Kun Duan , Liya Zhang , Shuyun Chen , Andrew Urquhart
{"title":"Heterogeneous housing bubbles and monetary policy","authors":"Kun Duan , Liya Zhang , Shuyun Chen , Andrew Urquhart","doi":"10.1016/j.irfa.2025.104079","DOIUrl":"10.1016/j.irfa.2025.104079","url":null,"abstract":"<div><div>This paper isolates rational and naive bubbles within a unified framework allowing bounded rationality, and studies how monetary policy surprises affect these bubbles’ characteristics differently. Employing a comprehensive dataset in urban China, our results demonstrate that both the magnitude and type of housing bubbles evolve across locations over time. Tightening monetary policy is found to exert a containing role in rational bubble dynamics but its role in naive bubbles is less significant. Our results confirm the effectiveness of contractionary monetary policy and home purchase restrictions in combating China’s housing bubbles thanks to the nationwide dominance of a rational bubble type.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"103 ","pages":"Article 104079"},"PeriodicalIF":7.5,"publicationDate":"2025-03-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143748149","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Quantifying uncertainty in economics policy predictions: A Bayesian & Monte Carlo based data-driven approach","authors":"Shafeeq Ur Rahaman , Mahe Jabeen Abdul","doi":"10.1016/j.irfa.2025.104157","DOIUrl":"10.1016/j.irfa.2025.104157","url":null,"abstract":"<div><div>Economic policy uncertainty relates to the unpredictability in government policies that can impact economic decision-making. High policy uncertainty can lead to less investment, slower economic growth, and increased volatility in financial markets. In this study, Markov Chain Monte Carlo (MCMC) simulations and Bayesian Hierarchical Modeling (BHM) are employed to quantify policy prediction uncertainty. This research focuses essentially on key policy domains and macroeconomic tools where uncertainty underlies crucial influences upon economic decisions. The methodology integrates data collection, feature scaling, normalization, Bayesian inference using MCMC simulations, uncertainty quantification and policy prediction to produce predictive insights under various economic scenarios. The Bayesian Hierarchical Model was employed to estimate the relationships between macroeconomic variables and policy outcomes. The posterior distribution results revealed significant predictors, with certain factors like monetary policy uncertainty exerting a substantial negative impact, while others such as equity market-related uncertainty showed positive influence. A rigorous uncertainty quantification step provided credible intervals for predicted outcomes with a 95 % credible interval ranging between 0.276 and 0.359. This enabled an assessment of the potential variability in predictions based on differing levels of economic uncertainty. The study concluded with policy predictions generated under two distinct economic scenarios. Under conditions of high uncertainty during global economic crisis, the predicted policy outcome was −0.2346, while a moderate uncertainty scenario during typical economic fluctuations resulted in a less negative outcome of −0.2060. These results demonstrate the sensitivity of economic policy predictions to varying levels of uncertainty. The findings provide a robust framework for understanding and quantifying uncertainty in economic policy-making. By applying BHM and Monte Carlo methods, this study can help in the establishment of more flexible and adaptive economic strategies in the face of uncertainty.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104157"},"PeriodicalIF":7.5,"publicationDate":"2025-03-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143678303","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Liming Sun , Feixiang Lu , Haoyuan Guan , Xiang Lu , Jun Zhai , Junchao Liu
{"title":"Tax incentives, business environment, and entrepreneurial and innovation outcome","authors":"Liming Sun , Feixiang Lu , Haoyuan Guan , Xiang Lu , Jun Zhai , Junchao Liu","doi":"10.1016/j.irfa.2025.104154","DOIUrl":"10.1016/j.irfa.2025.104154","url":null,"abstract":"<div><div>Using panel data from 294 cities in China (290 prefecture-level cities and 4 municipalities directly under the central government) from 2011 to 2020, this study investigates the impact of tax incentives on local innovation and entrepreneurship performance. Furthermore, it examines how the business climate and fiscal expenditure on science and technology (S&T) affect this process. Findings reveal that tax incentive programs significantly improve the effectiveness of innovation and entrepreneurship in cities, which is supported by robustness checks and endogeneity tests. Further mediation analysis indicates that tax incentives directly improve innovation and entrepreneurship performance and indirectly foster such activities by enhancing the business environment and augmenting fiscal allocations to S&T.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"103 ","pages":"Article 104154"},"PeriodicalIF":7.5,"publicationDate":"2025-03-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143738283","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Earning quality and climate risk: The case of European firms","authors":"Rim Ben Abdesslem , Imed Chkir , Samir Saadi","doi":"10.1016/j.irfa.2025.104133","DOIUrl":"10.1016/j.irfa.2025.104133","url":null,"abstract":"<div><div>We investigate the effect of climate risk on two fundamental characteristics of earnings quality: faithful representation and relevance, of 184 European-listed companies over the period of 2010 to 2019. We find that climate risk has a negative impact on both the faithfulness and relevance of earnings, ultimately reducing overall earnings quality. Firms in countries with higher climate risk are more prone to engage in accrual-based earnings management and report less persistent, predictable, and relevant earnings. In addition, we investigate the moderating effect of corporate social responsibility and the Paris agreement on this relationship and find that the negative effect on earning quality is stronger for less socially responsible firms and in the period before the Paris agreement. Our results are robust to alternative measures of climate risk and earnings quality.