Trade credit financing and stock price crash risk

This study investigates the association between trade credit financing and stock price crash risk within China's context. We find that firms using more trade credit financing have significantly lower future stock price crash risk. This negative association is more pronounced for firms with greater information asymmetry and for firms located in less developed financial markets. This finding is robust to the endogeneity concern, alternative measures of stock price crash risk, and the inclusion of other factors identified in prior studies that might affect stock price crash risk. Further evidence suggests that both the monitoring mechanism and the disclosure mechanism drive the documented relation. Our study suggests that access to trade credit can significantly reduce the likelihood of crash risk in a country like China with less developed formal bank financing. Our study also suggests that investors can effectively avoid stock price crash risk by using the trade credit information disclosed in financial statements.     

Corporate governance and stock price crash risk: Evidence from Taiwan

Managers are likely to withhold negative news to protect their own interests. When they can no longer withhold such news, extreme negative returns and a stock price crash (SPC) follow. This study explores whether a favorable corporate governance (CG) mechanism helps reduce SPC risk. The findings reveal that CG affects SPC risk. Moreover, the effects of institutional ownership, board size, and disclosure violation frequency are particularly significant in family-owned businesses. We also examine the effectiveness of CG evaluation (CGE) in Taiwan and discover that companies with high rankings are substantially less likely to encounter an SPC. This study verifies that CGE can be considered an indicator of SPC risk.     

近期股市价格走势与宏观经济协调性风险分析

股市价格走势与宏观经济运行的协调性是投资分析中很重要的研究问题。文章基于传统理论,对现阶段二者的协调性进行了分析,得出了其对投资分析具有较大风险的结论。通过深究原因,提出几个简单的解决方法。     

Environmental policies and financial performance: stock market reaction to firms for their proactive environmental practices recognized by governmental programs

Firms implement proactive environmental practices (PEPs), and governments in developing countries such as China implement environmental policies such as pilot and demonstration programs to promote these PEPs. However, it remains unclear whether and when firms recognized by such governmental programs improve financial performance. Using a sample of 233 firms recognized by a national Chinese government environmental program, event study is employed to estimate stock market reaction of recognized firms. The Heckman two-stage procedure is followed to examine the moderating effects. We find that the average stock market reaction is not significant. Cross-sectional analyses indicate that firms with earlier recognitions, recognized for demonstration projects (compared with pilot ones), and operating in more-polluting industries have greater market reactions, while types of PEPs (internal versus external), export intensity and government ownership (state-owned or not) do not moderate the market reaction. This paper provides implications for firms about whether and when they should participate in a government environmental program.     

Economic policy uncertainty,oil price volatility and stock market returns: Evidence from a nonlinear model

This paper investigates the nonlinear relationship between economic policy uncertainty, oil price volatility and stock market returns for 25 countries by applying the panel smooth transition regression model. We find that oil price volatility has a negative effect on stock returns, and this effect increases with economic policy uncertainty. Furthermore, there is pronounced heterogeneity in responses. First, oil-exporting countries whose economies depend more on oil prices respond more strongly to oil price volatility than oil-importing countries. Second, stock returns of developing countries are more susceptible to oil price volatility than that of developed countries. Third, crisis plays a crucial role in the relation between oil price volatility and stock returns.     

Environmental performance and bank lending: Evidence from unlisted firms

Growing public concerns about sustainability and adopting environmentally responsible practices increase risks as well as opportunities for firms and banks. It is unclear whether being environmentally responsible matters for unlisted firms, which are significant contributors to the degradation of the environment but which are not under strict scrutiny like public listed firms. Using a sample of 3915 firms from developing economies, we investigate whether the superior environmental performance of unlisted firms leads them to better loan conditions. After controlling for endogeneity and sample selection bias, we find that firms with better environmental performance received approximately 6.4% higher loans (as a ratio of total sales) and that this effect is more prominent in small and medium firms. This finding supports an information asymmetry view of agency costs. Our results, however, show that environmental performance does not affect loan duration and collateral requirement, indicating no spillover economic effect of corporate environmental performance on loan conditions. This partially supports a new perspective of legitimacy theory in relation to the ‘greenwash strategy’. Overall, our study shows that strategically engaged environmental activities that are integrated with core business objectives represent an important business strategy for firms to enhance credit access.     

