Research articles for the 2020-05-15

Bank Equity Value and Loan Supply
Girotti, Mattia,Horny, Guillaume
We study how bank equity values affect loan supply. We exploit granular balance sheet information on euro area banks matched with financial market data. We address endogeneity concerns by instrumenting bank stock prices with a shifter derived from each bank stock price's sensitivity to non-financial corporations' equity values. Our results indicate that, other things equal, rises in bank stock prices cause increases in corporate and household lending, and in bank capitalization. We interpret these results as due to bank managers reading the rises in their bank's stock price as reductions in their bank's cost of equity

Better Fewer, But Better: Stock Returns and the Financial Relevance and Financial Intensity of Materiality
Consolandi, Costanza,Eccles, Robert G.,Gabbi, Giampaolo
This paper investigates the role of the intensity and relevance of ESG materiality in equity returns. Adopting the classifications of materiality provided by the Sustainability Accounting Standards Board (SASB), the paper introduces the concept of the financial relevance and financial intensity of ESG materiality in order to estimate how it explains equity returns. The results of the analysis, based on a large sample of U.S. compa-nies included in the Russell 3000 from January 2008 to July 2019 show that not only do ESG rating change (ESG momentum) have a consistent impact on equity performance, but also that the market seems to reward more those companies operating in industries with a high level of ESG materiality concentration. The impli-cation is that the equity premium of listed companies is better explained by the concentration of material is-sues (i.e., the Gini index) than by the ESG momentum.

Big Tech 'Banks', Financial Stability and Regulation
Padilla, Jorge
This paper considers the financial stability risks caused by Big Tech’s entry into retail banking and discusses alternative policy responses aimed at allaying those concerns. The entry of Big Tech platforms may transform the retail banking industry in radical ways: while it may spur much-needed competition in the short term, it may also increase financial instability and lead to even more concentrated credit markets in the long-term. Importantly, traditional banks may be forced to transform into “narrow banks”, limited to funding the loans originated and distributed by the Big Techs. The separation between origination and funding has proved problematic once and again, from the S&L crisis of the 80s and 90s to the financial collapse of the Great Recession. This time need not be different. Whether this grim prospect materializes, though, will depend on several factors, including how regulators respond to the new challenges posed by the entry of Big Tech “banks”.

Bitcoin: Speculative Asset or Innovative Technology?
Lee, Adrian D.,Li, Mengling,Zheng, Huanhuan
We unite investment by speculators and tech-savvy investors with a heterogeneous agent model.While speculators seek to profit from extrapolating the price trends, tech-savvy investors trade based on the prospective value of Bitcoin, which is a function of factors that capture the market demand and technical supply of Bitcoin. Estimating the structural model, we find the coexistence of speculators and tech-savvy investors in the Bitcoin market. We further show that, regardless of the market states, tech-savvy investors consistently buy (sell) Bitcoin when its price goes below (above) the prospective value. However, speculators follow a momentum trading strategy in the high-market-volatility regime and switch to a contrarian strategy in the low-market-volatility regime. Our finding suggests that a significant fraction of tech-savvy investors value the potential of Bitcoin as an innovative technology. Incorporating heterogeneous investors yields better in-sample estimation efficiency and out-of-sample forecasting precision than models that consider only speculators or tech-savvy investors.

Central Clearing and Systemic Liquidity Risk
King, Thomas B.,Nesmith, Travis D.,Paulson, Anna L.,Prono, Todd
By stepping between bilateral counterparties, a central counterparty (CCP) transforms credit exposure. CCPs generally improve financial stability. Nevertheless, large CCPs are by nature concentrated and interconnected with major global banks. Moreover, although they mitigate credit risk, CCPs create liquidity risks, because they rely on participants to provide cash. Such requirements increase with both market volatility and default; consequently, CCP liquidity needs are inherently procyclical. This procyclicality makes it more challenging to assess CCP resilience in the rare event that one or more large financial institutions default. Liquidity-focused macroprudential stress tests could help to assess and manage this systemic liquidity risk.

