September 3, 2024 / 12:00 p.m. - 01:00 p.m. / D3.0.233
Alberto Rossi (Georgetown University)
"Fighting Climate Change with FinTech" (joint with Antonio Gargano)

Abstract: We study the environmental sustainability of individuals’ consumption choices using unique data from a FinTech App that tracks users’ spending and emissions at the transaction level. Using a randomized encouragement design, we show that individuals are likely to purchase carbon calculator services that provide them with detailed transaction-level information about their emissions. However, such a tool does not cause significant changes in their consumption and emissions. On the other hand, services that offset individuals’ emissions by planting trees are less likely to be adopted but prove effective in reducing users’ net emissions. Survey evidence suggests that the ineffectiveness of the carbon calculator is not due to the way the information is computed or delivered—users perceive the app’s information as easy to understand, accurate, new, and accessible. Instead, the lack of effectiveness likely stems from users not viewing climate change as more important than other socio-economic problems to alter their habits. The lack of adoption of carbon offsetting is instead driven by limited attention and users’ desire to directly benefit from the externality associated with having trees planted in their country of origin. Our results show the challenges and opportunities associated with the tools promoting sustainable behavior that were initially confined to specialized FinTech Apps and are now becoming widespread across large financial institutions.

August 20, 2024 / 12:00 p.m. - 01:00 p.m. / D3.0.222
Gordon Phillips (Tuck School of Business, Dartmouth College)
"The Impact of Cloud Computing and AI on Industry Dynamics and Competition" (joint with Yao Lu and Jia Yang)

Abstract: We examine the rise of cloud computing and AI in China and their impact on industry dynamics after a shock to the cost of Internet-based computing power. We find that cloud computing is associated with an increase in firm entry, exit, the likelihood of merger, and equity financing. Conversely, AI adoption has no impact on entry but reduces the likelihood of exit and merger. Firm size plays a crucial role in these dynamics: cloud computing increases exit rates across all firms, while larger firms benefit from AI, experiencing reduced exit rates. Cloud computing decreases industry concentration, but AI increases concentration.

August 19, 2024 / 12:00 p.m. - 01:00 p.m. / D3.0.222
Christian Kubitza (ECB)
"The Implications of CIP Deviations for International Capital Flows" (joint with Jean-David Sigaux and Quentin Vandeweyer)

Abstract: We study the implications of deviations from covered interest rate parity (CIP) for international capital flows using a novel dataset covering the universe of derivatives and securities holdings in the euro area. We document that euro-area investors’ holdings of USD bonds decrease following a widening in USD-EUR CIP deviation. Consistent with a simple dynamic model of currency risk hedging, we find that investors are significantly more responsive to CIP deviations when they need to roll over existing currency derivatives. CIP-driven shifts in bond demand significantly affect government bond prices. Our findings have important implications for understanding international capital flows and financial stability.

June 25, 2024 / 12:00 p.m. - 01:00 p.m. / D3.0.233
Irene Monasterolo (WU Vienna) 
"Technological Greenness and Long-run Performance" 

Abstract: Firms’ investments in green technology are crucial for investors’ alignment to the Net Zero target. However, it is still unclear whether firms that invest in green technologies are rewarded by the market, particularly in the long run. Using a science-based technological measure of greenness, we find that the adoption of sustainable technologies is associated with better future financial and operating performance. Firms with greener technologies do not just appeal to investors’ pro-social preferences but also represent better firms. The results are especially strong in countries characterized by higher financial development, and for firms with better climate-related disclosure.

June 24, 2024 / 12:30 p.m. - 01:30 p.m. / D3.0.225
Martijn Boons (Nova School of Business and Economics)
"When do Investors Care About Fund Performance?" 

Abstract: We revisit some of the most fundamental questions in the mutual fund literature using relatively high-frequency data on fund flows and returns. We show that weekly flows significantly respond to a single day of performance. More surprisingly, this flow-performance sensitivity is mainly driven by days with heightened investor attention, which we show to be days with unusually low market returns (``bad days'') using a novel dataset of traffic to financial websites. Further, in contrast to existing evidence at lower frequencies, flows respond to both out- and underperformance on bad days. These bad day flows represent smart money, because bad day outperformance is persistent and contributes significantly to unconditional fund outperformance. In turn, this persistence reveals specific bad day skill that we argue to be different from general managerial skill.  Overall, the marginal fund investor at higher frequency rewards fund managers with specific bad day skill, which highlights the importance of studying the interaction between fund and market returns for understanding the mutual fund market.

