CINSC 2023 Ljubljana

Scholars have started to investigate the greenwashing phenomenon as decoupling behavior or as selective disclosure practice to describe such flimsy methods that are insufficient to the content of the facts. It is possible to identify several streams of literature dealing with the identification of greenwashing proxies, the relationship between greenwashing and regulation, or either the existence of an association with performance and reputation of several business field. Our study contributes by performing a more comprehensive evaluation of the literature with the purpose of resolving the following questions: What is the domain of greenwashing research? What are the influential aspects of top journals and authors, and the characteristics of the most studied topics? What are the past and current key research streams in greenwashing literature? What is the substantial future relevant research questions to explore regarding this topic? The aim of this paper is to assess the intellectual development, knowledge structure and characteristics of authors and manuscripts pertaining to greenwashing topic and to investigate research trends, thematic areas tackled, as well as the specific authorship collaboration and co-cited references. Bibliometric analysis has been conducted on 372 articles published during the period 2003-2022. We undertake the following analyses for bibliometric citation analysis: (1) citation analysis, (2) bibliographic coupling analysis, (3) co-citation analysis and (4) co-word analysis. In each of these maps, the size of items is determined by their “total link strength” while the thickness of each connection is based on the “link strength” (Table 2). For the cluster analysis we use the VOSviewer program. We collect publications, in this research area, by searching in the Web of Science database. In order to identify the articles, we use the keywords “green wash*” OR “greenwash*” OR “green-wash*” that exist in article titles, abstracts, and author’ keywords. The keywords are derived from the title, abstract, and author keywords of the article. The keyword co-occurrence network map shows three main clusters that can be identified by their colours: red, green and blue. Overall, we observe that the most frequently occurring word in the red cluster, that is, the one with the largest node, is greenwashing (160), followed by corporate social responsibility (109), sustainability (67), performance (44), management (39), environmental performance (32) and disclosure (31). This article introduces a variety of findings, including yearly trends, top players at the journal and institute levels, citations, keyword distribution, highly cited works, co-authorship at the nation level, and the most influential journals and authors. This study can offer valuable results both from the academic and business perspective. The bibliometric analysis clearly illustrates the different stages of this field of study, as well as the emerging lines of research, which can be studied in greater depth. This study can contribute to existing literature on the issue of greenwashing, specifically in finance by enhancing it with a much more comprehensive, reliable picture given by the use of bibliometric analysis.

This study investigates the behavior of investors in sustainable investment funds in the United States over the past few years. Previous research has suggested that these investors are less sensitive to financial performance compared to investors in conventional funds. However, the growth of both demand and supply for sustainable investment products in recent years may challenge this assumption. Using data on 2,103 U.S. active equity mutual funds from August 2018 to December 2021, we provide evidence that investor sensitivity to past performance of sustainable funds has increased as sustainable investing becomes mainstream. In contrast to prior research based on earlier periods, we show that investors in sustainable funds are more sensitive to past performance than investors in conventional funds. We show that this strong sensitivity is driven by poor performance, indicating that sustainable investors are more likely to sell losing investments than their conventional peers. Our results also reveal that the flow-performance relationship is not convex for U.S. sustainable funds over the sample period, meaning that investors in these funds do not exhibit the typical behavior of chasing winners more intensely than selling losers. Furthermore, we find evidence of a “smart money” effect for sustainable funds, in which past money flows enhance fund performance. This result suggest that sustainable investors are financially smart in their investment decisions. Overall, our findings indicate that financial performance and sustainability are now complementary rather than substitutes for investors, contrary to traditional beliefs, and should therefore be considered jointly by fund managers when selecting assets.

Since the adoption of “The 2030 Agenda for Sustainable Development” by all United Nations member states in 2015, nations have been striving to achieve sustainable development goals (SDGs) with varying degrees of progress across countries. Sustainable development, among other things, is likely to provide economic resilience by smoothing out the volatility of adverse shocks. This paper examines whether countries’ progress toward SDGs during the pre-COVID-19 period provided economic stability during the COVID-19 shock. We do not find such evidence using daily data from stock markets and confirmed COVID-19 cases over the first two years of the pandemic from 72 countries. On the contrary, our model demonstrates that cultural, openness and economic factors provided resilience during the shock. Our results imply that countries’ progress toward achieving SDGs did not provide economic immunity during the COVID-19 shock.

In this paper, we explore the effect of a macroprudential measure of financial soundness on the value of green bond issuance in 84 countries during 1991-2021 based on recently released data by the International Monetary Fund (IMF). Our country-level measure of financial soundness (FSI) captures financial stability considerations based on a data-driven statistical approach and a dynamic factor model used to combine the individual country-level financial soundness indicators (FSIs) formed by the International Monetary Fund (IMF). We further control for the effect of environmental, macroeconomic and institutional factors. A concern is the potential endogeneity of cultural measures in our analysis. To address the endogeneity challenge, we apply a two-stage least square (2SLS) and a generalized method of moments (GMM) estimation model using a country-based measure of rising sea-levels as an external instrument for macroprudential policies.

This paper aims to analyse the joint impact of extraordinary and unprecedented monetary and fiscal policy measures in the EA during the COVID-19 pandemic. Joint action by fiscal and monetary policies can be seen as a key contributor to economic recovery from the pandemic in the Euro area. To capture the joint effects of monetary and fiscal policy shocks on macroeconomic variables, we consider the structural vector autoregressive model (SVAR) approach. The paper contributes to the literature on fiscal as well as monetary policy analysis by integrating both policies within a single SVAR framework as opposed to earlier studies which typically focus on one policy at a time. We study the interactions of both policies with output and inflation as key macroeconomic variables for the EA aggregate. The idea is to first set up and estimate the reduced-form vector autoregressive (VAR) model, then to impose restrictions to identify both monetary and fiscal policy shocks, and finally to calculate and present the impulse response functions. The SVAR model contains five endogenous variables, namely government spending, government revenue, real gross domestic product (GDP) and the shadow short rate (SSR). Choosing the appropriate EA monetary policy variable can be challenging in the prevailing ZLB environment of the past decade. We use the SSR by Wu and Xia (2016), which simulates the interest rate equivalent of conventional and unconventional central bank measures to address this challenge. Damjanović and Masten (2016) note that most empirical papers which include SSR focus on U.S. data, rather than on EA and emphasize the effects of monetary policy on financial markets rather than on the macroeconomic environment. This paper therefore also contributes to reducing this knowledge gap. Our results show that monetary policy tightening produces negative and lagged effects on both prices as well as output, whereby it can be observed that in line with other empirical studies the response of output is more significant and less delayed in comparison to the response of the prices. Additionally, it can be observed that a fiscal policy shock, stemming from government revenue, decreases output and increases prices. Government spending, on the other hand, increases output in the short run, which is well supported by other similar studies. In addition to the basic model specification, we consider two robustness checks to test whether our results are plausible and robust. First, we perform a different ordering of variables, in order to see how this impacts the estimates. In addition, we divide the data into two subperiods; the first subperiod includes data between 2010Q1 and 2021Q4, which means that it includes the period of the COVID-19 pandemic, but excludes the period of the global financial crisis. The other sub-period tested is the period from 2005Q1 to 2019Q4, which includes the period of the global financial crisis, but excludes the periods of the COVID-19 pandemic.

Using a large sample of banks operating in European Economic Area in the years 1996-2019 this study seeks to answer the question whether macroprudential policy affects the net interest margins of banks. Our study is based on the literature that analyses the effects of policy changes on bank performance. While there is an extensive literature on the determinants of bank margins and profits that follow the pioneering work of Ho and Saunders (1981) and some papers evaluate the role of interest rates and monetary policy in bank performance (Molyneux et al., 2018; Claessens et al., 2018), the literature focusing on macroprudential policy and bank margins is still somewhat limited. Thus our manuscript will fill in the gap in the literature that focuses on the role of macroprudential policy in the efficiency of banks. We are the first to study the role of this policy for bank margins. Our results show that macroprudential policy improves efficiency of banks because it is associated with reduction of net interest margins due to the tightening of the tools. The effects of the instrument are diversified, with lending standards restrictions and liquidity requirements and limits on currency mismatches improving efficiency of bank lending. Our study shows that if the policy is tightened the NIM is reduced. The effects of the policy depend on the type of policy action undertaken, with activation of a new tools reducing margins. We also show that the heterogeneity in effects of the policy on NIM is driven by the objectives of the instruments.

We use scenario analysis to assess the macroeconomic effects of carbon transition policies aimed at mitigating climate change. To this end, we employ a version of the ECB’s New Area-Wide Model (NAWM) augmented with a framework of disaggregated energy production and use, which distinguishes between “dirty” and “clean” energy. Our central transition scenario is that of a permanent increase in carbon taxes, which are levied as a surcharge on the price of dirty energy. Our findings suggest that increasing euro area carbon taxes to an interim target level consistent with the transition to a net-zero economy entails a transitory rise in inflation and a lasting, albeit moderate decline in GDP. We show that the short and medium-term effects depend on the monetary policy reaction, on the path of the carbon tax increase and on its credibility, while expanding clean energy supply is key for containing the decline in GDP. Undesirable distributional effects can be addressed by redistributing the fiscal revenues from the carbon tax increase to low-income households.

The path to green energy production and consumption is crucial in tackling the challenges of the ongoing climate change and energy crisis. However, this path is an expensive one and availability of financing sources is a necessary precondition for the green transition. In the present paper, the role of financial institutions and financial markets gets investigated by using a heterogenous sample of 32 EU and ASEAN countries, covering a period from 2000 to 2020. The results show, that financial institutions and banks a favorize well-known, carbon intensive energy production and therefore exhibit a negative effect on renewable energy consumption. Well-developed financial markets show a positive effect on green energy production and consumption in high-income and EU countries. We contribute by showing, that increasing financialization of renewable energy markets should be highly supported. Furthermore, more effort must be made to support banks and other financial institutions in granting financial access to renewable energy business models.

Identifying the cross-border interbank network of banks in Turkey, we investigate the impact of a currency shock on banks’ borrowing from abroad. We find that currency shock has a significant negative impact on cross-border interbank network. Moreover, the impact is more negative for the highly centralized banks. On the other hand, we demonstrate that the interconnectedness of banks having high foreign share is increased with crisis. Finally, controlling for the headquarter of the foreign lenders, we document that the impact of a currency shock is stronger for the lender banks headquartered in the US.

