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The Tax Cuts and Jobs Act of 2017 (TCJA) substantially lowered the corporate tax rate, making tax-exempt municipal bond issues less attractive investments for banks, savings and loan associations and insurance companies. To provide a benefit for small issuers the current Internal Revenue Code has a special provision that allows banks and S&Ls to deduct 80% of the borrowing costs for “bank-qualified” bonds – tax-exempt bonds from issuers who issue no more than $10 million in bonds during a year. This study examines whether the relationship between the true interest cost (TIC) on bank-qualified bonds and other tax-exempt bonds changed with the passage of the TCJA.

Using linear regression analysis this paper compares the TIC of bank-qualified bonds with the TIC of bonds not bank-qualified using a sample of bonds both before and after the passage of TCJA.

Prior to the passage of the TCJA, this study observes that these “bank-qualified” bond issues had a lower true interest cost than other tax-exempt bond issues; however, after passage of the TCJA, the difference in the true interest cost between “bank-qualified” bond issues and other tax-exempt bond issues dramatically decreased.

It appears that the benefit for small bond issuers is greatly reduced after corporate tax rates were significantly lowered. If federal lawmakers wish small issuers to have the same advantage over other tax-exempt municipal bond issuers after passage of TCJA, some changes will need to be made to the Internal Revenue Code to give small issuers an additional advantage when issuing tax-exempt debt.

No other empirical research to date has examined the impact of TCJA on bank-qualified bond issue interest cost.

A major source of external funding for US airports comes from issuing municipal bonds. Credit rating agencies evaluate the bonds using multiple factors, but the judgments behind the ratings are not well understood. This paper examines if airport rate-setting methods affect the bond ratings of US airports.

Using a set of unbalanced panel data for 58 hub airports from 2010 to 2019, we examine the effect of the rate-setting methods and other airport characteristics on Fitch’s airport bond rating.

We find that compensatory airports consistently receive a very high bond rating from Fitch. The probability of getting a very high Fitch rating increases by ∼28 percentage points for a compensatory airport. Additionally, the probability of getting a very high rating is about 33 percentage points higher for a legacy hub.

The study uses Fitch bond ratings. Future studies could examine if S&P’s and Moody’s ratings are also influenced by airport rate-setting methods and legacy hub status.

The results uncover the linkage between bond ratings and their determinants for US airports. This information is important for investors when assessing airport creditworthiness and for airport operators as they manage capital project financing.

This is the first study to evaluate the effects of rate-setting methods on airport bond rating and also the first to document a statistically significant relationship between airports’ legacy hub status and bond ratings.

In this study, we examine regulated public accessibility to municipalities’ financial reports and bond interest cost. In particular, we examine whether there is information content in a component of a constrained filing period that is useful to municipal bond market participants. The component of a filing period that we focus on is the period of time between an audit report date and a regulated public accessibility date.

To explore our research question, we collect a sample of observations from municipalities that: (1) are required to post annual/audit financial reports on a centralized state-level repository that includes a “transparent” date stamp on when reports are made publicly available and (2) have issued general obligation bonds. Our sample is limited to one observation per municipality. The sample period is 2006–2019. In terms of approach, we use an ordinary least square (OLS) regression model to empirically test whether the time period between municipalities’ audit report date and state-required repository filing date is associated with general obligation bond interest cost.

We find support for the idea that there is information content in a component of a constrained filing period. In particular, we hypothesize and find a positive association between the time period between an audit report date and a state filing date and general obligation bond interest cost. Seemingly, this component of time may provide something unique or not available in other components of a constrained filing period (e.g. the fiscal year-end date to the audit report date). In post hoc analyses, we also find that both components of the constrained filing period in our setting (i.e. the audit report date to state filing date and the fiscal year-end date to audit report date) need to be considered for either of the components to be significant. Moreover, although both components are necessary, the audit report date to state filing date component appears to have a slightly stronger association (in terms of statistical significance) with general obligation bond interest costs.

