Using 26,792 GPIF engagements across 21 funds (2017-2022), we provide empirical evidence on institutional investor stewardship effectiveness. Through propensity score matching and difference-in-differences analysis, we find that climate engagements significantly reduce greenhouse gas intensity and improve firm valuation, while governance engagements enhance shareholder returns, increase board independence, and reduce cross-shareholdings. Engagements target large-cap companies with lower controlling ownership. Our findings demonstrate that Japan's Government Pension Investment Fund, as a universal owner, drives measurable improvements in corporate governance, sustainability, and financial performance through structured asset manager engagements with investee companies.
This study examines how deposit and lending interest rates adjust to changes in two proxies for funding costs in the banking systems of the Euro area from January 2003 to July 2024. Using a panel framework and dynamic pooled least squares with cross-section fixed effects, we analyze both long- and short-run pass-through from two funding-cost proxies, the European Central Bank (ECB) policy rate and 10-year government bond yields, to retail interest rates. The results provide robust evidence of asymmetric interest rate pass-through, consistent with the 'rockets-and-feathers' phenomenon. Deposit and lending rates respond fully or even more than fully to increases in funding costs during periods of monetary tightening, whereas adjustments are incomplete or, in some cases, negative during periods of monetary easing. Short-run responses are modest, with both deposit and lending rates adjusting more rapidly to increases than to decreases, highlighting persistent downward rigidity. These patterns suggest that contractionary monetary policy is more effective than expansionary policy, as negative pass-through during easing phases indicates that lower policy rates are not fully transmitted to retail rates in the Euro Area.
Motivated by post-2020 fragmentation and underexplored institutional-geopolitical drivers, we examine how regulatory quality (RQ) and global power (GP) shape stock-market co-movements across 17 G20 economies. We estimate time-varying correlations via ADCC-GARCH, construct a scaled correlation index, and apply panel ARDL. We find that higher RQ and stronger GP raise long-run integration; effects appear conditional rather than purely additive. Results are robust to alternative openness proxies (trade vs. GDP). Our contributions are a unified RQ-GP framework, a correlation index for integration monitoring, and policy-relevant evidence on how institutional quality and geopolitical standing condition diversification and financial stability.
We examine whether volatility in textual tone across multiple information channels predicts future stock returns. Using a multi-source measure of tone volatility for Chinese A-share firms, we find that firms with higher tone volatility face significantly lower future excess returns. This negative predictability holds after a series of robust tests. Mechanism analyses suggest that the predictive relation operates through greater uncertainty at the corporate level and trading activity. We also show that the effects are weaker for state-owned firms and for firms audited by Big Four auditors. Overall, our findings demonstrate the importance of tone volatility in asset pricing by considering the divergence of textual tones across different information sources.
This study examines the momentum echo effect using cross-sectional momentum (CMOM) and idiosyncratic momentum (IMOM) in the Korean stock market. The results document robust evidence for CMOM-based portfolios, while IMOM-based portfolios exhibit contrasting evidence. Specifically, as the momentum formation period shifts from distant-past to near-past months, CMOM performance changes from positive to negative, while IMOM changes from negative to positive. These differences arise from contrasting trading behaviors of institutional and foreign (InsFOR) investors toward winner portfolios. For winner portfolios, InsFOR investors exhibit net-buying of CMOM winners but net-selling of IMOM winners. Their behavior reflects the delayed incorporation of public market information for CMOM and the underrecognition of firm-specific information for IMOM.
This paper examines how investors' past inattention affects market reactions to corporate innovation announcements, leveraging a unique setting in China where many publicly listed firms voluntarily disclose patent grants-information already public via the Patent Gazette. Using a hand-collected dataset of 2086 announcements from 2010 to 2018, we find a significant market reaction on the corporate news announcement day. Our analysis shows that this market reaction to stale patent news is positively related to investors' past limited attention, rather than to attention-driven overreaction or other factors influencing returns. Subsample analyses further show that this relationship is more pronounced among firms with low institutional ownership and opaque information environments, and is stronger for announcements preceded by the same type of innovation disclosure within the prior 3 months. In addition, we find that retail investors drive this relationship. Our evidence also indicates that managers take proactive actions to mitigate investors' attention constraints, thereby enhancing the market's pricing of innovation news.
This paper examines the effect of CSR assurance on employee overtime using a sample of Chinese listed companies from 2012 to 2023. To overcome data limitations, we use nighttime satellite data to construct an objective measure of employee overtime. Our results show that CSR assurance significantly reduces employee overtime. Channel tests indicate that CSR assurance curbs this practice by acting as an external monitoring mechanism that pushes firms to improve internal labor protection. This negative relationship is significantly stronger for firms under stricter public scrutiny or operating in regions with weaker formal labor protection. These findings offer new insights into the social dimension of CSR, demonstrating that assurance serves as a substantive governance tool to improve employee welfare. They also offer valuable guidance for firms and policymakers seeking to address the problem of employee overtime.
