We explore how investors react to firms' biodiversity-focused activities in the Voluntary Carbon Market. The average stock price reaction of forestry carbon offsetting with and without biodiversity impact is not significantly different from zero until the end of 2022. Following a Guardian article claiming rainforest carbon offsets to be "worthless" in January 2023, the announcement returns to carbon credit retirements turned significantly negative. This effect is not significant for carbon credits contributing to biodiversity conservation certified by the Climate, Community & Biodiversity (CCB) Standard, but it is significantly negative for other credits. Our results show that investors care about both the biodiversity impact of carbon credits as well as the climate-change mitigation integrity of offsetting activities.

In January 2021, a group of stocks listed on U.S. stock exchanges experienced sudden price increases, which, coupled with high short interest, led to short squeezes. We find that discussions on social media fueled the association between retail trading and subsequent stock returns. Options market activity and securities lending constraints also played a central role. Using unique data from social media platforms, we provide a comprehensive account of these short squeezes. We find that they significantly impeded market quality for the stocks at issue and their competitors. Thus, the interplay between social media and retail traders may have adverse consequences for market quality and efficiency. This paper was accepted by Will Cong, finance. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.02887 .

Independent retrospective analyses of the effectiveness of reducing deforestation and forest degradation (REDD) projects are vital to ensure climate change benefits are being delivered. A recent study in Science by West et al. (1) appeared therefore to be a timely alert that the majority of projects operating in the 2010s failed to reduce deforestation rates. Unfortunately, their analysis suffered from major flaws in the choice of underlying data, resulting in poorly matched and unstable counterfactual scenarios. These were compounded by calculation errors, biasing the study against finding that projects significantly reduced deforestation. This flawed analysis of 24 projects unfairly condemned all 100+ REDD projects, and risks cutting off finance for protecting vulnerable tropical forests from destruction at a time when funding needs to grow rapidly.

At the end of January 2021, a group of stocks listed on US stock exchanges experienced sudden surges in their stock prices, which - coupled with high short interest – led to brief short squeeze episodes. We argue that these short squeezes were the result of coordinated trading by investors, who discussed their trading strategies on social news platforms. In addition, option markets played a central role in these events. Using hand-collected data we provide the first rigorous academic study of these short-squeezes and show that they significantly impeded market quality not only of the stocks at issue but also of their competitors. This evidence calls for tighter monitoring of social news platforms and a better understanding of the interlinkages between these platforms, derivatives markets and equity markets.

On October 26, 2008, Porsche announced a largely unexpected domination plan for Volkswagen. The resulting short squeeze in Volkswagen’s stock briefly made it the most valuable listed company in the world. We argue that this was a manipulation designed to save Porsche from insolvency and the German laws against this kind of abuse were not effectively enforced. Using hand-collected data we provide the first rigorous academic study of the Porsche-VW squeeze and show that it significantly impeded market efficiency. Preventing manipulation is important because without efficient securities markets, the EU’s major project of the Capital Markets Union cannot be successful.

This chapter summarizes and empirically evaluates new regulatory policies as well as market innovations in the financial sector and their potential impact on SME financing. Using survey and balance sheet data for European SMEs, we find empirical evidence in line with the existing literature highlighting a recent deterioration in bank-based SME financing. More importantly, we provide empirical evidence suggesting that the negative macroeconomic effects of future restricted bank lending, due to new regulation, could be mitigated by policies allowing for and supporting new forms of market-based SME financing. To evaluate the financial and real effects of innovations in SME financing, we exploit the staggered introduction of SME equity and bond segments in different European countries, and show that they have been successful in providing non-bank financing to SMEs.

Due to crisis-ridden banks and new regulation (Basel III, IFRS, Mifid), there was a significant growth in innovative financing sources for SMEs in recent years. This paper uses the introduction of SME equity and bond segments as quasi-exogenous shocks and studies their effect on firm behavior. First, we find that the introduction of dedicated equity segments for SMEs increases their equity financing significantly (around 6% in relative terms). Equivalently, the introduction of SME bond segments increases bond financing of SMEs significantly (around 9.5% in relative terms). Our results suggest a positive complementarity of introducing SME bond and equity segments, as higher disclosure costs can be leveraged across segments. Second, we document significant real effects. In line with theory, an easier access to external finance increases investment and decreases the amount of cash holdings.

Purpose The purpose of this paper is to examine minority squeeze-outs and their regulation in Germany, a country where majority shareholders have extensively used this tool since its introduction in 2002. Using unique hand-collected data, the authors carry out the first detailed analysis of the German squeeze-out offers from the announcement to the outcome of post-deal litigation, examining also the determinants of the decision to squeeze-out minority investors. Design/methodology/approach Using unique data on court rulings and compensations, the authors analyze a sample of 324 squeeze-outs of publicly listed companies from 2002 to 2011 to carry out the first detailed analysis of the squeeze-out procedure and the post-deal litigation. The authors employ the event study methodology to assess the stock market reaction around the announcement of the squeeze-out. Findings Large firms with foreign large shareholders are the most likely to be delisted. Positive stock price performance increases the likelihood of a squeeze-out, but operating performance has the opposite effect. Stock prices react positively to squeeze-out announcements, in particular when the squeeze-out does not follow a previous takeover offer. Post-deal litigation is widespread: nearly all squeeze-outs are legally challenged by minority shareholders. Additional cash compensation is larger in appraisal procedures, but actions of avoidance are completed in less time. Overall, the evidence suggests that starting post-deal litigation by challenging the cash compensation offered in a squeeze-out delivers high returns for minority investors. Research limitations/implications The lack of data concerning the identity of minority shareholders in firms undergoing a squeeze-out does not allow a proper investigation of the incentives of the different types of investors. Practical implications The paper provides evidence about the incentives of the different players in a squeeze-out offer. The findings of the paper could be helpful in assessing the impact of the squeeze-out rule. The results also contribute to the understanding of minority investors’ incentives to start post-deal litigation. Originality/value This paper provides new evidence about post-deal litigation, in particular how investors use the procedures that the system provides them to protect themselves against controlling shareholders. The paper examines all the phases of the squeeze-out procedure and challenges.

