Exogenous Shocks Research Articles

Does Peer Socialization Within Cohorts Foster Political Attitudes? A Longitudinal Study of Elite Business Students

AbstractThe association between higher education and political attitudes is well-recognized, and research suggests that socialization amongst peers is one of the most probable mechanisms explaining a possible attitudinal change. However, identifying a socialization effect is difficult due to self-selection mechanisms and limitations in data availability. This article empirically investigates the underlying peer socialization by employing a longitudinal network study of undergraduate students in Swedish and Finnish top-ranked business schools (N = 2651). The study tests the hypotheses that (1) attitudes within a cohort converge over time, and (2) socially embedded students experience more attitudinal change during their studies than students who do not engage with their peers. The paper leverages the Covid-19 pandemic as an exogenous shock that severely affected the networking dynamics of specific cohorts since it moved their education off campus. It is thereby among the first studies to directly test the relationship between socializing behaviors within higher education and political attitudes using both subjective and objective measurements. Contrary to previous conjectures, the findings challenge a general socialization mechanism to foster political attitudes. Instead, they point toward the importance of self-selection mechanisms in studies of higher education and for the specific student composition.

The impact of the tobacco law on tobacco-related hospitalizations in Portugal - a natural experiment

Abstract Introduction Tobacco is responsible for approximately 8 million deaths annually worldwide, with 1.2 million resulting from passive exposure to smoke, as reported by the WHO. Comprehensive tobacco control policies have been enacted across Europe, yet their impacts are seldom assessed. This study evaluates the effects of the anti-tobacco legislation enacted in Portugal in 2007 on tobacco-related hospitalizations between 2002 and 2018. Methods Data from all in-patient admissions in public hospitals throughout the 2002-2018 period were utilized. A quasi-experimental interrupted time series design was employed, treating 2008 as an exogenous shock. The dependent variables include the municipality-based incidence of hospitalizations by year for tobacco-related diseases, namely, Acute Myocardial Infarction, stroke, lower respiratory tract infections, chronic obstructive pulmonary disease, and asthma. The analysis was adjusted for the percentage of women, the percentage of individuals aged over 65, and purchasing power in the municipality. Time trend graphs for each variable were generated, followed by an adjustment using the Poisson regression model to forecast their trends. A comparison was conducted between observed post-law implementation data and projected values from the regression model to ascertain the percentage difference between the two. Expected Results The 2007 tobacco law led to significant reductions in tobacco-related disease incidence, with the most notable effects immediately post-implementation. The impact varies across age groups, with younger individuals (30-49 years) showing a sharper decrease. The effect diminished over time, as indicated by negative coefficients in time:law interactions, such as -0.03. Conclusions The anti-tobacco laws implemented in Portugal have effectively decreased hospitalizations related to tobacco use, suggesting potential increases in life expectancy and reduction in health system burden. Key messages • Public health policies are crucial for the long-term improvement of people’s health. • Non-exposure to tobacco can bring health gains on several levels.

Corporate responsibility and corporate misbehavior: are CSR reporting firms indeed responsible?

Abstract We investigate whether firms that proclaim a commitment to corporate social responsibility (CSR) by CSR reporting indeed internalize such a commitment and behave more responsibly. We analyze the association of the issuance and quality of voluntary CSR reports with the occurrence, number, and severity of corporate misbehaviors, both preceding and subsequent to CSR reporting. We find a significantly positive association of CSR reporting with our measures of prior and future misbehavior. The results are corroborated by a quasi-natural experiment around the Rana Plaza disaster where we find that the signatories of an accord for better working conditions have significantly higher prior and future misbehavior relative to non-signatories and firms unaffected by the exogenous shock. Our results are in line with legitimacy theory implying that, on average, the firms’ proclaiming commitment to CSR is not a signal of internalized commitment but more likely serves greenwashing and impression management purposes.

