scholarly journals Are Sustainable Companies More Likely to Default? Evidence from the Dynamics between Credit and ESG Ratings

2021 ◽  
Vol 13 (15) ◽  
pp. 8568
Author(s):  
Aydin Aslan ◽  
Lars Poppe ◽  
Peter Posch
Keyword(s):  
Time Window ◽  
Credit Ratings ◽  
Transition Matrices ◽  
Listed Firms ◽  
Corporate Credit ◽  
Credit Default ◽  
The Us ◽  
Survivorship Bias ◽  
The Relationship ◽  
Over Time

We investigate the relationship between environmental, social and governance (ESG) performance and the probability of corporate credit default. By using a sample of 902 publicly-listed firms in the US from 2002 to 2017 and by converting Standard & Poor’s credit ratings into default probabilities from rating transition matrices, we find the probability of corporate credit default to be significantly lower for firms with high ESG performance. Furthermore, by expanding the time window in our regression analysis, we observe that the influence of ESG and its constituents strongly varies over time. We argue that these dynamics may be due to financial and regulatory shocks. In a sector decomposition, we additionally find that the energy sector is most influenced by ESG regarding the probability of corporate credit default. We expect an increasing availability of ESG data in the future to reduce possible survivorship bias and to enhance the comparison between ESG-rated and non-ESG-rated firms.

scholarly journals The Determinants of CDS Spreads in Multiple Industry Sectors: A Comparison between the US and Europe

Risks ◽  
2018 ◽  
Vol 6 (3) ◽  
pp. 89 ◽  
Author(s):  
Jatin Malhotra ◽  
Angelo Corelli
Keyword(s):  
Interest Rates ◽  
Global Financial Crisis ◽  
Causality Test ◽  
Macroeconomic Variables ◽  
Credit Default ◽  
The Us ◽  
Before And After ◽  
The Global Financial Crisis ◽  
Industry Sectors ◽  
The Relationship

The paper analyzes the relationship between the credit default swaps (CDS) spreads for 5-year CDS in Europe and US, and fundamental macroeconomic variables such as regional stock indices, oil prices, gold prices, and interest rates. The dataset includes consideration of multiple industry sectors in both economies, and it is split in two sections, before and after the global financial crisis. The analysis is carried out using multivariate regression of each index vs. the macroeconomic variables, and a Granger causality test. Both approaches are performed on the change of value of the variables involved. Results show that equity markets lead in price discovery, bidirectional causality between interest rate, and CDS spreads for most sectors involved. There is also bidirectional causality between stock and oil returns to CDS spreads.

scholarly journals Corporate Social Responsibility and Organizational Resilience to COVID-19 Crisis: An Empirical Study of Chinese Firms

2020 ◽  
Vol 12 (21) ◽  
pp. 8970
Author(s):  
Wenchuan Huang ◽  
Shouming Chen ◽  
Luu Thi Nguyen
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Time Window ◽  
Organizational Resilience ◽  
Listed Firms ◽  
The Past ◽  
Firm Capability ◽  
Path Dependent ◽  
Corporate Social ◽  
The Relationship

Resilience captures firm capability to adjust to and recover from unexpected shocks in the environment. Being latent and path-dependent, the manifestation of organizational resilience is hard to be directly measured. This article assesses organizational resilience of firms in the context of the COVID-19 pandemic with pre-shock corporate social responsibility (CSR) performance as a predictor that positively influences the level of organizational resilience to the external shock caused by the pandemic. We develop three theoretical mechanisms based on stakeholder theory, resource-based theory, reputation perspective and means-end chain theory to explain how CSR fulfillment in the past could help firms maintain stability to adapt to and react flexibly to recover from the crisis. We examine the relationship in the context of the systemic shock caused by COVID-19, using a sample of 1597 listed firms in China during the time window from 20 January 2020 to 10 June 2020. We find that companies with higher CSR performance before the shock will experience fewer losses and will take a shorter time to recover from the attack.

scholarly journals Is There a Connection between Sovereign CDS Spreads and the Stock Market? Evidence for European and US Returns and Volatilities

Mathematics ◽  
2020 ◽  
Vol 8 (10) ◽  
pp. 1667
Author(s):  
Laura Ballester ◽  
Ana González-Urteaga
Keyword(s):  
Stock Market ◽  
Financial Crises ◽  
Credit Default Swap ◽  
Equity Returns ◽  
Stock Market Volatility ◽  
Market Returns ◽  
Stock Market Returns ◽  
Credit Default ◽  
The Us ◽  
The Relationship

This study complements the current literature, providing a thorough investigation of the lead–lag connection between stock indices and sovereign credit default swap (CDS) returns for 14 European countries and the US over the period 2004–2016. We use a rolling VAR framework that enables us to analyse the connection process over time covering both crisis and non-crisis periods. In addition, we analyse the relationship between stock market volatility and CDS returns. We find that the connection between the credit and equity markets does exist and that it is time variable and seems to be related to financial crises. We also observe that stock market returns anticipate sovereign CDS returns, and sovereign CDSs anticipate the conditional volatility of equity returns, closing a connectedness circle between markets. Contribution percentages in terms of returns are more intense in the US than in Europe and the opposite result is found with respect to volatilities. Within Europe, a greater impact in Eurozone countries compared to non-Eurozone countries is observed. Finally, an additional analysis is also carried out for the financial sector, obtaining results largely consistent with those found using sovereign data.

