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The effects of state utility shutoff moratoria on credit delinquencies during the COVID-19 pandemic Journal of Economics and Business Pub Date : 2024-03-08 Jennifer Andre, Breno Braga, Kassandra Martinchek, Signe-Mary McKernan
The number of people in financial distress was expected to increase in the wake of the COVID-19 pandemic, with the most vulnerable populations likely suffering the most. To protect the most disadvantaged, states implemented emergency measures such as utility shutoff moratoria, which prevented utility companies from disconnecting families’ energy and water services due to non-payment. Using credit bureau
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Impacts of COVID-19-era economic policies on consumer debt in the United Kingdom Journal of Economics and Business Pub Date : 2024-02-28 Mingli Zhong, Breno Braga, Signe-Mary McKernan, Mark Hayward, Elizabeth Millward, Christopher Trepel
We examine the effects of the Universal Credit expansion and mortgage forbearance on the financial well-being of United Kingdom (UK) residents during the pandemic. Using anonymized individual-level consumer financial data on 2 million UK consumers, each with one or more defaulted accounts accrued before the pandemic, we found that average nonmortgage debt increased by 17% from October 2019 (£5497)
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State-dependent intertemporal risk-return tradeoff: Further evidence Journal of Economics and Business Pub Date : 2024-02-02 Surya Chelikani, Joseph M. Marks, Kiseok Nam
We suggest that the intertemporal risk-return tradeoff is not necessarily positive but rather state dependent. We further explore the state dependent risk-return relation by examining how the positive risk-return relation is distorted in response to various market conditions, including extreme price changes, differing levels of investor sentiment, the introduction of stock options, and throughout business
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The incentive effects of the overlapping project structure in credit markets Journal of Economics and Business Pub Date : 2024-01-19 J.-P. Niinimäki
In this theoretical paper, we examine the risk-shifting problem between lenders and a firm running projects in two different environments. In a synchronous environment, the firm introduces two new 2-period projects that both begin and end on the same date and hence have a new start date in odd-numbered periods. In an asynchronous environment, the firm introduces one new 2-period project in every period:
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Innovating microcredit: how fintechs change the field Journal of Economics and Business Pub Date : 2024-01-15 Rodrigo Leite, Layla Mendes, Emmanuel Camelo
We explore the relationship between traditional microfinance screening variables and a new one (job experience) for a Brazilian fintech microcredit firm, which developed a strategy that targets poor workers using the clients’ job contracts as collateral and by implementing a 100% online application. A total of 911 contracts were analyzed. Unlike previous studies, we show that the main variable used
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Who is paying all these fees? An empirical analysis of bank account and credit card fees Journal of Economics and Business Pub Date : 2024-01-06 Oz Shy, Joanna Stavins
Banks impose a variety of account fees, and credit card issuers impose a variety of fees related to card usage. Using detailed data from a 2021 representative diary survey of US consumers, we investigate whether lower-income consumers and Black consumers are more likely to pay bank account or credit card fees, and how payment behavior varies depending on paying such fees. We find that the probability
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How are veterans faring financially? Updates and new evidence from a national survey Journal of Economics and Business Pub Date : 2024-01-04 Gary Mottola, William Skimmyhorn, Olivia Valdes
This research provides new and updated evidence on the financial capability of military veterans. We leverage data from two waves of the FINRA Investor Education Foundation’s National Financial Capability Study (NFCS) to examine how veterans are faring over time, relative to comparable civilians. Overall, veterans in 2018 fared better than non-veterans in several areas. They reported higher financial
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Heterogeneous unbanked households: Which types of households are more (or less) likely to open a bank account? Journal of Economics and Business Pub Date : 2023-12-26 Fumiko Hayashi, Aditi Routh, Ying Lei Toh
Promoting bank account ownership is important because having a bank account is the foundation for households’ financial well-being. Unbanked households differ in their likelihood of opening a bank account, and understanding the factors associated with these differences can help policymakers and industry stakeholders to tailor financial inclusion strategies. This study examines which factors are associated
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SMEs and patents: Is it worth it? A longitudinal analysis of the patent-performance relationship Journal of Economics and Business Pub Date : 2023-10-25 Jonathan Taglialatela, Roberto Barontini
