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Non-financial information disclosed by firms is an important channel for investors and analysts to understand the operating conditions of firms and a major source of information other than financial data. This study examines the impact of disclosure of forward-looking non-financial information content by listed companies on the information efficiency of the capital market. Using data from A-share listed companies in China's Shanghai and Shenzhen markets from 2007 to 2022, it is found that forward-looking non-financial information content has a positive impact on improving capital market information efficiency, while analysts' attention plays a moderating role. The mechanism study finds that non-financial information disclosure with forward-looking content affects the accuracy of analysts' earnings forecasts, the type of audit opinion, and the degree of financialisation of firms, which in turn have different impacts on the information efficiency of the capital market. The heterogeneity test finds that disclosure of non-financial information with forward-looking content will more significantly improve the information efficiency of the capital market if the listed company receives a high level of media attention, as well as listed companies with higher quality of internal control. This study explores the forward-looking characteristics of non-financial information in depth, enriches the study of information efficiency in the capital market, and provides theoretical suggestions for the content and direction of corporate non-financial information disclosure. [ABSTRACT FROM AUTHOR]

This paper examines the effect of economic policy uncertainty (EPU) on the Indian capital market using the generalized autoregressive conditional heteroscedastic mixed data sampling (GARCH-MIDAS) approach. This study also disintegrates the Global EPU (GEPU) on its components using identity functions such as up, down, and composite parts dependent on the adjustment in the heading of the EPU and GEPU and tests the linkages among these parameters and the Indian securities exchange instability. Our empirical study shows that GEPU positively and significantly impacts the Indian capital market's volatility. That indicates that the Indian capital exchange volatility will also be unstable when the global economic policy uncertainty is higher. Further, based on the dynamic directions of EPU and GEPU, our results show that, in diverse situations, directional GEPU may present differently in predicting the uncertainty in the Indian capital market. This is primarily so when EPU and GEPU climb in the same period when our approach can obtain more powerful prediction precision. [ABSTRACT FROM AUTHOR]

We study a publicly traded firm that cares about its short-term stock market performance while collaborating with a privately owned firm in a business alliance. The firms each undertake a relation-specific investment and then bargain over the allocation of the joint surplus generated by the alliance. The public firm's myopic market concerns affect both the total size of the surplus and how the firms divide the surplus. While the public firm always becomes more aggressive and obtains more of the surplus, the total size of the surplus may become larger or smaller, due to the effect of myopic market concerns on the firms' investment incentives. We establish conditions under which the investment and the value of each firm increase or decrease with market concerns. The market concerns could mitigate or exacerbate the hold-up problem between the two firms and thus could either benefit or harm the whole business alliance. We also study two extensions with (i) the two investments being substitutes instead of complements and (ii) both firms being publicly listed. In both cases, the insights from our main model still hold. [ABSTRACT FROM AUTHOR]

This study investigates the impact of significant wildfires from 2019 to 2022 on nine sectors within the US capital markets, utilizing a dataset encompassing 161 wildfires. Employing a combination of parametric and nonparametric tests, alongside regression analysis, the research scrutinizes how capital markets in distinct sectors respond to wildfire events, revealing nuanced effects. In sectors directly impacted, the insurance industry displays sensitivity to fire costs, with explicit country or event mentions correlating with sustained returns. Conversely, the real estate sector experiences diminished returns during prolonged wildfires, while the forestry and timber industry exhibits heightened sensitivity to fire costs, especially when ignited by lightning. Within indirect impact sectors, the health industry shows vulnerability to fire-related fatalities, with subsequent negative correlations with country mentions. In the food industry, fire costs contribute positively to returns, while duration and size yield negative effects. The transportation industry witnesses a gradual decline in returns, escalating with the number of fire days or associated costs. In resilience and mitigation sectors, utilities demonstrate recovery post-wildfires, contrasting with consistent declines in the energy sector. Among interconnected sectors, the travel and tourism industry sees increased returns tied to the number of victims, with events caused by human actions having a more pronounced impact. This research underscores the significance of tailored risk assessment and mitigation strategies, offering valuable insights for investors and policymakers navigating the intricate relationship between environmental events and financial markets. [ABSTRACT FROM AUTHOR]

We examine whether gender-diverse boards prioritize product market concerns over capital market incentives when proprietary costs are high. We argue that gender-diverse boards protect their firm's competitive edge and maximize long-term shareholder wealth by ethically and carefully maintaining the confidentiality of proprietary information. Due to the reduced disclosure of proprietary information, firms with gender-diverse boards are likely to face more adverse selection when proprietary costs are high. However, the reduced disclosure of proprietary information enables firms with gender-diverse boards to enhance and maintain their competitive edge and gain higher long-term returns. Using a matched sample of the United States-listed companies, we find that firms with gender-diverse boards, relative to similar firms with all-male boards, (1) are associated with higher adverse selection costs and (2) higher long-run stock returns when the firm faces high product market competition. Collectively, our results suggest that firms with gender-diverse boards, which initially experience higher adverse selection in a competitive environment, are rewarded with a net gain of about 10 percent of their stock price in three years. Our research contributes to the literature by highlighting the importance of board gender diversity in fostering the ethical redaction of proprietary information for proprietary cost-based motives as opposed to agency cost-based motives. Our findings have important implications for regulators, firms, and shareholders by identifying gender-diverse boards as an antecedent for the ethical redaction of proprietary information. [ABSTRACT FROM AUTHOR]

