Journal of Risk and Financial Management

11 pages, 833 KiB

Open AccessCommunication

What’s Wrong with Enterprise Risk Management?

by John Fraser, Rob Quail and Betty Simkins

J. Risk Financial Manag. 2024, 17(7), 274; https://doi.org/10.3390/jrfm17070274 (registering DOI) - 29 Jun 2024

Enterprise risk management (ERM) was introduced in the 1990s and has since become expected by boards of directors and regulators as a sign of good management and good corporate governance. However, many organizations struggle to implement ERM, and still seek practical advice on [...] Read more.

Enterprise risk management (ERM) was introduced in the 1990s and has since become expected by boards of directors and regulators as a sign of good management and good corporate governance. However, many organizations struggle to implement ERM, and still seek practical advice on ERM implementation. This article explains many of the reasons why organizations are unsuccessful in their efforts at implementation and provides practical solutions provided by an experienced risk manager and consultant, an ex-Chief Risk Officer, and an academic, all of whom have written extensively in the subject. This article should be of interest to practitioners involved in implementing ERM, to consultants in ERM, and to academics teaching courses on ERM, risk management, and related topics. This article also provides a base against which further future research can be performed as ERM best practices continue to evolve. Full article

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

27 pages, 553 KiB

Open AccessArticle

The Role of Political Uncertainty in Climate-Related Disaster Impacts on Financial Markets

by Richard Paul Gregory

J. Risk Financial Manag. 2024, 17(7), 273; https://doi.org/10.3390/jrfm17070273 (registering DOI) - 29 Jun 2024

Abstract

This research presents a new model for analyzing the effects of government policies on climatic disasters on financial markets. Using Fama–MacBeth rolling regressions and the construction of model-proposed risk factors, three major risk factors are found to be significant in explaining stock returns. [...] Read more.

This research presents a new model for analyzing the effects of government policies on climatic disasters on financial markets. Using Fama–MacBeth rolling regressions and the construction of model-proposed risk factors, three major risk factors are found to be significant in explaining stock returns. First, there is the risk of climate disasters. Second, there is the risk of uncertainty regarding government actions. Third, there is the risk of government response to climatic disasters. Through the increase in the cost of capital from climate disasters and the uncertainty of government response, the future cost of capital is higher, leading to less investment and lower productivity. However, the government’s actions to compensate for losses due to climate damage help offset the damages from disasters. This implies that the previous estimates of economic damages due to climate risk have been underestimated. This work adds to the literature by providing a fuller estimate of the economic implications of climate change Full article

(This article belongs to the Special Issue Strengthening Financial Stability and Stability in Times of Risk, Crisis and Conflict)

21 pages, 1594 KiB

Open AccessArticle

Perspectives on Migration and Financial Markets Research

by Juan David González-Ruiz, Camila Múnera-Sierra and Nini Johana Marín-Rodríguez

J. Risk Financial Manag. 2024, 17(7), 272; https://doi.org/10.3390/jrfm17070272 (registering DOI) - 29 Jun 2024

Abstract

This study comprehensively analyzes the relationship between migration and financial markets. We examine existing research on this subject using a scientometric and bibliometric approach. By employing VOSviewer and Bibliometrix tools, we introduce a novel methodology that enhances comprehension of this intricate relationship. The [...] Read more.

This study comprehensively analyzes the relationship between migration and financial markets. We examine existing research on this subject using a scientometric and bibliometric approach. By employing VOSviewer and Bibliometrix tools, we introduce a novel methodology that enhances comprehension of this intricate relationship. The findings underscore two significant outcomes. Firstly, the impact of migration on financial markets is evident through the substantial flow of remittances and microfinance. Secondly, this study uncovers challenges hindering the integration of migrants into formal banking systems, thereby affecting financial market dynamics. This research deepens our understanding of migration’s implications on financial markets, offering practical insights that can guide policymakers and financial institutions in their decision-making processes. Full article

(This article belongs to the Special Issue Globalization and Economic Integration)

48 pages, 739 KiB

Open AccessArticle

COVID-19 and Non-Performing Loans in Europe

by John Hlias Plikas, Dimitrios Kenourgios and Georgios A. Savvakis

J. Risk Financial Manag. 2024, 17(7), 271; https://doi.org/10.3390/jrfm17070271 (registering DOI) - 28 Jun 2024

Viewed by 61

Abstract

This study investigates the impact of COVID-19 on the non-performing loans (NPLs) in Europe, distinguishing by European subregion, country-level prosperity, NPL type, and NPL economic sector. We utilized panel data analysis covering the period 2015Q1–2021Q4 while controlling for macro, bank-specific, and regulatory indicators. [...] Read more.