In response to scepticism about the benefits of patenting in small firms, this paper provides new evidence on the relationship between financial performance in SMEs and patents, distinguishing between applications and granted patents. Empirical analyses show that firms with a patent application still pending five years after the filing date report higher sales than comparable firms who have not filed
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R&D grants and medical innovation Journal of Economics and Business Pub Date : 2023-10-25 Omer Unsal, Reza Houston
This paper examines the relationship between government-funded R&D grants in the US and pharmaceutical firm innovation. We find a positive and robust relationship between grant receipt, future patents, and medical innovations. The strength of the relationship between R&D grants and pharmaceutical innovation is attenuated by firm lobbying but strengthened by industry competition, geographic dispersion
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From Hero to Zero: The case of Silicon Valley Bank Journal of Economics and Business Pub Date : 2023-09-16 Lai Van Vo, Huong Thi Thu Le
This paper examines the factors contributing to the rapid collapse of Silicon Valley Bank, once regarded as one of the best banks. We show that the bank invested heavily in debt securities during a period of low interest rates, and the subsequent surge in interest rates in 2022 resulted in significant unrealized losses. Additionally, the bank's deposits were heavily concentrated among a small group
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Board independence and analysts' forecast accuracy: R&D perspective Journal of Economics and Business Pub Date : 2023-09-03 Anisur Rahman, Bakhtear Talukdar, Zaifeng Steve Fan
Research and development (R&D) activities are essential for firm growth and profitability. However, R&D activities also exacerbate information complexity in the financial markets. Therefore, the accuracy of earnings forecasts suffers when R&D expenses are high. This study aims to examine whether board independence can mitigate the adverse effect of high R&D expenditure on analysts' forecasts. Using
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Competitive advantage and firm, industry, and country effects: An asset pricing perspective Journal of Economics and Business Pub Date : 2023-08-27 Tobias Kohls, Ferdinand Mager, Tobias Regele
We examine the relation between competitive advantage, its underlying drivers, and abnormal stock returns. We use a comprehensive global dataset covering 22 years. To measure competitive advantage, we use the cash flow return-on-investment (CFROI®) metric, which allows for consistent comparisons across industries, countries, and periods. We find a positive relation between competitive advantage and
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The impact of bank competition on contagion risk: The case of Mexico Journal of Economics and Business Pub Date : 2023-08-23 Enrique Bátiz-Zuk, José Luis Lara-Sánchez
This paper examines the link between bank competition measures and risk indicators using quarterly interbank exposures data for all banks in Mexico during 2008Q1–2019Q1. The classical literature focuses on disentangling the link between competition and individual bank solvency risk. In this paper, we take one step forward in analyzing the relationship between competition and systemic risk. We use counterfactual
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Monetary policy, funding liquidity, and undisbursed loans in Indonesia: The bank lending channel revisited Journal of Economics and Business Pub Date : 2023-08-20 Wahyoe Soedarmono, Iman Gunadi, Sudiro Pambudi, Tika Nurhayati
This paper extends the literature on the bank lending channel by assessing the interplay between monetary policy and funding liquidity in affecting undisbursed loans. Using a sample of Indonesian banks, our empirical findings highlight that a higher monetary policy interest rate increases undisbursed loan growth, suggesting that the bank lending channel affects borrower decisions. Furthermore, we find
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New experimental evidence on the relationship between home bias, ambiguity aversion and familiarity heuristics Journal of Economics and Business Pub Date : 2023-08-02 Dennis Dlugosch, Kristian Horn, Mei Wang
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ESG score, board structure and the impact of the non-financial reporting directive on European firms Journal of Economics and Business Pub Date : 2023-08-02 Marco Bigelli, Stefano Mengoli, Sandro Sandri
The primary objective of this research is to examine the impact of the EU Non-Financial Reporting Directive on the significance of specific board characteristics in promoting higher ESG scores among 835 European companies listed from 2002 to 2020. Empirical results indicate that gender diversity, cultural diversity, a higher number of independent directors on the board, and the presence of a CSR committee
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Multilateral exchange rates: A multivariate regression framework Journal of Economics and Business Pub Date : 2023-07-31 Michael Kunkler