How Does Digital Economy Influence Green Mobility for Sustainable Development? Moderating Effect of Policy Instruments

The role of green mobility as a low-carbon lifestyle in carbon reduction and sustainable development cannot be ignored. The digital economy effectively promotes green mobility for sustainable energy use in the broader setting of the significant data era and sustainable development. This study utilizes the panel data of 264 cities in China from 2011 to 2021 to construct a two-way fixed-effects regression model to analyze the impact of the digital economy on residents’ green mobility and the indirect impact mechanism of the two policy tools, a low-carbon transportation pilot and carbon emissions trading, from theoretical and empirical aspects. The results show that digital economic development helps promote residents’ green mobility. In addition, the implementation of low-carbon transportation pilots and carbon trading policies has strengthened the role of the digital economy in promoting green mobility. The findings remain after introducing robustness tests such as “smart city” pilots as exogenous shock policies. A heterogeneity study suggests that the effect of the digital economy on green mobility for residents is more significant in economically developed and human capital-rich areas. This study contributes to the literature by providing empirical evidence on the role of the digital economy in promoting sustainable urban transportation and by demonstrating the moderating effects of policy instruments, thereby offering practical insights for policymakers aiming to reduce urban pollution and enhance sustainable development.

Commercialisation, exogenous shocks and nutrition: Evidence from smallholder farmers in Bangladesh

AbstractThis study empirically analyses the effect of agricultural commercialisation on food spending and nutrition outcomes in Bangladesh. We examine whether exposure to exogenous climate shocks moderates these relationships. We construct individual‐level nutrition measures and time‐varying climate extremes using nationally representative panel data. To address endogeneity concerns, we use an instrument variable approach. Results show that commercialisation leads to an improvement in the broad nutritional profile of individuals. However, the commercialisation–nutrition linkage is weaker for households exposed to frequent climate shocks than those in climate‐resilient areas. Importantly, climate shocks dampen the positive nutritional impacts of commercialisation and exacerbate existing inequalities in the nutritional status within the households. Women and girls appear disproportionately vulnerable to the nutrition‐weakening effects of weather stresses in commercialised agricultural households. This highlights twin policy challenges: strengthening smallholders' resilience to escalating climate risks alongside promoting gender‐equitable, nutrition‐sensitive agricultural commercialisation.

Carbon emissions and CEO pay

AbstractOur study examines the link between firms' carbon emissions and their compensation to CEOs and finds a positive association in line with the compensating wage differentials theory. We use Donald Trump's 2016 election win as an exogenous shock to identify a causal relationship. Ruling out managerial power as an alternative explanation, the relations are stronger when firms are better governed and are more likely to be aware of their carbon risk. Additionally, we present evidence that high carbon emissions increase CEOs' risk of job loss, reinforcing the presence of compensating wage differentials as the plausible explanation for the positive association.

The real effects of distressed bank mergers

We show that distressed bank mergers that are a widely used instrument for bank resolution have the potential to generate adverse real economic effects. We analyze distressed mergers of German savings banks and show that they represent exogenous shocks to the (initially non-distressed) acquiring bank. In the years after a distressed merger: (i) the performance of the acquiring savings bank deteriorates; (ii) the shock is transmitted to firms in the acquirer’s region which cut back their investments and reduce employment and (iii) the overall macroeconomic dynamics in the region of the acquirer deteriorates, leading to reductions in investment and employment growth. To support a causal interpretation of our results we perform several tests that confirm that local economic dynamics is affected by the shock to the acquiring bank and not by real economic contagion.

Corporate culture and shareholder litigation rights: evidence from a quasi-natural experiment and textual analysis

PurposeTaking advantage of an innovative measure of corporate culture obtained from advanced machine learning and textual analysis, we investigate how corporate culture is influenced by shareholder litigation rights, which are widely recognized as a crucial external governance mechanism. The innovative measure of corporate culture is based on a textual analysis of over 200,000 earnings call transcripts.Design/methodology/approachTo mitigate endogeneity and thus demonstrate causality, we exploit a quasi-natural experiment based on the staggered passage of universal demand laws, which reduce shareholder litigation rights. The enactment of state-level legislation is likely exogenous to individual firms’ characteristics as it is beyond the control of any given firm. Following the literature, we employ a difference-in-difference analysis, supplemented by several robustness checks, i.e. propensity score matching and entropy balancing.FindingsOur difference-in-difference estimates show that an exogenous reduction in shareholder litigation rights weakens corporate culture considerably. Specifically, corporate culture is 12.74–14.41% weaker after the implementation of universal demand laws. Our results corroborate the hypothesis that a decline in litigation risk exacerbates agency problems, discouraging self-interested managers from taking actions that enhance shareholder value in the long run, such as cultivating a strong corporate culture.Originality/valueOur study is the first to explore how corporate culture is affected by shareholder litigation risk, which constitutes a vital external governance mechanism. Moreover, we utilize an innovative measure of corporate culture based on sophisticated textual analysis. Finally, we employ a quasi-natural experiment based on an exogenous shock, making it more likely that our conclusion reflects a causal influence rather than merely a correlation.

