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We analyse spillovers between the real and financial sides of the US economy, and between those in the US and other advanced economies. The approach developed allows for differences in sampling frequency between financial and macroeconomic data. We find that financial markets are typically net transmitters of shocks to the real side of the economy, particularly during turbulent market conditions. This result holds both for domestic US macro-financial spillovers, and also those between the US and other advanced economies. Our macro-financial spillover measures are found to have significant predictive ability for future macroeconomic conditions in both in-sample and out-of-sample forecasting environments. Furthermore, the predictive ability frequently of our macro-financial measures frequently exceeds that of purely financial systemic risk measures previously employed in the literature for the same task., Scientific and Technological Research Council of Turkey (TÜBİTAK); The authors wish to thank participants of the 2016 FMA Annual Meeting in Las Vegas, the 2016 Financial Econometrics and Empirical Asset Pricing Conference at Lancaster University, the Barcelona GSE Summer Forum at Universitat Pompeu Fabra, the 11th Computational and Financial Econometrics Conference in London, the 5th Asset Pricing Workshop at the University of York, the 2018 Irish Academy of Finance conference, the 2020 FMA Online Annual Meeting, seminar participants at Bilkent University, Boğaziçi University, University College Dublin, University of Essex, University of Konstanz, University of Liverpool, University of Stirling, the Central Bank of Ireland, University of Groningen, Aarhus University, European Securities and Markets Authority, Vienna University of Economics and Business, and Abhinav Annand, Turan Bali, Michael Brennan, Christian Brownlees, Eric Ghysels, Maureen O Hara, Matt Spiegel and Josef Zechner for valuable feedback and comments. John Cotter and Mark Hallam gratefully acknowledge the support of Science Foundation Ireland under grant number 16/SPP/3347 and 17/SPP/5447.

The most significant market for life settlements (LSs) is the U.S. LSs are not present in some European countries, such as Spain, and can therefore be seen as a novel and innovative financial service in those countries. This last consideration motivates this paper, which analyses the key factors, from the seller’s perspective, for the development of a secondary life insurance market through LSs in Spain. To do so, we use consumer behaviour findings from academic research on the acceptance of new technologies and services. Our analysis is based on the technology acceptance model developed by Davis (MIS Q 13:319–340, 1989) and Venkatesh et al. (MIS Q 27:425–478, 2003) and it is adjusted by means of a partial least squares-structural equation modelling. The findings show that relevant variables for the use of LSs are performance expectancy, expected easiness and social influence constructs. Ethical problems are not relevant in the decision to accept LSs. © 2021, The Geneva Association.

This paper explores the impact of different crises on the informational efficiency of financial assets. The study covers stock markets indices (ASX200, DAX30, EuroStoxx50, S&P500 and Nikkei), commodities (gold and oil) and volatility (VIX). The study analyzes, using a rolling window method, the long memory profile and the multifractality of the time series by means of the DFA and generalized Hurst exponents. This dynamic analysis is important as it uncovers the time-varying behavior of returns characteristics, affecting the investment decisions and trading strategies at different moments of time. The paper extends the current literature on informational efficiency, providing evidence of the distinct impact on the long memory and on the multifractality of the time series, depending on the nature of the crisis and the market. The results could be of interest for investors as well as for academics, regarding the hedging limits of the models during calm or turbulent times.

The current financial education framework has an increasing need to introduce tools that facilitate the application of theoretical models to real-world data and contexts. However, only a limited number of free tools are available for this purpose. Given this lack of tools, the present study provides two approaches to facilitate the implementation of an event study. The first approach consists of a set of MS Excel files based on the Fama-French five-factor model, which allows the application of the event study methodology in a semi-automatic manner. The second approach is an open-source R-programmed tool through which results can be obtained in the context of an event study without the need for programming knowledge. This tool widens the calculus possibilities provided by the first approach and offers the option to apply not only the Fama-French five-factor model but also other models that are common in the financial literature. It is a user-friendly tool that enables reproducibility of the analysis and ensures that the calculations are free of manipulation errors. Both approaches are freely available and ready-to-use.

