Research

"Not In My Backyard: Intrinsic Motivation And Corporate Pollution Abatement" 2025 (with Angie Andrikogiannopoulou and Scott Yonker), Review of Finance, Accepted, March 2025. 

Abstract

We investigate whether managers' intrinsic incentives affect firms' environmental policies. Exploiting within-facility variation in facility-to-CEO-birthplace distances, we find that facilities located near CEOs' birthplaces experience toxic emission reductions relative to those farther away. This is achieved by reducing waste generation at source rather than by downsizing operations or substituting pollution across locations. The effect is strongest for hometown facilities in high-polluting areas, and in firms with higher cash holdings and with CEOs with weaker pay incentives. Our results suggest that local representation in management could be a powerful means of encouraging corporate pollution abatement. 

"Reducing Labour Market Flexibility: A Causal Inference Study on Reform in the Netherlands" 2025 (with Kamalika Patra,  Nora Neuteboom and George Kapetanios), Economics Letters, Vol. 247, 112198, 2025.

Abstract

We investigate whether the Balanced Labour Market Act (WAB) of 2020, intended to reduce the disparity between permanent and temporary employees in The Netherlands, has achieved its desired aim. Using a synthetic control method, we find that the introduction of the WAB led to a substantial reduction in the number of temporary contracts, whereas the number of permanent workers increased. As of the WAB’s announcement in May 2019, strong anticipatory effects were evident. Inconclusive evidence of unintended side-effects, such as the substitution of temporary workers by self-employment work schemes, marks an avenue for future research.

"Corporate Pollution and Reputational Exposure" 2024 (with Georgios Chortareas and Fangyuan Kou), Financial Markets, Institutions and Instruments, Vol. 33 (2), pp. 149-178, 2024.

Abstract

We study the empirical association between corporate pollution and reputational exposure using a sample of 745 U.S. firms from 2007 to 2019 and an ordered probit model. Our results reveal an inverse relationship between chemical emissions and reputational exposure rating, after controlling for various firm attributes. We examine the roles of corporate governance structure and the demographic background of the top management team in the transmission process from polluting chemical emissions to reputation. Further, the negative impact of corporate pollution on reputational exposure rating is much stronger in areas where residents are convinced that climate change is happening. We perform several tests and analyses designed to mitigate endogeneity issues and correct sample bias to ensure the robustness

of our findings. Finally, our results suggest that the negative effect is stronger for companies with higher information asymmetry, which indicates the importance of information transparency for firms’ credibility.

"How did consumers react to the COVID-19 pandemic over time?" 2022 (with Nora Neuteboom, George Kapetanios and Feiko Ritsema), Oxford Bulletin of Economics and Statistics Vol. 84 (5), pp. 961-993, 2022.

Abstract

Non-pharmaceutical interventions (NPIs) have been the key policy instrument utilized to contain the impact of the COVID-19 pandemic. This paper disentangles the effects of NPIs from that of the virus and looks at the specific channels through which the virus impacts consumption. Using geo-located transaction data, we find that consumers' behaviour towards the virus has explanatory power for the drop in consumption in the early stages of the pandemic. This effect disappears in the later stages of the pandemic, suggesting that consumers have adapted their behaviour. As the COVID-19 pandemic progressed, consumers tended to make ‘safer’ consumption decisions, by avoiding crowded places.

"Informal institutions and corporate reputational risk: the role of public environmental perceptions" 2021 (with Chrysovalantis Gaganis, Panagiota Papadimitri and Fotios Pasiouras), British Journal of Management, Vol. 32 (4), pp. 1027-1061, 2021.

Abstract

Public awareness about issues surrounding the physical environment and climate change is becoming more important around the world. However, there is a lack of research on the association between environment-related perceptions and reputational exposure. Therefore, we know little about whether and how reputational exposure is shaped by institutional pressures, as would be stipulated by institutional theory. Using a sample of 643 firms from 19 European countries over the period 2015–2018, we aim to shed further light on this issue. Our results show that more environmentally friendly public perceptions result in lower reputational exposure. This finding holds when, on an individual basis, we examine public opinions on energy, climate and the introduction of related policies. To ensure robustness in our results, we conduct a number of analyses and tests designed to alleviate endogeneity and correct sample bias.