Effect of government's environmental attention on corporate philanthropy based on the institutional theory: Evidence from China's heavily polluting companies.

The underlying motivation behind corporate philanthropy (CP) is subject to multiple interpretations. For emerging markets, traditional interpretations based on a perspective of interest exchange often fall short. The institutional environment in China is characterized by uncertainty, particularly in the field of environmental protection, where the government's attention, a scarce institutional resource, can influence the behaviors of heavily polluting companies. The government's environmental attention (GEA) may be subject to campaign-style investment, which provides an opportunity for research. This study attempts to use institutional theory to construct a difference-in-differences model using the Central Inspection of Environmental Protection as an exogenous shock. It examines the causal impact of GEA on CP, observing that GEA has a positive effect on CP, especially for large companies, companies in less competitive industries, companies located in high-pollution areas, and companies with high environmental expenditure. The results indicate that campaign-style institutional changes provide a non-transactional political motivation for CP. In addition, we discuss the mechanism, which is the expectation change. Campaign-style institutional changes work by altering corporations' expectations of the future institutional environment. We verify this mechanism from two perspectives, namely, the intensity of changes caused by uncertainty and corporate sensitivity to changes. Our results remain robust when subject to several tests based on different identification hypotheses and alternative measures. Unlike the existing literature on the political connections driving CP in China, this study, based on the institutional theory framework, reveals that campaign-style institutional changes constitute a non-transactional, unidirectional political motivation, which is a significant driving factor for CP in a Chinese context. This study evaluates the importance of GEA and reveals the non-transactional political motivations from the institutional theory perspective. This not only enriches existing discussions on the political motivations of CP but also broadens our understanding of the relationship between institutional uncertainty and CP in emerging markets.

Climate policy shocks and crowdfunding success of renewable technology campaigns

AbstractThis study uses Trump's withdrawal from the Paris Accord as an exogenous policy shock and investigates its impact on crowdfunding outcomes. We find that this major policy change negatively affects the funding success of renewable technology campaigns. Mechanism tests suggest that social trust and availability bias transmit the influence of climate policy shock on crowd backers' decisions. Further analyses indicate that Biden's consequential policy reversal recovers the investors' support towards renewable technology. Overall, the Trump administration's climate policy shock induces significant shifts in the consumption preferences of small investors and incurs negative externalities upon renewable technology in crowdfunding markets.

Has the Anti-Corruption Campaign Decreased Environmental Pollution? Evidence from China

Whether anti-corruption efforts help reduce environmental pollution is a hot topic in academia. This paper analyzes the impact of anti-corruption on the emissions of environmental pollutants using panel data from 31 provinces (municipalities) in China from 2015 to 2022. By using the 2018 supervision system reform as an exogenous policy shock, a Difference-in-Differences (DID) model is employed to examine the impact of the anti-corruption campaign on environmental pollutant emissions. The results show that the effectiveness of anti-corruption measures has strengthened over time, especially after the 2018 system reform, although these reforms exhibit a lag effect before significantly reducing pollution levels. Furthermore, heterogeneity analysis indicates that due to the high-pollution, high-energy-consumption industrial structure, the pollution reduction effect of anti-corruption measures is more pronounced in resource-based provinces than in non-resource-based provinces. Our findings emphasize the importance of strengthening anti-corruption measures and establishing a sound legal framework to effectively curb corruption and enhance environmental protection.

Decision-Making Amid Economic Uncertainty: Exploring the Key Considerations of Commercial Property Investors

This study explored the key considerations of commercial property investors acting under conditions of economic uncertainty across the following three dimensions: market fundamentals, institutional, and behavioural factors. Over the past few decades, a series of exogenous shocks to the global economy has impacted property performance, investment volumes, and investor perceptions. Acknowledging that uncertainty further complicates investment decision-making, a mixed-methods research approach was adopted to examine the perspectives of 5 experts and 412 property investors. The findings revealed that, while most investors express negative responses to uncertainty and adopt more cautious attitudes, others are more aggressive and attempt to capitalise on emerging opportunities. Market fundamentals are not the only key consideration; access to information and investors’ behaviour all impact how decisions are made under these conditions. In particular, wealthy and more experienced investors make more comprehensive decisions, considering all three dimensions, while aggressive investors may disregard data in favour of intuition. Behavioural biases such as the bandwagon effect and fear of missing out (FOMO) all influence decisions and are sometimes exacerbated by media narratives. Practically, these considerations underscore the complexity of decision-making under conditions of uncertainty and how different investors attempt to navigate market volatility.

