Journal of Risk and Financial Management

15 pages, 628 KiB

Open AccessArticle

The Strategic Impact of Service Quality and Environmental Sustainability on Financial Performance: A Case Study of 5-Star Hotels in Athens

by Michalis Skordoulis, Angelos-Stavros Stavropoulos, Aristidis Papagrigoriou and Petros Kalantonis

J. Risk Financial Manag. 2024, 17(10), 473; https://doi.org/10.3390/jrfm17100473 - 19 Oct 2024

Viewed by 954

Abstract

This study explores the impact of guest satisfaction on the financial performance of 5-star hotels, with a focus on both service quality and environmental sustainability. The purpose of the research is to understand how improvements in key satisfaction dimensions influence hotel profitability, as [...] Read more.

This study explores the impact of guest satisfaction on the financial performance of 5-star hotels, with a focus on both service quality and environmental sustainability. The purpose of the research is to understand how improvements in key satisfaction dimensions influence hotel profitability, as measured by EBITDA, ROA, and ROE. Satisfaction was measured across SERVQAUL dimensions and the dimension of environmental sustainability. The data were analyzed using the Multicriteria Satisfaction Analysis (MUSA) method and linear regression models to determine the effect of satisfaction on financial performance. Results indicate that responsiveness is the most important factor for guests, while environmental sustainability ranks high in importance but shows lower satisfaction scores. The findings suggest that investing in both service quality and sustainability can significantly enhance a hotel’s financial returns. The study concludes that hotel managers should prioritize improvements in environmental sustainability and responsiveness to optimize guest satisfaction and financial performance. Full article

(This article belongs to the Special Issue Advances in Financial and Hospitality Management Accounting)

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14 pages, 345 KiB

Open AccessReview

The Role of Technology in Promoting Green Finance: A Systematic Literature Survey and the Development of a Framework

by Mitra Saeedi and Badar Nadeem Ashraf

J. Risk Financial Manag. 2024, 17(10), 472; https://doi.org/10.3390/jrfm17100472 - 18 Oct 2024

Viewed by 1436

Abstract

Green finance, defined as channeling money into sustainable development activities, is still far lower than needed to achieve net-zero emissions objectives. In this paper, we discuss the role of technologies in developing green finance. We identify that green finance faces three major challenges, [...] Read more.

Green finance, defined as channeling money into sustainable development activities, is still far lower than needed to achieve net-zero emissions objectives. In this paper, we discuss the role of technologies in developing green finance. We identify that green finance faces three major challenges, including the risk management of green projects, the scarcity of innovative green financing products, and compliance with the regulations. Then, in the context of the existing literature, we explore recent technologies, including blockchain, artificial intelligence (AI), machine learning (ML), data analytics, Internet of Things (IoT), and robotics that are helping to deal with the challenges in green finance. We show that data-driven approaches utilizing AI and ML help in the risk assessment of green projects; FinTech-based crowdfunding platforms provide innovative green financial products and regulatory technologies (RegTech) support in compliance with regulations. We also identify that the environmental footprint of cryptocurrencies is an emerging area in the technologies and green finance domain. Our framework could be helpful to further extend the debate on the role of technology in green finance. Full article

(This article belongs to the Special Issue FinTech, Blockchain and Cryptocurrencies)

26 pages, 1702 KiB

Open AccessArticle

Time–Frequency Co-Movement of South African Asset Markets: Evidence from an MGARCH-ADCC Wavelet Analysis

by Fabian Moodley, Sune Ferreira-Schenk and Kago Matlhaku

J. Risk Financial Manag. 2024, 17(10), 471; https://doi.org/10.3390/jrfm17100471 - 18 Oct 2024

Viewed by 602

Abstract

The growing prominence of generating a well-diversified portfolio by holding securities from multi-asset markets has, over the years, drawn criticism. Various financial market events have caused asset markets to co-move, especially in emerging markets, which reduces portfolio diversification and enhances return losses. Consequently, [...] Read more.

The growing prominence of generating a well-diversified portfolio by holding securities from multi-asset markets has, over the years, drawn criticism. Various financial market events have caused asset markets to co-move, especially in emerging markets, which reduces portfolio diversification and enhances return losses. Consequently, this study examines the time–frequency co-movement of multi-asset classes in South Africa by using the Multivariate Generalized Autoregressive Conditional Heteroscedastic–Asymmetrical Dynamic Conditional Correlation (MGARCH-DCC) model, Maximal Overlap Discrete Wavelet Transformation (MODWT), and the Continuous Wavelet Transform (WTC) for the period 2007 to 2024. The findings demonstrate that the equity–bond, equity–property, equity–gold, bond–property, bond–gold, and property–gold markets depict asymmetrical time-varying correlations. Moreover, correlation in these asset pairs varies at investment periods (short-term, medium-term, and long-term), with historical events such as the 2007/2008 Global Financial Crisis (GFC) and the COVID-19 pandemic causing these asset pairs to co-move at different investment periods, which reduces diversification properties. The findings suggest that South African multi-asset markets co-move, affecting the diversification properties of holding multi-asset classes in a portfolio at different investment periods. Consequently, investors should consider the holding periods of each asset market pair in a portfolio as they dictate the level of portfolio diversification. Investors should also remember that there are lead–lag relationships and risk transmission between asset market pairs, enhancing portfolio volatility. This study assists investors in making more informed investment decisions and identifying optimal entry or exit points within South African multi-asset markets. Full article

(This article belongs to the Special Issue Portfolio Selection and Risk Analytics)

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25 pages, 1043 KiB

Open AccessArticle

Enhancing Financial Advisory Services with GenAI: Consumer Perceptions and Attitudes Through Service-Dominant Logic and Artificial Intelligence Device Use Acceptance Perspectives

by Qin Yang and Young-Chan Lee

J. Risk Financial Manag. 2024, 17(10), 470; https://doi.org/10.3390/jrfm17100470 - 17 Oct 2024

Viewed by 1077

Abstract

Financial institutions are currently undergoing a significant shift from traditional robo-advisors to more advanced generative artificial intelligence (GenAI) technologies. This transformation has motivated us to investigate the factors influencing consumer responses to GenAI-driven financial advice. Despite extensive research on the adoption of robo-advisors, [...] Read more.