Do Non-Performing Loans Matter for Bank Lending and the Business Cycle in Euro Area Countries?
Huljak, Ivan,Martin, Reiner,Moccero, Diego,Pancaro, Cosimo
We contribute to the empirical literature on the impact of non-performing loan (NPL) ratios on aggregate banking sector variables and the macroeconomy by estimating a panel Bayesian VAR model for twelve euro area countries. The model is estimated assuming a hierarchical prior that allows for country-specific coefficients. The VAR includes a large set of variables and is identified via Choleski factorisation. We estimate the impact of exogenous shocks to the change in NPL ratios across countries. The main findings of the paper are as follows: i ) An impulse response analysis shows that an exogenous increase in the change in NPL ratios tends to depress bank lending volumes, widens bank lending spreads and leads to a fall in real GDP growth and residential real estate prices; ii ) A forecast error variance decomposition shows that shocks to the change in NPL ratios explain a relatively large share of the variance of the variables in the VAR, particularly for countries that experienced a large increase in NPL ratios during the recent crises; and iii ) A three-year structural out-of-sample scenario analysis provides quantitative evidence that reducing banks' NPL ratios can produce significant benefits in euro area countries in terms of improved macroeconomic and financial conditions.

Emergency Measures for Equity Trading: The Case Against Short-Selling Bans and Stock Exchange Shutdowns
Enriques, Luca,Pagano, Marco
After the COVID-19 crisis struck, equity prices abruptly plunged across the world. The clear prospect of an almost unprecedented decrease in supply and demand, coupled with extreme uncertainty about the longer-term prospects for the economy worldwide, justified the price adjustments. Yet, in conditions of plummeting prices and high volatility, policymakers around the world felt under pressure ‘to do something’ to stop the downward trend in market prices. As was the case during the financial crises of 2008-09 and 2011-12, these pressures have quickly led to the adoption of market-wide short-selling bans. In addition, both in Europe and in the US, there have been calls for an even more drastic measure: a lasting ‘stock exchange holiday’. This chapter reviews the evidence on the effects of short-selling bans during the financial crisis and discusses the merits of stock exchange holidays and concludes that neither of these measures bring benefits to financial markets.

Financing Firms in Hibernation during the COVID-19 Pandemic
Didier, Tatiana,Huneeus, Federico,Larrain, Mauricio,Schmukler, Sergio L.
The coronavirus (COVID-19) pandemic has halted economic activity worldwide, hurting firms and pushing them toward bankruptcy. This paper provides a unified framework to organize the policy debate related to firm financing during the downturn, centered along four main points. First, the economic crisis triggered by the spread of the virus is radically different from past crises, with important consequences for optimal policy responses. Second, to avoid inefficient bankruptcies and long-term detrimental effects, it is important to preserve firms' relationships with key stakeholders, like workers, suppliers, customers, and creditors. Third, firms can benefit from “hibernating," using the minimum bare cash necessary to withstand the pandemic, while using credit to remain alive until the crisis subdues. Fourth, the existing legal and regulatory infrastructure is ill-equipped to deal with an exogenous systemic shock such as this pandemic. Financial sector policies can help increase the provision of credit, while posing difficult choices and trade-offs.

How Does Financial Vulnerability Amplify Housing and Credit Shocks?
Couaillier, Cyril,Scalone, Valerio
In this paper we study how households’ financial vulnerability affects the propagation of housing and credit shocks. First, we estimate a non-linear model generating impulse responses that depend on the evolution of households' Debt to Service Ratio, i.e. the fraction of income that households use to pay back their debt. Second, we use sign restrictions to jointly identify a wide set of financial and economic shocks. We find that financial vulnerability: i) amplifies the response of the economy to housing shock, ii) makes the response to expansionary credit shocks less persistent and even negative after the first year since the arrival of the shock. Finally, overall recessionary shocks have larger effects with respect to expansionary ones of the same size.

How Important Is Moral Hazard For Distressed Banks?
Ben-David, Itzhak,Palvia, Ajay A.,Stulz, René M.
The moral hazard incentives of the bank safety net predict that distressed banks take on more risk and higher leverage. Since many factors reduce these incentives, including charter value, regulation, and managerial incentives, the net economic effect of these incentives is an empirical question. We provide evidence on this question using two distinct periods that include financial crises and are subject to different regulatory regimes (1985â€"1994, 2005â€"2014). We find that distressed banks reduce their leverage and decrease observable measures of riskiness, which is inconsistent with the view that, on average, moral hazard incentives dominate distressed bank leverage and risk-taking policies.