Currencies must be priced in terms of a numéraire when they are included in a regression model. The numéraire can be either a single-currency numéraire or a multicurrency numéraire: a weighted basket of numéraire currencies. Pricing currencies in terms of a multicurrency numéraire results in a system of multilateral exchange rates. A no-arbitrage condition enforces the movements in the system of multilateral
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Does fake news impact stock returns? Evidence from US and EU stock markets Journal of Economics and Business Pub Date : 2023-07-11 Maria Cristina Arcuri, Gino Gandolfi, Ivan Russo
This study investigates the effects of fake news on stock returns of targeted firms. Fake news is information which is presented as true but which is in fact fabricated and meant to mislead readers. On the basis of disagreement models, we argue that the fact that some investors might not be able to discern whether a piece of news is true or fabricated can cause disagreement among investors on the true
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Portfolio Choice with Endogenous Donations - Modeling University Endowments Journal of Economics and Business Pub Date : 2023-07-04 Georg Cejnek, Richard Franz, Neal M. Stoughton
University endowments differ from other institutions in that donation income and spending rates are of equal importance to asset allocation decisions. Our paper develops an optimal endowment framework with endogenous donations income through a feedback dependence based on investment performance. We investigate both substitution and wealth effects due to incomplete markets and nonlinear donation risk
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Small bank managers are prudent: A Benford’s Law approach to analyzing loan loss allowances Journal of Economics and Business Pub Date : 2023-06-14 Arthur M. Tran, Mark D. Griffiths, Drew B. Winters
Using an analysis of the two leading digits based on Benford’s Law, we analyze rounding patterns in loan loss allowances (LLAs) for a bank sample based on good and bad times, net income, profitability, bank size, regulatory level, and whether the banks are private or public. We find clear evidence of upward rounding during good times. Banks that are smaller, private, and subject to more lenient regulatory
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Securitization of subprime credit and the propagation of housing shocks Journal of Economics and Business Pub Date : 2023-06-14 Nadine Yamout
The 2007–2009 global financial crisis which originated in the U.S. subprime mortgage market and then spread to the whole financial system, drew attention to the impact that subprime lending and subprime mortgage securitization can have on the real economy. This paper explores the dynamics of the economy with a subprime mortgage market and the financial innovation in that sector when housing shocks
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Explainable FinTech lending Journal of Economics and Business Pub Date : 2023-06-02 Golnoosh Babaei, Paolo Giudici, Emanuela Raffinetti
Lending activities, especially for small and medium enterprises (SMEs), are increasingly based on financial technologies, facilitated by the availability of advanced machine learning (ML) methods that can accurately predict the financial performance of a company from the available data sources. However, despite their high predictive accuracy, ML models may not give users sufficient interpretation of
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Macroprudential regulatory policies with a dominant-bank oligopoly and fringe banks Journal of Economics and Business Pub Date : 2023-02-28 Enzo Dia, David VanHoose
This paper develops a model in which a handful of dominant banks mutually engage in head-to-head rivalry while acting as loan-quantity-setting leaders vis-à-vis numerous fringe banks. Under the most likely calibration of parameters governing behavior of the two groups, we find that increases in capital requirements substantially reduce equilibrium loan volumes and raise the market retail loan rate
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Local banking markets and barriers to entrepreneurship in minority and other areas Journal of Economics and Business Pub Date : 2023-01-12 James E. Prieger
This empirical study investigates the linkages among entrepreneurship in the form of establishment entry, local banking markets, and broadband availability, focusing on minority areas in the US. Lack of access to banks and lack of competition in the market for small business loans can make it more difficult for an entrepreneur to overcome the liquidity constraint to starting a new business. Broadband
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Monetary policy uncertainty, monetary policy surprises and stock returns Journal of Economics and Business Pub Date : 2023-01-04 Ghezal Sekandary, Mikael Bask
We study the effects of monetary policy surprises on stock returns under low and high monetary policy uncertainty in the U.S. using the Panel Smooth Transition Regression (PSTR) model to identify the uncertainty regimes. Monetary policy surprises are unexpected changes in the Federal Funds Rate (FFR) on Federal Open Market Committee (FOMC) announcement days, where the mimicking portfolio method is