Financial institutions are currently undergoing a significant shift from traditional robo-advisors to more advanced generative artificial intelligence (GenAI) technologies. This transformation has motivated us to investigate the factors influencing consumer responses to GenAI-driven financial advice. Despite extensive research on the adoption of robo-advisors, there is a gap in our understanding of the specific contributors to, and differences in, consumer attitudes and reactions to GenAI-based financial guidance. This study aims to address this gap by analyzing the impact of personalized investment suggestions, human-like empathy, and the continuous improvement of GenAI-provided financial advice on its authenticity as perceived by consumers, their utilitarian attitude toward the use of GenAI for financial advice, and their reactions to GenAI-generated financial suggestions. A comprehensive research model was developed based on service-dominant logic (SDL) and Artificial Intelligence Device Use Acceptance (AIDUA) frameworks. The model was subsequently employed in a structural equation modeling (SEM) analysis of survey data from 822 mobile banking users. The findings indicate that personalized investment suggestions, human-like empathy, and the continuous improvement of GenAI’s recommendations positively influence consumers’ perception of its authenticity. Moreover, we discovered a positive correlation between utilitarian attitudes and perceived authenticity, which ultimately influences consumers’ responses to GenAI’s financial advisory solutions. This is manifested as either a willingness to engage or resistance to communication. This study contributes to the research on GenAI-powered financial services and underscores the significance of integrating GenAI financial guidance into the routine operations of financial institutions. Our work builds upon previous research on robo-advisors, offering practical insights for financial institutions seeking to leverage GenAI-driven technologies to enhance their services and customer experiences. Full article

(This article belongs to the Section Financial Technology and Innovation)

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11 pages, 289 KiB

Open AccessArticle

Economic Freedom, Budget Deficits, and Perceived Risk from Larger National Debt-to-GDP Ratios: An Exploratory Analysis of Their Real Interest Rate Effects

by Richard J. Cebula

J. Risk Financial Manag. 2024, 17(10), 469; https://doi.org/10.3390/jrfm17100469 - 17 Oct 2024

Viewed by 638

Abstract

Since the early 1980s, there have been a number of principally empirical studies of the impact of government budget deficits on interest rates that have typically tested the hypothesis that larger deficits raise interest rates. However, in more recent years, this topic has [...] Read more.

Since the early 1980s, there have been a number of principally empirical studies of the impact of government budget deficits on interest rates that have typically tested the hypothesis that larger deficits raise interest rates. However, in more recent years, this topic has received far less attention. Accordingly, this study seeks to “update” the findings of such studies and to do so for the dominant North American economies of Canada and the U.S. Furthermore, in the pursuit of further insights into interest rates, the present study also investigates an effectively heretofore overlooked variable that arguably also might influence interest rates, namely, economic freedom. Finally, given the increased upward trend of government debt (relative to GDP) in recent years in Canada and the U.S., this study investigates the interest rate impact of rising national debt-to-GDP ratios. For the 1995–2024 period (and also in one estimate for the 1985–2001 period), this exploratory study finds compelling evidence (1) that the real interest rate yield on 10-year Treasuries in Canada and the real interest rate yield on 10-year U.S. Treasury notes are increasing functions of the central government budget deficits in both Canada and the U.S., respectively, and (2) the real interest rate yields on 10-year Treasuries in Canada and 10-year U.S. Treasury notes are both decreasing functions of economic freedom in Canada and the U.S., respectively. On the other hand, regarding the impact of a higher national debt-to-GDP ratio on the real ten-year Treasury yield, there is only very mixed support for an impact, with support for its impact coming from the Canadian estimates but no support whatsoever coming from the U.S. estimates. Full article

(This article belongs to the Special Issue Editorial Board Members’ Collection Series: Journal of Risk and Financial Management)

23 pages, 1541 KiB

Open AccessArticle

Digital Financial Literacy and Its Impact on Financial Decision-Making of Women: Evidence from India

by Deepak Mishra, Naveen Agarwal, Sanawi Sharahiley and Vinay Kandpal

J. Risk Financial Manag. 2024, 17(10), 468; https://doi.org/10.3390/jrfm17100468 - 17 Oct 2024

Viewed by 1919

Abstract

Despite the increasing accessibility of digital financial instruments globally, a number of women encounter obstacles in properly using these platforms due to insufficient digital financial literacy, which profoundly affects their financial decision-making and economic empowerment. This study aims to promote digital financial literacy [...] Read more.

Despite the increasing accessibility of digital financial instruments globally, a number of women encounter obstacles in properly using these platforms due to insufficient digital financial literacy, which profoundly affects their financial decision-making and economic empowerment. This study aims to promote digital financial literacy and Fintech adoption for women in India by examining the effects of digital financial literacy on financial decision-making while considering the mediating effect of government support and digital financial literacy. Furthermore, in this study, we analyzed the relationship between independent variables such as financial attitude (FAtt), subjective norms (SNs), perceived behavior control (PBC), digital financial literacy (DFL), and financial accessibility (FA) on the dependent variable, i.e., financial decision-making (FDM). We also explored how financial decision-making impacts women’ intention towards investment (INT). By analyzing 385 Indian women respondents using Structural Equation Modeling (SEM), this study revealed that financial attitude (FAtt) leads to higher financial decision-making (FDM), exerting moderate effects. Similarly, subjective norms (SNs), perceived behavioral control (PBC), digital financial literacy (DFL), and financial accessibility (FA) significantly lead to financial decision-making. Overall, the five predictors of financial decision-making explained around 71% of the variance. Financial decision-making exerted a significant and robust effect on women’s intention towards investment. Financial resilience significantly moderated the effects of financial decision-making on women’s intention towards investment. These findings emphasize the necessity of implementing a distinct government strategy and programs to enhance the adoption of Fintech among women living in urban and rural regions across India. This study is aligned with UN Sustainable Development Goals, especially Sustainable Development Goal (SDG) 1: No Poverty, SDG 5: Gender Equality, and SDG 8: Decent Work and Economic Growth. Full article

(This article belongs to the Special Issue Fintech, Business, and Development)

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27 pages, 1370 KiB

Open AccessArticle

The Cryptocurrencies in Emerging Markets: Enhancing Financial Inclusion and Economic Empowerment

by Mohammad El Hajj and Imad Farran

J. Risk Financial Manag. 2024, 17(10), 467; https://doi.org/10.3390/jrfm17100467 - 17 Oct 2024

Viewed by 2041

Abstract

The present study discusses how adopting cryptos affects financial inclusion in developing economies. Primary constructs like financial inclusion (FI), perceived economic empowerment (PEE), trust in financial institutions (TFI), user satisfaction (US), and cryptocurrency adoption (CA) were tested through Structural Equation Modeling (SEM). The [...] Read more.