To our knowledge, Illinois is the only state that provides a date stamp on when municipalities’ financial information is made publicly available on a centralized repository. As such we focus on municipalities in Illinois. While this increases the internal validity of our research, it potentially limits generalizability across other states. Also, as a reflection of the sample constraint, the number of observations in our study is relatively small. As part of post hoc analyses, we take a closer look at our sample, model and variables used to test our hypothesis.

For stakeholders, each component of a constrained filing period may provide unique information. For example, the time period between an audit report date and a regulated filing date may send a positive signal about the quality of financial management to investors. For regulators, requiring some sort of centralized public access to municipal financial reports that have transparent time constraints may help states provide stronger governance and help lower municipalities’ borrowing costs.

We use a novel approach (with the Illinois date stamp filing information) to examine our research question. Most prior research has often relied on an assumption that the time between fiscal year-end and the audit report date is the component of time that provides useful information to investors (e.g. Henke and Maher, 2016). In our setting, we explore and find that a component of a constrained filing time period (i.e. the date from an audit filing to a required public accessibility filing) may also provide impactful information to investors.

It was to investigate whether gender diversity – gender balance – within political municipal government teams affected the municipal indebtedness. Government ideology, the gender of the mayor and the wealth of the municipal environment were considered as moderators.

We used GMM estimators on two dynamic models and a sample of 144 Spanish municipalities with more than 50,000 inhabitants for the period 2013–2022.

Gender diversity within government teams reduces the municipal debt. Furthermore, the government right-wing ideology and the female gender of the mayor are robust moderators of the effects of the gender diversity within government teams on institutional indebtedness.

The differences in financial autonomy and powers to apply public policies by municipalities in the different countries, as well as some differential aspects within the right-wing ideological spectrum, may condition our findings. Within relational demography, gender diversity impacts municipal performance, opening the way to explore other relations in future research.

The tendency to implement legislation to try to achieve high gender balances within political decision-making bodies generates higher gender diversity, and our research shows that it leads to a better financial performance, a matter of transcendental importance for EU, credit rating agencies, and lenders.

This study provides new knowledge about the effect of gender within political decision-making bodies on municipal budgetary management. It is the first research analysing the impact of gender balance in the strict sense within decision-making bodies on municipal indebtedness.

This study aims to systematically review the literature in the fields of liquidity, informational efficiency and default risk. The authors outline the key research streams and provide possible pathways for future research.

The study adopts bibliographic mapping to identify the most influential studies in the research fields of liquidity, informational efficiency and default risk from 1984 to 2021.

The study identifies four key research themes that include efficiency and transparency of markets; corporate yield spreads; market interactions: bonds, stocks and cryptocurrencies; and corporate governance. By assessing publications published from 2018 to 2021, the authors also document seven key emerging research trends: cross markets, managerial learning and corporate governance, state ownership and government subsidies, international evidence, machine learning (FinTech approaches), environmental themes and financial crisis. Drawing on these emerging trends, the authors highlight the opportunities for future research.

Keyword searches have limitations since some studies might be overlooked if they do not match the specified search criteria, even though their relevance to the topic is under investigation. Adopt the R project to expand this review by incorporating more literature from other databases, such as the Scopus database could be a possible solution.

The four key research streams contribute to a comprehensive understanding of liquidity, informational efficiency and default risk. The emerging trends integrate existing knowledge and leave the chance for innovative research to expand the research frontier.

This study fulfills the systematic literature review streams in the fields of liquidity, informational efficiency and default risk, and provides fruitful opportunities for future research.

This study aims to explain the market-oriented transformation dilemma of Chinese urban investment and development companies (UIDCs; also known as local government investment and financing companies) and objectively evaluate their transformation efficiency from both static and dynamic perspectives. The results of the research provide methodological bases for improving the transformation efficiency of UIDCs, thus pointing out the direction for the rational planning of their transformation path.