The association of ESG to firm performance has been extensively researched over recent years. Studies have recognised several firm-level characteristics that mediate the relationship between ESG and performance with emerging literature becoming more focused on industry idiosyncrasies. Existing literature reviews of ESG and firm performance cover the topic in a broad context and in a narrative format, which opens the possibility of bias and subjectivity on the part of authors. The contribution of this review paper is thus two-fold: 1) to adopt a systematic approach to the analysis of literature on this topic, and 2) to focus this systematic review on industry specificities. Thus, the purpose of this systematic study is to review the literature on the association of ESG and firm performance (for both accounting- and market-based performance measures) that addresses specific industry contexts. The questions answered by the review include: What are industry variables and characteristics studied in the ESG-performance literature? What are research themes associated to cross-industry studies or studies within a particular industry? What are the key areas of future research in industry-specific studies? The objective of this paper is to synthesis research within these contexts. In doing so, a research framework can be developed that would allow researchers to better navigate the complexity of literature in this area and identifying salient variables explaining or moderating the association of ESG to performance.

Emerging market multinational firms (EMNEs) have increased their access into developed markets over the recent years through cross-border acquisitions. Since there is a growing emphasis on stakeholder approach and sustainability in current business practices, we examine the changes in environmental, social and governance (ESG) measures of EMNEs after accessing developed markets. Our results suggest that EMNE acquirers substantially improve on environmental and social performance in two years after acquiring developed market targets. We provide support for bonding and legitimacy-enhancing as EMNE firms improve the ESG attributes that are more prominent in the target country of acquisition. Furthermore, we explore the sensitivity of the post-event performance to various sustainability aspects and find that environmental but not social changes have value implications.

We empirically investigate how engagement in the environmental and social dimensions affects the value of listed American insurance firms in the period 2002-2018. Moreover, we assess if higher environmental, social and governance (ESG) scores “insures insurers” when exogenous environmental or social shocks occur. Our results, robust to several additional checks and alternative specifications, show that a positive association exists, and it is strongly determined by all dimensions of the environmental score. Our research contributes to the sustainable finance literature providing the first empirical evidence on the relationship between financial and non-financial performance in the insurance industry, in terms of exposure to environmental and social shocks. Our findings are supportive of regulatory actions taken worldwide to enhance the environmental and social sustainability of insurance companies.

We examine the characteristics of Special Purpose Acquisition Companies (SPACs) focused on green causes. The growing importance of SPACs in financial markets has led to an increased presence of entrepreneurs raising capital to fund environmently friendly companies. We examine the structural characteristics of ‘green SPACs’: explaining their ecosystem, documenting the primary determinants of IPO size, speed of going public, and calculating their returns around merger announcements. Regarding green SPAC size, we find that the amount of capital raised depends on geographical focus, CEO characteristics, choice of exchange, and specialization of respective legal counsels. The speed to IPO is related to respective geographical and legal-counsel characteristics. At the same time, green SPACs exhibit cumulative market-adjusted returns in the range of 6% to 12% around merger announcement. Further, while merger returns are positive at merger date, they quickly become negative (-1 to -9%) declining further with time.

In this paper, we investigate the effect of green bond announcements issues on the credit risk of the issuer, measured by its CDS spreads. We use a broad international sample of 1,206 green bonds issued from 2012 to 2022 by 233 entities covering 33 countries in Europe, Asia and North America. Our findings indicate that green bond announcements have a significant impact in issuer’s credit risk, which responds differently depending on whether the issuer is corporate or non-corporate. In the case of corporations, the sector matters, and more specifically, the importance that the environment has in their activity. A negative reaction is only obtained in the case of the sectors most exposed to environmental risk, but in all other sectors, and especially for financial entities, the effect is positive. In non-corporate issuances, we obtain mixed results depending on the geographical area. Agency green bond issues seems to be considered as good (bad) news for market participants by generating a decrease (increase) of issuer credit risk in Europe (Asia). The contrary is observed for sovereign events: an increase (decrease) of credit risk in Europe (Asia).

Green bonds fulfil market demand for debt securities and broaden the extent of proceeds used to fund climate-related initiatives. Since the first release of a green bond by a publicly-traded corporation in 2013, issuance volumes have amassed over $800 billion. They have resulted in a significant redirection of resources toward green-related initiatives, and institutional and retail investors alike have developed a strong predilection for investments that promote environmental sustainability (Krüger et al. 2020). In addition, green bond issuers have enjoyed increased levels of investor attention (Caramichael and Rapp 2022) that have translated into positive spillover effects on the equity prices of issuers. Early studies from Tang and Zhang (2020) and Flammer (2021) find evidence of positive abnormal returns in the equity prices of issuing firms when they announce the sale of upcoming green bonds. Both also acknowledge, however, the presence of information leakage associated with the price discovery behaviours, particularly in the week leading up to the announcement event. We further investment analysis and green bond literature by exploring the dynamics between these ‘green’ fixed income solution announcements, and equity price behaviours. Our study has two central objectives: to explore equity market reactions to green bond announcements, and to explore the potential for ‘green’ investing behaviours to be exploited by market insiders. First, we incorporate over 2,500 green bond announcement events by publicly-traded firms from 2013-2022, where the ‘announcement date’ is when information about an upcoming green bond sale is first publicly released to the market. Using this data, we demonstrate that green bond announcements have a significant spillover effect on the equity prices of issuers and that these spillover effects are concentrated amongst first-time issuers. Moreover, we find that statistically significant abnormal returns are only consistently observable in the days before the announcement event, and a sell-off tends to occur once the announcement is made publicly. These price discovery behaviours suggest evidence of information leakage before the official public announcement of the upcoming green bond issue. This study further explains these market inefficiencies by relating the anomalous price discovery behaviours to anonymous information leaks made to Bloomberg News and Bloomberg First Word in the period leading up to the public green bond announcement. From a sample of over 1,000 Bloomberg First Word articles, early results suggest that equity price inefficiencies before a green bond is publicly announced are largely explained by the presence of information leaks and their temporal distance to the public announcement, and that information leaks are largely concentrated within a small subset of equity markets. References: Caramichael, J. and Rapp, A.C. (2022) The Green Corporate Bond Issuance Premium, International Finance Discussion Papers 1346, Washington, DC. Flammer, C. (2021) 'Corporate green bonds', Journal of Financial Economics, 142(2), 499-516, available: https://doi.org/10.1016/j.jfineco.2021.01.010. Krüger, P., Sautner, Z. and Starks, L.T. (2020) 'The importance of climate risks for institutional investors', The Review of Financial Studies, 33(3), 1067-1111, available: https://doi.org/10.1093/rfs/hhz137. Tang, D.Y. and Zhang, Y. (2020) 'Do shareholders benefit from green bonds?', Journal of Corporate Finance, 61, 101427, available: https://doi.org/10.1016/j.jcorpfin.2018.12.001.

The growing popularity of cryptocurrencies has resulted in an increasing number of retail and institutional investors interested in new and rapidly evolving crypto assets. As the use of cryptocurrencies gains momentum, questions arise as to who is participating in this market and why. Using the survey data gathered from three Nordic countries, Denmark, Finland and Sweden, this paper uncovers the main drivers and barriers of cryptocurrency markets participation. Our results explain which groups of investors are particularly attracted to the specific cryptocurrency trends, such as DeFi, NFT, Stablecoins or Web3, and most importantly, what are the main motives of such investments. The findings add to the finance literature on cryptocurrency investments, but also offer useful insights on social and economic aspects of cryptocurrency adoption for businesses and regulators.

This paper examines the dependency between cryptocurrencies with different consensus mechanisms and energy sources, both clean and dirty. We determine whether the "clean" and "dirty" cryptocurrencies can be hedges or safe-havens against the clean energy indices and crude oil. Our sample period starts in January 2019 and ends in December 2022, containing several turbulent periods. Ten coins are considered, five confirmed through the proof-of-work mechanism, and five through proof-of-stake. The first group includes Bitcoin, Ethereum, Bitcoin Cash, Ethereum Classic and Litecoin, and the second includes Cardano, Ripple, IOTA, Stellar and Nano. "Dirty" energy is represented by Brent crude oil futures prices, while the clean energy sector is approximated by several NASDAQ and WilderHll indices. We apply a multivariate stochastic volatility model with dynamic conditional correlation and thus obtain the credibility intervals of dynamic correlations. Based on that, we assess the potential for hedging and can also compare the strength of dependency between both types of cryptocurrencies and energy assets.

The study employed the asymmetric nonlinear smooth transition generalized autoregressive conditional heteroskedasticity (ANST-GARCH) model to investigate the asymmetric responses of mean reversion and volatility.in cryptocurrency markets. The study finds strong evidence for the ANST-GARCH model. The study finds considerable asymmetries concerning the behaviour of investors who overreact to certain cryptocurrency market news. The study also shows asymmetric volatility is crucially significant in cryptocurrency markets and that investors can implement risk management techniques and trading strategies to mitigate the effect.

The ethical role of women directors in addressing the climate change issue is gaining much attention in the literature. This study contributes to the growing literature by investigating the impact of women directors on greenhouse gas (GHG) emissions across the globe. Using a dataset of 2,758 firms listed in 36 countries during the period from 2002 to 2019, we find a significantly negative association between women directors on board and GHG emissions including direct as well as indirect emissions. In the recent past, many countries have enacted board gender quotas leading to a significant increase in women's board representation. In this regard, we find that the marginal effect of women directors after implementing the gender quota on GHG emissions is negative and highly significant. We also note that the impact of women directors on GHG emissions is significant when the board has two or more women and is mainly because of the independent than executive women directors. Moreover, the relationship between women directors and GHG emissions is driven by the industry nature and climate change action-oriented compensation policies. Our results also show that less GHG emissions by firms with gender-diverse boards improve their financial performance. The results remain robust to various subsample analyses, and alternative specifications and offer important research and managerial implications. The findings of this study contribute to the growing literature on the role of women directors and board gender quotas in tackling the global issue of climate change.

The aim of this paper is to study the relation between dividend payments and executive turnover in banks. We analyse whether newly appointed CEOs and management boards are more likely to pay dividends in a sample of both listed and unlisted banks in Central Europe. We find that in general, executive turnover is negatively linked to dividend payments. In the year when CEOs change or a large part of the management board is new, dividends are less likely to be paid. Our results are confirmed for listed and unlisted banks, showing that dividend payment behaviour is not driven by the stock market pressure. However, we demonstrate that in banks reporting visibly lower profitability in relation to the past, the probability of paying dividends is higher when a new CEO or board were appointed in the previous year. This may indicate that new CEOs and boards are signalling good expected profitability in the future, despite current weak results. Conversely, for banks which report much higher profitability than in previous years, dividend payment by new boards is the same as for their peers. In such cases, it is likely that boards consider higher profitability to be a signal in itself. Hence dividend policy is not affected.