Leveraging the Chinese capital market, we investigate the relationship between a CEO's scientific research background and the level of digitalization within enterprises. Our results demonstrate robust findings indicating that a CEO's scientific research background significantly enhances the level of enterprise digitalization. Moreover, we observe that this correlation is more pronounced in companies controlled by non-state-owned enterprises, those operating within a more advanced digital economy, and those engaged in high levels of regional integration. Furthermore, we establish that the positive impact of a CEO's research background on a company's digitalization level is primarily driven by fostering the organization's innovation drive. Overall, our research suggests that CEOs with scientific research backgrounds are instrumental in encouraging a culture of innovation within their firms, thereby enhancing enterprise digitalization performance. This study contributes to the literature by exploring the factors influencing enterprise digitalization levels through the lens of managerial experience and analyzing the economic implications of management experience on enterprise digital transformation. Methodologically, we have refined and enhanced the measurement approach for assessing enterprise digitalization levels. Practically, our findings underscore the importance of promoting cross-industry and cross-regional exchanges of high-caliber talent for executives, enterprises, and governmental entities alike. [ABSTRACT FROM AUTHOR]

In this paper, we investigate the relationship between the indicators for COVID-19 monitoring and the dynamic of jumps across six major financial markets including China, France, Italy, Germany, the UK, and the US. First, this paper finds that jumps occurred more frequently in the index returns during the COVID-19 pandemic. Second, the empirical findings suggest that the anxiety stemming from potential future control measures, which were prompted by updates in COVID-19 briefings, plays a significant role in explaining the jumps in index returns within financial markets. The strategies of 'zero tolerance for COVID-19', 'maximum healthcare capacity', and 'less tolerance for restriction' were carried out by China, European countries, and the US respectively. These diverse approaches to managing COVID-19 have a significant and varied impact on the market's sudden price movements. [ABSTRACT FROM AUTHOR]

International portfolio management is influenced by the existence of "frictions", factors or events that interfere with trade, which are linked in financial literature to market-specific factors, such as available information, restrictions, investor protection, or market liquidity. Given the wide variety of factors that can be included in these categories, scientific studies typically focus on a reduced number of indicators at a time in order to offer an in depth analysis of their impact. We offer a consolidated view of the perspectives observed in financial literature by proposing a novel index for market frictions that includes all these four components and rank fifteen post-communist East European capital markets based on their index values. We then constructed various scenarios by assuming different levels of importance for the criteria used in index construction. By employing grey clustering analysis, we cluster these capital markets into three categories—strongly recommended, recommended with some reserve, and not recommended—based on the importance given by the decision maker to these factors. The results show that some of the studied markets are in the same cluster, irrespective of the chosen scenario. The only market always included in the "strongly recommended" category is Hungary, indicating that it is a good investment option for international participants. Bulgaria and Slovakia are always regarded as "recommended with reserve" markets, whereas the Republic of Moldova is part of the "not recommended" category. The other markets show a degree of variability that can be explained by different investor perspectives. This study contributes to the existing literature by combining the advantages of grey clustering and portfolio analysis. Investors can use this approach during the decision-making process related to their investments. [ABSTRACT FROM AUTHOR]

The 2015 Paris Agreement has set out the climate change target of limiting global warming to 1.5 °C, which poses a serious challenge to countries to reduce emissions. As the world's largest carbon emitter, promoting the realization of the "dual-carbon" goal is the key to realizing China's green transformation and high-quality development. Chinese asset managers play active roles in the capital market as an important channel of asset allocation. Currently, the vast majority of Chinese asset managers hold high percentages of high-carbon industries in their portfolios, and lack quantitative data of their carbon footprints embodied in equity investments, which faces huge carbon-related risks. Therefore, it's an urgent need to comprehensively and scientifically measure financed emissions of Chinese asset managers, which is of great significance for asset managers' carbon risk management and sustainable investment. This paper develops a detailed inventory of carbon emissions for equity portfolios managed by Chinese asset managers from 2010 to 2020, which stands as a pivotal reference for in-depth analysis of emission characteristics. [ABSTRACT FROM AUTHOR]

This paper presents a critical examination of recent Polish takeover regulation from a perspective of evolution of capital market law in Poland. The study is based on both legal analysis and an empirical and statistical approach. Firstly, as a starting point, it briefly describes the mandatory bid rule and Takeover Bids Directive as well as the development of early Polish provisions. Secondly, the paper elaborates on the normative model of takeovers, which was in force until 2022. Using a case study and a comprehensive statistical examination of all mandatory bids carried out between 2008 and 2017, it shows how the unusual and incorrect legislative structure of two thresholds of control (33% and 66% of votes) allowed the actual circumvention of mandatory bids, to the detriment of minority shareholders. The paper also describes political considerations and political influences on the legislative process, which led to the failure of the 2014–2015 takeover law proposal. The core of the paper is devoted to the current takeover rules. Statistical research of ownership structures in Poland shows that the threshold of control set at 50% of votes is undoubtedly too high, which entails risks to investor protection that may arise from the adopted model. Based on research on significant holdings in Polish listed companies, the paper further elaborates on the notion of control over a public company and proposes a regulatory utility function to determine the desired threshold of control. This leads to the conclusion that the optimal regulatory threshold of control, given the characteristics of the Polish capital market, is 30% of votes. [ABSTRACT FROM AUTHOR]

We examine how the culture of origin of sell-side financial analysts in the United States influences their forecasting. We find that analysts from individualistic cultures are more likely to issue bold earnings forecasts and stock recommendations than analysts from collectivist cultures. Individualistic (collectivist) analysts' tendency to overweight (underweight) their private information at least partly explains the results. The effect of culture decreases with the analysts' professional skills and their exposure to the U.S. culture but increases with task difficulty. For market consequences, short-window market reactions are stronger to bold reports by collectivist analysts than to those by individualistic analysts, consistent with the analysts' differential weighting of their private information. On average, however, a higher level of analyst individualism is associated with lower stock price synchronicity of the firm covered, indicating that more firm-specific information is impounded in the stock price. Our study extends research on the effect of national culture in the capital market by demonstrating how individualism, a central element of culture, affects analysts' information processing and the value of their work. [ABSTRACT FROM AUTHOR]

