Using the staggered adoption of the good faith exception to U.S. wrongful discharge laws, we examine the causal effect of employment protection and firing costs on bank dividend payouts. We find stronger employment protection significantly reduces dividends, with good faith adoption lowering payouts by 7% relative to the mean. In line with the operational leverage hypothesis, cross-sectional tests show this effect is concentrated among banks with higher labour costs and greater financial leverage. Overall, our results document how employment conditions influence bank dividend payouts and shape the allocation of corporate value among shareholders and employees.
This study examines whether corporate ESG performance affects syndicated loan spreads and whether the effect differs between Europe and the United States. Using LPC DealScan loans matched with Refinitiv ESG ratings for 2010-2023, we find that higher ESG scores are associated with lower loan spreads; a one-standard-deviation increase implies a 10.64-basis-point reduction. Environmental and social pillars drive the effect more strongly than governance. The negative ESG-spread relation is stronger in Europe and intensifies after the 2015 Paris Agreement, highlighting the roles of risk mitigation and institutional context in bank loan pricing.
The study examines the effects of headquarters-city traffic congestion on labour investment efficiency. The results indicate that firms headquartered in congested cities may engage in inefficient labour investment decisions. Further analysis indicates that the inefficiency is associated with both overinvestment and underinvestment in labour. The results suggest that the effect of traffic congestion on net hiring may be induced by managerial preference for empire building. The results remain robust to endogeneity concerns. In sum, the study underscores traffic congestion as a novel external determinant of corporate investment policy.
We find that firms with more independent directors adjust CEO inside debt towards an optimum more quickly. This effect is more pronounced in financially unconstrained, growth, and under-levered firms, and also firms led by more powerful or overconfident CEOs. We find that when the agency cost of CEO inside debt is low, board independence is associated with a slower adjustment speed. The ability of corporate boards to design CEO compensation contracts in the shareholders' best interest has come under intense scrutiny. Our evidence suggests that independent directors make intricate trade-off decisions when adjusting them in ways consistent with the optimal-contracting perspective.
This paper shows that for firms in Pacific time zone of the United States, the effect on weekly returns from overnight returns would be 23% stronger than firms in Eastern time zone. This asymmetrical impact is documented to be associated with degrees of information transparency due to firm's different timings of information releases. This paper demonstrates that such asymmetric effect contributes to the post earnings announcement drifts where the 1-day overnight returns at announcement day lead to higher cumulative returns of firms in the East coast; suggesting that for firms in the West, lower information asymmetry leads to weaker drift of returns.
This paper investigates whether thematic equity funds deliver abnormal performance relative to conventional global equity funds. Using Fama-French models augmented with latent factors, we estimate fund-level alphas, and apply the false discovery rate methodology to an estimated three-group mixture distribution, separating good, null and bad performing funds, distinguishing abnormal performance from luck. Thematic funds' alpha distribution meaningfully differs from that of non-thematic funds, after adjusting for hidden exposures. We interpret alphas as measures of abnormal performance, rather than managerial skill. The findings suggest that thematic funds offer distinctive performance characteristics relative to traditional ones.
This study investigates the impact of open R&D infrastructure on firm innovation. We exploit a Chinese policy mandating access to national R&D equipment as a natural experiment. We find that greater access significantly increases firm innovation, especially for firms facing tighter financing constraints or more limited prior access to such infrastructure. Firms respond by reallocating R&D inputs away from equipment investment and towards human capital, particularly inventors, thereby improving innovation efficiency and diversity. More broadly, the results highlight how the governance and sharing of quasi-public R&D infrastructure can shape private innovation.
This paper examines how China's 2019 public pension reform, which reduced firms' contribution burdens, affects corporate environmental performance. We find that firms significantly improved their environmental engagement following the reform. The increase is not driven by the COVID-19 pandemic and is more pronounced among firms with greater contribution reductions, fewer growth opportunities, lower financial constraints, or better governance. The enhanced efforts are reflected in increased green innovation, improved local air quality, and higher firm value, supporting the hypothesis that reduced labour costs free up resources so that firms could enhance their environmental engagement.
While financial technology innovation lowers intermediation costs, regulatory frictions may prevent these gains from reaching long-term investors and borrowers. Using variation in retail investor participation driven by state securities registration lapses in peer-to-peer lending, we demonstrate that regulatory frictions are associated with intermediation costs. Such frictions to investor participation impose substantial costs on excluded investors, with quote-based estimates suggesting an average loss in yield-to-maturity of 190-235 BPs. Primary-market interest rates also rise around lapse events, though we cannot distinguish between platform pricing responses and equilibrium capital tightening. Our results illustrate how regulatory fragmentation can generate redistribution costs in marketplace lending.
Investors in Mainland China embrace collectivism and government-driven socio-economic development, while their peers in Hong Kong cherish individualistic ethos and democratic governance policies. We test the hypothesis that these conflicts of values and preferences amplify the positive gaps in price and trading volume of dual-listed A- and H stocks in Shanghai and Hong Kong stock exchanges but dampen the associated relative price volatility. Our findings drawn from the stock market integration initiative of Hong Kong and Mainland China in 2014 and the 2018 trade wars between China and the United States offer persuasive support for this novel narrative.