"State-Level Wage Phillips Curves" 2021 (with George Kapetanios, Simon Price and Menelaos Tasiou) Econometrics and Statistics, Vol. 18, pp. 1-11, 2021.

Abstract

Based on US state-level data for the period 1982-2016, two reduced-form versions of New Keynesian wage Phillips curves are examined. These are based on either sticky nominal wages or real-wage rigidity. The endogeneity of unemployment is taken into account by instrumentation and the use of common correlated effects (CCE) and mean group (MG) methods. This is the first time that this methodology has been applied in this context. These are important issues, as ignoring them may lead to substantial biases. The results show that while the aggregate data do not provide estimates that are consistent with either of the theoretical models examined, the panel methods do. Moreover, use of an appropriate MG CCE estimator leads to economically significant changes in parameters (primarily a steeper Phillips curve) relative to those from inappropriate but widely used panel methods. In the real-wage rigidity case, this is required to deliver results that have a theoretically admissible interpretation.

"The Effects of Board of Directors’ Education on Firms’ Credit Ratings" 2020 (with Panagiota Papadimitri, Fotios Pasiouras and Menelaos Tasiou) Journal of Business Research, Vol 116, pp. 294-313, 2020.

Abstract

Using a data set of 1,618 firms from 39 countries, we examine the influence of the educational attainment of a firm’s board of directors on its credit rating. We construct a Leadership Education Index that reflects the educational level of the key members of the board. We document, after controlling for firm and country-specific characteristics, that firms in which the key members of the board have a higher educational level are more likely to receive better credit ratings. To ensure robustness in our results, we conduct a number of analyses and tests designed to alleviate endogeneity and correct for sample bias. Our findings highlight the importance of hiring and retaining well-educated board members that are capable to manage firms and obtain better credit ratings.

"Bank competition and regional integration: Evidence from ASEAN nations" 2018 Review of Development Finance, Vol 8 (2), pp. 127-140, 2018.

Abstract

This study provides a characterization of the Association of the South East Asian Nations (ASEAN) banking system’s competition under the new environment that the implementation of the Financial Integration Framework (AFIF) implies. We focus on the largest banking markets in the region, represented by the ASEAN-5. The period under study is 2007–2016, covering the preparation period of the ASEAN banks to fully implement the new Banking Integration Framework (ABIF) in 2020. Panzar and Rosse non-structural approach is utilised to measure the competition level. Following Goddard and Wilson’s (2009) disequilibrium approach, the test for the dynamic competition measure is also conducted as a robustness check. We examine the evolution of the banking competition by observing the trend of the competition level using a rolling estimation with a 5-year window. This paper also investigates the factors that may influence the competitive conditions, specifically controlling for structural conditions and institutional characteristics. Our main findings confirm that banks operate under monopolistic competition, although there is still a high level of heterogeneity among the ASEAN countries’ banking market and banking integration sure is a challenging objective for the region. Our results reveal a positive relationship between density of demand, concentration and competition.

"Interest Rate Liberalization and Capital Adequacy in Models of Financial Crises" 2017 (with Ray Barrell and Dilruba Karim) Journal of Financial Stability, Vol 33, pp. 261-272, 2017.

Abstract

We characterize the effects of interest rate liberalization on OECD banking crises, controlling for the standard macro prudential variables that prevail in the current literature. We use the Fraser Institute’s Economic Freedom of the World database. We test for the direct impacts of interest rate liberalization on crisis probabilities and their indirect effects via capital adequacy. Over the period 1980–2012, we find that interest rate liberalization has a crises reducing effect, and it appears that the beneficial effects work by strengthening capital buffers. We also show that when controlling for liberalization, capital adequacy and liquidity, the main driver of financial crises is property price growth. Our results are invariant when we control for alternative sensitivity tests for robustness purposes.