Purpose The 2008 and 2020 crises reinvigorated discussions on the democratization of finance. Peer-to-peer (P2P) lending is a valuable option worldwide, but credit risk is high. To encourage investors, P2P platforms use blockchain and the option of crypto as collateral. This study seeks insight into investor reactions to crypto collateral in P2P lending. Design/methodology/approach This study analyzes 663 lending decisions by 221 finance students conditioned through testimonials towards pro-social decision making on a mock P2P site. These lenders - within the age demographic driving crypto adoption (Granit, 2021) - were asked about changes in decisions in the case of different collaterals, as well as their views on sustainability. Previous research on a mock P2P site finds lifelike decision making and similar heuristics in a general-public and student sample (Gonzalez and Komarova, 2014). Findings Loan applications can be funded more quickly with a pledge of 20% in traditional collateral but not in crypto assets or crypto currency. Second, loan popularity also persuades investors, and lender projections of financial literacy influence decision confidence. Third, male lenders report a lower interest in sustainability than female lenders. Practical implications Crypto collateral options in P2P platforms do not appear to support financial inclusion and there is not clear association between sustainability and pro-social P2P lending. However, upcoming more stable digital currencies backed by central banks may further democratize P2P lending provided there is behavioral financial literacy as well. Originality This is the first study to examine sustainability views and the perception of crypto as a form of collateral in pro-social P2P lending.

The significant growth of companies with high ESG ratings in financial markets around the world has led to an intensive debate. It is also evident that investing with value based companies has clearly gone from the margins to the mainstream (Revelli, 2017). This is especially true during COVID-19 pandemic. Assets in European sustainable funds surged about 52% in one year to hit EUR 1.1 trillion in December 2020. But there was different reasons of this situation: driven by significant inflows, repurposed assets, and rising financial markets (Morningstar, 2021). In this study we would like to check how risky was companies with high ESG ratings during the periods of deep concern in financial market. General the risk of companies with high ESG ratings was also subject of debates in some different studies (Maraqa and Bein, 2020; Lee and Faff, 2009; Verheyden et al. 2016; Sassen et al. 2016; Bouslah, et.al, 2013; Hemingway and Maclagan, 2004, Muhammad et al., 2015). . But the question which we would like to answer is how risky was that companies during the periods of deep concern in financial market? To answer this question we analyses the volatility spillover among companies with high ESG ratings including in socially responsible indices (SRIs) during the periods of high volatility. We verified the previous results of Albuquerque et al., (2020), Broadstock et al., (2020) and Whieldon et al., (2020) research, who confirm that companies with high ESG ratings have achieved higher stock returns and lower volatility during high volatility periods in COVID-19 (Le et al., 2020). Additionally Starks et al. (2017) confirmed that long-term investors are less likely to sell a high ESG ratings than a low ESG ratings companies after a single quarter of poor returns. Brzeszczyński et al. (2022) have proven that the systematic risk of companies with high ESG ratings from the markets in East Asia decreased during the COVID-19 pandemic. Our analysis based on daily log returns of FTSE and FTSE4good indices (FTSE Russell Research Portal, 2022) for the period from 1st of January 2018 until 31th of December 2022. The time of our research includes three periods of deep concern in financial market, two as a result COVID-19 pandemic and one as a result 2022 Russian invasion of Ukraine. We apply Markov Switching (Hamilton, 1989) ARCH-type models with two regimes. This models can explain the dynamic of the volatility more accurate, than ordinary GARCH model. Furthermore, every regime became associated with specified state of the market. In this case the first regime is identified with normal market conditions and smaller volatility, and the second one with deep concern in financial market and higher volatility. Furthermore, it allow us to recognize the period of affecting the pandemic and 2022 Russian invasion of Ukraine on the market. In particular we are going to answer the question about the reaction speed of the ESG companies on the pandemic and the outbreak of the war and the persistence of the disturbance on the ESG companies.

The European sustainability mutual fund market is characterized by the co-existence of several labels and certifications that are designed to guide investors in their investment decisions. This study is the first to explore the influence of government and non-profit organization (GNPO) sponsored sustainability labels on fund flows and the marginal impact of multiple ESG labels. Our evidence documents that GNPO labels have an impact on fund flows. The effect is particularly stronger for younger funds and funds without other sustainability signals. We also find that when a fund already has other signals of sustainability, the addition of a GNPO label does not appear to attract additional fund flows unless the fund has an ESG-related name. The evidence using the upgrade of funds to article 8 and 9 SFDR classification also confirms that the marginal impact of more labels is questionable in a setting of proliferation of labels. Our paper provides useful insights into the effectiveness of different labels as signals for investors, suggesting that an internal and easy-to-grasp signal like the name seems more salient than third-party certifications, while also highlighting the relevance of holding aligned sustainability signals.

Recent studies in investor behavior have put forth a so-called “warm-glow” theory, suggesting that investors appear to have developed a preference for responsible investments. The theory explains why investors empirically appear to pay a premium for responsible assets. According to recent reports, however, Covid-19, supply chain uncertainties, and the recent surge in inflation, have led to a resurgence of investment in what could be considered non-responsible assets. Investor sentiment has changed. In this paper we put forth the hypothesis that market uncertainty acts as a contingency variable on warm-glow preferences, such that in times of crisis, the investor loses the taste for responsible assets, in favor of the preservation of consumption and wealth. Focusing on the global banking sector, we show that this helps explain what was observed during the financial crisis. Our study adds uncertainty as an important contextual contingency to discussions in the nascent warm-glow theory.

The demand for accurate predictions of sea-level rise to measure its impact on several affected sectors is increasing. From the global and regional mean sea-level rise (Dic/1992-Oct/2020), we propose Extreme Sea-Level Value at Rise (ExSLVaR) and Extreme Sea-Level Expected Rise (ExSLER) measures to forecast extreme mean sea-level rises at different periods calculated for 8 seas/oceans of the Earth, using Extreme Value Theory and Filtered Historical Simulation. Furthermore, we analyze the connection between our measures and financial risk in several sectors. The main evidence shows different regional and global forecasts and both energy and oil gas sectors, especially in the current COVID-19 period, are more affected by the extreme sea-level rises. These measures are relevant for policymakers, regulators, and investors for strategies that mitigate and integrate the future physical and financial costs of climate risk by extreme sea-level rises into policies, regulation, and portfolio allocation.

This research has two main objectives. First, to analyze the response of stock markets to the intensity of Covid, as reflected through measures of risk and return. Likewise, it aims to study how capital markets react to different responses to Covid-19, such as mobility restriction measures, health care support and economic aid to citizens and business, as well as to the announcements of fiscal and monetary policies. Second, to analyze whether companies with a higher environmental, social, and corporate governance commitment were able to reduce their exposure to Covid-19 intensity and response policies. In other words, whether the market and investors reward companies that commit to sustainable finance principles in periods of high uncertainty, such as the pandemic period. (See extended abstract in pdf)

This paper provides a novel rationale for why banks combine lending and deposit taking. It shows that liquidity provision through demand deposits commits banks to monitoring. Investors with liquidity needs withdraw their deposits early and are not willing to refinance a bank. This curtails excessive bank lending and limits the moral hazard problem of a bank. In contrast, banks with tradable debt face a refinancing problem in which they expand on risky lending by reissuing bonds and exploiting investors that need to trade. In this setting, demand deposits may commit banks to monitoring even in the presence of deposit insurance.

In the last few decades, the sustainability aspects and their relation to banking have been the subject of many discussions among researchers, regulators, investors, and the public. The environmental, social, and governance (ESG) aspects are currently one of the main focus areas for policymakers worldwide (Bruno, Lagasio, 2010). However, sustainability is not a new topic since the studies on ESG criteria and financial performance date back to the 1970s. More than 2000 empirical studies have been published since then (Friede et al., 2015). The number of papers on sustainable banking has been growing drastically, and the 2008 financial crisis has acted as an accelerator of the trend (Aracil et al., 2020). As the environmental issues are growing, so is the related regulation. Guidelines, reports, directives, and other documents are being published by the relevant authorities to make firms and banks behave in a way that would facilitate the so-called green transition or at least not hinder it. This paper offers an overview of the capital requirements regulation in the EU and in the US that is currently in place, together with the currently valid and upcoming sustainability regulation. In addition, I try to give some insight whether achieving the goals of transition to a more sustainable economy should, in fact, be done by banks and their lending activities. While it is clear that banks will have to be involved in the change to a certain degree, the question of the degree and the type of their involvement remains to be answered. The main contributions of this papers are the following. First, I provide a comprehensive overview and comparison between the EU and the US capital requirements regulation and sustainability-related regulation. Second, I provide some insight on whether incorporating ESG as a separate risk category into the risk-weighted assets (RWA) calculation is economically justifiable. In other words, I try to answer the question whether bank capital regulation should be used as a tool for transitioning towards a more sustainable economy.

This study investigates the effect of capital on asset and liability-liquidity risk measures and the impact of periods of stability and crises. Using an unbalanced panel of 18,670 commercial banks in the USA from 1993Q1-2021Q2, we find some variation across our measures of liquidity risk. For instance, on the asset side of the balance sheet, capital tends to worsen bank’s liquidity position in terms of cash and near cash assets, at all times. By contrast, on the liability-side of the balance sheet, capital enhances liquidity position (demand deposit and federal funds purchased) during normal and market crisis periods. Nevertheless, we document mixed evidence in relation to unused commitments and derivatives over crises period. During Covid-19 period, we observe bank capital enhances cash, federal funds purchased and demand deposits but worsens federal funds sold. Although an increase in money market deposits and a decrease in derivatives reflects the impact of the liquidity coverage ratio, we find no appreciable evidence of such an effect for an increase (decrease) in demand deposits (cash and near cash assets). Our results are affirmed by several robustness checks.

