On emerging stock market contagion: The Baltic region

This study provides new evidence on emerging stock market contagion during the Global Financial crisis (GFC) and the Euro zone Sovereign Debt Crisis (ESDC). Focusing on the three emerging Baltic markets and developed European markets, proxied by the EUROSTOXX50 stock index, we explore asymmetric dynamic conditional correlation dynamics across stable and crisis periods. Empirical evidence indicates a diverse contagion pattern for the Baltic region across the two crises. Latvia and Lithuania were contagious during the GFC, while they were insulated from the adverse effects of the ESDC. On the other hand, Estonia decoupled from the negative consequences during the global turmoil period, but recoupled during the ESDC. The results could be attributed to financial and macroeconomic characteristics of the Baltic countries before and after the turmoil periods and the introduction time of the Euro as a national currency.     

Crowdfunding: The collaborative economy for channelling institutional and household savings

The financial disintermediation mechanism known as “loan-based-crowdfunding” has recently come under regulation in several countries. This competitive investment and finance vehicle is already well established in the US and British markets.By compiling empirical data from a reference crowdfunding platform, this article compares loan-based crowdfunding with traditional investment vehicles such as investment funds, equities or pension funds.The conclusion of the study is that saving through crowdfunding allows the optimization of a portfolio comprising both institutional and retail investors.     

Determinants of time varying co-movements among international stock markets during crisis and non-crisis periods

In this paper, we use the DCC MIDAS approach to assess the validity of the wake-up call hypothesis for developed and emerging markets during the global financial crisis (GFC). We use this approach to decompose the total correlations into short- (daily) and long-run (quarterly) correlations for the period from 1999 to 2011. We then examine the transmission mechanisms by regressing the quarterly economic, financial, and behavioral variables on the quarterly DCC–MIDAS correlations. We find that country specific factors are crisis contingent transmission mechanisms for the co-movements of emerging country pairs and mixed pairs of advanced and emerging countries during the global financial crisis. However, we do not observe wake-up calls in the transmission of the crisis among advanced country pairs. The classification of the transmission mechanisms for crisis and non-crisis periods with the different country pairs has important implications for crisis management as well as for portfolio investment strategies. Thus, our findings contribute to the discussion on the role and effectiveness of the international financial architecture.     

Food industry structure in Norway and Denmark since the 1990s: Path dependency and institutional trajectories in Nordic food markets

Structural changes in Norwegian and Danish food industry since the 1990s is analysed as a path dependent response to the neo-liberal turn. Norway entered the 1990s as a protected market and Denmark as case of an export oriented industry. These developmental strategies are rooted in early 20th century industrialisation and influenced by institutional transformations in the 1990s, such as EU and WTO. Mergers and acquisitions (M&A) are studied in the context of changing political environments. Explaining two different trajectories, we combine path dependency theories and a Polanyi inspired ‘varieties of capitalism’ framework with corporate strategy theories on food industry M&As. We identify two different types of path dependent development, a self-reinforcing in Denmark and a transformative ‘breaking point’ in Norway.     

Does US news impact Asian emerging markets? Evidence from nonparametric causality-in-quantiles test

This paper aims to analyze whether US news on inflation and unemployment causes returns and volatility of seven emerging Asian stock markets from 1994 to 2014, by employing the causality-in-quantile approach. We find evidence that US news affect returns and/or volatility of all the seven stock markets considered, with these effects clustered around the tails of the conditional distribution of returns and volatility when they are either in bear or bull modes. In general, our results highlight the importance of modeling nonlinearity and studying entire conditional distributions of stock returns and volatility to draw correct inferences.     

Asset price volatility and banks

This paper examines the operation of Diamond–Dybvig banks when depositors have access to the asset market. Previous studies have shown that banks are redundant in this environment since it is impossible to prevent the strategic withdrawals. This paper shows that the strategic withdrawals can be prevented if the market risk, due to asset price volatility, is considered. Banks provide deterministic returns to the depositors since the aggregate withdrawals are predictable, and therefore, banks can choose the portfolio such that no asset liquidation is involved. However, an individual consumer with stochastic liquidity need is vulnerable to the price volatility if he holds the asset directly. Therefore, banks improve the consumers’ welfare by providing the insurance against not only the liquidity shock but also the market risk. Banks are not redundant.     

The going public decision and the structure of equity markets

The industries in which listed firms are concentrated in less developed equity markets are not random, nor entirely explained by the underlying composition of production. Listed firms and market capitalization are disproportionately concentrated in industries with low beta (measured with their beta with the market portfolio in the U.S.). We document a strong positive relationship between the industry-weighted country beta and the degree of market development across countries. Recent IPO activity confirms the result since new listings have higher betas than the average firm already in the market.     

EXPORT AND HEDGING DECISIONS UNDER CORRELATED REVENUE AND EXCHANGE RATE RISK

This paper examines the behaviour of a competitive exporting firm under joint revenue and exchange rate risk. The firm can trade unbiased currency futures contracts for hedging purposes. We show that neither the separation theorem nor the full‐hedging theorem holds when the revenue shock prevails. If the correlation between the revenue shock and the random spot exchange rate is non‐positive, the firm optimally produces less than the benchmark level when the revenue shock is absent. If, in addition, the firm is prudent, the optimal futures position is an under‐hedge. Finally, we derive sufficient conditions under which the firm's optimal output level is higher in the presence than in the absence of the revenue shock. Operational hedging and financial hedging as such interact in a complicated way to better cope with the multiple sources of uncertainty faced by the firm.     

Foreign investment,corporate governance and performance in the Chinese listed A Share companies

We present a novel lens on the presence and impact of qualified foreign institutional investors (QFII) in top shareholdings of the non-financial domestically listed Chinese ‘A’ share firms. The initial results suggest that the presence of a QFII as a top shareholder in these companies is associated with their better performance, using both Tobin’s Q and ROA as the performance measures. Our models include variables representing corporate governance mechanisms, foreign legal person shares, a proxy for international affiliations and a number of time-variant firm characteristics. Economically, the coefficient of impact on the market measure is the more significant, while the effect of having a QFII in top shareholdings on both performance measures is empirically significant. Previously, studies have often ignored the potential for reverse causality beyond using lagged regressors. This is problematic. Therefore, we follow up with a 2SLS instrumental variables and system GMM model to further mitigate this potential and find the empirical relationship holds. Contrary to earlier work on QFIIs and governance post-implementation of the QFII scheme, the findings from our models suggest that the presence of a QFII top shareholder augments market performance holding equal existing corporate governance mechanisms and other controls.