Abstract This paper examines the determinants and dynamics of sudden stops in international fund flows, distinguishing between conventional and socially responsible investment (SRI) funds. Using a comprehensive dataset covering 41 countries from 1998 to 2025, the study investigates how global, domestic, contagion, and cultural factors jointly shape financial vulnerability. The results show that global liquidity conditions, particularly the TED spread, are dominant drivers of stops, whereas robust domestic fundamentals, including GDP growth, equity market performance, and interest rate conditions, partially mitigate reversal risk. Contagion effects reveal that regional investor herding amplifies stop probabilities across both fund types and is notably stronger for SRI flows than for conventional flows, challenging the view that value‐driven investors unconditionally stabilize capital markets during stress periods. National cultural dimensions significantly influence conventional fund vulnerability: power distance, individualism, and uncertainty avoidance increase stop probability through institutional opacity, autonomous rebalancing, and home‐bias withdrawal mechanisms, whereas masculinity reduces vulnerability through performance‐oriented institutional structures. In contrast, cultural effects are largely absent in advanced economy SRI funds, suggesting that Environment, Social, and Governance (ESG) mandates weaken culturally driven transmission channels in cross‐border capital allocation. Overall, the findings suggest that sudden stop vulnerability reflects not only exposure to global financial shocks but also to the interaction between investor mandates and culturally embedded behavioral responses.
Abstract We examine the short‐term stock market reaction to the implementation of India's four consolidated Labour Codes on November 21, 2025. Employing the event study method on 1871 National Stock Exchange‐listed firms, we find a significant negative aggregate market reaction, with a cumulative average abnormal return of approximately −3.54% until the day after the implementation date. We find heterogeneous impact, disproportionately affecting labor‐intensive sectors, while firm‐level operational efficiency amplifies negative postannouncement returns. Results align with contracting cost theory, suggesting investors initially viewed the reforms as a substantial cost shock outweighing potential long‐term efficiency gains. The findings offer critical insights for policymakers and investors.
Abstract This study examines whether dual‐class governance affects how investors and firms respond to major capital allocation decisions. Using U.S.‐listed firms from 2014 to 2025, we analyze share repurchases and M&A transactions in which dual‐class firms act as acquirers or targets. We assess announcement‐period abnormal returns, long‐horizon stock performance, and post‐event operating performance relative to matched single‐class firms. The results show a favorable market response to repurchase announcements by dual‐class firms, while acquisition‐related outcomes are more neutral. Dual‐class acquirers do not exhibit systematic performance differences, and dual‐class targets show lower announcement gains only in univariate comparisons. Across longer horizons and accounting outcomes, we find no evidence of persistent disadvantages associated with dual‐class status. Overall, the findings indicate that unequal voting rights do not imply a uniform performance discount; their relevance depends on the type of capital allocation decision.
Abstract Using Taiwanese data (2009–2019), we examine the impact of climate risk on labor investment efficiency. Contrasting prevailing views, we find that higher climate risk significantly improves labor investment efficiency, primarily by mitigating under‐investment. We attribute this to a “discipline effect,” where heightened uncertainty fosters managerial prudence and aligns labor decisions with operational needs. This efficiency‐enhancing effect is pronounced in firms with strong governance, superior ESG performance, and high competition. Our findings offer novel evidence that climate risk can optimize resource allocation rather than merely disrupting it.
Abstract We examine whether corruption affects private firms' reliance on trade credit and whether this effect depends on access to formal bank financing. Using firm‐level data from the World Bank Enterprise Surveys for 60,732 private manufacturing firms across 130 countries, we measure corruption as a firm‐level indicator of whether the firm makes any informal payment or gift to public officials, and trade credit as the share of working capital financed through supplier credit or customer advances. We estimate models with country, industry, and year fixed effects and test the bank credit channel by interacting corruption with an indicator for whether the firm lacks a line of credit or loan from a financial institution. The results reveal a clear substitutability paradox: when corruption compromises the formal banking system, firms increasingly turn to supplier financing as a non‐traditional financial safety net. We find firms exposed to corruption finance 1.32 percentage points more of working capital through trade credit, equivalent to $13,200 per $1 million of working capital. This effect is significantly stronger for firms without access to a bank line of credit, consistent with the view that supplier financing serves as a substitute when corruption impairs formal lending. We further show that trade credit partially mitigates the financial constraints associated with corruption. The results are robust to instrumental variable estimation, propensity score matching, alternative measures, and placebo‐style tests. Overall, the evidence highlights a substitutability paradox: when corruption weakens the banking channel, trade credit becomes a non‐traditional financial safety net. More broadly, corruption affects not only the severity of financing constraints but also the composition of external finance in institutionally weak environments.
