Working Papers
Permanent URI for this collection
Browse
Browsing Working Papers by Department "Finance"
Now showing 1 - 11 of 11
Results Per Page
Sort Options
Publication Assessing the Impact of International Sanctions on Russian Oil Exports(SSRN, 2023-02-23) Mironov, Maxim; Babina, Tania; Hilgenstock, Benjamin; Itskhoki, Oleg; Ribakova, Elina; https://ror.org/02jjdwm75We use a unique high-frequency Russian customs dataset to evaluate the impact of international sanctions on Russia – focusing on Russian crude oil and oil products exports, as they are the key sources of export earnings and government revenues. We study the effects of two focal sanctions measures – the EU embargo and G7 price cap on Russian seaborne crude oil, which both took effect on December 5, 2022. We find that Russia was able to redirect crude oil exports from Europe to alternative markets such as India, China, and Turkey but that export earnings were curbed substantially by the sizable discounts that Russian exporters had to accept in market segments where the impeding EU embargo lowered demand, e.g., exports from Baltic Sea ports – a dynamic that only became more pronounced after the embargo and price cap’s taking effect. However, we do not find crude oil discounts as large as those reflected in Urals prices towards the end of 2022. In particular, prices in market segments that are unaffected by lower European demand, e.g., exports from Russia’s Pacific Ocean ports, have not dropped in a meaningful way and shipments do not appear to comply with the price cap. What the EU embargo and G7 price cap have, thus, triggered is a fundamental fragmentation of the market for Russian crude oil. Based on our analysis, we conclude that a central focus of policy going forward should be the enforcement of existing sanctions on Russian oil – along with the lowering of the oil price cap. As far as oil products are concerned, we show that it is significantly less feasible to redirect exports away from the European market. This suggests that the EU embargo on oil products, which took effect on February 5, 2023, will prove to be a powerful additional tool to further curb Russian export and fiscal revenues.Publication Carbon Emissions, Mutual Fund Trading, and the Liquidity of Corporate Bonds(2021-07-08) Zhang, Weiming (Elaine); Cao, Jie; Li, Yi; Zhan, Xintong; Zhou, Linyu (Lucy); https://ror.org/02jjdwm75This paper investigates the effect of climate risks on corporate bond mutual funds’ trading activities and explores its mechanism. We find that investor flows negatively respond to mutual funds’ carbon exposure, leveraging the Paris Agreement as a shock. Such carbon-induced redemptions prompt mutual funds to sell bonds issued by high-carbon companies, especially the bonds held by funds with higher outflow-to-carbon sensitivity. We rule out the alternative hypothesis that a fundamental shift in funds’ investment preferences drives the reduction in high-carbon holdings. Moreover, we note a deterioration in the liquidity of high-carbon bonds, particularly those heavily owned by mutual funds.Publication College Achievement and Attainment Gaps: Evidence from West Point Cadets(National bureau of economic research, 2020-05) Cestau, Dario; Epple, Dennis; Romano, Richard; Sieg, Holger; Wojtaszek, Carl; https://ror.org/02jjdwm75Assessing the effectiveness of education by race and gender is as difficult as it is important. We investigate this question utilizing data for eleven cohorts at West Point, a distinguished military academy and highly ranked liberal arts college. Employing matching using entry scores on three comprehensive measures, we obtain exceptional matches of score distributions for black and matched white students. We find black students have lower graduating achievement scores than matched white students, but comparable rates of graduation, retention in the Army after graduation, and early promotion. Hispanic-white comparisons reveal no differences. Female-male comparisons reveal women have lower attainment and retention rates.Publication Competition and Market Concentration in the Municipal Bond Market(SSRN, 2019-07-11) Cestau, Dario; https://ror.org/02jjdwm75Lack of competition among the underwriters of municipal bonds increases the borrowing costs of local municipalities. I find that the proportion of municipal bonds sold in competitive sales in the state has an economically significant effect on several measures of competitiveness. Competitive sales increase the number of active underwriters in the state and substantially decrease the concentration in the market for underwriting services for municipal bonds. I also find that state restrictions on the negotiated sale of municipal bonds can materially decrease market concentration. Market concentration has increased considerably over time, but only negotiated deals have contributed to greater concentration.Publication COVID-19 and the Value of CEOs : The Unintended Effect of Soccer Games across European Stocks(2020) Gómez, Juan Pedro; Mironov, Maxim; https://ror.org/02jjdwm75This paper studies the effect of the number of cases of COVID-19 on stock returns from over 3,500 publicly listed firms headquartered across 167 regions in 10 European countries. We instrument the number of cases per million inhabitant in each region with its population, density, and the soccer games celebrated in the region. Regions that hosted a soccer match during March show 30% more accumulated cases of COVID-19 in the same month. Within the same country and industry, an increase in the number of instrumented cases per million people in the region during March implies a decrease in stock returns over March and April. The market discount increases significantly among firms managed by CEOs 60 years and older. Overall, we interpret this as evidence of the market anticipating the potential loss of firm value in the event of the CEO dies of COVID-19Publication Firms’ Rationales for CEO Duality: Evidence from a Mandatory Disclosure Regulation(2020-12) Goergen, Marc; Limbach, Peter; Scholz Daneshgari, Meik; https://ror.org/02jjdwm75Exploiting the 2009 amendments to Regulation S-K, we provide unique evidence on the first-time disclosure of the reasons firms state for combining or separating the roles of CEO and chairman. The stated reasons support both agency theory and