Contributions published at Department of Banking and Finance (Pablo Koch Medina)

This study examines the stock price reactions of environmentally responsible stocks during the onset of the 2023 banking crisis, triggered by the collapse of Silicon Valley Bank (SVB). Our findings indicate that stocks poised to benefit from the shift to a low-carbon economy underperformed during the 2023 crisis. This suggests that investors anticipate a slowdown in climate tech development due to distress in the banking sector. Our results underscore the significance of considering not only the influence of the climate crisis on financial stability, but also the pivotal role that financial stability plays in ensuring a successful energy transition.

In the digital paradigm, collaborative value creation takes place across organisational boundaries while the consumer moves to the centre. Value will be created in the future through the combination of artificial intelligence, augmented reality, the internet of things, blockchain, cloud and quantum computing, and the customer journey will span different sectors. The golden triangle of digital ecosystems includes commerce, social media, and finance. Companies that understand the benefits of the platform economy can achieve exponential growth and become winners of the digital transformation. They can share knowledge and resources across organisational boundaries, react quickly to market changes and find the balance between existing businesses and new markets. The future of work and leadership in open and digital ecosystems requires rethinking and new dynamic capabilities such as openness, agility, and ambidexterity. The book is based on years of research. It expands traditional management models with pragmatic strategy and action concepts, which are explained with diverse practical examples of tech companies from the USA, cross-industry ecosystems from China and healthcare platforms from Switzerland.

The internal ratings-based (IRB) approach maps bank risk profiles more adequately than the standardized approach. After switching to IRB, banks’ risk-weighted asset (RWA) densities are thus expected to diverge, especially across countries with different supervisory strictness and risk levels. However, when examining 52 listed banks headquartered in 14 European countries that adopted the IRB approach, we observe a convergence of their RWA densities over time. We test whether this convergence can be entirely explained by differences in the size of the banks, loss levels, country risk, and/or time of IRB implementation. Our findings indicate that this is not the case. Whereas banks in high-risk countries with lax regulation, reduce their RWA densities, banks elsewhere increase theirs. Especially for banks in high-risk countries, RWA densities underestimate banks’ economic risk. Hence, the IRB approach enables regulatory arbitrage, whereby authorities only enforce strict supervision on capital requirements if they do not jeopardize bank viability.

Although sustainable finance (SF) has become a leading trend in the financial industry, little is known about how attention to news on SF, trust in the industry, and recent accusations of greenwashing affect the likelihood to invest in SF products. Based on a survey of a representative sample of Swiss citizens, we find that more attention to news about SF and trust in SF are positively related to the likelihood of investing in SF, whereas greenwashing perceptions are negatively related. Furthermore, attention to SF and economic news are positive predictors of sustainable finance literacy (SFL), whereas attention to SF news is negatively associated with greenwashing perception of SF. Collectively, these findings imply that engaging citizens with SF investments, particularly information seeking on SF news and trust in SF rather than SFL, need to be fostered. The Implications of the communication practices of the SF industry and policy implications are discussed.

What is the impact of policy interventions on the systemic risk of banks? To answer this question, we analyze a comprehensive sample that combines an original set of bank-specific bailout events with the balance sheets of key affected and nonaffected European banks between 2005 and 2014. We find a positive and significant association of guarantees with systemic risk that is somewhat weaker in the long run when the regulator appoints members to the supervisory board. The short run association between recapitalizations and systemic risk is also positive for large and less capitalized banks, while in the long run, recapitalizations are linked with reduced systemic importance, especially for less profitable banks and in cases when the regulator limits management pay. Liquidity injections are positively linked with systemic risk, but the long-run effect is mitigated for small or better capitalized banks. In the short run, injecting liquidity is associated with reduced systemic risk when the regulator imposes restrictions on supervisory board composition or on management pay or capital payouts.

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This paper studies the contribution of analysts to the functioning and failure of the market for Initial Coin Offerings (ICOs). The assessments of freelancing analysts exhibit biases due to reciprocal interactions of analysts with ICO team members. Even favorably rated ICOs tend to fail raising some capital when a greater portion of their ratings reciprocate prior ratings. 90 days after listing on an exchange the market capitalization relative to the initial funds raised is smaller for tokens with more reciprocal ratings. These findings suggest that conflicts of interest help explain the failure of ICOs.

Predicting equity returns is a complex task in finance. This paper examines the volume profile as a predictive tool using machine learning techniques. We process and summarize the volume profile into features, using an XGBoost classifier to forecast stock return direction. Our approach is validated across two equity sets, demonstrating its capability to identify high-return periods. Based on the probability estimates, trading strategies are created and shown to be able to outperform the benchmark on a risk-adjusted and total return basis. Overall, the results indicate the predictive potential of the volume profile leveraged by the model.

