Fin vs. tech: are trust and knowledge creation key ingredients in fintech start-up emergence and financing?

We investigate how the emergence of fintech start-ups and their financing is shaped by regional knowledge creation and lack of trust in financial services incumbents across 21 OECD countries, 226 regions and over the 2007–2014 period. We find that knowledge generated in the IT sector is much more salient for fostering new fintech start-ups than knowledge generated in the financial services sector. Additionally, the importance of new knowledge created in the financial services sector (IT sector) increases (decreases) as fintech start-ups grow and seek financing. When the level of trust in financial services incumbents falls within a region, this is followed by an increase in the financing provided to fintech start-ups. Nevertheless, regions with historically low average levels of trust in financial services incumbents attract less fintech investment overall

State pension funds and corporate social responsibility: do beneficiaries’ political values influence funds’ investment decisions?

This study explores the underlying drivers of US public pension funds’ tendency to tilt their portfolios towards companies with stronger corporate social responsibility (CSR). Studying the equity holdings of large, internally-managed US state pension funds, we find evidence that the political leaning of their beneficiaries and political pressures by state politicians affect funds’ investment decisions. State pension funds from states with Democratic-leaning beneficiaries tilt their portfolios more strongly towards companies that perform well on CSR issues, and this tendency is intensified when the state government is dominated by Democratic state politicians. Moreover, we find that funds which tilt their portfolios towards companies with superior CSR scores generate a slightly higher return compared with their counterparts. Overall, our findings indicate that funds align their investment choices with the financial and non-financial interests of their beneficiaries when deciding whether to incorporate CSR into their equity allocations

Entrepreneurs for a low carbon world: how environmental knowledge and policy shape the creation and financing of green start-ups

We investigate how different types of environmental policies and new regional environmental knowledge affect new venture creation in and financing of green (low carbon), brown (fossil fuel) and gray (unrelated to natural resources) technologies across 24 OECD countries and 293 regions over the period 2001-13. We find that new regional environmental knowledge positively impacts new venture creation in green technologies, and moderately in gray industries. Gray industries also benefit from enhanced start-up financing in regions where new environmental knowledge is created, confirming that environmental knowledge creation yields positive externalities beyond the green sector. We also find that a more stringent environmental policy regime negatively impacts the creation of new ventures across sectors, but most prominently, it discourages new fossil fuel ventures. However, once entrepreneurs decide to start a new business, stringent environmental policies have on aggregate a positive effect on new venture financing across sectors, particularly through feed-in-tariffs and emission standards

The city never sleeps, but when will investment banks wake up to the climate crisis?

Using a global dataset of over 840,000 equity, bond and syndicated loan investment banking deals, we build the fossil fuel investment brokerage profile of financial centres worldwide between 2000 and 2018. We also study whether city-level fossil fuel divestment commitments and country level green banking policies impact the profile of fossil fuel financial centres over our study timeframe. We find that several financial centres shift their fossil fuel investment brokerage profiles substantially, including the asset classes which they are active in. However, we do not find any evidence that this is driven by city-level divestment commitments. We do find however that fossil fuel investment banking brokers situated in financial centres exposed to voluntary green banking policies reduce their fossil fuel financing. This is driven by foreign brokers whose behaviour signals an anticipation of forthcoming mandatory green finance policies

Islamic and Conventional Exchanges: A Performance Analysis and Governance Perspectives

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Is Ethical Money Sensitive to Past Returns? The Case of Portfolio Constraints and Persistence in Islamic Funds

In this paper, we analyze the performance persistence and survivorship bias of Islamic funds. The remarkable growth of these types of ethical funds raises the question of how non-financial attributes, including beliefs and value systems, influence performance and its persistence. A procedure commonly used in prior literature to assess persistence is the measuring of the performance of investment strategies based on past performance. In this context, we propose a refined version of this methodology that controls the cross-sectional significance of the performance of these strategies. This procedure correctly identifies whether abnormal performance is due to a dynamic investment strategy based on past performance, or whether it is obtained by investing in a particular set of mutual funds. The significance of the persistence varies depending on the time horizon (yearly/half-yearly), survivorship, or the tail of the distribution. In particular, we find that persistence only exists for the best funds, whereas for the worst funds, the results are not significant

The level of compliance with the International Code of marketing of breast-milk substitutes: does it matter to stock markets?

The present paper explores, theoretically, and empirically, whether compliance with the International Code of marketing of breast-milk substitutes impacts on financial performance measured by stock markets. The empirical analysis, which considers a 20-year period, shows that stock markets are indifferent to the level of compliance by manufacturers with the International Code. Two important issues emerge from this result. Based on our finding that financial performance as measured by stock markets cannot explain the level of compliance, the first issue refers to what alternative types of mechanisms drive manufacturers who comply the least with voluntary codes such as the International Code. Conversely, from our finding that stock markets do not reward the most compliant, the second issue raised is an inherent weakness of stock markets to fully incorporate social and environmental values