The tremendous impact of the coronavirus pandemic on the global aviation industry has led to many cases of airline financial distress and bankruptcy. The Asia–Pacific region (APAC) contains more than half of the world’s population, and its airlines had the highest profit margin of any region. In this study, we investigate whether corporate sustainability practice can reduce the financial distress risk of air carriers, and, if so, what would the effect be in APAC? We first examine the relationship between environmental, social, and governance disclosure and the likelihood of financial distress of airlines as measured by the Altman Z″-score. Second, we analyze the moderating role of being an APAC airline in this relationship. The findings support the claim that implementing environmental actions may increase financial distress risk, and by improving social and governance activities, airlines can mitigate the risk of financial distress. The negative influence of the environmental pillar and the positive influence of the social pillar can be smaller for APAC airlines. Our study provides empirical evidence of the influence of environmental, social, and governance (ESG) on the likelihood of financial distress in the airline industry. Moreover, we analyze the moderating role of being an APAC airline in the relationship between sustainability and financial distress. This study has significant implications for executives, managers, and policymakers in the aviation industry on ESG strategy decisions and the general issue of sustainability.

This paper explores the use of clustering models of stocks to improve both (a) the prediction of stock prices and (b) the returns of trading algorithms. We cluster stocks using k-means and several alternative distance metrics, using as features quarterly financial ratios, prices and daily returns. Then, for each cluster, we train ARIMA and LSTM forecasting models to predict the daily price of each stock in the cluster. Finally, we employ the clustering-empowered forecasting models to analyze the returns of different trading algorithms. We obtain three key results: (i) LSTM models outperform ARIMA and benchmark models, obtaining positive investment returns in several scenarios; (ii) forecasting is improved by using the additional information provided by the clustering methods, therefore selecting relevant data is an important preprocessing task in the forecasting process; (iii) using information from the whole sample of stocks deteriorates the forecasting ability of LSTM models. These results have been validated using data of 240 companies of the Russell 3000 index spanning 2017 to 2022, training and testing with different subperiods.

In this study we develop an early warning system (EWS) to forecast currency crises in emerging countries in Asia and Latin America, using logit regression on monthly data from 1992 to 2011. We found that macroeconomic and institutional variables are valuable indicators for forecasting crises. Our results show that a low level of export growth, current account surplus/GDP, GDP growth, a high level of real exchange rate growth, import growth, and short-term debt/reserves can explain the advent of a possible currency crisis. We found that a poor law and order scenario and high external conflict can lead to a currency crisis. Additional findings include high government stability and the absence of internal conflict, which contribute to an absence of democracy, ultimately leading to a currency crisis. The policy-makers can consider taking the effective pre-emptive actions to prevent the currency crises occurring in the future.

The effectiveness of Financial Transaction Taxes (FTTs) for deterring speculative trading and improving market quality remains controversial. Studying the FTT imposed in 2012 on large-cap stocks traded on the Euronext Paris, we find that stocks subject to the FTT subsequently experience significantly decreased turnover and increased spreads relative to the untaxed peers. Further tests suggest that the FTT imposition induces investors to migrate their trades and results in less informativeness in the taxed stocks. Collectively our findings support the view that FTTs deter informed trades and reduce market quality.

This paper revisits the linkage between cryptocurrencies and public disclosed preferences, proxied by online searches. We show that cryptocurrencies are not related to a general uncertainty index as measured by the Google Trends data by Castelnuovo and Tran (2017). Instead, cryptocurrencies are linked to a Google Trends attention measure specific for this market. In particular, we find a bidirectional flow of information between Google Trends attention and cryptocurrency returns up to six days. Moreover, information flows from cryptocurrency volatility to Google Trends attention seem to be larger than those in the other direction. Finally, we report a significant tail dependence between cryptocurrency returns and Google Trends. These relations hold for the five cryptocurrencies analyzed and different compositions of the proposed Google Trends Cryptocurrency index.