We analyze diverse and heterogeneous literature to grasp the general effect size of financial development on economic growth on a world scale. For that, we perform by far the largest available meta-analysis of the finance–growth nexus using 3561 estimates collected from 177 studies. Our meta-synthesis results show that large heterogeneity in empirical evidence is, in fact, driven by only a limited number of variables (moderators). By using advanced techniques, we also document the existence of the publication selection bias that is propagated in the literature in a nonlinear fashion. We account for uncertainty in moderator selection by employing model-averaging techniques. After adjusting for the publication bias, the results of our meta-regression provide evidence of a small but genuine positive effect of the financial development on growth that very mildly declines over time. Finance channeled via capital markets seems to be more beneficial for economic growth than that provided in the form of private credit. Our evidence goes against arguments about the damaging role of financial development and is in line with century-old theoretical foundations that favor the positive role of finance on economic growth. [ABSTRACT FROM AUTHOR]

This study explores the role of financial support in the digital transformation of Chinese A-share-listed companies from 2001 to 2020. By utilizing the moderating effect model and threshold regression model, this study finds the following results: (1) Digital transformation positively impacts innovation, and the support of banking and capital markets further strengthens this impact. (2) With the development of banking and capital markets, the impact of digital transformation on innovation changes from negative to positive, which is also reflected in the subsamples of Eastern companies, small and medium-sized companies (SMEs), and non-SMEs. (3) The study reveals that only the capital market in the non-Eastern region has no threshold, and capital market support is effective only for non-SMEs when it reaches a higher level. These findings have important implications for policymakers in promoting digital transformation through financial support and help companies understand how to use financial support to improve competitiveness. [ABSTRACT FROM AUTHOR]

This paper provides novel evidence on the link between transparency through dissemination of economic data and financing conditions in international capital markets. It explores changes in sovereign financing conditions when countries join the International Monetary Fund Data Standards Initiatives—a multilateral framework that promotes data transparency as a global public good. The results from event studies and local projection methods suggest a significant decrease in sovereign spreads following the adoption of the standards. In addition, countries with relatively weaker governance benefit the most from signaling their effort toward strengthening transparency. [ABSTRACT FROM AUTHOR]

Working capital management (WCM) concerns decisions on the levels and turnover of the inventories, receivables, cash and current liabilities of a company. Consequently, WCM affects the profitability of an enterprise. This paper aims to determine the relationship between profitability and WCM, characterised by components of the company's operating cycle. The research is based on meta-analysis and meta-regression methods that allow for the combination and analysis of the outcomes of individual empirical studies using statistical methods. Our final research sample consists of 43 scientific papers from 2003 to 2018. These studies covered almost 62,000 enterprises in 35 countries from 1992 to 2017. Our results indicate that there is a common, negative relationship between profitability and the cash conversion cycle (CCC). This relationship is conspicuous in various countries and in different economic contexts. A negative, statistically significant relationship was also detected between profitability and average collection period (ACP), the accounts payable period (APP) and inventory turnover cycle (ITC) as well. We also identified moderators of the diagnosed dependencies on the grounds of macroeconomic and institutional factors. The richer the economy, the weaker a negative impact of CCC on profitability. The higher the protection of creditors and debtors, the weaker the negative relationship between profitability and ITC. The opposite is applicable to inflation and ACP and APP, unemployment and CCC, ACP and APP, the availability of credit and APP and the degree of capital market development and CCC and ACP. The aforementioned macroeconomic and institutional factors cause the negative relationship between particular components of the operating cycle and profitability to deepen even further. Our research contributes to the existing knowledge by confirming that the negative relationship between profitability and all components of the operating cycle is dominant in the global economy. It also indicates that there are macroeconomic and institutional moderators of the strength and direction of these relationships. [ABSTRACT FROM AUTHOR]

We examine the properties of overprecise forecasts, i.e., forecasts with more digits after the decimal than the mode of forecasts issued by all analysts following a given firm in a given year. Contrary to conventional wisdom, we find that overprecise forecasts are less accurate than peer forecasts. The lower accuracy is related to inexperienced analysts, who tend to overweight their models and produce more specific, yet less accurate forecasts. Additional analyses indicate that analysts issue fewer overprecise forecasts as they gain experience and that experience mitigates the negative association between forecast overprecision and forecast accuracy. Forecast overprecision is also positively associated with forecast boldness and brokerage house prestige, two proxies for analyst overconfidence in their model outputs. We further document that the capital market partially sees through this inaccuracy, as stock prices react less to overprecise forecast revisions. By revealing a novel behavioral bias of sell-side analysts, our study challenges the view that form precision signals greater accuracy and informativeness. [ABSTRACT FROM AUTHOR]

This paper studies how public information regarding a firm's riskiness affects investors' incentives to acquire information about the firm and the firm's ability to learn decision-useful information from its price. I find that risk information complements investor learning by informing investors of when it is most lucrative to investigate the firm, thereby reducing liquidity. Furthermore, risk information causes the firm's price to contain more information when the firm's investment decisions have the greatest impact on its value, thereby improving real efficiency. Extensions of the model suggest that the impact of risk information on real efficiency may deteriorate when the firm's manager is excessively exposed to idiosyncratic risk, when the firm's shareholders are excessively averse to such risk, or when the disclosure concerns a "downside risk." In sum, my analysis suggests that information regarding firms' expected values and information regarding firms' risks significantly differ in their effects on the capital market. [ABSTRACT FROM AUTHOR]

This paper examines the relationship between corporate governance mechanisms and their impact on green bond yield spreads for companies operating in emerging capital markets. The role of boards in mitigating ESG risks is well studied for developed countries, but there is no evidence of the impact of corporate governance on green finance for emerging capital markets. To fill in the gap, we use a unique dataset constructed with data from Thomson Reuters Refinitiv Eikon, World Bank, and Central Intelligence Agency (CIA). We study 283 green bond issues by 125 companies from 16 emerging markets with assigned ESG scores for the period between 2017 and 2022. Our findings contribute to the literature in several ways. First, we provide new evidence for the significant impact of corporate governance on green bond yield spreads in emerging capital markets. Second, we demonstrate that issuers with higher CEO power will enjoy higher green bond yields. Third, board size matters for investors in corporate green bonds from emerging capital markets and has a negative impact on the yield spread. Moreover, in the research model we account for the specific features of the country's institutional environment, such as the quality of the country's regulatory system, the capacity of the central authority and the nature of its legal system. Our findings provide evidence that only government effectiveness and rule of law indexes are significant drivers of green bond spreads, while the regulatory quality index is not. [ABSTRACT FROM AUTHOR]