This paper studies short- and long-run effects of disclosure of compliance with the German Corporate Governance Code. First, we present an analysis of firms' compliance with the Code. Second, event-study results suggest that aggregate market and firm values are unaffected, although there was widespread belief that market reactions would follow the disclosure of the declaration of conformity. Third, for the long horizon, we find that neither levels nor changes in Code compliance levels have an impact on stock price performance. Our results add evidence to the hypothesis that self-regulatory corporate governance reforms relying on disclosure without monitoring and legal enforcement are ineffective.

Limited attention has been paid to the comparative fate of banks benefiting from Capital Purchase Program (CPP) funding and less fortunate banks subject to FDIC resolution. We address this omission by investigating two core issues. One is whether commercial banks that ended up being subject to FDIC resolution received CPP funds. The other is whether the non-allocation of CPP funds made FDIC receivership more likely for viable commercial banks. Our findings show almost no overlap between CPP-funded and FDIC-resolved commercial banks, but we provide evidence that a significant number of FDIC-resolved banks could have avoided receivership if they had been allocated CPP funding. By comparing estimated funding and resolution costs we also show that bailing out more banks would have been cost-efficient. While our results do not allow for any policy suggestion on the optimality of bailouts per se, they suggest that once a bailout program is already on the table, it is better to err on the side of rescuing too many rather than too few banks.

This paper examines minority squeeze-outs and their regulation in Germany, a country where majority shareholders have extensively used this tool since its introduction in 2002. Using unique data on court rulings and compensations, we analyze a sample of 324 squeeze-outs of publicly listed companies from 2002 to 2011. Large firms with foreign large shareholders are the most likely to be delisted. Positive stock price performance increases the likelihood of a squeeze-out, but operating performance has the opposite effect. Stock prices react positively to squeeze-out announcements, in particular when the squeeze-out does not follow a previous takeover offer. Nearly all squeeze-outs are legally challenged by minority shareholders, either with an action of avoidance or with an appraisal procedure (or both). We find that additional cash compensation is larger in appraisal procedures, but actions of avoidance are completed in less time and offer higher annualized returns. Overall, our evidence suggests that challenging the cash compensation offered in a squeeze-out delivers high returns for minority investors, net of opportunity costs.

Private equity has traditionally been thought to provide diversification benefits. However, these benefits may be lower than anticipated as we find that private equity suffers from significant exposure to the same liquidity risk factor as public equity and other alternative asset classes. The unconditional liquidity risk premium is about 3% annually and, in a four-factor model, the inclusion of this liquidity risk premium reduces alpha to zero. In addition, we provide evidence that the link between private equity returns and overall market liquidity occurs via a funding liquidity channel.

Combining agency-theoretical with organisational population ecology approaches, this article analyses which factors drive the survival probabilities of organisations of the same type – listed stock corporations – facing the same institutional environment over a long period of time. It presents results from a unique hand-collected data set starting with the 51 largest firms in Baden-Württemberg in 1940 and follows their evolution for five time points from 1949 until 2007. Through an econometric survival analysis it is found that (i) the presence of multiple blockholders; (ii) a healthy capital structure (capital gearing); and (iii) the number of subsidiaries all have a positive impact on the probability of survival of the companies in our sample. To complement the findings from the survival analysis three exemplified anecdotal case studies are presented as narratives which are supportive of the general findings.

During the recent Global Financial Crisis (GFC), governments have tended to bail-out large banks, in particular those considered to be systemically important (SIBs). Governments had incentives to minimize the scope, costs and duration of their rescue intervention. Our study addresses three research questions: (i) what was the return on government bail-out investments? (ii) Did governments’ intervention occur at the expense of other stakeholders? (iii) Did governments behave like activist vulture investors?

In this paper, we use a unique hand-collected dataset to analyze stock listing as an entrepreneurial decision. By comparing mainland Chinese entrepreneurial firms listed in Hong Kong with the same type of firms opting for a domestic listing on the Shenzhen second board market, we argue that the decision to list on a particular stock exchange is a question of entrepreneurial signaling, and often a trade-off between short-term financial considerations and the entrepreneur's pursuit of long-term benefits. © 2008 Elsevier Inc. All rights reserved.

Using a comprehensive dataset containing the cash flows of 3,421 liquidated private equity investments made between 1981 and 2000, we find positive and significant loadings of investment returns on aggregate liquidity innovation measures and liquidity risk factors. The premium for liquidity risk of private equity is up to 15% per year. After adjusting performance for liquidity risk, (gross-of-fees) private equity investments have an NPV close to zero. We also find that larger investments have higher exposure to liquidity risk. These results are robust to various changes in the empirical design. Our study has important implications for the performance evaluation of private equity investments.

Our study examines private benefits of control in founding-family owned firms. We do this by analyzing a unique sample of 105 IPOs of family firms from 1970 to 2005 on German stock exchanges. We focus on three research questions. First, we show that substantial private benefits of control exist in these firms and - to our knowledge for the first time - we empirically determine the nature of these private benefits. Second, we verify that the separation of cash flow rights and voting rights via dual-class shares is used to create controlling shareholder structures in order to preserve private benefits. Thereby, we analyze the effect of different types of private benefits on dual-class adoption. Third, we show that the market cares about private benefits of control and find a significant long-run underperformance of dual-class IPO shares.