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Board gender diversity and investment inefficiency Journal of Economics and Business Pub Date : 2023-01-02 Chang Yu
This paper investigates the effect of board gender diversity on a firm’s investment inefficiency and finds that a firm with at least one female director on its board has significantly less investment inefficiency than firms without one. The fraction of female directors on the board has a significantly negative association with investment inefficiency. The instrumental variable approach and propensity
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Does market design contribute to market stability? Indications from a corporate bond exchange during the COVID-19 crisis Journal of Economics and Business Pub Date : 2022-12-09 Menachem (Meni) Abudy, Efrat Shust
The common practice worldwide is to trade corporate bonds over the counter (OTC). Conversely, in Israel bonds are traded on an exchange like stocks. We document that during the COVID-19 crisis, trading activity in the Israeli corporate bond market rose sharply despite a significant decrease in liquidity. It occurred without the need for any regulatory intervention. Our findings differ from the evidence
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Facial attractiveness and CEO compensation: Evidence from the banking industry Journal of Economics and Business Pub Date : 2022-11-17 Shaker Ahmed, Mikko Ranta, Emilia Vähämaa, Sami Vähämaa
This paper examines the effect of facial attractiveness on the compensation of bank Chief Executive Officers (CEOs). Consistent with the so-called beauty premium hypothesis, we document that good looks pay off for bank CEOs. Specifically, by utilizing machine learning to assess the facial appearance of the CEOs of large U.S. banks, we find that CEO facial attractiveness is positively associated with
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Under-pricing of South and East Asian IPOs: An investigation of the relevance of governance quality in closely controlled companies Journal of Economics and Business Pub Date : 2022-11-12 Lakshman Alles, Louis Murray
In this paper, we investigate the impact of national governance quality on the under-pricing of initial public offerings (IPOs) in developing South and East Asian equity markets. A significant feature of many listed companies in these markets is the dominant control position of insider shareholders or family groups. We therefore explore the issue of concentrated control when assessing the extent of
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The interplay between uncertainty, managerial decision making, and firm value: Evidence from Bangladesh Journal of Economics and Business Pub Date : 2022-10-14 Syed Manzur Quader
This paper investigates how uncertainty influences investment and cash-holding decisions and how these nexuses influence the performance of Bangladeshi firms. The results indicate threshold levels of investment and cash holdings up to which investment increases and cash holding decreases with uncertainty, and both reverse afterward. In other words, the effect of uncertainty on investment and cash holding
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U.K. economic policy uncertainty and innovation activities: A firm-level analysis Journal of Economics and Business Pub Date : 2022-09-24 Minh Hong Nguyen, Vu Quang Trinh
Our study investigates the effects of economic policy uncertainty (EPU) on firm-level innovation activities. Utilizing the news-based government EPU index of Baker et al. (2016) and a panel sample of 213 UK largest non-financial firms over the period 1999-2018, we find robust evidence that the government EPU has caused a substantial reduction in UK firms’ investment in innovation activities. Moreover
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What do we know about the relationship between banks and income inequality? Empirical evidence for emerging and low-income countries Journal of Economics and Business Pub Date : 2022-09-15 Claudio Oliveira de Moraes, Guilherme Cruz
The objective of this article is to examine whether the banking sector contributes to reducing income inequality and poverty. We assess the effect of banks on income inequality considering various banking qualities with a dynamic panel data analysis of 46 emerging markets (EMs) and 66 low-income countries (LICs) using updated data for the 2000–2018 period. The simultaneous and non-linear effects of
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Outward foreign direct investment and domestic innovation efforts: Evidence from India Journal of Economics and Business Pub Date : 2022-09-08 Ketan Reddy, Subash Sasidharan, Nadia Doytch
This paper examines the role of outward foreign direct investment (OFDI) by Indian firms on domestic firms' R&D using unique firm-level data for 2008–2018. While correcting for endogeneity arising from the sample selection, we apply panel data models to evaluate the OFDI and domestic R&D nexus. Our empirical analysis highlights the presence of positive impact of OFDI on the firm's decision to undertake
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Scaling up the FinTech business: Competition, regulation & data management Journal of Economics and Business Pub Date : 2022-09-06 Giancarlo Giudici, Laura Grassi, Paul P. Momtaz
Abstract not available