Organizational capabilities have a key influence on firm performance. Ordinary capabilities, a prominent classification advocated by capability scholars, allow a firm to perform its primary functional activities. Past research indicates that there are limits to the contributions of ordinary capabilities to firm performance, but largely has explored it via contingent effects in an industry context. We argue, however, that these limits also are a function of the development of market-supporting institutions. In this paper, we investigate the effect of capital market development – a key pillar of market-supporting institutions – on a firm's use of two ordinary capabilities, operations and marketing. We trace the heterogeneity of this effect for two key firm resources, investments in R&D and financial slack, that are indicative of different strategies pursued by firms. We test our three-way interaction model using a sample of Indian firms over a twenty-year period of institutional reforms. Our findings contribute to integrating the organizational capability and institutional theory literature and advancing research on the sustainability of firm profits in emerging economies. [ABSTRACT FROM AUTHOR]

This paper investigates the role of managerial biases in the real effects of limits to arbitrage. In a natural experiment setting with Regulation SHO, we find that the lifting of short sale constraints leads to a significant decrease in CEO confidence for pilot firms, and this result is more pronounced for pilot firms with financial constraints and stronger corporate governance. We further find that the real effects of Regulation SHO documented in the literature are primarily driven by CEOs with low confidence. Diffident CEOs of the pilot firms tend to decrease corporate investments, reduce earnings management, and improve social performance and employee relations following the removal of short sale constraints. Overall, we identify CEO confidence as a behavioral channel through which capital market frictions influence corporate decisions and CEO investments. [ABSTRACT FROM AUTHOR]

The article elaborates on the EU Green Bond Standard, a cornerstone of the Proposal for a Regulation on European green bonds that was put forward by the European Commission in July 2021. Within the analysis, three research questions are posed. First, the article deals with the question of whether the EU Green Bond Standard is really needed; particularly, whether there is a need for EU regulatory intervention on the EU green bond market. Second, it examines the method of regulation which was adopted for the EU Green Bond Standard. Specifically, does this standard differ and offer any added value compared to private standards for the issuance of green bonds? Finally, the article discusses the impact of the EU Green Bond Standard on the EU green bond market. Within this section, the questions of fragmentation and regulatory competition between public (EU) and private regimes are dealt with. The article ends with proposals for modifications of the EU Green Bond Standard. It has been suggested that the EU Green Bond Standard should have a mandatory character for all issuances of green bonds on the EU green bond market. Private standards should not be replaced by the EU Green Bond Standard but only reconciled with it. With regard to its content, the EU Green Bond Standard should constitute a mixture of public and private obligations; yet, some necessary regulatory space should be left for private standards. [ABSTRACT FROM AUTHOR]

This study investigates how real earnings management (REM) in the initial public offering (IPO) year affects long-run post-IPO market performance. The empirical results show that the effect of REM on a firm's stock returns varies with the forms of REM. Abnormal production costs are positively associated with long-run returns, whereas abnormal cuts in discretionary expenses are negatively associated with long-run returns. These results suggest that investors are not fully aware of the implications of REM and initially undervalue or overvalue the firm based on different REM activities. Further, this study examines the long-run role of the media in the capital market by examining the impact of media coverage on the consequences of IPO firms' REM practices. The results indicate that the associations between REM and stock returns become weaker if the IPO firm is more visible through the media. Additional analyses show that retail investors are more likely to initially misprice REM activities and be influenced by media information. Compared with media coverage, audit quality or analyst following has a relatively less pronounced effect on the consequences of REM activities. These findings imply that media coverage appears to mitigate the influence of REM on stock returns, facilitating market efficiency after a firm's IPO in the long run. [ABSTRACT FROM AUTHOR]

This paper investigates the so far unexplored theoretical tension associated with foreign investor valuations of emerging market firms (EMFs) that tap into global capital markets. One line of argument expands the liability of foreignness perspective into the capital market domain where a foreign firm faces legitimacy and unfamiliarity issues. In contrast, there is recognition of the benefits to global investors in EMFs associated with geographic portfolio diversification. Our core premise is that EMFs face a cost–benefit trade-off associated with the extent of institutional distance when venturing abroad in search of financial resources. Based on a theoretical model grounded in institutional theory, we find a curvilinear effect of institutional distance on foreign equity valuations. Furthermore, we show that information spillovers through a focal firm's domestic capital market and international product market strategies moderate this relationship. [ABSTRACT FROM AUTHOR]

Job vacancy duration reflects the time a firm spends searching, selecting, and hiring for a job opening. Capturing vacancy duration using the creation and deletion dates of job postings by US public firms, we examine the informativeness of vacancy duration for future firm profitability. We find that while firms that quickly fill low-skill job vacancies exhibit higher future profitability, firms that take more time to fill high-skill jobs exhibit higher future profitability. Our cross-sectional analyses across the benefits and costs of candidate selection and performance expectations suggest that the informativeness of vacancy duration comes from its reflection of firms' hiring strategies. That is, firms expecting higher profitability recruit more intensively to avoid the opportunity cost associated with vacancies for low-skill jobs and to ensure the selection of high-quality workers for high-skill jobs. Further analyses show that the implication of job vacancy duration for future profitability is not incorporated timely in the capital markets, as evidenced by pessimistic analyst forecasts and positive earnings announcement returns in future quarters for firms with short (long) durations for low-skill (high-skill) jobs. These results demonstrate the informativeness of job vacancy duration for firm profitability and advance the understanding of firms' hiring strategies. [ABSTRACT FROM AUTHOR]

