A simple dividend-based currency strategy, which shorts a currency on the date its country's recent aggregate dividend payment by listed companies is large, exhibits a significant Sharpe ratio and alpha not explained by standard factors in the currency market. To understand this anomaly, I identify the significant price impact of predetermined dividend payments on exchange rates around payment dates. I propose a dividend repatriation channel where benchmark investors (ETFs and mutual funds) predictably repatriate a certain proportion of dividends received in local currency. I build a model in which heterogeneous financial intermediaries with limited risk-bearing capacity accommodate benchmark investors' currency demands stemming from dividend repatriation flows. In line with the model's implications, I find that the price impact of dividend flows on FX around the payment date is large when the intermediary capital ratio is low, CIP deviations are large, and FX implied volatilities are high. My findings have implications for currency-market elasticity, capital regulations, and FX regimes.

This study examines the effect of increasing mandatory environmental disclosure frequency on firms' environmental investment choices between short-term solutions (end-of-pipe) and long-term investments (clean technologies). Clean technologies (e.g., adopting renewable energy) achieve long-term environmental efficiency by preventing pollution at its source but require a longer payback period. In contrast, end-of-pipe solutions (e.g., scrubbers or filters) are immediate remedies for specific pollutants post-production. Increased disclosure frequency mandate, coupled with public scrutiny, could steer firms toward the immediacy of end-of-pipe solutions at the expense of adopting sustainable clean technology. Examining a Chinese regulation transitioning from annual to daily mandatory emission reporting, I find that regulated firms increase end-of-pipe investments and reduce clean technology investments. This myopia pattern is more pronounced for firms with more public oversight of pollution and for those that are more likely to violate pollution standards or face more severe consequences upon violations. However, firms receiving government subsidies for clean technologies experience a weaker effect. Amidst growing demand for timely ESG information, this study highlights the adverse incentive created by the potential cost of such regulation.

This paper investigates the allocative efficiency of green finance instruments through a general equilibrium model with heterogeneous firms and financial frictions. We emphasize the impact of the timing of financial mechanisms—’ex-post’, such as carbon taxes, versus ’ex-ante’, like green credit schemes—on the distribution of dirty capital and its environmental implications. Our study reveals that ex-post measures inadvertently direct dirty capital towards financially constrained firms with higher utilization, potentially exacerbating economy-wide emission intensity. Such theoretical prediction explains empirical observations of Hartzmark and Shue (2023), indicating such strategies may be counterproductive. Conversely, ex-ante approaches yield beneficial redistributions. The study emphasizes the significance of incorporating the distributive effects of green finance tools into their design and advocates for a general equilibrium viewpoint to evaluate their effectiveness comprehensively, highlighting the pivotal role of instrument timing.