Full Academic Programme


FULL CONFERENCE PROGRAMME (printable v8)


NZFM 2023

DAY ONE

7TH DECEMBER 2023

   

WG306 (FOYER)

REGISTRATION & WELCOME COFFEE/TEA


08H00 TO 08H30
   

WG308

CONFERENCE OPENING ADDRESS

08H30 TO 09H00
   
 

STREAMS A TO C

 
   

STREAM A

  09H00 TO 10H30
   
SESSION A1COMMODITIES09H00 TO 10H30
CHAIRPERSONTHORSTEN GLUECK, WIESBADEN BUSINESS SCHOOLWG701
Paper HOW HETEROGENEITY DRIVES THE YIELD, CORRELATION, AND VOLATILITY OF OIL AND STOCK?
Authors Pengda An, Shanghai International Studies University; Tao Li, City University of Hong Kong
Abstract We explore the effects of households' heterogeneity on the crude oil, stock, and bond markets in an equilibrium model. The asset prices, volatilities, and correlations admit closed-form solutions. The key parts of all the asset yields can be explained by different weighted averages of the expected growth rates of goods or consumption portions among households, and the time-varying movements of all these volatilities and correlations can be well captured by differences between two certain sorts of weight averages, and all these weights depend on households' heterogeneous beliefs and preferences. The model estimation shows excellent performance in fitting three markets, including term structures of interest rates and crude oil futures, volatilities, and the correlation between crude oil futures and stock. Our model can explain many empirical regularities, including the time-varying correlation-volatility of oil and stock, decreasing and convex volatility term structure of crude oil futures, and the V-shaped relationship between the futures volatility and the slope of the futures curve. 
Presenter:  Pengda An, Shanghai International Studies University
Discussant: Christina Atanasova, Simon Fraser University
  
Paper THE EFFECTIVENESS OF REGULATIONS IN ELECTRICITY MARKETS: THE FINANCIAL IMPACT OF THE GLOBAL ENERGY CRISIS
Authors Ignacio Segarra Tamarita, Instituto de Investigaci├│n Tecnol├│gica; Universidad Pontificia Comillas, Christina Atanasova, Simon Fraser University; Isabel Figuerola Ferretti, Universidad Pontificia Comillas
Abstract We analyse the financial impact of electricity market regulations. Following Russia's invasion of Ukraine, the world experienced a global energy crisis that caused natural gas prices to soar. We show that regulatory policies in the EU, designed to establish a well-integrated electricity market, also created a tight connection between gas and electricity prices. The unprecedented volatility spike and the subsequent tightening of collateral requirements created a significant cost for EU power utilities required to hedge their exposure to electricity price risk. We document an almost seven-fold increase in the average collateral value required for one-year EU futures contracts. We provide empirical evidence that following the gas market squeeze, the EU power utilities experienced lower sales and profitability relative to their US power utility counterparts. We show that the risk-adjusted return on a portfolio comprising EU power utilities was significantly lower than that of a counterfactual portfolio.
Presenter:  Christina Atanasova, Simon Fraser University
Discussant:  Thorsten Glueck, Wiesbaden Business School
  
Paper SYSTEMIC RISK OF COMMODITY TRADERS
Authors Thorsten Glueck, Wiesbaden Business School; Zeno Adams, University of St. Gallen
Abstract We examine the disruptions to global commodity flows following the bankruptcy of a commodity trading firm. The physical commodity network is operated by a handful of large traders who are responsible for the timely delivery of raw materials and inputs to industrial production. We propose a model that simulates the resilience and response time of the network following a shock. Our results suggest that a number of commodity traders carry significant systemic risk. The forced removal of a trader from the network has considerable implications for the prices and availability of physical commodities over a period of 6 to 12 months.
Presenter:  Thorsten Glueck, Wiesbaden Business School
Discussant:  Pengda An, Shanghai International Studies University
   
SESSION A2CORPORATE FINANCE09H00 TO 10H30
CHAIRPERSONEMDAD ISLAM, MONASH UNIVERSITYWG702
  
Paper EMPLOYEE RIGHTS AND INVESTMENT CASH FLOW SENSITIVITY
Authors Thuy To, University of New South Wales; Eliza Wu, The University of Sydney; Ruoyun Zhao, University of Technology Sydney 
Abstract We examine the impact of Right-to-Work (RTW) laws on firms' investment cash flow sensitivity. Using a large sample of U.S. public firms from 1950 to 2021, we find that firms located in the RTW states have a higher cash flow sensitivity of investment and lower investment efficiency. These firms, arguably with weaker employee rights, also receive less value from each additional dollar of investment in non-cash assets. The effect is stronger for firms with more financial constraints, higher information asymmetry and weak corporate governance. It is also more pronounced when firms have more intensive labour demands, weak union power and higher risk. 
Presenter:  Ruoyun (Lucy) Zhao, University of Technology Sydney
Discussant:  Ivan Indriawan, University of Adelaide
  
Paper BUYING LOCAL FAVOR?  ESTABLISHMENT-LEVEL EVIDENCE ON THE INSURANCE EFFECT OF CORPORATE PHILANTHROPY AND POLITICAL CONNECTIONS
Authors Emdad Islam, Monash University; Lubna Rahman, Monash University; Cara Vansteenkiste, University of New South Wales
Abstract Based on a large establishment-level dataset, we find evidence of strategic complementarities between corporate philanthropy and political connections as insurance mechanisms against regulatory noncompliance costs. Quasi-exogenous adverse shocks to firms' local political connections resulting from closely contested elections trigger reverse changes in local charitable donations targeting stakeholders of establishments facing high regulatory scrutiny. We use staggered large increases in unemployment insurance benefits to show that the use of corporate philanthropy is amplified when regulatory noncompliance costs increase. These effects become stronger for firms facing higher financial constraints and decrease for firms that hedge against political connection losses.
Presenter:  Emdad Islam, Monash University
Discussant:  Stephen Bahadar, Auckland University of Technology
  
SESSION A3DOCTORAL SYMPOSIUM09H00 TO 10H30
CHAIRPERSONBEN MARSHALL, MASSEY UNIVERSITYWG703
  
Paper FOREIGN AID FLOWS AND CORPORATE LEVERAGE IN DEVELOPING ECONOMIES: EVIDENCE FROM AFRICA
Authors Theogene Habimana, Hanken School of Economics
Abstract We study the effect of foreign aid on corporate leverage in 22 African countries, using data from 1,639 non-financial listed firms. We show a negative relationship between total foreign aid and corporate leverage, which varies depending on the channels of aid and its sources. OECD members of the Development Assistance Committee (DAC) and non-DAC members aid have different negative effects, as do bilateral and multilateral aid. The study also suggests that the effect of foreign aid on corporate leverage is influenced by how it is allocated to the private sector. Aid to financial sector has a significant positive effect only for larger firms. We find that the negative effect of foreign aid on corporate debt weakens during election times, and the effect is influenced by the chief executive's party orientation and government effectiveness. Our results are consistent with an instrumental variable based on the voting similarity index between donors and recipient countries in the United Nations General Assembly.
Presenter:  Theogene Habimana, Hanken School of Economics
Discussant:  Fanqi Meng, The University of Melbourne
  
Paper FRIENDS VERSUS FUNDING: UNPACKING THE DYNAMICS OF SOCIAL CONNECTIONS AND STAGED FINANCING IN VC INVESTMENT
Authors Fanqi Meng, The University of Melbourne
Abstract This empirical study investigates the determinants of staged financing in venture capital (VC) investments and assesses its influence on post-investment performance. By employing innovative proxies for monitoring costs and outside opportunities, the study provides compelling empirical evidence supporting the hold-up hypothesis, indicating that VC-staged financing is driven by the severity of external opportunities for entrepreneurs contributing as the first to establish such empirical support. The findings reveal that higher outside opportunities are linked to increased staging, characterised by smaller investments per round, shorter round durations, more financing rounds, and a higher likelihood of additional rounds in the U.S. venture capital market. However, the monitoring hypothesis does not consistently align with the results. Furthermore, this research reconciles conflicting empirical findings in prior literature by highlighting a positive correlation between the number of financing rounds and entrepreneurial success when entrepreneurs face greater external opportunities. Lastly, this study enriches the venture capital and social finance literature by shedding light on the role of social connections in private market investments.
Presenter:  Fanqi Meng, The University of Melbourne
Discussant:  Zhangweiyi Ren, University of Adelaide 
  
Paper STRATEGIC ALLIANCES AND EARNINGS MANAGEMENT
Authors Ralf Zurbruegg, University of Adelaide; Zhangweiyi Ren, University of Adelaide; Chee Cheong, University of Adelaide; Ivan Obaydin, University of Adelaide       
Abstract In this paper, we examine the relationship between strategic alliances and earnings management. Utilising a difference-in-differences analysis based on matched pairs, we find that allied firms experience a significant 9% reduction in earnings management. This reduction is attributed to enhanced governance monitoring and increased reputation capital resulting from strategic alliances. Our additional analyses reveal that the effect is more pronounced when alliances involve partners from different industries, when the partner in the alliance is larger, and when firms build alliance networks with multiple entities. In sum, our findings support the notion that strategic alliances improve corporate governance and mitigate agency problems, thereby contributing to the integrity of financial reporting.
Presenter:  Zhangweiyi Ren, University of Adelaide 
Discussant:  Theogene Habimana, Hanken School of Economics
   
