Journal of Risk and Financial Management

14 pages, 430 KiB

Open AccessArticle

The Effectiveness of Credit Risk Mitigation Strategies Adopted by Ghanaian Commercial Banks in Agricultural Finance

by Abraham Nyebar, Adefemi A. Obalade and Paul-Francois Muzindutsi

J. Risk Financial Manag. 2024, 17(9), 385; https://doi.org/10.3390/jrfm17090385 - 29 Aug 2024

Viewed by 292

Lending to the agricultural sector by commercial banks in Ghana is characterized by high credit risk. Empirical evidence suggests that commercial banks in Ghana have credit risk management (CRM) challenges. This study explores the credit risk mitigation strategies adopted by commercial banks to [...] Read more.

Lending to the agricultural sector by commercial banks in Ghana is characterized by high credit risk. Empirical evidence suggests that commercial banks in Ghana have credit risk management (CRM) challenges. This study explores the credit risk mitigation strategies adopted by commercial banks to minimize credit risk in agricultural finance in Ghana. The study adopted a mixed-method approach using a survey questionnaire and interview instruments. The findings indicate that some of the strategies used by commercial banks to mitigate credit risk in agricultural finance do not meet commercial banks’ CRM needs. In addition, Ghanaian commercial banks have not fully adopted some of the recommended strategies that are used to mitigate credit risk associated with agricultural lending. The study unveils some appropriate strategies used to mitigate credit risk exposure in agricultural finance among commercial banks. These strategies include agricultural value-chain financing, collaboration with off-takers, incentive-based and risk-sharing schemes, adoption of a holistic agricultural value chain financing, policy interventions, use of agricultural insurance pool, and the proper structuring of agricultural loans. Full article

(This article belongs to the Special Issue Post SVB Banking Sector Outlook)

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20 pages, 306 KiB

Open AccessArticle

Network Impact on the Investment Strategy and Performance of Cross-Border Venture Capital Institutions in China

by Xiaoli Wang and Yi Tan

J. Risk Financial Manag. 2024, 17(9), 384; https://doi.org/10.3390/jrfm17090384 - 29 Aug 2024

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Abstract

In this paper, we investigate whether the VC institutions’ position in the network affects their investment strategies and performance. Our results show that network location has a negative correlation with geographic concentration index, industry concentration index, and stage concentration index, which indicates that [...] Read more.

In this paper, we investigate whether the VC institutions’ position in the network affects their investment strategies and performance. Our results show that network location has a negative correlation with geographic concentration index, industry concentration index, and stage concentration index, which indicates that the higher the network position of the cross-border VC institutions, the higher the degree of geographical diversification, the wider the industry diversification, and the higher the investment stage diversification of their investments. In addition, our results show that the relationship between network position and the VC’s performance is not simply linear but rather an inverted U-shaped correlation. When the network location is lower than the critical value, higher network location positively improves the VC’s investment performance; however, when the network location is higher than the critical value, then the relationship is reversed. Full article

(This article belongs to the Section Economics and Finance)

15 pages, 318 KiB

Open AccessArticle

Asymmetric Impact of Active Management on the Performance of ESG Funds

by Barbara Abou Tanos, Omar Farooq, Mohammed Bouaddi and Neveen Ahmed

J. Risk Financial Manag. 2024, 17(9), 383; https://doi.org/10.3390/jrfm17090383 (registering DOI) - 29 Aug 2024

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Abstract

This paper investigates the asymmetric impact of fund active management style on the performance of ESG funds. Unlike conventional measures of synchronicity, we propose new measures that capture the asymmetric patterns in a fund’s management style in upside and downside market conditions. Our [...] Read more.

This paper investigates the asymmetric impact of fund active management style on the performance of ESG funds. Unlike conventional measures of synchronicity, we propose new measures that capture the asymmetric patterns in a fund’s management style in upside and downside market conditions. Our data includes 170 equity funds that are identified as socially responsible, with a period spanning from 2010 to 2022. Our proposed methodology allows us to capture the asymmetric patterns in the fund management styles under different market conditions while mitigating the challenge of outliers, which is crucial when assessing funds’ active management activities. We find that while ESG funds promote sustainability, their active management is only beneficial during periods of market downturns. Our results are robust after controlling for different funds characteristics, for several active management proxies, and across various model specifications. This paper thus provides crucial guidelines for fund managers since it shows that their success is greatly influenced by their time-varying skills and management style in changing market conditions. Our findings incentivize ESG fund managers to pursue information acquisition activities during market downturns, as these activities improve market informational efficiency while aligning with their sustainability goals. Full article