Aspiring to achieve full EU membership, Western Balkan countries expect the banking sector to step up its contribution to the region’s development. In the past, lending booms have been found to be associated with financial reforms and economic growth (Ariccia, Igan, Laeven, & Tong, 2016; Levine, 2005). Such reforms are also expected to flow from the EU integration process (Dabrowski & Myachenkova, 2018). This opens the question how does EU integration affect bank lending behavior? The paper analyzes bank lending behavior of Western Balkan candidate countries and EU member states from the perspective of two parallel EU integration processes, known as widening and deepening. While widening refers to EU enlargement to new member states (Sekulic, 2020), deepening refers to establishing close and structured cooperation between EU countries based on shared rules and institutions to which they transfer some of their sovereign powers (Patel, 2019), or so-called institutionalization of the EU (Sekulic, 2020). Whereas 2004, 2007, 2013 and the Western Balkan enlargements are examples of EU widening in the recent decades, the monetary and banking union are examples of EU deepening during the same period. Various points can be considered as important milestones for widening. The signing of Stabilization and Association Agreement, formal application for EU membership, granting of candidate country status, opening of negotiations and membership. On the other hand, Economic and Monetary Union and the Banking Union can be considered as significant points for EU deepening. In addition to the basic relationship between EU integration and bank lending behavior, the paper also looks at potential channels that might be driving it. Specifically, the paper looks into how EU integration might affect bank lending through changes in individual country-specific and bank-specific factors. Furthermore, we assert that implications of EU widening for bank lending may already be evident in the accession process. For this purpose, different milestones in the accession process are treated as separate EU widening events. In terms of methodology, the paper develops two sets of econometric specifications along the lines of the models used by Alltavila at. all (2021), Kim&Sohn (2017), Micco&Panizza (2006), Allen at.all (2015) and Zandi at.all (2019). The response variable in both models is net-loans (Zandi, Haseeb, Widokarti, Ahmed, & Chankoson, 2019). The explanatory variables of interest are EU widening and deepening dummy variables. To control for the effects of other bank lending determinants, the first set of specifications includes several standard bank-specific and country-specific variables.The analysis is based on banking data from the FitchConnect database for the 2002-2020 period. The results of the study show that EU integration events have a significant and positive relationship with bank lending growth measured as increase of net-loans. The study showed that candidate and new member countries have the highest impact from the EU integration. Finally, looking at potential channels through which EU integration events might affect bank lending, the results indicate that EU integration events intensify the relationship of some of the bank-specific factors with net-loans.

There is an ever-increasing need for greater awareness of environmental, social and good management practises (ESG - Environmental, Social, and Corporate Governance) when making investment decisions. The role of the capital market in financing the energy transition, reducing global warming, and increasing social imbalances seems invaluable. However, it is important to note that aroused above-average investment in ESG assets may generate speculative activities, dictated by inadequate equity valuation of companies defining their activities as ESG compliance. Consequently, the valuation of risk may be subject to an error in measuring the so-called spillover effect in the capital market. The events of recent decades, the global crisis of 2007-2009, the COVID-19 pandemic, or the energy crisis caused by the war in Ukraine, show the need for constant monitoring of the risk of loss of financial market stability and attempts to anticipate events that are sources of systemic crises. In this context, the objective of the study is to identify the structure of linkages and systemic contagion pathways between the stock markets of companies committed to ESG in different regions of the world. To account for geographic diversity, a volatility analysis of ESG equity indexes will be performed for selected world regions: the USA, Western Europe, Central and Eastern Europe, Latin America, the Middle East, the Asia-Pacific region, and Africa. The study will be conducted over the past 10 years. The main analytical tool will be the estimation of volatility transmission indices by Diebold and Yilmaz (2012, 2014). The indicated method will be extended by the approach of Baruník and Krehlík (2018), who propose a volatility transmission analysis for different frequency horizons (short-, medium- and long-term). The study has the potential to make a significant contribution to the field of systemic risk pricing. Given that risk pricing is one of the core functions of the capital market to support informed and effective capital allocation decisions, we are convinced that, in the context of significant climate change and the energy crisis, an analysis of the structure of volatility links between ESG equity indices is worth verifying.

Socially Responsible Investments (SRI) indices have been introduced by stock exchanges around the world, in particular in smaller emerging markets, relatively recently. Even in the largest stock markets, e.g. in the USA or the UK, the indices Dow Jones Sustainability Index and FTSE4GOOD index were launched only in years 1999 and 2001, respectively, while one of the first SRI indices in emerging markets, i.e. the RESPECT index in Poland, was created in 2009 (some earlier papers analysing the SRI data include Sauer (1997), Statman (2000), Orlitzky and Benjamin (2001), Consolandi et al. (2009), Lee and Faff (2009), Managi et al. (2012) and more recently Sassen, Hinze and Hardeck (2016), Jin (2018), Brzeszczyński, Gajdka and Schabek (2021) and Brzeszczyński, Gajdka, Pietraszewski and Schabek (2022), among others). Overall, in majority of stock markets across the world the SRI indices were established only within the last 10-15 years period. Therefore, the available studies about the SRI indices using large samples of international markets are naturally still very limited. Previous literature in this area shows somewhat mixed results about the linkage between social responsibility and firms’ financial performance. The early review studies, such as Margolis and Walsh (2003) found a positive association regarding this relationship and Orlitzky, Schmidt and Rynes (2003) concluded that adoption of social responsibility is likely to pay off in terms of financial performance. Orlitzky, Schmidt, and Rynes (2003) also argued that markets do not penalize companies for positive corporate social performance. However, more recent reviews conducted by Revelli and Viviani (2013) and Revelli and Viviani (2015) reported a more mixed evidence, i.e. they found very symmetrically distributed positive, neutral and negative impact of SRI on financial performance in case of 40, 80 and 41 papers, respectively (see Revelli and Viviani (2013)), and they further argued, based on the new meta-analysis, that incorporation of corporate social responsibility in construction of stock market portfolios is neither a weakness nor a strength in comparison with conventional investments (see Revelli and Viviani (2015)). In this paper, we provide extensive new empirical evidence about the performance of international SRI indices covering a large sample of 35 stock markets from all 6 continents in the period between 2016 and 2021. We comprehensively include in our analysis both developed markets and emerging markets. The performance of the SRI indices is evaluated on raw return basis as well as using various risk-adjusted measures. We further investigate differences in results before and after the COVID-19 pandemic period. Our findings depict clear geographical differences in the SRI indices performance across markets and their respective broader regions, which we discuss in details in this study.

Different types of climate risks and attention to climate news have been thoroughly studied in recent literature (e.g. Khalfaoui et_al., 2022). Due to the recent economic and geopolitical crises surrounding the trade war between the US and China, the Covid pandemic, and the Ukraine war, we argue that the presence of other crises has limited the attention and alertness to the ongoing risks of climate change. To study the effects of limited climate news attention, we analyze the effects of transitional and physical climate risks on implied volatility and volatility spillovers in the US and European stock markets. We conduct a multivariate analysis of exogenous news shocks on daily implied volatility indices in the US stock market and major European stock markets and observe that the general impact of climate news risk has increased after the Paris climate agreement. Based on the limited attention hypotheses, we further find that the sensitivity of implied volatility indices to climate risks, and the volatility spillover have been negatively impacted by the most recent crises, reflecting greater urgency of economic and geopolitical risks compared to climate risks. Khalfaoui, Rabeh, Mefteh-Wali, Salma, Viviani, Jean-Laurent, Ben Jabeur, Sami, Abedin, Mohammad Zoynul, & Lucey, Brian M. 2022. How do climate risk and cleanenergy spillovers, and uncertainty affect U.S. stock markets? Technological forecasting and social change, 185, 122083.

Here, we develop methods to analyse the biodiversity risks from industrial sites around Europe. This study is novel as it is the first attempt to link the pollutant registers to the geographic data of protected areas and natural parks Furthermore, we applied charactirazation factors of an improved life-cycle-assessment database created recently for organizational environmental footrpint calculations by the European Commission. The proximity of largest industrial facilities to natural parks can affect biodiversity risks. human health. Here, we quantify hazard in the recent past and show that proximity to parks is ofne not a national but supranational issues due to cross-border impacts. We find that natural parks have been exposed to biodiversity risks.

This study empirically examines the effectiveness of government-financed impact investing grants available to private firms in Slovenia. We use a sample of 7,671 private firms during the 2005-2020 period applying for and eventually receiving impact investing financial grants from the government. We employ the staggered difference-in-difference approach as recently proposed by Baker et al. (2022) and Athey & Imbens (2022) to assess the effects of impact investing financial grants over time and across firms. This method allows for firms switching back and forth between receiving and not receiving impact investing financial grants and thus being a treated observation or a potential control observation respectively. Our results show that firms receiving a grant, on average, increase the number of employees in the subsequent period, generate higher cash flows, increase value added per employee, make higher capital investments, higher levels of exports, but – surprisingly – decrease productivity on average. Standard DID, PSM, Heckman’s two-stage, and the time-varying average treatment effects robustness analyses further support the conclusions that grants successfully foster firm performance.

Governments worldwide have adopted environmental regulations to fight global warming; however, the literature is divided on the impacts of such regulations on firm performance. Porter’s ‘win-win’ argument proposes a positive impact, while the ‘cost-regulation’ hypothesis suggests a negative impact. Against this backdrop, we examine the impact of the Perform, Achieve and Trade (PAT) scheme on energy efficiency and firm value using firm-level data from 2006 to 2015. Using a difference-in-differences (DiD) combined with the matching technique, we do not find the PAT scheme effective in enhancing the firm`s energy efficiency. However, the PAT scheme adversely affects firm value. On further examination, we find that increased expenditure on repair and maintenance, research and development, rising plant and machinery purchases, and a fall in productivity are potential channels for the decline in firm value post-PAT period. Our results are robust to alternative definitions of energy intensity, firm value, and empirical specifications. We also apply staggered DID and observe qualitatively similar results providing evidence to refute Porter’s ‘win-win’ argument in the case of India.

The appearance of Financial Technologies (FinTech) has been proclaimed as a major breakthrough in the financial services industry. With it comes the promise of increasing economic efficiency and performance, improving financial inclusion, and achieving equitable social growth, as well as reducing the degradation of the environment and improving ecological integrity. However, studies have so far failed to empirically measure the impact that FinTech has on the economic, social, and environmental sustainability levels. Further, the literature presents contradictory results on whether FinTech promotes or hinders economic and social development and if it can mitigate environmental degradation. The present study aims to fill these gaps in the literature. It uses annual panel data from 20 OECD countries for the period 2005-2018, to empirically test the relationships between FinTech and the economic sustainable development proxied by Gross Domestic Product (GDP), social sustainability represented by the Human Development Index (HDI), and environmental sustainability measured using ecological footprint. Results show that FinTech positively affects sustainable economic development. FinTech also has a positive social impact as it is shown to increase HDI. Further, the findings confirm that FinTech enhances environmental sustainability as it decreases the ecological footprint. These results show the importance of FinTech in improving critical economic, social, and environmental sustainability. This research not only offers several practical implications but also contributes to the literature exploring the FinTech sustainable development nexus.