The present study discusses how adopting cryptos affects financial inclusion in developing economies. Primary constructs like financial inclusion (FI), perceived economic empowerment (PEE), trust in financial institutions (TFI), user satisfaction (US), and cryptocurrency adoption (CA) were tested through Structural Equation Modeling (SEM). The results indicated that CA significantly and positively influenced FI, US, TFI, and PEE. These relationships extend to the interaction effects: US, TFI, and PEE, all positively related to FI. This is a reflection of cryptocurrencies as an opportunity to redress most of the afflictions characteristic of traditional finance systems and to promote financial inclusion and economic empowerment in developing countries. Future research should also investigate whether digital literacy and regulatory environments support cryptocurrency access. Full article

(This article belongs to the Special Issue The Future of Money: Central Bank Digital Currencies, Cryptocurrencies and Stablecoins)

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15 pages, 1134 KiB

Open AccessReview

A Systematic Literature Review on Transparency in Executive Remuneration Disclosures and Their Determinants

by Tando O. Siwendu and Cosmas M. Ambe

J. Risk Financial Manag. 2024, 17(10), 466; https://doi.org/10.3390/jrfm17100466 - 14 Oct 2024

Viewed by 881

Abstract

There are ongoing debates globally regarding excessive executive compensation, the perceived weak link between pay and performance, and the widening inequality gap. The South African corporate governance code King IV’s Principle 14 addresses the need for fair, responsible, and transparent remuneration. At the [...] Read more.

There are ongoing debates globally regarding excessive executive compensation, the perceived weak link between pay and performance, and the widening inequality gap. The South African corporate governance code King IV’s Principle 14 addresses the need for fair, responsible, and transparent remuneration. At the same time, the newly enacted Companies Amendment Act No. 16 of 2024 in South Africa emphasizes transparency in compensation, shareholder voting, and responding to shareholder feedback. This study conducts a systematic literature review of 30 articles on the transparency of executive remuneration disclosures and their determinants by analyzing Scopus-indexed articles published between 2010 and 2023, selected through specific keyword searches. The findings suggest an increasing focus on research regarding the disclosure of executive compensation, predominantly conducted in the Global North and primarily framed through agency theory. Studies exploring the factors influencing executive remuneration and the relationship between pay and performance are prevalent, with mixed results generally indicating a positive connection. Firm size emerges as a key factor in transparency, and many studies employ binary scoring to evaluate whether executive compensation disclosure is present. This paper provides valuable insights for investors, analysts, and policymakers and adds to the current understanding of executive remuneration transparency. Full article

(This article belongs to the Special Issue Risk Management in Accounting and Business)

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12 pages, 451 KiB

Open AccessArticle

Do Firms’ Characteristics Influence Their IT Strategies? A Study on the Driving Force behind Firms’ Decisions to Appoint IT Expertise

by Ashraf Khallaf, Anis Samet and Jap Efendi

J. Risk Financial Manag. 2024, 17(10), 465; https://doi.org/10.3390/jrfm17100465 - 14 Oct 2024

Viewed by 611

Abstract

The demand for information technology expertise has grown rapidly in the last few decades, signaling firms’ commitment to integrating IT into core business strategies. Understanding the conditions under which firms appoint a chief information officer (CIO) can provide valuable insights into the evolving [...] Read more.

The demand for information technology expertise has grown rapidly in the last few decades, signaling firms’ commitment to integrating IT into core business strategies. Understanding the conditions under which firms appoint a chief information officer (CIO) can provide valuable insights into the evolving role of IT in corporate governance. This study addresses a crucial gap in the literature by exploring the determinants of a firm’s decision to hire a CIO at the top management level. The study identifies several factors that influence a firm’s decision to appoint a CIO, including the firm’s size, its level of innovation, and its prior performance. The study examines these assertions by comparing the characteristics of firms that appoint a CIO at the top management level with those of similar firms in their industries that do not have a CIO position prior to the appointment. A logistic regression model that considers CIO firms and their matched firms indicates that firms that have larger capital expenditures, higher market value, or have experienced loss are more likely to hire a new CIO. Our study provides empirical evidence on why certain firms prioritize IT leadership at the executive level. Full article

(This article belongs to the Special Issue Advances in Accounting & Auditing Research)

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11 pages, 296 KiB

Open AccessArticle

Social Status, Portfolio Externalities, and International Risk Sharing

by Timothy K. Chue

J. Risk Financial Manag. 2024, 17(10), 464; https://doi.org/10.3390/jrfm17100464 - 14 Oct 2024

Viewed by 512

Abstract

We show that a model of “the spirit of capitalism”, or the concern for social status, can generate a high degree of international risk sharing as measured by asset prices, even when consumption and portfolio holdings exhibit “home bias”. We also show how [...] Read more.

We show that a model of “the spirit of capitalism”, or the concern for social status, can generate a high degree of international risk sharing as measured by asset prices, even when consumption and portfolio holdings exhibit “home bias”. We also show how portfolio externalities can arise in the model and highlight the caution that one needs in interpreting asset-price-based measures of international risk sharing: in the presence of portfolio externalities, even when the measured degree of risk sharing is perfect, it is still possible for government policies to induce investors to hold better-diversified portfolios and attain higher welfare. Full article

(This article belongs to the Special Issue Risk Management in Capital Markets)

21 pages, 3914 KiB

Open AccessArticle

Asset Returns: Reimagining Generative ESG Indexes and Market Interconnectedness

by Gordon Dash, Nina Kajiji and Bruno G. Kamdem

J. Risk Financial Manag. 2024, 17(10), 463; https://doi.org/10.3390/jrfm17100463 - 13 Oct 2024

Viewed by 1180

Abstract

Financial economists have long studied factors related to risk premiums, pricing biases, and diversification impediments. This study examines the relationship between a firm’s commitment to environmental, social, and governance principles (ESGs) and asset market returns. We incorporate an algorithmic protocol to identify three [...] Read more.

Financial economists have long studied factors related to risk premiums, pricing biases, and diversification impediments. This study examines the relationship between a firm’s commitment to environmental, social, and governance principles (ESGs) and asset market returns. We incorporate an algorithmic protocol to identify three nonobservable but pervasive E, S, and G time-series factors to meet the study’s objectives. The novel factors were tested for information content by constructing a six-factor Fama and French model following the imposition of the isolation and disentanglement algorithm. Realizing that nonlinear relationships characterize models incorporating both observable and nonobservable factors, the Fama and French model statement was estimated using an enhanced shallow-learning neural network. Finally, as a post hoc measure, we integrated explainable AI (XAI) to simplify the machine learning outputs. Our study extends the literature on the disentanglement of investment factors across two dimensions. We first identify new time-series-based E, S, and G factors. Second, we demonstrate how machine learning can be used to model asset returns, considering the complex interconnectedness of sustainability factors. Our approach is further supported by comparing neural-network-estimated E, S, and G weights with London Stock Exchange ESG ratings. Full article

(This article belongs to the Special Issue Business, Finance, and Economic Development)

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19 pages, 337 KiB

Open AccessArticle

The Determinants and Information Effects of Earnings Announcement Date Variability

by Sanghyuk Byun, Kristin C. Roland and Dongchang Kang

J. Risk Financial Manag. 2024, 17(10), 462; https://doi.org/10.3390/jrfm17100462 - 11 Oct 2024

Viewed by 663

Abstract

Prior research finds mixed evidence that firms strategically manage their earnings announcement timing to either highlight or obscure financial information. While most prior studies focus on the specific timing and the nature of individual earnings announcements, we instead focus on the variability of [...] Read more.

