We investigate the relationship between county-level social capital in the U.S. and asymmetric earnings timeliness (accounting conservatism). We measure social capital by the strength of civic norms and the density of social networks in a community. We find that firms headquartered in regions with higher social capital have earnings that reflect bad news more quickly than good news. Two potential mechanisms driving this connection are evident in our findings. First, the positive link between social capital and asymmetric earnings timeliness is more pronounced in firms with weaker external oversight, suggesting that social capital compensates for weaknesses in these mechanisms by discouraging managers from delaying the recognition of bad news. Second, we illustrate that firms in high social capital regions are more likely to recruit senior executives with higher asymmetric earnings timeliness coefficients. This result implies a preference for managers who adopt more conservative accounting practices. We find similar results using an international sample of firms from 21 countries. Our findings offer new insights into how local social norms influence corporate financial reporting.

In this paper, we use granular trading data from Taiwan between 2012 and 2016 to examine how local social capital influences retail investor behavior during corporate social irresponsibility (CSIR) events. Therefore, we are responding to longstanding calls in the international finance literature to explore investor behavior in non-US markets with distinct institutional and cultural characteristics. We find that investors residing in cities with higher social capital are less likely to purchase underpriced stocks following the announcements of negative events despite the potential for positive abnormal returns. This norm-driven restraint reflects a form of socially responsible investing motivated by community-based values rather than economic rationality. By documenting this behavior in an East Asian market, we extend the external validity of social norm theories developed in Western settings and contribute to a more nuanced understanding of how localized social preferences can influence asset pricing and capital allocation in a global context.

We study how and why local biodiversity affects residential property values. Leveraging remotely sensed greenness indicators and a novel dataset of granular property listings, we examine how changes in vegetation load on real estate prices. Hikes in greenness are associated with higher listing prices, fewer properties listed, and reduced liquidity in housing markets. These results suggest that price hikes in housing markets are driven by supply-side constraints instead of a “greenium” that buyers might be willing to pay due to innate preferences. Exogenous zoning shocks to foster biodiversity corroborate the presence of supply side constraints as price drivers in residential housing markets. Our findings emphasize the need to calibrate biodiversity and (social) housing policy objectives more explicitly.

How durable are the political accountability effects of the worst pandemic in a century? We track the effects of the COVID-19 pandemic on political preferences through its “high” and “low” phases in the Czech Republic. Uniquely, we ask about the effects of both the health and the economic costs of the pandemic measured at both personal and municipality levels. Consistent with the literature, we estimate effects suggestive of political accountability of leaders during “high” pandemic phases without higher support for non-democratic alternatives. However, we also find that the pandemic political accountability effects are mostly short-lived, and do not extend to the first post-pandemic elections.

We examine how banks manage carbon transition risk by selling loans given to polluting borrowers to less regulated shadow banks in securitization markets. Exploiting the election of Donald Trump as an exogenous shock that reduces carbon risk, we find that banks’ securitization decisions are sensitive to borrowers’ carbon footprints. Banks are more likely to securitize brown loans when carbon risk is high but swiftly change to keep these loans on their balance sheets when carbon risk is reduced after Trump’s election. Importantly, securitization enables banks to offer lower interest rates to polluting borrowers but does not affect the supply of green loans. Our findings are more pronounced among domestic banks and banks that do not display green lending preferences. We discuss how securitization can weaken the effectiveness of bank climate policies through reducing banks’ incentives to price carbon risk.

How do beliefs on admission probability influence application choices? In this study, we empirically investigate whether and how admission probability is reflected in application choices in a centralized admission system. We exploit a novel setting of a dynamic deferred acceptance mechanism as employed in Croatia with hourly information updates and simultaneous application choices. This setting allows us to explore within-applicant strategic adjustments as a reaction to changing signals on admission probability. We show in an RDD analysis that applicants react to negative signals on admission probability with an increased propensity to adjust their application choices by 11-23%. Additionally, we show how application strategies evolve over time, while applicants learn about their admission probability. The group most-at-risk to remain unmatched improves their application choices by applying to programs with a higher admission probability towards the application deadline. Yet, we also identify a popular and potentially harmful strategy of applying to safer programs before applying to more risky “reach” programs. About a quarter of applicants have the potential to improve their application choices by resorting their application choices.