Sustainability, Energy Finance and the Role of Central Banks: A Review Monika Marcinkowska University of Łódź Janusz Brzeszczyński Robert Gordon University and University of Łódź Ailie Charteris University of Cape Town Jerzy Gajdka University of Łódź Lidia Obojska Kozminski University Jan Jakub Szczygielski Kozminski University and University of Pretoria ABSTRACT In this review paper, we discuss existing literature on sustainable finance with a particular focus on energy finance and the role of central banks. We begin with the presentation of ESG risks connected with the energy market. We focus on environmental (i.e. climate-related) risks related to fossil fuels, but we also highlight environmental risks connected with non-fossil fuel energy sources. In addition, we discuss a less frequently emphasised aspect, i.e. social risks stemming from both: conventional energy sources as well as the transition towards renewable energy sources (including orderly transition and rapid changes induced by emergencies, such as wars). We also describe interdependencies between the different environmental and social risks indicating how they can escalate. Moreover, we present a model describing risk drivers and their transmission channels through which those risks affect financial institutions and markets (banks, insurance companies, asset markets) as well as macroeconomic and social factors, namely: price stability, economic growth, financial stability and social wellbeing (including full employment and living conditions). Next, we link it to the mandates of central banks in order to show how sustainability fits into the overarching objectives of those institutions and what their potential or, in some cases, actual role is in this area. We further explore in detail two key areas of central bank activity, i.e. monetary policy and macroprudential policy actions, and we present the instruments and tools (protective and proactive measures) which those institutions can use to serve not only the conventional goals of those policies, but also the objectives of sustainable finance and energy finance. Within that area we discuss intermediate targets and ultimate objectives. In particular, we analyse monetary policy operations: credit operations, collateral and asset purchases to show how standard operations are modified as a result of taking sustainability objectives into account. In doing so, we illustrate how the inclusion of the SDGs affects the effectiveness of these actions in terms of the primary (economic) objectives of central banks. In terms of macroprudential policy, we focus on climate stress tests and capital requirements (analysing all three Basel accord pillars) and other supervisory requirements. In the next part we describe the issues related to central banks’ communication with the market, taking into account aspects of sustainable finance with particular regard to energy finance. We concentrate on central banks’ disclosures (on overall governance, strategy and risk management) with regard to sustainability and present other means of communication (publications, speeches, education etc.). We conclude by discussing the constraints faced by central banks in relation to sustainable finance and energy finance as well as the limits of their role in this regard. Finally, we outline the gaps in the existing literature and indicate the directions for future research.

We examine whether corporate green innovation can improve enterprises’ access to trade credit. Using Chinese A-share enterprises listed in the Shanghai Stock Exchange (SHSE) and the Shenzhen Stock Exchange (SZSE) from 2014 to 2019 as a sample, we reveal that corporate green innovation can significantly enhances firms’ access to trade credit and this finding still holds after various robustness checks. Mechanism analysis shows that the decreasing financing constraint provides a crucial linkage between corporate green innovation and trade credit. Heterogeneity analyses report that the improving effect of corporate green innovation is more prominent in non- SOEs, small-size enterprises, and enterprises highly covered by analysts. Our findings contribute to the literature related both to corporate green innovation and trade credit, and support enterprises and policymakers to promote green innovation, improve financing conditions, and drive sustainable development.

With the global concern over climate change, there has been a growing interest in the role of greenhouse gases (primarily CO2) emissions of corporations. Using a sample of European listed companies from 2013 to 2020, this study contributes to the current trends in carbon accounting research and policy by: (a) examining the relationship between CO2 emissions and firm values (b) exploring how CO2 emissions moderate the relation between a firm's earnings and equity valuation (i.e., the value relevance of earnings) (c) investigating which individual component of total carbon emissions (i.e., Scopes 1 and/or Scopes 2 and/or Scopes 3 is most responsible for driving results (c) exploring the influence of societal characteristics (i.e., the Rule of Law and the Control of Corruption indicators) on the aforesaid relationship. We document that in the European context corporate carbon emissions are negatively associated with a company’s market valuation. Moreover, we find that CO2 emissions reduce the value relevance of earnings (i.e.., for high polluting firms’ earnings are less relevant for market valuation). Furthermore, we discover that only Scope 1 emissions and, partially, Scope 2 emissions, drive these results. Finally, we find that the effect of carbon emissions in reducing companies’ market values and decreasing value relevance of earnings is more noticeable in countries with a well-established formal and informal institutions.

A dataset of more than 5,000 corporations over the period from 2002 to 2019 is built to analyse the relation between indicators of firms’ environmental performance and their stock market valuation. Several models are estimated, from dummy regressions to propensity score matching, using several indicators of environmental performance. The results suggest a mild evidence of Greenium. Non-linearities do not explain this result, as the effect is not found to be stronger for larger changes in the environmental performance. However, the effect is stronger when firms announce emission targets, thereby reinforcing their commitment to greener processes. This signaling effect has become stronger over time. Also, the valuation of “greener” firms is found to be less volatile. This could be explained by the fact that “greener” companies attract a longer-term oriented investor base, more stable by definition.

In the seminal paper about the refinement to the Sharpe ratio and information ratio, Israelsen (2004) proposed an adjustment to the traditional Sharpe ratio measure, which became known in the academic literature and in investment practice as the modified Sharpe ratio. This important, albeit very simple, alteration allowed to overcome the problem of incorrect assessment of risk-adjusted performance, and the resulting wrong formation of the rankings of funds (or other investment results), whenever the excess returns happen to be negative in case of some of the observations in the evaluated historical sample periods. As Israelsen (2004) demonstrated, the differences in rankings of funds from the best to the worst performing ones, based on the calculations relying on the traditional Sharpe ratio versus the modified Sharpe ratio, can be so large that certain funds can even swap places between top and bottom segments of respective ranking lists. A similar risk-adjusted measure to Sharpe ratio is the Treynor index in which instead of the standard deviation of excess returns in the denominator the beta parameter is utilised. Also in this case the possibility of incorrect assessment of risk-adjusted performance and mischaracterisation of the order of funds in their rankings is indeed a major challenge and it is, in fact, the issue that is not dissimilar in nature to the problem of the Sharpe ratio without and with the adjustment introduced by Israelsen (2004). In the spirit of Israelsen (2004) idea, we propose in this paper a refinement to the Treynor index and we demonstrate its usefulness based on calculations relying on a sample of different funds (including traditional investment funds as well as socially responsible investments (SRI) funds). We further discuss the advantages of the modified Treynor index as well as its applicability and some practical limitations (which may arise in very rare cases when the estimated beta parameters have negative values).

Credit scoring models are generally developed on a sample of accepted loan applications while the rejected applications are avoided making the model biased. We consider a population of unique consumer loan-level data with accepted and rejected applications of a commercial bank from a candidate EU country. We employ logistic regression, classification tree method, and radial basis function to assess performance with and without selection bias correction. Our results reveal that reject inference improves the performance of scoring models. The logistic regression model performs better than the classification tree method, and radial basis function in classification accuracy, ACC, and ROC curve.

As empirical research in international finance, sustainable and climate finance, and other areas, has becomes more diverse in the research questions asked, it has converged on a core set of econometric tools. At the same time, researchers’ understanding of the proper use of the tools has advanced. Nevertheless, recent methodological papers point out further refinements that can help produce the most accurate inferences possible. This workshop session will provide a relatively non-technical overview of some of these refinements and their practical implementation.

We investigate whether political risk is priced in the cross-section of corporate bond returns by using a machine-learning-based measure of firm-level political risk. We document a positive and significant political risk premium after controlling for bond and firm characteristics, conventional risk factors, and exposure to aggregate economic policy uncertainty. Political risks are more relevant for firms with high political risk and high credit risk, and for smaller and more illiquid corporate bonds. Our findings reveal the importance of idiosyncratic political risk beyond common risk factors and aggregate economic uncertainty.

We evaluate the role of foreign short-sale bans in muting the return-response to negative earnings surprises for stocks cross-listed in unbanned markets. We update the global timeline of short-sale restrictions until the COVID-19 crisis. With low dispersion of beliefs, we surprisingly observe cross-border reach of bans manifested in delayed price responses through reduced short-interest and failures-to-deliver. In contrast, large profit opportunities created by high dispersion of beliefs trigger regulatory arbitrage and full return-response through cross-border short-selling. Earnings management practices and CEO compensation structure reinforce the trade-off between compliance-overreach versus profit intensity, determining the effects of short-sale bans.

This study aims to empirically assess if a measure of global environmental awareness can forecast stock returns. Further, it tests if stocks of more environmentally friendly companies are expected to show higher returns than those of less environmentally friendly companies when environmental awareness among investors increases. To capture environmental awareness, it uses the index of Dabbous et al. (2023) who identify 342 keywords and aggregate the individual Google search volumes of these keywords to construct a measure of environmental awareness. All aspects of the E-pillar in Environmental, Social, and Governance (ESG) rating provided by Sustainalytics are used to proxy how environmentally friendly companies are. Daily total return and market capitalization data from Thomson Reuters Datastream from the beginning of the year 2010 until the end of the year 2018 are used. In addition to the analysis with individual stock level data, we sort stocks based on their E-pillar score and form quintile portfolios for every month. We calculate the difference between the returns of the fifth quintile portfolio (highest E-pillar score) and the first quintile portfolio (lowest E-pillar score). Results confirm that on average, individual stocks with a higher E-pillar score show lower returns and alphas. Second, the findings indicate that when climate change concerns rise unexpectedly, stocks with higher E-pillar score reduce the differences in returns and alphas or show even higher returns and alphas than stocks with lower E-pillar score. The results confirm that when environmental issues matter, stocks with higher environmental risks suffer more than stocks with lower environmental risks.

Although cryptocurrencies have already established themselves in the financial markets, the question of what factors influence price behavior is open. This article aims to examine what type of risk has the greatest impact on the price movements of cryptocurrencies. We focus on the dependency between various uncertainty proxies and major cryptocurrencies as well as the spillover effects. Within the first group we consider the economic policy uncertainty index, the volatility index, crude oil volatility index, gold volatility and the geopolitical risk index. Within the cryptocurrencies we take into account ten mostly capitalized coins. The dynamic linkages between indices and coins are examined within the dynamic conditional correlation approach and the time varying vector autoregressive models. Further, we analyze the volatility spillovers from risk indices to various coins and based on this we built the networks. The data sample starts from April 2018 and ends up in December 2022 thus encompassing the upturn and downturn of the coin market, the COVID19 pandemic, the war in Ukraine and the continued rise in inflation. We find that for some pairs of indices and coins the dynamic correlations are different from zero and negative, but in majority of cases there is no correlation between uncertainty indices and cryptocurrencies. In the case of spillovers, both the economic policy uncertainty index and the geopolitical risk index are net senders to coins, while the opposite is observed for OVX which till the pandemic outbreak is a net receiver. The uncertainty indices based on the stocks' market implied volatility behave similarly generating the spillovers to coins in the pandemic period. The majority of spillovers is observed between coins itself and not with the risk indices.