The implications of digital school quality information for neighbourhood and school segregation: Evidence from a natural experiment in Los Angeles

A digital information explosion has transformed cities’ residential and educational markets in ways that are still being uncovered. Although urban stratification scholars have increasingly scrutinised whether emerging digital platforms disrupt or reproduce longstanding segregation patterns, direct links between one theoretically important form of digital information – school quality data – and neighbourhood and school segregation are rarely drawn. To clarify these dynamics, we leverage an exogenous digital information shock, in which the Los Angeles Times’ website revealed measures of a particularly important school quality proxy – schools’ value-added effectiveness – for nearly all elementary schools in the Los Angeles Unified School District. Results suggest that although the information shock had no detectable effects on residential sorting or neighbourhood racial segregation, it did exert modest effects on school sorting – particularly for Latino and Asian students – albeit not in ways that materially diminished school racial segregation because the racial compositions of high- and low-value-added schools were broadly similar both before and after the information shock. We conclude that the urban stratification implications of digital information may be more nuanced than often appreciated, with effects operating through mechanisms beyond residential segregation and reflecting racial heterogeneity in constraints and preferences vis-à-vis specific types of information.

Political spillover effects of environmental policy: Evidence from China

This paper explores the causal relationship between automatic environmental monitoring and political trust. We utilize staggered monitoring automation as exogenous shocks to assess the impact on residents' political trust. Our findings reveal a significant and positive effect of monitoring automation on political trust, a factor rarely considered by most existing studies. The mechanism investigation shows that monitoring automation has heightened residents' environmental concerns and increased their expectations regarding the government's role in pollution prevention. This paper offers a pioneering quantitative assessment of feedback from residents due to a specific environmental policy, suggesting that potential spillover effect should be considered.

NATO after the invasion of Ukraine: how the shock changed alliance cohesion

AbstractFollowing Russia’s invasion of Ukraine in 2022, experts predicted a NATO revival. The record on alliance cohesion, however, is mixed. Allies achieved consensus on some issues but not others. While some Alliance politics scholars and NATO experts assert that cohesion improved, new scholarship is needed to explain the nature of and changes in cohesion across NATO’s many issue areas. Leveraging organizational change scholarship, I argue that the extent to which an exogenous shock—here, the invasion of Ukraine—aligns with NATO’s mission can explain differences in cohesion on issue areas across three realms. To test the argument, I employ discourse analysis of high-level NATO documents, leader statements, relevant quotes from allied and NATO officials and public opinion polls (2010–2024). Findings reveal the importance of an alliance’s mission for the reconfiguration of cohesion after shock, and the study offers an alternative means for explaining the ebbs and flow of alliance cohesion.

The impact of phasing out subsidy for financial performance of photovoltaic enterprises: evidence from “531 new policy” on China’s photovoltaic industry

In the past two decades, China’s government subsidy policy has promoted the rapid development of the photovoltaic industry. Concerns have been raised about how the financial performance of China’s photovoltaic firms changes with the gradual cancellation of subsidies. Taking the “531 New Policy” of China’s photovoltaic industry as an exogenous shock, based on the sample of listed companies in Shanghai and Shenzhen A-share photovoltaic industry from 2015 to 2023, this paper uses the diference-in-diferences model to study the impact of the phasing out subsidy on the financial performance of photovoltaic enterprises from the micro level. The study found that the implementation of the “531 New Policy” significantly reduced the financial performance of photovoltaic enterprises in general. Considering the difference of industrial chain links, the negative impact of decreasing subsidies on the financial performance of downstream photovoltaic enterprises is more significant, among which R&D investment plays a partially intermediary role. In addition, the phasing out subsidy has a more significant negative impact on the financial performance of senior and eastern enterprises than young and midwest enterprises. The conclusions of this study have important practical implications for photovoltaic enterprises’ decision-making under the changing external policy environment.

