Spillover Channels Research Articles

Study on the Impact of Institutions on the Labor Productivity of Private Enterprises in Vietnam through the Spillover Effect from State-Owned Enterprises

The paper analyzes the impact of institutions on the labor productivity of small and medium-sized private enterprises through the spillover effect from state-owned enterprises (SOEs). The authors used data samples from three datasets: (i) The Annual Enterprise Survey conducted by the General Statistics Office of Vietnam (GSO) from 2010 to 2018; (ii) Institutional data (PCI) published by the Vietnam Chamber of Commerce and Industry (VCCI) from 2010 to 2018; (iii) GSO 2012 I-O balance sheet and a set of tabular data containing 666,221 observations at the enterprise and provincial levels in Vietnam from 2010 to 2018, including both listed and unlisted enterprises. The model’s experimental result shows that institutional improvement boosts labor productivity of domestic private enterprises through a horizontal and forward spillover channel from SOEs. Through the backward spillover channel from SOEs, how institutional improvement affects the labor productivity depends on the degree of backward spillover channel from SOEs.

Cross-stock market spillovers through variance risk premiums and equity flows

We estimate variance risk premiums (VRPs) in stock markets of selected major advanced economies (AEs) and emerging market economies (EMEs) over 2007–2015, and decompose the VRP into variance-diffusive risk premium (DRP) and variance-jump risk premium (JRP). Daily VAR analysis reveals significant spillovers from US and developed Eurozone’s VRPs to the other economies’ VRPs, especially during the post-Global Financial Crisis (GFC) period. We also find that during the post-GFC period, shocks on the DRPs of the United States and the developed Eurozone have relatively strong and long-lived positive effects on other economies’ VRPs, whereas shocks on their JRPs have relatively weak and short-lived positive effects. In addition, we show that increases in the size of US VRP, DRP and JRP tend to significantly reduce weekly equity fund flows to all other AEs and some EMEs during the post-GFC period, while the impacts are limited during the GFC period. Finally, US DRP plays a more important role than US JRP in the determination of equity fund flows to other AEs during the post-GFC period. Such results indicate the possibility of equity fund flows working as a channel of cross-stock market VRP spillovers.

Risk spillover network structure learning for correlated financial assets: A directed acyclic graph approach

Using cross-asset return data in global financial markets, we propose a novel empirical framework to identify the causal structure of the asset risk spillover network. The joint return distribution of the global financial system can be characterized using a directed acyclic graph approach. However, since assets tend to be highly correlated during market turbulence, when adopting a nodewise penalized regression approach for neighborhood estimation, parameter estimates will receive large standard errors, and edges cannot be reliably estimated. In this work, we propose a two-stage approach for directed acyclic graph skeleton estimation for highly correlated variables. In the first stage, a variable screening ensemble is incorporated into the sparse partial least squares regression method to both reduce the size of the active variables set and impose an adaptive penalization on the weight vectors. In the second stage, a modified PC algorithm based on Gram-Schmidt orthogonalization is applied to remove the false positive edges. Simulation studies are conducted to demonstrate the effectiveness of the proposed method. Finally, we apply our method to analyze the asset risk spillover channels for international financial assets during the COVID-19 pandemic.

Impact of COVID‐19 pandemic on risk transmission between googling investor’s sentiment, the Chinese stock and bond markets

PurposeThe main objective of this paper is to investigate whether the investors' behavior under optimistic (pessimistic) conditions has an impact on risk transmission between the Chinese stock and bond markets and the sector indices mainly during the COVID-19 pandemic.Design/methodology/approachThis study uses a new measure of the investor's sentiment based on Google trend to construct a Chinese investor's sentiment index and a quantile causal approach to examine the causal relationship between googling investor's sentiment and the Chinese stock and bond markets as well as the sector indices. On the other hand, the network connectedness is used to estimate the spillover effect on the investor's sentiment and index returns. To check the robustness of the study results, the authors employed the Chinese VIX, as another measure of the investor's sentiment using daily data from May 2019 to December 2020.FindingsIn fact, the authors found a dual causality between the investor's sentiment and the financial market indices in optimistic or pessimistic situations, which indicates that positive and negative financial market returns may have an effect on the Chinese investor's sentiment. In addition, the results indicated that a pessimistic investor's sentiment has a negative impact on the banking, healthcare and utility sectors. In fact, the study results provide a significant peak of connectivity between the investor's sentiment, the stock market and the sector indices during the 2015–2016 and 2019–2020 turmoil periods that coincide respectively with the 2015 recession of the Chinese economy and the COVID-19 pandemic.Originality/valueThis finding suggests that the Chinese googling investor's sentiment is considered as a prominent channel of shock spillovers during the coronavirus crisis, which confirms the behavioral contagion. This study also identifies the contribution of a particular interest for portfolio managers and investors, which helps them to accordingly design their portfolio strategy.