This study investigates the impact of COVID-19 on the non-performing loans (NPLs) in Europe, distinguishing by European subregion, country-level prosperity, NPL type, and NPL economic sector. We utilized panel data analysis covering the period 2015Q1–2021Q4 while controlling for macro, bank-specific, and regulatory indicators. We derived that the COVID-19 deaths and the strictness of lockdown measures positively affected the NPLs, while the economic support policies exerted a negative effect. Profitable, capitalized banks fared better. The strictness of lockdown measures hindered the ability of SMEs to repay their loans, increasing their NPLs. Sectors involving physical work-related activities also experienced an increase in their NPLs. We also deduced that bank securitization and national culture significantly contributed to NPL reduction. Full article

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

24 pages, 3114 KiB

Open AccessArticle

Comparative Analysis of Gold, Art, and Wheat as Inflation Hedges

by Nguyen Thi Thanh Binh

J. Risk Financial Manag. 2024, 17(7), 270; https://doi.org/10.3390/jrfm17070270 (registering DOI) - 28 Jun 2024

Viewed by 89

Abstract

This study confirms gold’s role as a reliable inflation hedge while introducing new insights into lesser-explored assets like art and wheat. Using advanced methodologies such as the ARDL framework and LSTM deep learning, it conducts a detailed analysis of inflation-hedging dynamics, exploring non-linear [...] Read more.

This study confirms gold’s role as a reliable inflation hedge while introducing new insights into lesser-explored assets like art and wheat. Using advanced methodologies such as the ARDL framework and LSTM deep learning, it conducts a detailed analysis of inflation-hedging dynamics, exploring non-linear relationships and unexpected inflation impacts across various asset classes. The findings reveal complex dynamics. Gold demonstrates strong long-term inflation hedging potential. The negative coefficient for the US dollar index suggests that gold acts as a hedge against currency depreciation. Furthermore, a positive relationship between gold returns and inflation during high inflation periods highlights its effectiveness in protecting purchasing power. Art presents a more intricate picture. Long-term analysis suggests a weak mean-reverting tendency, but a negative relationship with inflation, potentially linked to economic downturns. Interestingly, unexpected inflation positively correlates with art returns in the long run, hinting at its potential inflation-hedging abilities. No statistically significant connection between wheat prices and overall inflation was observed; the short-run analysis reveals a dynamic interplay between inflation, real GDP growth, and wheat prices at different time points. Full article

(This article belongs to the Special Issue Inflation Hedging Instruments)

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16 pages, 2981 KiB

Open AccessArticle

Beyond the Silicon Valley of the East: Exploring Portfolio Diversification with India and MINT Economies

by Caner Özdurak and Derya Hekim

J. Risk Financial Manag. 2024, 17(7), 269; https://doi.org/10.3390/jrfm17070269 - 28 Jun 2024

Viewed by 196

Abstract

In the past few decades, India’s tech industry has boomed, making it a leader in the digital world. Today, India has many big tech companies, well-trained software developers, and cutting-edge technology like AI and cloud computing. This success shows India’s innovative spirit and [...] Read more.

In the past few decades, India’s tech industry has boomed, making it a leader in the digital world. Today, India has many big tech companies, well-trained software developers, and cutting-edge technology like AI and cloud computing. This success shows India’s innovative spirit and makes the country a good example for other developing nations. However, global portfolio managers often overlook potential diversification opportunities beyond India’s dynamic stock market. This study investigates the viability of MINT (Mexico, Indonesia, Nigeria, and Turkey) as diversification targets, specifically analyzing spillover effects and volatility dynamics between their stock markets and that of India. Leveraging vector autoregressions (VARs) and dynamic conditional correlation (DCC)–GARCH models, we uncover intricate relationships. Further, DCC–GARCH analysis reveals varying degrees of volatility spillover, offering valuable insights for risk management. Our findings suggest that MINT economies, particularly Mexico and Turkey, hold promise for Indian portfolio diversification. By strategically incorporating these markets, investors can potentially mitigate India-specific risks and enhance portfolio returns. We urge global portfolio managers to consider Turkey as a viable diversification avenue, acknowledging the nuanced market growth dynamics highlighted in this study. Full article