Interest rate liberalization and corporate innovation: Evidence from natural experiments in China

AbstractWe examine whether and how interest rate liberalization affects corporate innovation in China. Using the removal of the interest rate ceiling and floor as exogenous shocks, and the numbers of granted patents to proxy for corporate innovation, we find that corporate innovation increases after interest rate liberalization. Our finding holds through several robustness tests. Furthermore, we show that state‐owned enterprises (SOEs) and non‐SOEs benefit from interest rate liberalization differently: Non‐SOEs benefit more from interest rate ceiling removal, whereas SOEs benefit more from interest rate floor removal. Cross‐sectional analyses also show that the effect is more pronounced when bank competition is higher and when firms rely more on external finance. Exploring potential channels through which interest rate liberalization spurs innovation, we find that although ceiling removal mitigates firms’ financial constraints, floor removal lowers corporate loan costs. Our study provides evidence of how financial reform benefits the real economy.

There and Back Again: How UK–EU De‐Institutionalisation After Brexit Shaped Re‐Engagement After Ukraine

AbstractRussia's invasion of Ukraine in February 2022 disrupted the status quo of the European security order and brought about a re‐engagement in the UK–EU security relationship. However, co‐operation remains informal and ad hoc in ways that diverge from theoretical expectations of security co‐operation in the face of external threats. Applying insights from Historical Institutionalism and drawing on semi‐structured elite interviews with UK and EU officials from 2017 to 2023, our article explains why a shock as severe as the Russian invasion was not sufficient to bring about the wholesale renewal of UK–EU co‐operation. Our analysis demonstrates that the exogenous shock of conflict interacted with path‐dependent dynamics stemming from the Brexit process, shaping the institutional outcomes and limiting co‐operation in important ways. We show that co‐operation has intensified only when problematic Brexit legacies have been removed, arguing that UK–EU security re‐engagement represents a phased process rather than a linear one.

Do CEO Connections to the Chinese Politburo Pay Off and How?

ABSTRACTResearch Question/IssueThis study investigates the effect of connections to the Politburo, the top 25 members of the Chinese Communist Party (CCP), on CEO compensation, pay‐for‐performance sensitivity, and turnover decisions using a comprehensive dataset of 3764 Chinese listed firms from 2007 to 2019.Research Findings/InsightsOur findings reveal that CEOs of privately owned listed firms who have connections to the Politburo via shared educational backgrounds receive significantly higher compensation (up to 20% more). However, such connections do not significantly affect CEO compensation in state‐owned enterprises (SOEs). CEOs who have connections to the Politburo also exhibit lower turnover rates, and their compensation is less sensitive to performance outcomes. Our measure of connections excludes reverse causality, as we leverage an exogenous shock—the promotion to the Politburo of an individual with whom the CEO is already connected—to investigate the gain associated with a political connection in the absence of CEO turnover in private firms. This event allows us to observe that CEO pay increases significantly in such cases. We also find that elite connections serve as a mechanism for resource allocation, as politically connected CEOs in private firms benefit from higher subsidies and lower tax rates, and politically connected CEOs in SOEs benefit by being appointed to larger SOEs. Additionally, we find that the positive relationship between CEO pay and elite connections is even stronger when the connection is stronger but is negative when the CEO is a CCP member.Theoretical/Academic ImplicationsThis study enriches the literature on political connections by introducing a novel proxy for elite connections based on past educational ties to members of the political elite. It disentangles the influence of personal educational connections to the political elite from that of a more generic political membership of the CCP, offering a clearer understanding of their distinct impacts.Practitioner/Policy ImplicationsOur study underscores the necessity of differentiating between private and SOEs in China due to their distinct characteristics and goals. Furthermore, it highlights the critical role of elite political connections in emerging economies such as China in resource allocation, labor market dynamics, and corporate governance.

The Belt and Road Initiative: Industry Competition and Corporate Environmental Information Disclosure in China

The Belt and Road Initiative (BRI) is a significant Chinese strategic measure designed to construct a platform for multinational cooperation. The study investigates whether the BRI construction influences corporate environmental information disclosure (EID) and whether the industry competition moderates their relationship. Adopting the legitimacy theory, we assume that firms focus more on EID to differentiate themselves after the BRI construction, especially amongst fierce competition where firms apply the EID strategy more for higher legitimacy. Taking the BRI construction in 2014 as an exogenous shock, we use a difference-in-differences method (DID) and propensity score matching difference-in-differences method (PSM-DID) based on the panel data of 4099 A-share listed firms from 2008 to 2022 and take the parallel trend and placebo tests for the robustness. We reveal a significant improvement in the EID of firms within the BRI stock sector following its establishment, with the effect of the BRI construction being further strengthened by industry competition. Leveraging legitimacy theory, the paper sheds light on the motivations behind EID and how industry competition serves as a moderating factor of the EID-promoting effects brought by the BRI construction.