Journal Description
International Journal of Financial Studies
International Journal of Financial Studies
is an international, peer-reviewed, scholarly open access journal on financial market, instruments, policy, and management research published quarterly online by MDPI.
- Open Access— free for readers, with article processing charges (APC) paid by authors or their institutions.
- High Visibility: indexed within Scopus, ESCI (Web of Science), EconLit, EconBiz, RePEc, and other databases.
- Journal Rank: JCR - Q2 (Business, Finance) / CiteScore - Q2 (Finance)
- Rapid Publication: manuscripts are peer-reviewed and a first decision is provided to authors approximately 27.6 days after submission; acceptance to publication is undertaken in 8.5 days (median values for papers published in this journal in the second half of 2023).
- Recognition of Reviewers: reviewers who provide timely, thorough peer-review reports receive vouchers entitling them to a discount on the APC of their next publication in any MDPI journal, in appreciation of the work done.
Impact Factor:
2.1 (2023);
5-Year Impact Factor:
2.1 (2023)
Latest Articles
Ownership Structure and Bank Dividend Policies: New Empirical Evidence from the Dual Banking Systems of MENA Countries
Int. J. Financial Stud. 2024, 12(3), 63; https://doi.org/10.3390/ijfs12030063 - 28 Jun 2024
Abstract
This study investigates the relationship between ownership structures and dividend policies for 46 Islamic and 75 conventional banks from 12 MENA and Asian countries between 2012 and 2020. Logit regression is employed to estimate the regression equation, centering on the moderating impacts of
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This study investigates the relationship between ownership structures and dividend policies for 46 Islamic and 75 conventional banks from 12 MENA and Asian countries between 2012 and 2020. Logit regression is employed to estimate the regression equation, centering on the moderating impacts of the COVID-19 pandemic and national culture. Our findings remain robust as we tackle the endogeneity issue using probit and logistic regression models. Asset growth and GDP growth serve as proxies for investment opportunities. Additionally, dividend per share acts as a proxy for dividend policy. Our findings emphasize how the ownership structure impacts dividend payouts in both banking systems. We observed positive relationships between dividend payouts and foreign ownership, bank size, age, and performance. Conversely, concentration of ownership and leverage negatively influence dividend payouts. The COVID-19 pandemic directly boosts the dividend policy for conventional banks and alters the relationship between foreign ownership and distribution policy in Islamic banks. Specifically, COVID-19 interacts with foreign and state ownership to reduce dividend payouts, but concentration of ownership does not show this effect. This study furnishes evidence affirming the significance of the ownership structure in shaping the dividend payout policy within Islamic and conventional banking. The results maintain their reliability across various estimation approaches. Moreover, this study accounts for the crisis period as a moderating factor influencing dividend payments.
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Open AccessArticle
Financial Development and Economic Growth: Evidence from Low-Income Nations in the SADC Region
by
Courage Mlambo
Int. J. Financial Stud. 2024, 12(3), 62; https://doi.org/10.3390/ijfs12030062 - 27 Jun 2024
Abstract
The study sought to examine the relationship between financial development and economic growth in low-income nations in the SADC region. Motivated by the observation that numerous states in the SADC region lack adequately developed financial systems, this investigation was undertaken. Many SADC states
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The study sought to examine the relationship between financial development and economic growth in low-income nations in the SADC region. Motivated by the observation that numerous states in the SADC region lack adequately developed financial systems, this investigation was undertaken. Many SADC states are low-income countries, and they remain financially underdeveloped, which could compromise their growth prospects. The analysis was quantitative in nature, and used panel data to achieve its objectives. The data period spanned from 2000 to 2022. The dynamic common correlated effects (DCCE) technique was used for estimation purposes. Results showed that there is a positive relationship between financial development and economic growth. The relationship was also found to be causal: financial development is not only a result of economic growth; it also influences growth. The evidence from the findings supports the notion that financial development is needed to increase the effectiveness of resource allocation and consequently promote growth. This calls on the governments in the countries under investigation to create environments that foster financial development.
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Open AccessArticle
Generalized Loss-Based CNN-BiLSTM for Stock Market Prediction
by
Xiaosong Zhao, Yong Liu and Qiangfu Zhao
Int. J. Financial Stud. 2024, 12(3), 61; https://doi.org/10.3390/ijfs12030061 - 27 Jun 2024
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Stock market prediction (SMP) is challenging due to its uncertainty, nonlinearity, and volatility. Machine learning models such as recurrent neural networks (RNNs) have been widely used in SMP and have achieved high performance in terms of “minimum error”. However, in the context of
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Stock market prediction (SMP) is challenging due to its uncertainty, nonlinearity, and volatility. Machine learning models such as recurrent neural networks (RNNs) have been widely used in SMP and have achieved high performance in terms of “minimum error”. However, in the context of SMP, using “least cost” to measure performance makes more sense. False Positive Errors (FPE) can lead to significant trading losses, while False Negative Errors (FNE) can result in missed opportunities. Minimizing FPE is critical for investors. In practice, some errors may result in irreparable losses, so measuring costs based on data is important. In this research, we propose a new method called generalized loss CNN-BiLSTM (GL-CNN-BiLSTM), where the cost of each datum can be dynamically calculated based on the difficulty of the data. We verify the effectiveness of GL-CNN-BiLSTM on Shanghai, Hong Kong, and NASDAQ stock exchange data. Experimental results show that although there is no significant difference in the accuracy and winning rate between GL-CNN-BiLSTM and other methods, GL-CNN-BiLSTM achieves the highest rate of return on the test data.