© 2020 John Wiley & Sons Ltd Small and Medium Enterprises (SMEs) are substantial contributors to employment and to the GDP growth in many countries. Therefore, understanding their difficulties to find appropriate financial resources are a key task for policy makers. Despite being a long-debated topic, there are still several gaps in the literature, probably due to the lack of empirical data. A relatively new database, the Survey of Access to Finance of Enterprises (SAFE) emerged after the subprime crisis. It is regularly conducted by the European Central Bank and can provide new information on SMEs financing. This paper conducts a meta-analysis of the literature based upon this survey, identifying key working hypothesis, methodologies and results.

AbstractIn this article, we use volatility surface data from options contracts to document a strong, robust, and positive cross-sectional relation between risk-neutral skewness (RNS) and subsequent stock returns. The differential return between high- and low-RNS stocks amounts to 0.17% per week. Preannouncement RNS is positively related to earnings announcement returns, and the positive RNS–return relation is more pronounced for other nonscheduled news releases. This suggests that it is informed trading that drives the positive relation between RNS and subsequent stock returns. We also find that RNS contains incremental information beyond trading signals captured by option-implied volatility and volume.

Using panel vector autocorrelation models (Panel VaR), we examine the dynamic interrelationships between short-term financing sources for a large sample of 8,464 firm-year observations from seven understudied developing economies over the period 1991-2015. On average, we find that short-term debt and trade credit are complements, while cash holdings are substitutes for short-term debt and trade credit. However, our further analyses show that the interrelationships between short-term financing sources are strong and significant before the financial crisis but diminish thereafter with contractions in credit supply. These changes highlight the impact of credit supply shocks on short-term financing policies of firms domiciled in less-developed capital markets. As firms in Africa, an exemplary less-developed capital market context, rely heavily on short-term financing sources, the dynamic interrelationships we document have important implications that are of interest to academics, practitioners, and policymakers alike.

Using 2696 acquisition announcements reported in Australia between 2000 and 2016, we document lower stock returns but higher risk for deals made by serial acquirers compared to those made by single acquirers after controlling for firm and deal characteristics. We also find that serial acquirers' underperformance relative to single acquirers is more pronounced when managers gain more control over their firm's resources. Further analysis reveals that the outcome of the first transactions is key to deriving serial acquisitions' motivation and performance.

We investigate how recently developed measures of uncertainty affect the voting behavior of individual Bank of England Monetary Policy Committee (MPC) members. To determine the precise impact of uncertainty on individual policymakers, we estimate the standard errors of member-specific parameters in a random parameters ordered probit framework. We find that uncertainty is typically associated with voting to ease the policy stance. The Bank of England's in-house uncertainty index plays a prominent role in driving voting behavior. Based on this measure, the MPC emerges as a diverse group of activist risk managers.

We compare acquiring firms’ CEO pay with that of the highest-paid non-CEO director and investigate the influence of CEO pay disparity on takeover premiums and bidder performance. Based on a takeover sample of Australian listed targets and bidders during the 2002–2015 period, we find that takeover premiums are significantly higher if the deals are processed by acquiring firms with higher CEO pay disparity. Although these firms do not receive favourable immediate market responses to their takeover announcements, they outperform in the long run. We find no evidence that offering a large takeover premium harms shareholders’ wealth. Overall, our findings largely support efficient contracting theory in the Australian M&A context.

We investigate the risk-return trade-off on the US and European stock markets. We investigate the non-linear risk-return trade-off with a special eye to the tails of the stock returns using quantile regressions. We first consider the US stock market portfolio. We find that the risk-return trade-off is significantly positive at the upper tail (0.9 quantile), where the upper tail is large positive excess returns. The positive trade-off is as expected from asset pricing models. For the lower tail (0.1 quantile), that is for large negative stock returns, the trade-off is significantly negative. Additionally, for the median (0.5 quantile), the risk-return trade-off is insignificant. These results are recovered for the US industry portfolios and for Eurozone stock market portfolios.