Prior research finds mixed evidence that firms strategically manage their earnings announcement timing to either highlight or obscure financial information. While most prior studies focus on the specific timing and the nature of individual earnings announcements, we instead focus on the variability of firms’ annual earnings announcement dates (hereafter referred to as EADs) over a span of time. Using archival data collected from I/B/E/S and Compustat, we find that firms with fewer resources, weaker internal monitoring systems, and greater financial uncertainty are much more likely to exhibit increased EAD variability. Furthermore, we provide substantial evidence that the capital market’s response to earnings is noticeably weaker when a firm’s EAD variability is higher. Additional in-depth analysis reveals that firms exhibiting higher EAD variability tend to report significantly lower future performance in both the short- and long-term horizons. Consequently, while managers might intentionally alter an earnings announcement date to exploit variations in investor attention, this comprehensive study provides significant evidence that they should also consider how the market perceives and interprets the overall EAD variability. This understanding is crucial to improve strategic financial communication and maintain investor trust. Full article

(This article belongs to the Special Issue Innovations and Challenges in Management Accounting)

14 pages, 504 KiB

Open AccessArticle

Distortion Risk Measures of Increasing Rearrangement

by Joachim Paulusch, Thorsten Moser and Anna Sulima

J. Risk Financial Manag. 2024, 17(10), 461; https://doi.org/10.3390/jrfm17100461 - 10 Oct 2024

Viewed by 706

Abstract

Increasing rearrangement is a rewarding instrument in financial risk management. In practice, risks must be managed from different perspectives. A common example is the portfolio risk, which often can be seen from at least two perspectives: market value and book value. Different perspectives [...] Read more.

Increasing rearrangement is a rewarding instrument in financial risk management. In practice, risks must be managed from different perspectives. A common example is the portfolio risk, which often can be seen from at least two perspectives: market value and book value. Different perspectives with different distributions can be coupled by increasing rearrangement. One distribution is regarded as underlying, and the other distribution can be expressed as an increasing rearrangement of the underlying distribution. Then, the risk measure for the latter can be expressed in terms of the underlying distribution. Our first objective is to introduce increasing rearrangement for application in financial risk management and to apply increasing rearrangement to the class of distortion risk measures. We derive formulae to compute risk measures in terms of the underlying distribution. Afterwards, we apply our results to a series of special distortion risk measures, namely the value at risk, expected shortfall, range value at risk, conditional value at risk, and Wang’s risk measure. Finally, we present the connection of increasing rearrangement with inverse transform sampling, Monte Carlo simulation, and cost-efficient strategies. Butterfly options serve as an illustrative example of the method. Full article

(This article belongs to the Special Issue Computational Finance and Financial Econometrics)

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25 pages, 2293 KiB

Open AccessArticle

ESG in Business Research: A Bibliometric Analysis

by Evangelos Chytis, Nikolaos Eriotis and Maria Mitroulia

J. Risk Financial Manag. 2024, 17(10), 460; https://doi.org/10.3390/jrfm17100460 - 10 Oct 2024

Viewed by 1734

Abstract

A company’s “value” is increasingly influenced by three criteria: the way it acts to protect the environment, its attitude towards society and the principles of corporate governance it has adopted. That is the Environmental, Social and Governance (ESG) acronym, and it has substantial [...] Read more.

A company’s “value” is increasingly influenced by three criteria: the way it acts to protect the environment, its attitude towards society and the principles of corporate governance it has adopted. That is the Environmental, Social and Governance (ESG) acronym, and it has substantial impact on company value. To further understand the ESG landscape in business research, this article aims to analyze the existing literature and present the current state of knowledge, main trends, and future perspectives. Through the Scopus database, the authors examine a sample of 1034 articles spanning from 2006 to 2022. VOSviewer and Biblioshiny packages are used for performance analysis and visualization of the publication trends, the conceptual structure of the field and the research collaborations. The results suggest that the publication and citation trends of ESG register an upward trend over time. In terms of research institutions, most of the influential ones emanate from the US, while a significant percentage of articles were published in top-tier financial journals. Science mapping via co-authorship analysis bifurcates the sample into six clusters and reveals the major themes and their evolution. Keyword analysis unfolds emerging trends that could be further explored. Given the breadth of the sustainability field and the ever-changing business environment, this paper is of great practical importance in motivating companies to engage in ESG activities. To the authors’ knowledge, no other study has attempted a comprehensive and detailed BA covering multiple aspects and dimensions of ESG in the corporate research field. The theoretical framework of this paper fills this gap and offers an in-depth synthesis of all published papers, providing invaluable insights to scholars, the business community and regulatory authorities, and creating alternative research paths for aspiring researchers. Full article

(This article belongs to the Special Issue Sustainable Finance Development)

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26 pages, 836 KiB

Open AccessArticle

The Price Formation of GCC Country iShares: The Role of Unsynchronized Trading Days between the US and the GCC Markets

by Nassar S. Al-Nassar

J. Risk Financial Manag. 2024, 17(10), 459; https://doi.org/10.3390/jrfm17100459 - 10 Oct 2024

Viewed by 418

Abstract

Some US-listed country exchange-traded funds (ETFs) suffer from chronic and meaningful mispricing in the form of premiums or discounts relative to their fundamental value despite the presence of the creation/redemption mechanism. This mispricing is mainly attributed to the staggered information flow due to [...] Read more.