SESSION A4BANKING09H00 TO 10H30
CHAIRPERSONYANHUI (SEAN) WU, QUEENSLAND UNIVERSITY OF TECHNOLOGYWG801
  
Paper BANKING SYSTEM STABILITY: A GLOBAL ANALYSIS OF CYBERCRIME LAWS
Authors My Nguyen, RMIT
Abstract We compile a novel dataset on the enactment of cybercrime legislation in 132 developed and developing countries to analyse the impact of cybercrime legislation on bank stability around the world. The results reveal that cybercrime laws significantly bolster bank stability through the enhancement of bank liquidity and reduction of operating risks. The positive impact is less evident in countries with a high global cybersecurity index and well-capitalized banks, but more pronounced in countries with strong adherence to the rule of law. The study, therefore, underscores the vital role of cybercrime laws in fostering a secure and reliable banking environment and contributes to the understanding of the mechanisms through which these laws affect bank stability on both individual and systemic levels.
Presenter:  My Nguyen, RMIT
Discussant:  Yizheng Li, University of Auckland
  
Paper BANKING EFFICIENCY, ECONOMIC CRISES, AND FIRM INVESTMENT: INTERNATIONAL EVIDENCE FROM THE COVID-19 PANDEMIC
Authors Yanhui (Sean) Wu, Queensland University of Technology
Abstract Using a Bayesian treatment of the principal component analysis, we construct time-varying country-level indexes that capture efficiency in banking institutions. The indexes are used to evaluate the impact of banking efficiency on firm investment during economic crises. During the Covid-19 crisis, domestic banks extended significantly more credit to the private non-financial sector in countries with efficient banks. The sensitivity of investment to an economic crisis is considerably lower for firms in economies with efficient banking institutions. The banking effect is more pronounced for firms that are more dependent on external financing and firms holding assets that can be pledged as collateral. 
Presenter:  Yanhui (Sean) Wu, Queensland University of Technology
Discussant:  My Nguyen, RMIT
  
Paper HOW DO BANKS CATER IN THE AFTERMATH OF THE FINTECH WAVE
Authors Yizheng Li, University of Auckland; Xing Han, University of Auckland; Helen Lu, University of Auckland
Abstract Since 2013, Fintech-enabled money market funds (MMFs) in China have increasingly challenged traditional banks in the deposit market. In this paper, we investigate MMFs' clientele effects on banks' financing decisions. We find that banks cater to MMFs by offering Negotiable Certificates of Deposits (NCDs) with attractive yields. Such catering activities are concentrated on Tier 2 banks (AAA and AA+ rated banks excluding 18 nationwide banks directly regulated by CBIRC). However, the 2017 provision implemented by CSRC restricted single-fund families from investing in any single bank's financial products to 10% of the bank's equity. Using this provision as a quasi-experiment, we find a significant reduction in catering activities after the provision. The provision has more pronounced effects among banks with larger reductions in fund families' bargaining power.
Presenter:  Yizheng Li, University of Auckland
Discussant:  Yanhui (Sean) Wu, Queensland University of Technology
   

WG306 (FOYER)

MORNING TEA


10H30 TO 11H00
   

STREAM B

 
11H00 TO 12H30
   
SESSION B1CORPORATE GOVERNANCE11H00 TO 12H30
CHAIRPERSONWEISHUO XU, UNIVERSITY OF SYDNEYWG701
  
Paper COMPREHENDING CORPORATE DISCLOSURES: WHAT LIES BENEATH?
Authors Sugato Chakravarty, Purdue University; Prasad Hegde, Auckland University of Technology
Abstract This paper explores how the readability of corporate financial disclosures, specifically annual 10-K filings, can impact investor reaction. Prior research has shown that language attributes, such as the use of concrete language, influence message delivery and enhance confidence in the company's communications. In this study, we use a novel proxy for document readability that is free of measurement errors that normally plague other approaches to the quantification of specific language attributes in written corporate communication: the XBRL characters. We then examine how firm-specific factors, such as size, investments, profitability, and institutional holdings, might moderate the relationship between readability and investor reaction. The findings suggest that 10-K readability is positively related to investor reaction, and for small firms, firms that invest lower, firms with lower institutional ownership and firms with lower operating profit exhibit a greater positive response. The paper contributes to the literature by highlighting the impact of document readability on market efficiency and informing firms on how to improve their disclosure practices. Also, we use a simple and freely available document readability measure and analyse carefully crafted written statements instead of oral speech, which can introduce inaccuracies and misclassifications. Overall, this study sheds light on the importance of document readability in corporate communication and its implications for researchers, investors, firms, and regulators.
Presenter:  Prasad Hegde, Auckland University of Technology
Discussant:  Weishuo Xu, University of Sydney
  
PaperOPENING THE DOOR: HOW CAPITAL CONTROL REFORMS ARE BOOSTING INVESTOR PROTECTION
AuthorsDequan Jiang, Shanghai University of Finance and Economics; Wencong Li, Shihezi University; Gary Gang Tian, Macquarie University; Xingqiang Yin, Xi'an Jiaotong University
AbstractLeveraging the phased implementation of China's capital control reforms, where select firms gradually become investable to the international market, our difference-in-differences regression analyses reveal that these pilot firms significantly curtail the extent of related party transactions and augment their corporate market value following liberalisation. We identify several potential mechanisms through which market liberalisation may inhibit expropriation. Notably, pilot firms demonstrate considerable improvement in corporate governance and attract increased engagement from auditors, heightened interest from institutional investors, and expanded analyst coverage. Cross-sectional examinations indicate that the mitigating effect of stock market liberalisation is especially pronounced among firms with severe agency problems and a higher proportion of Hong Kong investors' shareholding. However, expropriation by controlling shareholders reemerges during periods of stock market de-globalization. Collectively, our findings underscore the crucial role of financial globalisation in bolstering investor protection.
Presenter:Gary Tian, Macquarie University
Discussant:Prasad Hegde, Auckland University of Technology
  
Paper THE NEW GOVERNANCE ROLE OF CORPORATE BOARD: SUSTAINABILITY COMMITTEES
Authors Jianfeng Shen, University of New South Wales; Weishuo Xu, University of Sydney; Jing Yu, University of Sydney
Abstract The growing importance of managing stakeholder relations in modern corporations requires a new governance role of corporate boards to integrate environmental and social (ES) issues into corporate decision-making. With the detailed information on board sustainability committee manually collected from firm proxy statements for US S&P1500 companies, this paper performs a systematic analysis on the determinants and consequences of establishing board sustainability committees. Our initial analysis reveals that firms with strong ES reputation and exposed to high ES regulatory risk are more likely to form sustainability committees on boards. Firms also tend to introduce such committees when expanding businesses. Further analysis distinguishes sustainability committees based on its independence from other committees: Tier 1 committee refers to a specialised board committee designated to only ES issues while Tier 2 committee indicates an existing board committee with expanded ES responsibilities. In contrast to the weak outcomes of Tier 2 committees, our results suggest that firms experience increased third-party ES ratings but not reduced ES regulatory risk following the formation of Tier 1 committees, indicating that firms set up such committees to cater for renewed shareholder preference for ES-conscious investments. In keeping with this interpretation, we further document that stocks of firms with Tier 1 committees are associated with lower expected stock returns. This evidence is consistent with the notion that investors are willing to accept a lower rate of return on firms committed to building their ES reputation.
Presenter:  Weishuo Xu, University of Sydney
Discussant:  Gary Tian, Macquarie University
   
SESSION B2CORPORATE BONDS11H00 TO 12H30
CHAIRPERSONTING ZHANG, UNIVERSITY OF DAYTONWG702
  
Paper DEBT REFINANCING AND CORPORATE BOND RETURNS
Authors Yifei Li, University of Nevada; Anni Wang, University of Nevada; Qun Wu, University of Nevada; Ting Zhang, University of Dayton
Abstract This paper presents empirical evidence that the maturity structure of financial leverage affects future corporate bond returns, specifically through the rollover risk channel. We demonstrate a robust positive correlation between debt refinancing, as measured by refinancing intensity, and corporate bond returns. An increase of one standard deviation in a firm's short-term leverage is associated with a 32 basis point increase in excess bond returns per annum. Additionally, we demonstrate that the impact of debt refinancing is more significant when a firm is exposed to higher levels of credit risk and liquidity risk. This effect is particularly pronounced during financial crises, periods of elevated interest rates, and tight market conditions. Our research has important implications for corporate finance: firms should take into account the risk of rolling over their short-term debt when determining the maturity structure of their debt.
Presenter:  Ting Zhang, University of Dayton
Discussant:  Peipei Li, Southern University of Science and Technology
  