Uncertainty, the global energy crisis and the response of global markets and industries: A multilevel analysis Abstract The energy crisis of 2021-2023 is the first truly global energy crisis yet its economic impact and impact on stock markets is not fully understood. We investigate the impact of uncertainty on financial markets at the global, industry group and industry level, with uncertainty defined as that stemming from energy price increases during the crisis. To isolate and quantify uncertainty related to the rapidly increasing prices of primary fossil energy sources, namely oil, natural gas and coal, we use a two-step approach that combines multipath modelling and elastic net regression with Google searches and designate the resultant measures as the energy price uncertainty (ENPU) index. To assist in our analysis, we expound and use a measure that we term the ‘overall impact of uncertainty’ (OIU) measure. This measures considers both the magnitude of the impact of uncertainty and the intensity with which returns respond to uncertainty to offer a more comprehensive insight into the impact of ENPU than that provided by an analysis of return and volatility responses alone. The responsiveness of industry groups and industries differs. While returns for all industry groups and industries are negatively impacted by ENPU, a number do not exhibit significant volatility triggering and, according to the OIU, are more resilient. Our findings have implications for investors, analysts, researchers and econometricians. (Extended abstract attached)

This study examines the impact of oil price uncertainty on Special Purpose Acquisition Companies (SPAC) operating in the wide energy sector. Existing since 2003 and labeled as a new asset class, SPACs brought structural changes in IPO market and, in the last few years ,outnumbered traditional IPOs. A significant proportion of SPACs entering the market are energy-related related causes. This paper aims to understand their financial returns and the relationship with oil price uncertainty. To achieve that we analyze a sample from 2003-2022.

The field of development banking has gained significant importance after a period of stagnation at the turn of the century as a result of financial market failures and increased environmental, social and economic. However, increasing relevance of development banks does not go hand in hand with increased understanding of these financial institutions. Development banks act as promotors of socio-economic progress which is why the spotlight is most frequently put on their development actions. Nevertheless, they are also financial intermediaries which should be financially sound in order to effectively implement their development mandate. Academic literature on development banks is sparse – De Luna-Martínez & Vicente (2012) offer a cross sectional global survey of national development banks with responses from 90 banks whilst De Luna-Martínez et. al (2018) repeat the same cross-sectional survey with a modified questionnaire yielding a response from set consisting of 64 banks. Both papers omit multilateral, regional and sub regional development banks. On the other hand, Xu et. al (2021) construct a qualitative database for over 500 development institutions with data on pursued mandates, bank size, ownership scope and geographical scope of operation. Characteristics discussed in the existing literature were to the best of our knowledge never linked to financial performance of development banks. Therefore, our paper addresses this knowledge gap in the following two areas. First, it provides a broad mapping of development bank types focusing on the nexus between financial performance and bank heterogeneity. Second, the paper differentiates development banks from other bank types by looking at differences in development banks’ financial performance relative to other bank types. We start by augmenting the publicly available qualitative database from Xu et. al (2021) with financial data on income statements and balance sheets from Fitch Connect. Several indicators of financial performance are considered, including profitability, efficiency, liquidity, loan quality, loan loss provisioning and capital adequacy. Our database includes information on 240 development banks spanning over the period from 1995 to 2022. We use principal component analysis to derive a composite financial performance indicator and link it to both qualitative and quantitative characteristics of development banks with regression models. Similar approach of composite financial performance indicator construction was used in Jan et al. (2019) to evaluate financial performance of Islamic banking. Our findings show that development banks differ with respect to their size and relative importance in the socio-economic environment – larger and more important development banks are on average less profitable and more cost efficient than smaller banks. They also have higher loan quality and are thus required to hold less loan loss provisions relative to their total assets. Banks following a broader, flexible mandate experience similar characteristic. Apart from this, development banks differ across country income groups – banks operating predominantly in high income and upper-middle income countries are less profitable, hold more liquid assets and experience less non-performing loans. Additionally, they tend to be better capitalized as they have higher Tier1 and total regulatory capital ratios.

We examine the relationship between firms’ risk management and idiosyncratic volatility. We analyze their annual reports and compare two proxies of risk management: the keywords for the steps in the cybernetic cycle of risk management and the implementation of an enterprise risk management (ERM) system. We hypothesize that the disclosure of risk management reduces idiosyncratic volatility. The analyzation is based on stocks listed in the German CDAX index between 2002 and 2020. Firms that report several steps in the cybernetic cycle of risk management show significantly lower idiosyncratic volatility. Furthermore, disclosing the steps in the cycle has a significantly negative relationship with the idiosyncratic volatility in the next year. We do not find a significant relationship between disclosure regarding the implementation of the ERM and idiosyncratic volatility. These findings indicate that the market perceives the ERM as less important than convincing information about a fundamental process for managing risk.

This paper focuses on the reactions of investors to disclosures related to emerging technologies in firms’ initial 8-K filing each year. We conducted a keyword search of each 8-K filing by US firms between 2010 and 2019 based on the Gartner Hype Cycle. We find that investor reactions to emerging technologies-related disclosures are significantly positive in the short-term but reversed in the long-term. Further investigation suggests that this reversal of investors attitude is due to insider selling after emerging technologies-related disclosures. We also find a negative impact of over-selling, with the more emerging technologies words in a firm’s initial 8-K filing and the number of 8-Ks including those words each year, the more negative the short-term market reaction. Furthermore, investors seem to be attracted by technologies which are at the peak of inflated expectations. Firms with lower institutional holdings, lower analyst coverage, or higher information asymmetry attract a positive market reaction to the disclosures. Our results are robust to placebo tests, alternative measures of CARs, and after excluding other event noise. These novel findings expand the study of market reactions to a specific technology.

Cryptocurrencies such as bitcoin have given rise to a new architecture of decentralized finance, allowing the control of money to be transferred from a bank to the hands of the people. In terms of its electricity usage, however, today the Bitcoin network is synonymous with adding a small country to the world. Because electricity generation is one of the leading sources of greenhouse gas emissions, bitcoin production could be imposing a large carbon footprint depending on the miners’ geographical locations and the corresponding fuel mixes for electricity generation. Since the locations of bitcoin miners are concealed by the network, as their IP addresses are not recorded in the blockchain, this work identifies the characteristics of an obscure but environmentally important industry to facilitate its successful inclusion in climate mitigation policies. This paper develops and applies a practical computational accounting methodology for the CO₂ emissions due to bitcoin mining. It accurately estimates the industry’s emissions over time and permits an understanding of how miners respond intensively, in terms of their electricity usage, and locationally to changes in socioeconomic variables. While bitcoin mining was once concentrated in China, their regulations banning cryptocurrency mining in June 2021 resulted in the widespread migration of miners. Due to this dispersion, it is difficult to estimate Bitcoin’s carbon footprint and how it is changing over time. Other work in this area relies on self-reported data comprising only a third of the Bitcoin network’s hashrate. This paper addresses these limitations by analyzing objective, complete and geographically granular data collected on the miners’ CO₂ emissions since January 2021. After the Chinese mining ban, the data reveal a sharp and immediate fall in global CO₂ emissions (a decrease of 22.4% and 45.2% by July 1 and August 1, 2021, respectively, from June 1, 2021) that was largely due to a commensurate decrease in the network hashrate and thus electricity usage. Approximately 8 months later, however, Bitcoin’s CO₂ emissions fell relative to its electricity usage by nearly a third (a decrease of 29.1% by February 8, 2022 from June 1, 2021) due to significant locational changes in mining activity. While the improved composition of mining has been relatively stable since this time, fierce competition among the relocated miners has led to historic increases in the network difficulty, requiring miners to use more computational power for the same reward. Mining activity in North America rose to approximately 55% of the total network hashrate by the end of 2022, resulting in its average emissions of 44,200 tonnes of CO₂ equivalent per day, which is 20% greater than the levels in Asia and the Pacific prior to the Chinese mining ban and comprised 62% of the network’s total emissions by the end of 2022. This paper also estimates the degree of mobility in the bitcoin mining industry, which is integral to assessing carbon leakage (the transfer of production to countries and regions with laxer regulatory constraints) and informs the debate of how to best regulate cryptocurrency mining.

Given the continuing Russian-Ukraine conflict and concomitant sanctions, price caps on natural gas are of considerable current interest to scholars and policymakers. We explore if the recent European natural gas price cap announcement, on December 19, 2022, has affected Title Transfer Facility (TTF) prices. After controlling for market and demand forces typically affecting TTF prices, we do not identify any significant impact of this cap announcement on natural gas prices. We conclude that the introduction of this price cap has provided little utility, and that there is a need for alternative actions to address European natural gas price spiking.

Our study provides new evidence on the impact of the various sources of uncertainty on the ESG thematic bond markets in emerging and frontier countries. Motivation comes from the fact that sustainable finance in emerging markets is growing rapidly, reflected in the strong post-COVID era recovery of ESG flows and exceptional green bonds volume issuances. In particular, gross flows into ESG-related emerging markets bond grew from $66 billion in 2020 to $200 billion in 2021 (Goel et al, 2022). Our study is one of the first papers to link sustainable finance in emerging and frontier markets (represented by the ESG thematic bond markets) to different sources of uncertainty. In our analysis we cover wide spectrum of uncertainty sources, originating from political, geopolitical, economic, macro and financial, climate policy, economic policy, Trade Policy Uncertainty and risk aversion. Dataset includes J.P. Morgan ESG CEMBI Index universe on the aggregate and country levels (tracking liquid, US Dollar-denominated emerging market fixed and floating-rate debt instruments issued by corporates) launched in 2012. The index utilizes an ESG scoring and screening methodology to tilt toward issuers ranked higher on ESG criteria and green bond issues, and to underweight and remove issuers that rank lower. The empirical analysis include the following measures tracking particular uncertainty sources: (i) Political Risk Index (International Country Risk Guide); (ii) Geopolitical Risk Index (Caldara and Iacoviello, 2022); (iii) Economic Uncertainty (Bekaert et al., 2022); (iv) Financial Uncertainty (Jurado et al., 2015); (v) Climate Policy Uncertainty (Gavriilidis, 2021); (vi) Economic Policy Uncertainty EPU (Baker et al., 2016); (vii) Trade Policy Uncertainty (Caldara et al., 2020); and (viii) Risk Aversion Index (Bekaert et al., 2022). Methodological framework is similar to Baur and Smale (2020). More specifically, we apply regression analysis with different specifications to investigate the impact of various uncertainty sources (both level and change) on the ESG thematic bond returns from emerging and frontier markets. The study has important practical implications for international investors in the context of sustainable investing and diversification strategies in emerging and frontier bond markets. In addition, our results might be useful for portfolio managers who are evaluating the risk originating from different uncertainty sources.