This study takes Chinese UIDCs in market transformation during 2015–2019 as the research object and uses principal component analysis to screen the index system for measuring the efficiency of market transformation. It then uses a three-stage data envelopment analysis model and the Malmquist productivity index to evaluate the market transformation efficiency of these companies during 2015–2019 and comprehensively analyzes the influence of external environmental factors on the market transformation of Chinese UIDCs.

Research results show that the transformation efficiency of Chinese UIDCs is low and slow overall and that large spatial and temporal differences exist. The transformation efficiency of UIDCs located in eastern China is higher than that of UIDCs in central and western China. The higher the external environmental factors of regional GDP, local debt service pressure and credit rating, the more likely they are to cause input redundancy in the transformation process of Chinese UIDCs, which is not conducive to their market-oriented transformation. In addition, the higher the urbanization rate, the more effective it is to improve the efficiency of market-oriented transformation of UIDCs. If the influence of environmental factors is stripped away, both the overall efficiency value and pure technical efficiency value of market-oriented transformation of Chinese UIDCs will increase while the scale efficiency value becomes smaller.

This research measures the transformation efficiency of Chinese UIDCs and comprehensively analyzes the influence of external environmental factors on their market-oriented transformation. The goal is to enrich the study of the market-oriented transformation efficiency evaluation index system of Chinese UIDCs at the theoretical level and provide important reference values for improving the efficiency of market-oriented transformation of Chinese UIDCs at the practical level.

This paper investigates the relationship between climate finance and climate ergodicity. More specifically the paper examines how climate ergodicity as measured by a mean-reverting Ornstein–Uhlenbeck process affects the value of climate-linked bonds.

Bond valuation is evaluated using Monte Carlo methods of the Ornstein–Uhlenbeck process. The paper describes climate risk in terms of the Hurst coefficient and derives a direct linkage between the Ornstein–Uhlenbeck process and the Hurst measure.

We use the Ornstein–Uhlenbeck mean reversion relationship in its OLS form to estimate Hurst coefficients for 5 × 5° grids across the US for monthly temperature and precipitation. We find that the ergodic property holds with Hurst coefficients between 0.025 and 0.01 which implies increases in climate standard deviation in the range of 25%–50%.

The approach provides a means to stress-test the bond prices to uncover the probability distribution about the issue value of bonds. The methods can be used to price or stress-test bonds issued by firms in climate sensitive industries. This will be of particular interest to the Farm Credit System and the Farm Credit Funding Corporation with agricultural loan portfolios subject to spatial climate risks.

This paper examines bond issues under conditions of rising climate risks using Hurst coefficients derived from an Ornstein–Uhlenbeck process.

The burgeoning literature on climate-related finance suggests that climate change influences financial markets. Building on this foundation, the present study aims to investigate the time-varying predictive power of news related to physical and transition climate risks for financial instability across the financial systems of the US, EU, and the ASEAN+3 countries (comprising the Association of Southeast Asian Nations plus China, Japan, and South Korea), from January 2003 to August 2022, on a monthly basis.

In this study, we use the VAR-based Granger-causality test in the presence of instabilities introduced by Rossi and Wang (2019), and combine it with the innovative rolling and recursive bootstrap time-varying Granger-causality approach of Shi et al. (2020). These methods were chosen for their capacity to effectively capture the dynamic influence of climate risk-related news on financial instability over time, offering an advantage over traditional constant parameter regressions and standard Granger causality methods. Additionally, we make use of the Media Climate Change Concerns indices recently developed by Ardia et al. (2022), coupled with regional financial stress indices.

Our findings indicate that the predictive power of climate change news for financial instability is substantial but varies over time. This influence becomes especially pronounced during periods that align with specific local and global events. In the US and EU, the predictive power is influenced by a combination of global and local macroeconomic, political, health, and climate-related factors. In contrast, ASEAN+3 financial systems show a stronger response to regional and local events, with comparatively less sensitivity to global events.