A widespread perception exists that tax havens facilitate corporate opacity. This study provides new evidence on the association between tax havens and the transparency of firm financial reporting using a unique group of firms whose parent companies are incorporated in tax havens but whose headquarters or primary operations—that is, their base—are in nonhaven countries. While most research suggests a negative association between tax havens and transparency, I examine whether this association depends on the firm's corporate governance environment as well as its capital market incentives. I find that the negative association is limited to firms subject to weak governance in the base country. In contrast, I find, among firms in stronger governance environments, a positive association between tax haven incorporation and transparency, which is most concentrated among firms with greater capital market incentives. My findings suggest that future researchers should use caution when assuming an unambiguous negative association between tax havens and corporate transparency. The study also provides unique evidence that tax planning can motivate higher transparency in certain settings. [ABSTRACT FROM AUTHOR]

We investigate firms' initial stock and bond issues in public capital markets and explain fluctuations in these IPOs over time. We study Belgium from 1839 to 1935, which provides a setting with poor investor protection, no tax distortions, and changing regulations. We find that economic growth induces stock and bond IPOs and that the issuers time offerings such that they coincide with favorable market conditions. Even though in 1873, regulation was abruptly relaxed, we find no evidence of increases in the number of IPOs. Finally, we show that stock and bond IPOs do not interact when controlling for the determinants of these IPOs. [ABSTRACT FROM AUTHOR]

We examine how research posted by "social media analysts" (SMAs)—individuals posting equity research online via social media investment platforms—is related to research subsequently produced by professional sell-side equity analysts. Using data from Seeking Alpha, we find that the market reaction to sell-side analyst research is substantially reduced when the analyst research is preceded by the report of an SMA, and that this is particularly true of sell-side analysts' earnings forecasts. We further find that this effect is more pronounced when SMA reports contain more decision-useful language, are produced by SMAs with greater expertise, and relate to firms with greater retail investor ownership. We also provide evidence that the attenuated response to sell-side research is most likely explained by SMA research preempting information in sell-side research and that analysts respond to SMA preemption with bolder and more disaggregated forecasts. Collectively, our results suggest that equity research posted online by SMAs provides investors with information that is similar to but arrives earlier than sell-side equity research, and speak to the connected and evolving roles of information intermediaries in capital markets. [ABSTRACT FROM AUTHOR]

The financing of energy efficiency measures and renovations is key to reaching energy efficiency targets for the housing sector. The purpose of this article is to add the Swedish case of how capital market funds have become accessible and used by public and private housing companies, in particular for energy efficiency measures. The core of this article are interviews with representatives of Swedish housing companies made during the spring of 2021 with the purpose of mapping how public and larger private housing companies finance renovation and energy efficiency measures, and to what extent funds from the capital market are used for these purposes. In this article, we have found that capital market funds are commonly used by the Swedish public and the largest private housing companies. Bonds are less costly compared to bank loans, and green bonds are 0.02–0.03 percentage points less costly than conventional bonds. Furthermore, control systems that investigate the values of building portfolios as security for bonds are poor. A conclusion is that governmental control systems over the capital market issuing bonds for the housing market could be needed to avert future housing bubbles. [ABSTRACT FROM AUTHOR]

The paper studies the convergence and growth behavior of 11 Central and Eastern European members states of the European Union between 2000–2019, using a modified development accounting approach based on the neoclassical growth model. The main goal of the exercise is to decompose the still existing development gap relative to Western Europe (Austria) into three components: convergence, productivity, and long-run factors. The latter may include general institutional features such as population growth, or capital market imperfections measured by the capital wedge. The capital wedge is identified by leveraging the neoclassical growth model's ability to explain the observed behavior of the capital-output ratio. The main conclusions are that for most countries, lower productivity and capital distortions are both important to understand underdevelopment. Economic policy, therefore, should primarily target productivity growth and a free and efficient capital market. [ABSTRACT FROM AUTHOR]

We investigate the relationship between competition and stage specialization in the venture capital (VC) markets. A typical successful entrepreneurial company goes through multiple stages of VC investments; but an average VC firm specializes and participates only in a subset of these stages. We hypothesize that a VC firm's decision to stage-specialize (or not) poses a trade-off between business expansion and competition mitigation. Both effects are influenced by the intensity of competition. Consistent with a prediction of the theoretical model, we find robust empirical evidence for a non-monotonic relationship—an inverted-U shape—between competition and stage specialization in the U.S VC markets between 1980 and 2012. This result is novel and can have interesting managerial and policy implications. [ABSTRACT FROM AUTHOR]

Using a 2005–2020 sample of A-share listed companies in China's heavily polluting industries, this paper divides environmental investment strategies into "light green," "medium green," and "deep green" dimensions and constructs a panel threshold model to investigate the impact of different environmental strategies on China's stock market. The study found that environmental investment intensity has a double threshold effect on stock returns, "medium green" behavior helps improve stock returns, and "light green" and "deep green" behaviors are not conducive to stock returns. Institutional investors are more accurate than ordinary investors in identifying heterogeneous environmental strategies. The mechanism test shows that different environmental strategies affect stock returns through internal "value enhancement" and external "government subsidy" mechanisms. Moreover, "greenwashing" benefits for companies are short-lived; the market eventually imposes punitive pricing. These findings provide a reference for enterprise- and market-oriented green development systems. [ABSTRACT FROM AUTHOR]

This paper uses the data from the Chinese capital market to study the relationship between cost stickiness, earnings forecast accuracy and stock price information content. The empirical results show that: (1) Cost stickiness significantly affects the earnings response coefficient of stock prices. Lower cost stickiness improves the ability of current returns to reflect future earnings, which is manifested in higher future earnings response coefficient (FERC). (2) Cost stickiness significantly reduces the future earnings response coefficient of non-state-owned enterprises, but does not reduce the future earnings response coefficient of state-owned enterprises. It can be seen that investors have different attitudes towards cost stickiness of listed companies with different property rights in the process of investment decision-making. (3) Cost stickiness significantly increases stock prices synchronicity and decreases the number of company-specific information reflected in stock prices. Further analysis shows that cost stickiness increases earnings forecast accuracy, which is the partial intermediary mechanism for cost stickiness to improve FERC and reduce stock price synchronicity. This paper not only enriches the relevant literature of cost stickiness and earnings response coefficient, but also shows that cost stickiness is an important factor affecting the information efficiency of capital market. [ABSTRACT FROM AUTHOR]