Measuring the social impact of social enterprises remains one of their key challenges. Yet, at same time, the non-financial reporting methodologies developed primarily for large corporations do not reflect social enterprises' heterogeneous characteristics and the wide array of their impacts. Social enterprises also have limited competencies and resources available to dedicate to these activities. Responding to these challenges, the paper aims to devise an effective tool for mandatory reporting to allow social enterprises to evaluate and report their social impact (the SIMSEN tool). The tool integrates contemporary methodologies, frameworks, standards and guidelines that better fit the specific features of social enterprises. An advantage of the tool is its flexibility in being able to capture different social impacts and adapt to various levels of measuring skills. Moreover, being partly standardised, the tool enables the aggregation of the collected data for policymaking purposes.

This paper investigates whether the degree of digitalisation of European Banks may improve their non-financial performance. Using a sample of a hundred European banks over the period 2005-2021, we assess whether banks’ investments in information technology (IT) affects their ESG score. We then analyse whether banks’ digitalisation exert a different effect on the three pillars, environmental (E), social (S) and governance (G), with a specific focus on the environmental dimension. The empirical evidence suggests that investment in IT enhances banks’ sustainability by improving banks’ direct emissions, workforce and human rights scores and CSR-strategy score. Moreover, the analysis suggests that the outbreak of the pandemic did foster banks’ digitalisation, but not its effect on sustainability and that the beneficial effect of digitalisation on sustainability is non-linear on banks’ sustainability scores.

Corporate capital structure is one of the most important areas of corporate finance. A constant need to study SMEs' behaviour in their choice of financing sources is highlighted in the literature. Stock liquidity is a potential, rather underexplored factor that can differentiate the choice of external financing source. There are relatively few studies related to this issue, especially in small and medium-sized enterprises as well as in the markets of Central and Eastern Europe. Using data on firms from Central and Eastern Europe covering the period 2009 to 2021, in this study we analyse if firms of different sizes and with various levels of stock liquidity differ in their preference for financing deficit via debt issuance. Our study is the first in which the relationship between liquidity and debt-equity choice is considered solely from a pecking order theory point of view. We regress the net debt issuance on the financial deficit and utilise several liquidity measures. Our results indicate that stock liquidity may be a substitute for debt issuance in alleviating the adverse effects of information asymmetry in small and medium-sized companies.

Dual-class shares split the ownership and control rights of a firm in such a way that some investors receive superior voting power. They typically grant ten votes per share and usually provide the owner with the vote majority despite having only a minority equity stake. Many countries allowed different dual-class share structures for decades. Regulators and institutional investors always viewed them critically and recommended to adhere to the “one-share-one-vote” principle. More recently, many entrepreneurial firms employ them when going public in the U.S. and Asia. In Europe, we observe a drastic decline of firms with multiple-voting shares in the Nordic countries, a rise in loyalty shares in Southern European countries, and decline of preference shares in Germany. In this study, we examine the financial and operational performance of firms with dual-class shares for 13 European capital markets from 1994 to 2020. The focus is on the costs and benefits of disproportional ownership and voting arrangements and on differences between single- and dual-class firms. We find that IPOs with dual-class shares are relatively lower valued compared to single-class firms, but they are more profitable. There is no general valuation discount, although regional and country differences exist. The ownership structure, life cycle effects, operational efficiency and agency problems of dual-class firms are important factors leading to specific valuation and performance effects in some countries. Currently, most stock exchanges around the world allow dual-class shares, especially to attract unicorns and to stay competitive. Germany remains the only European country prohibiting shares with multiple voting rights.

This paper presents new evidence of the overall negative effect of housing on demand for risky assets measured with stock market participation and share of stocks in portfolios of young to middle-aged European households. Empirical findings from this study differ from the previous one because I instrumentalise endogenous housing decisions with exogenous intergenerational housing transfers in the form of inheritance or gift. This novel setting allows me to estimate the overall effect of housing on demand for risky assets. I apply two empirical strategies on pooled cross-sectional Households Finance and Consumption Survey data. First, I model treatment variable homeownership tenure status and outcome vector demand for risky assets conditional on the rich set of control variables that account for much of the heterogeneity between homeowners and non-homeowners. In that spirit, I attend to separate dependencies between housing purchase and demand for risky assets measured with treatment variable out of other dependencies between homeownership tenure status and demand for risky assets measured with the vector of control variables. This approach is challenging because there is no guarantee that control variables introduced in models capture all critical sources of endogeneities. I use the probit model for specifications with binary dependent variable stock market participation and the tobit models for estimating relationships with the limited dependent variable share of risky assets. Second, I use the instrumental variable method to instrumentalise endogenous housing decisions with exogenous intergenerational housing transfer as a gift or inheritance. Those two instruments align with the exclusion restrictions because they are as good as randomly assigned and affect the demand for risky assets only through the first-stage regression. Since homeownership tenure status is instrumentalised directly, and because instruments do not violate exclusion restriction, the second-stage regression reflects the overall causal effect of housing on demand for risky assets. Taken together, I report two sets of results in this paper. First, I demonstrate that dependency between homeownership status and demand for risky assets changes sign and becomes significantly negative after enough critical heterogeneities between homeowners and non-homeowners are fixed. Second, I present the significantly negative overall causal effect of housing on demand for risky assets after homeownership tenure status is instrumentalised with intergenerational housing transfers. The magnitude of negative dependency obtained from the regression with conditioning is less considerable than the overall negative effect obtained with two-stage least square regression. The difference is probably the consequence of omitted variable bias due to unobserved heterogeneities, like different expectations and preferences of homeowners and non-homeowners. In that case, potentially missing control variables under the first empirical strategy do not allow regression to adjust the dependencies to the extent that the treatment coefficient equals the causal effect. Finally, the main results from both empirical strategies are robust to different sample specifications and differently defined risky assets.

We analyze the relation between virtual stock holding changes on a social trading platform and stock holding changes of all private investors in a national economy. Our data sources are the social trading platform wikifolio.com and the Securities Holdings Statistics-Base plus (SHS-base) of the German central bank. We find that the transactions of signal providers on wikifolio.com are a good proxy for aggregate transactions of private investors – mirrored by the SHS-base – during the same month, and a good predictor for the aggregate transactions of the private investors in the following month.

In this paper, we study the effect of geopolitical risk (GPR) on stock prices and we investigate the mediating role of the ESG factors in this relationship. Using a large international sample of publicly listed firms, we find that higher GPR causes stock price performance to decline and stock price crashes to occur more frequently. These results are robust to the use of different measures of stock price performance and crash risk. However, using ESG scores by Refinitiv, we observe these negative implications to be less severe for higher ESG-rated issuers and, specifically, for firms scoring high in the Environmental and Social dimensions. Our study demonstrates that firms more engaged in ESG practices are more resilient to the adverse effects of geopolitical risk.

This paper examines the effect of FinTech lending on the market power and stability of incumbent banks. Using an international sample of 6,309 banks during the period 2013-2019, our results show that the volume of credit provided by FinTech lenders negatively affects bank market power and stability. This negative effect is less relevant in countries with greater protection of creditor rights. We also find that the impact of FinTech lending on bank stability is partially channeled by the effect of FinTech credit on the market power of incumbent banks. Our main results – lower bank market power and stability – are also observed at the country level, after addressing potential endogeneity concerns related to FinTech lending and several robustness checks.

Research Question/Issue: The goal of this study is to meta-analyze the results of 146 studies examining the effect of real earnings management (REM) and three categories of corporate governance: ownership structure, gatekeepers, and management characteristics. Our research question investigates whether and how these categories affect REM. Research Findings/Insights: Regarding the ownership structure category, the shareholding of insiders and families weakens the limiting effect of institutional investors on REM, although state ownership seems to limit REM when compared with institutional ownership. For the gatekeepers category, the only factor identified as more effective in reducing REM than external audit quality is the analyst coverage. In the management characteristics category CEO duality weakens the mitigating effect of executive compensation on REM. The study finds significant differences in certain aspects of structural and methodological heterogeneity in existing empirical results. Theoretical/Academic implications: Results of our study can be interpreted in light of agency theory, and signaling theory. Further operationalization and expanding the analysis of individual components of the corporate governance categories could contribute to a stronger link between REM and theories in corporate governance. Practitioner/Policy implications: We have not found a significant mitigating effect of external and internal audit on REM. Such results should lead to a spread of knowledge among audit firms and audit committee members when it comes to recognizing and countering REM. Our results may be useful for investors since companies followed by more analysts and having higher state ownership may have less REM, which may increase investor confidence as to the quality of the information provided by the company. Keywords: Corporate Governance, Ownership Structure, Gatekeepers, Management Characteristics, Real Earnings Management, Heterogeneity, Meta-Analysis

Environment (e.g., climate change) related risks and opportunities are increasingly prominent agenda items at board-level. However, reports are that critically low numbers of board directors have adequate expertise to identify, evaluate and address them (Whelan, 2021). Prior research has identified positive effects of board-level environment expertise on firm environmental performance. Our study instead concentrates on the value of environmental expertise on boards to shareholders. We develop director-level tests of how prior environmental experience relates with shareholder satisfaction, as expressed through votes in annual director elections. Employing firm-year fixed effects to control for firm-level variation, we find surprisingly little evidence that environmental experience is valued by shareholders. Instead, we find some evidence it reduces shareholder satisfaction when possessed by directors with significant influence over firms’ executive function, and when firms perform strongly on environmental objectives but weakly on financial objectives. Finally, we observe that exogenous shocks to sustainability preferences of mutual fund managers experiencing major natural disasters lead to short-term increases in support for environmentally experienced directors. Overall, our findings suggest that, on aggregate, concern of agency costs relating to environmental governance appears to negate perceived benefits to shareholders of board-level environmental expertise.

The article verifies the possible impact of COVID-19 and the increase in fuel prices, being a side-effect of the Russian invasion of Ukraine on the consumers’ interest in sustainable transportation modes. For this purpose, we analyse the search intensity in Google for the phrases related to public transport (e.g.”timetable”) and non-oil vehicles (e.g. ”bicycle”, ”electric bicycle”, ”electric scooter”, ”electric car”) over two periods: before and during the COVID-19 pandemic in Czechia, Slovakia, Hungary and Poland (January 2017- December 2019 and January 2020- end of February 2023, respectively). As explanatory variables, we use the consumer prices of fuels in the countries in respective periods and COVID-cases intensity.

