Using a large cross-sectional dataset comprising of FTSE 350 listed firms, this study investigates whether superior environmental, social and corporate governance (ESG) disclosure affects firm value. ...We find a positive association between ESG disclosure level and firm value, suggesting that improved transparency and accountability and enhanced stakeholder trust play a role in boosting firm value. We also report that higher CEO power enhances the ESG disclosure effect on firm value, indicating that stakeholders associate ESG disclosure from firms with higher CEO power with greater commitment to ESG practice. This evidence is strong and consistent for three different measures of ESG-related disclosure: the ESG, environmental and social disclosure scores. The results are robust to the use of an instrumental variable approach, and the Heckman two-stage estimation procedure.
•I investigate the stock market's reaction to coronavirus news in the top six most affected countries by the pandemic.•The fake news exerts a negative nonlinear influence on the inferior and the ...middle quantiles throughout the distribution of returns.•The media coverage leads to a decrease in returns across middle and superior quantiles and has no effects on the inferior ones.•During COVID19 turmoil superior quantiles of returns distribution exhibit negative dependence on past performances, while inferior and middle quantiles are not affected by this phenomenon.•The gold return has a positive correlation with the stock markets, which amplifies during extreme bearish and bullish periods indicating that it does not behave as a “Safe Havens” asset.
Voluntary nonfinancial Environmental, Social, and Governance (ESG) disclosure is a rapidly growing and increasingly important topic that has attracted great attention from both academic researchers ...and capital market participants in recent years. The objective of this survey study is to provide a comprehensive review of the ESG disclosure literature in accounting research with suggestions for the future. Specifically, we organize the literature into four categories: motivations for and consequences associated with ESG information, in addition to disclosure- and user-level characteristics with the potential to affect the observed outcome of information disclosure. We also discuss the key role of nonfinancial rating agencies as a new type of ESG information intermediary in capital markets and suggest opportunities for future research.
This paper assesses the classification performance of the Z‐Score model in predicting bankruptcy and other types of firm distress, with the goal of examining the model's usefulness for all parties, ...especially banks that operate internationally and need to assess the failure risk of firms. We analyze the performance of the Z‐Score model for firms from 31 European and three non‐European countries using different modifications of the original model. This study is the first to offer such a comprehensive international analysis. Except for the United States and China, the firms in the sample are primarily private, and include non‐financial companies across all industrial sectors. We use the original Z′′‐Score model developed by Altman, Corporate Financial Distress: A Complete Guide to Predicting, Avoiding, and Dealing with Bankruptcy (1983) for private and public manufacturing and non‐manufacturing firms. While there is some evidence that Z‐Score models of bankruptcy prediction have been outperformed by competing market‐based or hazard models, in other studies, Z‐Score models perform very well. Without a comprehensive international comparison, however, the results of competing models are difficult to generalize. This study offers evidence that the general Z‐Score model works reasonably well for most countries (the prediction accuracy is approximately 0.75) and classification accuracy can be improved further (above 0.90) by using country‐specific estimation that incorporates additional variables.
•The number of Covid-19 pandemic cases per million has significant negative effects on global financial markets.•The adverse effects of the coronavirus on the stock markets are less in freer ...countries. In other words, the stock markets of less-free countries are affected more by the same size of increase in the number of coronavirus cases.•For every increase in the growth of number of Covid-19 cases per million, the stock market returns in freer countries are associated with less return decreases.•Even though the growth of the number of Covid-19 cases per million increases the volatility in less-free countries, its effect on freer countries is not statistically different from zero.
•We investigate short-term stock market reactions during the COVID-19 pandemic.•Stocks react significantly negatively to the announcement of the first death.•Stock markets react negatively to ...country-specific fiscal policy measures.•Monetary measures have the power to calm markets.
We study the short-term market reactions of US and European stocks during the beginning of the COVID-19 pandemic. Employing an event study, we document that stocks react significantly negatively to the announcement of the first death in a given country. While our results suggest that the announcements of country-specific fiscal policy measures negatively affect stock returns, monetary policy measures have the potential to calm markets. These reactions are either intensified or lessened by firm-specific characteristics such as tangible assets, liquidity, and institutional holdings.
We analyze the relationship between sentiment generated by coronavirus-related news and volatility of equity markets. The ongoing coronavirus outbreak (COVID-19) resulted in unprecedented news ...coverage and outpouring of opinions in this age of swift propagation of information. Ensuing uncertainty in financial markets leads to heightened volatility in prices. We find that overwhelming panic generated by the news outlets are associated with increasing volatility in the equity markets. Our results for individual economic sectors demonstrate that panic-laden news contributed to a greater extent to volatility in the sectors perceived to be most affected by coronavirus outbreak.
•COVID-19 pandemic led to media panic sentiment shock.•Media frenzy contributes to investment climate uncertainty.•Panic caused higher market volatility.
•We examine the effect of government responses of G7 countries to COVID-19.•We focus on reaction of G7 stock market returns.•We show the importance of lockdowns, travel bans, and economic ...stimulus.•Lockdowns resulted in cushioning the effects of COVID-19 most.
This paper examines the effect of government responses of G7 countries to the coronavirus pandemic (COVID-19) on stock market returns. Using time-series data, we show that lockdowns, travel bans, and economic stimulus packages all had a positive effect on the G7 stock markets. However, lockdowns were most effective in cushioning the effects of COVID-19. Our results are robust to different measures of returns and controls for other factors of returns.
•The COVID-19 pandemic has significant impacts on global financial markets.•Substantial increases of volatility are found in global markets due to the outbreak.•Global stock markets linkages display ...clear different patterns before and after the pandemic announcement.•Policy responses may create further uncertainties in the global financial markets.
The rapid spread of coronavirus (COVID-19) has dramatic impacts on financial markets all over the world. It has created an unprecedented level of risk, causing investors to suffer significant loses in a very short period of time. This paper aims to map the general patterns of country-specific risks and systemic risks in the global financial markets. It also analyses the potential consequence of policy interventions, such as the US’ decision to implement a zero-percent interest rate and unlimited quantitative easing (QE), and to what extent these policies may introduce further uncertainties into global financial markets.
•Low frequency exchange rate data detect the impacts of policy and non-policy uncertainty poorly.•Daily exchange rate data consistently detects the impact of policy and non-policy ...uncertainty.•Substantial portions of US EPU, UK EPU, and non-policy uncertainty variance occur within a month.•I include a method for separating economic uncertainty by type.•More Exchange rate volatility is due to UK EPU than to US EPU.•More Exchange rate volatility is due to Non-policy uncertainty than to economic policy uncertainty.
The extent to which economic policy uncertainty (EPU) amplifies exchange rate volatility has been an important research question for at least a decade. Previous research has investigated this relationship using monthly data, concluding that EPU imparts an effect on exchange rate volatility either contemporaneously, or with a one month lag. The use of monthly frequency, however, may not provide an accurate causal interpretation, and may even compromise the accuracy of the estimates if the natural cycles of EPU are shorter than a month. To address this econometric concern I construct uncertainty measures at a daily frequency, and estimate a GARCH model using daily USD/British pound returns. The evidence indicates that EPU contributes to exchange rate volatility much more quickly than monthly data can detect. Using a regression technique for separating EPU from non-policy economic uncertainty, I find that non-policy market uncertainty increases volatility more than EPU does.
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