This study examines how environmental, social, and governance (ESG) activities influence stock liquidity using a panel of European listed firms from 2003 to 2019. We distinguish between ESG performance and ESG controversies to capture both proactive sustainability engagement and negative ESG shock events. We find that higher ESG performance is associated with improved liquidity, whereas ESG controversies significantly impair it, indicating asymmetric market reactions to positive versus negative ESG information. The evidence is consistent with a framework in which ESG activities shape firms’ information environment and investor participation, thereby affecting trading frictions. Environmental practices are associated with lower risk-related uncertainty, social practices with more stable investor participation, and governance practices with reduced information asymmetry. We further find that voluntary ESG disclosure improves liquidity, especially for firms facing high information asymmetry. To strengthen identification, we employ change analysis, Granger causality tests, instrumental variables, Heckman selection correction, and a staggered difference in differences design based on shifts in ESG salience. Overall, the findings suggest that ESG-related information materially affects market liquidity through economically distinct channels.

This study investigates the causal impact of hedge fund activism (HFA) on market liquidity. The empirical results show that HFA leads to a deterioration in stock liquidity, with the effect being more pronounced in firms characterized by greater information asymmetry and financial constraints. The decline in liquidity is also more evident in cases of high-intensity campaigns, led by funds with weaker market reputation, and that engage more frequently in activist interventions. Additional analyses reveal that price efficiency, corporate information flow, and operating complexity contribute to liquidity decline. This evidence holds using several liquidity metrics and sensitivity tests, and we rule out any potential endogeneity concern using an exogenous setting in our Difference-in-Differences regression analysis. Overall, this study underscores the disruptive influence of HFA on corporate dynamics and its wider market repercussions.

This paper investigates the impact of the ELITE program for SMEs on their ability to access external financing. Leveraging on unique dataset of Italian unlisted companies, we discovered that ELITE firms accessed funding more efficiently than matched controls, experiencing a rise in financial leverage, accompanied by a reduction in the cost of debt. When looking at debt structure, ELITE companies exhibit a restructuring towards longer maturities, with bank debt partially replaced by bond issuance, indicating an openness to market-based finance. Our analysis sheds light on the role of growth programs in mitigating the financing challenges faced by SMEs, offering important insights for academics and practitioners.

This paper analyzes whether there is any relationship between sustainability performance and corporate cost of debt. Using a sample of European listed companies, we find that high-ESG firms pay a lower cost on their debt, with the environmental dimension explaining most of this result and the governance dimension, instead, to have no effect in this respect. We also show that, consistent with the risk-reducing effect of superior ESG performance, a positive relation exists between ESG ratings and credit ratings. Our results are relevant to different groups of stakeholders, including policymakers, investors and firms themselves, suggesting them that they can benefit from being more socially responsible in terms of lower costs of financing.

We study the impact of ESG performance on the cost of debt in the primary corporate bond market. Using an international sample of 25,234 bonds from 2677 ESG-rated issuers, we analyse yield spreads between bonds from high- and low-ESG-rated issuers, finding lower yields (by about 10 bps) for high-ESG firms. Our results are robust to additional tests, including controls for endogeneity, and are mainly explained by the environmental and social pillars. We also find that this result is driven by more developed financial markets, likely affected by lower information frictions, and by countries where bankruptcy rules guarantee higher protection for bondholders, making them more willing to grant ESG premia. Finally, we observe lower yield spreads for bond issues that occurred after the introduction of the SFDR, highlighting the importance of regulations promoting socially responsible investments. Overall, our results suggest that firms can benefit from superior ESG performance in the form of lower borrowing costs in the corporate bond market.

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.

In this study, we analyze a sample of 1,630 corporate green bonds issued internationally between November 2012 and January 2024 to investigate the yield differences between green and non-green bonds. Our findings reveal a small greenium, particularly significant in the secondary market among carbon-intensive industries, first-time green bond issuers, and riskier issuances. We show that Geopolitical Risk (GPR) significantly influences the greenium in the secondary market, primarily driven by geopolitical acts rather than threats. Additionally, we establish that third-party certifications and corporate exposure to environmental risk are critical in explaining the GPR-greenium relationship. These results underscore the importance of GPR in enhancing investor preference for green bonds, offering important implications for both practice and policy.

We study the effect of geopolitical risk (GPR) on stock price crash risk and we investigate the mediating role of the ESG factors in this relationship. Using a large international sample of publicly listed firms, we find that higher GPR causes stock price crashes to occur more frequently. This result holds to several robustness checks and to the use of different measures of stock price crash risk and we rule out any potential endogeneity concern using an Instrumental Variables (IV) approach. We also find that the causal effect of GPR on crash events is mainly driven by the expectations and threats of geopolitical tensions (geopolitical threats), rather than their effective realization and escalation (geopolitical acts). However, when exploring the potential mitigating role of ESG factors, we observe these negative implications to be less severe for high ESG-rated issuers and, specifically, for firms scoring high in the Environmental and Social dimensions. Our study demonstrates that firms more engaged in ESG practices are more resilient to the GPR's adverse effect on stock price crash risk.

This study documents corporate culture at the time of initial public offering (IPO) and the relationship between corporate culture at the time of IPO and firm financial performance. Based on a sample of 1157 US firms that went public between 1996 and 2011 and performance information through 2016, the data provide strong evidence that regional culture, industry characteristics, and pre-IPO financing play key roles in explaining a firm's cultural orientation. Moreover, the data indicate that IPO firms with a highly competition- and creation-oriented culture experience higher profitability and less risk of financial distress than other IPO firms.

