This study examines how the United States-Iran military escalation of February 28, 2026, was transmitted across 17 global equity markets. Using event study, panel regression with Driscoll-Kraay standard errors, Fama-MacBeth estimation, and generalized autoregressive conditional heteroskedasticity (GARCH) modeling, we document significant negative cumulative abnormal returns of approximately -2.5%. A negative war effect (beta = -0.00356, p = .044) is confirmed under panel and cross-market frameworks, transmitted primarily through global risk sentiment. Interaction analysis reveals an oil channel sign reversal during the crisis. Extended-sample GARCH shows significant volatility elevation in 14 of 17 markets, consistent with a persistent shift in volatility conditions.JEL Codes: G14, G15, F51, O16, C23
In low-sample settings, minimum variance portfolios often rely on covariance matrix inversion, introducing noise in such settings. This study explores the usage of Gaussian graphical models, which directly estimate the precision matrix for portfolio allocation and compare them with shrinkage, thresholding and other approaches, which estimate the covariance matrix. Using the Nifty 500 dataset, where true covariance and precision matrices are unknown, we compare portfolio allocation methods with the model confidence set approach, using portfolio variance as the performance metric. A comparative analysis of precision matrix estimators across different concentration ratios highlights that graphical Lasso and GreedyPrune outperform traditional covariance-based methods. Synthetic and empirical results consistently show that directly estimating the precision matrix yields superior portfolios in low-sample regimes. Among covariance estimators, nonlinear shrinkage delivers lower out-of-sample portfolio variance than linear shrinkage and thresholding methods. JEL Code: G11
In recent years, the prominence of environmental, social, and governance (ESG) investing has expanded significantly due to growing awareness of sustainability issues, such as climate change and social justice concerns, as well as an increasing understanding of the need for sustainable business approaches. This increasing focus on ESG has led to a growing demand for ESG-related disclosure in the financial market. Therefore, this study investigates the mediating role of financial constraints in the relationship between ESG disclosure and financial performance. The study aims to determine whether firms with strong ESG disclosure experience reduced financial constraints, leading to improved financial outcomes. Analyzing 690 Indian-listed firms from 2011 to 2022, the research provides a comprehensive assessment of sustainability practices in an emerging market. Findings suggest that a company's ESG disclosure has a positive impact on the financial outcome performance, with financial constraints acting as a partial mediator. Organizations that implement effective ESG disclosure encounter reduced financial constraints, ultimately enhancing their financial stability. Through the application of a mediation effect model, the study clarifies the indirect influence of financial constraints on the relationship between ESG and financial performance. These results highlight the importance of disclosing ESG initiatives in enhancing operational efficiency, mitigating financial risks, and fostering stakeholder trust. The insights contribute to the ongoing discussion on the integrated reporting of ESG and its financial implications.JEL Codes: G32, G34, M14, Q56
Inefficient investment by the private sector, especially in manufacturing, has been a major cause of worry for policymakers across the globe because of its adverse impact on productivity and potential economic growth. This article studies the impact of economic policy uncertainty (EPU) on investment inefficiency among Indian manufacturing firms. Higher EPU is found to reduce investment inefficiency among Indian firms, but the impact is stronger for firms facing greater product market competition. The negative impact of EPU on investment inefficiency is stronger for overinvesting firms and firms with better quality of financial reporting. Greater product market competition and better quality of financial reporting are both mechanisms that reduce investment inefficiency in the face of higher EPU with some degree of substitutability. Policies aimed at improving financial reporting quality in industries with lower product market competition can significantly improve investment efficiency with resulting benefits.JEL Codes: E22, E20, E60
This article examines how climate policy uncertainty (CPU) affects corporate capital structure using firm-level data from 10 countries that ratified the Kyoto Protocol. Employing a news-based measure of CPU and fixed effects models, I find that higher CPU is associated with significantly lower corporate debt financing, even after controlling for firm-, industry-, and country-level characteristics. Difference-in-differences analyses around the Kyoto Protocol's first commitment period show that heavy-emitting firms reduce leverage more strongly than light emitters following heightened CPU. The results are robust across multiple specifications and alternative financing measures. Moreover, the negative financing response to CPU is weaker in countries with more stringent environmental regulations, highlighting the role of credible policy commitment. Overall, the findings suggest that CPU induces firms to adopt more cautious financing strategies and underscore the importance of stable and credible climate policies in shaping corporate financial decisions.JEL Codes: G32, Q51, Q58
We examine the impact of unclaimed deposits on the banking stability using a sample of 33 Indian scheduled commercial banks for the period 2005-2022. We also examine the impact of increasing unclaimed deposits on the banks' profitability. We find that there is a significant negative impact of unclaimed deposits on banks' stability. Result shows a significant moderating effect of banks' interest income on the relationship of unclaimed deposits and banks' stability, indicating banks with higher reliance on interest income might experience lower negative impact of unclaimed deposits, while banks with low-interest income may find it more challenging to offset the negative effect of unclaimed deposits. Further, we find that unclaimed deposits significantly influence banks' profitability and exhibit a non-monotonic relationship. If the unclaimed deposits exceed more than 50% of the total deposits of the bank, it may have a detrimental effect on the banks' profitability as the associated cost or risk will be higher, operational complexity may rise, leading to compliance failure as well.JEL Codes: C23, E58, G21