Paper INVESTORS' INTEREST RATE RISK EXPOSURE: EVIDENCE FROM CORPORATE BOND MUTUAL FUND FLOWS
Authors Peipei Li, Southern University of Science and Technology; Licheng Zhang, Southern University of Science and Technology
Abstract This paper employs data on corporate bond mutual fund flows to study investors' exposure to interest rate risk. We document that following a decrease in the interest rate, investment-grade bond funds receive large inflows, whereas this is not the case for high-yield bond funds. We show that this is because investment-grade bonds have a longer duration than high-yield bonds and are primarily exposed to interest rate risk, while high-yield bonds are mostly exposed to credit risk. Moreover, as lower rates lead to lower yields, investors buy longer-maturity bonds in order to preserve yield targets. In contrast, when the interest rate becomes higher, investors move away from long-term bond funds to short-term bond funds. A higher interest rate implies higher interest rate risk, leading to more capital losses for long-term bonds. 
Presenter:  Peipei Li, Southern University of Science and Technology
Discussant:  Mengjuan Liu, City University of Hong Kong
  
Paper MEDIA AND CORPORATE BOND MARKET MOMENTUM
Authors Mengjuan Liu, City University of Hong Kong; Junbo Wang, City University of Hong Kong; Chunchi Wu, State University of New York
Abstract This paper investigates whether media makes corporate bond momentum. Using a comprehensive data set of media coverage from RavenPack News Analytics between 2000 to 2020, we find that bonds with high media coverage exhibit stronger momentum than those with low media coverage. This difference cannot be explained by conventional risk factors. Media tone enhances news coverage effect and informed trading of bonds with high media coverage leads to stronger momentum in the short run. Momentum reverses in the long run, and bonds with higher media coverage have a more pronounced reversal. The evidence is consistent with theory of investor overreaction.
Presenter:  Mengjuan Liu, City University of Hong Kong
Discussant:  Ting Zhang, University of Dayton
   
SESSION B3FINANCIAL ANALYSTS11H00 TO 12H30
CHAIRPERSONJIAN SONG, CURTIN UNIVERSITYWG703
  
Paper CROSS-FIRM INFORMATION IN ANALYST REPORTS
Authors Kotaro Miwa, Kyushu University
Abstract Analysts often mention related (economically linked) stocks whose performance could be influenced by the firm highlighted in their report. In this study, I investigate the informational value of such cross-firm information in analyst reports. Specifically, I analyse whether and how such information is gradually incorporated into their estimates for the related firms and causes return predictability. I find that revisions in the target prices of the highlighted stocks induce subsequent revisions in their target prices for the related stocks. Furthermore, these revisions for the highlighted stock are positively associated with the subsequent stock returns for related firms. Finally, the positive association with stock returns is attributed to the lead-lag relationship in the target prices. These results support the informational value of cross-firm information and the gradual incorporation of the information into analysts' and investors' expectations for the related stocks. 
Presenter:  Kotaro Miwa, Kyushu University
Discussant:  Wanyi Yang, Auckland University of Technology
  
Paper DISPERSION IN ANALYSTS’ RECOMMENDATIONS AND INTERNATIONAL STOCK MARKETS
Authors Wanyi Yang, Auckland University of Technology
Abstract This paper shows that country-level disagreement measured from single stock recommendation dispersion is negatively related to future realized market returns. A trading strategy based on last month’s aggregate analyst dispersion yields an abnormal return of around 0.7 percent per month. This paper also provides evidence that growth stocks show higher level of overpricing compared to value stocks. The aggregate difference of opinion remains significantly negatively related to market returns after allowing time-varying risk exposure. However, countries with more binding short sale constraints do not show lower expected market returns.
Presenter:  Wanyi Yang, Auckland University of Technology
Discussant:  Jian Song, Curtin University
  
Paper HOW DOES FOREIGN ECONOMIC POLICY UNCERTAINTY AFFECT DOMESTIC ANALYST EARNINGS FORECASTS?
Authors Jian Song, Curtin University; Xiaozhou Zhou, University of Quebec at Montreal
Abstract In this study, we examine the impact of foreign economic policy uncertainty (EPU) on the performance of domestic analyst earnings forecasts. We analyse separately how U.S. EPU influences the accuracy of analyst earnings forecasts in other markets, as well as the reverse relationship. Our results show that the U.S. EPU (global EPU) negatively (positively) affects the accuracy of analyst earnings forecasts in other economies (the U.S.). The primary channel for this negative (positive) impact is the economic dependence of a given economy on the U.S. (capital flow to the U.S.). Our results remain robust even after controlling for a comprehensive set of variables. 
Presenter:  Jian Song, Curtin University
Discussant:  Kotaro Miwa, Kyushu University
   
SESSION B4DERIVATIVES MARKETS11H00 TO 12H30
CHAIRPERSONSTEPHEN BAHADAR, AUCKLAND UNIVERSITY OF TECHNOLOGYWG801
  
Paper CREDIT SECURITIZATION AS SUSTAINABLE FINANCE CHANNEL? - EVIDENCE FROM SYNTHETIC CAPITAL RELIEF TRADES
Authors Philipp Klein, University of Muenster; Alexander Nitschke, University of Muenster; Andreas Pfingsten, University of Muenster 
Abstract Securitisation can serve different purposes. We employ a novel data set of synthetic transactions aiming at releasing capital, so-called synthetic capital relief trades (SCRTs). Our study examines bank characteristics driving SCRT issuances as well as the impact of these transactions for banks and the loan supply in the economy. Ex ante, we find higher total capital ratios not to incentivise banks' SCRT issuances, while non-performing loan ratios have a negative effect. Ex-post, we observe that SCRT issuances lead to a significant increase in the supply of syndicated green loans while the overall supply of syndicated loans is not expanded. These green loans are riskier than the existing loan portfolio, finally raising banks' non-performing loans ratios. The total capital ratios are not affected by SCRTs, evidencing that capital arbitrage, as known from before the Global Financial Crisis seems no longer to be possible. Our results have important policy implications. Banks use SCRTs to eventually increase green lending, which can be seen as one potential remedy to overcome the green finance gap, while adverse effects of SCRTs seem to be prevented.
Presenter:  Alexander Nitschke, University of Muenster
Discussant:  Terry Zhang, Australian National University
  
Paper STOCK OPTIONS PRICING VIA MACHINE LEARNING METHODS COMBINED WITH FIRM CHARACTERISTICS
Authors Chulwoo Han, Sungkyunkwan University
Abstract This paper proposes machine learning-based option pricing models that incorporate firm characteristics. We employ two semi-parametric models, one that uses machine learning to predict the implied volatility and the other to correct the pricing error of the Black-Scholes model and use 114 firm characteristics as well as option-related variables as the input features. Tested on the stock options in the US market, we find that both models outperform a parametric model even without firm characteristics, and firm characteristics significantly enhance the performance of these models. Idiosyncratic volatility, share price, market equity, illiquidity, and firm age are found to be the most important features.
Presenter:  Chulwoo Han, Sungkyunkwan University
Discussant: Alexander Nitschke, University of Muenster
  
Paper THE GLOBAL IMPLIED VOLATILITY SURFACE, CONVEXITY, AND COMMON PREDICTABILITY OF INTERNATIONAL EQUITY PREMIA
Authors Terry Zhang, Australian National University
Abstract We construct a global implied volatility surface by combining information from the index options of twenty countries and regions. The convexity of the global surface positively predicts equity premia around the world, in- and out-of-sample, at horizons from one to twelve months. Semi-annually, R2 are 14.4% for S&P500 and 8.8% for twenty indexes on average, increasing to 20.8% and 11.4% out-of-sample. For U.S. forecasts, global convexity subsumes other option-based predictors, including global level and slope, U.S. convexity, VIX, SVIX, variance risk premium, and left-tail volatility. The predictability of global convexity comes from its left-tail contributions related to crash fears (left-tail volatility), and right-tail contributions related to speculative demand (short-sales and funding conditions). Our findings highlight the importance of global options markets for risk sharing and information aggregation.
Presenter:  Terry Zhang, Australian National University
Discussant:  Juebin Zeng, University of Auckland
   

WG306 (FOYER)

LUNCH


12H30 TO 13H15
   

WG308

PROFESSOR RANDALL MORCK, UNIVERSITY OF ALBERTA


13H15 TO 14H30

KEYNOTE 1

Corporate Governance for the Social GoodWG308
Abstract
A useful debate is now occurring over whether firms should be run to maximize profits or social welfare. The debate is not new, but has arisen several times in business history, albeit with Left and Right sometimes switching sides. Some of the deepest thinkers of prior generations thought hard about the social purpose of the corporation and came to well-reasoned positions, though not always to agreement. Our current debate can seem innocent of all this, and might avoid intellectual detours by building on prior generations' thoughts. In particular, today's advocates of each side might gain perspective by seeing how their viewpoints were once advanced by their ideological opposites.
   