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104133"},"PeriodicalIF":7.5,"publicationDate":"2025-03-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143678304","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Green investment and quality of economic development: Evidence from China","authors":"Yan Wu , Hongmin Sun , Lixia Zhang , Can Cui","doi":"10.1016/j.irfa.2025.104147","DOIUrl":"10.1016/j.irfa.2025.104147","url":null,"abstract":"<div><div>Green investment, a key element of green finance, is vital for enhancing the quality of economic development (EDQ); however, green investment remains understudied. This study developed a comprehensive evaluation index for EDQ, considering five factors: innovation, coordination, greenness, openness, and sharing. Findings show that green investment enhances EDQ through industrial structure transformation and upgrading, green technological innovation, and carbon reduction. We also find that green investment has a significant positive spillover effect on EDQ. Green investment significantly promotes EDQ in the eastern region of China and in areas with higher levels of economic and financial development. The positive impact of green investment on EDQ becomes significant when per capita GDP exceeds a certain threshold and increases as per capita GDP increases.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"103 ","pages":"Article 104147"},"PeriodicalIF":7.5,"publicationDate":"2025-03-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143705996","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Employee welfare and earnings management","authors":"Qifan Zhai , Lin Xu","doi":"10.1016/j.irfa.2025.104076","DOIUrl":"10.1016/j.irfa.2025.104076","url":null,"abstract":"<div><div>This study examines the association between employee welfare and corporate earnings management. Existing literature suggests that firms with better employee welfare are more productive and hence have less incentive to engage in accrual earnings management. At odds with this incentive view, this paper finds that firms with high welfare levels actually substitute accrual earnings management with real earnings management based on a sample of China A-share listed firms. Beyond the scope of incentives, this research proposes that employee welfare also proxies for operating flexibility, which facilitates managers’ ability to use real earnings management relative to accrual earnings management. Consistent with this agency theory-based view, further evidence demonstrates that the positive (negative) relation between employee welfare and real (accrual) earnings management is more pronounced for firms faced with lower ability of real-activity manipulation and higher likelihood of employee whistleblowing. The mediation model results consistently confirm operating flexibility as the channel through which employee welfare affects earnings management strategy. Besides, the impact of employee welfare on earnings management increases with CEO power and managerial horizon, but can be curbed by high-quality corporate governance. Lastly, the relationship between employee welfare and earnings management demonstrates a counter-cyclical nature, strengthening the argument of agency theory.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104076"},"PeriodicalIF":7.5,"publicationDate":"2025-03-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143685721","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Marta Vidal , Javier Vidal-García , Stelios Bekiros , Juan E. Trinidad-Segovia
{"title":"Global mutual fund flows","authors":"Marta Vidal , Javier Vidal-García , Stelios Bekiros , Juan E. Trinidad-Segovia","doi":"10.1016/j.irfa.2025.104156","DOIUrl":"10.1016/j.irfa.2025.104156","url":null,"abstract":"<div><div>In this paper, we examine how different variables impact the profitability-flows relationship in mutual funds across different countries around the world; we also determine whether fund investors prefer some variables against others when making investment decisions. We compare different performance measures throughout this work; we examine the relationship between flows and performance employing a dataset of global equity mutual funds, from January 1990 to December 2023. Furthermore, we evaluate whether the results vary depending on the size of the fund and its position with respect to the market. Our evidence shows that investors consider mutual fund performance for their investment decisions. We also show that investors of small mutual funds are influenced by the risk-adjusted extra return, while large funds investors only consider the previous performance of the fund, although both attract flows when the market evolves favorably.