organization theory. They are more numerous, comprise more words, and have a more positive tone for firms with duality. Examining the announcement returns to firms’ disclosures, we find that investors evaluate the most frequently cited reasons for CEO duality by considering the firm’s characteristics. Our evidence enhances the understanding of firms’ endogenous decision to opt for CEO duality and its value consequences.Publication Not all General Obligation Bonds Are Created Equal(2021-07-04) Cestau, Dario; https://ror.org/02jjdwm75We document a comprehensive new classification of the legal structures backing municipal bonds and the effects that different legal features have on bond yields. It is a well-documented fact that investors rely on credit ratings to determine the credit risk of municipal bonds. However, rating agencies do not fully factor in the legal structures backing the bonds because measuring and testing the effects of said legal structures is inherently onerous. Since the price of risk is unusually high in this market, these flaws have important effects on yields.Publication Russian Oil Exports Under International Sanctions(SSRN, 2023-05-09) Mironov, Maxim; Hilgenstock, Benjamin; Shapoval, Nataliia; Ribakova, Elina; Babina, Tania; Itskhoki, Oleg; https://ror.org/02jjdwm75We use a unique, comprehensive transactions-level dataset on Russian exports to evaluate the impact of international sanctions—focusing on crude oil and oil products. Relying on data through the first quarter of 2023, we find that the sanctions coalition’s strategy to keep Russian oil on the global market, while restricting the country’s export earnings and fiscal revenues, is showing results. Importantly, global oil prices did not increase since the taking-effect of the EU embargo on crude oil on December 5, 2022—a key concern of some coalition governments. Rather, discounts on Russian crude oil exports widened considerably in segments of the market, where demand conditions changed due to the exit of European buyers. Russian crude oil and oil product exports, in value terms, fell by $15.6 billion in 2023Q1 vs. 2022Q4 and account for 40% of the total decline in goods exports. We estimate contributions of 6.1 billion from smaller volumes, $4.2 billion from lower global prices, as well as $5.2 billion from wider discounts. At the same time, 2023Q1 budget revenues from hydrocarbons came in 47% below the previous quarter. Even so, our findings also point to violations of the price cap and underscore the urgent need for more rigorous enforcement. Specifically, export prices at the critical Pacific Ocean port of Kozmino stood at around $73/barrel in 2023Q1—with 96% of volumes sold above the $60/barrel threshold—, while a substantial share of shipments continues to involve Western-owned or –insured vessels. Based on our analysis, we conclude that a critical focus of sanctions policy going forward should be the enforcement of existing sanctions on Russian oil.Publication Should State Governments Prohibit the Negotiated Sales of Municipal Bonds?(SSRN, 2020-08-06) Cestau, Dario; Green, Richard; Hollifield, Burton; Schürhoff, Norman; https://ror.org/02jjdwm75Should legislation ban the negotiated sales of municipal bonds? What are the costs of forcing public auctions? We compare the offering yields of local governments that are forced by state law to use public auctions to the offering yields of local governments that can choose between auctions and negotiated sales. Using a sample of 369,482 school bonds issued between 2004 and 2014, we find that a restriction on negotiated sales has a negative cost instead of positive. The prohibition benefits issuers on average. The offering yields of constrained issuers are 17 basis points lower than the offering yields of unconstrained issuers. The effect is equivalent to a rating upgrade from non-rated to AA-. Nevertheless, most issuers prefer to use negotiated sales even if they do not maximize bond proceeds.Publication Specialization investments and market power in the underwriting market for municipal bonds(2020) Cestau, Dario; https://ror.org/02jjdwm75I find that municipal bond underwriters tend to specialize either in competitive sales or in negotiated sales. In a sample of 69,347 school district deals, on average, the market shares of competitive deals of the three main underwriters of negotiated deals in the state are 85% smaller than their shares of negotiated deals. Similarly, the top three competitive underwriters in the state have market shares of negotiated deals 94% smaller than their shares of competitive deals. I also find that competitive and negotiated sales require different types of specialization investments. The former requires investments in dealer networks, while the latter requires building relationships with investors and issuers. Local underwriters have a cost advantage in the specialization investments required for negotiated sales, and often dominate this market. However, this cost advantage disappears quickly crossing state borders. On the other hand, underwriters who invest in dealer networks can amortize their investment in multiple states. Compared to negotiated underwriters, I find that prime competitive underwriters in one state are more likely to become dominant competitive underwriters in a second state. Therefore, banks with pre-established networks have a cost advantage for competitive sales, and these markets are often dominated by national banks headquartered in New York. These cost dynamics also explain the higher industry concentration observed in negotiated sales markets.Publication Unlocking ESG Premium from Options(SSRN, 2023-03-24) Zhang, Weiming (Elaine); Cao, Jie ; Goyal, Amit; Zhan, Xintong (Eunice); https://ror.org/02jjdwm75We find that option expensiveness, measured by delta-hedged option returns, is higher for low-ESG stocks, indicating that investors pay a premium in the options market to hedge against ESG-related uncertainty. We estimate that this ESG premium is about 0.2% for 50 days. All three components of ESG contribute to option pricing. We find that investors pay the ESG premium to hedge against jump risks, but not volatility risks. The effect of ESG performance is more prominent during periods when attention to ESG is higher and for firms that are more subject to ESG-related risks.