The problem of renewed market investment in the Russian real economy is closely related to the business environment state in the imperfect capital market in Russia and to the assessment of the profitability of investment projects. Difficulties in determining profitability in an imperfect monetary and credit system are associated with the significant discrepancy between the interest rates on deposits and loans and can be overcome by applying the Cantor–Lippman approach, which makes it possible to calculate the profitability of a pool of investment projects available to an investor. From the point of view of a production owner, market investment depends on the state of the business environment and competes with investment in consumption. The problem arises of estimating the profitability threshold at which private market investment is preferred to private consumption. We propose an approach to the solution of this problem in terms of a mathematical model of investment behavior of a production owner in an imperfect capital market. The model is formalized as an infinite-horizon optimal control problem with a state constraint. The solution of the problem is based on constructing a viscosity solution of the Hamilton–Jacobi–Bellman equation. It is shown that the investment strategy of a production owner can depend substantially on the business environment state. Based on the results of this study, an explanation is proposed for the transition from recovery growth to stagnation in the Russian economy in late 2007, which was accompanied by recession of investment activities in the manufacturing sector. [ABSTRACT FROM AUTHOR]

The main objective of this paper is to study the market efficiency of nonagricultural commodities markets. Based on the review of literature, the present study tries to find out whether there is a cointegration, lead and lag relation in spot and futures market prices of identified non agricultural commodities traded in multi commodities exchange, using Stationary tests Cointegration and Regression Model which explains Casual relationship between Spot and Futures Markets. The study find that futures prices cause spot prices and vice versa and suggests that no profitable arbitrage exists and investor cannot book profit since new information already gets to be discounted by spot and futures prices simultaneously. The main contribution of the study is empirically identified and proves that there is a casual relationship between futures and spot which helps the investor to forecast the price with respect to Non Agricultural commodities. [ABSTRACT FROM AUTHOR]

We apply the synthetic control method to a case study of the Dutch State Treasury Agency's funding policy. We study empirically what effect a change in funding strategy by the Dutch treasury had on market conditions. First, our results suggest that introducing more uncertainty to the funding policy, by means of a target range for capital market issuances, does not lead to a higher risk premium on Dutch government debt. Second, our paper shows that the synthetic control method, or the related constrained regression, is more suitable than a difference-in-differences method for this particular case study. The synthetic control method and constrained regression only include control units that are similar to the Netherlands. The difference-in-differences estimator includes all control countries, even ones that are not similar to the Netherlands. The difference-in-differences estimates incorrectly suggest that introducing more uncertainty in the funding policy leads to a higher risk premium. This shows that synthetic control and constrained regression are in some cases more suitable than a standard difference-in-differences. Furthermore, the synthetic control and constrained regression results hold when time and unit placebo tests are applied, whereas difference-in-differences results are not robust for this case study. [ABSTRACT FROM AUTHOR]

We explore the global interactions between oil and renewable energy returns during the Covid-19 pandemic between July 2019 and June 2020. Moreover, we reflect on market stress and global economic activity. In order to deal with challenges generated by exogenous shocks coming from financial, economic or pandemic areas, a battery of advanced time–frequency domain methods is applied, ranging from wavelet transformation and wavelet coherency to wavelet cohesion. The main finding shows that pandemic disease is veritable glue for the oil energy–renewable energy nexus, validating their coupling effect. Additionally, the emerging connection between renewable and financial developments is evidenced during the pandemic crisis, although the connection between oil and financial developments is still stronger. Finally, both renewable energy and oil markets have comparably strong relationships with the general global economic activity. The policy implications should follow direct adjustments in the renewable energy area, and subsidiary to cover the behaviour of agents on the capital markets. [ABSTRACT FROM AUTHOR]

Investment intensity is the level of investment in fixed assets that affects a company's long-term growth prospects. In order to make good investment decisions, investors pay more attention to achieving a high level of investment intensity. This study examines the impact of two non-GAAP measures of profitability—earnings before interest, tax, depreciation, and amortization and earnings before interest and tax—on investment intensity in Gulf Cooperation Council (GCC) member countries. The study also examines the preference for two non-GAAP measures of profitability from the perspective of foreign investors. The study conducts panel data regressions using 205 firm observations covering the period 2010–2019 to examine the relationship between earnings before interest, tax, depreciation and amortization, earnings before interest and tax, and investment intensity. The study used various statistical estimators to overcome the heterogeneity and endogeneity problems of panel data and employed many diagnostic tests to increase robustness. The study finds that earnings before interest, tax, depreciation and amortization are positively and significantly associated with investment intensity in all GCC countries, but earnings before interest and tax are negatively associated with investment intensity in these countries. The results indicate that foreign investors prefer to use earnings before interest, tax, depreciation, and amortization to make decisions about investment intensity. The main implication of the study is that capital market regulators and foreign investors should use earnings before interest, tax, depreciation, and amortization information as a guideline to improve investment intensity decisions and achieve a better allocation of resources in capital markets. [ABSTRACT FROM AUTHOR]

Using a sample of publicly traded U.S. REITs, we examine the impact of at-the-market (ATM) equity offerings on participating firms' cost of capital. While ATM programs can improve a firm's financial flexibility, capital market access, and market timing capabilities, they also may engender agency conflicts and increase the information opacity of the firm's operations. Consistent with these adverse effects, we document a positive relation between ATM program availability and the implied cost of equity capital. These core findings are most pronounced for firms that are relatively opaque, thus providing further evidence of an information-based channel for the cost of capital effect. [ABSTRACT FROM AUTHOR]