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The importance of international trade credit for industry investment Journal of Economics and Business Pub Date : 2022-08-29 Sarah Carroll, Rebecca Neumann
Trade credit is an important feature of many trade contracts, offering buyers a means of financing purchases using credit from suppliers. This paper aims to identify a channel through which international trade credit affects industry investment. We use an interaction variable approach, first implemented by Rajan and Zingales (1998), where industries are ranked by different propensities to use supplier
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Why do video pitches matter in crowdfunding? Journal of Economics and Business Pub Date : 2022-08-18 Maura Kolbe, Sasan Mansouri, Paul P. Momtaz
Recent research finds that whether or not ventures publish video pitches during crowdfunding campaigns affects their funding success. Little is known, however, about how and why video pitches help startups achieve higher valuations. To close this gap, we analyze metrics and the content of video pitches published along blockchain-based crowdfunding campaigns (a.k.a. token offerings, initial coin offerings
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Banks responding to the digital surge through Open Innovation: Stock market performance effects of M&As with fintech firms Journal of Economics and Business Pub Date : 2022-08-17 Francesco Cappa, Francesca Collevecchio, Raffaele Oriani, Enzo Peruffo
The rise of digitalization and advancements in information technology are changing the business environment in a radical manner. In the banking sector specifically, in response to these recent trends and embracing the Open Innovation (OI) framework, banks increasingly seek mergers and acquisitions (M&As) with fintech firms. Since it is unclear what is the impact of these M&A transactions, this research
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Online financing without FinTech: Evidence from online informal loans Journal of Economics and Business Pub Date : 2022-08-12 Filipe Correia, António Martins, Anthony Waikel
We present the first comprehensive dataset on an online informal micro-lending community. These informal loans are small, short duration and high-cost. Using our unique micro data, and the Covid-19 pandemic as a laboratory, we uncover different types of information contained on loan terms and on the narratives of market participants. First, loan terms reflect the aggregate economic context of borrowers
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Machine-learning forecasting of successful ICOs Journal of Economics and Business Pub Date : 2022-06-10 Michele Meoli, Silvio Vismara
The identification of ventures that are more likely to be successful is a complex task for equity investors, such that a mix of assessment criteria is typically employed. Machine learning (ML) techniques may provide valid support to investors in processing the set of available information. This paper applies ML to initial coin offerings (ICOs), which allows firms to raise blockchain finance through
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Do FinTech acquisitions improve the operating performance or risk profiles of acquiring firms? Journal of Economics and Business Pub Date : 2022-06-02 Rebekah E. Austin, Lee M. Dunham
We examine whether firms that acquire FinTech firms experience improved post-acquisition operating performance and/or reductions in risk profile. We employ a difference-in-differences methodology to analyze changes in the acquiring firm’s operating performance and risk profile before and after an acquisition. We present strong evidence that the risk profiles of acquirers significantly improve in the
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Wasteful procedures? Journal of Economics and Business Pub Date : 2022-05-18 Malin Arve, Takakazu Honryo
We study investment decisions in organizations with private information in a principal-agent hierarchy. We show how investment decisions can be improved when the principal engages in two-sided money burning through the wasteful involvement in meetings and other procedures even if this is costly for the principal. In fact when this is more costly for the agent, the principal is willing to impose wasteful
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Investment choices and production dynamics: The role of price expectations, financial deficit, and production constraints Journal of Economics and Business Pub Date : 2022-05-07 Svetlana A. Ikonnikova, Victor del Carpio Neyra, Sofia Berdysheva
We propose a model that helps answer two questions: (1) what motivates firms to invest in novel technologies, often characterized by low (or negative) returns, forgoing high-profitability projects, and (2) why responses to price changes of seemingly similar firms may differ substantially. The developed framework reveals how financial limitations, production capacity constraints, and expectations on
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How do banking fintech services affect SME debt? Journal of Economics and Business Pub Date : 2022-05-04 Francesco Fasano, Francesco Cappa