WG306 (FOYER)

AFTERNOON TEA


14H30 TO 14H45
   

STREAM C

  14H45 TO 16H45
   
SESSION C1CEOs14H45 TO 16H15
CHAIRPERSONOLGA DODD, AUCKLAND UNIVERSITY OF TECHNOLOGYWG701
  
Paper HIGHER RISK REQUIRES MORE REWARDS? FIRM-LEVEL CLIMATE RISK AND TOP EXECUTIVES' COMPENSATIONS
Authors Nhan Huynh, Macquarie University; Lee Eun Kyung, Chongqing University; Hoa Phan, RMIT University
Abstract This study examines the impacts of firm-level climate risk on top management's extrinsic incentives. Utilising a large sample of firms across 35 countries from 2001 to 2021, our results support the risk-driven-reward hypothesis that climate risk positively (negatively) influences cash-based (equity-based) compensation. Further, we confirm three channels for impacts of climate risk, including motivations for eco-innovation, managerial bargaining power, and future corporate performance. We find supportive evidence that the primary effects of climate risk are more pronounced for firms with financial constraints, higher international exposure, and more socially responsible. The impacts are also confirmed for firms of more polluting industries and countries with high corruption and ineffective minority shareholder protection. Our results hold after we address the endogeneity problem by using a battery of robustness tests and sensitivity analyses.
Presenter:  Thi Kieu Hoa Phan, RMIT University
Discussant:  Olga Dodd, Auckland University of Technology
  
Paper PEER INFLUENCE AND CORPORATE RISK-TAKING
Authors Elaine Yongshi Jie, City University of Hong Kong; Yue Ma, City University of Hong Kong; Yinggang Zhou, Xiamen University
Abstract This paper documents that corporate risk-taking is a response to peer influence. Firms take more risks if they encounter greater peer firms' risk-taking. We further identify four plausible channels through which peer influence on corporate risk-taking operates. First, we find that firms with low-talented CEOs or low performance are more eager to learn from their peers' risk-taking decisions for survival purposes. Second, firms under strong corporate governance are more likely to mimic their peers' risk-taking behaviours to minimise the discrepancy of relative performance resulting from increasing job security concerns and reputational pressure. Third, we find that the firms in the competitive industry are more prone to follow their peers to take more risks to ensure that their company would not be left behind. The fourth channel provides evidence on strategic motivation that predatory behaviour drives the financially constrained firms to follow the risk-taking decisions of their peer firms to mitigate the potential loss of market share.
Presenter:  Yongshi (Elaine) Jie, City University of Hong Kong
Discussant:  Shunji Mei, University of Auckland
  
Paper CEO INITIAL CONTRACT HORIZON AND THE DESIGN OF PRIVATE DEBT CONTRACTS
Authors Hasibul Chowdhury, The University of Queensland; Wenbin Hu, The University of Queensland; Shunji Mei, The University of Auckland; Kelvin Jui Keng Tan, The University of Queensland
Abstract Exploiting hand-collected CEO contract data from SEC filings (1994-2018), we find that newly appointed CEOs with longer initial contract periods are associated with significantly higher bank loan costs. We demonstrate that this positive relationship is causal by utilising a quasi-natural experiment that exogenously reduces CEO contract length. We further uncover that this correlation is more pronounced during economic downturns, within firms with less transparent information environments, or for younger CEOs. Our findings also indicate that CEOs with lengthier contract horizons are met with stricter nonprice loan terms. Additionally, we reveal that when CEOs have lengthier initial contract horizons, fewer lenders are willing to form the lending group in a loan facility, which supports the monitoring incentive for syndication. Finally, our study culminates with the observation that the firm's weakened debt repayment capacity and financial condition are the primary drivers behind the positive relation between a CEO's initial contract horizon and loan contracting. We conclude that bank lenders perceive heightened risks with CEOs serving longer initial contracts, which markedly amplifies a firm's earnings volatility.
Presenter:  Shunji Mei, University of Auckland
Discussant:  Thi Kieu Hoa Phan, RMIT University
  
Paper CEO CULTURAL MASCULINITY AND EARNINGS MANAGEMENT
Authors Olga Dodd, Auckland University of Technology, Auckland; Bart Frijns, Open Universiteit; Shushu Liao, Kuhne Logistics University; Xiu-Ye Zhang, The Australian National University
Abstract We evaluate how CEOs' cultural masculinity, which is the set of cultural norms and values associated with achievement and material wealth (Hofstede, 1980, 2001), impacts firms' earnings management practices. Arguably, masculine CEOs are more likely to engage in earnings management to meet their financial targets because they place a greater emphasis on short-term financial success and achievement than on ethical or long-term considerations. For a sample of S&P1,500 firms, we document a positive relationship between CEO cultural masculinity and the firm's earnings management. The results of the analysis around CEO changes suggest a causal effect of CEO masculinity on earnings management practices. Masculine CEOs manage earnings more before initiating acquisitions and following a poor stock performance of their firms. Governance and monitoring mechanisms are effective in preventing earnings management by masculine CEOs.
Presenter:  Olga Dodd, Auckland University of Technology
Discussant:  Yongshi (Elaine) Jie, City University of Hong Kong
   
SESSION C2GREEN FINANCE I14H45 TO 16H15
CHAIRPERSONROB BAUER, MAASTRICHT UNIVERSITYWG702
  
Paper RATINGS AND NEGATIVE ENVIRONMENTAL PERFORMANCE
Authors Ben R. Marshall, Massey University; Justin Hung Nguyen, Massey University; Nhut H. Nguyen, Auckland University of Technology; Buhui Qiu, University of Sydney; Nuttawat Visaltanachoti, Massey University 
Abstract We consider the extent to which the environmental (E) ratings of eight different ESG rating companies predict future negative environmental performance. Ratings companies are focused on providing a broad representation of firm environmental performance. They consider a range of dimensions and do not claim to generate a proxy for any environmental outcome. Nonetheless, we suggest that stakeholders would expect firms with strong E ratings to be less likely to be represented in EPA enforcement actions and environmental lawsuits and less likely to engage in toxic chemical releases. Our results indicate that none of the ratings consistently forecast EPA enforcement actions, environmental lawsuits, or toxic releases. However, large negative changes in Rep Risk, KLD, Sustainalytics, and S&P Trucost contain important information on future firm environmental performance. The E ratings of polluting firms are no more informative than the E ratings of non-polluting firms. Moreover, E ratings are no more accurate for firms with better information disclosures. Our results provide a useful addition to the current discussion around ESG measurement. Article 2 of the Paris Agreement has the objective of making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development. However, investor surveys find that data quality is the biggest challenge to adopting sustainable investing Our paper should assist investors by providing them with evidence on the effectiveness of various popular environmental rating measures at capturing negative environmental performance. 
Presenter:  Ben Marshall, Massey University
Discussant:  Hongyu Shan, China Europe International Business School (CEIBS)
  
Paper THE EFFECT OF DIVESTMENT FROM ESG EXCHANGE TRADED FUNDS
Authors Sebastian A. Gehricke, Climate and Energy Finance Group & University of Otago; Pakorn Aschakulporn, University of Otago; Tahir Suleman, University of Otago; Ben Wilkinson, University of Otago
Abstract This paper aims to empirically investigate whether divestment by predominantly passive, Environmental, Social and Governance (ESG) Exchange Traded Funds (ETFs) can affect firm-level share prices, cost of capital and subsequent ESG performance, for the period from 2013 to 2022. In total we identified and investigated 45,397 unique divestment events. Employing panel regression models, we show that divestment by these funds has a significant and prolonged negative effect on the returns of individual companies. Coordination in divestment, measured by a higher number of ESG ETFs divesting a firm in the same quarter, results in significant prolonged negative effects to stock returns, increases in the cost of capital. The increases in the cost of capital, seem to take longer to materialize, especially for the cost of debt. These results provide further evidence that divestment, particularly coordinated divestment, is an important tool for the sustainability transition, even though its effects are indirect.
Presenter:  Sebastian Gehricke, Otago University
Discussant:  Jun Myung Song, Singapore Management University
  
PaperELICITING BELIEFS ON RESPONSIBLE INVESTING
AuthorsRob Bauer, Maastricht University
AbstractSocially Responsible Investment (SRI) has gained increasing attention and attracted trillions of dollars in asset under management in recent years. The mainstream explanation for investor’s preference for sustainable assets is social preference, or the pure selfless contribution to the general welfare, and it has been documented that investors are willing to even sacrifice some financial gains to pursue higher sustainability. Although expectations towards risk and return in such investments are crucial, they have not been formally investigated in this literature. To bridge this gap, we created a novel belief elicitation method, which is robust to respondents’ differential risk or ambiguity attitudes, as well as to nonlinear probability weighting. And the belief elicitation task is concealed in a series of binary lottery choices. We validated this method with student participants in the lab and conducted a field experiment with clients of the largest index fund in The Netherlands. We compare our novel incentivised belief elicitation method, another incentivised method (choice matching), with the unincentivized Likert scale that is typically used in this literature. We find that the two incentivised methods generate consistent responses that are in opposite direction than the unincentivized elicitation. In particular, we find that participants systematically expect that more sustainable funds will generate higher return with lower risk. Moreover, this belief is also significantly and positively correlated with their investment in a sustainable product relative to a conventional product in an incentivised asset allocation task. These results suggest that investors typically associate better financial performance with more sustainable assets, and we should assess these expectations with caution.
Presenter:Rob Bauer, Maastricht University
Discussant:Ayesha Scott, Auckland University of Technology
  
