EcoFin Research Papers

This paper investigates how trust-based and ethical mechanisms shape market stability across heterogeneous financial systems. We assemble a multi-layer dataset combining firm-level data for publicly listed companies in 38 countries, country-level equity market indices, and major cryptocurrencies over the period 2010–2024. Trust and ethical capital are proxied by employee happiness indicators, religious and moral exposure of firms, and institutional backing measures in crypto markets. Using panel fixed effects models, interaction-based asset pricing regressions, and volatility decomposition techniques, we examine whether trust-related attributes reduce price instability and enhance valuation. The results show that higher employee happiness and stronger ethical alignment are associated with lower return volatility and higher risk-adjusted performance in equity markets. Similarly, cryptocurrencies with stronger institutional or hybrid governance backing exhibit significantly lower volatility. These stabilizing effects are more pronounced in environments with weaker formal institutions, suggesting that trust and ethics act as informal substitutes for regulatory credibility. Overall, the findings highlight trust-based capital as a unifying stabilizing force across traditional and digital financial markets.

This paper proposes an integrated framework of intangible capital that encompasses human well-being, ethical alignment, and institutional design, and evaluates its pricing implications. Using a comprehensive dataset of publicly listed firms from 40 countries, national equity indices, and major cryptocurrencies over the period 2000–2024, we construct measures of human capital (employee happiness), ethical capital (sin exposure), and institutional capital (macro credibility and crypto governance structures). Asset pricing tests are conducted using multi-factor models, panel regressions, and risk-adjusted performance metrics. The findings reveal that human and institutional capital are consistently associated with higher firm valuation and lower downside risk, while ethical penalties are reflected in return premia for sin-related assets. In crypto markets, institutional capital emerges as a key determinant of volatility reduction and return persistence. These results suggest that intangible capital represents a missing dimension in conventional valuation models, with relevance across both traditional and digital financial systems.

This study examines how moral norms influence financial valuation across firms, asset classes, and institutional settings. Using firm-level equity data from 30 countries and cryptocurrency market data over the period 2005–2024, we analyze whether moral constraints are systematically priced. Moral exposure is measured through firm involvement in sin-related industries, employee happiness scores, and the absence or presence of institutional backing in crypto markets. Employing Fama–MacBeth cross-sectional regressions, portfolio sorting techniques, and panel volatility models, we find that firms operating in morally contentious industries earn higher expected returns but exhibit elevated downside risk. In contrast, firms with higher employee happiness display valuation premiums and lower crash risk. In crypto markets, assets lacking institutional or governance anchors experience significantly higher volatility and weaker long-term performance. These results suggest that moral constraints affect not only expected returns but also the distribution of risk, reinforcing the role of ethical considerations as a priced dimension of financial markets.