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Open AccessArticle
AI-Driven Financial Analysis: Exploring ChatGPT’s Capabilities and Challenges
by
Li Xian Liu, Zhiyue Sun, Kunpeng Xu and Chao Chen
Int. J. Financial Stud. 2024, 12(3), 60; https://doi.org/10.3390/ijfs12030060 - 27 Jun 2024
Abstract
The transformative impact of AI technologies on the financial sector has been a topic of increasing interest. This study investigates ChatGPT’s applications in financial reasoning and analysis and evaluates ChatGPT-4o’s effectiveness and limitations in conducting both basic and complex financial analysis tasks. By
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The transformative impact of AI technologies on the financial sector has been a topic of increasing interest. This study investigates ChatGPT’s applications in financial reasoning and analysis and evaluates ChatGPT-4o’s effectiveness and limitations in conducting both basic and complex financial analysis tasks. By designing a series of multi-step, advanced reasoning tasks and establishing task-specific evaluation metrics, we assessed ChatGPT-4o’s performance compared to human analysts. Results indicate that while ChatGPT-4o demonstrates proficiency in basic and some complex financial tasks, it struggles with deep analytical and critical thinking tasks, especially in specialized finance areas. This study underscores the need for meticulous task formulation and robust evaluation in AI financial applications. While ChatGPT enhances efficiency, integrating it with human expertise is crucial for effective decision-making. Our findings highlight both the potential and limitations of ChatGPT-4o in financial analysis, providing valuable insights for future AI integration in the finance sector.
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Open AccessArticle
Enhancing Forecasting Accuracy in Commodity and Financial Markets: Insights from GARCH and SVR Models
by
Apostolos Ampountolas
Int. J. Financial Stud. 2024, 12(3), 59; https://doi.org/10.3390/ijfs12030059 - 26 Jun 2024
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The aim of this study is to enhance the understanding of volatility dynamics in commodity returns, such as gold and cocoa, as well as the financial market index S&P500. It provides a comprehensive overview of each model’s efficacy in capturing volatility clustering, asymmetry,
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The aim of this study is to enhance the understanding of volatility dynamics in commodity returns, such as gold and cocoa, as well as the financial market index S&P500. It provides a comprehensive overview of each model’s efficacy in capturing volatility clustering, asymmetry, and long-term memory effects in asset returns. By employing models like sGARCH, eGARCH, gjrGARCH, and FIGARCH, the research offers a nuanced understanding of volatility evolution and its impact on asset returns. Using the Skewed Generalized Error Distribution (SGED) in model optimization shows how important it is to understand asymmetry and fat-tailedness in return distributions, which are common in financial data. Key findings include the sGARCH model being the preferred choice for Gold Futures due to its lower AIC value and favorable parameter estimates, indicating significant volatility clustering and a slight positive skewness in return distribution. For Cocoa Futures, the FIGARCH model demonstrates superior performance in capturing long memory effects, as evidenced by its higher log-likelihood value and lower AIC value. For the S&P500 Index, the eGARCH model stands out for its ability to capture asymmetry in volatility responses, showing superior performance in both log-likelihood and AIC values. Overall, identifying superior modeling approaches like the FIGARCH model for long memory effects can enhance risk management strategies by providing more accurate estimates of Value-at-Risk (VaR) and Expected Shortfall (ES). Additionally, the out-of-sample evaluation reveals that Support Vector Regression (SVR) outperforms traditional GARCH models for short-term forecasting horizons, indicating its potential as an alternative forecasting tool in financial markets. These findings underscore the importance of selecting appropriate modeling techniques tailored to specific asset classes and forecasting horizons. Furthermore, the study highlights the potential of advanced techniques like SVR in enhancing forecasting accuracy, thus offering valuable implications for portfolio management and risk assessment in financial markets.