(This article belongs to the Section Sustainability and Finance)

26 pages, 517 KiB

Open AccessArticle

The NGDOs Efficiency: A PROMETHEE Approach

by Susana Álvarez-Otero and Emma Álvarez-Valle

J. Risk Financial Manag. 2024, 17(9), 382; https://doi.org/10.3390/jrfm17090382 - 26 Aug 2024

Viewed by 332

Abstract

The current economic and political crisis has brought about a change in the environment in which non-governmental development organisations (NGDOs) have traditionally operated. This change can be summed up as a reduction in the funds they receive and an increase in the population [...] Read more.

The current economic and political crisis has brought about a change in the environment in which non-governmental development organisations (NGDOs) have traditionally operated. This change can be summed up as a reduction in the funds they receive and an increase in the population they must serve. The need then arises to have mechanisms that allow an analysis of the good work performed by the NGDOs. Knowing the efficiency of the NGDOs in the management of their previous projects can contribute towards improving their future achievements. The aim of this research is to establish some objective indicators that allow an evaluation of the efficiency of these organisations. Firstly, a detailed analysis of the regulation of the three agencies is conducted (Spanish-AECID, European-EuropeAid, and American-USAID). This allows us to synthesise the indicators of good performance of the NGDO based on the study of the eligibility criteria of public donors. The research concludes with the study of the efficiency following the Promethee Approach. Our results reveal that 44.6% of the NGDOs (33 out of the 74 studied) operate inefficiently, compared to 29.7%, which are efficient. Full article

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

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28 pages, 405 KiB

Open AccessArticle

ESG Performance and Systemic Risk Nexus: Role of Firm-Specific Factors in Indian Companies

by Mithilesh Gidage, Shilpa Bhide, Rajesh Pahurkar and Ashutosh Kolte

J. Risk Financial Manag. 2024, 17(9), 381; https://doi.org/10.3390/jrfm17090381 - 25 Aug 2024

Viewed by 558

Abstract

This study investigates the ESG performance–systemic risk (SR) nexus among Indian companies. Using the beta coefficient from the Capital Asset Pricing Model (CAPM) and statistical analysis, it explores how ESG performance affects SR. The findings reveal that firms with higher ESG scores have [...] Read more.

This study investigates the ESG performance–systemic risk (SR) nexus among Indian companies. Using the beta coefficient from the Capital Asset Pricing Model (CAPM) and statistical analysis, it explores how ESG performance affects SR. The findings reveal that firms with higher ESG scores have lower SR sensitivity. Notably, there is a significant difference in risk sensitivity between high- and low-ESG-rated companies, with ESG effects being less pronounced in high-cap firms compared to low-cap firms. Conversely, large firms, older firms, and those with lower borrowing costs show a diminished effect of ESG ratings on their SR sensitivity. These results underscore the importance of firm-specific characteristics in determining the efficacy of ESG strategies in risk mitigation. This study reveals that ESG performance reduces SR, with market valuation affecting this relationship. Full article

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

20 pages, 933 KiB

Open AccessArticle

Improving Volatility Forecasting: A Study through Hybrid Deep Learning Methods with WGAN

by Adel Hassan A. Gadhi, Shelton Peiris and David E. Allen

J. Risk Financial Manag. 2024, 17(9), 380; https://doi.org/10.3390/jrfm17090380 - 23 Aug 2024

Viewed by 351

Abstract

This paper examines the predictive ability of volatility in time series and investigates the effect of tradition learning methods blending with the Wasserstein generative adversarial network with gradient penalty (WGAN-GP). Using Brent crude oil returns price volatility and environmental temperature for the city [...] Read more.

