Lieven De Moor

Corporate social responsibility reporting: A comprehensive picture?

Abstract This study develops a content analysis framework that provides information on the comprehensiveness of corporate social responsibility (CSR) reporting, an important aspect of social and environmental accountability. Comprehensive reporting, as defined here, requires three types of information for each disclosed CSR item: (i) vision and goals, (ii) management approach, and (iii) performance indicators. The feasibility of the framework to assess the comprehensiveness of CSR reporting is demonstrated using the 2005 annual reports of a sample of publicly traded Belgian companies. The content analysis reveals a low level of comprehensive reporting. This finding complements those of prior studies on the completeness of CSR reporting and, therefore, feeds the debate regarding the extent to which CSR reporting can be considered a mechanism for discharging social and environmental accountability.

What drives international equity and bond holdings? An empirical study

In this article, we explore tentatively and formally the differences between bond and equity home and foreign bias based on a large data set including developed and emerging markets for the period 2001 to 2010. We show that, unlike for equities, the international demand for bonds is mainly supply-side driven: bond home bias increases with a growth in public debt, while the underinvestment bias towards a foreign countrys bonds decreases if this country issues more (sovereign) debt. This explains the absence for a negative time trend in bond home bias while equity home bias has decreased over time, and similarly a decrease in foreign bond bias, which is not observed for equities. Besides variables being significantly more, less or incompatibly important for bond versus equity investment bias, we also determine variables to be exclusively relevant for bonds, like sovereign credit ratings and bank credit supply.

Mutual Fund Performance: A Market Efficiency Perspective

ABSTRACT This study reconciles existing literature on stock market efficiency and mutual fund performance by developing a framework to test whether fund managers are able to exploit market inefficiencies. We find a positive relationship between alpha and weak-form market efficiency. Most funds are unable to outperform the market systematically, although a few are able to exploit relatively inefficient markets. Top performing funds are characterised by a better management of downside risk in times of market distress, whilst simultaneously exploiting learning effects when markets return to equilibrium. By conditioning fund performance on the state of the underlying market, we propose a conditional alpha ratio, which helps to better understand fund performance and can improve the fund selection process for investors.

Myths about fundamental indexing

ABSTRACT Fundamental indexing starts from the observation that in a value-weighted portfolio, any overpricing affects the stock’s portfolio weight upward and its typical return downward, and vice versa; but on average the ‘drag’ on the portfolio’s expected return caused by this negative interaction is avoided if weights are based instead on accounting-based instruments for true value. We find that the drag effect is statistically and economically unimportant. Our empirical work avoids regression-based alphas, which are flawed by demonstrable instabilities in the exposures.

Determinants of bank loan spread in project finance

The purpose of this paper is to develop a better understanding of the pricing decisions of banks for project finance (PF) loans and the main drivers affecting the cost of debt in infrastructure deals. As infrastructure projects are typically highly leveraged, the cost of bank lending is an important driver of the overall funding costs for the project.,First, the paper provides a general review of the drivers of the cost of funds in PF. Second, the paper develops a regression analysis of the loan’s spread on four categories: project, loan, bank characteristics and the economic environment. By using a new data set of InfraDeals containing data on bank spreads of more than 700 infrastructure projects worldwide from 2006 to 2016.,The results show that the cost of debt is predominantly affected by the market and the business cycle, rather than the structuring of the project. This implicates that the timing when the deal is closed weighs more heavily than the specificities of the project itself.,The results have important policy implications. As PF deals are often paid for by taxpayers, this paper could help policymakers to use public funds for infrastructure in the most efficient way.,One weakness of existing studies in PF loan pricing is that they undervalue the role of the economic environment in the cost of debt. Few studies in the literature include macroeconomic control variables in their model and the others do not seem to find significant results. This paper reveals new insights on the pricing decisions of banks for PF loans.

Constraints related to developing small-scale PPPs and how to reduce them

Purpose The purpose of this paper is to better understand the constraints related to developing small-scale public-private partnerships (PPPs) and how to reduce them. Design/methodology/approach The paper provides a general review of the characteristics of small-scale PPPs and identifies overarching concerns. Findings The paper finds for small-scale PPPs constraints with respect to the definition, government processes and procedures, transaction costs, public capacity and institutional structure; important issues of transaction costs, minimum size requirement and increasing popularity and recommendations for further development. Practical implications Since most small PPPs are conducted by cities and regional governments, many local bodies would benefit from a better understanding of small-scale projects, helping to develop standard documentation, which is especially relevant for small-scale projects given their relatively large transaction and bid costs, supporting the long-term growth of small PPPs. Originality/value Small-scale PPPs have different characteristics compared with large projects and these characteristics should be studied separately. Although the benefits of small-scale projects are undeniable, relatively few have been undertaken relative to the substantial requirement. A more thorough understanding of the constraints related to developing small-scale PPPs and how to reduce them would help the subset of small projects to reach its full potential. This paper serves as a first step, clearing the ground for further research in specific areas.

Characteristics of pricing errors in stocks implied by autocovariance and ‘drag’

In this article, we estimate the lower bounds on the volatility and autocorrelation of pricing errors in stocks and infer the market-wide component in the pricing errors, by combining information from the autocovariance and ‘drag’ in stock returns. For the smaller US stocks, we estimate lower bounds of 8−10% for the volatility and 0.3−0.5 for the autocorrelation of the pricing errors, at monthly horizon. We infer that approximately 50% of the pricing errors of the smaller stocks originate from the market-wide component, whereas for larger stocks, virtually all of the pricing errors are market-wide. In practice, this evidence means that market-wide bubbles and busts are far more important than idiosyncratic sources of pricing errors, like thin trading, low liquidity or little analyst following.