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Current Issue

Volume 25 Number 2 (2021)

PISSN : 2508-1640 EISSN : 2508-1667

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1
  • The Motivating Role of Sentiment in ESG Performance: Evidence from Japanese Companies
  • https://dx.doi.org/10.11644/KIEP.EAER.2021.25.2.393
  • Ngoc Bao Vuong; Yoshihisa Suzuki
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    The paper investigates investor sentiment’s role in boosting Japanese companies to enhance their environmental, social, and corporate governance (ESG) performance. Using ESG scores of 367 firms between 2005 and 2019 from the ASSET4 database, we find that negative sentiment in the previous year, both firm and market level, can be a stimulation for the company’s commitments to its ESG activities next year. Notably, the moderating effect of the business sector and economic cycle on the sentiment-ESG inference are detected in our study differentiating between corporate and market sentiment, which have never been reported before. In detail, we discover that the impact of firm-specific sentiment is less pronounced for high-sensitive ESG firms. On the other hand, the driving force of market sentiment on corporate social behaviors weakens when economic recessions happen. Our results are robust after controlling for potential endogeneity issues and using alternative proxies for market sentiment.

    JEL Classification: G30, G40, M14

2
  • Does Inward Foreign Direct Investment Affect Productivity across Industries in Korea?
  • https://dx.doi.org/10.11644/KIEP.EAER.2021.25.2.394
  • Yong Joon Jang
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    This paper empirically examines whether and how inward foreign direct investment (FDI) affected industrial productivity in Korea during the 2000-2016 period, based on dynamic panel data of inflow FDI on an arrival basis from 427 manufacturing industries. The paper adds to the literature by analyzing whether both technology spillovers and industrial restructuring from inward FDI can differ according to industrial characteristics such as capital intensity, imported intermediate inputs, and tariffs. The empirical results show that the overall effects of inward FDI on total factor productivity (TFP) were statistically insignificant in general. However, the positive effects of inward FDI on productivity became statistically significant for industries with lower tariffs. Capital intensity were not involved in the relationship between inward FDI and productivity. Thus, the paper highlights that the results in previous studies with inward FDI on a notification basis were overestimated and inward FDI policies in Korea should focus on channels such as trade liberalization and the redistribution of production factors rather than capital accumulation.

    JEL Classification: F15, F21, F23

3
  • Financial Market Integration and Income Inequality
  • https://dx.doi.org/10.11644/KIEP.EAER.2021.25.2.395
  • Jae Wook Jung; Kyunghun Kim
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    Over the past decades, financial markets have been integrated across countries while income inequality has increased in most countries. This paper studies the effect of financial market integration on income inequality and investigates whether this effect varies with the degree of financial market development. We find empirical evidence that financial market integration and financial market development interact to change income inequality. Specifically, the effect of financial market integration on income inequality is nonlinear, and the degree of financial market development plays an important role. Opening financial markets worsens income inequality in the countries holding the underdeveloped state of financial markets, however, the effect of capital account openness on income inequality is statistically insignificant in the countries with developed financial markets.

    JEL Classification: F36, D63, O11

4
  • The COVID-19 and Stock Return Volatility: Evidence from South Korea
  • https://dx.doi.org/10.11644/KIEP.EAER.2021.25.2.396
  • Dong-Jin Pyo
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    This study examines the impact of the number of coronavirus cases on regime-switching in stock return volatility. This study documents the empirical evidence that the COVID-19 cases had an asymmetric effect on the regime of stock return volatility. When the stock return is in the low volatility regime, the probability of switching to the high volatility regime in the next trading day increases as the number of cumulative cases increases. In contrast, in the high volatility regime, the effect of cumulative cases on the transition probability is not statistically significant. This study also documents the evidence that the government measures against the pandemic contribute to promoting the high volatility regime of the KOSPI during the pandemic. Besides, this study projects future stock prices through the Monte Carlo simulation based on the estimated parameters and the predicted number of the COVID-19 new cases. Under a scenario where the number of new cases rapidly increases, stock price indices in Korea are expected to be in a downward trend over the next three months. On the other hand, under the moderate scenario and the best scenario, the stock indices are likely to continue to rise.

    JEL Classification: G11, G12, I10