This paper examines the predictive ability of volatility in time series and investigates the effect of tradition learning methods blending with the Wasserstein generative adversarial network with gradient penalty (WGAN-GP). Using Brent crude oil returns price volatility and environmental temperature for the city of Sydney in Australia, we have shown that the corresponding forecasts have improved when combined with WGAN-GP models (i.e., ANN-(WGAN-GP), LSTM-ANN-(WGAN-GP) and BLSTM-ANN (WGAN-GP)). As a result, we conclude that incorporating with WGAN-GP will’ significantly improve the capabilities of volatility forecasting in standard econometric models and deep learning techniques. Full article

(This article belongs to the Section Financial Markets)

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22 pages, 1224 KiB

Open AccessArticle

Consumers’ Financial Knowledge in Central European Countries in the Light of Consumer Research

by Łukasz Gębski and Georges Daw

J. Risk Financial Manag. 2024, 17(9), 379; https://doi.org/10.3390/jrfm17090379 - 23 Aug 2024

Viewed by 407

Abstract

Consumer protection in the financial market has several dimensions. From a formal point of view, consumer rights are guaranteed by law. Educational programs are implemented in schools and the media to promote knowledge and responsible use of financial products and services. Despite the [...] Read more.

Consumer protection in the financial market has several dimensions. From a formal point of view, consumer rights are guaranteed by law. Educational programs are implemented in schools and the media to promote knowledge and responsible use of financial products and services. Despite the efforts made, the number of incorrect and suboptimal financial decisions is so high that the risk of households falling into excessive debt remains significant. The limited effectiveness of the law led to the claim that only effective education can reduce the risk of suboptimal financial decisions. Unfortunately, the efforts made in this area are not fully satisfactory. The study of financial knowledge of consumers, which was conducted in Poland in January 2024, aimed to verify consumer errors and their nature. As part of the consumer study, not only declared knowledge was verified, but also actual knowledge. The researchers’ doubts resulted from a comparison of the results of scientific research in this area with the current market situation. Consumers declare a high level of knowledge of economic and financial concepts. In practice, however, they make mistakes that do not only indicate behavioral cognitive errors but also a lack of knowledge. The test questions were constructed in such a way as to verify the declared knowledge (based on verification questions). These showed that the actual level of knowledge was lower than the declared one. A review of the literature and studies of financial knowledge and financial competence of consumers in Central European countries was also carried out. Analysis of the results allowed for the formulation of conclusions regarding the educational gap in relation to social characteristics. The conclusions resulting from the study raise questions about the effectiveness of the educational methods used and indicate possible directions of changes in the consumer regulation policy, the aim of which is to ensure a high level of consumer protection. Full article

(This article belongs to the Section Economics and Finance)

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15 pages, 1669 KiB

Open AccessArticle

A Framework for Investment and Risk Assessment of Agricultural Projects

by Leonir Vilani, Antonio Zanin, Mauro Lizot, Marcelo Gonçalves Trentin, Paulo Afonso and José Donizetti de Lima

J. Risk Financial Manag. 2024, 17(9), 378; https://doi.org/10.3390/jrfm17090378 - 23 Aug 2024

Viewed by 406

Abstract

Investment appraisal of agricultural projects (APs) is particularly demanding due to several factors. Namely, APs may have longer time horizons, higher external and internal volatility, and uncertainty caused by less control of production and external conditions (e.g., climatic conditions and market demand). Indeed, [...] Read more.

Investment appraisal of agricultural projects (APs) is particularly demanding due to several factors. Namely, APs may have longer time horizons, higher external and internal volatility, and uncertainty caused by less control of production and external conditions (e.g., climatic conditions and market demand). Indeed, these APs may face high and different risks that should be managed properly. Nevertheless, both the literature and practice do not address such complexity and uncertainty conveniently. Thus, this research aimed to develop an integrative and easy-to-use framework to support the investment appraisal of APs, which goes beyond the traditional approach based on simple and deterministic models. This framework is based on an approach that includes several capital budgeting techniques integrating extended multi-index methodology (EMIM), Monte Carlo simulation (MCS), and real options analysis (ROA). This framework allows dealing with different risk and uncertainty scenarios and managerial flexibilities, which allow alternative and additional investment options. A simpler and easier approach can be particularly important for family agribusinesses, which usually do not use sophisticated decision-making tools. An AP in an agrosilvopastoral system (i.e., agriculture, livestock, forestry) was used to present and discuss the proposed methodology considering the relevance of such systems for sustainable agriculture and their higher risk and complexity when compared to traditional approaches. The main contribution of the framework is structuring a set of steps based on several tools to carry out investment appraisal in APs. Full article

(This article belongs to the Section Financial Markets)

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J. Risk Financial Manag., Volume 17, Issue 9 (September 2024) – 8 articles

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