The relationship between economic indicators and financial development has long been a topic of particular interest for researchers and policymakers alike. Despite extensive research in the past, the true nature of the relationship remained unknown. The goal of this thesis is to analyze this research question for multiple advanced Asian countries with various economic and financial indicators. The analysis is conducted by means of ordinary least squares regression. The results reveal that many indicators have a rather negative impact but not consistently across all countries, making it difficult to draw a general conclusion about the observed relationship.

Mit dieser quantitativen empirischen Studie mit 207 Probanden wird gezeigt, dass die Big-Five- Persönlichkeitsdimensionen einen Einfluss auf ausgewählte Kauf- und Finanzierungspräferenzen bei Wohneigentum in Deutschland ausüben, wohingegen die Persönlichkeitsdimension ‹Eigenschaftsangst› diese Präferenzen nicht beeinflusst. Die Auswertung erfolgte mittels ‹Ordinary Least Squares›-Regressionsanalyse. Des Weiteren besteht kein Zusammenhang zwischen den Big Five und der Preisbereitschaft bei nachhaltigen Gebäudeattributen. Ausserdem wurde festgestellt, dass sich die Kauf- und Finanzierungspräferenzen im Mittelwert länderüber- greifend zwischen Israel und Deutschland signifikant voneinander unterscheiden. Diese Ergebnisse unter- streichen einerseits die Bedeutung von Persönlich- keitsdimensionen in Entscheidungsprozessen und andererseits die Notwendigkeit, auch kulturelle Faktoren in zukünftige Forschungen einzubeziehen, um Abweichungen besser zu verstehen.

The flows to equity method is commonly used in leveraged buyouts and other highly levered transactions. These flows are hybrid flows, mixing expected operating cash flows with promised debt payments under a planned debt schedule. Because of this, it is difficult to accurately estimate the appropriate discount rate, a difficulty that is compounded by the typically changing leverage over time under the planned debt schedule. We show how the flows to equity approach works and discuss its benefits and drawbacks as compared with other, ‘more standard’ methods.

We analyze the predictive power of technical analysis with a novel data set based on news sentiment that allows to systematically examine a set of technical analysis indicators over an extensive time period. We do not find much statistically significant relationships with the examined indicators and future asset returns, and we almost do not find any alphas in trading strategies based on technical analysis sentiment. We find evidence for a contrarian-based hypothesis: past market returns and technical analysis sentiment are able to predict future technical analysis sentiment with a negative relationship.

This study examines the stock price reactions of environmentally responsible stocks during the onset of the 2023 banking crisis, triggered by the collapse of Silicon Valley Bank (SVB). Our findings indicate that stocks poised to benefit from the shift to a low-carbon economy underperformed during the 2023 crisis. This suggests that investors anticipate a slowdown in climate tech development due to distress in the banking sector. Our results underscore the significance of considering not only the influence of the climate crisis on financial stability, but also the pivotal role that financial stability plays in ensuring a successful energy transition.

Team of researchers wants to use tech to expose greenwashing.

Central-bank money provides utility by serving as means of exchange for virtually all transactions in the economy. New reserves (money) are issued to banks in exchange for collateral such as government bonds. An asset's degree of direct convertibility into fresh reserves may affect its utility and, consequently, its market price. We show the existence of a government-bond reserves convertibility premium, which tapers off at longer maturities. Essentially, there is a pure monetary component to some asset prices. Our findings have implications for our understanding of liquidity premia, the term structure of interest rates, and the impact of central-bank collateral policy.

We investigate the impact of three non-climate environmental criteria: biodiversity, water, and pollution prevention, on infrastructure firms' credit risk term structure from the perspective of double materiality. Our findings show that firms that effectively manage these three environmental risks to which they are materially exposed have up to 93bps better long-term refinancing conditions compared to the worst-performing firms. While the results are less significant for the firm's material impact on the environment, investors still reward the management of these criteria beyond climate with improved long-term financing conditions for infrastructure investments. Overall, we find that financial markets respond positively to the prospect of more stringent regulations related to these criteria, which are currently used by the EU Taxonomy to assess the sustainability of investments.

Der Fokus auf Stock Picking, das Timing des Ein- und Ausstiegs sowie Erzielen einer Überrendite führt in die Irre. Entscheidend ist die richtige Anlagestrategie.

We assess how investors’ willingness-to-pay (WTP) for sustainable investments responds to the impact of those investments, using a framed field experiment. While investors have a substantial WTP for sustainable investments, they do not pay more for more impact. This also holds for dedicated impact investors. When investors compare several sustainable investments, their WTP responds to differences in impact but not to the absolute level of impact. Investors experience positive emotions when choosing sustainable investments, irrespective of investments’ impact. Our findings suggest that the WTP for sustainable investments is driven by an emotional rather than a calculative valuation of impact.