Fintech technologies have become increasingly important in the banking industry, as they allow alternative effective means to interact with clients and collect hard information, i.e. codifiable data, to make better lending decisions. However, the advent of technology contrasts with the traditional bank-firm relationship based on human interactions and soft information. This study examines whether fintech
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Digitalization and data, institutional quality and culture as drivers of technology-based credit providers Journal of Economics and Business Pub Date : 2022-05-04 Oskar Kowalewski, Paweł Pisany, Emil Ślązak
We investigate the development of technology-driven alternative credit markets using data from 94 countries for the period 2013–2019. We find that digitalization, institutional quality, and culture play significant roles in the national development of fintech and big tech credit. Moreover, we present the differences between the two types of alternative technology-based lending and consumer bank loans
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The differential impact of political risk factors on emerging market bond spreads and credit rating outlooks Journal of Economics and Business Pub Date : 2022-04-09 Ralph Sonenshine, Sapna Kumari
It is well established that sovereign bond spreads vary with changes in financial conditions and political risk factors. What is less evident is the differential impact of political risk factors relative to the financial conditions of emerging market (EM) countries. This paper fills this gap by analyzing how changes in political risk overall and political risk components impact EM bond spreads and
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How bad is a bad loan? Distinguishing inherent credit risk from inefficient lending (Does the capital market price this difference?) Journal of Economics and Business Pub Date : 2022-03-30 Joseph P. Hughes, Choon-Geol Moon
Small community banks and the largest banks experience higher ratios of nonperforming loans than other sizes of banks. To what extent does their nonperformance result from lending to riskier borrowers, and to what extent does it result from a lack of proficiency at loan making? Does market discipline punish or reward credit risk and lending proficiency? Using stochastic frontier estimation, we develop
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Customer environmental concerns and profit margin: Evidence from manufacturing firms Journal of Economics and Business Pub Date : 2022-03-25 Dengjun Zhang, Yifan Xie
This study evaluates the impact of customer environmental concerns on manufacturing firms’ profit margin. Eco-conscious customers may have a high demand for green products and are willing to pay a price premium for those products. The green effect is subject to the degree of greenness in production processes. In addition, environmental investments reduce the negative impact of production processes
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Home price growth and minority access to mortgage credit Journal of Economics and Business Pub Date : 2022-02-16 Salman Tahsin
This paper examines the relationship between home price growth and mortgage lending standards for minority applicants during the 2001–2006 (pre-crisis) and 2012–2017 (post-crisis) periods. Using the housing supply elasticity measure by Saiz (2010) to instrument for home price growth, I find that minorities in metropolitan areas with home price appreciation experienced looser mortgage lending standards
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Does rollover risk matter to payout policies? Evidence from Japanese listed firms Journal of Economics and Business Pub Date : 2022-01-19 Hiromichi Iwaki, Junyu Saito
This study examines the effects of rollover risk of a firm’s debt on its payout policies, considering differences in the structure of that debt. The results reveal that in the face of rollover risk, firms decrease dividends, in addition to the total payout to shareholders, including stock repurchases. However, these results are more pronounced for firms that depend on bank financing as compared to
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Unexpected money growth, nonfinancial firms as large shareholders and investment-cash flow relationship: Evidence from Vietnam Journal of Economics and Business Pub Date : 2022-01-07 Bao Khac Quoc Nguyen, Bao Cong Nguyen To, Nham Thi Hong Nguyen
This paper uses a sample of listed firms to raise questions as to how unexpected money growth affects firm-level investment in Vietnam, resembling tightening monetary policy impact. We find that most results that hold true in other countries also apply to Vietnamese firms during the years of our study. In particular, we find that higher cash flows are associated with higher investment when the assumption
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Initiating contact in merger negotiations: Who leads and who follows? Journal of Economics and Business Pub Date : 2022-01-06 Stephen N. Jurich, M. Mark Walker
We examine the determinants of the managers’ choice of negotiating procedure when firms merge. We use company filings with the Securities and Exchange Commission (SEC) to identify the merging firms’ negotiating procedure and their underlying operating, marketing, and financial motivations for pursing the deal. When target-firm managers cite technological expertise and access to capital as reasons for