How Market Sentiment Drives Forecasts of Stock Returns
Frydman, Roman,Mangee, Nicholas,Stillwagon, Josh R.
We reveal a novel channel through which market participants’ sentiment influences how they forecast stock returns: their optimism (pessimism) affects the weights they assign to fundamentals. Our analysis yields four main findings. First, if good (bad) “news” about dividends and interest rates coincides with participants’ optimism (pessimism), the news about these fundamentals has a significant effect on participants’ forecasts of future returns and has the expected signs (positive for dividends and negative for interest rates). Second, in models without interactions, or when market sentiment is neutral or conflicts with news about dividends and/or interest rates, this news often does not have a significant effect on ex ante or ex post returns. Third, market sentiment is largely unrelated to the state of economic activity, indicating that it is driven by non-fundamental considerations. Moreover, market sentiment influences stock returns highly irregularly, in terms of both timing and magnitude. This finding supports recent theoretical approaches recognizing that economists and market participants alike face Knightian uncertainty about the correct model driving stock returns.

How Much Can the U.S. Congress Resist Political Money? A Quantitative Assessment
Ferguson, Thomas,Jorgensen, Paul,Chen, Jie
The extent to which governments can resist pressures from organized interest groups, and especially from finance, is a perennial source of controversy. This paper tackles this classic question by analyzing votes in the U.S. House of Representatives on measures to weaken the Dodd-Frank financial reform bill in the years following its passage. To control as many factors as possible that could influence floor voting by individual legislators, the analysis focuses on representatives who originally cast votes in favor of the bill but then subsequently voted to dismantle key provisions of it. This design rules out from the start most factors normally advanced by skeptics to explain vote shifts, since these are the same representatives, belonging to the same political party, representing substantially the same districts. Our panel analysis, which also controls for spatial influences, highlights the importance of time-varying factors, especially political money, in moving representatives to shift their positions on amendments such as the “swaps push out” provision. Our results suggest that the links between campaign contributions from the financial sector and switches to a pro-bank vote were direct and substantial: For every $100,000 that Democratic representatives received from finance, the odds they would break with their party’s majority support for the Dodd-Frank legislation increased by 13.9 percent. Democratic representatives who voted in favor of finance often received $200,000â€"$300,000 from that sector, which raised the odds of switching by 25â€"40 percent.

Humans vs Machines: Soft and Hard Information in Corporate Loan Pricing
Adelino, Manuel,Ivanov, Ivan,Smolyansky, Michael
This paper uses novel regulatory data on internal loan-level risk metrics of US banks to show that corporate loan interest rates line up closely with measures of hard information. We show that the variation in interest rates in excess of what internal models suggest provides limited information for predicting loan default. These results hold similarly for large and small banks, and are stronger for large firms, where hard information is more readily available. These results show that virtually all credit-relevant information contained in corporate loan pricing is hard information.

Influence or Preference? A New Look at Institutional Ownership and Earnings Management
Wang, Jun,Wang, Qijian
Prior literature finds that earnings management is negatively correlated with institutional ownership. The question is whether institutional investors drive down earnings management of the firms they invest in, or they choose firms with lower earnings management. In this paper, we use the regression discontinuity design around Russell 1000 and 2000 indexes reconstruction to obtain an exogenous variation in institutional ownership. We find that institutional investors do not drive down earnings management after they become shareholders. Instead, institutions choose firms with lower earnings management level when they make investment decisions. To further support the preference hypothesis, we add measures of institution preference in the panel regression and find that the negative relation between institutional ownership and earnings management disappears.

Is Sustainable Investing Driven by Altruism: Evidence from Shocks to Philanthropy
Boutchkova, Maria,Gonzalez, Angelica,Zhang, Renfang
We test the conjecture that sustainable investing (SI) is driven by altruistic motives by examining the responses of charitable giving and SI flows to exogenous shocks to altruism. We find that while philanthropy responds strongly and significantly, SI flows do not. In addition, two further types of shocks to the reputation and tax shield benefits of philanthropy do not result in an increase in SI either. Our results contribute to understanding the channels behind SI and suggest that altruism is not as an important determinant as previously suggested.

Local Ambassadors Promote Mobile Banking in Northern Peru
Agurto, Marcos,Djebbari, Habiba,Silupú, Brenda,Triveli, Carolina
We experiment with a novel way to boost information acquisition that exploits existing social ties between the promoter of a new financial technology and community members. We offer information and training workshops on a new mobile-money platform in peri-urban and rural areas in Peru. In the treatment group, workshops are led by promoters who are personally known to the invited participants. In the control group, comparable individuals are invited to attend similar workshops, but the workshops are led by agents external to the community. Our findings suggest that lack of information impedes product adoption, which is itself limited by lack of trust in the individual who provides the information.