Paper HOW DOES ESG SHAPE CONSUMPTION?
Authors Joel F. Houston, University of Florida; Chen Lin, University of Hong Kong; Hongyu Shan, China Europe International Business School and Fordham University; Mo Shen, Auburn University
Abstract Exploiting millions of retail purchases by US households, we examine how negative ESG shocks ripple through the product market and shape consumption. We show that the sales of affected products drop by an average of 5 - 10% compared to unaffected products consumed by the same households during the same period. The observed contraction is mainly demand-driven rather than a reflection of the manufacturer's decision to phase out production. This effect is strongest among millennial households, for more severe ESG shocks, and within the consumption of durable products. Furthermore, we find that salience about climate issues heterogeneously affects the household's response. Lastly, we map the shocks to a set of well-defined ESG issues and identify significant heterogeneity among consumers' reactions to these issues. In summary, we present the first comprehensive product-level evidence on the financial materiality of ESG via the household consumption channel.
Presenter:  Hongyu Shan, China Europe International Business School (CEIBS)
Discussant:  Ben Marshall, Massey University
   
SESSION C3HOUSEHOLD FINANCE14H45 TO 16H15
CHAIRPERSONJOSHUA THORNTON, BAYLOR UNIVERSITYWG703
  
Paper LESS ATTENTION IS BETTER: THE EFFECT OF PORTFOLIO DISCLOSURE ON RETAIL INVESTORS' TRADING
Authors Yiqing Lu, NYU Shanghai; Xin Zhou, NYU Shanghai
Abstract This paper studies the effect of attention on trading behaviour by utilising the browsing activities of retail investors on a mutual fund trading APP. Exploiting a quasi-experiment of a sudden change in portfolio disclosure frequency for a certain type of mutual funds, we show that after the adoption of the policy, investors browse affected funds (treated) more frequently than unaffected funds (control). The effect holds for both holding and non-holding funds and during both trading and non-trading hours. Investors, nevertheless, shorten their attention span on treated relative to control funds when not holding these assets or when browsing them during non-trading hours. We further show that after the new policy, investors hold less treated funds and are subject to a greater disposition effect. Investors' trading performance on treated funds is worsened compared to control funds following the new policy. The heterogeneity in the effect of the disclosure policy on trading parallels that on attention across investors with varying financial literacy and attention capacity. Finally, an instrumented difference-in-differences estimation supports a causal interpretation of the effect of attention on trading. Overall, our results suggest the role of attention in shaping beliefs and causing myopic loss aversion.
Presenter:  Yiqing Lu, NYU Shanghai
Discussant:  Aaron Gilbert, Auckland University of Technology
  
Paper FRIENDS WITH BENEFITS: SOCIAL CAPITAL AND HOUSEHOLD FINANCIAL BEHAVIOUR
Authors Brad Cannon, Binghamton University; David Hirshleifer, University of Southern California; Joshua Thornton, Baylor University
Abstract Using friendship data from Facebook, we study the effects of three aspects of social capital on individual investment and saving behaviour. We find that social capital is strongly associated with stock market participation and propensity to save. Furthermore, the most important measure of social capital in explaining these outcomes is Economic Connectedness, measured as the fraction of one's social network with high socioeconomic status. One standard-deviation greater Economic Connectedness is associated with 2.9% greater stock market participation and 5.0% greater propensity to save. Compared to Network Clustering or Volunteering Rate, Economic Connectedness explains more than 6 times the variation in stock market participation and more than 4 times the variation in propensity to save.
Presenter:  Joshua Thornton, Baylor University
Discussant:  Jordan Neyland, George Mason University
  
Paper CAN FINANCIAL EDUCATION IMPROVE DEBT USE FOR YOUNG ADULTS?
Authors Aaron Gilbert , Auckland University of Technology; Kelly Nicholson, Auckland University of Technology; Ayesha Scott, Auckland University of Technology
Abstract For financial education to enable financial well-being, we need to observe meaningful (positive) changes in financial behaviour. However, the extant literature suggests financial education is less effective for some groups and for changing some behaviours, like debt handling. Poor debt handling is a significant risk to financial well-being, compromising a person’s ability to meet current and future financial obligations. It is therefore crucial to investigate financial education’s efficacy for debt use.  Using a sample of 705 young adults aged 18-34 years, we investigate the impact of financial education experiences on their buy now pay later (BNPL) use. Our results paint a concerning picture of financial education’s efficacy for young adults’ debt handling and dealing with new products like BNPL. Given young adults are particularly vulnerable to (literally) paying for poor financial decision-making, finding ways to improve financial education for debt in general, and new products specifically, requires urgent attention.
Presenter:  Aaron Gilbert, Auckland University of Technology
Discussant:  Yiqing Lu, NYU Shanghai
  
Paper DO INVESTORS VALUE PRIVACY? REVEALED PREFERENCES FROM LOTTERY SALES
Authors Jordan B. Neyland, George Mason University
Abstract Debate surrounds recent statutes and several proposed bills that offer anonymity to lottery winners. Proponents emphasise the thieving, scamming, and violence that plagues jackpot winners, but opponents note that transparency reduces lottery fraud and legitimises the fairness of games. I obtain state lottery sales with FOIA requests and hand-collect information on anonymity statutes through analysis of statutes and case law. The combination of the staggered adoption of anonymity laws and the lottery's randomisation of the state of the world through drawing balls provides causal evidence of the effect of anonymity on sales. Results reveal a significant decline in ticket sales following the passage of anonymity statutes, suggesting that purchasers (at the margin) value transparency and fairness over privacy and security. This result reveals the participants' preference in this market and speaks to larger questions on the disclosure of investor identity. 
Presenter:  Jordan Neyland, George Mason University
Discussant:  Joshua Thornton, Baylor University
   

SKY CITY

CONFERENCE DINNER @ ORBIT 360 RESTAURANT


17H15 TO 20H30
   
NZFM 2023

DAY TWO

8TH  DECEMBER 2023

   

WG306 (FOYER)

REGISTRATION & WELCOME COFFEE/TEA


08H30 TO 08H50
   
WG308

WOMEN IN FINANCE: LEADING GLOBAL EXPERTS SHARE THEIR INSIGHTS


08H50 TO 10:45
 
Join financial experts from New Zealand and around the world for an insightful conversation on confidence, capability, and collaboration for investing.
 
 

PROUDLY SPONSORED BY:

 
   

KEYNOTE

PROFESSOR RENEE ADAMS, OXFORD UNIVERSITY

08H50 TO 09H45
  Prof. Renee Adams (Oxford University) presents virtually from Germany to share her thoughts on gender diversity in finance, business & academia. Professor Adams is a world-leading interdisciplinary scholar, with her work published across accounting, finance, economics and management journals. In 2019, she was awarded the Female Career Award from HEC Lausanne for her outstanding academic career and co-founded AFFECT, the American Finance Association’s ‘Academic Female Finance Committee,’ in 2015. Her work on gender diversity, in particular, has received global media coverage and has been featured in the Financial Times, the Economist, the Daily Telegraph, The Australian, The New Zealand Herald, and many others. WG308 
   

WG306 (FOYER)

MORNING TEA


09H45 TO 10H00
   

WG308

PANEL DISCUSSION
A panel discussion with leading finance experts to reflect on Prof. Adams keynote, and how we can narrow the gap for women in finance.


10H00 TO 10H45
CHAIRED BYFrances Cook, Business Desk 
  
PANELISTS Angel Zhong, RIMT University
  Christina Atanasova, Simon Fraser University
  Lina El Jahel, University of Auckland
   
 

STREAMS D - F

 
   

STREAM D

 
11H00 TO 12H30
   
SESSION D1VOLATILITY11H00 TO 12H30
CHAIRPERSONGUANGLIAN HU, UNIVERSITY OF SYDNEYWG701
  
Paper CO-MOVEMENT RISK PREMIUMS AND RETURN PREDICTABILITY
Authors Hamish Malloch, The University of Sydney
Abstract This paper develops a new measure of asset co-movement and studies the associated price of risk. Based on characteristic functions, our new measure captures all forms of co-movement, can isolate higher-order co-movement, is model free and can be computed under the risk-neutral and physical measures allowing direct measurement of risk premia. We find a positive and statistically significant co-movement risk premium at all examined horizons whereas higherorder co-movement exhibits a risk premium that changes sign as the return horizon increases. We examine the determinants of co-movement risk premia and further show that these risk premiums can help to predict future returns on the S&P 100 index, complementing other classic predictors such as the P/E ratio, default spread and consumption-wealth ratio (CAY), with strongest predictability occurring at the one-year horizon.
Presenter:  Hamish Malloch, The University of Sydney
Discussant:  Ha Truong, RMIT University
  
Paper DO DIFFERENT MEASURES OF STOCK MARKET VOLATILITY RISKS HAVE THE SAME PRICE?
Authors Guanglian Hu, University of Sydney
Abstract Common measures of aggregate stock market volatility are priced differently in the cross-section of stock returns. Stocks with high sensitivities to changes in realised and expected volatilities have significantly low average returns, while option-implied volatility is not priced. The differential pricing of market volatility risks is hard to reconcile with existing theories but potentially consistent with partial segmentation between index options and equity markets. I argue the comovement between option implied and actual stock volatilities contain valuable information about time-varying segmentation between equity and options markets. The two markets appear to have become more integrated in recent years. 
Presenter:  Guanglian Hu, University of Sydney
Discussant:  Jose Da Fonseca, Auckland University of Technology
  