Some US-listed country exchange-traded funds (ETFs) suffer from chronic and meaningful mispricing in the form of premiums or discounts relative to their fundamental value despite the presence of the creation/redemption mechanism. This mispricing is mainly attributed to the staggered information flow due to nonoverlapping time zones between the market where the ETF is listed and its underlying home market. This study provides out-of-sample evidence on the price formation of Gulf Cooperation Council (GCC) country ETFs and gauges the impact of mispricing on their underlying home markets. The GCC context is particularly insightful because these markets have nonoverlapping time zones with the US and follow distinct trading schedules. Our sample comprises daily data from three countries’ iShares that exclusively track the Qatari, Saudi, and Emirati stock markets from 17 September 2015 to 14 March 2023. The results show that GCC ETFs are driven mainly by their net asset values (NAVs), albeit imperfectly, while the S&P500 exerts a relatively mild influence on these ETFs compared to other country ETFs, as reported by prior studies. Moreover, we find that crude oil prices positively and significantly impact GCC ETFs’ pricing. When we control for unsynchronized trading days between the US and the GCC home markets, we find a structural difference between overlapping and nonoverlapping trading days. This structural difference manifests in a sluggish adjustment to correct mispricing in the ETF market on the day the home market is closed; however, other variables, including the S&P500, show no discernible difference, which refutes the overreaction explanation. This recurrent pattern is reflected in a clear day-of-the-week pattern in the price discovery these ETFs offer to their underlying home markets. Full article

(This article belongs to the Special Issue The New Econometrics of Financial Markets)

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15 pages, 1469 KiB

Open AccessArticle

On the Effects of Physical Climate Risks on the Chinese Energy Sector

by Christian Oliver Ewald, Chuyao Huang and Yuyu Ren

J. Risk Financial Manag. 2024, 17(10), 458; https://doi.org/10.3390/jrfm17100458 - 9 Oct 2024

Viewed by 669

Abstract

We examine the impact of physical climate risks on energy markets in China, distinguishing between traditional energy and new energy stock markets, and the energy commodity market, utilizing a time-varying parameter vector autoregressive model with stochastic volatility (TVP-SV-VAR). Specifically, we investigate the dynamic [...] Read more.

We examine the impact of physical climate risks on energy markets in China, distinguishing between traditional energy and new energy stock markets, and the energy commodity market, utilizing a time-varying parameter vector autoregressive model with stochastic volatility (TVP-SV-VAR). Specifically, we investigate the dynamic effects of five specific subtypes of physical climate risks, namely waterlogging by rain, drought, typhoon, cryogenic freezing, and high temperature, on WTI oil prices and coal prices. The findings reveal that these physical climate risks exhibit time-varying similar effects on the returns of traditional energy and new energy stocks, but heterogeneous effects on the returns of WTI oil prices and coal prices. Finally, we categorize and examine the impact of both acute and chronic physical risks on the energy commodity market. Full article

(This article belongs to the Special Issue Dynamic Stochastic General Equilibrium Models, Energy Policy, and Climate Change Adaptation)

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20 pages, 1035 KiB

Open AccessArticle

Optimal Market Completion through Financial Derivatives with Applications to Volatility Risk

by Matt Davison, Marcos Escobar-Anel and Yichen Zhu

J. Risk Financial Manag. 2024, 17(10), 457; https://doi.org/10.3390/jrfm17100457 - 8 Oct 2024

Viewed by 688

Abstract

This paper investigates the optimal choices of financial derivatives to complete a financial market in the framework of stochastic volatility (SV) models. We first introduce an efficient and accurate simulation-based method applicable to generalized diffusion models to approximate the optimal derivatives-based portfolio strategy. [...] Read more.

This paper investigates the optimal choices of financial derivatives to complete a financial market in the framework of stochastic volatility (SV) models. We first introduce an efficient and accurate simulation-based method applicable to generalized diffusion models to approximate the optimal derivatives-based portfolio strategy. We build upon a double optimization approach, i.e., expected utility maximization and risk exposure minimization, already proposed in the literature, demonstrating that strangle options are the best choices for market completion within equity options. They lead to lower investors’ risk exposure for a wide range of strikes compared to the lesser flexibility of calls, puts, and strangles. Furthermore, we explore the benefit of using volatility index derivatives and conclude that they could be more convenient substitutes when short-term maturity equity options are not available. Full article

(This article belongs to the Special Issue Computational Finance and Financial Econometrics)

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14 pages, 1015 KiB

Open AccessArticle

Examining the Role of Local Government’s Financial Performance and Capital Expenditure in Increasing Economic Growth in Banten Province, Indonesia (2018–2022)

by Mohamad Harry Mulya Zein, Muhtarom Muhtarom, Mulyadi Mulyadi and Sisca Septiani

J. Risk Financial Manag. 2024, 17(10), 456; https://doi.org/10.3390/jrfm17100456 - 8 Oct 2024

Viewed by 646

Abstract

This study aims to analyse how financial ratios such as the independence ratio, effectiveness ratio, efficiency ratio, fiscal decentralisation ratio, dependency ratio, and compatibility ratio affect economic growth, directly or indirectly, through capital expenditure as a mediating factor. This research used a quantitative [...] Read more.

This study aims to analyse how financial ratios such as the independence ratio, effectiveness ratio, efficiency ratio, fiscal decentralisation ratio, dependency ratio, and compatibility ratio affect economic growth, directly or indirectly, through capital expenditure as a mediating factor. This research used a quantitative approach; purposive sampling was conducted, and path analysis was applied to explore the relationships between variables. The results show that self-reliance, effectiveness, efficiency, fiscal decentralisation, dependency, and capital expenditure significantly affect economic growth. The independence and effectiveness ratios have a positive impact, indicating that improvements in these variables directly foster economic growth. However, the efficiency and fiscal decentralisation ratios have a negative effect, suggesting that increases in these variables may reduce economic growth. Indirectly, through capital expenditure, the independence, effectiveness, dependency, and compatibility ratios significantly affect economic growth, with the independence ratio being the most dominant. Conversely, the fiscal decentralisation and efficiency ratios did not show significant indirect effects, indicating that capital expenditure is not an effective mediator for these variables. These findings provide insights into how local financial management strategies can influence regional development, offering key policy recommendations for Banten’s local government. Full article

(This article belongs to the Section Economics and Finance)

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26 pages, 726 KiB

Open AccessArticle

The Influence of Environmental, Social, and Governance (ESG) Perception on Investor Trust and Brand Relationship Quality: A Study Among Retail Investors in Hong Kong

by Hok Ko Pong and Fion Lai Chun Man

J. Risk Financial Manag. 2024, 17(10), 455; https://doi.org/10.3390/jrfm17100455 - 8 Oct 2024

Viewed by 1334

Abstract

Background/Introduction: Investor trust and brand relationship quality, along with initiatives for environmental, social, and governance (ESG), have become highly important. Despite their relevance, limited research has been conducted on how ESG initiatives influence investors’ perceptions in financial markets. Objectives/Aims: This work conducts a [...] Read more.

