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National supervisors in a world of integrated financial markets and cross-border banks face limited information and biased incentives, which can exacerbate financial fragility. While supervisory authorities have started cooperating across borders, such cooperation falls mostly short of supranational supervision as in the Euro area. This paper summarises recent theoretical and empirical research in this area; it presents data on cross-border supervisory cooperation, shows the (limited) stability impact of such cooperation and reactions of global banking groups to increased supervisory cooperation.

We investigate market timing behaviors by corporate managers. During Ramadan, the perceived overvaluation of firms may induce managers to time acquisitions. We find that, consistent with the market timing hypothesis, on average during Ramadan, aggregate mergers and acquisitions (M&A) activity is higher, managers are less likely to listen to the market and post-acquisition performance is lower. Further analyses show differing results for the top three M&A countries in our sample. Results for Malaysia show strong evidence for detrimental market timing during Ramadan: for deals announced during the period, managers are less likely to listen to the market, the probability of stock acquisitions is higher as is the probability of deal completion, and post-merger operating performance is worse. Conversely, there is no evidence for market timing in Turkey and Saudi Arabia. We tentatively interpret results for the latter two countries as consistent with religious sentiment leading to higher quality deals during Ramadan. JEL Classification: G34, G41

This paper develops a backtesting procedure that evaluates how well ESG ratings help in predicting a company's idiosyncratic risk. Technically, the inference is based on extending the conditional predictive ability test of Giacomini and White (2006) to a panel data setting. We apply our methodology to the forecasting of stock returns idiosyncratic volatility and compare two ESG rating systems from Sustainalytics and Asset4 across three investment universes (Europe, North America, and the Asia-Pacific region). The results show that the null hypothesis of no informational content in ESG ratings is strongly rejected for firms located in Europe, whereas results appear mixed in the other regions. In most configurations, we find a negative relationship between ESG ratings and idiosyncratic risk, with higher ratings predicting lower levels of idiosyncratic volatility. Furthermore, the predictive accuracy gains are generally higher when assessing the environmental dimension of the ratings. Importantly, applying the test only to firms over which there is a high degree of consensus between the ESG rating agencies leads to higher predictive accuracy gains for all three universes. Beyond providing insights into the accuracy of each of the ESG rating systems, this last result suggests that information gathered from several ESG rating providers should be cross-checked before ESG is integrated into investment processes. JEL Codes: G10, G17, C12, C33

The following paper analyzes the strategic competition between privately informed fast and slow traders where a Fast Trader (FT) benefits from lower latency compared to a slower trader (ST). As a consequence, a Fast Trader (FT) can trade more, on a given piece of information, than a slow trader (ST). In accordance with the overwhelming findings in the empirical literature, we find that the speed advantage of FTs has a beneficial effect on market liquidity as well as price efficiency. We obtain that FTs earn higher expected profits than their slower counterparts and that slower traders are worse off when FTs are present. We find that price volatility is non-monotonic with the number of fast traders and their relative speed. This means that price volatility can be increased due to the presence of fast traders. Finally, our model estimates that the participation rate of the fast traders to the volume is large and increases with their speed advantage.