"Does Executive Ownership Lead to Excess Target Cash? The case of UK Firms" 2017 (with Alfonsina Iona and Leone Leonida), Corporate Governance, Vol 17 (5), pp. 876-895, 2017.

Abstract

Purpose: The aim of this paper is to investigate the dynamics between executive ownership and excess cash policy in the UK.

Design/methodology/approach: The authors identify firms adopting an excess policy using a joint criterion of high cash and cash higher than the target. Logit analysis is used to estimate the impact of executive ownership and other governance characteristics on the probability of adopting an excess cash policy.

Findings: The results suggest that, in the UK, the impact of the executive ownership on the probability of adopting an excess cash policy is non-monotonic, in line with the alignment-entrenchment hypothesis. The results are robust to different definitions of excess cash policy, to alternative specifications of the regression model, to different estimation frameworks and to alternative proxies of ownership concentration.

Research limitations/implications: The authors’ approach provides a new measure of the excess target cash for the firm. They show the need to identify an excess target cash policy not only by using an empirical criterion and a theoretical target level of cash, but also by capturing persistence in deviation from the target cash level. The authors’ measure of excess target cash calls into questions findings from previous studies. The authors’ approach can be used to explore whether excess cash holdings of UK firms and the impact of managerial ownership have changed from before the crisis to after the crisis.

Practical implications: The authors’ measure of excess target cash allows identifying in practice levels of cash which are abnormal with respect to an equilibrium level. UK firms should be cautious in using executive ownership as a corporate governance mechanism, as this may generate suboptimal cash holdings and suboptimal firm value. Excess cash policy might be driven not only by a poor corporate governance system, but also by the interplay between agency costs of managerial opportunism and cost of the external finance which further research could explore.

Originality/value: “How much cash is too much” is a question that has not been addressed by the literature. The authors address this question. Also, this amount of cash allows the authors to study the extent to which executive ownership contributes to explain the out-of-equilibrium persistency in the cash level.

"Credit Market Freedom and Cost Efficiency in US State Banking" 2016 (with Georgios Chortareas and George Kapetanios), Journal of Empirical Finance, Vol 37, pp. 173-185, 2016.

Abstract

This paper investigates the dynamics between the credit market freedom counterparts of the economic freedom index drawn from the Fraser institute database and bank cost efficiency levels across the U.S. states. We consider a sample of 3809 commercial banks per year, on average, over the period 1987–2012. After estimating cost efficiency scores using the Data Envelopment Analysis (DEA), we develop a fractional regression model to test the implications of financial freedom for bank efficiency. Our results indicate that banks operating in states that enjoy a higher degree of economic freedom are more cost efficient. Greater independence in financial and banking markets from government controls can result in higher bank efficiency. This effect emerges in addition to the efficiency-enhancing effects of interstate banking and intrastate branching deregulation.

"The Sovereign Spread in Asian Emerging Economies: The Significance of External versus Internal Factors" 2014 (with Sanjay Banerji and Zilong Wang), Economic Modelling, Vol 36, pp. 566-576, 2014.

Abstract

This paper investigates the dynamic relations between external factors, domestic macroeconomic factors with sovereign spreads, debt to GDP ratio, etc. in Asian emerging countries. First, we develop a theoretical model that determines the equilibrium debt level, probability of default and sovereign spread and draw empirical implications. We then employ a Structural Vector Autoregression (SVAR) model to investigate empirically how the spread of sovereign debt is influenced over time by both external and domestic factors. The empirical results show that variations in sovereign spreads are mainly driven by external shocks, with the term structure of US interest rate and the global risk aversion having the most important role. The findings also indicate that shocks from the US have a direct effect on sovereign spread and an indirect effect via domestic macroeconomic fundamentals. Finally, the evidence produced validates the presence of some response patterns of sovereign spread to the external shocks.

"Financial Freedom and Bank Efficiency: Evidence from the European Union" 2013 (with Georgios Chortareas and Girardone Claudia), Journal of Banking and Finance, Vol 37 (4), pp. 1223- 1231, 2013.