Background/Introduction: Investor trust and brand relationship quality, along with initiatives for environmental, social, and governance (ESG), have become highly important. Despite their relevance, limited research has been conducted on how ESG initiatives influence investors’ perceptions in financial markets. Objectives/Aims: This work conducts a cross-sectional analysis to examine the relationship between perceived ESG initiatives and investor trust and brand relationship quality among retail investors in Hong Kong, one of one of the world’s leading financial markets. Methods: This study involved 479 retail investors. Three instruments were administered in the questionnaires: (1) the perceived environmental, social, and governance scale, (2) the investor trust scale, and (3) the brand relationship quality scale. Results: The analysis demonstrates that PESG and various aspects of investor trust and brand relationship quality had strong positive correlations. Notably, the environmental and social concerns of PESG were found to be strong predictors of investor trust and brand relationship quality, whereas governance awareness had the least effect. Conclusions: Improving a firm’s ESG image can boost investors’ confidence and the quality of brand relationships, thus aligning with sustainability and business strategies. Full article

(This article belongs to the Section Sustainability and Finance)

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18 pages, 1197 KiB

Open AccessArticle

The Influence of Fixed and Flexible Funding Mechanisms on Reward-Based Crowdfunding Success

by Lenny Phulong Mamaro and Athenia Bongani Sibindi

J. Risk Financial Manag. 2024, 17(10), 454; https://doi.org/10.3390/jrfm17100454 - 7 Oct 2024

Viewed by 689

Abstract

This study examined whether fixed or flexible funding mechanisms influence crowdfunding success. Under the fixed funding mechanism, the pledges contributed to the crowdfunding campaign projects are returned to the backers if the project fails, whereas, under the flexible funding mechanism, the project creator [...] Read more.

This study examined whether fixed or flexible funding mechanisms influence crowdfunding success. Under the fixed funding mechanism, the pledges contributed to the crowdfunding campaign projects are returned to the backers if the project fails, whereas, under the flexible funding mechanism, the project creator can keep all the raised pledges, irrespective of whether the project succeeds or fails. Secondary data consisted of reward-based crowdfunding projects retrieved from The Crowd Data Centre. Logistic regression was employed to respond to research objectives. The results reveal that the fixed funding mechanism increases the probability of success more than flexible funding. Entrepreneur experience, spelling errors, and project description negatively affect crowdfunding success, and backers positively affect crowdfunding success. The findings guide entrepreneurs seeking financing to design and choose an appropriate funding mechanism that effectively reduces the failure rate. Although many entrepreneurs seek funding in the crowdfunding market, relatively little research has been conducted on the influence of flexible or fixed funding mechanisms on crowdfunding success in Africa. This study provides entrepreneurs with appropriate financing strategies that enhance crowdfunding success. The empirical literature indicates that the flexible funding mechanism creates distrust among backers due to unrealistic target amounts. Full article

(This article belongs to the Section Financial Technology and Innovation)

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36 pages, 3806 KiB

Open AccessArticle

Insider Trading before Earnings News: The Role of Executive Pay Disparity

by Ann-Ngoc Nguyen, Viet Le, Andros Gregoriou and David Kernohan

J. Risk Financial Manag. 2024, 17(10), 453; https://doi.org/10.3390/jrfm17100453 - 6 Oct 2024

Viewed by 766

Abstract

We investigate how executive pay disparity affects insider profits around earnings news. Our findings reveal that high pay disparity is linked to higher abnormal returns from insider purchases before positive news, suggesting insiders exploit good news for greater gains. Conversely, it is associated [...] Read more.

We investigate how executive pay disparity affects insider profits around earnings news. Our findings reveal that high pay disparity is linked to higher abnormal returns from insider purchases before positive news, suggesting insiders exploit good news for greater gains. Conversely, it is associated with lower abnormal returns from insider sales before negative news, indicating less benefit from such sales. These insights highlight the influence of pay disparity on insider trading and underscore the importance of understanding this dynamic to improve decision-making and reduce misuse of insider information. Full article

(This article belongs to the Special Issue Featured Papers in Corporate Finance and Governance)

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19 pages, 317 KiB

Open AccessArticle

A Collection of Wisdom in Predicting Sector Returns: The Use of Google Search Volume Index

by Hsiu-lang Chen and Jolana Stejskalova

J. Risk Financial Manag. 2024, 17(10), 452; https://doi.org/10.3390/jrfm17100452 - 5 Oct 2024

Viewed by 744

Abstract

This study investigates whether the aggregate investor information demand for all stocks in a sector demonstrated in the Google search volume index (SVI) can predict the sector’s performance. The evidence shows that a sector’s abnormal SVI can predict the sector’s performance next month, [...] Read more.

This study investigates whether the aggregate investor information demand for all stocks in a sector demonstrated in the Google search volume index (SVI) can predict the sector’s performance. The evidence shows that a sector’s abnormal SVI can predict the sector’s performance next month, even after controlling for the sector’s contemporaneous standardized unexpected earnings and lagged returns on both the market and the sector. Also found is a partial reversal in the sector’s long-run performance that is not completely consistent with the price pressure hypothesis. This indicates that some fundamental information about a sector can be captured by the sector’s abnormal SVI on a timely basis. Full article

(This article belongs to the Special Issue Financial Valuation and Econometrics)

20 pages, 1522 KiB

Open AccessArticle

Forecasting Foreign Direct Investment Inflow to Bangladesh: Using an Autoregressive Integrated Moving Average and a Machine Learning-Based Random Forest Approach

by Md. Monirul Islam, Arifa Jannat, Kentaka Aruga and Md Mamunur Rashid

J. Risk Financial Manag. 2024, 17(10), 451; https://doi.org/10.3390/jrfm17100451 - 5 Oct 2024

Viewed by 1287

Abstract

This study focuses on the challenge of accurately forecasting foreign direct investment (FDI) inflows to Bangladesh, which are crucial for the country’s sustainable economic growth. Although Bangladesh has strong potential as an investment destination, recent FDI inflows have sharply declined due to global [...] Read more.

This study focuses on the challenge of accurately forecasting foreign direct investment (FDI) inflows to Bangladesh, which are crucial for the country’s sustainable economic growth. Although Bangladesh has strong potential as an investment destination, recent FDI inflows have sharply declined due to global economic uncertainties and the impact of the COVID-19 pandemic. There is a clear gap in applying advanced forecasting models, particularly the autoregressive integrated moving average (ARIMA) model and machine learning techniques like random forest (RF), to predict FDI inflows in Bangladesh. This study aims to analyze and forecast FDI inflows in Bangladesh by employing a hybrid approach that integrates the ARIMA model and the RF algorithm. This study covers the period from 1986 to 2022. The analysis reveals that net FDI inflow in Bangladesh is integrated into the first order, and the ARIMA (3,1,2) model is identified as the most suitable based on the Akaike Information Criterion (AIC). Diagnostic tests confirm its consistency and appropriateness for forecasting net FDI inflows in the country. This study’s findings indicate a decreasing trend in net FDI inflows over the forecasted period, with an average of USD 1664 million, similar to recent values. The results from the RF model also support these findings, projecting average net FDI values of USD 1588.99 million. To achieve the aims of Vision 2041, which include eradicating extreme poverty and becoming a high-economic nation, an increasing trend of FDI inflow is crucial. The current forecasting trends provide insights into the potential trajectory of FDI inflows in Bangladesh, highlighting the importance of attracting higher FDI to accomplish their economic goals. Additionally, strengthening bilateral investment agreements and leveraging technology transfer through FDI will also be essential for fostering sustainable economic growth. Full article

(This article belongs to the Special Issue Advances in Macroeconomics and Financial Markets)

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14 pages, 296 KiB

Open AccessArticle

Financial Flexibility Prevalence Revisited with Evidence from South Africa

by Philip Kotze, Kunofiwa Tsaurai and Godfrey Marozva

J. Risk Financial Manag. 2024, 17(10), 450; https://doi.org/10.3390/jrfm17100450 - 5 Oct 2024

Viewed by 472

Abstract

Financial flexibility occurs when companies borrow less than expected and is widely practiced. A commonly used model to establish the presence of financial flexibility is based on the determinants of the leverage model, which was developed some time ago and is composed of [...] Read more.

Financial flexibility occurs when companies borrow less than expected and is widely practiced. A commonly used model to establish the presence of financial flexibility is based on the determinants of the leverage model, which was developed some time ago and is composed of various factors that determine a company’s leverage use. Governmental borrowing and financial sector development in the meantime were shown to be key drivers of corporate borrowing. We add these two factors to the original model to establish how the prevalence of financial flexibility is affected by these inclusions into the model. South Africa is used as a locality for the study because of its relatively recent financial sector development and increased governmental borrowing. The results of the study show that financial flexibility is more prevalent when these factors are considered in a South African context. Previous studies have paradoxically shown a lower financial flexibility prevalence in South Africa when compared to a developed market such as the UK, which is contradictory to developing market debt conservatism. In this study, we show that when accounting for financial sector development and governmental borrowing, financial flexibility is widely prevalent in a South African context, at similar levels to that of a developed economy. The primary implication of the study’s findings is that financial flexibility may have been underreported in developed markets in prior studies. Full article

(This article belongs to the Section Financial Markets)

21 pages, 301 KiB

Open AccessArticle

Clarity in Crisis: How UK Firms Communicated Risks during COVID-19

by Ahmed Saber Moussa and Mahmoud Elmarzouky

J. Risk Financial Manag. 2024, 17(10), 449; https://doi.org/10.3390/jrfm17100449 - 4 Oct 2024

Viewed by 546

Abstract

This study explores the influence of risk disclosure levels and types on the readability of annual reports of non-financial firms in the UK during the COVID-19 outbreak. It further investigates how the disclosure of COVID-19-related information moderates the relationship between risk disclosure and [...] Read more.

This study explores the influence of risk disclosure levels and types on the readability of annual reports of non-financial firms in the UK during the COVID-19 outbreak. It further investigates how the disclosure of COVID-19-related information moderates the relationship between risk disclosure and readability. The study uses a content analysis approach and CFIE software to measure the level of risk disclosure and readability in the annual reports of non-financial firms listed on the FTSE all-share from 2019 to 2021. The results show a positive and significant effect of risk disclosure level on readability, which is stronger for firms that disclosed COVID-19 information. Different types of risk disclosure have varying effects on readability, with COVID-19 risk, credit risk, and strategic risk positively affecting readability, while operational risk negatively affects it. The study contributes to the literature on information asymmetry and institutional theory by demonstrating how risk disclosure and readability are influenced by external factors like the COVID-19 outbreak and internal factors such as firm characteristics and types of risks. It introduces a new risk definition and category specific to the COVID-19 pandemic and develops new measurements for risk disclosure, including credit, liquidity, market, operational, business, strategic, and COVID-19 risks. The study provides valuable insights for managers, investors, regulators, and standard setters on the relationship between risk disclosure and readability in annual reports. It highlights the importance of disclosing COVID-19-related information to enhance the readability and understandability of financial communication. The paper contributes to the literature and practice on risk disclosure, readability, and financial communication during crises. Full article

(This article belongs to the Special Issue Featured Papers in Corporate Finance and Governance)

20 pages, 382 KiB

Open AccessArticle

From Brown to Green: Climate Transition and Macroprudential Policy Coordination

by Federico Lubello

J. Risk Financial Manag. 2024, 17(10), 448; https://doi.org/10.3390/jrfm17100448 - 4 Oct 2024

Viewed by 910

Abstract

We develop a dynamic, stochastic general equilibrium (DSGE) model for the euro area that accounts for climate change-related risk considerations. The model features polluting (“brown”) firms and non-polluting (“green”) firms and a climate module with endogenous emissions modeled as a byproduct externality. In [...] Read more.

We develop a dynamic, stochastic general equilibrium (DSGE) model for the euro area that accounts for climate change-related risk considerations. The model features polluting (“brown”) firms and non-polluting (“green”) firms and a climate module with endogenous emissions modeled as a byproduct externality. In the model, exogenous shocks propagate throughout the economy and affect macroeconomic variables through the impact of interest rate spreads. We assess the business cycle and policy implications of transition risk stemming from changes in the carbon tax, and the implications of the micro- and macroprudential tools that account for climate considerations. Our results suggest that a higher carbon tax on brown firms dampens economic activity and volatility, shifting lending from the brown to the green sector and reducing emissions. However, it entails welfare costs. From a policy-making perspective, we find that when the financial regulator integrates climate objectives into its policy toolkit, it can minimize the trade-off between macroeconomic volatility and welfare by fully coordinating its micro- and macroprudential policy tools. Full article

(This article belongs to the Special Issue Dynamic Stochastic General Equilibrium Models, Energy Policy, and Climate Change Adaptation)

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22 pages, 705 KiB

Open AccessArticle

Behavioral and Psychological Determinants of Cryptocurrency Investment: Expanding UTAUT with Perceived Enjoyment and Risk Factors

by Eugene Bland, Chuleeporn Changchit, Robert Cutshall and Long Pham

J. Risk Financial Manag. 2024, 17(10), 447; https://doi.org/10.3390/jrfm17100447 - 2 Oct 2024

Viewed by 2237

Abstract

With their potential for high returns and expanding role in the financial landscape, cryptocurrency investments have garnered the attention of the financial press and investors. Applying an integrated research model based on the Unified Theory of Acceptance and Use of Technology (UTAUT), this [...] Read more.

With their potential for high returns and expanding role in the financial landscape, cryptocurrency investments have garnered the attention of the financial press and investors. Applying an integrated research model based on the Unified Theory of Acceptance and Use of Technology (UTAUT), this study investigates the factors influencing individual investors’ attitudes toward cryptocurrency investments and their intention to continue investing. The model incorporates constructs such as performance expectancy, effort expectancy, social influence, perceived risk, perceived privacy, technology competency, perceived enjoyment, and prior experience. Data from 506 cryptocurrency investors located in the United States were collected through a 50-item questionnaire. The findings indicate that performance expectancy and perceived enjoyment positively impact attitudes toward cryptocurrency investments, which, in turn, influence the intention to continue investing. Perceived privacy positively affects performance expectancy, while technology competency enhances effort expectancy. These results offer valuable insights for policymakers and cryptocurrency exchanges to foster sustainable growth in the cryptocurrency market. Despite its contributions, the study acknowledges limitations, including a focus on current investors in the US and the exclusion of factors such as optimism and innovativeness. Future research should explore these aspects across different populations and regions to gain a more comprehensive understanding of cryptocurrency investment behavior. Full article

(This article belongs to the Special Issue Integrating the Metaverse, Cryptocurrency, and AI for Sustainable Financial Development)

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15 pages, 291 KiB

Open AccessArticle

Martingale Pricing and Single Index Models: Unified Approach with Esscher and Minimal Relative Entropy Measures

by Stylianos Xanthopoulos

J. Risk Financial Manag. 2024, 17(10), 446; https://doi.org/10.3390/jrfm17100446 - 2 Oct 2024

Viewed by 611

Abstract

In this paper, we explore the connection between a single index model under the real-world probability measure and martingale pricing via minimal relative entropy or Esscher transform, within the context of a one-period market model, possibly incomplete, with multiple risky assets and a [...] Read more.

In this paper, we explore the connection between a single index model under the real-world probability measure and martingale pricing via minimal relative entropy or Esscher transform, within the context of a one-period market model, possibly incomplete, with multiple risky assets and a single risk-free asset. The minimal relative entropy martingale measure and the Esscher martingale measure coincide in such a market, provided they both exist. From their Radon–Nikodym derivative, we derive a portfolio of risky assets in a natural way, termed portfolio G. Our analysis shows that pricing using the Esscher or minimal relative entropy martingale measure is equivalent to a single index model (SIM) incorporating portfolio G. In the special case of elliptical returns, portfolio G coincides with the classical tangency portfolio. Furthermore, in the case of jointly normal returns, Esscher or minimal relative entropy martingale measure pricing is equivalent to CAPM pricing. Full article

(This article belongs to the Section Economics and Finance)

30 pages, 2325 KiB

Open AccessArticle

From Sensors to Standardized Financial Reports: A Proposed Automated Accounting System Integrating IoT, Blockchain, and XBRL

by Mohamed Nofel, Mahmoud Marzouk, Hany Elbardan, Reda Saleh and Aly Mogahed

J. Risk Financial Manag. 2024, 17(10), 445; https://doi.org/10.3390/jrfm17100445 - 1 Oct 2024

Viewed by 1220

Abstract

Modern advances in technology have increased the demand for traditional accounting systems to be upgraded for real-time data processing, security, and standardized reports. Thus, this paper proposes a new accounting information system that integrates IoT, blockchain, and XBRL. The proposed system aims to [...] Read more.

Modern advances in technology have increased the demand for traditional accounting systems to be upgraded for real-time data processing, security, and standardized reports. Thus, this paper proposes a new accounting information system that integrates IoT, blockchain, and XBRL. The proposed system aims to automate the accounting process by using IoT to collect data and send it automatically to a blockchain, which acts as a database that will generate journal entries automatically through smart contracts. XBRL will then be used as an output method for standardized financial reports based on the data transferred from the blockchain. This paper uses a qualitative research design based on semi-structured interviews with 13 industry experts from IT engineering, academia, and financial systems analysis. NVivo software was used to conduct a thematic analysis of interview transcripts. The findings demonstrated that integrating IoT, blockchain, and XBRL is technically feasible, with significant potential to enhance accounting systems. Additionally, the findings identified key challenges of the proposed system, including the complexity of integration, data validation across technologies, costs, user adoption, and scalability concerns. However, the results showed that this system offers substantial benefits, such as real-time data capture from IoT devices, secure data storage and immutability through blockchain, standardized financial reporting via XBRL, accounting process automation, improved data accuracy, and enhanced security and transparency in financial reporting. The study also identified an optimal mechanism for ensuring seamless data transmission between these technologies. The study makes a valuable contribution to the accounting field by providing a new framework for automating data collection, enhancing data security, and streamlining financial reporting, with significant potential to advance accounting systems and improve transparency, accuracy, and efficiency in financial reporting. The study’s potential to impact accounting systems and financial reporting research and practice emphasizes its importance. Full article

(This article belongs to the Section Financial Technology and Innovation)

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18 pages, 1181 KiB

Open AccessArticle

Corporate Governance and Financial Performance: Family Firms vs. Non-Family Firms

by Audney Mashele, Marise Mouton and Lydia Pelcher

J. Risk Financial Manag. 2024, 17(10), 444; https://doi.org/10.3390/jrfm17100444 - 1 Oct 2024

Viewed by 1349

Abstract

The essence of a family business captures the distinguishing factors differentiating them from non-family businesses. Among these factors, the constructs of family firms’ managing and governance elements are perceived differently by non-family firms. This is especially important in a developing country such as [...] Read more.

The essence of a family business captures the distinguishing factors differentiating them from non-family businesses. Among these factors, the constructs of family firms’ managing and governance elements are perceived differently by non-family firms. This is especially important in a developing country such as South Africa (SA) with many governance challenges. The objectives of this study were, first, to identify relationships among financial performance, corporate governance, and ownership concentrations of listed family and non-family businesses in SA. Next, a comparison was made between the different ownership structures. Secondary data were collected using purposive sampling from 2015 to 2019. These data were analysed using panel data analysis and descriptive statistics. The results show that family firms place a greater emphasis on ownership concentration, board size, and board gender diversity, which have a significant relationship with financial performance. Only board size was significant to financial performance for non-family firms. The results indicate that family businesses should appoint female family members as directors on their boards, given the significance of gender-diverse boards for financial performance. Non-family businesses should also consider having smaller boards. Theoretically, this study expands on the literature regarding family businesses in SA. However, the findings cannot be generalised due to a single industry being selected. This study should be replicated in different industries to compare the results. Full article

(This article belongs to the Special Issue Risk Management in Accounting and Business)

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J. Risk Financial Manag., Volume 17, Issue 10 (October 2024) – 47 articles

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