate expectation uncertainty on corporate cross-border mergers and acquisitions (M&As) in China. The results show that increased RMB exchange rate expectation uncertainty significantly promotes corporate cross-border M&As. The effect is more pronounced for certain types of firms and firms with specific characteristics.
PACIFIC-BASIN FINANCE JOURNAL
(2024)
Article
Business, Finance
Ye Jin Heo
Summary: This paper empirically investigates the effects of two primary types of debt financing, bank credit and trade credit, on firm sales performance during the Global Financial Crisis using Korean firm-level data. The findings indicate that firms relying more on bank credit experienced slower sales growth, while those relying more on trade credit performed better. However, the mitigating effect of trade credit was not observed for exporters. There was also evidence of a heterogeneous effect of trade credit among non-exporters, depending on firms' degree of financial access.
JOURNAL OF INTERNATIONAL MONEY AND FINANCE
(2024)
Article
Business, Finance
Gary C. Biddle, Lilian H. Chan, Jeong Hwan Joo
Summary: This study provides evidence that clawback adoptions have a significant impact on firms' capital investment mix and efficiency. The effects are particularly pronounced for firms prone to financial misreporting. Additionally, the study finds that performance-based compensation serves as an important channel through which the adoption of clawbacks influences capital investment mix and efficiency.
JOURNAL OF CORPORATE FINANCE
(2024)
Article
Business, Finance
Chien-Lin Lu
Summary: This study examines the relationship between wage differential and corporate cash holdings using novel data from Taiwan. The research finds that employee wages positively affect cash holdings, mainly due to the precautionary motive, while manager wages have a relatively weak effect but only under high agency motive. The study identifies these motives through factors such as employee turnover rate, female worker coverage ratio, and financial constraints. Revisions in labor standards and accounting laws help address endogeneity. Additionally, firms are more likely to save cash for employees from internal cash flows when employee wages increase, and firms with higher manager wages prefer debt financing.
PACIFIC-BASIN FINANCE JOURNAL
(2024)