June 05, 2024 / 02:00 p.m. - 03:00 p.m. / TC.4.05
Justin Sydnor (Wisconsin School of Business)
"Liquidity Constraints and the Value of Insurance" (joint with Keith Marzilli Ericson)

Abstract: Insurance moves resources across both time and states. We study the consumption-smoothing benefits of insurance under liquidity constraints in a model where contracts span multiple consumption periods. The normative benchmarks for insurance demand under liquidity constraints differ qualitatively and quantitatively from the standard model: individuals may only partially insure at actuarially fair prices, may benefit from insurance when premiums are very high and even sometimes when dominated, and may value insurance against events that will surely happen. Simulations for health insurance show that the alternative normative benchmark for liquidity-constrained individuals affects whether common choice patterns should be interpreted as mistakes
 

May 28, 2024 / 12:30 p.m. - 01:30 p.m. / D3.0.222
Alex Weissensteiner (Free University of Bozen-Bolzano)
"Futures and options trading with heterogeneous agents: A general equilibrium model"

Abstract: We examine the trading behavior of EuroStoxx 50 futures and options on EUREX exchange. Our analysis reveals a consistent pattern: during periods of heightened uncertainty, agents (traders acting on behalf of clients) tend to sell, while principals (market makers and proprietary traders) tend to buy. Agents drive the majority of trades, effectively positioning principals as liquidity providers. Interestingly, despite their selling activity in the futures market, agents engage in a "counterintuitive" strategy in the options market. They short puts and buy calls, effectively creating a synthetic long futures position. To shed light on these trading patterns, we propose a general equilibrium model that accounts for the presence of heterogeneous agents.
 

May 16, 2024 / 01:00 p.m. - 02:00 p.m. / TC.5.15
Markus Parlasca (WU Vienna)
"Voting and Trading on Proxy Advice" (joint with Paul Voss)

Abstract: This paper studies how proxy advice affects corporate decision-making when shareholders can vote and trade. Because proxy advice correlates shareholders’ votes, it is informative about the vote outcome. We show that the predictability of the vote outcome induces shareholders with conflicting information vis-à-vis the proxy advice to sell their shares – precisely when their vote would be most valuable for information aggregation. We find that proxy advice can thus reduce firm value and more precise proxy advice may not improve corporate decision making. Our results give rise to new empirical predictions and have implications for regulation.
 

May 15, 2024 / 12:00 p.m. - 01:00 p.m. / TC.3.08
Kristian Miltersen (CBS Copenhagen Business School)
"Incremental Issuance in a Model of Risky Debt with Proportional Issuance Costs" (joint with Jens Dick-Nielsen and Walter N. Torous)

Abstract: We study incremental issuance of corporate debt with and without commitment in a model where earnings are log-normally distributed.  We provide a non-smooth Markov perfect equilibrium solution as an alternative to the smooth Markov perfect equilibrium developed by DeMarzo and He (2021).  In our no commitment non-smooth equilibrium, equity holders gain positive tax benefits to leverage, there is a unique optimal leverage ratio, and a unique optimal maturity structure of debt.
 

March 07, 2024 / 12:30 p.m. - 01:30 p.m. / TC.3.05
Luana Zaccaria (Einaudi Institute for Economics and Finance)
"Welcome on Board:The Spillover Effects of Mandatory Gender Quotas" (joint with L. Guiso and F. Schivardi)

Abstract: The efficacy of board quotas as a policy to foster gender balance in business relies on the expectation that its effect can trickle down vertically inside the firms targeted by quota laws ‑ improving the working conditions of other female employees ‑ and/or spill over horizontally to other firms in the economy. Research has found little evidence so far for vertical trickle-down effects. We shift focus and investigate horizontal spillovers. We examine the 2011 Italian law that required listed and state-controlled enterprises (target companies) to significantly increase the number of board seats assigned to directors of the under-represented gender. Within the universe of Italian corporations, we identify “connected” firms as non-target firms that shared at least one board member with target companies in the years prior to the reform. We document that connected firms significantly increase the share of female board members after the reform as compared to similar non-connected firms, despite not being subject to the new law requirements. When accounting for spillover effects, the overall increase in the number of new female directors is at least twice as large as that computed on target firms alone. Connected firms are more likely to hire new female directors after the reform, and newly appointed directors, both male and female, are hired drawing from a broader geographical area, tend to have fewer prior connections with older board members, and are more likely to be firm outsiders. This suggests that the change in search technology induced by the reform may spill over to connected firms as target firms share information on new professionally selected candidates for directorship positions.