Does foreign investment improve domestic firm productivity? Evidence from a developing country

This study examines the linkages between foreign investment and the total factor productivity of local enterprises within manufacturing industry in Vietnam. The Wooldridge GMM estimation approach is applied to panel data to estimate production function, which allows us to obtain total factor productivity of local firms. We then investigate how foreign investment influences local enterprise productivity through different spillover channels using two-step system GMM, FE and RE estimations. Our consistent findings show that foreign investment has a negative impact on the total factor productivity of domestic enterprises through the competition channel within an industry. There are strong positive spillovers associated with backward rather than forward linkages. Further insights relate to firm ownership, location, and the state of technology in which the different spillovers occur.

Industry 4.0: technology spillover impact on digital manufacturing industry

PurposeUnder the guidance of the concept of openness and development, the paper grasps the mechanism of technology spillover in developed countries and analyzes how to better absorb advanced manufacturing technology based on empirical analysis so as to point out the path for the transformation and development of China’s digital manufacturing industry.Design/methodology/approachThe paper constructs the panel data model and further analyzes the impact of international technology spillovers on the transformation and development of the digital manufacturing industry.FindingsThis paper measures the level of technology spillover in the Yangtze River Delta region and finds that foreign direct investment (FDI) technology spillover and import trade technology spillover among four provinces and cities show a growth trend from 2010 to 2017. But after 2017, there is a certain degree of decline.Originality/valueWith the advent of industry 4.0, the digital manufacturing industry of all countries in the world is developing with a new attitude, the global technology spillover methods are diverse and the spillover channels have changed greatly, which will affect the transformation and upgrading of China's digital manufacturing industry.

The role of media coverage in measuring the systemic risk of Chinese financial institutions

ABSTRACT This paper examines the impact of media coverage on systemic risk spillover in the Chinese market based on a tail event-driven network. By calculating the nonlinear conditional value at risk (CoVaR) through a tail-event driven network of Chinese financial institutions, we find that the CoVaR that considers media coverage has more accurate validity. When media coverage is high, the overall risk of the financial sector shifts. Compared with four different sectors, other financial institutions have the highest average risk inputs and outputs while the banking sector is the most robust. To provide further evidence, we analyse the spillover channels in times of crisis. We find that increased coverage can reduce the risk exposure within the system. We also find positive media have a lower level of systemic risk than negative media coverage in the sample period. We calculated the systemic risk exposure to illustrate the Systemically Important Financial Institutions (SIFIs) based on systemic risk emitters and receivers. The results are consistent with the Global Systemically Important Financial Institutions (G-SIFIs) and are broadly consistent with the media coverage results.

Covid-19 fiscal support and its effectiveness

This paper uses a threshold-augmented Global VAR model to quantify the macroeconomic effects of countries’ discretionary fiscal actions in response to the Covid-19 pandemic and its fallout. Our results are threefold: (1) fiscal policy is playing a key role in mitigating the effects of the pandemic; (2) all else equal, countries that implemented larger fiscal support are expected to experience less output contractions; (3) emerging markets are also benefiting from the synchronized fiscal actions globally through the spillover channel and reduced financial market volatility.

Monetary Policy Spillovers Under Covid-19: Evidence from U.S. Foreign Bank Subsidiaries

This paper uses Call Report data to examine the impact of home country monetary policy on foreign bank subsidiary lending in the United States during the COVID-19 pandemic. Examining a large sample of foreign bank subsidiaries and domestic U.S. banks, we find that foreign bank lending growth was positively associated with both lower home country policy rates and negative home country rates. Our point estimates indicate that a one standard deviation decrease in home country policy rates was associated with a 3.5 percentage point increase in lending growth while negative home country policy rates added an additional 3.0 percentage points on average. Disparities in sensitivity to home country rates also exist by bank size, as large banks exhibited more responsiveness to home country policy rate levels, but were less responsive to negative policy rates. Easier home country policy rates are also found to impact negatively in growth in capital ratios and bank income, in keeping with expanded foreign subsidiary activity. However, income responses to negative home country rates are mixed, in a manner suggestive of sophisticated adjustment of global bank balance sheets to changes in relative home and host country monetary policy stances. Overall, our findings confirm that the bank lending channel for global monetary policy spillovers was active during the pandemic crisis.

Credit risk spillovers and cash holdings

This paper examines how credit risk spillovers affect corporate financial flexibility. We construct separate empirical proxies to disentangle the two channels of credit risk spillovers—credit risk contagion (CRC), where one firm's default increases the distress likelihood of another; and product market rivalry (PMR), where the same default strengthens the position of a competitor. We show that firms facing greater CRC have weaker subsequent operating performance and must contend with less favorable bank loan terms. Meanwhile, they accumulate more cash by issuing equity, selling assets, and reducing investment and payout. In contrast, PMR generally has opposite, albeit weaker, effects. Our findings suggest that credit risk spillovers, especially CRC, play an important role in corporate liquidity management.

Financial openness and Chinese regional growth imbalance: New insight from spatial spillovers

This paper uses spatial panel methods and Chinese provincial data from 2003 to 2017 to study the spatial spillovers of financial openness on economic growth. The results show, first, a positive direct effect and an overall negative spatial spillover of financial openness on provincial growth. Second, there are two spatial spillover channels: a positive growth externality and a harmful resource competition among provinces. Third, we estimate the state dependence and dynamics of spatial spillover, and find that the negative spatial spillover is smaller in provinces with high levels of financial openness and in the long term; thus, the negative spatial spillover declined over time. These results are robust to the choice of SDM and GNS spatial econometrics methods and under different spatial weight matrices.

Spillovers across industries and regions in China’s regional economic diversification

ABSTRACT Industrial diversification depends on spillovers from related industries and nearby regions, yet their interaction remains largely unclear. We study economic diversification in China during the period 1990–2015 and present supportive evidence on both spillover channels. We add to the literature by showing that these two channels behave as substitutes when explaining new entries and exits, and by using acceleration campaigns of high-speed rail to address some endogeneity concerns with regional spillovers. Our findings confirm the role of relatedness and geographical distance in the diffusion of economic capabilities and support the idea that improvements in transportation can facilitate the diffusion of productive capabilities.

Credit Contagion and Risk Sharing among State Governments

We investigate how the negative credit events of a state can affect the credit risk of other states as well as the channels of state credit-risk spillover in the U.S. We find that one state’s credit rating downgrades and credit default swap jumps have a contagion effect on the credit risk of other states. In contrast, a negative credit outlook can introduce credit competition to non-event states. Additionally, risk sharing via capital markets and federal government are two crucial channels on the spillover effects. Industry similarity, political connections, and geographical proximity could affect the size of the interstate spillovers. Key words: State credit events, risk sharing, capital market, credit market, federal government

Commercial anion exchange membrane water electrolyzer stack through non-precious metal electrocatalysts

Ni-based electrocatalysts for replacement of precious metal electrocatalyst, the cathode materials of anion exchange membrane water electrolyzer (AEMWE), are seriously unstable and low activity at hydrogen production conditions. This study develops a high-performance, durable non-precious metal electrocatalyst for AEMWE, which show improved activity and durability. First, Ni/C was alloyed with Co and supported on carbon cloth coated with microporous carbon layer to improve the electrocatalytic activity of the hydrogen evolution reaction (HER) electrocatalyst; then, oxide (Ni/Co-O) was locally formed on the synthesized NiCo/C to increase its activity and durability. Specifically, this oxide increased the coverage of OH− ions, formed hydrogen spillover channels, and promoted the HER. Further, its improved electrochemical durability was attributed to the high bond dissociation energy of the metal oxide. The electrocatalyst was also evaluated as the cathode in single-cell (1-cell) and stack cell (5-cell) AEMWE systems to demonstrate that this superior performance would translate to the commercial scale.

Idiosyncratic information spillover and connectedness network between the electricity and carbon markets in Europe

With a systematic approach, this study investigates the roles of the peak-valley prices and idiosyncratic factors in the information spillover mechanism between the electricity and carbon markets in Europe. Our findings show that electricity demand plays a crucial role in the idiosyncratic information spillover channel, especially in the risk spillover channel. Moreover, the German and Austrian electricity market operators reveal the dominating power in the system while the carbon market is the net information receiver from the system. The results also indicate that the EU-ETS functions well in prompting the integration of European electricity market and reducing the greenhouse gas emission. Crucially, we find that after the “clean energy for all Europeans” package were adopted in 2016 by the European Commission, the European internal electricity markets gradually integrated. The results provide supportive evidence for the effectiveness of the new rule on developing a single European electricity market. Our research can provide useful information for policy-makers, regulators, and investors.