The results of this study are noteworthy for investors, highlighting increased market instability during periods with prevalent climate change news. Investors can adjust their strategies to mitigate risks and respond to macro-events that trigger climate news-related market instability, while considering regional sensitivities. Similarly, these findings are significant for policymakers, emphasizing the need to consider the influence of climate news on financial markets when designing regulatory frameworks. This could involve enacting measures to stabilize the financial system during periods of significant climate news. Policymakers might consider developing macroprudential regulations to bolster financial institutions’ resilience against climate change news effects.

This study pioneers the exploration of how climate change news affects financial system stability at the macro level. It extends beyond traditional research, typically focusing on direct effects of climate change in banking and asset markets, by examining broader implications of climate risk-related news for financial system instability. Furthermore, this study enhances our understanding of the predictors of global financial stability by examining the financial systems of the US, the EU, and ASEAN+3. It specifically investigates the impact of climate change news, a topic not extensively explored in previous research focusing mainly on macro-factors such as financial liberalization and business cycles.

Taking advantage of distinctive text-based measures of climate policy uncertainty and firm-specific exposure to climate change, this study aims to examine the impact of firm-specific vulnerability on dividend policy.

To mitigate endogeneity, the authors apply an instrumental-variable analysis based on climate policy uncertainty as well as use additional analysis using propensity score matching and entropy balancing.

The authors show that an increase in climate policy uncertainty exacerbates firm-specific exposure considerably. Exploiting climate policy uncertainty to generate exogenous variation in firm-specific exposure, the authors demonstrate that companies more susceptible to climate change are significantly less likely to pay dividends and those that do pay dividends pay significantly smaller dividends. For instance, a rise in firm-specific exposure by one standard deviation weakens the propensity to pay dividends by 5.11%. Climate policy uncertainty originates at the national level, beyond the control of individual firms and is thus plausibly exogenous, making endogeneity less likely.

To the best of the authors’ knowledge, this study is the first attempt in the literature to investigate the effect of firm-specific exposure on dividend policy using a rigorous empirical framework that is less vulnerable to endogeneity and is more likely to show a causal influence, rather than a mere correlation.

This paper aims to study the impact of tax avoidance on corporate risk. It also examines the moderating impact of tax risk on the relationship between tax avoidance and firm risk.

Based on available information in the DATASTREAM database about a sample of French firms listed in the CAC 40 from 2010 to 2022, the study uses the feasible generalized least squares method to investigate the impact of tax avoidance on firm risk and the moderating impact of tax risk. To check the robustness of our results, the authors changed the measurement of variables to identify potential biases and they significantly mitigated the endogeneity concerns using instrumental variable regression. Additional estimations were performed, first by using book-tax differences (BTD) and its components, i.e. temporary and permanent, and second by retesting hypotheses of years before the outbreak of the corona virus disease 2019 (COVID-19) pandemic.

The results show that tax avoidance negatively affects the firm risk while tax risk has a positive effect on firm risk. More importantly, tax risk moderates the negative impact of tax avoidance on the firm risk. When tax avoidance is associated with a high level of tax risk, it leads to a high firm risk. Accordingly, tax avoidance should be considered in conjunction with tax risk when studying the effect put on the firm risk. Further analyses indicate that tax risk moderates the negative relationship between permanent BTD and firm risk.

The major limitation of this study is that it focuses only on French-listed firms, which make it difficult to generalize the results. Furthermore, the authors did not introduce governance variables into our models. An effective governance system and transparent information can reduce some of the perverse effects of risky tax avoidance by reducing the tax avoidance costs. The obtained results are of great interest to researchers who need to include the tax risk concept in their examination of the tax avoidance impacts.

The results are useful for investors wishing to make sound decisions regarding risky tax avoidance practices. Furthermore, the results may signal the need for French policymakers to make more efforts to reduce risky tax avoidance activities that are harmful to investors. They must enforce the existence and the reporting of a tax risk management strategy by firms.

This study contributes to the growing body of literature on the tax avoidance effects with a special focus on firm risk. This study provides the first French evidence of the role of tax risk in the relationship between tax avoidance and firm risk.