© 2020 Elsevier Inc. This letter studies of the multifractal dynamics in 84 cryptocurrencies. It fills an important gap in the literature, by studying this market using two alternative multi-scaling methodologies. We find compelling evidence that cryptocurrencies have different degree of long range dependence, and –more importantly – follow different stochastic processes. Some of them follow models closer to monofractal fractional Gaussian noises, while others exhibit complex multifractal dynamics. Regarding the source of multifractality, our results are mixed. Time series shuffling produces a reduction in the level of multifractality, but not enough to offset it. We find an association of kurtosis with multifractality.

This paper investigates how competition affects the double-bottom-line performance of microfinance institutions (MFIs). While classical economic theory highlights that competition enhances efficiency and benefits both customers and firms, we argue that this is unlikely to apply to institutions operating in socially oriented industries, such as microfinance. Using a cross-country dataset of 4576 MFI-year observations (1139 unique MFIs) operating in 59 countries over a 10-year period (2005-2014), we find that competition has an adverse effect on MFIs’ economic sustainability and that competition undermines their breadth of outreach but enhances their depth of outreach. These results are robust to alternative specifications of competition and to the use of a two-stage least squares (2SLS) analysis to alleviate the endogeneity concern. The findings from our analysis have important implications when considering the regulation of MFI competition, especially in the light of the recent turmoil of MFI markets in some developing countries.

There has been a significant worldwide movement to adopt International Financial Reporting Standards (IFRS), which are more principles-based compared to many of the more rules-based national accounting standards that they replaced. The majority of previous studies focus on how this financial reporting environment change influences earnings quality, while there has been limited research on how auditors respond to IFRS. We perform an experiment using Chinese professional auditors to test the joint effects of the type of accounting standards and the strength of the financial regulatory regime on both the quantity and quality of auditors' evidence demands. We find that auditors are likely to have more evidence demands and, particularly, more diagnostic evidence demands under principles-based accounting standards. This influence is more pronounced under the stronger financial regulatory regime. The effect of the institutional environment on IFRS standards is an important international reporting topic particularly for emerging markets like China where there is strong economic growth with an increased focus on reporting standards and regulation. China is an ideal environment to examine this topic because it is the largest country in the world to adopt IFRS, and many Chinese auditors have experienced both rules- and principles-based accounting standards.

The aim of this paper is to study the determinants of bank loan applications and financial access of small and medium enterprises from 2013 to 2015. We applied binary and ordered logit models to a sample of 27.811 firms from 37 countries from the Survey on the Access to Finance of Enterprises (SAFE). We provided evidence that larger firms and those belonging to the industry sector are more likely to apply for and obtain bank loans. A puzzling result was found regarding the matter of innovation. It is relevant for both application and access to bank loans, but in opposite ways: innovation boosts external finance applications but hampers actual financial access. Furthermore, the use of retained earnings enhances financial application and the effective financial access. This could indicate that internal funds are complementary, rather than substitutes in the firms' financial structure. The results of the study are relevant to improve policies of SMEs access to finance in the European context.

© 2020, European Central Bank. All rights reserved. In this article we extend the rational partisan model of Alesina and Gatti (1995) to include a second policy, fiscal pol-icy, besides monetary policy. It is shown that the extent to which an independent central bank is successful in attaining price stability depends on the degree of conservativeness of the central bank in relation to the political parties and the private sector’s expectations on which party will win the elections. In addition, the inclusion of fiscal policy in Alesina and Gatti’s model implies that uncertainty about the course of policy is not a sufficient factor to ensure that, when supply shocks are not relevant, independent central banks bring about low inflation at no real cost.