(This article belongs to the Special Issue Accounting, Finance and Banking in Emerging Economies)

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25 pages, 1157 KiB

Open AccessArticle

Risk Premium and Fear of Investors in Crisis’ Periods: An Empirical Approach Based on Fama–French and Carhart Factor Models

by Antonios Pentsas, Paraskevi Boufounou, Kanellos Toudas and Ioannis Katsampoxakis

J. Risk Financial Manag. 2024, 17(7), 268; https://doi.org/10.3390/jrfm17070268 - 27 Jun 2024

Viewed by 197

Abstract

This study aims to answer the question about the interactions between “investors’ fear”, two factors proposed by Fama & French, the Carhart momentum factor, andthe risk premium, and how these interactions were affected by two financial crises, the Dot-Com and Sub-Prime crises. This [...] Read more.

This study aims to answer the question about the interactions between “investors’ fear”, two factors proposed by Fama & French, the Carhart momentum factor, andthe risk premium, and how these interactions were affected by two financial crises, the Dot-Com and Sub-Prime crises. This paper is the first empirical study that considers the effects of these financial crises. It is of critical importance as it changes the specificity of the empirical models for different periods, significantly affecting the results compared to previous research work. The main findings include a general negative change in fear over all of the sub-periods. Secondly, no consistent positive trend was observed in any of the risk premiums over time. After each crisis, the relationships between the endogenous variables had significant changes. More specifically, investors’ fear, on the first day of the week, appears to be systematically higher across all sub-periods except during the Sub-Prime crisis. Finally, after the Sub-Prime financial crisis, there is an almost complete loss of the explanatory power of the VAR models. Although fear does not seem to affect risk premiums or momentum, it was nevertheless found that the results are sensitive to the specification of the models. Full article

(This article belongs to the Section Economics and Finance)

13 pages, 381 KiB

Open AccessArticle

Climate Change and Corporate Financial Performance

by Lian Liu, John Beirne, Dina Azhgaliyeva and Dil Rahut

J. Risk Financial Manag. 2024, 17(7), 267; https://doi.org/10.3390/jrfm17070267 - 27 Jun 2024

Viewed by 190

Abstract

Climate change impacts will continue to worsen with rising greenhouse gas (GHG) emissions, underscoring the growing necessity to foresee and comprehend the impact of climate change risks on economic activity. Using quarterly firm-level data of 209 firms from the People’s Republic of China [...] Read more.

Climate change impacts will continue to worsen with rising greenhouse gas (GHG) emissions, underscoring the growing necessity to foresee and comprehend the impact of climate change risks on economic activity. Using quarterly firm-level data of 209 firms from the People’s Republic of China (PRC) over the period Q1 2018–Q2 2022, this study estimates the impact of firms’ exposure to climate-related risks on their financial performance. The results indicate a notable adverse effect of climate change exposure on firms’ rate of return, with a lag of around two years. Firms located in more climate-vulnerable coastal areas and high-income provinces experience relatively greater negative impacts on their financial returns. Our findings have important policy implications for firms aiming to maximize their returns through enhanced climate change mitigation and adaptation efforts. Full article

(This article belongs to the Special Issue Financial Markets and Institutions)

11 pages, 292 KiB

Open AccessArticle

Does the Way Variables Are Calculated Change the Conclusions to Be Drawn? A Study Applied to the Ratio ROI (Return on Investment)

by Tiago Patrocínio, Mara Madaleno and Manuel Carlos Nogueira

J. Risk Financial Manag. 2024, 17(7), 266; https://doi.org/10.3390/jrfm17070266 - 27 Jun 2024

Viewed by 183

Abstract

This research aims to analyse the financial performance of companies using one of the most used profitability indicators, the return on investment (ROI), which measures the company’s performance in terms of the profit generated over time. To this end, several different methods are [...] Read more.

