ABSTRACT Relying on the phased rollout of the carbon emission trading (CET) pilot policy, we estimate a staggered difference‐in‐differences (DID) model to identify how transition risks induced by carbon pricing policies are priced in stock returns. Our results show that after CET implementation, stocks of CET‐covered firms command a significant carbon risk premium, providing empirical support for the carbon risk premium hypothesis. The premium arises from the market pricing of three distinct cash‐flow risks triggered by CET: operational uncertainty, credit deterioration, and information asymmetry. Meanwhile, divestment by rational investors serves as a key transmission channel for the premium. Dynamic analysis reveals pronounced time variation in the premium: it is significant during the initial period, persists for two years after implementation, then gradually attenuates, and reappears after the national CET launch. We further find that exposure to these risks is partially captured by established market factors (size/ SMB , value/ HML , profitability/ RMW ), indicating that carbon risk itself does not constitute a standalone pricing factor. Third‐party verified environmental ratings account for a substantial fraction of the cross‐sectional variation, whereas self‐disclosed environmental information by firms has limited explanatory power, indicating that information asymmetry constrains the market's ability to price carbon transition risks. This study provides microlevel evidence on how carbon policies are transmitted through capital markets.
ABSTRACT This paper examines how managerial risk‐taking incentives impact corporate hedging decisions. By nesting a well‐known corporate hedging model within a principal‐agent framework, we show that managers are motivated to maintain the same level of hedge intensity even if they are provided with stock option incentives. They are, however, motivated to add speculative positions on the downside to supplement their hedging operations. These predictions are verified empirically using separate measures for hedging and speculative activities. Our results contradict previous studies that suggest that managers hedge less of their firm's risk if they have stock option incentives.
ABSTRACT This paper studies the determinants of banks' and fintech companies' systemic risk. We adopt both a systemic and firm‐level perspective and consider not only factors traditionally used to explain systemic riskiness, which have never been applied to the fintech sector, but also the new potential source of instability, for both banks and fintech firms, stemming from the crypto market vulnerabilities. We find that crypto market downturns exacerbate both banks' and FinTechs' systemic risk, but they do so in a different way. Then, we prove that, overall, firm‐specific accounting and market‐related indicators exhibit lower power in explaining fintech companies' systemic risk, and that their different impact on banks' and FinTechs' systemic risk is consistent with the different nature of these two groups of firms. This work contributes to the debate on the new threats for the financial system stability associated with the development of the tech‐driven revolution and provides useful insights from the perspective of regulators' and supervisors' efforts to define a proper set of rules and monitoring tools.
ABSTRACT We examine the ability of mutual fund managers to generate a positive alpha in a consistent manner around the uncertainty‐generating Federal Open Market Committee (FOMC) meetings. The consistency of active equity mutual funds in generating a positive alpha over the successive FOMC announcements is positively related to future fund flows. This consistency is linked to the sensitivity of fund holdings (average uncertainty beta) to the monetary policy uncertainty related to the FED decisions. The uncertainty beta of mutual funds with respect to monetary policy uncertainty can predict both the investor flows and the future performance of the fund. Thus, the monetary policy uncertainty appears to be an important risk factor for funds, as investors redirect their capital to funds with the ability to hedge this risk and provide a positive risk‐adjusted return over the FOMC announcements.
Does national cultural distance create higher synergistic gains in cross-border mergers and acquisitions (CBMAs)? Existing research on the role of cultural distance suggests that cultural disparities destroy shareholders’ wealth. Using an international sample of CBMAs over 19 years, we document that synergistic gains increase by 1.75 percentage points with one standard deviation increase in cultural distance. Drawing from the organizational learning theory, we suggest that learning diverse cultural practices in the post-acquisition stage is a source of higher synergy gains. The positive association between cultural distance and synergies is more pronounced if the acquirer pays in stock and already has takeover experience. This suggests that better awareness of the target country's culture and risk management through stock payment are boundary conditions for higher gains. Overall, our results lead to the counter-intuitive finding that CBMAs between firms from countries with dissimilar cultures are not always valued as destructive but depend on how merging firms learn the cultural practices of one another and manage integration challenges. We offer practical implications for regulators and policymakers about how the international takeover market can serve as a vehicle for learning new cultural practices and increasing combined firm value.
