Research articles for the 2021-05-15

Exploring the Financial Dimensions of Lebanese SMEs: Comparative Study Between Family and Non-family Business
El-Chaarani, Hani,El-Abiad, Zouhour
This study investigates the financial dimensions of family and non-family SMEs in Lebanon from 2005 to 2016. Based on 81 family SMEs and 45 non-family SMEs, the results reveal that family SMEs have outperform the non-family SMEs during economical and political instability period. In addition, the results show that family SMEs rely on long term debts (LTD) more than non-family SMEs. Oppositely to non-family SMEs, when the level of risk increased with local and regional instability in the period between 2005 and 2011, the results reveal that family SMEs enhanced their needs of financial resources by developing their LTD and lowering their short term debts. Finally, the results show that family SMEs have more.

Permanent and Transitory Responses to Capital Gains Taxes: Evidence from a Lifetime Exemption in Canada
Lavecchia, Adam,Tazhitdinova, Alisa
Using panel data on a 20% random sample of Canadian taxpayers, we study behavioral responses to the cancellation of a lifetime capital gains exemption that resulted in increased capital gains taxation for some individuals. The unique setting allows us to distinguish between short-term avoidance responses and permanent responses to capital gains taxes. We show that the exemption did not change the number of taxpayers reporting positive capital gains, and thus unlikely resulted in increased participation in capital markets. However, the exemption cancellation slightly increased capital gains realizations of the existing traders.

Research Guide for Datastream and Worldscope at Wharton Research Data Services
Dai, Rui,Drechsler, Qingyi (Freda) Song
The integration of Datastream and Worldscope databases at the Wharton Research Data Services (WRDS) offers researchers a simple solution to bypass the cumbersome data collection and preparation process for global empirical research. This study guide proposes a clean approach to link these two databases through Refinitiv's Quantitative Mapping facilities. We then discuss various details about constructing stock returns through Datastream Return Index (RI). Finally, we demonstrate through an empirical case study on how to combine Datastream's pricing data and Worldscope's fundamental data to compare market characteristics across countries.

Risk Assessment based on the Analysis of the Impact of Contagion Flow
Edirisinghe, Chanaka,Gupta, Aparna,Roth, Wendy
This paper presents a new framework to model and calibrate the process of firm value evolution when an unanticipated exogenous event impacting one firm can contagiously affect other firms. The nature of propagation of such contagion is determined by the underlying connections between firms, which can adversely affect the tail risks of firm value, hence the securities issued by the firm. This paper combines the insights gained from the existing firm-value models and historical events into a structural model for flow of contagion among firms using a network-based approach. Rather than using stylized networks, we develop a data-driven approach for network construction where we define and calibrate several contagion variables to model the spread of contagion. This framework is applied for assessing firm-level risk under downside risk measures. Using actual data, our model illustrates how connections between firms can lead to heavy-tailed default distributions and default clustering observed in practice.

The Famous New Bubbles of the 21st Century: Cases of Irrational Exuberance
Taskinsoy, John
Speculative economic, financial, and cryptocurrency bubbles are not arcane anymore; nonetheless, they are still misunderstood. For this exact reason, they continue to form even centuries after the famous first speculative bubbles of 17th and 18th centuries. Bubbles do not form instantaneously; quite the opposite, they progress through several distinct stages that can be monitored and studied in order to take proper policy actions to avoid costly crises. Speculation, as an economic cycle, fuels investment activity; therefore, it is not entirely bad unless it is done excessively via manipulative actions which ultimately cause panic among investors. Speculation alone does not result in a crash, but the induced fear spiraling through the broader economy like the venom of a poisonous snake can be enough to rattle markets and cause bubbles to burst. Exactly what happened in the famous first three bubbles; the Dutch Tulipmania (1634-38), the Mississippi Bubble (1719-20), and the South Sea Bubble (1720). We all know that history repeats itself; every time it does, the damage is far greater than before. Three centuries after the famous first bubbles, the 21st century began with its own famous three bubbles; the Internet Bubble (the crisis of 2002), the U.S. Housing Bubble (the subprime crisis of 2006-07 followed by the 2008 global financial crisis), and the Cryptocurrency Bubble (Bitcoinmania).

The Impact of oil Prices on the Financial Performance of Banking Sector in Middle East Region
El-Chaarani, Hani
The objective of this study is to determine the impact of oil price fluctuations on the financial performance of banking sector in 8 oil producing and exporting countries in Middle East region (Kingdom Saudi Arabia, United Arab Emirates, Qatar, Bahrein, Kuwait, Jordan, Oman, Iran) in the period between January 2012 and December 2017. The results do not reveal the same impact of oil price fluctuations on the financial performance of banking sector in each studied country. A significant direct impact of oil prices on the financial performance of banking sector has been found in Bahrein, Oman and Iran. In Jordan, Kuwait, Qatar, Saudi Arabia and United Arab Emirates, the results do not reveal any direct impact of oil price fluctuations on the financial performance of banking sector. The analysis also showed that the size of the economy in each country and its diversification in non-oil sectors have a direct impact on the relationship between oil price fluctuations and financial performance of banking sector. The existence of well diversified economy in non-oil sector reduces the direct impact of oil price fluctuations on the financial performance of banking sector.