This paper examines how short sellers value “greenness” in trading corporate bonds. We document significantly higher shorting volumes for green bonds relative to conventional bonds issued by the same firm. We consider several potential explanations, including short-sale constraints and lending market frictions, sources for future price declines, and demand pressure from investors. None of the above could explain the higher shorting volumes for green bonds, leaving an intriguing puzzle.
This article investigates the impact of Vietnam's Corporate Governance Code (CGC) on corporate governance practices and firm performance from 2016 to 2023. We find that the CGC enhances board independence and gender diversity. Tobin's Q has improved for firms that have increased the number of independent and female directors and for firms with external monitoring exposure. There was no empirical evidence for an increase in the accounting measure of operating performance, except for firms having Big 4 auditors and high state ownership. These findings suggest the capital market's appreciation of corporate governance reforms, but limited operating performance benefits. The study highlights the CGC's role in shaping corporate behavior in emerging markets and offers implications for policymakers and business leaders seeking to strengthen governance frameworks.
ABSTRACT This study examines whether public data availability improves corporate ESG performance. Exploiting the rollout of China's data‐sharing platforms as a quasi‐natural experiment, we find that platform adoption significantly enhances firms' ESG outcomes. Treated firms exhibit lower toxic emissions, higher labor income shares and charitable giving, and lower overhead costs and excessive managerial perks. Mechanism analyses show that these effects arise through improved firm performance, reduced information asymmetry, greater ESG‐oriented institutional ownership, and stronger public attention, with public scrutiny playing the most important role. Heterogeneity tests suggest that public data‐sharing platforms function primarily as opacity‐reducing, information‐forcing interventions: effects are stronger among firms with poorer information quality, tighter financial constraints, and private ownership, and in cities with higher‐quality platform data. Public data availability also amplifies the performance penalties associated with negative ESG events, indicating that it makes ESG‐related information more salient and economically consequential.
This study gathered rating data from diverse countries and regions between 1995 and 2022 to assess the influence of the level of political and economic interactions with the United States on credit ratings. It employs a random-effects ordered logit model for empirical analysis. The findings reveal that for countries aligned with the United States or members of the Organization for Economic Cooperation and Development, sovereign credit ratings reflect their economic alliance with the United States. Specifically, higher levels of direct investment and bilateral trade with the United States correlate with enhanced sovereign credit ratings. Conversely, for other countries, sovereign credit ratings primarily reflect the United States' political stance. This is evident when a lower human rights index, indicating serious human rights concerns perceived by the United States, results in a downgrade of the sovereign credit rating.
This article investigates the impact of common suppliers on the stock return co-movement of firms using a sample of Chinese listed firms. We find that firms with common suppliers show a higher stock return co-movement. Common suppliers are an additional determinant of the correlation in future operating performance between paired firms. The effect of common suppliers is more pronounced in the period of worse market performance as well as for firms with closer size and geographical distance relative to their common supplier, higher purchasing proportions from common supplier, and no overseas common supplier. Finally, the channel analyses show that common suppliers can improve the common stock informativeness of firms and the consistency of investor attitudes and trading behaviors, which then increases the firms' stock return co-movement. Overall, our results shed light on the role of supply chain in stock market performance.
ABSTRACT Traditional monetary policy transmission theory posits that policy easing enhances credit availability. However, we document a reversal‐like attenuation of this channel under net interest margin (NIM) pressure. Using data from 183 small and medium‐sized banks (SMBs) in China from 2009 to 2024, we employ high‐frequency identification and local projection to conduct empirical tests. We find that lending rates fall significantly faster than deposit rates following monetary easing, leading to a sharp rapid compression of NIMs. State‐dependent local projection results indicate that high‐NIM banks respond sluggishly to monetary policy and exhibit limited credit growth. By characterizing NIM as an intrinsic equilibrium outcome of cost rigidity and the competitive environment, we employ multiple methods to deconstruct these dual dimensions. The results are consistent with supply‐side constraints: cost rigidity emerges as the dominant factor limiting credit expansion, while the competitive environment acts as an amplifier. This paper documents the underlying conditions under which conventional monetary transmission becomes attenuated and state‐dependent, offering important implications for economies with similar financial systems.
ABSTRACT This study examines the relationship between controlling shareholders’ share pledging and (a) firms’ financial leverage and (b) the cost of debt. The evidence shows that controlling shareholders’ pledging activity is positively associated with firms’ total debt ratios and cost of debt. Further analyses show that better corporate governance and greater transparency can mitigate the increase in debt costs. The results remain robust after addressing endogeneity concerns using an instrumental variable approach and propensity score matching. We also conduct additional tests suggesting that information asymmetry may be an important driver of our findings while partially ruling out two alternative explanations. Overall, this study provides support for the pecking order theory and suggests that controlling shareholders’ share pledging is an additional determinant associated with firms’ capital structure and cost of capital.