Managers of public companies communicate with investors through channels such as conference calls and press releases. We develop a linear optimization model that predicts the optimal allocation of positive and negative information across channels, accounting for investors' limited processing capacity and channel-specific cognitive costs. The model demonstrates how managers can enhance comprehension of favorable messages while deflecting attention from unfavorable ones. Using textual features of positivity, readability, and message length, the model predicts up to 79% of real-world channel choices across over 24,000 earnings announcements. Firms with lower ESG and Social scores are more likely to engage in selective channeling, suggesting self-serving motives. Regression analyses using cosine similarity and Jaccard coefficients support the model's mechanics. These results offer practical insights: investors should be cautious with firms exhibiting low stakeholder orientation, while companies can optimize multi-channel strategies to account for stakeholders' cognitive limitations. Future research could extend the model to richer communication strategies, the persuadee's perspective, and microeconomic signaling frameworks integrating bounded rationality.
This study examines the determinants of foreign portfolio investment inflows into Vietnam's stock market from 2010 to 2023 using the system GMM estimator. Results reveal that stock dividend payouts, foreign ownership, profitability, and firm size significantly attract FPI, while exchange rate volatility and inflation deter it. The lagged FPI variable indicates momentum trading among foreign investors. Although ESG disclosure shows no significant effect, transparency and macroeconomic stability, especially in corruption control, enhance investment appeal. The findings provide policy implications for listed firms and regulators in improving corporate governance, disclosure quality, and macroeconomic consistency to sustainably attract foreign capital.
This study investigates how climate change exposure, board effectiveness, and circular economy (CE) practices jointly influence corporate default risk, using 23,516 firm-year observations from 65 countries (2003-2023). Employing panel regressions and 2SLS to address endogeneity, I find that climate risk significantly increases default likelihood. Effective boards reduce default risk and strongly moderate the negative impact of climate exposure, with this effect intensifying over time. Adoption of CE practices, including resource efficiency, emissions reduction, product responsibility, and environmental innovation, significantly enhances financial resilience. My findings highlight the critical value of integrating sustainability and governance into corporate risk models.
In March 2020, during the first quarter of the COVID-19 pandemic, the Federal Reserve System (Fed) in the U.S. took major decisions within the scope of conventional monetary policy by eliminating reserve requirements for banks and bringing the federal funds rate near zero, toward the so-called zero lower bound (ZLB). In this ZLB environment, the Fed further applied unconventional monetary policy tools in the sense of "monetary easing" to prevent a possible credit crunch and foster bank lending in the pandemic crisis. However, so far, it is unclear how this monetary easing has impacted banks' liquidity and profitability during the period of ZLB environment and COVID-19. Therefore, we examine how the Fed's monetary easing initiative - measured by the shadow short rate (SSR) - affected banks' liquidity and profitability during the ZLB period of the COVID-19 pandemic (2020Q1-2021Q4). Using a panel of 87 U.S. commercial banks over eight quarters, we estimate ordinary least squares (OLS), fixed and random effects, system and difference generalized method of moments (GMM), and quantile regression models. We find empirical evidence that expansionary monetary policy pursuing monetary easing, including unconventional monetary policy interventions, decreases banks' liquidity by promoting bank lending compared to deposits and by decreasing the holding of liquid assets compared to total assets. Moreover, monetary easing increases banks' profitability as measured by the return on assets (ROA) and the return on equity (ROE). In other words, deeper easing (i.e., lower SSR) goes together with higher loan-to-deposit ratios, lower liquid asset shares, and improved return metrics (ROA, ROE). These results are robust based on two-step system GMM models and, additionally, two-step difference GMM models. Moreover, we observe a heterogeneous impact of monetary easing on banks' liquidity and profitability applying quantile regression. Our study provides interesting empirical evidence for policymakers.
This article investigates the causal dynamics between sustainability uncertainty (ESGUI) and implied volatility indices (stock, crude oil, gold, and exchange rate). In doing so, this study develops a multiscale nonparametric framework for testing causality across conditional quantiles and frequencies. Departing from conventional tests that focus on the linear conditional mean or a single quantile, this approach employs the Complete Ensemble Empirical Mode Decomposition with Adaptive Noise (CEEMDAN) to decompose each series into low-, mid-, and high-frequency components, and then examines nonlinear directional dependence across the entire conditional distribution within each frequency band. The results show that ESGUI predicts implied volatility in euro exchange rates, oil, equities, and gold mainly through low-frequency components, with stronger effects in the lower to middle quantiles, weaker influence at higher quantiles, and only sporadic transmission at high-frequency components. In contrast, implied volatility indices exhibit broader predictive power for sustainability uncertainty, driven primarily by low-frequency dynamics and supported by mid-frequency effects, while variance-based results indicate low-frequency bidirectional dependence that weakens under extreme states. The study derives policy implications based on these findings.
