14 results found
Bolton P, Kacperczyk MT, 2021, Do investors care about carbon risk?, Journal of Financial Economics, Vol: 142, Pages: 517-549, ISSN: 0304-405X
We study whether carbon emissions affect the cross-section of US stock returns. We find that stocks of firms with higher total carbon dioxide emissions (and changes in emissions) earn higher returns, controlling for size, book-to-market, and other return predictors. We cannot explain this carbon premium through differences in unexpected profitability or other known risk factors. We also find that institutional investors implement exclusionary screening based on direct emission intensity (the ratio of total emissions to sales) in a few salient industries. Overall, our results are consistent with an interpretation that investors are already demanding compensation for their exposure to carbon emission risk.
Svartzman R, Bolton P, Despres M, et al., 2020, Central banks, financial stability and policy coordination in the age of climate uncertainty: a three-layered analytical and operational framework, CLIMATE POLICY, Vol: 21, Pages: 563-580, ISSN: 1469-3062
The promise of contingent convertible capital securities (CoCos) as a ‘bail-in’ so-lution has been the subject of considerable theoretical analysis and debate, butlittle is known about their effects in practice. We undertake the first comprehen-sive empirical analysis of bank CoCo issues, a market segment that comprises over 730 instruments totaling $521billion. Four main findings emerge: 1) thepropensity to issue a CoCo is higher for larger and better-capitalized banks; 2)CoCo issues result in a statistically significant decline in issuers’ CDS spread,indicating that they generate risk-reduction benefits and lower costs of debt (thisis especially true for CoCos that convert into equity, that have mechanical trig-gers, and that are classified as Additional Tier 1 instruments); 3) CoCos withonly discretionary triggers do not have a significant impact on CDS spreads; and 4) CoCo issues have no statistically significant impact on stock prices, exceptfor principal write-down CoCos with a high trigger level, which have a positive effect.
Bolton P, Wang N, Yang J, 2019, Investment under uncertainty with financial constraints, JOURNAL OF ECONOMIC THEORY, Vol: 184, ISSN: 0022-0531
Bolton P, Wang N, Yang J, 2019, Optimal contracting, corporate finance, and valuation with inalienable human capital, The Journal of Finance, Vol: 74, Pages: 1363-1429, ISSN: 0022-1082
A risk‐averse entrepreneur with access to a profitable venture needs to raise funds from investors. She cannot indefinitely commit her human capital to the venture, which limits the firm's debt capacity, distorts investment and compensation, and constrains the entrepreneur's risk sharing. This puts dynamic liquidity and state‐contingent risk allocation at the center of corporate financial management. The firm balances mean‐variance investment efficiency and the preservation of financial slack. We show that in general the entrepreneur's net worth is overexposed to idiosyncratic risk and underexposed to systematic risk. These distortions are greater the closer the firm is to exhausting its debt capacity.
Bolton P, Oehmke M, 2019, Bank resolution and the structure of global banks, The Review of Financial Studies, Vol: 32, Pages: 2383-2421, ISSN: 0893-9454
We study the resolution of global banks by national regulators. Single-point-of-entry (SPOE) resolution, where loss-absorbing capital is shared across jurisdictions, is efficient but faces implementation constraints. First, when expected transfers across jurisdictions are too asymmetric, national regulators fail to set up SPOE resolution ex ante. Second, when required ex post transfers are too large, national regulators ring-fence assets instead of cooperating in SPOE resolution. In this case, a multiple-point-of-entry (MPOE) resolution, where loss-absorbing capital is preassigned, is more robust. Our analysis highlights a fundamental link between efficient bank resolution, the operational structures, risks, and incentives of global banks.
Andersson M, Bolton P, Samama F, 2019, Hedging Climate Risk, FINANCIAL ANALYSTS JOURNAL, Vol: 72, Pages: 13-32, ISSN: 0015-198X
Bolton P, Huang H, 2018, Optimal Payment Areas or Optimal Currency Areas?, 130th Annual Meeting of the American-Economic-Association (AEA), Publisher: AMER ECONOMIC ASSOC, Pages: 505-508, ISSN: 2574-0768
Bolton P, Huang H, 2018, The capital structure of nations, Review of Finance, Vol: 22, Pages: 45-82, ISSN: 1382-6662
When a nation can finance its investments via foreign-currency denominated debt or domestic-currency claims, what is the optimal capital structure of the nation? Building on the functions of fiat money as both medium of exchange, and store of value like corporate equity, our model connects monetary economics, fiscal theory, and international finance under a unified corporate finance perspective. With frictionless capital markets both a Modigliani–Miller theorem for nations and the classical quantity theory of money hold. With capital market frictions, a nation’s optimal capital structure trades off inflation dilution costs and expected default costs on foreign-currency debt. Our framing focuses on the process by which new money claims enter the economy and the potential wealth redistribution costs of inflation.
Arezki R, Bolton P, Peters S, et al., 2017, From global savings glut to financing infrastructure, ECONOMIC POLICY, Vol: 32, Pages: 223-+, ISSN: 0266-4658
Bolton P, 2016, Presidential Address: Debt and Money: Financial Constraints and Sovereign Finance, The Journal of Finance, Vol: 71, Pages: 1483-1510, ISSN: 0022-1082
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