Paying more corporate taxes may signal tax compliance. An alternative view suggests that corporations that pay more taxes are less efficient in designing their tax strategies than those that pay less taxes. Therefore, firms may adopt tax-saving strategies. The problem arises when firms become too aggressive and embark upon the grey zone, where there is no clear distinction between tax saving and tax avoidance/evasion. We provide empirical evidence that tax aggressiveness causes an increase in firm-specific risk. This effect is more pronounced for opaque firms, but it is not sensitive to the quality of corporate governance. It does not differ between multinational and domestic firms, or between firms that borrow money from the foreign debt market and those that do not. Additionally, we find that tax aggressiveness is positively related to higher levels of earnings volatility, stock price crash risk, total risk, and systematic risk. The relationship between tax aggressiveness and idiosyncratic volatility is unaffected by managerial incentives, past investment behavior, ESG performance, or innovation intensity.
ABSTRACT We examine the relation between firm‐level investment and income inequality in an international setting. We find that firms' investments reduce income inequality and poverty. We document that increases in employment, compensation paid to employees, and labor productivity due to firms' investment activities can be the underlying drivers of the negative firm‐level investment and income inequality link. The impact of firms' investments on income inequality varies across industries and countries. The negative investment and income inequality relation disappears when credit markets are in distress and stock market participation is low. Our findings indicate that encouraging firm‐level investment can be a valuable tool for economic policymakers who aim to reduce income inequality and poverty.
This paper examines the impacts of stock market internationalization on corporate ESG efforts in emerging markets. We employ a staggered difference-in-difference approach, focusing on the phased inclusion of Chinese firms in the MSCI Emerging Market index. The findings reveal that companies improve their ESG performance and disclosure quality after the inclusion. Notably, the effect of inclusion on firms' disclosure practices is more substantial than on their actual ESG operations. These impacts are particularly pronounced in non-state-owned enterprises and companies with weaker governance. Also, inclusion leads to a significant rise in foreign investment and analyst attention, indirectly improving corporate ESG engagement.
This study examines the relationship between CEO behavioral integrity (BI)-defined as the consistency between a leader's words and actions-and a firm's implied cost of equity capital (COEC). Drawing on the managerial style literature, we conceptualize BI as a distinct, communication-based trait that reflects the credibility of executive decision-making. Using textual analysis, we construct a proxy for CEO BI from the causal and explanatory language contained in shareholder letters of S&P 500 firms between 2013 and 2018. The results reveal a significant negative association between CEO BI and COEC across seven alternative measures. This relation remains robust after addressing endogeneity through both a CEO-turnover falsification test and an instrumental-variable approach based on peer-industry BI. The effect is more pronounced when the information environment is less transparent, firm-level risk is higher, and CEOs possess greater power. Further analysis indicates that aggressive earnings management and lower accounting quality mediate the effect, suggesting that BI operates through information-risk channels. Overall, the findings show that shareholders demand a higher risk premium and incur greater monitoring costs when CEOs exhibit low behavioral integrity, underscoring the market's valuation of managerial credibility as a priced governance attribute.
This study examines the effect of climate risk information disclosure on corporate debt financing costs in the context of China's low-carbon transition. Using a panel of Chinese A-share listed firms from 2013 to 2021, we construct a localized climate risk disclosure index based on Word2Vec and textual analysis of annual reports. The results show that higher-quality climate risk disclosure significantly lowers firms' debt financing costs. Mechanism analyses indicate that this effect operates through reduced information asymmetry, driven by stronger external supervision and improved internal governance. Further analyses reveal that the effect is more pronounced for state-owned enterprises, firms in heavy-polluting industries, and companies led by executives without environmental backgrounds. Moreover, transition risk disclosures exert a stronger cost-reducing effect than physical risk disclosures. Overall, this study provides micro-level evidence on the financing implications of climate risk communication and offers policy insights for improving climate disclosure frameworks in emerging markets.
This paper investigates whether individual CEOs and CFOs have fixed effects on firm-level future stock price crash risk. We find that both CEOs and CFOs exhibit such fixed effects, and these effects remain robust across various tests. Additionally, we observe that CEOs' fixed effects are stronger than those of CFOs. And there is some marginal evidence that the executives' fixed effects are less pronounced in firms with better information environment quality. Finally, consistent with the influence of managers' fixed effects, we find that CEOs' professional qualifications (e.g., MBA, JD, and CPA) and CFOs' family status and military experience are associated with stock price crash risk.