This study explores the causal effect of analyst coverage on corporate default risk. Using the exogenous drop of analyst coverage due to brokerage mergers and closuresas a natural experiment, we observe an increase in the probability of default following the coverage termination. This result is driven by firms having large asymmetric information problems (few analysts following and intangible-intensive firms), higher financing constraints, lower stock liquidity and firms operating in countries with a larger domestic stock market size. We explore agency costs and stock liquidity as potentialchannels, finding empirical support only for this latter. Finally, we observe that firms react to the analyst loss by adopting conservative investment and financing policies in the aim to mitigate the increase in default risk.

In this paper, we examine the relationship between geopolitical risk and stock liquidity. Using an international sample of publicly listed firms, we find that higher geopolitical risk is associated with lower stock liquidity, and this is mainly driven by the expectations and threats of geopolitical tensions, rather than their effective realization and escalation. Also, we observe the largest decrease in stock liquidity in correspondence of stocks traded in less liquid markets and whose preexisting liquidity was already low, as well as stocks whose issuers are more financially constrained and less transparent. Our results shed light on the stock market implications of geopolitical risk and show that financing constraints and information asymmetry are two relevant features in explaining these implications.

This article investigates whether equity analysts promote or discourage environmental, social and governance (ESG) engagement by using an international sample of firms incorporated in 46 countries. To establish causality, we rely on two natural experiments, that is, brokerage mergers and closures, which generate an exogenous coverage termination. We find that the loss of an equity analyst results, on average, in an increase in the ESG score. This finding is consistent with the view that equity analysts exacerbate managerial myopia, encouraging listed firms’ managers to excessively focus on short-term outcomes. We also find that the impact of analyst loss on the ESG performance holds only for companies whose managers pay more attention to not miss earnings targets and for firms located in countries where the cultural orientation to long-term growth (rather than short-term results) is stronger. Finally, by decomposing the ESG score into its various sub-pillars, we observe that the impact of analyst loss is driven by the Environmental and Social dimensions, while no significant impact is found for the Governance dimension.

This paper examines the relationship between green innovation and default risk using a sample of 26,904 firm-year observations across 35 European countries from 2003 to 2019. We find that green innovation is negatively related to firms' default risk, proxied by the market-based probability of default and accounting-based Altman's Z’‘-score and Zmijewski's ZM-score. The results are robust using an OLS fixed-effect regression and an alternative two-step GMM analysis to exclude the possibility of reverse causality. We also find that the mitigating effect of green innovation on default risk is more significant in market-oriented countries than in bank-oriented countries. However, such a mitigating effect loses significance in IPO firms. Finally, the investigation of firm risk channels shows that the mitigating effect is mainly driven by improved profitability and market value rather than reduced leverage channels. As the first study on the link between eco-innovation and credit risk, the present study's findings provide valuable guidance for the policymaker, corporate managers, investors, and other stakeholders.

This paper investigates how equity analysts influence firms' green innovation across different financial markets. Using a unique data set consisting of more than 6000 listed firms across 56 different countries, we find that corporate green innovation is positively associated with the number of equity analysts following the firm. We attribute this result to the informational role of analysts, which encourages managers to invest more in eco-innovation. However, when we divide the full sample into two subsamples based on whether covered firms are incorporated in market-oriented or bank-oriented countries, we find that the association between firm's green innovation and analyst coverage becomes negative in the case of market-oriented financial systems. We argue that potential explanations for this result rely on the differences occurring among market-oriented and bank-oriented systems in terms of listed companies' ownership structure and the prevalence of arm's length transaction banking rather than long-term lender-borrower relationships.

We investigate the relationship between the going-public decision and firm risk. We employ a comprehensive sample of firms that went public on European stock exchanges from 2000 to 2015 and examine how the risks of these newly listed firms are different from those of private firms and long-listing firms. We find that compared with private firms, newly listed firms have significantly increased risks of financial distress. This difference is largely attributable to the increase in leverage and the decline in liquidity, profitability and retained earnings. The results are consistent after controlling for selection bias, the effect of stock issuance, and the impact of the financial crisis and are robust to different risk indicators and estimation models (namely, the treatment effect model and DID). Finally, we find that the risks of newly listed firms are much higher than those of long-listing firms, and the risk effect of newly listed firms gradually weakens after listing. We argue that the increase in risk of IPO firms is temporary and is likely to be caused by the transition to public listing.

Using a unique dataset of privately held firms and companies that went public on the European and Asian stock exchanges between 2007 and 2011, we find that on average, newly listed firms experience negative abnormal operating performance in the years after the IPO. Furthermore, we document a nonlinear relation (inverted Ushaped) between public float and post-IPO abnormal operating performance. We interpret this quadratic relation as evidence that for each level of public float, factors that facilitate the convergence of interest between insiders and outsiders (namely, monitoring effects) and entrenchment factors (namely, agency problems) are both at work. Specifically, we suggest that at low levels of public float, increasing the float intensifies agency problems less than it increases monitoring effects. However, at a high level of public float, the situation is inverted, and increasing public float intensifies agency problems much more than it facilitates the convergence of interest between insiders and outsiders.

Using a sample of 2480 firms from 51 countries covering the period 2010–2015, we find that firms with more effective corporate governance mechanisms are more likely to be more engaged in CSR. Consistent with the stakeholder theory and the conflict resolution model, this result suggests that managers adopt effective governance mechanisms together with CSR engagement in an attempt to mitigate conflicts among stakeholders. Moreover, after controlling for endogeneity and simultaneity issues, we find that both CSR engagement and corporate governance mechanisms have a significantly negative influence on the firms' risk of financial distress measured by the Altman et al. model (1995). Our results also show that the favorable influence of CSR on the firms' capability of survivorship is more pronounced in SMEs than in large firms.