© 2019 by the authors. Licensee MDPI, Basel, Switzerland. Knowledge generated using data mining techniques is of great interest for organizations, as it facilitates tactical and strategic decision making, generating a competitive advantage. In the special case of credit granting organizations, it is important to clearly define rejection/approval criteria. In this direction, classification rules are an appropriate tool, provided that the rule set has low cardinality and that the antecedent of the rules has few conditions. This paper analyzes different solutions based on Particle Swarm Optimization (PSO) techniques, which are able to construct a set of classification rules with the aforementioned characteristics using information from the borrower and the macroeconomic environment at the time of granting the loan. In addition, to facilitate the understanding of the model, fuzzy logic is incorporated into the construction of the antecedent. To reduce the search time, the particle swarm is initialized by a competitive neural network. Different variants of PSO are applied to three databases of financial institutions in Ecuador. The first institution specializes in massive credit placement. The second institution specializes in consumer credit and business credit lines. Finally, the third institution is a savings and credit cooperative. According to our results, the incorporation of fuzzy logic generates rule sets with greater precision.

Price reviews are a potentially costly activity. A significant fraction of unchanged prices may stem from firms not reviewing prices, rather than from obstacles to changing prices per se, such as menu costs. In this paper, we disentangle these two causes of price stickiness by estimating an inflated ordered probit model on a panel of French manufacturing firms. The results point to a low frequency of price reviews, suggestive of the relevance of information costs as a determinant of the observed price stickiness. In view of the “inattentive producers” literature, pointing that the source of price rigidity matters, this is suggestive of a large real effect of monetary policy.

© 2019 Accounting and Finance Association of Australia and New Zealand We add to the literature on the real effects of macroprudential regulation by investigating the novel link between a mandatory capital adequacy disclosure and bank intermediation. The mandatory disclosure stems from the Federal Reserve regulation change of 2013 and leads to identification of bank intermediation effects with treatment methods. A combined empirical strategy of difference-in-differences and regression discontinuity design point to economically significant evidence for the reduction of both lending and on-balance sheet liquidity creation, for banks that disclose their capital adequacy as prescribed by the regulation.

© 2017 AFAANZ We examine how CEO compensation is affected by the presence of busy and overlap directors. We find that CEOs at firms with more busy directors receive greater total pay, fixed salary and equity-linked pay and exhibit higher pay-performance (delta) and pay-risk (vega) sensitivities. Our results also suggest that CEOs at firms with more overlap directors take smaller total pay and equity-linked pay and reveal lower delta and vega. We further show that the impact of busy and overlap directors on CEO pay is more visible for firms with less complexity and low information acquisition cost.

© 2019 by the authors. Licensee MDPI, Basel, Switzerland. In this paper, we analyze the main characteristics of European Small and Medium Enterprises (SMEs), related to the demand for and access to external financial resources. We use microdata from an extensive database, elaborated by the European Central Bank and the European Commission: the Survey on the Access to Finance of Enterprises. Firstly, we consider a set of variables as determinants to the decision to apply for different financial instruments. Secondly, we use the same set of variables to analyze the actual access to these instruments. For each regression, several SMEs profiles were created, in order to detect SMEs archetypes according to their decisions. The results are thought-provoking, and highlight that differences in firms characteristics (size, innovative activities, etc.), influence not only the access to, but also the demand for external finance.

© 2019 Elsevier B.V. Blockchain technology, and more specifically bitcoin (one of its foremost applications), have been receiving increasing attention in the scientific community. The first publications with bitcoin as a topic, can be traced back to 2012. In spite of this short time span, the production magnitude (1162 papers) makes it necessary to make a bibliometric study in order to observe research clusters, emerging topics, and leading scholars. Our paper is aimed at studying the scientific production only around bitcoin, excluding other blockchain applications. Thus, we restricted our search to papers indexed in the Web of Science Core Collection, whose topic is “bitcoin”. This database is suitable for such diverse disciplines such as economics, engineering, mathematics, and computer science. This bibliometric study draws the landscape of the current state and trends of bitcoin-related research in different scientific disciplines.