Credit risk signals in CDS market vs agency ratings

2016 ◽  
Vol 17 (2) ◽  
pp. 194-217 ◽  
Author(s):  
Michael Jacobs Jr ◽  
Ahmet K. Karagozoglu ◽  
Dina Naples Layish
Keyword(s):  
Credit Risk ◽  
Credit Rating ◽  
Credit Ratings ◽  
Credit Default Swap ◽  
Risk Assessments ◽  
Content Type ◽  
Rating Agencies ◽  
Market Participants ◽  
Credit Default ◽  
The Relationship

Purpose This research aims to model the relationship between the credit risk signals in the credit default swap (CDS) market and agency credit ratings, and determines the factors that help explain the variation in such signals. Design/methodology/approach A comprehensive analysis of the differences in the relative credit risk assessments of CDS-based risk signals and agency ratings is provided. It is shown that the divergence between credit risk signals in the CDS market and agency ratings is explained by factors which the rating agencies may consider differently than credit market participants. Findings The results suggest that agency credit ratings of relative riskiness of a reference entity do not always correspond with assessments by CDS spreads, as the price of risk is a function of additional macro and micro factors that can be explained using statistical analysis. Originality/value This research is unique in modeling the relationship between the credit risk assessments of the CDS market and the agency ratings, which to the best of the authors' knowledge has not been analyzed before in terms of their agreement and the level of discrepancy between them. This model can be used by investors in debt instruments that are not explicitly CDSs or which have illiquid CDS contracts, to replicate market-based, point-in-time credit risk signals. Based on both market-based and firm-specific factors in this model, the results can be used to augment through-the-cycle credit risk assessments, analyze issues surrounding the pricing of CDSs and examine the policies of credit rating agencies.

scholarly journals Investigating Persistence in the US Mutual Fund Market: A Mobility Approach

2015 ◽  
Vol 7 (1) ◽  
pp. 54-83
Author(s):  
Konstantinos Drakos ◽  
Nicholas Giannakopoulos ◽  
Panagiotis Theodore Konstantinou
Keyword(s):  
Markov Chain ◽  
Mutual Fund ◽  
Transition Probabilities ◽  
Performance Persistence ◽  
Transition Matrices ◽  
The Us ◽  
Over Time

Performance persistence in the US mutual fund market is investigated, modeling risk-adjusted performance as a Markov Chain. This allows us to explore whether there is a higher probability for funds to remain in their initial ranking, compared to the probability that funds exhibit some kind of movement. We find some degree of inertia due to non-uniformity of transition probabilities across states. Our analysis allows also assesses the proximity of empirical transition matrices to two benchmark matrices, identifying the no-persistence/perfect immobility cases. We find that the observed transition matrices are closer to the no-persistence benchmark and also that performance persistence has decreased over time.

Do direct market farms use fewer agricultural chemicals? Evidence from the US census of agriculture

2018 ◽  
Vol 34 (5) ◽  
pp. 415-429 ◽  
Author(s):  
Ethan D. Schoolman
Keyword(s):  
Food Systems ◽  
Local Food ◽  
Local Food Systems ◽  
Agricultural Chemicals ◽  
The Us ◽  
Relationship Of ◽  
Us Census ◽  
The Relationship ◽  
Direct Market ◽  
Over Time

AbstractAre strong local food systems better for the environment than conventional food systems where relatively close proximity between points of production and consumption is not a defining characteristic? Despite growing support for efforts to strengthen local food systems, surprisingly little is known about the relationship of local food to environmental sustainability. In particular, the relationship of local food systems to the use of agricultural chemicals to manage pests, weeds and disease has not been a subject of systematic research. In this paper, I use longitudinal data from the US Census of Agriculture to explore whether growth in local food systems is associated with decreased on-farm use of agricultural chemicals. Drawing on county-level data from 1997 to 2012, I find that an increase in the strength of local food systems—whether measured as the number of farms that market products directly to consumers, or as the total value of direct market products—has been broadly associated with a decrease in spending on agricultural chemicals in the USA as a whole. But the magnitude of the relationship between direct marketing to consumers and changes in agricultural chemical use has dwindled over time, to the point where it is not clear whether contemporary local food systems are still incentivizing farmers to reduce their use of pesticides. Overall, this study lends new credence to the idea that robust local food systems can benefit the environment. But even where just one dimension of agriculture's impact on the environment is concerned, the characteristics of local food systems appear to have varied over time—a qualification that argues strongly for further research into the relationship of local food to agricultural practice.