This research aims to analyse the financial performance of companies using one of the most used profitability indicators, the return on investment (ROI), which measures the company’s performance in terms of the profit generated over time. To this end, several different methods are used to calculate the ROI indicator, considering the different calculation methods used by different authors over the years. The use of different ROI calculation formulas has been identified in the literature, leading to different conclusions. Based on a sample of 2805 Portuguese companies, it examines how the different indicators react to the different variables analysed, using nine different econometric models. Through this study, it is possible to verify that the different variables that depend on the return on investment have different results, namely that the variables “age” and “size” have a negative effect on the return on investment. On the other hand, “financial leverage” and “ROA” have a positive impact on the contribution to the return on investment. We also found that the different variables behave similarly for virtually all types of ROI calculation, although not completely harmonious, especially in terms of impact. The results are empirically vital, as they alert researchers and companies to the need for standardised formulas for calculating variables such as ROI so that results are not distorted. Using one to the detriment of the other impacts the results obtained and the analyses to be carried out. How empirical research will continue to use the ROI metric will always depend on its users’ discretion and free will. Full article

(This article belongs to the Special Issue Risk Planning and Management in Companies)

7 pages, 194 KiB

Open AccessArticle

External Auditor’s Reliance Decision on the Internal Audit Function: A Qualitative Analysis on the Coordination Process

by Lawrence Chui, Byron J. Pike and Kasey Martin

J. Risk Financial Manag. 2024, 17(7), 265; https://doi.org/10.3390/jrfm17070265 - 27 Jun 2024

Viewed by 152

Abstract

Authoritative standards encourage external auditors to coordinate their efforts with the client’s internal audit function (IAF) as part of a financial statement audit. Academic research on this relationship finds that it has the potential to improve audit quality and efficiency. The objective of [...] Read more.

Authoritative standards encourage external auditors to coordinate their efforts with the client’s internal audit function (IAF) as part of a financial statement audit. Academic research on this relationship finds that it has the potential to improve audit quality and efficiency. The objective of this research is to better understand how coordination can impact the external auditor’s decision to rely on the IAF. Prior research has shown that the reliance decision is complex and involves several factors that must be considered simultaneously. In this study, we surveyed external auditors to better understand the benefits of coordinating efforts, the antecedents to successful coordination, and the elements that potentially inhibit external auditors from relying on the work of internal auditors. We find that external auditors are coordinating with the IAF to achieve more efficient and effective audits. The degree of this reliance, however, does vary between audits and is largely dependent upon the perceived competence and objectivity of the IAF as well as effective communication. Our findings are informative to external audit practitioners and their decision to rely on IAFs and work towards a successful arrangement where the integrated audit is applied more efficiently and effectively. This additional insight also helps inform and direct future research into external auditors’ coordination decisions. Full article

(This article belongs to the Special Issue Judgment and Decision-Making Research in Auditing)

22 pages, 386 KiB

Open AccessArticle

Entrepreneurial Intentions in the Absence of Banking Services: The Case of the Lebanese in Crises

by Jeanne Laure Mawad and Sibelle Freiha

J. Risk Financial Manag. 2024, 17(7), 264; https://doi.org/10.3390/jrfm17070264 - 26 Jun 2024

Viewed by 318

Abstract

This paper investigates the complex factors hindering entrepreneurial aspirations in Lebanon, focusing on the absence of a functional financial system and its impact on entrepreneurial intentions. Drawing on surveys conducted with 325 Lebanese participants across three generations, using ordinal regression, the research reveals [...] Read more.

This paper investigates the complex factors hindering entrepreneurial aspirations in Lebanon, focusing on the absence of a functional financial system and its impact on entrepreneurial intentions. Drawing on surveys conducted with 325 Lebanese participants across three generations, using ordinal regression, the research reveals crucial determinants of entrepreneurial intentions, emphasizing the roles of entrepreneurial attitude, the absence of banking sector services, optimism, risk propensity, and age. Positive attitudes and optimism correlate with stronger intentions; however, the weakened economic situation and lack of a functional financial system diminish this positive correlation. Demographic factors like gender and education do not significantly influence intentions. In addition, the study reveals differences in entrepreneurial intentions determinants across the three generations of X, Y, and Z. This study underscores the urgent need for financial system reforms in Lebanon to enhance stability while advocating for financial literacy programs and private sector initiatives to empower entrepreneurs and expand their businesses. Full article

(This article belongs to the Section Business and Entrepreneurship)

24 pages, 409 KiB

Open AccessArticle

The Impact of Family Firms and Supervisory Boards on Corporate Environmental Quality

by Hendra Susanto, Nyoman Adhi Suryadnyana, Rusmin Rusmin and Emita Astami

J. Risk Financial Manag. 2024, 17(7), 263; https://doi.org/10.3390/jrfm17070263 - 26 Jun 2024

Viewed by 183

Abstract

This paper examines the impact of family ownership and supervisory board characteristics on carbon emission disclosure. It uses balanced panel data and a matched-pair design of 124 non-financial firms listed on the Indonesia Stock Exchange from 2017 to 2019. This study finds that [...] Read more.

This paper examines the impact of family ownership and supervisory board characteristics on carbon emission disclosure. It uses balanced panel data and a matched-pair design of 124 non-financial firms listed on the Indonesia Stock Exchange from 2017 to 2019. This study finds that family firms and larger boards improve, while female board members harm carbon emission performance. Further analyses reveal non-linear relationships between family ownership and carbon performance. When control rights are limited, family firms prioritize controlling managers and improving carbon quality. Conversely, they prioritize personal objectives over environmental concerns when there are high control rights, resulting in decreased carbon emission performance. Additionally, family board members generate more carbon information, indicating the family owners effectively utilize their position on the supervisory boards to influence the company’s carbon emission performance. Finally, the study reports that more faculty member boards seem to hurt carbon emission reduction efforts. This result suggests that the diversity of their professional experiences does not affect the environmental effectiveness of supervisory boards. Our findings highlight the importance of understanding SEW principles and their connection to families in comprehending Indonesian corporate carbon emissions disclosures. The findings of this study enrich the worldwide literature by exploring the potential benefits of family business environmental performance. This study also adds to the literature on corporate governance, especially the role played by supervisory boards. Our findings align with the resource dependence theory, emphasizing the central function of supervisory boards as a monitoring tool. This study is constrained by its reliance on carbon emission data extracted from the annual reports of public firms, with a particular emphasis on pre-COVID-19 data. Future research should focus on sustainability reports and explore the time frame encompassing COVID-19 (2020–2022 datasets) to determine any differences in the findings. Full article

(This article belongs to the Section Sustainability and Finance)

19 pages, 607 KiB

Open AccessArticle

Impact of Ownership Structure and Dividends on Firm Risk and Market Liquidity

by Abhinav Rajverma

J. Risk Financial Manag. 2024, 17(7), 262; https://doi.org/10.3390/jrfm17070262 - 26 Jun 2024

Viewed by 165

Abstract

This article examines the impact of ownership structure and dividend payouts on idiosyncratic risk and market liquidity using agency, signaling, and bankruptcy theories from an emerging market perspective. The evidence shows that family firms dominate and have concentrated ownership, and dividend payouts are [...] Read more.

This article examines the impact of ownership structure and dividend payouts on idiosyncratic risk and market liquidity using agency, signaling, and bankruptcy theories from an emerging market perspective. The evidence shows that family firms dominate and have concentrated ownership, and dividend payouts are lower among family firms than their counterparts. The idiosyncratic risk is high among firms with higher family ownership concentration. The family ownership concentration and control positively influence the (firm) risk, dividends positively affect the market liquidity, and risk relates negatively to the market liquidity, supporting the entrenchment of the minority shareholders’ proposition that a significant payout leads to a decrease in information asymmetry and a lower level of risk. The study further supports the proposition that information asymmetries are central to elucidating the dynamics of dividend payouts and their effects on firm risk and market liquidity. The evidence confirms that family ownership concentration affects policy decisions, especially ownership control. The paper’s originality lies in factoring ownership concentration when analyzing how payouts affect firm risk and market liquidity from an emerging markets perspective where controlling shareholders enjoy substantial private benefits, whereas minority shareholders have limited protection. Full article

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

14 pages, 1155 KiB

Open AccessArticle

The Asymmetric Effects of Oil Price Volatility on Stock Returns: Evidence from Ho Chi Minh Stock Exchange

by Loc Dong Truong, H. Swint Friday and Nhien Tuyet Doan

J. Risk Financial Manag. 2024, 17(7), 261; https://doi.org/10.3390/jrfm17070261 - 26 Jun 2024

Viewed by 192

Abstract

This study is the first to investigate the asymmetric effects of oil price volatility on stock returns for the Ho Chi Minh Stock Exchange (HOSE). We utilized weekly series of VN30-Index, WTI crude oil prices, geopolitical risks (GPR) index, and gold prices spanning [...] Read more.

This study is the first to investigate the asymmetric effects of oil price volatility on stock returns for the Ho Chi Minh Stock Exchange (HOSE). We utilized weekly series of VN30-Index, WTI crude oil prices, geopolitical risks (GPR) index, and gold prices spanning from 6 February 2012 to 31 December 2023 as data sources. Using a nonlinear autoregressive distributed lag (NARDL) bounds testing approach, we found that, in the shortterm, oil price volatility has negative asymmetric effects on market returns. Specifically, in the shortterm, a 1 percent increase in oil price volatility immediately leads to a 2.6868 percent decrease in the market returns, while a similar magnitude decrease in oil price volatility is associated with a 6.3180 percent increase in the market returns. In addition, the results obtained from the NARDL model indicated that, in the longterm, the negative and positive changes of oil price volatility have significantly negative effects on the market returns. Finally, the findings derived from the error correction model (ECM) show that a 98.21 percent deviation from the equilibrium level in the previous week is converged and corrected back to the long-term equilibrium in the current week. Full article

(This article belongs to the Special Issue Globalization and Economic Integration)

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15 pages, 421 KiB

Open AccessArticle

Asymmetry in Cost Behavior in Brazilian Hospitals

by Josiane Da Conceição Bitela Da Silva, Tany Ingrid Sagredo Marin, Katia Abbas, Luiz Eduardo Gaio, Carlos Alberto Grespan Bonacim and Rafael Confetti Gatsios

J. Risk Financial Manag. 2024, 17(7), 260; https://doi.org/10.3390/jrfm17070260 - 25 Jun 2024

Viewed by 282

Abstract

Abstract: Objectives: Investigating if the proportion of fixed assets over total assets is positively associated with the asymmetric cost behavior of public and private hospitals in Brazil. Methods: In order to test the sticky cost phenomenon in a different sector of companies [...] Read more.

Abstract: Objectives: Investigating if the proportion of fixed assets over total assets is positively associated with the asymmetric cost behavior of public and private hospitals in Brazil. Methods: In order to test the sticky cost phenomenon in a different sector of companies and industries, we used panel data regression to investigate the asymmetric cost behavior in Brazilian hospitals, analyzing the hospital cost behavior regarding the variation in revenues and verifying whether the proportion of fixed assets over total assets is positively associated with the asymmetric cost behavior. As a result, this research took the findings obtained by the models applied to data from the 101 hospitals comprising the sample, spread over the 2010–2019 period. The research was divided into four sections. The first section tested asymmetry for fixed assets over total assets for hospitals in general. The second section divided the sample into public and private hospitals. The third section analyzed the sample of conglomerates against a single hospital. Finally, the fourth section tested the asymmetry of the hospitals in the sample measured by the number of beds. Results: The evidence documented here partially confirms the results of literature on the existence of asymmetric cost behavior regarding variations in revenue. The H₁ hypothesis that the proportion of fixed assets over total assets is positively associated with the asymmetric cost behavior was confirmed, especially for private and small hospitals regarding fixed assets. Full article

(This article belongs to the Section Economics and Finance)

14 pages, 741 KiB

Open AccessArticle

The Feasibility of Coordinating International Monetary Policy Strategies in the Context of Asymmetric Demand Shocks

by Leonid Serkov, Sergey Krasnykh, Julia Dubrovskaya and Elena Kozonogova

J. Risk Financial Manag. 2024, 17(7), 259; https://doi.org/10.3390/jrfm17070259 - 22 Jun 2024

Viewed by 234

Abstract

In the context of the increasing interdependence of countries due to the development of international trade, a relevant question arises as to whether it is necessary to conduct independent monetary policies for each country or whether it is advisable to coordinate these policies. [...] Read more.

In the context of the increasing interdependence of countries due to the development of international trade, a relevant question arises as to whether it is necessary to conduct independent monetary policies for each country or whether it is advisable to coordinate these policies. This question becomes a key in the debate on optimal monetary policy strategies in open economies. The aim of this study is to analyze the impact of asymmetric aggregate demand shocks on the appropriateness of monetary policy coordination in a simple stochastic model of two interacting countries. The analysis of equilibrium states of the monetary authorities’ interaction strategies under study was carried out analytically by minimizing the loss function and solving one-period static optimization problems. The equilibrium states of macroeconomics of interacting countries under coordination of monetary policy and in cases of lack of coordination (Nash and Stackelberg equilibrium) in the presence of asymmetric, serially uncorrelated demand shocks have been analyzed. It is proven that the response of inflation to asymmetric demand shocks is smaller in the case of coordinated policy than in the case of non-cooperative policy. The loss function analysis shows that the compensation of demand shocks is found to be more costly in Nash equilibrium than in the case of monetary authority coordination policy. The analysis of the monetary authorities’ interaction strategies showed that the real exchange rate plays an important role in balancing supply and demand in the two economies. Full article

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20 pages, 524 KiB

Open AccessArticle

Diverging Paths: CEO Regulatory Focus, Corporate Social Responsibility, and the Enigma of Firm Performance

by Tianmin Cheng, Wen Hua Sharpe and Abdel K. Halabi

J. Risk Financial Manag. 2024, 17(7), 258; https://doi.org/10.3390/jrfm17070258 - 22 Jun 2024

Viewed by 216

Abstract

Regulatory focus theory theorizes that there are two distinct dispositional foci of self-regulation (promotion focus and prevention focus) that impact individuals’ motivational tendencies to achieve their decision-making processes. This study integrates regulatory focus theory with upper echelons theory to investigate how CEO regulatory [...] Read more.

Regulatory focus theory theorizes that there are two distinct dispositional foci of self-regulation (promotion focus and prevention focus) that impact individuals’ motivational tendencies to achieve their decision-making processes. This study integrates regulatory focus theory with upper echelons theory to investigate how CEO regulatory focus (i.e., higher degrees of promotion focus relative to prevention focus) influences corporate strategic outcomes, particularly regarding the pursuit of corporate social responsibility (CSR) performance and firm performance. This study uses data collected from the annual reports of S&P 1500 firms in the US from 2000 to 2018. Results show a negative association between CEOs who are predominantly promotion-focused and CSR performance. This negative association is diminished in firms with better corporate governance (i.e., higher CEO equity compensation and greater institutional ownership). The results also show that CSR plays a mediating role in the relationship between CEO regulatory focus and firm performance. These findings not only contribute to the existing literature by highlighting the role of CEO regulatory focus in shaping CSR initiatives but also shed light on its implications for firm performance. Full article

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

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26 pages, 1470 KiB

Open AccessArticle

Mechanisms of Stimulation of Small- and Medium-Sized Entrepreneurship: The Experience of Kazakhstan

by Damira Kazbekova, Mariana Petrova, Olena Sushchenko, Anargul Belgibayeva and Milen Mitkov

J. Risk Financial Manag. 2024, 17(7), 257; https://doi.org/10.3390/jrfm17070257 - 21 Jun 2024

Viewed by 435

Abstract

This study aimed to investigate the prerequisites, factors, and mechanisms for stimulating economic growth in small and medium-sized enterprises (SMEs), using the manufacturing industry of the Republic of Kazakhstan as a case study. Econometric tools, including statistical methods, regression analysis, time series analysis, [...] Read more.

This study aimed to investigate the prerequisites, factors, and mechanisms for stimulating economic growth in small and medium-sized enterprises (SMEs), using the manufacturing industry of the Republic of Kazakhstan as a case study. Econometric tools, including statistical methods, regression analysis, time series analysis, scenario development methods, and the decision tree method, were employed to analyze the data. This research employed a range of scientific and applied methods, resulting in practical outcomes that can be utilized by SMEs to model various development scenarios. The key factors influencing SME development, such as the costs of technological innovations, average monthly wages, level of innovative activity, and investments in fixed capital, were identified. Based on these factors and the diagnosis of the state, a mechanism for state stimulation of entrepreneurship, encompassing financial incentives, tax breaks, infrastructure support, and targeted training programs, was developed. This mechanism includes a system of incentives, goal-setting, and tool formation. This study also developed a model to evaluate the potential impact of measures at the regional level on production volume growth in the manufacturing industry, presenting three scenarios—pessimistic, realistic, and optimistic—for consideration, which are significant for policymakers, practitioners, and stakeholders in the field. Stakeholders, including investors and industry practitioners, can apply the recommended strategies to foster innovation and drive economic growth. This study provided actionable recommendations and a robust framework for stimulating SME growth, offering valuable insights for enhancing the economic resilience and industrial development of Kazakhstan. Full article

