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  • A*

    This paper examines whether stock market listing influences the persistence of bank performance across crises. We find that for both publicly and privately held banks, bank performance during the 1998 crisis is a strong predictor of bank performance during the 2007–2008 crisis. While for publicly held banks, the persistence is uniquely driven by bottom performers, for privately held banks the persistence is also driven by a group of top performers. We further show that banks that make a private-to-public transition between the two crises underperform in the 2007–08 crisis, especially if they are top performers during the 1998 crisis and more concerned about short-term stock price. We also document that after making a private-to-public transition, banks increase risk in a way that makes them more vulnerable to crises.

  • FT50 UTD24 A*

    This paper introduces a real-time, continuous measure of national sentiment that is language-free and thus comparable globally: the positivity of songs that individuals choose to listen to. This is a direct measure of mood that does not pre-specify certain mood-affecting events nor assume the extent of their impact on investors. We validate our music-based sentiment measure by correlating it with mood swings induced by seasonal factors, weather conditions, and COVID-related restrictions. We find that music sentiment is positively correlated with same-week equity market returns and negatively correlated with next-week returns, consistent with sentiment-induced temporary mispricing. Results also hold under a daily analysis and are stronger when trading restrictions limit arbitrage. Music sentiment also predicts increases in net mutual fund flows, and absolute sentiment precedes a rise in stock market volatility. It is negatively associated with government bond returns, consistent with a flight to safety.

  • FT50 A* Open Access

    This article introduces a new measure of a firm’s negative impact on biodiversity, the corporate biodiversity footprint (CBF), and studies whether it is priced in an international sample of stocks. On average, the CBF does not explain the cross-section of returns between 2019 and 2022. However, a biodiversity footprint premium (higher returns for firms with larger footprints) began emerging in October 2021 after the Kunming Declaration, which capped the first part of the UN Biodiversity Conference (COP15). Consistent with this finding, stocks with large footprints lost value in the days after the Kunming Declaration. The launch of the Taskforce on Nature-related Financial Disclosures (TNFD) in June 2021 had a similar effect. These results indicate that investors have started to require a risk premium upon the prospect of, and uncertainty about, future regulation or litigation to preserve biodiversity.

  • FT50 A*

    We explore the effects of online customer ratings on financial policy. Using a large sample of Parisian restaurants, we find a positive and economically significant relationship between customer ratings and restaurant debt. We use the locally exogenous variations in customer ratings resulting from the rounding of scores in regression discontinuity tests to establish causality. Favorable online ratings reduce cash flow risk and increase resilience to demand shocks. Consistent with the view that good online ratings increase the debt capacity of restaurants and their growth opportunities, restaurants with good ratings use their extra debt to invest in tangible assets.

Last update from database: 9/16/24, 10:02 PM (AEST)