Term premium dynamics in an emerging market: Risk,liquidity, and behavioral factors

This paper contributes to the fixed income research by identifying determinants of term premium in an emerging market’s treasury bond yields with particular attention on ambiguity. We use Nelson–Siegel yield curves generated from daily bond price quotes as input to construct a three-factor affine term structure model which decomposes observed yields into risk-neutral and term premium components. We also construct an ambiguity index using intraday FX return data following Brenner and Izhakian (2018). Our analyses suggest that a combination of factors representing market risk, credit risk, liquidity, ambiguity, and investor sentiments can explain majority of the variation in term premia. Explanatory power of credit risk measures are found to increase while those of volatility, ambiguity, and sentiment measures diminish with the maturity horizon. The results imply that ambiguity aversion of bond investors is a major determinant of the shape of the yield curve as it drives the premia for short end of the yield curve lower in line with the expectation of flight-to-safety behavior.     

The winner's curse in high-tech enterprise certification: Evidence from stock price crash risk

Exploiting the High and New Technology Enterprise (HNTE) certification program in China, we find a significant increase in firm-specific stock price crash risk for certified firms relative to non-certified firms. The result holds after a battery of robustness tests. Importantly, we find that the increase in stock price crash risk is concentrated in firms with poor innovation records before receiving HNTE certification, with less innovation improvement after obtaining HNTE certification, with weak external governance, and for state-owned enterprises. Our findings uncover a novel and substantial cost of HNTE certification as it can stimulate strategic bad news hoarding and release, being associated with greater crash risk, especially for firms less likely to engage in fact-based innovation.     

Absorptive capacity,learning and profiting from outward FDI: Evidence from Canadian firms

The extant literature highlights a threshold productivity level firms are required to attain ex-ante in order to successfully undertake FDI. The current paper extends this framework by modelling a threshold productivity range which is below the required threshold productivity level. Firms in this range can successfully venture abroad when learning allows these firms to rise above that threshold productivity level, ex-post. Theoretical models which predict negative profitability for firms which undertake FDI when below the required threshold productivity level are extended to incorporate learning, and negative profits during the transition path turn positive once productivity increases above the threshold productivity level. The hypotheses developed are tested using panel data on firms operating in Canada over the period 2000 to 2014. These firm-level data include measures of productivity, firm size, R&D intensity, and when firms undertake outward FDI. We demonstrate that firms which venture abroad while in the threshold productivity range and also have sufficiently high levels of absorptive capacity, proxied by R&D intensity, are able to learn from their foreign experience, and hence increase their productivity levels, ex-post.     

Impact of high-speed railway on urban resilience in China: Does urban innovation matter?

Based on calculating the urban resilience index from five aspects of economy, society, institutions, infrastructure, and ecology by adopting the entropy method, this study applies the time-varying DID model to systematically examine HSR's impact on China's urban resilience, on basis of which its heterogeneities and the mediating effect of urban innovation are also quantified. The findings reveal that: (1) HSR can significantly promote China's urban resilience, as supported by various robustness tests. (2) HSR can significantly improve economic and institution resilience of cities, but does not play a significant role on social resilience and infrastructure resilience, and has a negative effect on ecological resilience. (3) The driving effects of HSR on the resilience of core cities, large cities, and non-resource-based cities are more significant. (4) Urban innovation is an important channel through which HSR impacts urban resilience. The conclusions of this study can offer useful insights for China's future HSR planning and resilient cities construction.     

Financial market development: A potentiating policy choice for the green transition in G7 economies

Despite the overwhelming literature claiming the environmental benefits of the transition towards a green economy, the evidence favoring these broad claims is still obscure and fuzzy. The present study makes two significant contributions to this important yet unsettled issue. First, we segregate the overall green transition in G7 economies into three different manifestations i.e., Green Energy, Green Industry, and Green Trade, to evaluate their idiosyncratic effects on the environment. Second, we assess the moderating role of financial development in green transition and ultimately in achieving the COP-26 targets. Our findings indicate that the transition towards green energy and the green industrial sector improves environmental quality, and the benefits are more pronounced with a high degree of financial development. In contrast, the transition towards green trade does not help in improving environmental quality and may have some adverse effects; however, financial development could mitigate some of these undesirable effects and help combat carbon emissions. The study emphasizes that policymakers should view financial development as a crucial policy choice to achieve COP-26 targets owing to its benign environmental impact.     

Nonlinear impact of the interaction between internal knowledge and knowledge spillover on patent quality: Evidence from China's provincial high-tech industry

This paper first divides knowledge resources into internal knowledge and knowledge spillover from the dual perspective of inside and outside the region. Then, a panel threshold regression model is constructed by using the panel data from 30 provincial high-tech industries in China during the 2009–2019 period using the intellectual property protection intensity as the threshold variable, and the nonlinear impact of the interaction between internal knowledge and knowledge spillover on the patent quality in the high-tech industry is empirically explored. The results show the following. (1) The interaction between internal knowledge and knowledge spillover has a significant nonlinear effect on the patent quality in China's provincial high-tech industry. There is a double-threshold effect with the intellectual property protection intensity as the threshold variable. (2) As the threshold value of the intellectual property protection intensity increases, the promotion effect of the interaction between internal knowledge and knowledge spillover on the patent quality first increases and then decreases. (3) The spatiotemporal heterogeneity of the intellectual property protection intensity is obvious in all regions in China. (4) Internal knowledge, the infrastructure construction level, and the human capital level have significant positive effects on the patent quality, while knowledge spillover and the opening-up level have significant negative effects.     

Economic preferences for risk-taking and financing costs

We hypothesize and empirically establish that economic preferences for risk-taking in different subnational regions affect firm financing costs. We study this hypothesis by hand-matching firms' regions worldwide with the corresponding regional economic risk-taking preferences. We first show that higher regional risk-taking is positively associated with several measures of firm risk and investments. Subsequently, our baseline results show that credit and bond pricing increase when risk-taking preferences increase. For the loan of average size and maturity a one-standard-deviation increase in regional risk-taking increases interest expense by $0.54 million USD. We also find that these results are demand (firm)-driven and stronger for firms with more local shareholders.     

Outside directors' equity incentives and strategic alliance decisions

This study examines whether the proportion of equity-based compensation in outside director compensation is associated with corporate strategic alliances. We hypothesize that equity incentives provided to outside directors mitigate potential agency conflicts between outside directors and shareholders that arise from the strategic alliance decision-making process, thus resulting in more alliance activities. Our empirical evidence indicates that the percentage of equity in outside director compensation is positively associated with the incidence and the number of strategic alliance activities. Additionally, when the proportion of outside directors' equity in total compensation is higher, firms with strategic alliances generate better future stock returns. Overall, our findings suggest that providing equity incentives in outside director compensation mitigates the agency problems inherent in corporate strategic alliance decisions and enhances the quality of alliance activities.