Abstract

This paper investigates the dynamics between the financial freedom counterparts of the economic freedom index drawn from the Heritage Foundation database and bank efficiency levels. We rely on a large sample of commercial banks operating in the 27 European Union member states over the 2000s. After estimating bank-specific efficiency scores using Data Envelopment Analysis (DEA), we develop a truncated regression model combined with bootstrapped confidence intervals to test our main hypotheses. Results suggest that the higher the degree of an economy’s financial freedom, the higher the benefits for banks in terms of cost advantages and overall efficiency. Our results also show that the effects of financial freedom on bank efficiency tend to be more pronounced in countries with freer political systems in which governments formulate and implement sound policies and higher quality governance.

"Bank Supervision, Regulation, and Efficiency: Evidence from the European Union" 2012 (with Georgios Chortareas and Girardone Claudia), Journal of Financial Stability, Vol 8, pp. 292-302, 2012.

Abstract

This paper investigates the dynamics between key regulatory and supervisory policies and various aspects of commercial bank efficiency and performance for a sample of 22 EU countries over 2000–2008. In the first stage of the analysis we measure efficiency by employing the Data Envelopment Analysis (DEA) technique. In addition, we employ two distinct accounting ratios to capture the costs of intermediation (net interest margin) and cost effectiveness (cost-to-income ratio). Our regression framework includes truncated regressions and generalized linear models. Moreover, we carry out a sensitivity analysis for robustness using a fractional logit estimator. Our results show that strengthening capital restrictions and official supervisory powers can improve the efficient operations of banks. Evidence also indicates that interventionist supervisory and regulatory policies such as private sector monitoring and restricting bank activities can result in higher bank inefficiency levels. Finally, the evidence produced suggests that the beneficial effects of capital restrictions and official supervisory powers (interventionist supervisory and regulatory policies) on bank efficiency are more pronounced in countries with higher quality institutions.

"Financial Frictions, Bank Efficiency and Risk: Evidence from the Eurozone" 2011 (with Georgios Chortareas and Girardone Claudia), Journal of Business, Finance and Accounting, Vol 38, pp. 259-287, 2011.

Abstract

This paper employs a simultaneous equations approach to investigate the dynamics between financial frictions, efficiency and risk for eurozone's commercial banks. We consider two related channels through which financial frictions may arise: informational and market structure imperfections, and allow for a possible reverse causation from efficiency to banks’ asset quality. The findings validate the presence of both channels of financial frictions and are consistent with the efficiency-lending quality hypothesis that low efficiency signals poor asset quality loans. Finally, our findings suggest that policies aimed at constraining banks’ degree of openness may ultimately direct management choices towards riskier investments.

"Efficiency and Productivity of Greek Banks in the EMU Era" 2009 (with Georgios Chortareas and Girardone Claudia), Applied Financial Economics, Vol 19 (16), pp. 1317-1328, 2009.

Abstract

We provide a characterization of the Greek banking system's efficiency and productivity under the new environment that the Economic and Monetary Union (EMU) participation implies. We consider cost and profit efficiency as well as productivity change of commercial banks using the nonparametric Data Envelopment Analysis (DEA) and the Total Factor Productivity (TFP) Malmquist Index. The period under study is 1998–2003 covering Greece's entry into the euro area in 2001 and the run-up to it. Moreover, enhanced competition along with lower inflation and interest rates has further motivated financial innovation and Off-Balance Sheet (OBS) business. Our findings suggest that cost efficiency has risen by 4.3% over the 6 years under study. Moreover, Greek banks seem to enjoy relatively high profit efficiency (on average 75%) showing an increase by 93% over 1998–2003. Similarly, productivity seems to have risen by 15% and this was mainly driven by the improvements in the performance of best-practice institutions. Our results do not show any role for OBS activities in Greek banks’ efficiency. Finally, while the impact of profitability and size on efficiency and productivity yields mixed results, our empirical findings seem to corroborate previous studies in that controlling for risk preferences is important in determining bank efficiency.