Risks

17 pages, 3297 KiB

Open AccessArticle

Transmuted Distortion Functions for Measuring Risks

by Muna Alkasasbeh, Carl Lee and Felix Famoye

Risks 2024, 12(10), 153; https://doi.org/10.3390/risks12100153 - 26 Sep 2024

This paper introduces a new family of distortion functions for measuring risks, developed using transmutation techniques. We identify the parameter spaces where the proposed distortions exhibit concavity. Considering that the choice of distortion parameters can be influenced by political factors or users’ risk aversion levels, we generate plots of the distortion functions to examine how these parameters impact the tasks and users’ attitudes toward risk. The coherent properties of the resulting risk measures are explored, outlining the conditions under which the transmuted Kumaraswamy and transmuted truncated normal distortions ensure coherence. Numerical analyses demonstrate the effects of parameter variations on the derived risk measures, highlighting the effectiveness of the proposed distortion functions in accurately assessing risk. Full article

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17 pages, 12461 KiB

Open AccessArticle

A Contrast-Tree-Based Approach to Two-Population Models

by Matteo Lizzi

Risks 2024, 12(10), 152; https://doi.org/10.3390/risks12100152 - 25 Sep 2024

Viewed by 116

Abstract

Building small-population mortality tables has great practical importance in actuarial applications. In recent years, several works in the literature have explored different methodologies to quantify and assess longevity and mortality risk, especially within the context of small populations, and many models dealing with this problem usually use a two-population approach, modeling a mortality spread between a larger reference population and the population of interest, via likelihood-based techniques. To broaden the tools at actuaries’ disposal to build small-population mortality tables, a general structure for a two-step two-population model is proposed, its main element of novelty residing in a machine-learning-based approach to mortality spread estimation. In order to obtain this, Contrast Trees and the related Estimation Contrast Boosting techniques have been applied. A quite general machine-learning-based model has then been adapted in order to generalize Italian actuarial practice in company tables estimation and implemented using data from the Human Mortality Database. Finally, results from the ML-based model have been compared to those obtained from the traditional model. Full article

(This article belongs to the Special Issue Life Insurance and Pensions: Latest Advances and Prospects)

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17 pages, 440 KiB

Open AccessArticle

The Impact of Value-Added Intellectual Capital on Corporate Performance: Cross-Sector Evidence

by Darya Dancaková and Jozef Glova

Risks 2024, 12(10), 151; https://doi.org/10.3390/risks12100151 - 25 Sep 2024

Viewed by 257

Abstract

This study explores the relationship between intellectual capital (IC) and the financial performance of 250 publicly traded companies in France, Germany, and Switzerland from 2009 to 2018, addressing the gaps in prior research regarding the differential impacts of IC components across countries and industries in Western and Central Europe. Using the Value-Added Intellectual Coefficient (VAIC™) approach, this study evaluates human capital efficiency (HCE), structural capital efficiency (SCE), and capital employed efficiency (CEE). Panel regression analyses at the country and industry levels were conducted to assess their effects on financial metrics, such as return on equity (ROE), return on assets (ROA), and asset turnover ratio (ATO). The findings reveal a significant positive association between SCE, CEE, and firm performance, with CEE showing the most substantial effect, while HCE had a relatively weaker impact. Additionally, the study uncovers a trade-off between the accumulation of patents and trademarks and short-term financial performance, raising new considerations for intellectual property management. This research contributes to the literature by providing a nuanced understanding of how IC components influence financial outcomes across different contexts and offers practical insights for firms aiming to optimize structural capital and capital-employed strategies for improved financial performance while acknowledging the limitations regarding the sample of publicly traded firms. Full article

(This article belongs to the Special Issue Corporate Finance and Intellectual Capital Management)

21 pages, 763 KiB

Open AccessArticle

Risk Management in Product Diversification: The Role of Managerial Overconfidence in Cost Stickiness—Evidence from Iran

by Mona Parsaei, Davood Askarany, Mahtab Maleki and Ali Rahmani

Risks 2024, 12(10), 150; https://doi.org/10.3390/risks12100150 - 24 Sep 2024

Viewed by 358

Abstract

Purpose: This study investigates the relationship between product diversification strategy and cost stickiness, focusing on managerial overconfidence as a moderating factor. It aims to address a critical gap in the literature by providing empirical insights grounded in the Resource-Based View (RBV) theory, specifically examining firms listed on the Tehran Stock Exchange. Methodology: Utilizing a sample of 149 companies from the Tehran Stock Exchange in Iran spanning from 2015 to 2021, this study tests two hypotheses: (1) a positive relationship between product diversification and cost stickiness and (2) the amplification of this relationship by managerial overconfidence. Product diversification is quantified using the Herfindahl Index, while managerial overconfidence is measured through an investment-based index derived from capital expenditures. Cost stickiness is assessed by analysing the asymmetric behaviour of costs in response to changes in sales, focusing on how costs tend to remain high even when sales decrease. Findings: The empirical results substantiate both hypotheses, demonstrating a significant positive relationship between product diversification strategy and cost stickiness. Furthermore, managerial overconfidence amplifies this relationship, highlighting the role of internal resources and managerial perceptions in shaping cost behaviour. Originality: This study contributes substantially to the literature by being among the first to empirically examine the interplay between product diversification strategy, cost stickiness, and managerial overconfidence. Extending the RBV theory to cost behaviour and strategic management provides novel insights for scholars and practitioners in entrepreneurship, corporate strategy, and organizational behaviour. The findings underscore the importance of strategic choices and managerial traits in determining cost stickiness, offering valuable implications for financial analysts, auditors, and stakeholders. Full article

(This article belongs to the Special Issue Financial Analysis, Corporate Finance and Risk Management)

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Risks, Volume 12, Issue 10 (October 2024) – 4 articles

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