This paper examines how investors interpret initial public offering (IPO) announcements as informational signals for peer firms in the same industry. Using Merton's (1974) contingent-claims framework, we analyze abnormal stock and bond price reactions to IPO announcements to distinguish whether investors primarily revise expected firm value or refine uncertainty about firm value. Across a sample of large IPOs, we document positive abnormal bond returns and negative abnormal equity returns, an asymmetric pattern consistent with IPOs reducing uncertainty about peer firms' future value distributions. Post-IPO, peer firms exhibit significant declines in realized and implied volatility, providing empirical support for this interpretation. These results suggest that IPOs convey information about industry conditions that is relevant to both senior and residual claims but is priced differently across security classes. The findings highlight the importance of analyzing debt and equity markets jointly to identify the informational content of IPO spillovers.
The goal of this work is to determine the crash risk of certain commodities and to study the impact of certain macroeconomic and geopolitical factors, such as the geopolitical risk index, GDP, CPI, and economic policy uncertainty, on crash risk for gold, silver, crude oil, and natural gas, spanning the period 2006–2023. The findings document that macroeconomic factors, economic uncertainty, and geopolitical variables play a substantial role in determining commodity price crash risk, while the role of the economic and uncertainty variables is stronger during the global financial crisis vis-à-vis during the pandemic crisis, with the opposite being true concerning the geopolitical variable. The results provide valuable insights into policymakers and investors.
Given the well-established role of banking sector instability in driving financial and economic crises, this paper investigates the potential determinants of systemic risk on a selected sample of European listed banks. Drawing from a comprehensive review of literature, we employ a novel Least Absolute Shrinkage and Selection Operator (LASSO) enhancement of a panel data regression model to pinpoint the balance-sheet factors that significantly explain the systemic risk levels of the banking institutions. The analysis highlights that the interbank exposures among banks — measured through metrics like the interbank ratio — greatly amplify systemic risk, particularly during crises. Distinctively from past literature, this finding underscores the importance of “interconnectedness” over bank size, with the latter exhibiting a nonlinear impact on systemic risk level. Furthermore, our findings suggest that excessive bank capital can amplify the systemic importance of institutions by fostering risk-taking behavior among highly capitalized banks. Methodologically, our LASSO-based framework enhances variable selection by filtering out statistical noise and mitigating multicollinearity issues, thereby isolating the most relevant drivers of systemic risk. From a regulatory standpoint, our findings advocate for supervisory frameworks that explicitly integrate interbank exposure metrics into capital regulation and systemic risk assessments, thereby aligning prudential requirements with the true network-driven nature of systemic risk.
This article investigates the effect of digitalization on profitability, using a dataset of 58 European listed banks over the period 2018 - 2023. Specifically, amortization and potential impairment of intangible software, together with IT administrative expenses - both standardized over operating costs - are used as a digitalization proxy. This proxy is found to be positively related to the most common accounting-based profitability indicators and market-based performance measures, although with possible non-monotonic patterns and non-trivial effects driven by the allocation of financial resources between IT administrative expenses and software investments. Additionally, the results confirm the positive role of intangibles in market valuations. Finally, insights from the same database, enriched with UK-listed banks, suggest interestingly that the introduction of the prudential rule under CRR 2 for the recognition of intangible software within the regulatory capital did not exert a push effect on such investments, which are rather linked to business development.
Banks play a pivotal role in supporting the real economy throughout the transition toward a more environmentally sustainable model. Among the initiatives available to them, the issuance of green bonds represents a concrete means of demonstrating a commitment to sustainable finance. However, for such initiatives to be credible, banks must ensure that green bond issuance translates into measurable and timely improvements in their environmental performance. This research stems from the skepticism around banks issuing green bonds, as a result of which they may not benefit from a greenium (a premium on the yield of green bonds in favor of the issuer), perhaps because they are not perceived by investors as reliable in implementing green projects. Consequently, investors may perceive the “environmental benefit” and allocation of bond proceeds as less direct and transparent, and the impact of green bank bonds as reduced. The findings document that the ESG score (comprehensive and per pillar), the GHG Scope 1, Scope 2 and Scope 3 emissions, as well as the alignment with the climate-related SDGs (SDG-7 and SDG-13), exert a negative, statistically significant impact on the yield. In contrast, the green bond label and the number of SDGs have a positive, statistically significant effect on bond yields. This indicates that the green bond label or the alignment with the SDGs that are not relevant to green projects do not convince investors to accept lower returns, whereas more specific or relevant indicators do.
This research project examines the role of insurance companies in facilitating the transition to a sustainable economy. In particular, we will explore how insurance companies can contribute to the containment and protection from catastrophe risks. For this study, we want to investigate the Italian case as one of the European countries. We forecast gross insurance claims expenditure and evaluate the model’s performance. The forecast for 2021–2028 reveals an upward trend, suggesting potential financial stress for insurers. These findings have significant implications for financial regulators and managerial decision-making, emphasizing the need for robust forecasting tools to support climate risk assessment, solvency planning, and strategic adaptation. The study aligns with the Climate-Wise Partnership approach by promoting transparent, data-driven collaboration among stakeholders to enhance resilience against climate-induced risks.