Government Engagement,Environmental Policy,and Environmental Performance: Evidence from the Most Polluting Chinese Listed Firms

This study empirically examines the implementation of environmental policies and how government engagement impacts on a firm's environmental performance based on a sample of Chinese listed firms in the eight most polluting industries over a 10‐year period. The findings of the study demonstrate that government engagement, measured as ownership structure, is positively correlated with environmental performance, measured by environmental capital expenditure, for state‐owned firms, but no significant relation is found for non‐state‐owned firms. In addition, non‐state‐owned firms are more likely to perform better in terms of environmental investment after the 2006 enactment of a new policy explicitly linking environmental issues with political incentives to regional governments. This study also reports that corporate environmental performance impairs firm value for state‐owned firms but has no impact on firm value for non‐state‐owned firms, suggesting that investors negatively respond to environmental investments made by state‐owned firms as a result of government engagement/political pressure. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.     

The effects of regional trade integration and renewable energy transition on environmental quality: Evidence from South Asian neighbors

Improving environmental quality across South Asia has become one of the utmost important policy agendas of the concerned governments. The susceptibility of the majority of the South Asian countries to multifaceted climate change adversities has motivated the need to identify the factors that can function to ensure environmental sustainability across South Asia. Although several studies have highlighted the importance of globalization and cleaner energy use in tackling the environmental degradaton issues of the South Asian countries, very little is known regarding the impacts of regional trade and renewable energy transition in this regard. Hence, this paper aims to scrutinize the effects of enhancing intra-regional trade integration and undergoing renewable energy transition on per capita carbon dioxide emissions in the context of six South Asian nations between 1990 and 2016. The results from the recently developed cross-sectionally augmented autoregressive distributed lag regression approach, accounting for cross-sectional dependency and slope heterogeneity issues, reveal that facilitating trade among the South Asian neighbors reduces carbon emissions in both the short and long run. Moreover, enhancing the share of renewable energy in the aggregate energy consumption figures is also found to reduce carbon dioxide emissions in both the short and long run. Furthermore, both regional trade integration and renewable energy transition are found to jointly reduce carbon dioxide emissions in South Asia. The results also authenticate the existence of the environmental Kuznets curve hypothesis, while financial development and urbanization are found to boost carbon dioxide emissions only in the long run.     

Strategic business risk evaluation for sustainable energy investment and stakeholder engagement: A proposal for energy policy development in the Middle East through Khalifa funding and land subsidies

This article projects business risk through deferent industrial scenarios in concentrated solar investments in the United Arab Emirates (UAE). Nationwide, the government seeks a sustainable solution through energy policy development and engagement of the stakeholders for clean energy generation at wider level in the long run. Support has been extended through various support schemes. In the current study, Monte Carlo simulations and net present value (NPV) risk are used to analyse the return on investment. A 5 MW concave solar panel project is evaluated. We have assessed the impact of local factors on profits through NPV. The study proposes that a higher NPV is expected if the concave solar panel project is financed 50% by Khalifa funding. The study also proposes a robust policy and highlights the opportunity of business profitability if the government subsidises land leasing with respect to each scenario. Additionally, the study also proposes a policy to maintain the interests of investors in the UAE.     

Economic policy uncertainty and stock market sector time-varying spillover effect: Evidence from China

This paper investigates the volatility spillover effect among the Chinese economic policy uncertainty index, stock markets, gold and oil by employing the time-varying parameter vector autoregressive (TVP-VAR) model. Three main results are obtained. Firstly, the optional consumption, industry, public utility and financial sectors are systemically important during the sample period. Secondly, among the four policy uncertainties, the uncertainty of fiscal policy and trade policy contributes more to the spillover effect, while the uncertainty of monetary policy and exchange rate policy contributes less to the spillover effect. Thirdly, during COVID-19, oil spillovers from other sources dropped rapidly to a very low point, it also had a significant impact on the net volatility spillover of the stock market. This paper can provide policy implication for decision-makers and reasonable risk aversion methods for investors.     

Horse race of weekly idiosyncratic momentum strategies with respect to various risk metrics: Evidence from the Chinese stock market

This paper focuses on the horse race of weekly idiosyncratic momentum (IMOM) with respect to various idiosyncratic risk metrics. Using the A-share individual stocks in the Chinese market from January 1997 to December 2017, we first evaluate the performance of the weekly momentum based on raw returns and idiosyncratic returns, respectively. After that the univariate portfolio analysis is conducted to investigate the return predictability with respect to various idiosyncratic risk metrics. Further, we perform a comparative study on the performance of the IMOM portfolios with respect to various risk metrics. At last, we explore the possible explanations to IMOM as well as risk-based IMOM portfolios. We find that 1) there are prevailing contrarian effect and IMOM effect for the whole sample; 2) the negative relations exist between most of the idiosyncratic risk metrics and the cross-sectional stock returns, and better performance is linked to idiosyncratic volatility (IVol) and maximum drawdowns (IMDs); 3) additionally, the IVol-based and IMD-based IMOM portfolios exhibit better explanatory power to the IMOM portfolios with respect to other risk metrics; 4) finally, higher profitability of IMOM as well as IVol-based and IMD-based IMOM portfolios is found to be related to upside market states, high levels of liquidity and high levels of investor sentiment.     

