Measuring extreme risk spillovers across international stock markets: A quantile variance decomposition analysis

This paper proposes a quantile variance decomposition framework for measuring extreme risk spillover effects across international stock markets. The framework extends the spillover index approach suggested by Diebold and Yilmaz (2009) using a quantile regression analysis instead of the ordinary least squares estimation. Thus, the framework provides a new tool for further study into the extreme risk spillover effects. The model is applied to G7 and BRICS stock markets, from which new insights emerged as to the extreme risk spillovers across G7 and BRICS stock markets, and revealed how extreme risk spillover across developed and emerging stock markets. These findings have important implications for market regulators.     

Hedging and temporal permit issuances in cap-and-trade programs: The Market Stability Reserve under risk aversion

Cap-and-trade programs such as the European Union's Emissions Trading System (EU ETS) expose firms to considerable risks, to which the firms can respond with hedging. We develop an intertemporal stochastic equilibrium model to analyze the implications of hedging by risk-averse firms. We show that the resulting time-varying risk premium depends on the size of the permit bank. Applying the model to the EU ETS, we find that hedging can lead to a U-shaped price path, because prices initially fall due to negative risk premiums and then rise as the hedging demand declines. The Market Stability Reserve (MSR) reduces the permit bank and thus, increases the hedging value of the permits. This offers an explanation for the recent price hike, but also implies that prices may decline in the future due to more negative risk premiums. In addition, we find higher permit cancellations through the MSR than previous analyses, which do not account for hedging.     

中国股市行业风险与宏观经济之间的风险传导机制

本文采用行业收益率溢出指数度量股市行业风险,并进一步研究中国股市行业风险与宏观经济的相互影响,同时引入股息率和利率两个中介渠道深入挖掘其传导机制。我们运用GARCH-in-Mean模型对股市行业风险和宏观经济变量之间的一阶矩和二阶矩相互关系同时进行分析,结果发现,股市行业风险和宏观经济变量之间水平值和波动率都存在双向影响,对外溢出效应较大的行业起主导作用。此外,股市行业风险对宏观经济变量的影响方面,股息率和利率均起到中介渠道作用;宏观经济变量对股市行业风险的影响方面,只是利率起到中介渠道作用。股市行业风险与宏观经济的传导效应在不同时期差异显著。本文研究结论有助于深刻理解金融与实体经济之间的风险传导机制,对防范系统性风险、防止金融和实体经济“风险共振”以及提升金融服务实体经济能力等具有参考意义。     

Innovative Credit Guarantee Schemes with equity-for-guarantee swaps

Small and medium-sized enterprises (SMEs) faces much more severe financial constraints compared to large mature companies and it is more vulnerable to market imperfection. To alleviate SMEs’ financial constraints, Public Credit Guarantee Schemes (CGSs) have been introduced and widely used around the world. Having provided a thorough analysis of the effectiveness of the traditional CGSs, we introduce an innovative financing contract, referred to as equity-for-guarantee swap (EGS), with the aim of reducing SMEs’ financial constraints in a more effective way. We show that EGS effectively alleviates SMEs’ severe financial constraints as it transfers the information asymmetry between lenders and SMEs to that between insurers and SMEs We investigate how asset prices vary across time under the EGS contract and analyze insurers’ risk exposure, i.e. value-at-risk (VaR) and expected shortfall (ES), of participating in the EGS contract. Consistent with pecking order theory, SMEs tend to use debt financing first dispite the benefit of a boosted growth rate from private equity financing in our model.     

TrAffic LIght system for systemic Stress: TALIS3

For the purposes of financial stability, identifying financial institutions that, when in distress, could have a significant adverse impact on financial markets is important. A TrAffic LIght System for Systemic Stress (TALIS-cube) is proposed that provides a comprehensive color-based classification for grouping companies according to both the stress reaction level of the system when the company is in distress and the company’s stress level. TALIS³ can integrate multiple signals from the interaction between different risk metrics. Starting from specific risk indicators, companies are classified by combining two loss functions—one for the system and one for each company—evaluated over time and as a cross section. An aggregated index is also obtained from the color-based classification of companies. TALIS³ can be used to enhance the performance and robustness of existing systemic risk measures. An empirical analysis of the U.S. market is also provided.     

