Finance Research Seminars

The ACFR holds regular online (via MS Teams) Research Seminars that highlight current research in the Finance Industry. Format: Academic papers are presented by one of their authors and are followed by a Q&A discussion. All are welcome to join the Teams Meeting via the links below.

2023 Speakers:

20/02/2023, 10-11 am in NZST, Room WF713

Professor Oliver Entrop, University of Passau

Local Religiosity and Stock Liquidity

Abstract

We investigate whether local religious norms affect stock liquidity for U.S. listed companies. Over the period 1997–2020, we find that firms located in more religious areas have higher liquidity, as reflected by lower bid-ask spreads. This result persists after the inclusion of additional controls, such as governance metrics, and further sensitivity and endogeneity analyses. Subsample tests indicate that the impact of religiosity on stock liquidity is particularly evident for firms operating in a poor information environment. We further show that firms located in more religious areas have a lower price impact of trades and smaller probability of information-based trading. Overall, our findings are consistent with the notion that religiosity, with its anti-manipulative ethos, probably fosters trust in corporate actions and information flows, especially when little is known about the firm. Finally, we conjecture an indirect firm value implication of religiosity through the channel of stock liquidity.

09/03/2023, 9-10 am in NZST, Room WF711

Sebastian Gehricke, Otago University

ESG ETF Divestment and Financial Performance

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 from 2013 to 2022. In total we identified and investigated 45,397 individual divestment events. Employing panel regression models, we find that divestment by these funds has a significant and prolonged negative effect on the returns of individual companies. More importantly, a higher number of ESG ETFs divesting in a firm, which could be seen as coordinated divestment, results in significant prolonged negative effects to stock returns. We identify that even when very few ETFs divest, this can have negative effects on contemporaneous quarter stock returns. These results provide further evidence that divestment is an important tool for the sustainability transition.

27/03/2023, 9-10 am in NZST via MS Teams

Remco Zwinkels, Vrije Universiteit Amsterdam

Risk, Return, and Sentiment in a Virtual Asset Market

Abstract

The joint-hypothesis problem casts doubt on the results of market efficiency research. Specifically, it is hard to assess to what extent financial markets reflect economic fundamentals or mispricing. To address this issue, we study price formation in a large virtual asset market where fundamentals are predetermined and publicly known. We find that a number of well-established determinants of returns from the real world also affect asset prices in this market, despite the absence of systematic risk. The results suggest that prices in real financial markets include a substantial behavioral component, which is likely underestimated in canonical asset pricing tests.

Click here to join the meeting

01/05/2023, 10-11 am, NZST, Room WF714

Stephen Bahadar, Auckland University of Technology

Forward-looking information: Does IIRC Framework adoption matter?

Abstract

We examine whether the adoption of the International Integrated Reporting Council’s Integrated Reporting Framework (IIRC Framework) influences the extent of forward-looking disclosures provided by reporters. We capture forward-looking disclosures of Australian and New Zealand-based IR reporters over a period of 10 years from 2010 to 2019 using a machine learning algorithm. We find that the adoption of the IIRC Framework has a significant positive impact on the extent of forward-looking disclosures provided by reporting entities. Our primary evidence suggests that while listing status alone negatively influences the extent of forward-looking disclosures, our additional analysis reveals that the acceptance of the IIRC Framework by listed entities leads to an increase in forward-looking information. These results remain valid when subjected to a variety of robustness (alternative variables and country fixed effect) and endogeneity (system Generalized Method of Moments (GMM) and Entropy Balancing estimations) tests. This study provides novel evidence by highlighting the role played by the IIRC Framework in promoting forward-looking disclosures.

08/05/2023, 10-11 am, NZST, via MS Teams.

Dr Yili Lian, California State University, Stanislaus

Financial Distress, Bank Branching Deregulation, and Customer-Supplier Relationships

Abstract

The paper exploits the deregulation of interstate bank branching laws to examine whether improved access to bank credit for customer firms affects the probability of their suppliers’ financial distress. The study provides robust evidence that suppliers’ financial distress risk is lower when the states of their major customer firms experience bank branching deregulation. The results are more pronounced for supplier firms with stronger customer-supplier relationships, for financially constrained suppliers, and for suppliers whose customers are financially unconstrained. Overall, the findings highlight the importance of customers’ access to credit on the financial distress risk of their suppliers.

14/08/2023, 11-12 pm, NZST, via MS Teams

Dr Matthew Wynter, Stony Brook University

The Role of Domestic and Foreign Sentiment for Cross-Border Portfolio Flows

Abstract

We show that sentiment influences the demand for foreign stocks, as identified by international portfolio flows between investors in the United States and investors in 44 other countries. We document two channels through which sentiment affects flows. First, inflows are higher in countries with higher sentiment. Second, higher sentiment in a given country is associated with lower outflows from that country to bilateral trade partners, suggesting that sentiment in one country can have spillover effects on demand for assets in other countries. The combined sentiment effects are associated with economically meaningful implications for net flows. Finally, we consider country closed-end funds and find evidence of the pricing effects of sentiment.

21/08/2023, 11-12 pm, NZST, Room WF411

Dr Jose Da Fonseca, Auckland University of Technology

A linear-rational Wishart term structure model with jumps

Abstract

This study proposes a linear-rational multi-curve model based on the Wishart process with jumps. The jump component allows the model to replicate the skew observed in the cap/floor market as well as the non-trivial correlation between the curves. The linear-rational property implies that pricing a swaption or a cap/floor is of equal numerical complexity. Thanks to the affine property of the Wishart process with jumps, we derive an explicit formula that relates the swaption/cap/floor market volatility and the model parameters. Further to this, we derive two approximate pricing formulas for interest rate derivatives that are fast to evaluate and that can be applied to liquid products, such as swaption/cap/floor, or more exotic ones, like constant maturity swap derivatives. We illustrate the model’s ability to generate skewed smiles as observed in the EUR-Euribor cap/floor market and the numerical
accuracy of the different option pricing formula approximations.

06/09/2023, 11-12 pm, NZST, Room WF702 and MS Teams

Huiqiong (Joanne) Tang, Auckland University of Technology

Responsible investment funds and their management companies' emphasis on ESG performance: First priority or icing on the cake?

Abstract to follow

18/09/2023, 11-12 pm, NZST, Room WF411

Dr Prasad Hegde, Auckland University of Technology

TBA

30/10/2023, 11-12 pm, NZST, Room WF411

Dr Nhut (Nick) Hoang Nguyen, Auckland University of Technology

TBA

13/11/2023, 11-12 pm, NZST, via MS Teams

Dr Özlem Dursun de Neef, Monash University

Monetary Policy, HTM Securities, and Uninsured Deposit Withdrawals

27/11/2023, 11-12 pm, Room

Dr Hari Srivastava, Auckland University of Technology

TBC

04/12/2023, 9-10 am, NZST via MS Teams

Dr Elio Bolliger, University of Lausanne

Do Local Forecasters Have Better Information

Abstract

Using individual inflation and GDP growth forecasts by professional forecasters for a panel of emerging and advanced economies, we provide direct evidence that foreign forecasters update their forecasts less frequently than local forecasters (about 10% less frequently) and make larger errors in absolute value (up to 9% larger). The local forecasters' more accurate expectations are not due to a more irrational expectation formation by foreigners but to local forecasters' more precise information. The asymmetry is stronger at shorter horizons and when forecasting inflation. In general, the asymmetry is not weaker when forecasting is less uncertain. Taken together, our results provide a basis for disciplining international finance and trade models with heterogeneous information. On the methodological side, we provide tests that identify differences in information frictions across groups.