Paper COMMON OWNERSHIP AND STOCK RETURN COMOVEMENT
Authors Ha Truong, RMIT University
Abstract Comovement in stock returns is an important determinant of market risk and stability. This study shows that increased common ownership between same-industry firms leads to greater comovement in their stock returns. The results are robust after controlling for time trends and various empirical specifications. The effect of common ownership on pairwise comovement is more pronounced between firms with less similarity in their products. These findings are consistent with previous studies, which suggest that comovement at the market level is due to blurred firm boundaries. Common ownership serves as a mechanism for joint control across firms, allowing coordination in firm activities, efficient resource allocation, and cross-monitoring. Thus, the market considers firms with common ownership relevant and correlated in fundamentals.
Presenter:  Ha Truong, RMIT University
Discussant:  Hamish Malloch, The University of Sydney
   
SESSION D2GREEN FINANCE II: REGULATION11H00 TO 12H30
CHAIRPERSONJUN MYUNG SONG, SINGAPORE MANAGEMENT UNIVERSITYWG702
  
Paper OPPORTUNISTIC NPE LITIGATION AND GREEN CORPORATE INNOVATION
Authors Piers Herring, The University of Queensland; Wenquan Li, The University of Queensland; Suman Neupane-Joshi, The University of Queensland
Abstract This study analyses the effects of opportunistic non-practising entity (NPE) litigation activity on green corporate innovation (GCI) strategies. Our findings highlight the detrimental effects of opportunistic litigation behaviour on a firms' innovation-related decision-making. We find that immediately after being involved in a litigation event, targeted firms prioritise the reduction of GCIs, specifically, climate change mitigating (CCM) technologies. This suggests that firms sacrifice their commitments to long-term sustainability efforts to produce low-risk, less innovative technologies. Additionally, we demonstrate that firms produce green technologies that are of a lower quality and value after being targeted by an opportunistic NPE. Cross-sectionally, we find that low-asset re-deployable firms substantially reduce all innovation following litigation. We identify causality through the America Invents Act (AIA), which leads to an exogenous increase in opportunistic litigation exposure in the state of Texas. Consistent with our baseline results, we find firms headquartered in Texas to escalate their reduction in green and non-green innovation following the introduction of the Act. Finally, we demonstrate that the introduction of various state-level anti-troll laws has had an insignificant effect on reducing opportunistic NPE litigation risk. We show that firms facing NPE litigations reduce their future innovation despite the introduction of these laws.
Presenter:  Piers Herring, The University of Queensland
Discussant:  Jiri Svec, The University of Sydney
  
Paper THE CAUSES AND CONSEQUENCES OF SPLIT CREDIT RATINGS: EVIDENCE FROM THE DODD-FRANK ACT
Authors Andrew Ainsworth, University of Wollongong; He Huang, The University of Sydney; Jiri Svec, The University of Sydney
Abstract  Split credit ratings increase the cost of capital for bond issuers. The introduction of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 reduced the importance of credit ratings and increased the penalties on credit rating agencies for inaccurate ratings. We show that Dodd-Frank increased the proportion of split-rated bonds. Investment grade and boundary bonds not preceded by earnings announcements and bonds of firms with less liquid equities experience the largest increase of 15 to 20 percentage points. These results are consistent with credit rating agencies engaging in idiosyncratic information discovery and relying on public information to produce defendable quantitative information in the threat of litigation. The split rating yield premium reduces after Dodd-Frank from 23 basis points to 12 basis points, with pricing no longer based on the pessimistic credit rating.
Presenter:  Jiri Svec, The University of Sydney
Discussant:  Piers Herring, The University of Queensland
  
Paper AIR POLLUTION, REGULATIONS ON EMISSION AND FIRMS' SOCIAL RESPONSIBILITY
Authors Jun Myung Song, Singapore Management University
Abstract This paper examines whether firms update their strategy in emissions when air pollution is severe. Considering high PM 2.5 as severe air pollution across 65 countries, I show that firms from countries with severe air pollution have low emission scores, suggesting that they put less effort into reducing emissions. This is because if they improve the emission strategy, firm performance deteriorates. However, such a relationship disappears when the government's environmental stringency is strong. This paper concludes with an analysis of the factors which can mediate the negative impact of air pollution on firms' emission strategies.
Presenter:  Jun Myung Song, Singapore Management University
Discussant:  Sebastian Gehricke, Otago University
   
SESSION D3FINTECH11H00 TO 12H30
CHAIRPERSONXING HAN, UNIVERSITY OF AUCKLANDWG703
  
Paper THE HIDDEN IMPACT OF PRIVATE MONEY CREATION ON STOCK RETURNS: EVIDENCE FROM THE FINTECH REVOLUTION OF CASH INVESTING
Authors Xing Han, University of Auckland; Wenqiong Liu, Ghent University; Yuliang Wu, University of Bradford
Abstract Private money creation in the form of money market funds exerts its hidden impact on stock returns via the "dual-market clientele”, a subset of investors who systematically exploit the distinctive features of cash investing (as opposed to stock investing). This clientele-based channel has the power to explain the stylised seasonality: Long-short anomaly strategies that buy non-speculative stocks and sell speculative stocks experience low Monday-through-Wednesday returns and high Thursday-through-Friday returns. Using the FinTech revolution of cash investing as an exogenous shock to dual-market clientele's market participation, we provide difference-in-differences evidence that the cross-sectional seasonality is amplified by more than 100 percent following the shock. The enlarged seasonality comes from the short-leg speculative stocks and is stronger in high volatility and uncertainty periods. 
Presenter:  Xing Han, University of Auckland
Discussant:  Minh Nguyen, RMIT University Vietnam
  
Paper THE DETERMINANTS OF LIQUIDITY IN DECENTRALIZED LENDING
Authors Minh Nguyen, RMIT University Vietnam; Binh Nguyen, RMIT University Vietnam; Tra Pham, RMIT University Vietnam; Huy Pham, RMIT University Vietnam
Abstract Decentralised Lending is a new concept in finance. Based on blockchain and smart contracts, the innovative design of DeFi lending allows pseudonymous participants to lend and borrow money on a large scale without the need for financial intermediaries. Although in the theory of financial intermediation, DeFi Lending is claimed to have certain advantages, it has multiple hurdles to overcome. In contrast to traditional banks, where governments can bail out or deposit insurance can work, DeFi, as an unregulated market, must deal with illiquidity problems. Moreover, it is considered a main source of financial instability because of the increasing connection between cryptocurrency and traditional financial products. Given that the main reason for these lending platforms' instability is the liquidity shortage, this study investigates the interconnectedness of liquidity between DeFi Lending platforms and the determinants affecting liquidity in DeFi Lending. While many studies have approached this issue at a conceptual level or using aggregate data, this study aims to explore DeFi lending using transaction-level blockchain data. This study applies the time-varying parameter vector autoregression (TVP-VAR) to measure the liquidity connectedness between DeFi Lending platforms, and then the ARDL model and a novel dynamic ARDL simulation are employed to find the factors that affect liquidity in the DeFi Lending platform. The results indicate that even DeFi Lending platforms are highly competitive to each other, it has an extreme liquidity connectedness, and Aave is founded to be the net transmitter of liquidity spillovers to other DeFi platforms. The finding also shows that the market power of users and interest rate are two main entrain points that should be looked at in the design of DeFi lending to manage the liquidity in these platforms.
Presenter:  Minh Nguyen, RMIT University Vietnam
Discussant:  Xing Han, University of Auckland
   

WG306 (FOYER)

LUNCH


12H30 TO 13H15
   

STREAM E

 
13H15 TO 14H45
   
SESSION E1CRYPTOCURRENCY13H15 TO 14H45
CHAIRPERSONLES OXLEY, UNIVERSITY OF WAIKATOWG701
  
Paper FINANCIAL AND INFORMATIONAL INTEGRATION THROUGH ORACLE NETWORKS
Authors Lin William Cong, Cornell University; Eswar Prasad, Cornell University; Daniel Rabetti, National University of Singapore
Abstract Oracles are software components that enable data exchange between siloed blockchains and external environments, enhancing smart contract capabilities and platform interoperability. Integration through oracle networks for blockchain and DeFi platforms allows them to be informationally and financially connected to other blockchain ecosystems and off-chain environments. Using hand-collected data on hundreds of DeFi protocols and data from the market for decentralised oracle networks (DONs), we document that oracle integration has positive financial and economic ramifications. Additionally, our initial evidence suggests that symbiotic gains from enhanced interoperability between protocols on a given chain and, depending on the mass of integrated protocols, among integrated chains, translate to positive network effects. Moreover, oracle integration appears to improve risk-sharing without significant contagions; integrated protocols appear more resilient than non-integrated protocols during times of crisis. We draw parallels between oracle integration and international economic and financial integration, offering insights for regulators, entrepreneurs, and practitioners in the emerging space blockchains, DeFi, and Web3 ecosystems. 
Presenter:  Daniel Rabetti, National University of Singapore
Discussant:  Les Oxley, University of Waikato
  