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"103 ","pages":"Article 104156"},"PeriodicalIF":7.5,"publicationDate":"2025-03-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143705998","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Financial order matters: The real effect of financial-judicial trials on stock price informativeness","authors":"Xudong Lin , Hao Zhu , Yiqun Meng","doi":"10.1016/j.irfa.2025.104122","DOIUrl":"10.1016/j.irfa.2025.104122","url":null,"abstract":"<div><div>Financial-judicial trials play a critical role in maintaining a sound financial order that is essential for the informativeness of stock prices. By utilizing panel data from judgment documents on crimes of undermining order of financial management in prefecture-level cities from China Judgments Online between 2014 and 2021, we find that firms in cities with high intensity and efficiency of financial-judicial trials exhibit greater stock price informativeness. This result is robust across several checks, and we address potential endogeneity issues by leveraging the establishment of China's first financial court, the Shanghai Financial Court, as a quasi-natural experiment and including a Bartik instrumental variable. The mechanism analyses indicate that financial-judicial trials enhance stock price informativeness by promoting corporate governance and information disclosure quality. Heterogeneous analyses reveal that this relationship is particularly evident for nonpolitically connected firms, firms with general managers who do not have a legal background, highly competitive industries, and firms in areas with lower marketization. In addition, our results also show that the positive impact of financial-judicial trials on stock price informativeness contributes to enhanced investment efficiency, and that enhanced financial-judicial trials reduce stock price delays. Our study deepens the understanding of the positive role of financial-judicial trials in enhancing stock price informativeness from the financial order maintenance perspective.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104122"},"PeriodicalIF":7.5,"publicationDate":"2025-03-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143685714","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Qian Liang , Qingyuan Lin , Mengzhuo Guo , Quanying Lu , Dayong Zhang
{"title":"Forecasting crude oil prices: A Gated Recurrent Unit-based nonlinear Granger Causality model","authors":"Qian Liang , Qingyuan Lin , Mengzhuo Guo , Quanying Lu , Dayong Zhang","doi":"10.1016/j.irfa.2025.104124","DOIUrl":"10.1016/j.irfa.2025.104124","url":null,"abstract":"<div><div>Crude oil prices substantially impact the global economy, national security, and international politics. Accurate forecasting of crude oil prices and understanding the causality mechanism are crucial for policymakers, investors, and academia. Given the multitude of influence factors and oil prices’ complex nonlinearity, we propose a novel Gated Recurrent Unit-based non-linear Granger Causality (GRU-GC) model to provide precise oil price forecasting and causality determination. First, we collect numerous potential influence factors, including supply and consumption, global economic development, financial factors, and the energy market. We then harness the powerful predictive capabilities of the GRU, coupled with the insightful interpretation offered by the linear Granger model. This enables point prediction, probability density estimation, and causal inference simultaneously. The experimental results on the Brent and West Texas Intermediate (WTI) oil data sets show a significant superiority in multi-step-ahead forecasting. Furthermore, the unexpected variability of oil prices spurred by the COVID-19 pandemic validates the need and efficacy of integrating a probability density function for robust prediction. Additionally, our model reveals the non-linear Granger causality that differentiates Brent and WTI oil prices.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104124"},"PeriodicalIF":7.5,"publicationDate":"2025-03-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143678307","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Zongguo Ma , Chenhui Ding , Xu Wang , Qiaozhi Huang
{"title":"Carbon emission reduction development, digital economy, and green transformation of China's manufacturing industry","authors":"Zongguo Ma , Chenhui Ding , Xu Wang , Qiaozhi Huang","doi":"10.1016/j.irfa.2025.104149","DOIUrl":"10.1016/j.irfa.2025.104149","url":null,"abstract":"<div><div>This paper integrates Carbon Emission Reduction Development (CERD), the digital economy, and the green transformation of manufacturing within a unified analytical framework to explore the impact of CERD on the green transformation of manufacturing and examine the role of the digital economy in this process, offering significant theoretical and practical insights for advancing green, high-quality development in the manufacturing sector. Using panel data from 283 Chinese cities between 2014 and 2022, a bidirectional fixed-effects model and a panel threshold model were constructed to investigate the impact of CERD on the green transformation of manufacturing, along with the underlying mechanisms, and to assess the threshold effects of the digital economy development. The findings suggest that CERD significantly promotes the green transformation of manufacturing, a conclusion that remains valid after rigorous robustness tests. Heterogeneity analysis indicates that CERD has a stronger impact in eastern China, non-resource-based cities (non-RBCs), and the National Independent Innovation Demonstration Zones (NIDZs), while its impact on the central and western China, resource-based cities (RBCs), and non-NIDZs is negligible. Mechanism analysis suggests that green technological innovation is the key pathway through which CERD facilitates the green transformation of manufacturing. Threshold effect analysis reveals an inverted U-shaped relationship between CERD's impact and digital economy development, indicating that its effect initially intensifies and then weakens beyond certain levels of digital economic maturity. In the context of promoting green development in the manufacturing industry, our research findings provide valuable references for the formulation and implementation of carbon emission reduction policies in China and other countries that are actively working toward green transformation.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104149"},"PeriodicalIF":7.5,"publicationDate":"2025-03-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143685640","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}