Analysis of the cross-region risk contagion effect in stock market based on volatility spillover networks: Evidence from China

This article uses the stock market regional indexes of 31 provinces (include Province-level municipalities and Minority Autonomous Regions) in mainland China as a sample, and constructs an inter-regional volatility spillover network of China’s stock market based on the GARCH-BEKK model. Through network centrality analysis, Diebold and Yilmaz's spillover index method and block model analysis, we comprehensively analyze the risk contagion effect among different regions in China’s stock market. The empirical results show that: (i) The risk contagion intensity (risk reception intensity) in various regions of China’s stock market has a typical “core-periphery” distribution characteristic due to regions’ different levels of economic development. (ii) There are obvious risk spillover effect in China’s stock market, among which the economically developed regions along the southeastern coast of China, such as Beijing, Shanghai, Zhejiang and Jiangsu, are the main risk transmitters, while the economically undeveloped regions in the Midwest of China, such as Xinjiang, Xizang, Gansu, Nei Menggu and Qinghai are the main risk receivers. (iii) Each region is divided into 4 blocks according to their respective roles in the risk spillover process in China’s stock market. Block 1 that is composed of the economically underdeveloped regions in the Midwest is the “main benefit block”, it acts as a “receiver”. Block 2 that is composed of regions with strong economic growth vitality in the Midwest is a “Bilateral spillover block”, it both plays the role of “receiver” and “transmitter”. Block 3 that is composed of developed regions along the southeast coast, it acts as a “transmitter”; Block 4 that is composed of the relatively fast-growing regions in the Southwest is the “brokers block”, it serves as a “bridge”. The results of this article can provide some reference for investors in financial institutions and decision makers in financial regulators.     

Influences on Sustainable Innovation Adoption: Evidence from Leadership in Energy and Environmental Design

The adoption of innovations associated with environmental sustainability has been a topic of growing interest among scholars. The research presented in this paper draws on Abrahamson's theoretical framework of fads and fashions to argue that dimensions of uncertainty and degree of external versus internal influence provide significant insights into firms' decisions to adopt sustainable building innovations. We develop three hypotheses, reflecting three views of adoption influence: fad, fashion, and efficient‐choice. We find that adoption of Leadership in Energy and Environmental Design (LEED) green building certification in the United States was more likely among firms similarly oriented toward end‐consumers and among firms strategically positioned as environmental leaders. These results provide support for the fad and efficient‐choice views of adoption, respectively. Contrary to expectations suggested by the fashion perspective, adoption was not more likely among firms located in states whose political leaders are more committed to environmental protection. Our findings offer important implications for practitioners and policy makers seeking to encourage sustainable building design. Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment.     

Environmental degradation,energy consumption and sustainable development: Accounting for the role of economic complexities with evidence from World Bank income clusters

The anthropogenic consequences of renewable and non-renewable energy consumption, economic growth, and air transport have been assessed enormously in the literature. However, given the complexities in many economies of the world today, it is important to reassess the ecological concerns of these factors in light of the Environmental Kuznets Curve framework. Therefore, this current study investigates the global assessment using data from World Bank Development database from 1995 to 2016. Evidence from the method employed, sys-GMM, revealed that the economic complexities index increases the carbon emission in low-income groups while it significantly decreases the carbon emission for upper-middle and high-income groups. For the combined group, the EKC hypothesis holds, and ECI significantly hampers carbon emissions. For the other variables, it is worthy of note that (1) economic growth contributes to the high carbon contents across the income group especially for low-income, upper-middle-income and high-income group; (2) the effects of air transport on carbon emission is positive for lower-middle-income and high-income group and negative for the upper-middle-income group; (3) the use of coal rents and energy use leads to high release of carbon contents across all the income groups; and (4) a significant increase in the utilization of energy leads to increase in carbon contents except for lower-income group, it leads to a decrease. From this empirical assessment, vital energy policy directions are suggested.     

Asset price,risk transfer and economic activities: Firm-level evidence from China

The paper investigates the extent of the impact from changes in asset price and risk on corporate investment behaviors as well as the real economy. The results support the unidirectional causality effects from asset price fluctuations on the macro-level. By applying quarterly data of Chinese listed companies, we further find the existence of balance sheet effect on the firm-level, which suggests that the changes in asset prices and risk affect the net asset value, and consequently influence corporate investment decisions. More importantly, the balance sheet effect appears to be much more significant after the implementation of new fair value accounting standards in 2007. The impact on the real economy from asset price risk is found to be more prominent as well.     

