CEF.UP – FIN Seminar/Webinar

Thursday – October 31^th, 2024 at 13:00h | Room 305| Online

Securities Losses, Interbank Markets, and Monetary Policy – Transmission: Evidence from the Eurozone

Mariassunta Giannetti  – Stockholm School of Economics (Sweden), European Central Bank (European Union), Center for Economic Policy Research (U.K.)

CEF.UP – FIN Seminar/Webinar

Thursday – October 24^th, 2024 at 1:00 p.m. | Room 305| Online

The VAT Trap: How Consumption Tax Hikes Make Firms Pay Out More and Invest Less

Martin Jacob  – IESE Business School, University of Navarra (Spain)

Abstract:

“Using comprehensive firm-level data for 54 countries, we document that, contrary to standard economic theory, value-added tax (VAT) increases cause firms to permanently increase their cash payout and to reduce their investment. We reconcile these surprising findings using an OLG model where agents have finite lives. We show that VAT increases can come with unintended negative consequences on capital accumulation. Furthermore, the negative effects of VAT on capital accumulation critically hinge on the country’s culture. The more the country’s attitudes are oriented toward the consumption of current generations, the greater the negative consequences of VAT on capital accumulation and growth.”

CEF.UP – FIN Seminar/Webinar

Thursday – October 3^rd, 2024 at 1:00 p.m. | Room 305| Online

Sustainable Retail Investing: Motivations, Portfolio Consequences and the Role of ESG Ratings

Amir Amel-Zadeh– Saïd Business School, Oxford University (England, United Kingdom)

Abstract:

“This study examines whether, how and to what effect wealthy retail investors use sustainability information in their investment decisions. Using a proprietary dataset of investment holdings of wealthy European retail investors, we exploit a quasi- exogenous shock to the coverage of sustainability ratings available to investors and document a plausibly causal effect of these ratings on investment allocations. We find the preference for assets with high sustainability ratings to stem from non-pecuniary motives and that sustainability is not perceived as a luxury good. We further find that “ESG-minded” investors hold significantly concentrated and under-diversified portfolios, over-allocate to home stocks and hold on longer to unrealised losses than “ESG-agnostic” investors. The former seem to achieve their objectives of investing in more sustainable firms that have fewer social and governance incidents but also overweight carbon-intensive sectors.”

CEF.UP – FIN Seminar/Webinar

Thursday – June 6^th, 2024 at 1:00 p.m. | Room 305| Online

Manipulating Growth: The Unintended Consequences of Antitrust Policies on Small Firms

Gustavo Grullon– Rice University

Abstract:

“Recent evidence indicates that acquirers avoid antitrust regulatory scrutiny by targeting firms whose size fall below exemption thresholds. We find evidence that potential targets near these thresholds intentionally reduce their size, which makes them more attractive targets for stealth acquisitions. They achieve this by limiting asset growth and increasing their payouts when they have excess cash. Our results indicate that this effect is especially pronounced for firms with liquidity needs and is driven, in part, by exit strategy motives. Overall, our results reveal that antitrust exemptions can create perverse incentives that can offset public policies aimed at promoting the growth of small firms.”

CEF.UP – ECO/FIN Seminar/Webinar

Thursday – May 23^rd, 2024 at 1:00 p.m. | Room 305| Online

Bank Specialization in Lending to New Firms

Diana Bonfim– Banco de Portugal and European Central Bank

Abstract:

“We formulate a novel dimension of bank-lending specialization—specialization in lending to new firms—and investigate its impact on the creation, credit access, and survival of new businesses. We exploit a Portuguese reform that drastically reduced the red tape of starting a new firm and that was rolled out in a staggered manner across municipalities. We show that while reducing regulatory barriers stimulates business creation, this effect depends crucially on the pre-reform local presence of bank branches specialized in lending to new firms. A greater presence of such branches is associated with improved credit access and higher leverage of new local businesses. Moreover, new firms that obtain loans from specialized branches exhibit an up to 12 percent higher survival rate.”

CEF.UP – FIN Seminar/Webinar

Thursday – May 16^th, 2024 at 1:00 p.m. | Room 305| Online

“Invest as for Your Kids: Performance and Implications of Children’s Investment Accounts on Portfolios in Adulthood“

Jarkko Peltomaki– Stockholm University (Sweden)

Abstract:

“We explore the performance of custodial investment accounts for children and their implications on portfolios in adulthood. We find that children’s accounts, often resembling passive investment strategies, yield annual returns three times higher with lower volatility compared to adults’ accounts. Parental risk-taking behavior does not significantly differ for kids of different genders during early childhood. However, a notable shift occurs once boys enter their teenage years, as their accounts begin to mirror the investment patterns typically associated with adult men. Consequently, during this phase, boys’ accounts tend to underperform relative to those of girls. Furthermore, we document that individuals whose investment accounts were initiated by their parents during childhood consistently demonstrate superior performance as young adults compared to peers who opened accounts themselves. Moreover, they exhibit a narrowed gap in risk-taking behavior observed between men and women. These findings emphasize the importance of passive investment strategies and highlight the influential role parental interventions play in shaping investment attitudes.”