This paper investigates the role of tone management in shaping future stock price crash risk within the banking sector. Building on the idea that managers strategically exploit discretion over disclosure tone as a tool of impression management, we provide evidence that an excessively optimistic use of language in financial communication is associated with sharp stock price declines. The effect is particularly pronounced in contexts where managerial incentives and opportunities to mislead are stronger, underscoring the opportunistic nature of tone manipulation. Collectively, our results emphasize how managers can temporarily conceal adverse signals, increasing informational opacity and paving the way for severe market corrections, with critical implications for the stability of the financial system.
This study presents a method to analyze social media interactions and their relationship with investor decisions and stock market movements. It explores three questions: (1) the best method for classifying stock-related social media posts, (2) the influence of posts on stock returns and trading volumes, and (3) the impact of posts by opinion leaders. The WallstreetBets board on Reddit social media and the GameStop stock provide an ideal laboratory for answering these questions. We analyzed 135,000 posts, 5.6 million comments, and 90,000 users from November 2020 to June 2021. Using natural language processing and deep learning, posts and comments were classified by user intention (buy, sell, hold). We found that a BERT-based classifier achieved the highest performance with an F1 score of 80.2%. We then analyzed the relationship between social media activity and stock market data, finding that posts are related to trading volumes but not stock returns. However, considering the popularity of posts, there is a significant relationship between social media opinions and stock returns and trading volumes. The study highlights the importance of “influencers”: posts from a few influential users significantly impact stock returns and volumes. This research underscores the importance of social media dynamics in financial market behavior.
The 2007–2009 global financial crisis prompted significant regulatory reforms in the U.S. banking sector. Among these, advanced approaches bank holding companies (AABHCs) were required to gradually incorporate unrealized losses on available-for-sale (AFS) securities into regulatory capital between 2014 and 2018. This study examines how banks adjusted their earnings management strategies in response to this change, focusing on two key tools: discretionary loan loss provisions (LLPs) and AFS security sales. Using panel data, we find that AABHCs reduced their discretionary use of LLPs during the phase-in period, while comparable non-AABHCs with stronger capital positions increased such use, though the magnitude of this effect is limited. We find no consistent evidence of strategic AFS sales for earnings management by either group. Overall, the results suggest that the regulatory change did not generate significant unintended consequences for earnings management. However, regulators may need to more closely monitor LLP reporting quality, particularly among non-AABHCs with ample regulatory capital.
This paper investigates the relationship between corruption-related disclosure in banking and the market discipline exercised by depositors. We examine to what extent depositors penalize banks that are opaque with reference to their corruption-related disclosures by demanding higher interest rates for their deposits. By focusing on the banking industry of the GIPSI countries (Greece, Ireland, Portugal, Spain and Italy), we show that banks which disclose less on corruption-related issues tend to be penalized by depositors, who ask for higher interest rates, likely to counterbalance the negative consequences of possible involvement of such banks in corruption scandals. These basic relationships are shaped by specific bank-level characteristics and by the features of each country in terms of institutional quality.
This research explores the factors that shape financial advisors’ intentions to recommend Environmental, Social, and Governance (ESG) financial products to their clients. To address this, a survey was conducted among financial advisors from a leading European bank. The study draws on Ajzen’s [(1985) From intentions to actions: A theory of planned behavior. In: Action Control, 11–39. Berlin, Heidelberg: Springer], augmenting its core constructs with additional variables that act as proxies for ESG-related themes. The findings reveal that, alongside factors such as prior experience, perceived behavioral control, and subjective norms, advisors’ self-assessed knowledge of ESG investments significantly boost their willingness to propose ESG products to their clients. These results highlight the critical role of enhancing advisors’ ESG expertise to encourage broader adoption of ESG financial instruments. This study adds to the ongoing discussion about the pivotal influence of financial advisors in promoting ESG investment strategies.
The industry of financial services and investors is characterized by a still low number of female directorships. In 2021, women held 21% of board seats, 19% of C-suite roles, and 5% of CEO positions. So, companies are encouraged to increase the number of female directorships as women are more risk-averse and their participation is considered as a successful device to enhance monitoring and improve the risk oversight, leading to greater resilience of financial institutions. Hence, this study aims at verifying whether female participation in the board of directors might affect the success of merger and acquisition (M&A) operations. In order to do this, a sample of M&A operations over the time window between 2013 and 2022 has been collected, conducted by only Western European acquirers toward worldwide targets. Then, regression analyses have been performed to identify whether the percentage of women in the board affected the results of M&A operations throughout the three phases considered, i.e. pre-merger phase, actual merger and post-merger phase. Empirical results show that companies with a higher percentage of women on the board of directors will perform M&As with a smaller relative transaction size; similarly, the presence of female directors is related to acquisition with a lower premium paid. Lastly, we found evidence of higher post-merger acquisition performance in enterprises with higher percentage of women in the board.