We investigate the impact of stock-specific investor sentiment, investor attention, and analyst coverage on stock price synchronicity in the Indian market. We develop a stock-level investor sentiment index using nine sentiment proxies. The results show that investor sentiment has a negative impact on price synchronicity, supporting the notion that lower stock co-movement is associated with more noise rather than firm-specific information in the presence of stock-specific investor sentiment. Using the Google Search Volume Index as a measure of investor attention, we find that investor attention positively impacts the stock price synchronicity. Moreover, our findings reveal that the negative (positive) impact of investor sentiment (attention) on stock price synchronicity lessens (improves) the effect of analyst coverage on price synchronicity.JEL Codes: G02, G14, G12
In the branch banking system, branches with surplus funds cannot be profitable without an internal fund transfer pricing (FTP) system. Therefore, a dynamic FTP model is critical to enhance a bank's sustainability. This article has designed a market-oriented multiple FTP model by factoring in liquidity risk, market interest rate, credit demand, and portfolio diversification. The FTP rates are estimated using the 151 branch-level daily data of a bank in India. We reduced the endogeneity issue related to variable selection with the 2SLS system equation. The findings suggest that dual-functioning branches are profitable if they reduce their fund borrowings from the corporate head office (HO). Corporate treasury provides liquidity support to banks, but their profit gets impacted by the increase in the policy and HO-transfer rate. The study showed that corporate spread is significantly affected by increased liquidity cost and market borrowing rate. It is also empirically established that internal FTP pricing may hamper branches' earnings when branch managers mobilize funds beyond the cost of lending as per FTP rates. The dynamic FTP model is linked to the yield curve, making it market oriented and enabling managers to price products effectively.JEL Codes: G21, D02
In the pursuit of sustained growth, businesses allocate resources for research and development (R&D) activities, aiming to gain a competitive edge and adapt to market changes. This study empirically examines the impact of R&D expenditure and intangible assets on the financial performance of Indian companies. A novel composite research intensity variable, encompassing various research and innovation expenditures, is introduced. The results indicate that increased investments in R&D and intangible assets negatively affect accounting-based performance metrics but positively influence market value. These findings offer valuable insights for investors, business leaders, and decision-makers. One of the concerning facts is that alternative innovations or firms concentrating on environment-friendly production fail to ensure a better firm performance. As India's economic landscape evolves, influenced by environmental and regulatory dynamics, the study contributes to understanding the multifaceted relationship between research expenditure, intangible assets and firm performance, highlighting the increasing importance of such investments in a changing global market.
This article examines the impact of spillovers from unconventional and conventional monetary policies during and after the COVID-19 pandemic. The study analyses eight countries-five advanced economies (Australia, Canada, New Zealand, the United Kingdom, and the United States) and three emerging economies (Brazil, India, and South Africa), to assess monetary policy spillovers across eight sectors from 2019 to 2025, using the event study methodology. The results indicate that emerging markets experienced greater sectoral monetary policy spillovers than advanced economies. In the case of conventional monetary policy spillovers, both advanced and emerging markets responded similarly. Monetary policy is one of the most effective policies for guiding sectoral dynamics. The results of this study may help investors and policymakers.JEL Codes: E4, E44, E5
This article aims to investigate the impact of a business model on bank performance and stability, with a focus on net interest margins. Using a large sample of 300 commercial banks covering 46 African countries, we define the business model by the income structure. Overall, we find that the shift toward non-interest income is associated with a decrease in net interest margins and overall performance. Besides, we observe limited, if any, impact on stability on average. Thus, our results suggest that African banks do not clearly benefit from diversification. However, the results show that ownership and size matter.JEL Codes: G21, G32, N27
We draw upon a recently released, large-scale dataset to conduct an empirical analysis of the determinants underlying regional disparities in digital payment technology adoption in India. Older individuals and women are less likely to adopt these technologies. Educational attainment plays a significant role. While caste and religion do not directly influence digital payment usage, their effects appear to be mediated through education and economic access. A counterintuitive finding is that economically advanced states such as Chandigarh, Delhi, Gujarat, and Karnataka have relatively low adoption of digital payment systems. Individuals prefer to conduct high-value transactions in cash to evade paying income tax.JEL Codes: C3, E7, G2
We examine the relationship between free float and multiple dimensions of stock liquidity and price discounts in an emerging market. Our findings suggest that free float significantly affects all dimensions of stock liquidity. Findings further indicate the inadequacy of the regulatory definition of float and provide evidence for the differential impact of the type of investors on liquidity-both during normal and crisis periods. Finally, we establish a link between stock liquidity and price discounts. The article contributes to the sparse literature on market microstructure in emerging markets and has direct implications for policy and investors in considering free float instead of public shareholding.JEL Codes: G100, G120, G180, G140, G190