Using data from the EDGAR log, we construct a novel metric capturing the intensity of information acquisition about a firm by its competitors relative to investors, who comprise the intended audience for regulatory disclosure. We show that greater information acquisition by rivals, relative to investors, is more pronounced for younger firms, R&D-intensive firms, and firms in more competitive industries. Firms subject to greater relative information acquisition by rivals invest less, have lower innovation, and suffer financially, both in terms of profitability and valuation. Taken together, these findings are suggestive of a negative externality of mandatory disclosure requirements.
We investigate differences in corporate culture between family and non-family firms using sexual harassment reports as proxies. Firms with weak and permissive cultures are expected to have more sexual harassment incidents but many of them could go unreported due to fears of retribution. In contrast, firms with strong corporate cultures could have fewer incidents but with more of them being reported due to employees feeling safe to do so. We find that family firms led by non-founder CEOs report significantly more sexual harassment cases than founder CEO family firms or non-family firms, with evidence that is more consistent with this pattern reflecting a comparatively stronger corporate culture.
To the extent that individual financial literacy is important, the expected declining share of students attending and completing college suggests high schools will have an increasingly outside role in imparting individual financial literacy. In this paper, we consider whether high school only financial education enhances financial literacy and knowledge, and whether it has a beneficial impact on adult income, securities ownership, and home ownership. With data from the National Financial Capability Study, we estimate high school financial education only treatment effect parameters of outcome specifications that mitigate the effect of unobservables and selection into treatment. Our parameter estimates reveal that high school financial education has favorable treatment effects-possibly causal-on financial literacy and self-reported financial knowledge. With respect to income and individual decisions to invest in securities and purchase a home, high school only financial education has no overall treatment effect. Our results suggest that high school financial education may not sufficiently impart that today's youth will live longer than previous cohorts, with a longer period of post-retirement life that requires more consumption. This may fail to induce participants in high school financial education to set goals for investing in assets and careers that can finance post-retirement consumption. Understanding financial strategies for financing post-retirement consumption should perhaps be made an explicit learning outcome in a strengthened high school financial education curriculum.
This study investigates the determinants of bankruptcy duration and resolution outcomes among publicly traded U.S. healthcare firms filing under Chapter 11. Using parametric survival models, we find that firm age and capital structure complexity are associated with longer proceedings, particularly among firms that ultimately liquidate. In contrast, prearranged filings, debtor-in-possession financing, and broader client reach shorten durations, especially in reorganizations. Governance disruptions such as fraud discovery and management turnover accelerate liquidation exits by eroding stakeholder confidence and reducing resistance to closure. The findings carry implications for policy design, creditor coordination, and institutional resilience in healthcare, where financial distress has systemic consequences for service continuity and public accountability.
This study examines whether CEOs' engineering education is associated with superior firm-level financial performance and whether the depth of technical education further amplifies this relationship. Drawing on Upper Echelons Theory (UET), Human Capital Theory (HCT), Cognitive-Fit Theory, and Innovation Diffusion Theory, the study conceptualizes engineering education as a form of task-specific and cumulative human capital that shapes executive cognition, decision quality, and innovation adoption. Using a six-year panel (2019-2024) of Fortune 500 firms, the analysis employs correlation and hierarchical regression techniques to assess the relationship between CEO engineering education and three accounting-based performance measures: Return on Assets (ROA), Return on Equity (ROE), and Net Income Growth. The findings provide consistent evidence that firms led by engineering-educated CEOs outperform those led by non-engineering CEOs across all three financial indicators. Moreover, CEOs holding both undergraduate and graduate engineering degrees exhibit significantly stronger performance effects, with higher coefficients and increased explanatory power across regression models. These results suggest that deeper technical education enhances analytical rigor, capital allocation efficiency, and the ability to scale performance-enhancing innovations. Moving beyond traditional MBA-centric perspectives, this study contributes to executive leadership and finance research by demonstrating that discipline-specific and cumulative engineering education represents a meaningful and economically relevant dimension of CEO human capital. The findings offer important implications for executive selection, leadership development, and governance in data-intensive and technology-driven organizational contexts.