Foreign Direct Investment’s Impact on China’s Economic Growth, Technological Innovation and Pollution

In recent years, China has gradually become one of the countries with the largest levels of foreign direct investment (FDI). FDI has played a significant role in promoting Chinese economic development, and the FDI technology spillover effect is one of the core forces driving China towards reaching new growth milestones. Therefore, due to the country’s interest in development, there is competition for FDI throughout China. However, the existing imperfect environmental protection system cannot prevent FDI from flowing into China’s highly polluting and resource-intensive industrial chain, possibly causing serious environmental problems. Therefore, the topic of properly introducing foreign capital to promote development and effectively end China’s current environmental pollution crisis has become a research focus. To explore FDI’s impact on China’s economic growth, technological innovation, and environmental pollution, we use Chinese provincial panel data for 2004–2016 to construct a dynamic panel simultaneous-equation model. Considering the interrelationships between the equations, we construct economic models of economic growth, technological innovation, and pollution emissions, and incorporate them into the same research system for generalized method of moments (GMM) estimation. Our results show that FDI has a significant and positive direct impact on China’s economic growth and technological innovation, and can furthermore have a significant pull effect on the domestic economy through the backward spillover channel. At the same time, FDI has a direct and significant impact on the increase in regional waste-water discharge, while exhibiting a pollution halo effect on the emission of sulfur dioxide (SO2) and chemical oxygen demand (COD) emissions directly. In addition, we observe “benign feedback mechanism” between technological innovation output and these three types of pollution, namely SO2 emission, COD emissions, and ammonia and nitrogen discharge.

The long-term spillover effects of changes in the return to schooling

We study the spillover effects of a reform that substantially increased the returns to schooling in kibbutzim, socialist-oriented communities in Israel. This reform, which induced kibbutz students to improve their high-school academic performance, spilled over to their non-kibbutz peers who attended the same schools. In the short run, the peers improved their high-school outcomes and shifted to courses with higher financial returns. In the long run, they completed more years of post-secondary schooling and increased their earnings. We discuss two possible spillover channels: standard classroom peer effects and increased salience of the relationship between education and financial success.

Auxiliaries to Abusive Supervisors: The Spillover Effects of Peer Mistreatment on Employee Performance

An accumulating amount of research has documented the harmful effects of abusive supervision on either its victims or third parties (peer abusive supervision). The abusive supervision literature, however, neglects to investigate the spillover effects of abusive supervision through third-party employees’ (i.e., peers’) mistreatment actions toward victims. Drawing on social learning theory, we argue that third parties learn mistreatment behaviors from abusive leaders and then themselves impose peer harassment and peer ostracism on victims, thereby negatively affecting victims’ performance. Further, we posit that, if a victim has a proactive personality, this will weaken these indirect, negative effects. We conducted two studies, both with three-wave longitudinal data, to verify the hypotheses. The results of Study 1 evidence the significant indirect effects of abusive supervision on employee creative performance via both peer harassment and peer ostracism. Contrary to our moderation hypothesis, the analysis shows that victims’ proactive personality strengthens rather than weakens the negative indirect effects of peer harassment. Study 2 generally replicated the results of Study 1 with employee’s objective job performance as outcome. Our research contributes to the abusive supervision literature by highlighting a social learning process of third-party peer mistreatment, suggesting a spillover channel of abusive supervision on the victim’s performance.

How Is the Audit Market Affected by Characteristics of the Nonaudit Services Market?

ABSTRACTHow can features of the markets for audit and nonaudit services (NAS) affect an audit firm's incentives to invest in audit quality, average audit quality, and social welfare? We address these questions in a model focusing on competition in both audit and NAS markets. We show that, when audit and NAS demand are positively correlated, prohibiting auditors from providing NAS to audit clients leads to higher investments in audit quality, but can decrease average audit quality if marginal clients switch to lower quality auditors. The effect on social welfare can be positive or negative, depending on the distribution of clients' service demands. General bans on auditor provision of NAS can, via similar channels, increase or decrease audit quality and social welfare. Overall, our findings suggest a more nuanced view of how regulating an auditor's provision of NAS might affect audit quality and social welfare, and are driven by the effects of multimarket competition on the auditor's incentives to invest in audit quality, rather than previously identified auditor independence or knowledge spillover channels.

Economic spillover of design awards in the multifamily residential context

Many residential projects that receive publicly recognized awards for their architectural design and are built alongside monotonous public housing in Singapore present a unique opportunity to analyze the economic spillovers of design awards in the multifamily residential context. The difference-in-differences approach is utilized to estimate the design award’s effects on market prices of nearby public housing. Analysis results show that prices fell by 2% for public housing units within a 300-m radius of award-winning residences and sold during the first year after awards were given. In contrast, neither actual completion of award-winning residences nor the completion of non-awarded condominiums with good design led to a significant price change. These results provide suggestive evidence that the dominating channel for negative economic spillovers is winning an award rather than congestion from new residential developments or good design itself. Furthermore, price reduction was significant only for newer public housing units with better design attributes compared to older ones. This suggests that the economic spillover of design awards is negative when surrounding housing units are potentially comparable and substitutional with award-winning residences and have a limited possibility for self-improvement through upgrades or redevelopment. A potential explanation is that envy based on the comparison with a neighboring residence receiving a publicly recognized design award may play an influential role in conspicuous housing consumption.