Paper THE INFLUENCE OF EUROPEAN MICA REGULATION ON CRYPTOCURRENCIES 
Authors Thomas Conlon, University College Dublin; Shaen Corbet, Dublin City University & University of Waikato; Les Oxley, University of Waikato
Abstract This research investigates the intricate relationship between impending regulatory measures, specifically the European MiCa regulations, and their influence on cryptocurrency markets. Drawing upon a rigorous analysis of market responses, we highlight significant shifts in liquidity, variance, and return dynamics post-MiCa-related announcements. Specifically, MiCa announcements are significantly associated with negative cryptocurrency returns and elevated liquidity. The findings reveal defined heterogeneity across different cryptocurrency sub-classes, each uniquely affected by its inherent attributes and susceptibility to regulatory changes. Such work offers a comprehensive insight into the multifaceted nature of market responses to regulatory cues, providing an invaluable perspective on the delicate equilibrium between cryptocurrency market behaviour and the evolving European regulatory landscape.
Presenter:  Les Oxley, University of Waikato
Discussant:  Daniel Rabetti, National University of Singapore
   
SESSION E2MACROECONOMY & FINANCE13H15 TO 14H45
CHAIRPERSONIVAN INDRIAWAN, UNIVERSITY OF ADELAIDEWG702
  
Paper WARTIME FINANCING AND CORPORATE LEVERAGE
Authors Gonul Colak, Hanken School of Economics; Theogene Habimana; Hanken School of Economics; Timo Korkeamaki, Aalto University
Abstract The impact of wartime finance on the leverage of corporations is analysed in 101 different nations. Depending on the nature of the conflict, we discover that corporate leverage is affected. This research also shows that a company's ability to use debt markets in its own country is largely dependent on the level of government support it receives during times of conflict. The results also show that sovereign debt restructuring and crisis, both of which have a negative influence on the cost of debt, are the primary conduits through which war funding manifests its effects. In the end, we find that the armed conflict increases the cost of debt only for small firms. The conflicts in neighbouring nations are also a topic of study because of the potential for spillover consequences.
Presenter:  Theogene Habimana, Hanken School of Economics
Discussant:  Thanh Nguyen, James Cook University Singapore
  
Paper ARE THE SYNERGY OF STABLE ENERGY SUPPLY, ROBUST FINANCIAL SERVICE AND STRONG ECONOMIC GROWTH ACHIEVABLE? EVIDENCE FROM 134 COUNTRIES
Authors Thanh Pham Thien Nguyen, James Cook University; Son Nghiem, The Australian National University; Abhishek Singh Bhati, James Cook University
Abstract Stable energy supply and financial services drive economic growth, but they have also been linked to past crises. Technological progress helps prevent future energy and financial crises, potentially leading to a steady-state equilibrium in energy diversification, per-capita income, and financial development across countries. This study analyses 134 countries from 1995 to 2019, testing convergence in these factors and exploring their interdependent relationships for the first time. While overall convergence was not found using the club convergence test, countries did converge within specific groups. Regression analysis revealed positive two-way relationships between energy diversification and per-capita income, as well as between financial development and per-capita income, with an increasing trend observed in these factors. The findings emphasise the importance of investing in human capital and technology for sustainable economic and financial development. Additionally, this study confirms the U-shape relationship between oil price and energy diversification for the first time.
Presenter:  Thanh Nguyen, James Cook University Singapore
Discussant:  Theogene Habimana, Hanken School of Economics
  
Paper LABOR PAINS: THE IMPACT OF LABOR MARKET COMPETITION ON STOCK RETURNS
Authors Ivan Indriawan, University of Adelaide; Shihe Li, University of Adelaide; Ralf Zurbruegg, University of Adelaide
Abstract We introduce a novel approach to quantifying labour market competitiveness, focusing on the heightened competition arising from the increased demand for identical occupations. Using this metric, we find that an increase in labour market competitiveness leads to a decrease in aggregate market excess returns in the subsequent three to twelve months. This supports the concept of a "war for talent", with heightened labour market competitiveness leading to negative cash flow shocks, manifested through increased personnel-related expenditures and reduced cash holdings. We further find that firms that are more sensitive to labour market competition face higher risks and thus command a risk premium. Specifically, a portfolio that invests in stocks with a high sensitivity to labour market competition, or high 'competition betas,' yields higher returns than those with lower competition betas. These findings suggest that investors view a highly competitive labour market as a risk factor and demand higher returns for stocks with greater exposure to this risk.
Presenter:  Ivan Indriawan, University of Adelaide
Discussant:  Ruoyun (Lucy) Zhao, University of Technology Sydney
   
SESSION E3MANAGED FUNDS & ETFS13H15 TO 14H45
CHAIRPERSONHELEN LU, UNIVERSITY OF AUCKLANDWG703
  
Paper ARE INVESTORS BETTER OFF DOING NOTHING DURING EXCHANGE-TRADED FUND CLOSURES?
Authors Ekkehart Boehmer, Singapore Management University; Marinela Adriana Finta, Singapore Management University
Abstract We investigate a sample of several Exchange-Traded Funds (ETFs) that closed between 2012 and 2019. Our findings show that ETFs close after positive returns and flows. Moreover, both returns and flows are good predictors of the ETFs' decision to close. In general, we also find that small ETFs earn greater daily returns on average than larger ETFs with the same investment objective. We finally highlight that after the closure announcement, investors are better off keeping calm and doing nothing while waiting to receive shares' cash at the NAV from the ETF issuer.
Presenter:  Marinela Finta, Singapore Management University
Discussant:  Ihsan Badshah, Auckland University of Technology
  
Paper CLIMATE UNCERTAINTY AND INVESTOR LEARNING IN SUSTAINABLE FUNDS
Authors Sara Ali, Auckland University of Technology; Ihsan Badshah, Auckland University of Technology; Riza Demirer, Southern Illinois University Edwardsville Prasad Hegde, Auckland University of Technology and Lavinia Rognone, University of Manchester
Abstract This paper presents a novel take on the effect of uncertainty on investor learning about managerial skills by examining the fund flow-performance relationship in ESG-rated funds in the context of climate uncertainty. Utilising a large sample of mutual funds domiciled in Australia and New Zealand and recently developed transition and physical climate risk indexes for the Australia-Oceania region, we show that investor learning regarding manager skills is affected by not only the nature of climate uncertainty faced by decision-makers but also the sustainability ratings of the funds under consideration. While the response of fund flows to past performance is found to be stronger for funds with higher sustainability scores, we show that high climate risk dampens investors' ability to process information when it comes to funds with lower sustainability scores, thus hindering their ability to differentiate fund manager skill from luck. Our findings suggest that investor learning could be enhanced by the ESG performance of funds even under high uncertainty. We underscore the informational value captured by ESG ratings from a novel angle, particularly during periods of higher climate uncertainty. Our findings have implications for the managed fund industry and the information asymmetries that may arise between fund managers and investors.
Presenter:  Ihsan Badshah, Auckland University of Technology
Discussant:  Helen Lu, The University of Auckland
  
Paper ESG DISCLOSURE AND INVESTORS' ATTENTION: EVIDENCE FROM MUTUAL FUND PROSPECTUSES
Authors Huayu (Sarah) Shi, The University of Auckland; Helen Lu, The University of Auckland; John B. Lee, The University of Auckland
Abstract We study the association between Environmental, Social and Governance (ESG) disclosures in the Principal Investment Strategy (PIS) section of U.S. equity mutual fund prospectuses and their fund flows. Using pre-trained large language models (LLMs) to identify specific and generic ESG disclosures, we find that fund flows increase with specific, but not generic ESG disclosures. In addition, we show that the fund-performance sensitivity is more pronounced for fund that make longer specific ESG disclosures relatively to their peers. We also note that specific ESG disclosures are essential for attracting investment primarily during periods of heightened climate concerns.
Presenter:  Helen Lu, The University of Auckland
Discussant:  Marinela Finta, Singapore Management University
   
SESSION E4M&A AND DISCLOSURE13H15 TO 14H45
CHAIRPERSONFRANK ZHAO, UNIVERSITY OF AUCKLANDWG801
  
Paper VOLATILITY INFORMATION TRANSFER ALONG THE SUPPLY CHAIN: EVIDENCE FROM CORPORATE DISCLOSURES 
Authors Wenli Huang, The Hong Kong Polytechnic University; Gang Li, The Hong Kong Polytechnic University; Shaojun Zhang, The Hong Kong Polytechnic University
Abstract We investigate how new information about one stock's future volatility is transferred to other related stocks along the supply chain. We show analytically that the change of option-implied forward volatility around a corporate disclosure event is an unbiased measure of new volatility information. Using large samples of mandatory and voluntary disclosures, we document empirical evidence that the change of forward volatility after both types of disclosures centres at zero. Consistent with the network theory of volatility comovement, we find a strong effect of volatility information transfer from customers to their suppliers, and the effect is stronger if customers are larger in firm size, have a greater number of suppliers, and have stronger economic links with suppliers. This study contributes to the literature on how firm-specific volatility information spreads across firms.
Presenter:  Shaojun Zhang, Hong Kong Polytechnic University
Discussant:  Yaru Ren, WeBank Institute of Financial Technology Shenzhen University
  
