Knowledge that Transforms

This study extends Acharya and Naqvi’s (2012) theory of liquidity-driven risk-taking to digital asset markets by examining the relationship between U.S. and Chinese excess-liquidity conditions and cryptocurrency returns. Using monthly panel data for ten major cryptocurrencies from 2019 to 2024, and defining excess liquidity and economic policy uncertainty (EPU) as binary state indicators, the baseline results show that periods of U.S. excess liquidity are associated with a 12.1 percentage-point increase in average monthly cryptocurrency returns. This liquidity-return premium is reduced by approximately 54% during episodes of rising U.S. EPU. Chinese excess-liquidity regimes are associated with a 9.3 percentage-point increase in monthly returns, but this positive association is more than offset under rising Chinese policy uncertainty, as indicated by a −13.8 percentage-point interaction effect. These findings are consistent with the interpretation that surplus-liquidity conditions coincide with stronger cryptocurrency returns, in line with risk-taking and stablecoin-based arbitrage channels, whereas rising-EPU regimes weaken the liquidity-return relationship by increasing risk aversion and reducing arbitrage efficiency. The results highlight a macro-financial channel through which liquidity conditions are linked to digital asset markets and suggest that regulators should monitor stablecoin issuance, leverage, funding conditions, and liquidity-driven speculative pressure in the crypto market.

This study examines how the introduction of China's deposit insurance system affects bank risk-taking, using panel data on 117 commercial banks from 2010 to 2023. Employing a theoretical framework together with system GMM and difference-in-differences estimations, we find that deposit insurance does not uniformly enhance stability; instead, it may increase idiosyncratic risk by weakening market discipline. The effect is concentrated among local commercial banks, with large commercial banks showing comparatively limited responses. Corporate governance and financial leverage serve as important transmission channels: banks with more concentrated ownership or higher leverage exhibit stronger moral hazard incentives following the reform. Robustness tests using the provision coverage ratio confirm these patterns. Overall, the results highlight the heterogeneous impact of deposit insurance across bank types and underscore the importance of governance quality and capital structure in mitigating risk-taking incentives under explicit insurance schemes.

Publisher Copyright: © 2026 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license. http://creativecommons.org/licenses/by/4.0/

With rising public attention to climate change, the proliferation of green mutual funds reflects expectations that they will contribute to a sustainable economic transition. This paper investigates the effects of climate news on mutual fund flows and portfolio allocation decisions. Using detailed flow- and holding-level data, we observe that heightened climate news results in significantly larger capital inflows into green funds than into their non-green counterparts. Furthermore, we show that, in response to climate news, green funds decrease their exposure to high-polluting firms relative to low-polluting firms more than non-green funds do. These results suggest that increasing public attention boosts capital reallocation towards green funds and that, in turn, potentially fosters investment relocation towards more environmentally friendly companies.

<div> What is the impact on the cost of bank credit of local corporate environmental and biodiversity exposure? At loan origination, banks charge higher rates to firms creating more environmental damage, especially when they are lowly capitalized, and when the firms operate in “greener” states with lower climate denial and more negative environmental news. Biodiversity risk is also priced, especially when public interest in it intensifies. Following the Trump withdrawal from Paris, banks modulate their environmental risk pricing in “browner” states. In sum, environmental risk pricing in bank lending is also driven by local beliefs and attitudes. </div>