Trust and corporate debt maturity mismatch: Evidence from China

Abstract

This study explores the relationship between social trust and firm debt maturity mismatch in the Chinese context. Additionally, we investigate the economic mechanisms through which social trust affects debt maturity mismatch, and the differential roles played by social trust among firms with different characteristics. We employ enterprise trustworthiness scores and provincial blood donation rates as our measures of regional social trust level and find a negative relationship between local trust and firm debt maturity mismatch, suggesting that social trust which promotes ethical norms acts as a restraint on firms' propensity for excessive risk. An alternative but consistent explanation is higher social trust increases debtors' willingness to lend, hence it reduces firms' funding costs and consequently the potential cost-saving motivation behind such a mismatch. We further document evidence that social trust improves the firm information environment and consequently risk-taking and/or the ability to reduce funding costs. The study also reveals variations in the role of social trust based on firm characteristics, such as leverage and profitability, and the ownership structure (state-owned enterprises vs. non-state-owned enterprises). The findings contribute to the literature by highlighting the increasing importance of social capital for policy and governance.

Heterogeneity in needs and purchases in Australian retirees

Abstract

To plan for retirement, it is important to understand how needs and purchases may change. We use data from a survey of elderly Australians to see how needs and purchases changed in different categories of goods and services. We looked especially at those who had experienced financial or health shocks. Our analysis shows variation in people's experiences, particularly for health costs, which increase with age. Having private health insurance appears to increase the level and volatility of health costs – presumably as a result of out-of-pocket costs. This information can be useful for financial advisors and superannuation trustees.

Emotions and inventor productivity: Evidence from terrorist attacks

Abstract

We examine whether the emotional shocks associated with terrorist attacks affect local inventors' productivity. We find that high-fatality attacks make inventors less innovative, and low-fatality attacks make them more innovative. Inventors living in high risk-taking environments have greater increase in productivity following low-fatality attacks, while less decrease in productivity following high-fatality attacks. Further, the effect of terrorist attacks on inventor productivity comes mainly from exploratory innovation which involves more risks. Inventors affected by high-fatality attacks are also more likely to move to places without any significant terrorist attack history, but there is no such effect for low-fatality attacks.

On the state of financial research: Is it in a silo?

Abstract

This study on the state of financial research analysed the citations made in leading business and economics journals in the period 1997–2020. It found that, contrary to other business fields, and despite citing more references, finance researchers overlooked the fruitful mode of knowledge creation by integrating advances from disciplines other than economics. Additionally, citations in economics became disproportionate to older papers. Furthermore, intradisciplinary citations remained predominantly in the same four journals, although others became prominent. These findings on the state of financial research supplement other issues inhibiting finance knowledge progression and have inferences regarding the training of future scholars.

IPO suspension and pricing: Evidence from China

Abstract

Securities regulators in China occasionally suspend their IPO market. We explore the impact of IPO market suspension on IPO pricing. We find that IPOs interrupted by market suspensions are eventually priced at a higher level. The positive impact of IPO suspension on IPO offer price is more pronounced for IPOs backed by venture capitalists (VCs) and/or those with higher VC ownership. Further, we find that IPOs affected by market suspensions show poorer post-IPO performance, and higher post-IPO earnings management. Suspension-affected firms ask for lower offer prices on seasoned equity offerings (SEOs) if they price their IPO shares at a higher level. Combined, our findings suggest that IPO suspensions result in an unexpected wealth transfer from secondary market investors to pre-IPO investors, and thus the higher offer price for suspension-affected IPOs is a manifestation of the wealth transfer.

Arbitrage across different Bitcoin exchange venues: Perspectives from investor base and market related events

Abstract

This paper examines the impact of market related events and investor base on the spread of Bitcoin prices between two exchange platforms, Coinbase and Binance. Based on high-frequency data samples collected from 2019 to 2021, we show how investors from different bases react differently to market related events, which create the price spreads between exchange platforms. We also identify the arbitrage opportunities these spreads create and establish arbitrage strategies for all identified events to exploit the variations in Bitcoin prices traded on both platforms. Findings indicate arbitrage offers profits that are higher overall than holding Bitcoin on either platform.

Institutional investors’ corporate site visits and resource extraction: Evidence from China

Abstract

This study examines the effect of corporate site visits on resource extraction. Taking advantage of China's mandatory disclosure of detailed investors' site visits information, we find that firms with more investors' site visits have lower levels of managerial private consumption and tunnelling. This association is more pronounced when the monitoring effect of corporate site visits is more efficient, and the agency problem is more severe. We utilise the two-stage least squares (2SLS) estimation approach to demonstrate the robustness of our results. Collectively, our findings highlight the external monitoring role of investors' site visits in reducing corporate agency conflicts.

Investor attention and the predictability of the volatility of CNY‐CNH spreads: Evidence from a GARCH‐MIDAS model

Abstract

Combining the four aspects of self-, macro, environmental, and policy attention, using backward-looking rolling regressions, we construct novel international and domestic investor-attention indices using the search volume index from Google Trends together with Baidu Index to investigate how investor attention affects the CNY-CNH spreads volatility. Moreover, comparing different GARCH-MIDAS models and conventional GARCH-type models is conducted concerning the out-of-sample volatility forecasting capability. Our results show that: (i) international and domestic investor attention has a positive impact; and (ii) the GARCH-MIDAS models involving investor attention improve forecast accuracy. In particular, the model with domestic investor attention has an advantage in forecasting.

Climate risk and audit fees: An international study

Abstract

Using a comprehensive global sample, we find that climate risk positively relates to audit fees. Specifically, auditors charge higher fee premiums when firms are located in countries with more stringent auditing regulations, higher information opacity and less adaptive capacity for climate risk. Audit fee premiums are also higher when firms are incentivised to manipulate earnings, less important to auditors, and audited by short-tenured and industry-specialised auditors. Our study provides worldwide evidence that climate risk induces more earnings management and increases the efforts of auditors in the auditing process, resulting in higher audit fees.

The effects of Tech‐Fin on corporate innovation: Evidence from China

Abstract

This paper uses the multi-period difference-in-differences (DID) method to empirically test the effects of Tech-Fin on the innovation output of companies based on a quasi-natural experiment to examine China's Tech-Fin pilot city reform. We find that Tech-Fin significantly increased the innovation output of high-tech companies in the pilot cities and in cities with weak intellectual property protection. In addition, Tech-Fin had no significant effects on the innovation output of pseudo-high-tech companies and technology-intensive high-tech companies. We further find that Tech-Fin motivated high-tech companies to increase their innovation output through innovation correction and risk-smoothing effects.