© 2017 Elsevier B.V. We examine the nature of impact of national culture on bank leverage using a broad sample of 1701 banks from 79 countries, over the period 2000–2013, i.e., 18,996 bank-year observations. We find that banks in countries with high individualism culture dimensions hold more leverage while, banks in countries with high uncertainty-avoidance, power distance, and long-term orientation have less leverage. Notably, bank size substantially moderates these cultural effects. Our findings are robust to endogeneity, and alternative proxies for the dependent and core explanatory variables.

© 2017, © 2017 Informa UK Limited, trading as Taylor & Francis Group. This study sets out to examine the extent to which access to credit and credit rationing are influenced by the microfinance type based on the major factors determining micro, small and medium enterprises’ access to credit from microfinance institutions in the era of financial liberalization. The data for the study were gleaned from the microfinance companies’ credit and loan records consisting of the various pieces of information provided by the borrowers in the application process. Our results are puzzling and show that credit rationing is not influenced by the microfinance types but by the individual microfinance companies. Our results also show that the Government microfinance company is the least severe in the rationing behavior.

© 2016 International Review of Finance Ltd. Behavioral finance research relies on proxies for unobservable phenomena. Different proxies for the same underlying phenomena should be correlated (formal proof of this proposition is presented in this letter). This letter examines proxies for an unobservable variable, sentiment. We utilize a well-known methodology to construct text-based sentiment proxies and compare these with metrics from Baker and Wurgler. We find that they are not correlated. At least one, but perhaps all, of these are not valid proxies of sentiment.

© 2016 Asociación Española de Contabilidad y Administración de Empresas (AECA). We examine the influence of multiple board directorships and boards’ committee memberships on three board supervisory outcomes: executive remuneration, external auditor opinion, and earnings management. The study uses a panel of 122 non-financial companies listed on the Spanish Stock Exchange over the period 2004–2011. Our results show that firms with busy directors offer low executive remuneration and present a low probability of a qualified audit opinion. Furthermore, the results indicate that firms with overlap directors exhibit a higher probability of receiving a qualified audit opinion. Additionally, we find evidence that the overcommitment effects of busy and overlap directors are more evident for large firms. Overall, our findings suggest that busy (overlap) directors are beneficial (detrimental) to the monitoring capability of the board in the Spanish context.

© 2015 Elsevier Inc. The modernization hypothesis and the democratic domino theory have been at the forefront in explaining the democratization around the globe. This paper empirically investigates the ‘middle class-driven modernization’ hypothesis and the ‘middle class-driven democratic domino’ effect in a panel of 145 countries over the period 1985 to 2013. Using several middle class measures and a dynamic panel estimator, we show that the ‘middle class-driven modernization’ hypothesis finds strong empirical support in the sample of developing countries excluding Eastern Europe and Central Asia, while the ‘middle class-driven democratic domino’ effect finds support in the sample of developing countries excluding East Asia and the Pacific.

© 2015 Elsevier B.V. We analyze the effects of multiple board directorships (busy directors) and multiple committee memberships of a board (overlap directors) on four board supervisory outcomes: CEO remuneration, external auditor opinion, audit fees and CEO turnover. Using a panel of 684 Australian listed firms from 2001 to 2011, we find that firms with busy directors pay high remunerations to their CEOs, and experience low CEO pay-performance and low CEO turnover-performance sensitivities. Our results also suggest that firms with overlap directors have a lower probability of receiving a qualified audit opinion and are able to negotiate lower payments, both to their CEOs and to the external auditors. These results hold for alternative specifications and proxies. Our results suggest that busy (overlap) directors are detrimental (beneficial) to the monitoring capability of the board and its committees. Finally, our findings suggest that the negative monitoring effect of busy directors are predominantly observed in large firms where over-commitment problems are severe, while the positive monitoring effects of overlap directors are observed in small firms where directorial positions are less time demanding.