CEF.UP – FIN Seminar/Webinar

Thursday – April 18^th, 2024 at 1:00 p.m. | Room 305| Online

“The Information Content of Central Bank Disclosures: Firm-level Evidence from Eurosystem Collateral Haircuts”

Aytekin Ertan – London Business School (England, United Kingdom)

Abstract:

“This paper explores firm-specific central bank disclosures, specifically the Eurosystem’s collateral haircuts on nonfinancial corporate bonds. Our findings reveal that updates to collateral haircuts by central banks are significant: they not only trigger reactions in debt capital markets, but also predict future changes in issuers’s credit ratings and overall financial health. Our analysis further highlights that impact of these haircut revisions is more pronounced among riskier issuers, firms with bank debt, and in periods of greater uncertainty. Overall, our study underscores the relevance of firm-specific central bank information and provides new insights into the role of collateral haircut policies in the financial landscape.”

CEF.UP – FIN Seminar/Webinar

Thursday – April 11^th, 2024 at 1:00 p.m. | Room 305| Online

Suppliers, Investors, and Equity Market Liberalizations

Martin Strieborny  – Adam Smith Business School – University of Glasgow (Scotland, United Kingdom)

Abstract:

“Allowing foreign investors to acquire equity stakes in domestic firms stimulates the real economy by promoting frictionless relationships between buyers and suppliers of intermediate goods. I combine insights from research on financial liberalization and relationships specific investment to derive this hypothesis and then use a difference-in-difference empirical framework to test it. Results from panel-data and event-study estimations confirm that equity market liberalizations boost output growth particularly in suppliers-dependent industries that require a high share of specialized inputs in their production process. Financial openness can thus facilitate smooth interactions between firms and an important corporate stakeholder – suppliers of crucial production inputs.”

CEF.UP – FIN/ECO Seminar/Webinar

Thursday – March 21^st, 2024 at 1:00 p.m. | Room 305| Online

“Information Frictions and Firm Take up of Government Support: A Randomised Controlled Experiment” 

Diogo Mendes  – Stockholm School of Economics (Sweden)

Abstract:

“This paper studies whether informational frictions prevent firms from accessing government support using a randomised controlled trial. We focus on two Portuguese COVID-19 relief programs, providing (i) wage support for workers who are kept on payroll and (ii) credit lines backed by government guarantees. We randomly assign firms to a treatment providing either simplified information about a program, or a combination information and step-by-step application support. We find a significant treatment effect on take up of the wage support program. Our results constitute direct evidence that information frictions act as a barrier to comprehensive distribution of firm-level support measures.”

CEF.UP – FIN Seminar/Webinar

Thursday – March 7^th, 2024 at 1:00 p.m. | Room 305| Online

“Service Flows in Euro Area Corporate Bonds” (joint work with Felix Corell and Melina Papoutsi)

Lira Mota  – MIT Sloan School of Management (United States of America)

Abstract:

“Investors place value on financial assets not only for their cash flows but also for the additional services they offer, such as acting as a reliable store of value, serving as collateral, and meeting capital and liquidity requirements. These services have traditionally been valued as “convenience yields,” a reduced-form measure that is silent about the potentially multifaceted nature of these service flows. By analyzing detailed price and holdings data of the euro area corporate bond market, this paper reveals the persistent variations in convenience yields across different sector portfolios, with banks, insurance companies, and pension funds leading, and the lowest yields noted in foreign-held portfolios. Notably, post-ECB corporate quantitative easing, the ECB’s portfolio emerged with the highest convenience yield. Our findings suggest that factors such as collateral value, regulatory capital requirements, and liquidity needs are primary drivers of convenience yields in Euro area corporate bonds. Furthermore, it highlights the importance of service flows for the transmission of monetary policy.”

CEF.UP – FIN Seminar/Webinar

Thursday – February 22^nd, 2024 at 1:00 p.m. | Room 305| Online

“Does Paying Passive Managers to Engage Improve ESG Performance?” (joint work with Marco Becht, Julian R. Franks and Hideaki Miyajima)

Kazunori Suzuki  – Waseda Business School (Japan)

Abstract:

“The paper studies a natural experiment in responsible investment conducted by the Japanese Government Pension Investment Fund (GPIF). In 2018 GPIF gave its largest passive manager a remunerated mandate to engage with portfolio companies to improve ESG and adopted best-in-class indexes, rewarding high ESG score companies with additional equity investment. Using private data and difference-in-differences analysis we show that engagement by the asset manager has improved scores. In an event study, we find that the conditional portfolio tilt significantly impacts share prices. We also provide evidence that ESG scores for Japan increased significantly more than for companies in other countries.”