This study explores the relationship between Environmental, Social, and Governance (ESG) ratings and financial performance within technology-intensive sectors. Although the link between ESG factors and financial performance is widely recognized, its specific relevance to the Technology and Telecommunications sector, which is innovation-driven and has unique characteristics compared to traditional industries, remains largely unexplored. Financial performance is assessed using two key metrics: Return on Investment (ROI) and Conditional Beta (BETA). The dataset comprises a basket of firms listed in the Euro Stoxx 600 index for the period 2016–2021. Employing a Machine Learning approach and SHapley Additive exPlanations (SHAP) values for model interpretability, the study, leveraging covariate analysis, uncovers patterns and reveals how ESG factors contribute to shaping financial outcomes. The findings suggest that ESG considerations, particularly Social(S) factors, are important in driving financial performance in high-growth, innovation-driven companies.
Financial Well-being (FW) is defined as an individual’s perception of their ability to meet current and future financial obligations and expectations. This paper aims to extract relevant topics from the existing literature on FW by applying text analysis to the documents extracted from the Scopus using the key search term “financial well-being”. A topic model based on Latent Dirichlet Allocation was then applied. The content of the topics was visualized by a word cloud and labeled. A narrative approach was used to provide an interpretation for each topic. The study contributes to the literature on FW in several ways. First, the study raises awareness of the potential for text analysis to uncover previously unknown, high-quality information from large document collections within the field of FW. Second, this is the first paper to construct a topic modeling of the FW literature. Finally, the findings suggest the following main directions for future FW research: (i) extending the analysis to the countries, where FW is understudied; (ii) further analysis of the link between FW and other domains of well-being, between FW and its antecedents, between FW and ‘treatments’ targeted at children and young people, between FW and sustainability; and (iii) a tailored approach to analyzing the resilience of vulnerable groups.
This study investigates how the COVID-19 pandemic affected the European banking system, focusing on lending activities and risk-taking behavior. We use a difference-in-differences (DID) approach to compare the performance of banks highly impacted by the pandemic with those operating in less affected countries. Our results indicate a negative impact on lending activities, as banks reduced their exposure to both individuals and businesses. Nonetheless, the impact on bank risk-taking was heterogeneous, as certain banks increased their risk-taking by relaxing their lending standards to support their borrowers while others tightened lending criteria. The reduction in total lending for the banking system was primarily driven by less capitalized banks — with a sharp decline in corporate loans combined with stability in mortgages and consumer loans — and those with limited access to public guarantee schemes. Different characteristics, such as size, profitability, and listing status, led to varied lending behaviors during the COVID-19 pandemic, with smaller and more profitable banks exhibiting greater resilience.
This paper investigates the method for calculating funding banks must provide to Deposit Guarantee Schemes (DGSs) according to the “ex-ante” and “risk-based” criteria introduced by Directive 2014/49/EU (DGSD). We aim to further support the existing documents providing an approach to identify risk indicators and assign weights thereof to determine fundings to be paid to DGSs. It is worth noting that such an approach could enhance current practices as it takes into account the risk and performance of banks as opposed to the overall banking market. By doing so, a more targeted funding can be encouraged. Our results consider the Texas ratio as one of the indicators to look out for. Likewise, such methods could serve as self-assessment frameworks for Institutional Protection Schemes (IPSs) and banks, fostering sound and prudent management, in turn warding off “moral hazard” issues.
This paper presents an in-depth examination of the impact of public support to small and medium Italian enterprises during the COVID-19 pandemic. The country’s banking system was entrusted a key role in implementing extraordinary measures of financial support, such as moratoria and public guarantees. This support prevented the sudden drop in revenues and cash flows — caused by the pandemic and the related severe restrictive measures adopted by the Italian Government — from compromising the liquidity and solvency of a huge number of firms, thus preventing the occurrence of a chain of insolvencies, which would have seriously deteriorated Italian economy. To perform these tasks, Italian banks had to cope with commitments which severely tested their organizational structure, due to a large number of operations and the complexity and urgency these tasks entailed, especially in the first months of the emergency period. The study, in a five-year perspective, analyses — in terms of intensity and pervasiveness — the set of such initiatives, both at the entire Italian banking system level and at the specific cooperative banks level, the latter characterized by greater proximity to potentially more fragile customers. The aim of this work is to verify whether the effectiveness of the Italian banking system in this key role of accomplishing the transmission of economic policy decisions, aimed at promoting and sustaining real economy during a particularly difficult period, can be confirmed.
This study was concerned with the correlates of attitudes to, and habits surrounding money, particularly budgeting. It involved a secondary analysis of a representative (UK) sample of adults who completed a questionnaire that enquired into such things as their saving and spending habits, and investments. We drew on data from 1767 participants and looked specifically at demographic correlates (age, gender, income), as well as money attitudes, spending habits and their self-rated financial literacy. Our central interest was how specific beliefs about money, impulsive spending, and financial literacy are related to regular saving, spending and investment. Through correlation and regression analyses, we were able to show that household income was a major correlate of these behaviors, as were participant gender and age. We paid particular attention to the money attitude variable which suggested that those who saw money primarily as a source of security tended to be savers rather than investors and had more disposable cash. Implications of the findings and limitations of the study are discussed, including implications for detecting and advising those with money-related issues.
