Refine
Year of publication
- 2023 (87) (remove)
Document Type
- Working Paper (87)
Language
- English (87) (remove)
Has Fulltext
- yes (87)
Is part of the Bibliography
- no (87)
Keywords
- Monetary Policy (4)
- DSGE (3)
- ESG (3)
- Machine Learning (3)
- Numerical accuracy (3)
- Solution methods (3)
- Sustainable Finance (3)
- climate change (3)
- household finance (3)
- social preferences (3)
Institute
- Center for Financial Studies (CFS) (87) (remove)
Biodiversity loss poses a significant threat to the global economy and affects ecosystem services on which most large companies rely heavily. The severe financial implications of such a reduced species diversity have attracted the attention of companies and stakeholders, with numerous calls to increase corporate transparency. Using textual analysis, this study thus investigates the current state of voluntary biodiversity reporting of 359 European blue-chip companies and assesses the extent to which it aligns with the upcoming disclosure framework of the Task Force on Nature-related Financial Disclosures (TNFD). The descriptive results suggest a substantial gap between current reporting practices and the proposed TNFD framework, with disclosures largely lacking quantification, details and clear targets. In addition, the disclosures appear to be relatively unstandardized. Companies in sectors or regions exposed to higher nature-related risks as well as larger companies are more likely to report on aspects of biodiversity. This study contributes to the emerging literature on nature-related risks and provides detailed insights on the extent of the reporting gap in light of the upcoming standards.
We examine whether the uncertainty related to environmental, social, and governance (ESG) regulation developments is reflected in asset prices. We proxy the sensitivity of firms to ESG regulation uncertainty by the disparity across the components of their ESG ratings. Firms with high ESG disparity have a higher option-implied cost of protection against downside tail risk. The impact of the misalignment across the different dimensions of the ESG score is distinct from that of ESG score level itself. Aggregate downside risk bears a negative price for firms with low ESG disparity.
This research focuses on the cost of financing green projects on the primary bond market and tests for a potential price differential between green bonds issued by government entities and those issued by supranational and private sector issuers. Our findings indicate that government entities benefit from more favorable pricing conditions worldwide. This advantage is growing over time and particularly pronounced for sovereigns and municipal authorities. Our analysis also reveals that country-specific factors, such as strong political commitment to address climate change, low income level and high degree of indebtedness are significant predictors of the pricing spread across bonds.
We explore how personality traits are related to household borrowing behavior. Using survey data representative for the Netherlands, we consider the Big Five personality traits (openness, conscientiousness, agreeableness, extraversion and neuroticism), as well as the belief that one is master of one’s fate (locus of control). We hypothesize that personality traits can complement as well as substitute financial knowledge of a household. We present three sets of results. First, we find that personality traits are positively correlated with borrowing expectations. Locus of control, extraversion and agreeableness are correlated with informal borrowing expectations, which is the expectation that one can borrow from family and friends. With respect to expectations on the approval of a formal loan application, it is locus of control and conscientiousness that are positively associated. Effect sizes are large and economically meaningful. Second, we find that personality traits are important for borrowing constraints. A more internal locus of control and higher neuroticism are correlated with being denied for credit, as well as discouraged borrowing. Our third set of results reports findings on personality traits and loan regret, and how traits are correlated with dealing with loan troubles. Many households in our sample express regret (21%), but more open, more agreeable and more neurotic individuals are more likely to express regret. Our results are not driven by financial knowledge, time preferences or risk attitudes. Overall these findings imply that non-cognitive traits are important for borrowing behavior of households.
Contagious stablecoins?
(2023)
Can competing stablecoins produce efficient and stable outcomes? We study competition among stablecoins pegged to a stable currency. They are backed by interest-bearing safe assets and can be redeemed with the issuer or traded in a secondary market. If an issuer sticks to an appropriate investment and redemption rule, its stablecoin is invulnerable to runs. Since an issuer must pay interest on its stablecoin if other issuers also pay interest, competing interest-bearing stablecoins, however, are contagious and can render the economy inefficient and unstable. The efficient allocation is uniquely implemented when regulation prevents interest payments on stablecoins.
The right to ask questions and voice their opinions at annual general meetings (AGMs) represents one of the few avenues for shareholders to communicate directly and publicly with the firm’s management. Examining AGM transcripts of U.S. companies between 2007 and 2021, we find that shareholders actively express their concerns about environmental, social and governance (ESG) issues in accordance with their specific relationship with the company. Further, they are also demonstrably more vocal about ESG issues at AGMs of firms with poor sustainability performance. What is more, we show that this soft engagement translates into a more negative tone which, in turn, results in lower approval rates for management proposals. Shareholders' soft engagement at AGMs is hence an effective way to "walk the talk".
The issuance of sustainability-linked loans (SLLs) has grown exponentially in recent years. Using a scoring methodology, we examine the underlying key performance indicators of a large sample of SLLs and analyze whether their design creates effective incentives for improving corporate sustainability performance. We demonstrate that the majority of loans fails to meet key requirements that would make them credible instruments for generating effective sustainability incentives. These findings call into question the actual sustainability impact that may be achieved through the issuance of ESG-linked debt.