Paper HOW DO ACQUIRERS BID? A TEST OF ANCHORING EFFECT IN SERIAL TAKEOVERS
Authors Yaru Ren, WeBank Institute of Financial Technology Shenzhen University; Ping Hu, WeBank Institute of Financial Technology Shenzhen University; Lin Li, Audencia Business School Nantes
Abstract Studies on takeover are plenty; however, few have examined how acquirers bid in serial takeovers. We show that there is a strong relationship between two consecutive takeover bids by the same acquirer, with a higher bid premium for the former and a higher bid premium for the latter, and vice versa. The strength of the link between successive takeover bids varies by deal characteristics and economic environment. Our evidence suggests an anchoring effect in serial takeover bids, where each bid is not a single event unrelated to the other bids across multiple takeovers, as has often been assumed in previous studies on takeovers.
Presenter:  Yaru Ren, WeBank Institute of Financial Technology Shenzhen University
Discussant:  Frank Zhao, University of Auckland
  
Paper THE IMPACT OF RELATED PARTY TRANSACTIONS ON M&A PERFORMANCE: MEDIATING EFFECT OF PRIVATE TARGETS DISCOUNTS
Authors Frank Zhao, University of Auckland; Lina El-Jahel, University of Auckland; Michelle Li, University of Auckland
Abstract The evaluation of privately held companies has received significant attention in mergers and acquisitions research. While there is a common belief among academics, practitioners, courts, and regulators that private targets are sold at discounts, the empirical evidence is mixed. This study examines target evaluation reports from China and finds that unlisted targets are indeed sold at a discount. The discount can primarily be attributed to the relationship between the acquirer and the target company. Furthermore, when acquirers take over unlisted targets, the market reacts positively, as indicated by the acquirers' cumulative abnormal returns (CARs). This positive reaction can be explained by the relationship between the acquirers and the targets, with the discount acting as a mediating factor. Additionally, the mediating effect of the discount is more prominent for acquiring firms that are non-state-owned enterprises. The mediating effect of the discount is not driven by the acquiring firm’s power. While the liquidity needs of parent companies do impact the discount, they do not diminish the influence of the relationship between acquirers and targets. These findings are robust under various tests.
Presenter:  Frank Zhao, University of Auckland
Discussant:  Shaojun Zhang, Hong Kong Polytechnic University
   

WG306 (FOYER)

AFTERNOON TEA


14H45 TO 15H00
   

STREAM F

 
15H00 TO 16H30
   
SESSION F1MACHINE LEARNING15H00 TO 16H30
CHAIRPERSONKAREL HRAZDIL, SIMON FRASER UNIVERSITYWG701
  
Paper PREDICTING FORCED CEO TURNOVER USING MACHINE LEARNING
Authors Juebin Zeng, University of Auckland
Abstract This study predicts forced CEO turnover with machine learning. In out-of-sample tests, our machine learning model substantially outperforms traditional models across different performance metrics. Machine learning's predictions show evidence to support the strong-form RPE and reject the weak-form RPE in the CEO dismissal process. Globally, performance-related, incentive-related, and risk-taking-related features contribute the most to predicting forced CEO turnover. Locally, machine learning can deal with sophisticated interactions and nonlinearity among the features, especially detecting the skill-matching between CEOs and firms. Finally, this study reveals that CEO entrenchment leads to undervaluation of CEOs' poor performance, explaining why some CEOs are rarely fired. In addition, this study suggests that directors may misattribute financial distress to CEOs who should not be fired to preserve their reputations and positions.
Presenter:  Juebin Zeng, University of Auckland
Discussant:  Chulwoo Han, Sungkyunkwan University
  
Paper PORTFOLIO CONSTRUCTION WITH NEWS SENTIMENT USING LARGE LANGUAGE MODEL
Authors Qi Zhang, University of Technology Sydney
Abstract Most existing text-based sentiment measures in finance are lexicon-based, which are effectively based on word counts of positive and negative sentiment dictionaries and naturally lose most information. We measure news sentiment using BERT, a state-of-the-art large language model, which reads and comprehends the whole text and explores return predictability based on Refinitiv Machine Readable News. The resulting portfolio achieves annualised Sharpe ratios of 2.79, 3.09, and 3.87 when considering news alerts, news alerts and articles' headlines, and article body contents, respectively, significantly higher than passive investment as proxied by S&P 500 index's Sharpe ratio of 0.32 and dictionary method of 1.59, 2.94, and 0.04, suggesting that large language models are much better at capturing sentiment, and dictionary methods struggle to extract information from complicated texts. Our results also imply that reacting too fast on incomplete textual news information may yield suboptimal performance. An interesting finding is that news of positive sentiment is tailored to fewer audiences, contains fewer topics, and is generally shorter.
Presenter:  Qi Zhang, University of Technology Sydney
Discussant:  Karel Hrazdil, Simon Fraser University
  
Paper CFO FACIAL BEAUTY AND BANK LOAN CONTRACTING
Authors Karel Hrazdil, Simon Fraser University; Jiyuan Li, Chongqing University of Technology; Gerald Lobo, University of Houston; Ray Zhang, Simon Fraser University
Abstract We examine whether the facial attractiveness of borrower firms' chief financial officers (CFOs) influences bank loan contracting terms. Using a machine learning-based face beauty evaluation algorithm to measure facial attractiveness, we document that firms led by CFOs with greater facial beauty receive more favourable loan contracts from their banks, as evidenced by lower loan spreads, longer maturities, fewer covenants, and lower likelihood of collateral requirements. We further show that the relation between CFO facial beauty and bank loan contracting terms is significantly influenced by the characteristics of both the borrower and the lender. Collectively, our results suggest that loan contracting is not an entirely rational process, as the beauty premium is at least partly driven by taste-based discrimination. 
Presenter:  Karel Hrazdil, Simon Fraser University
Discussant:  Qi Zhang, University of Technology Sydney
   
SESSION F2ESG15H00 TO 16H30
CHAIRPERSONAYESHA SCOTT, AUCKLAND UNIVERSITY OF TECHNOLOGYWG703
  
Paper EMPLOYEE HEALTH AND FIRM PERFORMANCE
Authors Alexander Schandlbauer, University of Southern Denmark
Abstract Using administrative data on the universe of private firms in Denmark, we find that even temporary and small health shocks to employee health, like seasonal influenza, can significantly reduce firm profitability. The effects are driven by labour-intensive firms and a decrease in firm size and financial flexibility, suggesting that firms that are better able to shift resources can insulate themselves better. Our results indicate that employees are shielded from these negative effects, while owners (especially of small firms) see reduced dividends. Back-of-the-envelope calculations propose that all but the largest firms may benefit from subsidising vaccination programs for their employees.
Presenter:  Alexander Schandlbauer, University of Southern Denmark
Discussant:  Fei Su, Nanjing University of Aeronautics and Astronautics
  
Paper DO RESPONSIBLE INVESTMENT FUND (RIF) MANAGERS’ CAREER PATHS IMPACT THEIR FUND’S ESG PERFORMANCE?
Authors Huiqiong Tang, Auckland University of Technology; Bart Frijns, Open Universiteit; Aaron Gilbert, Auckland University of Technology; Ayesha Scott, Auckland University of Technology
Abstract This paper focuses on how the responsible investment fund manager’s past career path impacts their funds’ ESG performance. Using a dataset of 47 US domestic equity funds from 2005 to 2020, we contribute to the growing mutual fund literature on managerial characteristics. We find insignificant differences between funds with purely RIF managers and those where all the managers have conventional experience. Of note, those funds with a mix of career paths report a slightly better performance when solely considering financial return. Our results suggest that for the majority of our ESG measurements, RIFs with a wholly conventional experience management team exhibit the best ESG performance, suggesting these funds are more likely to invest in companies with higher ESG scores. When considering joint ESG and financial performance, the proportion of managers with exclusive RIF working experience positively impacts the joint performance of the fund.
Presenter:  Ayesha Scott, Auckland University of Technology
Discussant:  Rob Bauer, Maastricht University
  
Paper ESG PERFORMANCE AND CORPORATE FRAUDULENCE: EVIDENCE FROM CHINA
Authors Fei Su, Nanjing University of Aeronautics and Astronautics; Mengyao Guan, Nanjing University of Aeronautics and Astronautics; Yujie Liu, Nanjing University of Aeronautics and Astronautics; Jia Liu, University of Portsmouth
Abstract Using a large sample of Chinese publicly listed firms from 2014 to 2021, we examine whether firms' ESG performance inhibits corporate fraud. We find that high ESG performance mitigates corporate fraudulence. After conducting a series of robustness tests, the results remain unchanged. This negative relationship is more pronounced in non-SOE (non-state-owned enterprise) firms and firms that voluntarily disclose ESG information. The mechanism analysis suggests that high-quality ESG engagement improves firms' corporate governance performance and inhibits managerial myopia, which fosters good business ethics and mitigates corporate fraud. Overall, our findings provide additional evidence supporting the role of ESG in filling institutional voids in emerging economies. Our findings also provide significant policy implications for regulators and policymakers who seek to promote corporate information disclosure and mitigate corporate fraud risk.
Presenter:  Fei Su, Nanjing University of Aeronautics and Astronautics
Discussant:  Alexander Schandlbauer, University of Southern Denmark
   

WG308

CONFERENCE CLOSE AND PAPER AWARDS CEREMONY


16H30 TO 17H00