Theoretical models predict that exit threat can mitigate agency problems and force managers to undertake actions that would maximize the firm value in the long run. We examine whether the institutional blockholder exit threat curbs managerial misbehavior and short-termism reflected in real earnings management. Our study exploits a natural experiment—a Polish pension fund reform that imposed a real threat of exit on pension fund portfolio companies. Using a difference-in-differences approach, we provide evidence that the reform significantly decreased the level of real earnings management in “treated” companies, that is, companies with pension funds playing the role of blockholders. The effect was more significant for firms in a multiple blockholder setting, firms under common ownership, and firms with higher insider’s stakes.

The contentious role of a government in banking has spurred several avenues of research. Our article unveils that the government is intertwined with banking through a hitherto underexplored channel—through public procurement. We construct a comprehensive firm-level dataset on public procurement and firm accounting statements in Slovenia. We apply the Synthetic Control Method to show that a firm that secures a public procurement contract can strengthen its bank borrowing terms. A treated firm obtains a greater amount of bank funding and a higher share of long-term bank funding compared to the control firm. However, the causal mediation analysis shows that although the indirect effect of public procurement through higher firm revenues improves firm bank lending, the direct effect of winning a public procurement contract is negative. This paints a more nuances picture over the impact of public procurement on bank lending.

Purpose Since inception in 2005, and with the 2008 bank crisis spurring exponential growth, online Peer-to-Peer (P2P) lending has aimed to facilitate financial inclusion worldwide. Thus, the Covid-19 pandemic arguably provides a unique opportunity to examine changes in credit risk pricing and much-needed inclusion around the world. Design/methodology/approach This study is based on a unique novel hand-collected dataset of 1,363 P2P loans. It includes 772 peer-to-peer (P2P) loans collected between October 2019 and February 2020, as well as 591 loans collected between October 2020 and April 2021. The pre- and COVID-19 sub-samples include loan applications posted in U.S., Germany, Czech Republic, Lithuania, Mexico, Peru, and Argentina. The sample also includes loans from India, South Korea and Switzerland. Findings Overall, P2P loans available for funding during the COVID-19 pandemic are more highly rated and funded more quickly, but borrowers are charged higher interest rates than before the pandemic. Practical implications P2P platforms, borrowers and lenders would benefit from fine-tuning the use of blockchain and collateral to attenuate credit risk perceptions and facilitate financial inclusion around the world when it is most needed. Originality This is a pioneer multinational study on COVID-19 and P2P lending. It uses unique hand-collected data and contributes to the understanding of how credit risk is priced in association to loan and country factors.

For assessing various performance indicators of companies, the focus is shifting from strictly financial (quantitative) publicly disclosed information to qualitative (textual) information. This textual data can provide valuable weak signals, for example, through stylistic features, which can complement the quantitative data on financial performance or on Environmental, Social, and Governance (ESG) criteria. In this work, we investigate the link between ESG quantitative scores and textual features from various aspects - the evolution of ESG topics over time, industry-specific features and effects, and the relationship between corporate ESG scores and text-based sustainability reporting measures.

This paper aims to analyze the first application of the EU Taxonomy disclosure requirements and to evaluate if the ESG score incorporates the actual eligibility of the portfolio of the banks to the European Taxonomy, as shown in their NFS. After analyzing the new EU regulatory framework on non-financial information, the paper focuses on the Italian case, and the resulting extent of disclosure put in place by Italian financial institutions in the first year of application of Article 8 of the Taxonomy Regulation. The sample analysed consists of the companies operating in the financial sector (NACE Sector K - Financial and Insurance Activities) included in the Consob list of subjects that have published the Non-Financial Statement ("NFS") in 2021.[1] We first carried out a descriptive analysis, highlighting the declared sustainability status of Italian financial companies and possible peculiarities arising from the business model and the company size. At a second stage, we focused on banks, trying to evaluate if their ESG score incorporates the actual eligibility of their portfolio to the European taxonomy; at this scope, we referred to the Refinitiv ESG data source. We estimate a statistically significant positive effect of the Taxonomy-eligible exposures on the Refinitiv Environmental score. However, a low value of the R2 suggests that only a small part of the E score is explained by the Taxonomy eligibility, and that there are several unobserved variables taking into account in the score definition. In conclusion, the Taxonomy eligibility seems to still have a marginal role in defining the bank's score, while it should be fundamental according to the role that banks have into the transition path. [1] List of subjects who published the Non-Financial Statement ("DNF") as of 31 December 2022 published on Consob website on 23 January 2023.

This study analyses the implications of the regulatory and economic environment, monetary policy regime, and uncertainty for bank performance. Employing multiple indicators of bank performance and underlying explanatory factors, we used a novel set of empirical approaches including Fixed Effects, Random Effects, Panel Fully Modified Least Squares (FMOLS), Panel Dynamic Least Squares (DOLS), and the Generalized Method of Moments (GMM). Considering the data of both developed (G7) and emerging (E7) economies from 2001 to 2020, our results reveal that leverage, capital adequacy, monetary policy, economic growth, inflation, exchange rate and uncertainty have significant implications for various aspects of bank performance. We also find significant differences between the developed and developing economies’ banking sector performance under the influence of regulatory and economic environment, monetary regime, and uncertainty. The empirical findings have vital implications for the banking sector in emerging and advanced economies, monetary and prudential policymakers and stakeholders of financial stability.

This research is the first of its kind to examine the impact of the Economic Policy Uncertainty (EPU) index on the Non-performing Loans (NPLs) and government debt in the 19 Eurozone countries. Using a sample of panel data for 450 banks during the 2001-2021 period,we find that EPU has a positive impact on the NPLs, but negative on government debt considering that this indirect positive impact on the overall economic performance, financial stability and the real economy as an early warning of a crisis. The lesson learned from the previous European debt crisis has made the Eurozone introduce economic support packages to counter and overcome the Covid-19 consequences, with the main purpose of maintaining the financial system stability. Although the EPU index as an early warning for the instability has been blamed for generating a panic about the increase of the NPLs, this paper reveals it otherwise.

This paper investigates whether due to the SSM implementation, the significant banks which are supervised by ECB altered their borrowing behaviour compared to the less significant banks, which are supervised by their NSAs. Since significant banks perceived the ECB as stricter supervisory authority compared to the NSAs (Fiordelisi et al., 2017), banks which are supervised by ECB are likely to be considered as safer due to the stricter supervision. Consequently, we expect increase of deposits in banks supervised by ECB, compared to banks which are supervised by NSAs. This kind of depositors’ perception should be especially identifiable in case of non-protected deposits such as the interbank deposits which are based on trust and less pronounced in case of deposits covered by the deposit insurance schemes. Therefore, we expect positive impact of the SSM implementation on banks’ borrowing behaviour measured via total deposits and interbank deposits as sources for bank funding.Furthermore, this paper investigates whether in anticipation of the CA, and in anticipation of the SSM lunch, the significant banks which expected to be supervised by ECB altered their borrowing behaviour compared to the less significant banks, which expected to be supervised by their NSAs. Using the difference-in-difference method, we find evidence that the significant banks positively adjusted their interbank deposits compared to the less significant banks. Specifically, when we inspected the effect of the SSM implementation on interbank deposits by maturity, we found evidence that significant banks increased the short-term interbank deposits with maturity less than 3 months and decreased the long-term interbank deposits, with maturity 1-5 years. These results indicate that depositors’ trust in the significant banks, which are supervised by ECB, increased significantly after the SSM implementation, which implies that the implementation of the SSM improved the credibility of the significant banks. These results have important policy implications for the policy makers and supervisory authorities as confirm that the SSM is fulfilling its main priority which is increased safety and stability of the banks and the overall banking sector. Moreover, we find evidence that in anticipation of the SSM lunch and the expected stress test exercise under the CA, the significant banks, positively adjusted their interbank deposits compared to the less significant banks. Specifically, when we inspected the effect of interbank deposits by maturity in anticipation of the SSM and the expected stress test exercise under the CA, the significant banks increased their interbank deposits with maturity up to 3 months and decreased their interbank deposits with maturity of 3-12 months and 1-5 years, compared to less significant banks. This implies that significant banks adjusted their liabilities in their balance sheets in an attempt to affect the scope of the stress test aiming to avoid possible capital adjustments after the CA. It also implies that the banks which expected to be supervised by ECB, in fact perceived ECB as more strict supervising authority compared to the NSAs and in anticipation of its implementation, adjusted their borrowing behaviour. This finding is consistent with the literature that investigates supervision architecture.

As part of the credit risk management process of financial institutions, the non-performing loans (NPLs) ratio remains one of the essential components that distinguish the well-managed assets of a bank. In this paper, we aim to empirically forecast the level of non-performing loans (NPL) in afflicted periods like the Covid-19 pandemic using an seasonal ARIMA (SARIMA) model. Our analysis is based on the NPLs level observed in the Albanian banking system between December 2015 and November 2022. The results indicate that the seasonal ARIMA(1,1,0)x(1,0,2)12 is the appropriate model that can be applied to predict the monthly level of NPLs. The results also reveal that the expected average monthly ratio of NPLs remains stable, with a slight decrease until the end of 2021. Efforts on being proactive rather than reacting post-factum involve using mechanisms and forecasting models to define non-performing loan ratios and better manage them. This paper considers significant implications in credit risk management in terms of developing actions to manage the magnitude of non-performing loans throughout the Covid-19 pandemic.

In the third decade of the third millennium, we have witnessed major health (i.e., COVID pandemic) and political (i.e., Ukrainian conflict) crises, which despite their non-economic origin have significant undesired economic effects, such as inflation. The key monetary response to inflation worldwide was an increase in interest rates, yet despite significant increases, inflation proves to be stubborn. The study reported herein estimates the effects of interest rates, currency index, and unemployment on inflation rates in the context of enduring non-economic Crises. The proposed model is tested using monthly panel data for a period of 72 months for the US and EU. The findings show that interest rates have a significant impact on inflation decline, but the impact is minimal for increases less than 10 points above the base level, whereas an increase in interest rate over 100 points above the base level even triggers an opposite effect, i.e., increased prices. While the effect of currency depreciation is only marginally related to the increase in inflation, we observe that the unemployment rate is significantly negatively related to the inflation rate. More precisely, when the unemployment level is one percentage point above the base level, inflation drops to just two percent. As for regional differences, the US is more responsive to inflation than the EU and the Eurozone. We observe that increase of interest rate below 200 points (i.e., mild monetary policy) has a delayed effect on inflation decline, while an increase of the interest rate over 200 points (i.e., more aggressive monetary policy) delivers an almost-immediate inflation decline effect.