We examine the association between economic policy uncertainty (EPU) and expected stock returns and how short-selling regulations in China moderate this relationship. Consistent with the overpricing effects literature, we find a negative EPU-return relationship before the introduction of margin trade and short-selling (MTSS) program in 2010. However, after implementation of MTSS, the relationship turned positive for stocks without short-selling constraints, reflecting investors' demand for higher risk compensation. Using propensity score matching and difference-in-differences, we demonstrate that relaxation of short-selling constraints mitigates overpricing and generates positive uncertainty premium. Our findings highlight the importance of short selling in pricing of uncertainty and implications for policymakers and investors.JEL Codes: D53, D81, G11, G12
Based on the resource base theory and spatial circulation perspective, this study explores the impact of domestic and international cross-regional development on enterprise innovation from the dimension of enterprise cross-regional development. The study finds that (a) both domestic and international cross-regional development can promote enterprise innovation. (b) The intensity of domestic cross-regional development positively moderates the relationship between the scale of domestic cross-regional development and enterprise innovation, while the intensity of international cross-regional development negatively moderates the relationship between the scale of international cross-regional development and enterprise innovation. (c) Mechanism research finds that domestic cross-regional development promotes enterprise innovation mainly through the diffusion effect, while international cross-regional development promotes enterprise innovation mainly through the absorption effect. (d) Industry-specific heterogeneity analysis shows that the effect is significantly stronger in high-tech manufacturing firms than in traditional manufacturing firms, suggesting that firms in innovation-intensive industries benefit more from cross-regional expansion. Country-specific heterogeneity analysis shows that the effect is more pronounced in culturally distant host countries, highlighting the critical role of institutional and cultural contexts in shaping global innovation strategies.JEL Codes: O32, L25, F23
This study makes an attempt to unfurl why the off-budget exposure of the government, which poses sizeable fiscal risks as and when they materialize, is an off-shoot of the on-budget constraints that governments either inherit or get involved in. These not only include procedural or rule-driven inefficiencies but also combine asymmetrical nature of growth episodes at both the national and sub-national levels. As a result, much of the off-budget debt burden rises in both its implicit form through the rise in magnitude of the debt-deficit stock-flow reconciliation and explicit form in the form of guarantees extended to distressed public sector bodies. We employ the Nonlinear Autoregressive Distributed Lag Model to account for this relationship between the off-budget and on-budget indicators at both the national and sub-national levels. This carries significant policy implications for a federal nation like India where lack of uniformity in fiscal rules coupled with the responsibility of bailing out state governments lying with the national government entails a clear mandate for fiscal transparency at all level of the government.JEL Classification: E610, E620, E660, E600
This study utilizes the exogenous shock of the COVID-19 pandemic to test whether the market values the precautionary motive of cash holding. Our analysis considers the period 2017–2020 to capture the market value of cash holdings owing to the anticipation of potential containment policies. Using a generalized difference-in-difference methodology, we show that firms with high cash holdings have a positive market valuation due to the reduction of firms’ default risk. Additionally, using a causal mediation analysis, our study establishes the causal pathway through which cash affects firms’ market value during the COVID-19 pandemic. JEL Classifications: G01, G32, G12, E44
This study examines how real estate and stock markets can protect against inflation in East Asian countries compared to the United States. The study finds that stocks have a stronger relationship with inflation than housing in East Asian countries. In Hong Kong and Singapore, stock markets are influenced by unexpected sentiment, while in South Korea and Taiwan, they are aligned with expected inflation. In the real estate market, there is a long-term connection between housing prices and inflation in the United States, Hong Kong, and Singapore, but it is weak in the short term. However, the study finds that there is no clear link in Taiwan. This study emphasizes the importance of understanding the relationships between financial assets, especially as central banks address inflation and financial markets differently based on each country’s context. Investors in East Asia should be aware of these dynamics when managing inflation risks. JEL Codes: E6, F4
A steady increase in India’s public debt (PD) during the post-COVID-19 phase, as in many other developing economies, has received significant scholarly attention. This study examines India’s debt sustainability based on debt threshold estimation, which, if exceeded, is likely to hinder economic growth and impede future surges. It explores the role of institutional quality (IQ) in stimulating economic growth and reducing the negative effect of PD on primary surplus by employing the quadratic autoregressive distributed lag bound test approach and the fiscal reaction function. Focusing on India, this study analyzes data from 1985 to 2023. The findings suggest that India has already surpassed the debt threshold of 76.83%, partly due to the acceleration of public expenditure during the COVID-19 pandemic. Moreover, while rising PD negatively affects primary surplus, IQ plays a significant role in alleviating this impact and fostering economic growth. JEL Codes: O43, H63, H68, C22, O53
Starting 2015, the Indian banking regulator conducted clean-up exercise of banks’ balance sheets—aka asset quality review (AQR). This clean-up drive came along with a divergence disclosure, which captures the deviation in asset quality between the regulator and the bank’s assessment. We exploit this natural experiment to tease out the causal impact of divergence disclosure on risk-taking behavior in the presence of two counter-appealing theories: “market discipline” and “debt overhang.” Our results show that divergence disclosures do not discipline banks but rather amplify risk-taking behavior. JEL Codes: G21, E58, G32