Using institutional theory, we examine how country governance affects two ESG outcomes: ESG performance and ESG controversies. With Refinitiv/LSEG data for similar to 146,000 firm-years in 86 countries (2002-2023) and World Bank WGI, we apply a Mundlak within/between decomposition to test complementarity versus substitution (performance) and prevention versus detection (controversies). Better governance is strongly associated with higher ESG performance-overall and across E, S and G-especially cross-country. Yet governance also predicts more reported controversies, consistent with detection/visibility rather than worse conduct. Instrumental Variable and DiD tests corroborate these results.not subset of
We identify a spillover effect from Mergers and Acquisitions (M&A) activity to CEO compensation. Previous research shows that post-merger, acquiring CEOs receive higher pay with reduced sensitivity to negative performance. We demonstrate that CEOs who don't engage in M&A, but have compensation peers who do, also experience increased pay and decreased pay-performance sensitivity for negative returns. Additionally, M&A activity significantly influences compensation peer group composition. Our results reveal the effect of peer M&A on compensation results from both labour market pressures and self-dealing, contributing to explanations for the substantial rise in CEO compensation in recent decades.
Drawing on relative income utility and loss aversion from prospect theory, we investigate whether poor-performing peer stocks shape investor preferences. Defining 'relief' as the difference between a stock's return and the worst-performing stock in its industry, we find that high-relief stocks have lower future returns than low-relief stocks. This effect strengthens with low relief values, weaker industry performance and greater characteristic similarity to the benchmark. Relief exhibits limited long-term predictive power and lacks persistence, suggesting the benchmark's relevance is short-lived. Our findings illustrate the role of positive relative performance comparisons in determining expected returns.
This study examines the optimal M&A entry strategy in structurally asymmetric markets, focusing on how market concentration affects the choice between serial and direct M&A strategies. We find that firms prefer to initially merge with a medium-sized firm that is less risky but has sufficient market share in highly concentrated markets. Conversely, it is necessary to merge with a large firm, even if it exposes the firm to greater risk in low-concentration markets. For example, SoftBank's serial acquisitions in the concentrated Japanese mobile market and Yahoo!'s direct acquisition of ZOZO in the fragmented fashion e-commerce market support our theoretical findings.
This paper investigates whether climate policy signals influence ESG disclosure quality in maritime transport, a capital-intensive industry responsible for roughly 3% of global CO2 emissions. Using panel data from 126 listed shipping firms between 2009 and 2023, we construct an author-based disclosure quality index and treat the IMO's 2018 Initial GHG Strategy as an environmental information shock. Difference-in-differences and dynamic panel estimations show significant improvements in disclosure quality from 2019 onward. Firms with stronger innovation and tighter financial constraints respond more intensively, while weaker profitability reduces persistence. Results underscore the capital-market relevance of credible ESG disclosure in shipping globally.
This study examines how biodiversity risk affects corporate cash holdings and the mechanisms shaping this relationship. We find that firms facing higher biodiversity risk significantly increase cash reserves. Internal CSR governance and external institutional pressures both reinforce precautionary cash policies, highlighting the importance of internal capabilities and external pressures. The increase in cash is sourced primarily from reductions in discretionary spending rather than external financing. Higher cash reserves mitigate the adverse effects of biodiversity risk, helping firms preserve financial performance, mitigate uncertainty, and maintain ESG commitments. Overall, our results underscore the precautionary nature of corporate cash management under biodiversity pressures.
The IMO2020 regulation for the green transition in shipping turned the industry into using two compliant bunker fuels: very low-sulphur fuel oil (VLSFO) and low-sulphur marine gas oil (LSMGO). VLSFO futures contracts introduced in late 2019 and other energy-related futures contracts indicate that the VLSFO contracts trading on the Singapore Exchange, when used in direct hedging, are the most effective. Cross-hedging can work on rare occasions. Copula-family models in certain locations perform better in the calculation of optimal hedge ratios in cross-hedging situations, as in LSMGO hedging. Models that produce time-varying and constant hedge ratios can also work well, particularly in direct-hedging situations.
Repeated episodes of bank misconduct can threaten financial stability and increase the risk of systemic crises, yet evidence on their drivers remains limited. This paper investigates whether the shift from traditional retail banking towards a universal, fee-based business model in the United States is associated with greater misconduct. Using a panel of more than 70 US banks, we find that universal banking is positively related to the likelihood of misconduct. These results support structural banking reforms aimed at reducing the complexity of financial conglomerates' business models.
This study investigates whether large language models (LLMs) can predict short-term market reactions to M&A announcements. We prompt OpenAI's latest reasoning models (o3, GPT-5, and GPT-5.1) to forecast whether the combined market value of acquirer and target will increase or decrease, drawing on deal-, firm-, and macroeconomic data for large domestic U.S. transactions (2012-2022). Our analysis shows that LLMs outperform logistic regression and naive buy-all benchmarks in predictive accuracy. Their forecasts further translate into portfolios with superior risk-adjusted performance. These findings highlight the transformative potential of generative AI for empirical finance and M&A decision-making.
This paper investigates the causes and consequences of hedge fund investments in exchange-traded funds (ETFs) using US data from 1998 to 2020. The findings show that transient and quasi-indexer hedge funds are significantly more likely to invest in ETFs. Moreover, hedge fund firms with a greater share of assets under management in Macro, Relative Value, and Fund of Funds strategies tend to invest more in ETFs, whereas those focused on Equity Hedge and Event-Driven strategies are less inclined to do so. ETF investments are generally associated with lower hedge fund returns, consistent with the presence of agency costs.