Consumer acceptance of irradiated food and information disclosure – A retail imperative

There is substantial contribution in the literature for understanding the complex nature of irradiated foods, the growing importance and the controversial views expended by consumers, yet acceptance of these foods for many have not met with optimal recognition. The study extends the theory of planned behaviour antecedents to analyse independent determinants and the influences of risk and trust. The indirect effects are also examined. The study uses multigroup analyses to identify whether consumer's concerns on information for irradiated foods act as moderators in order to provide a better explanatory power.The data was analysed using Structural Equation Modelling on responses obtained from a sample of 322 consumers. The study found that the theory of planned behaviour antecedents successfully predicted behavioural intention for irradiated foods but with some limitations. The findings also demonstrate additional support to show that the robustness of the TPB framework is effective for irradiated foods and addresses the literature calls on research for more theoretical underpinnings. It further addresses retailer implications, as the ultimate decision falls with retailers who assess whether sales for irradiated foods are acceptable depending on consumer demand.     

The influence of auditor narcissism and moral disengagement on risk assessments of a narcissistic client CFO

Global capital markets rely heavily on independent and skeptical auditors as gatekeepers to provide assurance that corporate financial reports are free of material fraud. The rise of narcissism among the ranks of both client and audit professionals challenge this gatekeeper function. In addition, auditor moral disengagement may undermine auditor skepticism, further eroding public confidence in the integrity of financial reporting and the audit process. We conduct a quasi-experiment with 118 auditors from three international audit firms. In a simulated interview with a client CFO, we examine whether auditors underestimate risks of fraudulent financial statements due to the interactive effects of (1) client narcissism (manipulated verbally and nonverbally) and (2) auditor narcissism. We also examine the influence of auditor moral disengagement on client risk assessments. Results indicate that CFO verbal and nonverbal narcissism significantly influenced auditors’ assessment of management-related client risk. Moreover, auditor narcissism was found to interactively influence client risk inferences such that auditors higher in narcissism exhibited narcissistic tolerance (lower risk assessments) when the hypothetical CFO displayed high verbal narcissism. Auditor moral disengagement was negatively associated with client risk assessments. We discuss the implication of these findings on future audit judgment research, audit firm policy and training on maintaining auditor skepticism, and the audit oversight role of standard-setters.     

The role of managerial risk‐taking in the ‘rise and fall’ of the CDS market

Since the innovation of credit default swaps (CDSs) in 1997, the market for CDSs grew dramatically to $62 trillion in 2007 (ISDA 2010). However, this market declined significantly with the onset of the GFC, prompting the question, ‘What lies behind the phenomenal growth and the eventual collapse of the CDS market?’ Using CDS spread data from 319 bank and non‐bank financial institutions across 33 countries over the period 2001–2010, I provide evidence of the determinants that affect risk‐taking by financial institutions, proxied by CDS spreads, and argue within an agency theoretical framework that managerial risk‐taking contributed to the ‘rise and fall’ of the CDS market.     

Factor pricing in commodity futures and the role of liquidity

This paper empirically investigates the pricing factors and their associated risk premiums of commodity futures. Existing pricing factors in equity and bond markets, including market premium and term structure, are tested in commodity futures markets. Hedging pressure in commodity futures markets and momentum effects is also considered. This study combines these factors to discuss their importance in explaining commodity future returns, while the literature has studied these factors separately. One of the important pricing factors in equity and bond markets is liquidity, but its role as a pricing factor in commodity futures markets has not yet been studied. To our knowledge, this research is the first to study liquidity as a pricing factor in commodity futures. The risk premiums of two momentum factors and speculators’ hedging pressure range from 2% to 3% per month and are greater than the risk premiums of roll yield (0.8%) and liquidity (0.5%). The result of a significant liquidity premium suggests that liquidity is priced in commodity futures.     

股东对创新投入的反应：股权激励异质性的信号作用

以我国2017—2019年沪深两市A股实施股权激励的上市企业为样本,基于股东视角分析股东对创新投入信息的反应,探讨这一反应在股权高度集中时的变化,并考察高管团队股权激励异质性因素向股东传递信号的机制。结果表明,创新投入与股东反应正相关;股权集中度正向调节创新投入与股东反应的关系;股权激励异质性负向调节创新投入与股东反应的关系,且该效应在民企中更加显著;经营风险是股权激励异质性负向影响股东对创新投入反应的中介变量。