On the Instability of Banking and Other Financial Intermediation
Gu, Chao,Monnet, Cyril,Nosal, Ed,Wright, Randall
Are financial intermediaries inherently unstable and, if so, why? To address this, we analyse whether model economies with financial intermediation are particularly prone to multiple, cyclic or stochastic equilibria. Several formalisations are considered: a dynamic version of Diamond-Dybvig banking incorporating reputational considerations; a model with fixed costs and delegated investment as in Diamond; one with bank liabilities serving as payment instruments similar to currency in Lagos-Wright; and one with intermediaries as dealers in decentralised asset markets, similar to Duffie et al. Although the economics and mathematics differ across specifications, in each case financial intermediation engenders instability in a precise sense.

Political Activism and Market Power
Ferracuti, Elia,Michaely, Roni,Wellman, Laura
Using novel data on firms’ government relations staff, and two distinct empirical settings, we show that political activism enables firms to grow their market power. The documented increases in profit margins and market share persist for up to two years, and are concentrated among large politically active firms. We also utilize firms’ mandatory lobbying disclosures to identify a broad set of legislative actions lobbied for by sample firms, and analyze their strategic actions around those events. Taken together, our results show that politically active firms gain a competitive advantage through strategically timed investments when policy uncertainty is high.

Private Equity Buyouts and Employee Health
Garcia-Gomez, Pilar,Maug, Ernst G.,Obernberger, Stefan
We examine the role of employee health in Private Equity buyouts using employee-level data on employment, wages, medical prescriptions, and health expenditures.We conduct matched-sample difference-in-differences estimations including more than 55,000 buyout employees. Employees with a lower health status before the buyout face the most substantial losses of income and employment from buyouts, and these losses are predicted by health-related estimates of employees’ productivity. Buyouts influence employees’ career paths, and health outcomes after buyouts are associated with career path outcomes: Those who become unemployed are in poorer health and the health of those who find new jobs is better. More than half of the negative effect of buyouts on employees’ incomes is buffered by social transfers and this insurance effect is strongestfor employees in poor health. We conclude that buyout-related restructuring has a stronger negative impact on the careers and human capital of employees with health problems.

Private Equity Buyouts in Healthcare: Who Wins, Who Loses?
Appelbaum, Eileen,Batt, Rosemary
Private equity firms have become major players in the healthcare industry. How has this happened and what are the results? What is private equity’s ‘value proposition’ to the industry and to the American people -- at a time when healthcare is under constant pressure to cut costs and prices? How can PE firms use their classic leveraged buyout model to ‘save healthcare’ while delivering ‘outsized returns’ to investors? In this paper, we bring together a wide range of sources and empirical evidence to answer these questions. Given the complexity of the sector, we focus on four segments where private equity firms have been particularly active: hospitals, outpatient care (urgent care and ambulatory surgery centers), physician staffing and emergency room services (surprise medical billing), and revenue cycle management (medical debt collecting). In each of these segments, private equity has taken the lead in consolidating small providers, loading them with debt, and rolling them up into large powerhouses with substantial market power before exiting with handsome returns.

Profits, Innovation and Financialization in the Insulin Industry
Collington, Rosie
The list prices of analogue insulin medicines in the United States have soared during the past decade. In the wake of high-profile cases of prescription medicine “price-gouging”, such as Mylan’s EpiPen and Turing-acquired Daraprim, actors across the insulin supply chain are today facing growing scrutiny from US lawmakers and the wider public. For the most part, however, the role of shareholders in the insulin supply chain has been overlooked. This paper considers the relationship between profits realized from higher insulin list prices, pharmaceutical innovation, and the financial structures of the three dominant insulin manufacturing companies, which set list prices. It shows that despite claims to the contrary, insulin manufacturers extracted vast profits from the sale of insulin products in the period 2009-2018, as insulin list prices rose. Distributions to the company shareholders in the form of cash dividends and share repurchases totaled $122 billion over this period. The paper also considers the role of other actors in the insulin supply chain, such as pharmacy benefits managers (PBMs), in the determination of list prices. The data and analysis presented in the paper indicates that financialization could be considered in tension with not only the development of new drugs that will be available to patients in the future, but also the affordability of products that already exist today.