Funding liquidity risk and the low-volatility anomaly: Evidence from the Taiwan stock market

We investigate whether the funding liquidity risk to institutional investors influences the negative relation between expected returns and variance (the ‘‘Low-volatility anomaly’’). With the Taiwan stock market as a setting, we implement a multivariate Markov switching model and use the funding liquidity risk to model the time-varying transition probabilities of the regime-switching process to capture changes in the funding liquidity risk regime. Our evidence documents that the low-volatility anomaly is most pronounced when there is high funding liquidity risk. When there is low funding liquidity risk, however, the low-volatility anomaly has a significant reversal. These results imply that the increased funding liquidity risk due to financial shock transmitted from parent banks is associated with higher selling pressure on institutional investors’ high-volatility stocks, leading to the low-volatility anomaly.     

Oil structural shocks,bank-level characteristics,and systemic risk: Evidence from dual banking systems

By performing a structural VAR analysis on oil price shocks, we provide an evidence on how the origins of oil price shocks impact the risk level of banks in oil-exporting countries and whether bank-level characteristics can influence the sensitivity of risk to oil shocks. When conducting panel regression analysis, we document the following findings. First, not all shocks have the same effect on bank risk. Due to oil supply shocks, the increase in oil price raises bank risk, whereas the similar increase in price due to economic expansion or oil-market specific demand reduces that risk. Second, the business model (whether the bank is Islamic or conventional), size, income diversification, profitability, and financial leverage influence the bank risk exposure to oil shocks differently. Third, the two major recent crises (global financial crises and COVID-19 pandemic) magnified bank risk exposure to oil supply shocks and speculative oil demand shocks. Overall, the structural oil shocks explain a large fraction of the variation in financial stability in GCC countries.     

COVID-19, ESG investing,and the resilience of more sustainable stocks: Evidence from European firms

Following the COVID-19 outbreak, orientation toward sustainability is a critical factor in ensuring firm survival and growth. Using a large sample of 1,204 firms in Europe during the year 2020, this study investigates how more sustainable firms fare during the pandemic compared with other firms in terms of risk–return trade-off and stock market liquidity. We also highlight the drivers of the resilience of more sustainable firms to the pandemic. Particularly, we document that higher levels of cash holdings and liquid assets in the pre-COVID period help these firms to perform and absorb the COVID-19 externalities better than other firms. Our results are robust to a host of econometric models, including GMM estimations and several measures of stock market performance. These findings contribute to the theoretical and empirical debate on the role of the sustainability as a source of corporate resilience to unexpected shocks.     

Flexible work arrangements,national culture,organisational characteristics,and organisational outcomes: A study across 21 countries

Using a contingency perspective, we investigated two complementary topics: (a) the influence of the GLOBE national cultural values and key organisational variables on employee use of flexible work arrangements (FWAs), and (b) the contribution of the level of congruence between cultural values and FWA use on absenteeism and turnover. The results, based on Cranfield Network on Comparative Human Resource Management—a large data set across multiple countries—supported the hypothesised effects of the cultural values on employee use of FWAs and the moderating effects of these cultural values on FWA use and organisational outcomes. Specifically, we found that national cultural values and organisational characteristics were related to outcomes via FWA use; and employees' use of FWAs had the overall effect of reducing absenteeism and turnover, but this effect was weakened when the FWAs were not consistent with cultural values. Theoretically, our results add to our knowledge and understanding of the effects of FWA use on absenteeism and turnover under different degrees of “fit” with cultural context. From a practical perspective, our results suggest that organisations should consider national cultural characteristics before implementing FWAs. A misfit between national culture and FWAs would potentially reduce employee use of FWAs and increase the likelihood of absenteeism and turnover.     

Environmental Requirements,Knowledge Sharing and Green Innovation: Empirical Evidence from the Electronics Industry in China

Building on the Porter hypothesis, which posits that regulatory stringency triggers innovation and thereby allows firms to achieve the dual purpose of environment protection and enhanced business performance, the present research develops an integrative model that explores the determinants of green innovation with a focus being placed on knowledge sharing. Data were collected from 203 green innovation project leaders from electronics manufacturers operating in China. The results indicate that knowledge sharing mediates the relationship between green requirements and new green product success as well as that between green requirements and green product and process innovations. Interestingly, the empirical analysis rejects the hypothesized positive influence of green requirements on green product and process innovations as well as that on new green product success, while confirming that there exists a direct and positive association between green requirements and knowledge sharing. The direct positive impact of knowledge sharing is the strongest on green process innovation. This study provides a theoretical basis for investigating the possible determinants in the causal links between green requirements and green innovation success and establishes that knowledge sharing and green process innovation may be the points where leverage can be applied to best secure innovation success. Implications of the findings on environmental policy and law design are also discussed to see how the regulatory role of the government can be better positioned to facilitate compliance and innovation. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment.