Scopus İndeksli Yayınlar Koleksiyonu
Permanent URI for this collectionhttps://hdl.handle.net/20.500.12573/395
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Book Part Rule of Law, International Trade, and Corporate Financing Decisions in Europe: Evidence From the COVID-19 Pandemic(IGI Global, 2022-11-18) Polat, Ali YavuzThis chapter investigates whether the institutional environment that the firms operate has an impact on their leverage choice. Namely, rule of law is used as an institutional variable. Considering that better implementation of rule of law impacts positively firms' export performance, total exports in each country are also used as the other main explanatory variable. The findings show that both institutional variables and exports negatively and significantly affect the leverage level. This implies that firms in favorable institutional environment tend to borrow less, which results with lower leverage. Moreover, this study finds that the COVID-19 pandemic period as an unprecedented shock to economies pushed the leverage levels higher. Regarding the implications of the findings, firms' capacity to access external finance especially during a significant crisis period depends on the institutional environment. Namely, the effective implementation of rule of law should be first priority for the policy makers. © 2023 Elsevier B.V., All rights reserved.Article Citation - WoS: 2Citation - Scopus: 3Investor Bias, Risk and Price Volatility(Emerald Group Publishing Ltd, 2022-11-29) Polat, Ali YavuzPurposeThis study proposes a framework based on salience theory and shows that focusing on one type of risk (idiosyncratic or systemic) can explain overpricing of securities ex ante, and resales at low prices during crisis periods.Design/methodology/approachThe author consider an overlapping generations (OLG) model where each generation lives for two periods and there is no population growth. Agents (investors) start their lives with an endowment W > 0 and have mean-variance utility. They invest their endowment when young and consume when old. Each period, the young investors optimally choose their portfolio from different risky assets acquired from the old generation, all assumed to be in fixed supply.FindingsThe author show that investor salience bias can explain excess volatility of asset prices and the resulting fire-sales in periods of financial turmoil. A change in salience - from one component (idiosyncratic) to the other (systemic) - will generate excess volatility. Interestingly, higher risk aversion generally exacerbates the excess volatility of prices. Moreover, the model predicts that if a big systemic shock hits the financial system, due to salience bias the price of systemic assets falls sharply. This relates to the observed fire-sales of assets during the global financial crisis.Practical implicationsThe proposed model and results suggest that there may be a scope for intervention in financial markets during turbulences. In terms of ex ante policies the study suggests that investors and regulator should use better risk assessment technologies.Originality/valueThis is the first study constructing a tractable model based on the argument that investor salience may exacerbate the excess volatility of prices during financial downturns. The author relate salience to two types of risk; idiosyncratic and systemic and assume that investors' risk perception is biased towards the type of risk that is currently salient based on prior beliefs or past data. The author show that the diversification fallacy of the precrisis period, where seemingly safe assets were overpriced, can be explained by agents overweighing idiosyncratic risk and ignoring systemic risk.