Investment Traits and Intelligence in Adulthood

2013 ◽  
Vol 34 (2) ◽  
pp. 82-89 ◽  
Author(s):  
Sophie von Stumm
Keyword(s):  
Individual Differences ◽  
Personality Traits ◽  
Fluid Intelligence ◽  
Need For Cognition ◽  
Openness To Experience ◽  
Intelligence Tests ◽  
Crystallized Intelligence ◽  
New Knowledge ◽  
The Relationship ◽  
Over Time

Intelligence-as-knowledge in adulthood is influenced by individual differences in intelligence-as-process (i.e., fluid intelligence) and in personality traits that determine when, where, and how people invest their intelligence over time. Here, the relationship between two investment traits (i.e., Openness to Experience and Need for Cognition), intelligence-as-process and intelligence-as-knowledge, as assessed by a battery of crystallized intelligence tests and a new knowledge measure, was examined. The results showed that (1) both investment traits were positively associated with intelligence-as-knowledge; (2) this effect was stronger for Openness to Experience than for Need for Cognition; and (3) associations between investment and intelligence-as-knowledge reduced when adjusting for intelligence-as-process but remained mostly significant.

Power Values and Power Distance Moderate the Relationship Between Workplace Supervisory Power and Job Satisfaction

2020 ◽  
Vol 19 (3) ◽  
pp. 135-141
Author(s):  
Kenneth D. Locke
Keyword(s):  
Job Satisfaction ◽  
Multilevel Modeling ◽  
Power Distance ◽  
European Social Survey ◽  
Social Survey ◽  
The Relationship ◽  
Workplace Power ◽  
Over Time

Abstract. Person–job (or needs–supplies) discrepancy/fit theories posit that job satisfaction depends on work supplying what employees want and thus expect associations between having supervisory power and job satisfaction to be more positive in individuals who value power and in societies that endorse power values and power distance (e.g., respecting/obeying superiors). Using multilevel modeling on 30,683 European Social Survey respondents from 31 countries revealed that overseeing supervisees was positively associated with job satisfaction, and as hypothesized, this association was stronger among individuals with stronger power values and in nations with greater levels of power values or power distance. The results suggest that workplace power can have a meaningful impact on job satisfaction, especially over time in individuals or societies that esteem power.

Emotional Impact Feedback Changes How We Remember Negative Autobiographical Experiences

2010 ◽  
Vol 57 (5) ◽  
pp. 354-359 ◽  
Author(s):  
Melanie K. T. Takarangi ◽  
Deryn Strange
Keyword(s):  
Well Being ◽  
The Other ◽  
Personal Perspective ◽  
Emotional Impact ◽  
Potential Mechanism ◽  
Negative Experiences ◽  
Negative Memory ◽  
The Relationship ◽  
Negative Memories ◽  
Over Time

When people are told that their negative memories are worse than other people’s, do they later remember those events differently? We asked participants to recall a recent negative memory then, 24 h later, we gave some participants feedback about the emotional impact of their event – stating it was more or less negative compared to other people’s experiences. One week later, participants recalled the event again. We predicted that if feedback affected how participants remembered their negative experiences, their ratings of the memory’s characteristics should change over time. That is, when participants are told that their negative event is extremely negative, their memories should be more vivid, recollected strongly, and remembered from a personal perspective, compared to participants in the other conditions. Our results provide support for this hypothesis. We suggest that external feedback might be a potential mechanism in the relationship between negative memories and psychological well-being.

Rethinking social remittances and the migration-development nexus from the perspective of time

2013 ◽  
Vol 10 (1) ◽  
pp. 11-22 ◽  
Author(s):  
Peggy Levitt ◽  
Deepak Lamba-Nieves
Keyword(s):  
Social Influence ◽  
Change Over Time ◽  
Social Remittances ◽  
The Relationship ◽  
Migration And Development ◽  
Over Time

This article explores how the conceptualization, management, and measurement of time affect the migration-development nexus. We focus on how social remittances transform the meaning and worth of time, thereby changing how these ideas and practices are accepted and valued and recalibrating the relationship between migration and development. Our data reveal the need to pay closer attention to how migration’s impacts shift over time in response to its changing significance, rhythms, and horizons. How does migrants’ social influence affect and change the needs, values, and mind-frames of non-migrants? How do the ways in which social remittances are constructed, perceived, and accepted change over time for their senders and receivers?

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