Using a recent stock market liberalization reform policy in China—the Stock Connect—as a quasi-natural experiment, this study examines the effect of stock market liberalization on market efficiency. Employing a dataset of 17,086 Chinese listed firms covering 2009 to 2018, we find that stock market liberalization improves the market efficiency of the Chinese mainland stock market. We further explore the potential channels through which the Stock Connect can enhance the efficiency of the A-share (A-shares refer to shares issued by Chinese companies incorporated in mainland China, traded in the Shanghai Stock Exchange and the Shenzhen Stock Exchange. They are denominated in Chinese RMB (the local currency). A-shares were restricted to local Chinese investors before 2003, are open to foreign investors via the Qualified Foreign Institutional Investor, RMB Qualified Foreign Institutional Investor, or the Stock Connect programs.) market. The findings show that liberalizing capital markets could benefit local market efficiency by increasing stock price informational efficiency and improving corporate governance quality. The additional analysis shows that stock market liberalization has a significant and positive impact on local market efficiency, enhancing firm value and reducing stock crash risk. We conduct various robustness checks to corroborate our findings. This study provides important policy implications for emerging countries liberalizing capital markets for foreign investors. [ABSTRACT FROM AUTHOR]

We examine the predictability of 299 capital market anomalies enhanced by 30 machine learning approaches and over 250 models in a dataset with more than 500 million firm-month anomaly observations. We find significant monthly (out-of-sample) returns of around 1.8–2.0%, and over 80% of the models yield returns equal to or larger than our linearly constructed baseline factor. For the best performing models, the risk-adjusted returns are significant across alternative asset pricing models, considering transaction costs with round-trip costs of up to 2% and including only anomalies after publication. Our results indicate that non-linear models can reveal market inefficiencies (mispricing) that are hard to conciliate with risk-based explanations. [ABSTRACT FROM AUTHOR]

This paper analyzes the moderation effect of government responses on the impact of the COVID-19 pandemic, proxied by the daily growth in COVID-19 cases and deaths, on the capital market, i.e., the S&P 500 firm's daily returns. Using the Oxford COVID-19 Government Response Tracker, we monitor 16 daily indicators for government actions across the fields of containment and closure, economic support, and health for 180 countries in the period from January 1, 2020 to March 15, 2021. We find that government responses mitigate the negative stock market impact and that investors' sentiment is sensitive to a firm's country-specific revenue exposure to COVID-19. Our findings indicate that the mitigation effect is stronger for firms that are highly exposed to COVID-19 on the sales side. In more detail, containment and closure policies and economic support mitigate negative stock market impacts, while health system policies support further declines. For firms with high revenue exposure to COVID-19, the mitigation effect is stronger for government economic support and health system initiatives. Containment and closure policies do not mitigate stock price declines due to growing COVID-19 case numbers. Our results hold even after estimating the spread of the pandemic with an epidemiological standard model, namely, the susceptible-infectious-recovered model. [ABSTRACT FROM AUTHOR]

Recent advances in digitalization and increasing integration of international markets are paving the way for a new generation of firms to use non-traditional entry modes that are largely marginalized in previous entry mode studies. While extant research revolves around the level of resource commitment and control in foreign activities, non-traditional modes are encapsulated by the extent of embeddedness required for exploring new and/or exploiting existing resources. In particular, we draw attention to four such categories of non-traditional entry modes the literature has touched on, i.e., capital access, innovation outposts, virtual presence, and the managed ecosystem. We explore the key attributes, antecedents, and strategic implications of these modes. Our paper highlights the need for enriching current entry mode research by considering a broader range of entry mode activities available to firms as well as employing new theoretical perspectives to understand the complex phenomena of internationalization. [ABSTRACT FROM AUTHOR]

Financial contagion refers to the spread of market turmoils, for example from one country or index to another country or another index. It is standardly assessed by modelling the evolution of the correlation matrix, for example of returns, usually after removing univariate dynamics with the GARCH model. However, significant events like crises visible in one financial market are usually reflected in other financial markets/countries simultaneously in several dimensions, i.e., in general, entire distributions of returns in other markets are affected. These distributions are determined/described by their expected value, variance, skewness, kurtosis and other statistics that determine the shape of the distribution function of returns, which can be based on higher (mixed) moments. These descriptive statistics are not constant over time, and, moreover, they can interreact within the given market and among the markets over time. In this article we propose, and use for the daily values of five indexes (CAC40, DAX30, DJIA, FTSE250 and WIG20) over the time period 2006–2017, a new, simple and computationally inexpensive methodology to automatically extend contagion evaluation from the evolution of the correlation matrix to the evolution of multiple higher mixed moments as well. Specifically, the joint distribution of normalized variables for each pair of indexes is modeled as a polynomial with time evolving coefficients estimated using an exponential moving average. As we can obtain any arbitrary number of evolving mixed moments this way, its dimensionality reduction using PCA (principal component analysis) is also discussed, obtaining a lower number of dominating and relatively independent features, which can each be interpreted through a polynomial that describes the corresponding perturbation of joint distribution. We obtain features that describe the interrelations among stock markets in several dimensions and that provide information about the current stage of crisis and the strength of the contagion process. [ABSTRACT FROM AUTHOR]

In the present contribution, the innovative nonlinear state marginal price vector model introduced in Toll and Kintzel (CEJOR 27(4):1079–1105, 2019) (plus Errata herein) is enriched to include budgeting problems under agency conflicts. Under asymmetric information, a company owner as principal can only rely on information transmitted to her from her managers as agents. In the related modeling, it is assumed that slack and capital rationing are optimal. The governing budgeting relations are integrated into a nonlinear framework furnished by a multi-period newsvendor approach and are solved numerically by means of a two-step valuation procedure based on two successive nonlinear convex optimizations. The capital market is assumed to be imperfect. As case study, the M&A-valuation case of a merger of two IT-service companies is considered subjected to optimal combined dimensioning of capacities and budgets under stochastic demand. On balance, by addressing agency conflicts within the well-established nonlinear framework, the practical application field of the valuation procedure is widened. [ABSTRACT FROM AUTHOR]