This study examines how the collapse of Silicon Valley Bank (SVB) and heightened inflation affected shareholders wealth in U.S. financial institutions. Using daily stock returns from February 15 to March 29, 2023, we calculate abnormal and cumulative abnormal returns to measure market reactions. Applying ordinary least squares (OLS) and difference-in-differences methods, we record a substantial reduction in shareholder wealth linked to SVB bankruptcy, exacerbated by inflationary pressures. These results highlight the systemic nature of financial shocks, where distress in individual institution can transmit broadly across markets. Our findings enhance the literature on financial institutions by shedding the light on the protective benefits of diversification diminishing during extreme adverse events. For policymakers, investors, and firms, the findings underscore the importance of monitoring systemic risk and strengthening resilience against contagion effects in periods of heightened uncertainty.
This paper examines the origin of the demand for corporate environmental responsibility in capital markets by comparing the responses of retail and institutional investors to environmental information releases. Employing public green rankings for S&P 500 firms, we show that retail investors respond positively to increases in public rankings by paying a green premium and increasing their holdings during the period when environmental, social and governance (ESG) investment was becoming increasingly popular. Conversely, increases in private green scores do not result in significant market reactions, indicating that institutional investors did not emphasize environmental protection in their investment decisions. A quasi-natural experiment and robustness tests with institutional holdings provide additional support for this finding. This effect has disappeared in recent years, as demand from retail investors has been met by institutional options. Overall, this study provides evidence that retail investors are the primary drivers of early demand for environmental responsibility, providing important policy implications to incentivize institutional investors.
This study analyzes co-movements in energy markets and commodities during geopolitical events and financial stress periods. Using spectral causality tests, bivariate wavelet coherence, and multiple wavelet coherence techniques, we reveal intricate associations among diverse financial stress and energy market indices. Significantly, the CBOE oil volatility index exhibits a substantial long- and medium-term causal effect on the S&P Global Clean Energy index during extreme events such as the COVID-19 pandemic and the Russia-Ukraine war. Bivariate wavelet coherence analysis reveals remarkable lead-lag relationships with gold volatility as a leading indicator for clean energy stocks, especially in turbulent periods. The multiple wavelet coherence assessment explores the combined effects of uncertainty indicators on the relationships between clean energy, energy, and commodities indices. Interestingly, during a high uncertainty period, the S&P 500 Energy index and geopolitical risk significantly jointly influence the clean energy market, emphasizing the importance of external factors in the market dynamics. Our findings contribute valuable insights into investors and policy-makers, as well as market participants, and as such highlight the need for a nuanced understanding of lead-lag dynamics and the combined effects of various risk factors on market co-movements.
This study analyses the distributional impact of healthcare reform policies using a computable general equilibrium model with disaggregated household groups. Two simulations are conducted using a static computable general equilibrium model for Malaysia based on a health-focused Social Accounting Matrix to align with the government's aims in the Health White Paper: implementing an earmarked tax and a co-payment system. The findings suggest that the earmarked tax scenario significantly benefits low-income people if public health subsidies are expanded under the revenue neutrality policy. The welfare effect becomes more pronounced when the simultaneous health effect is present. Regarding expenditure, the household-specific consumer price index demonstrates notable progressivity among urban households in the co-payment simulation but not in the earmarked tax simulations. It is plausible to claim that raising the healthcare fund would boost welfare only if taxpayers received more benefits, as in the earmarked tax scenario. The findings provide insights for designing equitable and fiscally sustainable healthcare financing reforms in Malaysia, particularly in balancing revenue generation with distributional equity across income groups.
This study investigates the long-term performance of Benjamin Graham's net current asset value (NCAV) strategy, one of the most stringent forms of value investing, in U.S. equity markets using data from 1969 to 2019. The NCAV criterion identifies firms trading at less than two-thirds of current assets minus total liabilities, effectively pricing them below their estimated liquidation value. Using a sample of 648 unique firms, we find that a value-weighted NCAV portfolio earns an average monthly return of 1.94%, significantly outperforming market benchmarks. After controlling for the Fama-French five factors, the Pastor-Stambaugh liquidity factor, and the January effect, NCAV portfolios deliver a statistically and economically significant alpha of 1.09% per month (13.9% annually). In contrast, industry- and size-matched control portfolios exhibit no abnormal returns, indicating that the NCAV premium is not driven by small-firm effects. The strategy's profitability, however, declines in the 2004-2019 period, consistent with structural changes in the U.S. economy, increased institutional participation, and evolving factor exposures. Our findings provide new evidence on the persistence, limitations, and conditional nature of deep-value investment strategies, with implications for market efficiency and contrarian investment approaches.
