Does the fossil fuel divestment movement impact new oil and gas fundraising?

This article explores whether increasing fossil fuel divestment commitments are related to the reduction of capital flows into the oil and gas sector, based on an analysis of syndicated lending, equity and bond underwriting across 33 countries from 2000 to 2015. We find that increasing oil and gas divestment pledges in a country are associated with lower capital flows to domestic oil and gas companies. This effect is enhanced in more stringent environmental policy regimes and diminished in countries which heavily subsidise fossil fuels. However, the divestment movement may have an unintended effect, insofar as domestic banks situated in countries with high divestment commitments and stringent environmental policies provide more finance to oil and gas companies abroad. We explain these findings through the lens of institutional theory and show how both regulatory and socially normative elements of institutions shape this dynamic.

The Social Value of Financial Expertise

I study expertise acquisition in a model of trading under asymmetric information. I propose and implement a method to measure r, the ratio of the marginal social value to the marginal private value of expertise. This can be decomposed into three sufficient statistics: traders’ average profits, the fraction of bad assets among traded assets, and the elasticity of good assets traded with respect to capital inflows. I measure r = 0.16 for the junk bond underwriting market. Since this is less than 1, it implies that marginal investments in expertise destroy surplus. (JEL D82, G11, G14, G21, L84)

Properties Of Analyst Forecasts And Bond Underwriting Relationship: Evidence From Korea

Previous studies find that analysts forecast earnings more optimistically but inaccurately when they face the conflict of interest (COI). We extend this line of research by examining whether analysts’ forecasting behavior affected by the mere existence of potential COI are related with underwriting contracts.We document that analysts affiliated with security companies that become underwriters ex post issue more optimistic but less accurate forecasts for firms to issue bonds in Korea. We also find that firms to issue bonds are likely to award underwriting contracts to security companies with analysts who issue more optimistic but less accurate forecasts.