Report on Corporate Governance of Italian Listed Companies - 2019 (Rapporto 2019 sulla corporate governance delle società quotate italiane)
Linciano, Nadia,Ciavarella, Angela,Signoretti, Rossella,Pierantoni, Lucia,Della Libera, Eugenia,Frasca, Elena
English In recent years, the European regulatory framework for listed companies has been undergoing significant changes as a consequence, among the others, of the implementation of the Action Plans on European company law and corporate governance, Capital Markets Union, sustainable finance and the new rules on non-financial information. In this framework, long-term orientation and consideration of stakeholders’ interest are becoming increasingly important in the definition of business strategies. Corporate governance is now called to play a crucial role in the transition towards a new paradigm, encompassing a sustainable business model and a deeper interaction and engagement with internal and external stakeholders. In this context, it is of extreme interest to investigate at what point Italian companies are. The 2019 Report on corporate governance of Italian listed companies (at its eighth edition) delves deeper into a number of issues concerning, respectively, the evolution of ownership structure (Section I), corporate boards (Section II), institutional participation in Annual general meetings (AGMs) (Section III) and related parties transactions (Section IV). The Report also includes a Focus investigating the relationship between sustainability and remuneration policies of managers and executives with strategic responsibilities in Italian listed companies.While the ownership structure is overall stable over time, board gender diversity has risen, driven by Law 120/2011. At the end of June 2019, women serving as directors and internal auditors account for more than 36% and 39% respectively. As for institutional investors’ activism as related to say-on-pay, data on the 2019 Annual general meetings (AGMs) of the 100 most capitalized Italian listed companies confirm the large attendance by institutional investors, accounting for 31% of the capital represented at the AGMs. As for the vote on the board members’ remuneration policy, the 2019 proxy season marks the highest dissent of institutional investors, as abstention and rejection of the policy account for 44% of their shares, 12 percentage points more than the 2012 value. The Focus on corporate governance and sustainability shows that companies’ awareness of ESG factors has increased. In 2018, 152 Italian companies with ordinary shares listed on MTA market released a non-financial statement. The number of firms entrusting the supervision of sustainability issues to a specific internal committee has risen up to 54 from 45. As for the integration of ESG factors in the remuneration policies of directors, at the end of 2018, 33 listed companies link CEOs remuneration to sustainability through either the short-term component (32 cases) or the long-term component (nine cases). Sustainability is mainly connected to social and environmental issues, in particular to job safety, human capital, customer satisfaction and CO2 reduction. Italian Abstract: Negli ultimi anni il quadro regolamentare di riferimento delle società quotate sta sperimentando significativi cambiamenti a fronte, tra le altre, delle misure di attuazione dei Piani di azione europei in materia di diritto delle società e governo societario, Unione dei mercati dei capitali, finanza sostenibile e della nuova disciplina sulla informativa non finanziaria. Il governo societario va assumendo una nuova centralità nella definizione di un’attività di impresa sostenibile nel medio-lungo periodo e di una interazione con gli attori di mercato (primi fra tutti, gli investitori istituzionali) destinata a divenire più strutturata e ad abbracciare un perimetro più ampio di quello attuale. In questo contesto è di interesse chiedersi a che punto siano giunte le società quotate italiane. Il Rapporto 2019 sulla corporate governance delle società quotate italiane (Rapporto), all’ottava edizione, fornisce al proposito interessanti spunti di riflessione sulla base di un quadro d’insieme che include assetti proprietari, organi sociali, assemblee e operazioni con parti correlate. In particolare, alla luce delle evoluzioni normative in corso sono rilevanti le evidenze concernenti la diversity degli organi di amministrazione, la partecipazione degli investitori istituzionali alla vita assembleare e l’integrazione di tematiche di sostenibilità nelle politiche retributive degli esponenti aziendali. Il Report è articolato in quattro sezioni. Nella prima sono descritte le principali caratteristiche degli assetti proprietari e di controllo delle società italiane con azioni quotate. Nella seconda sono riportate evidenze relative alla governance interna delle società, ovvero alla composizione e al funzionamento del board e dei suoi comitati. Sono poi analizzate le assemblee annuali tenute dalle società, con particolare riferimento alla partecipazione degli azionisti e ai voti espressi in materia di say-on-pay. Infine, nell'ultima sezione del Report si descrivono le operazioni con parti correlate realizzate nel corso dell’anno dalle società quotate italiane. L’approfondimento del Report 2019 è dedicato alla relazione tra sostenibilità e politiche retributive di amministratori e dirigenti con responsabilità strategiche delle società italiane quotate.

