This paper introduces a novel measure to quantify firms’ sensitivity to shifts in bilateral trade flows between the United States and its trading partners. We exploit the 2016 U.S. presidential election as an exogenous shock to trade policy expectations and assess the stock market reactions of firms across 52 countries. Our findings indicate that firms with higher trade policy sensitivity experienced significantly more negative stock returns surrounding the election. These results are robust to variations in event windows, return model specifications, and alternative estimations of trade policy sensitivity.

This paper examines how supplier IPO events affect their key customers’ cost of debt. The evidence reveals that average loan spreads for customers increase by roughly 20% (23.7 basis points) following suppliers’ IPO events. This negative spillover effect is more pronounced when suppliers make significant relationship-specific investments (high switching cost), when suppliers face less concentrated customer bases, or when customers face more concentrated supplier bases. Our results show that customers receive less favourable trade terms and are forced to pay more for inputs after their suppliers go public, all of which increase customers’ operational costs, risk and subsequent borrowing costs. Furthermore, we document that customer loan contracts become significantly more restrictive after a supplier's IPO. Finally, we find that the observed negative spillover effect is also present in customers’ access to the public bond market.

Using a market-indicator-based approach, this paper empirically examines whether the stability of the US and EU financial systems is affected by the digital finance revolution driven by BigTechs, FinTechs, and crypto-assets. These three sectors display different downside volatility profiles, with financial intermediaries being particularly sensitive to shocks from the crypto ecosystem only under extremely severe downturns, which are prevented in regulated equity markets. In that vein, we provide evidence that the Markets in Crypto Assets Regulation reduced financial systemic risk in EU. Overall, our empirical analysis shows that markets perceive the performance and riskiness of tech-driven companies and assets in differentiated ways, and that the transmission of shocks from digital finance ecosystems operates uniquely under varying conditions of systemic stress. Finally, we also document asymmetric spillover effects between advanced and emerging economies, with shock transmission from the US and EU to emerging markets being systematically stronger than in the reverse direction.

Exploiting the executive compensation reform for state-owned enterprises (SOEs) in China that enforce strict pay restrictions, this study examines whether and how pay restrictions affect firms’ labor investment inefficiency. We find that SOEs experience a decrease in abnormal labor investment following the reform relative to non-SOEs, particularly in over-investment in labor. Our results show that the reform is associated with lower labor investment inefficiency through strengthened internal governance and mitigated internal social comparison. In addition, pay restrictions specifically curb firms’ tendency to over-hire. Further analysis reveals that imposing pay restrictions on executives enhances labor quality and also promotes employee well-being. This study offers novel policy insights by showing how pay restrictions to SOE executives can reduce vertical agency costs and investment inefficiency and enhance workforce quality and well-being in weak institutional environments.

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.

This study examines the institutional demand for mispriced stocks with incongruent expectations implied by the book-to-market (BM) ratio and financial strength. Institutional trading (or institutional demand) is calculated by both changes in institutional ownership (percentage of shares held) and the number of institutional investors from the previous to the current quarter. Market mispricing and expectation errors in value/glamour stocks can be identified by analysing firms’ recent financial strength (measured by FSCORE). Firms are sorted into value stocks (top 30%), middle stocks (between 30% and 70%) and glamour stocks (bottom 30%) by distribution of BM ratios at the end of the previous fiscal year. Firms in the sample are then double sorted by FSCORE and BM: in each BM portfolio, firms are further classified into high-, mid- and low-FSCORE groups. Consistent with the argument of expectation errors in value/glamour stocks (Piotroski and So, 2012), institutional investors buy value stocks with strong fundamentals (underpriced) and sell glamour stocks with weak fundamentals (overpriced). Independent institutions are more likely to take advantage of the mispricing in value/glamour firms than passive institutions. Institutional trading on expectation errors could reduce the abnormal returns to mispriced stocks. Institutional trading patterns on mispriced value/glamour stocks are also documented in global markets. Our research provides new evidence that the institutional investors do exploit the BM anomalies if the mispricing can be identified by both the BM and the recent financial strength. Our study differs from Caglayan, Celiker and Sonaer (2018) as we emphasise that financial institutions, in addition to relying on only the BM values, process information from financial statements to infer firms’ financial strength. This study is also the first to document that institutional demand on mispricing could attenuate the BM anomaly.

Using lenders who become members of the Task Force on Climate-Related Financial Disclosures (TCFD) as an exogenous shock, we examine whether and how lenders’ commitment to transparent climate-related disclosures affects borrowers’ environmental performance. We find that borrowers of TCFD-member lenders, relative to control firms, significantly improve their environmental performance after the TCFD launch. Lenders’ disclosure commitments influence borrowers through credit rationing and monitoring. Specifically, polluting borrowers face higher borrowing costs, reduced access to credit, and greater incorporation of environmental action covenants in loan agreements. Additionally, polluting borrowers of TCFD-member lenders experience heightened financial constraints. Finally, borrowers of TCFD-member lenders are more likely to adopt the TCFD framework for climate-related disclosure after the TCFD establishment. Together, these findings illuminate the role of lenders in driving corporate environmental performance improvement through their commitment to transparent climate-related disclosures.