CEF.UP – FIN Seminar/Webinar

Thursday – January 25^th, 2024 at 1:00 p.m. | Room 305| Online

“Brexit, what Brexit? Euro area portfolio exposures to the United Kingdom since the Brexit referendum“

Daniel Carvalho  – Banco de Portugal (joint work with Martin Schmitz)

Abstract:

“We study euro area investors’ portfolio adjustment since the Brexit referendum in terms of securities issued in the UK or denominated in pound sterling, in the context of heightened policy uncertainty surrounding the exit process of the UK from the EU. Our sector-level analysis “looks-through” holdings of investment fund shares to gauge euro area sectors’ full exposures to debt securities and listed shares. Our key finding is the absence of a negative “Brexit-effect” for euro area investors, which would have rendered UK-issued and pound-denominated securities generally less attractive. Instead, we observe that euro area investors increased their absolute and relative exposures to UK-issued and pound-denominated debt securities since the Brexit referendum. The analysis also reveals an increase in the euro area’s exposure to listed shares issued by UK non-financial corporations, while the exposures to shares issued by UK banks declined. These findings should be seen against the backdrop of low yields on euro area debt securities and a strong recovery in UK share prices since the Brexit referendum, which appear to have largely outweighed the uncertainties associated with Brexit.”

CEF.UP – FIN Seminar/Webinar

Thursday – January 18^th, 2024 at 1:00 p.m. | Room 305| Online

“Do Specialized Distress Investors Undermine Upstream Lending?” (joint work with Irem Demirci and Miguel Oliveira)

Fernando Anjos – Nova School of Business and Economics, Universidade Nova de Lisboa

Abstract:

“A growing class of investors specializes in funding distressed firms. Specialization allows these investors to develop valuable expertise, which in principle can contribute to overall economic efficiency. Notwithstanding this argument, we show that specialized distress investors (SDIs) can inadvertently worsen borrower moral hazard, since these downstream financiers rescue firms after poor performance (bailout effect). Moreover, SDI presence can make upstream lenders develop a counter-intuitive preference towards projects with lower continuation value and/or worse agency problems, in order to reduce SDI entry. In contrast to these results, we show that from a longer-run perspective SDIs can actually help in managing borrower moral hazard. This occurs in the model when SDI entry makes it easier for upstream lenders to sustain a reputation of toughness, which can in turn be critical for disciplining borrowers.”

CEF.UP – FIN Seminar/Webinar

Thursday – December 14^th, 2023 at 1:00 p.m. | Room 305| Online

“The effectiveness of monetary incentives of independent directors in retail and in institutional mutual funds”

Ania Zalewska  – Leicester University

Abstract:

“Using a hand–collected data for boards from over 10,000 U.S. mutual funds in the 2002–2020 period, we document (studying fund liquidations) that the directors’ remuneration received from fund families aligns directors with fund families’ preferences in retail funds, whereas shares held by directors do not align them with shareholders’ preferences. The opposite effects are found for institutional funds. Our results indicate that when shareholders’ monitoring is weak (retail funds), directors’ share–ownership is ineffective in representing shareholders’ interests, and the size of directors’ remuneration signals poor governance. In contrast, directors’ remuneration signals pay–for–performance in institutional funds.”

CEF.UP – FIN Seminar/Webinar

Thursday – November 30^th, 2023 at 1:00 p.m. | Room 305| Online

Design risk: the curse of CPPIs

Raquel Gaspar– ISEG, Universidade de Lisboa

Abstract:

“This study underscores the notion that inadequately designed structured products or investment strategies have the potential to expose investors to unintended risks. Within this context, we introduce the concept of design risk into the portfolio insurance literature.

Specifically, our analysis focuses on Constant Proportion Portfolio Insurance (CPPI) structures and draws comparisons with classical Option-Based Portfolio Insurance (OBPI) as well as naive strategies like Stop-Loss Portfolio Insurance (SLPI) or CPPI with a multiplier set at one.

To assess the effectiveness of these strategies, we employ conditional Monte Carlo simulations to control the terminal value of the underlying asset. Our findings reveal a noteworthy phenomenon: even in scenarios where the terminal value of the underlying asset exceeds several times its initial value, CPPI strategies can lead to a cash-lock situation. The probability of getting cash-locked is influenced more by the multiplier’s magnitude and the investment horizon than by the dynamics of the underlying asset.”