Risk, Uncertainty and Monetary Policy in a Global World
Bekaert, Geert,Hoerova, Marie,Xu, Nancy R.
Since the global financial crisis, there has been renewed interest in understanding how monetary policy shocks transmit across countries through risk variables, spurring a literature on the "global financial cycle." This paper studies how (conventional and unconventional) monetary policy shocks affect risk and uncertainty in three large economies: the US, euro area, and Japan. We construct measures of financial risk factors for each country by decomposing option-implied variances of the stock market into a conditional variance component ("uncertainty") and a variance risk premium component (which is more closely associated with risk aversion). The conditional variance component is computed using a novel non-linear forecasting model. We then analyze monetary policy effects on risk and uncertainty. We do not find evidence that US monetary policy affects risk or uncertainty in the other countries. Instead, we provide evidence of significant spillovers through interest rates. We find limited evidence of cross-country monetary policy spillovers to the major asset classes (stocks, bonds, exchange rates, commodities), but rather strong evidence of non-monetary policy-driven risk aversion and uncertainty shocks transmitting across all countries (not just emanating from the US).

Sentiment and Uncertainty
Birru, Justin,Young, Trevor
Sentiment should exhibit its strongest effects on asset prices at times when valuations are most subjective. Consistent with this hypothesis, we show that a one-standard-deviation increase in aggregate uncertainty amplifies the predictive ability of sentiment for market returns by two to four times relative to when uncertainty is at its mean. We find similar evidence for the cross-section of returns; the predictive ability of sentiment for returns of test assets expected to be most sensitive to sentiment and for anomaly returns is substantially larger in times of higher uncertainty. The results hold for both daily and monthly proxies for sentiment and for various proxies for uncertainty. The evidence sheds light on one component of time-series variation in mispricing and suggests that the effects of sentiment are greatest in times of higher uncertainty.

The International Spillover Effects of US Monetary Policy Uncertainty
Lakdawala, Aeimit,Moreland, Timothy,Schaffer, Matthew
An extensive literature studies the international transmission of US monetary policy surprises (shifts in expected path of the policy rate). In this paper we show that changes in uncertainty around the expected path constitute an important additional dimension of spillover effects to global bond yields. In advanced countries, it is the term premium component of yields that responds to uncertainty. We find that this can be explained by an international portfolio balance mechanism. In contrast, for emerging countries it is the expected component of yields that reacts to uncertainty. This can be rationalized from a flight to safety channel. We find heterogeneity in the country-level response to uncertainty only in emerging economies and it is driven by the degree of financial openness. Finally, equity markets in both advanced and emerging countries also respond to US monetary policy uncertainty, but only since the financial crisis.

What is the Value of Film Copyrights? â€" An Analysis of Basic Methods of Valuation
Kossecki, Pawel
The functioning of the film production sector strongly depends on the use of copyrights and related rights. Problems regarding their clearing could badly harm the functioning of companies and in some cases lead to serious financial problems.The development of a proper method for calculating the value of copyrights and related rights is an important task in the current climate of the new economy. This type of valuation is not a typical task for film producers or copyright owners. There is a problem with using common methods.The largest set of operating costs for companies like television companies and VoD platforms are usually content costs related to copyrights and neighborhood rights. Broadcasters, TV stations, cable operators and Pay TV providers pay producers content fees. Additionally, Copyright Management Organizations (CMOs) collect fees for copyright-protected content that is broadcast and rebroadcast.There are many court disputes related to copyright fees. The main reason for disputes is the lack of a common methodology for calculating compensation for copyright owners and the potential for misunderstanding the real value of copyrights. The objective of this analysis is to show basic methods for financial valuation of copyrights related to film. The author has carefully analyzed and described common methods applicable for the financial valuation of copyrights and described their advantages and disadvantages.

When Rain Matters! Investment Timing and Value Relevance
Rao, Sandeep,Koirala, Santosh,Thapa, Chandra,Neupane, Suman
We study whether firms in the rain-sensitive sectors time their investments to generate value in response to extreme deviations in rainfall conditions. Using Indian monsoon data, we show that the market-based valuations of rain-sensitive firms significantly declines in the immediate aftermath of extreme rainfall deviations. In terms of the cross-sectional variance of the extreme rainfall conditions and consistent with investment timing economic argument, our investigations show that when compared to normal rainfall conditions, affected rain-sensitive firms tend to significantly increase their investments following excess rainfall periods. Contrarily, we observe shrinkage of investments following deficit rainfall periods. However, in both cases, firms seem to regain the lost market-based values in the lead periods of extreme rainfall deviations.