(This article belongs to the Special Issue Corporate Social Responsibility, Governance, and Small & Medium Enterprises Performance)

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22 pages, 367 KiB

Open AccessArticle

Capital Structure and Financial Performance of Moroccan Agricultural Small- and Medium-Sized Enterprises: Moderating Effects of Government Subsidies

by Imad Nassim and Bouchra Benraïss

J. Risk Financial Manag. 2024, 17(7), 256; https://doi.org/10.3390/jrfm17070256 - 21 Jun 2024

Viewed by 319

Abstract

In the context of implementing the new agricultural strategy, “Generation Green 2020–2030”, Moroccan agricultural SMEs are benefiting from specific lines of credit and significant financial incentives. This study focuses on assessing how the capital structure influences the financial performance of these medium-sized enterprises, [...] Read more.

In the context of implementing the new agricultural strategy, “Generation Green 2020–2030”, Moroccan agricultural SMEs are benefiting from specific lines of credit and significant financial incentives. This study focuses on assessing how the capital structure influences the financial performance of these medium-sized enterprises, based on an analysis of a sample of 30 agricultural SMEs over a period of 4 years from 2019 to 2022. This examination delves into the effects of debt, government subsidies, and their combined impact on the return on equity and assets of these SMEs. The findings reveal a significant negative correlation between capital structure and the financial performance of agricultural SMEs. This underscores the importance of advocating for self-financing in line with the pecking order theory, as debt appears to significantly diminish asset returns. Additionally, although government subsidies alone do not significantly influence enterprise profitability, their interplay with capital structure—especially long-term debt—exhibits a detrimental moderating effect on asset returns. This suggests that subsidies play a significant role in moderating the relationship between capital structure and SME financial performance, albeit with an adverse effect. Full article

(This article belongs to the Section Business and Entrepreneurship)

28 pages, 1466 KiB

Open AccessArticle

Financial Risk Management Early-Warning Model for Chinese Enterprises

by Haitong Wei and Xinghai Wang

J. Risk Financial Manag. 2024, 17(7), 255; https://doi.org/10.3390/jrfm17070255 - 21 Jun 2024

Viewed by 300

Abstract

As enterprises face increasing competitive pressures, financial crises can significantly impact on their capital operations, potentially leading to operational difficulties and, ultimately, market exclusion. Consequently, many enterprises have begun to utilize financial early-warning systems to guide and control risks. Currently, there is neither [...] Read more.

As enterprises face increasing competitive pressures, financial crises can significantly impact on their capital operations, potentially leading to operational difficulties and, ultimately, market exclusion. Consequently, many enterprises have begun to utilize financial early-warning systems to guide and control risks. Currently, there is neither a universal nor comprehensive enterprise financial risk management model in China, nor a unified classification standard for enterprise financial risk management levels. This article takes financial data on A-share listed companies in 2020 as the data sample, including those with special treatment (represented by ST) or non-ST status. We establish an independent indicator system within the framework of profitability, solvency, operational capability, development potential, shareholders’ retained earnings, cash flow, and asset growth. The model is constructed employing the factor–logistic fusion algorithm. The factor part addresses the issue of collinearity among risk indicators, and the logistic part presents the results in probabilistic form, enhancing the interpretability of the model. The prediction accuracy of this model exceeds 89%. Finally, by applying the principles of interval estimation theory to statistical hypothesis testing, we categorize the risk levels into Grade A, representing significant risk; Grade B, representing moderate risk; Grade C, representing minor risk; and Grade D, representing no risk. This article aims to provide a comprehensive definition of a universal financial risk management early-warning model applicable to all enterprises in China. Full article

(This article belongs to the Section Business and Entrepreneurship)

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J. Risk Financial Manag., Volume 17, Issue 7 (July 2024) – 20 articles

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