The paper proposes a set of metrics and a methodology to measure the progress that European Union Member States are making towards the development and integration of capital markets. It identifies a set of indicators and analyzes the performance of these countries over the 2007–2018 period using a composite indicator approach (in both a static and dynamic environment), based on the six priorities related to achieving a well-functioning and integrated European capital market included in the European Commission Capital Markets Union Action Plan. The author uses robust clustering to identify groups of countries and tracks their development over time. He finds that the process of capital market development and integration process has started but is not completed and that it is mainly associated with countries' adherence to European increasing trends driven by the benchmarks rather than the policy actions of countries aimed at catching up with the best performers. [ABSTRACT FROM AUTHOR]

Scientific and effective tail risk measurement and early warning are key points and difficulties in the identification and control of major risks in capital markets. In this paper, we use the autoregressive conditional Fréchet model (AcF) to construct a tail risk measurement index for the capital market in China. The tail risk status identified by the scientific index method is used as a monitoring anchor to construct and optimize a tail risk early warning model based on machine learning algorithms. The study yields three findings. (1) The AcF model can overcome the shortcomings of traditional models in tail risk measurement and significantly improve the tail risk measurement efficiency of the capital market. (2) Tail risk synergies between equity and bond markets are significantly stronger than yield synergies, and the tail risk measure index has the role of a leading indicator of significant risk in capital markets. (3) Based on the joint test of risk status and crisis identification efficiency, the Logit model of crisis identification fails whereas the tail risk warning model optimized by machine learning algorithms can accurately identify crises and significant risks. The optimal early warning model pairings for the stock market and bond market are the oversampling-random forest algorithm and the double sampling-random forest algorithm, respectively, with out-of-sample crisis warning accuracies of 81.94% and 90.20%, respectively. [ABSTRACT FROM AUTHOR]

We focus on the timely issue of Content Delivery Network (CDN) resource management. We introduce a multi-stage scheme that leverages solutions from the capital market. The mechanism of Stock Options (SOs) is used to address a potential scarcity of resources, not adequately addressed by other predictive mechanisms previously introduced by the authors. Using a Predictive Reservation Scheme (PRS), network resources offered by a CDN are monitored through established techniques (Kernel Regression Estimators) in a given time frame. Next, a Secondary Market (SM) significantly reduces resource waste by allowing the fast exchange of unused (remaining) resources granted to Origin Servers (OSs). This exchange occurs either by implementing socially optimal practices or by allowing automatic electronic auctions at the end of the day (EoD) or shorter time intervals. Finally, we further enhance our Load Prediction Mechanism (LPM); SOs are purchased and exercised, depending on the lack of resources at the EoD. As a result, OSs may acquire resources (if required) at a standard price. The effectiveness of the proposed stock market-based CDN resource management framework further improves. [ABSTRACT FROM AUTHOR]

Agriculture in developing countries operates on small-scale plots in general, which makes the direct utilization of durable capital equipment difficult. An intermediate sector is needed to facilitate the usage of capital. By accommodating the agricultural producer service sector, this paper builds three-sector general equilibrium models and investigates the impact of mitigation of capital market distortion on wage inequality between skilled and unskilled labor. The paper highlights the agricultural producer service sector and substitution between service and unskilled labor and arrives that mitigation of capital market distortion may widen wage inequality. The main conclusion is different from existing literature and provides new insights into this issue. [ABSTRACT FROM AUTHOR]

A novel methodology to investigate the fine structure of interest rates based on Machine Learning techniques is discussed. The aim is to capture in an unsupervised way the common stochastic structure that drives the dynamics of interest rates of different maturities. The proposed approach is based on the Wasserstein barycenter, a powerful tool of analysis that allows us to construct, from a set of assigned probability distributions, a single probability distribution that captures the essential features of the whole set. To identify common stochastic factors, a Gaussian Mixture Model is fitted to the Wasserstein barycenter by maximum likelihood using the Expectation-Maximization algorithm with an initialization strategy based on Graph Machine Learning techniques. A fine-tuning of single-maturity interest rates is discussed in an attempt to capture maturity-specific stochastic factors. The proposed analysis also gives us the opportunity to test the hypothesis of a market segmentation into a short-term segment, the money market, and a long-term segment, the capital market, each with its own segment-specific stochastic factors. The methodology is tested on the US zero-coupon Treasury yield curve. The results obtained seem to show that most of the stochastic nature of the dynamics of the US zero-coupon yield curve can be captured by a three-component Gaussian Mixture Model describing the Wasserstein barycenter of the short-term segment of the yield curve. [ABSTRACT FROM AUTHOR]

Shareholder engagement has come to be seen to be pivotal to good corporate governance. It is therefore more important than ever for the mechanisms of shareholder engagement to be up to the important task they are meant to perform. Historically, these mechanisms have fallen short because of the capital markets' necessary dependency on custody chains. Custody chains perform valuable functions but they also create a distance between the company and the end investor from which flows a significant risk of voting preferences and other important information not passing smoothly up and down the chain. Corporate governance is thus at risk of being distorted by process deficiencies. Changes to the operation of custody chains that were introduced by the EU's flagship amended Shareholder Rights Directive II became operative in September 2020. This article is therefore among the first to draw on operational impact to assess the significance of these new measures. Experience has already demonstrated that while there have been some important advances, the regulatory changes are struggling on two levels: they have created new uncertainties within national laws; and they have failed to provide the necessary cross-border harmonization of key concepts. These are not issues that can be resolved effectively by technology or market workarounds on their own. There is a continuing need for legislative change to ensure that legal uncertainties do not act as a barrier to further technology-driven market standardization and innovation. [ABSTRACT FROM AUTHOR]