Working Papers

  •  Pension De-Risking and Firm Risk: Traditional versus Innovative Strategies (with Zezeng Li)
    • ​​Abstract: We examine the determinants of firms’ defined benefit pension plan de-risking strategy choices, and their impact on firm risk using a unique dataset covering FTSE 100 firms for the period of 2009-2017. In particular, we investigate which firm financial and pension fund characteristics influence de-risking strategy choices and their impact on firm risk, proxied with earnings and return volatility, default and credit risk. Results show that de-risking strategies are more likely to be implemented when pension plans have a longer investment horizon, indicating a higher level risk exposure due to investment uncertainty. We find that firms with larger pension plans prefer innovative de-risking strategies (buy-in/buy-out and longevity swap), as these reduce the risk more effectively removing various pension fund risk altogether, over the traditional ones (soft and hard freezing). Firms with higher market capitalization and that are financially unconstrained implement innovative pension de-risking strategies as they have the ability to pay the cash premiums required. We also find that pension de-risking strategies reduce firm risk. Hard freezing and pension buy-ins/buy-outs have the most significant impact in reducing firm risk. In contrast, soft freezing and longevity swaps tend to have a weaker or no impact on the overall firm risk.


  • Do Reputable Issuers Provide Better-Quality Securitizations? (with Solomon Y Deku and David Marques-Ibanez).
    • Abstract: ​​We examine the link between issuer reputation and the performance of mortgage-backed securities (MBS) using a sample of 4,247 European MBS issued between 1999 and 2007. We measure performance via credit rating changes and delinquency rates. Controlling for all observable characteristics at issuance, we find that MBS sold by reputable issuers were collateralised by higher quality asset pools with lower delinquency rates and less likely to be downgraded. However, as credit standards declined during the boom period of 2005-2007, asset pools securitised by reputable issuers were of worse quality compared to those of less reputable issuers, suggesting that as a credit cycle evolves reputable institutions have an incentive to cash on their reputation (Benabou and Laroque, 1992). We also find that foreign issuers, who are distant from the origination market, tend to sell lower quality MBS, which are more likely to be downgraded.


  • ​​Issuer reputation in securitization pricing (with Solomon Y Deku and David Marques-Ibanez).
    • ​​Abstract: We assess the certification value of issuer reputation in securitization by examining initial yield spreads of 4,201 mortgage-backed securities (MBS) from fourteen European countries. We find that issuer reputation has a certification value for riskier, difficult to evaluate, MBS and is considered to be more critical by investors when information asymmetries in credit markets intensify. We show that MBS originated by subsidiaries of foreign banks are perceived to be relatively more risky and issuer reputation does not alleviate this risk. We also find that investors require higher yields if there is an indication of rating shopping and when issuers’ pre-securitization loan growth is excessive.


  • Domestic and foreign monetary policy impact on bank and non-financial company stock returns during financial crisis: Evidence from China (with Yifan Zhou, Xiangyi Zhou and Solomon Y Deku).
    • ​​Abstract: We investigate the impact of varying domestic and foreign central bank monetary policy on the stock returns of listed Chinese companies during the period of financial crisis. We find that Chinese listed banks are more sensitive to the effects of the global central banks’ (Fed, ECB and BoE) unconventional policy spillovers as well as the Central Bank of China’s restrictive monetary policy. We also find that stock prices of large non-financial companies are more sensitive to monetary policy shocks. Additionally, the impact of monetary policy on individual stock returns might be conditionally dependent on the firm-level heterogeneity of ownership structure. 


  • Professional accountancy body accreditation in English universities: A quantitative analysis (with Alison Zimmer).
    • ​​Abstract: Accreditation of university courses and modules by professional accountancy bodies (PABs) is a defining feature of accountancy education in England. In this paper, we examine the extent of professional accountancy body accreditation in English universities and its relationship with research and teaching quality, rankings and graduate prospects using a quantitative approach. We collect data on levels of accreditation, across four professional bodies (ICAEW, ACCA, CIMA and CIPFA) in 79 universities. Utilising OLS and probit estimators, we find that accounting programmes in universities that rank highly in research and teaching quality, as well as graduate prospects, have higher levels of accreditation. We also find that post-1992 universities generally have higher levels of accreditation in comparison to others. Looking at overall university rankings, we find that higher ranked universities offer more accreditation. Finally, we observe that these identified relationships differ depending on the professional accountancy body. We check robustness of our results by also applying Propensity Score Matching as a third type of analysis.