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Open AccessArticle
The Moderating Effect of Ownership Structure on the Relationship between Related Party Transactions and Earnings Quality: Evidence from Saudi Arabia
by
Abdulaziz Alsultan and Khaled Hussainey
Int. J. Financial Stud. 2024, 12(3), 58; https://doi.org/10.3390/ijfs12030058 - 26 Jun 2024
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This paper seeks to investigate how earnings quality is affected by related party transactions (RPTs). The research also examines the impact of ownership structure as a moderating variable on this relationship. Panel data with the firm fixed effects model are utilized in the
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This paper seeks to investigate how earnings quality is affected by related party transactions (RPTs). The research also examines the impact of ownership structure as a moderating variable on this relationship. Panel data with the firm fixed effects model are utilized in the paper. A sample of 91 non-financial companies listed on the Saudi Stock Exchange between 2018 and 2022 were included, resulting in 429 observations of company performance over that time period. This paper finds that there is a negative association between RPTs and earnings quality. Furthermore, the study found that the adverse effect of RPTs on earnings quality is intensified when there is managerial ownership and institutional ownership as moderating variables. The study’s conclusions are robust and reliable, as the sensitivity analysis results reinforce those of the basic analysis. To the authors’ knowledge, there is relatively little available evidence on the connection between RPTs and their correlation with earnings quality, particularly in the context of ownership structure acting as a moderating variable. Moreover, the study’s findings hold important implications for enhancing earnings quality in developing economies. To the authors’ knowledge, no studies have been conducted in Saudi Arabia thus far to investigate the impact of ownership concentration, institutional ownership, managerial ownership, foreign ownership, and state ownership on the association between RPTs and earnings quality. Therefore, this paper expands the literature by modeling how the interaction between ownership structure and related party transactions may influence earnings quality. In this way, the authors contribute to the body of knowledge by unveiling a more robust control mechanism, particularly in developing economies with ineffective markets for corporate control.
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Open AccessArticle
Share Repurchases and Corporate Sustainability: Evidence from South Africa
by
Frank Mouton, Carly Londt, Gerhard Cloete, Wynand Hattingh and Gretha Steenkamp
Int. J. Financial Stud. 2024, 12(2), 57; https://doi.org/10.3390/ijfs12020057 - 18 Jun 2024
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This study examined the relationship between share repurchases and corporate sustainability in South Africa during 2011–2019. According to stakeholder theory, companies may feel a sense of obligation to not only distribute returns to shareholders through share repurchases but also to other stakeholders by
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This study examined the relationship between share repurchases and corporate sustainability in South Africa during 2011–2019. According to stakeholder theory, companies may feel a sense of obligation to not only distribute returns to shareholders through share repurchases but also to other stakeholders by investing in environmental, social or governance (ESG)-related projects. Our study, the first of its kind in the context of an emerging economy, reported a positive relationship between share repurchases and corporate sustainability in South Africa (proxied using ESG scores)—specifically social scores. The emphasis on the social, rather than the environmental, dimensions of ESG might result from the emerging economy context, where several societal problems are experienced. The results support stakeholder theory, but increased disclosure pertaining to the social dimension of ESG in years when share repurchases are executed might also provide evidence of ‘social washing’ (when companies employ their integrated report disclosures to paint an overly positive picture of their social responsibility initiatives).
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Open AccessArticle
Financial Decisions Based on Zero-Sum Games: New Conceptual and Mathematical Outcomes
by
Pierpaolo Angelini
Int. J. Financial Stud. 2024, 12(2), 56; https://doi.org/10.3390/ijfs12020056 - 14 Jun 2024
Abstract
All the n possible returns on a financial asset are the components of an element of a linear space over . This paper shows how to transfer all these n possible returns on a one-dimensional straight line. In this research work, two
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All the n possible returns on a financial asset are the components of an element of a linear space over . This paper shows how to transfer all these n possible returns on a one-dimensional straight line. In this research work, two or more than two financial assets are studied. More than two financial assets are always studied in pairs, so they are treated inside the budget set of a given decision-maker. Two univariate financial assets give rise to a bivariate financial asset characterized by a bivariate (two-dimensional) distribution of probability. This research work shows how constrained choices being made by a given decision-maker under conditions of uncertainty and riskiness maximize his utility of an ordinal nature. For this reason, prevision bundles are dealt with. Furthermore, every choice identifies a zero-sum game. Since a specific kind of choice associated with two or more than two objects is investigated, new conceptual and mathematical outcomes related to financial decisions are shown.
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Open AccessArticle
Constant Leverage Covering Strategy for Equity Momentum Portfolio with Transaction Costs
by
Mario Enrique Negrete
Int. J. Financial Stud. 2024, 12(2), 55; https://doi.org/10.3390/ijfs12020055 - 6 Jun 2024
Abstract
The Constant Leverage covering strategy for the equity momentum portfolio (CLvg) developed in this project cannot mask its shortcomings by increasing leverage. It has to successfully forecast and avoid more losses than profits to perform better than the momentum portfolio. This approach is
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The Constant Leverage covering strategy for the equity momentum portfolio (CLvg) developed in this project cannot mask its shortcomings by increasing leverage. It has to successfully forecast and avoid more losses than profits to perform better than the momentum portfolio. This approach is different from other covering strategies available in the literature that focus on increasing the right tail of the momentum returns distribution at a faster rate than they increase the left tail. The CLvg strategy only depends on past information and uses the daily volatility of the loser portfolio to determine episodes of high and low volatility. The daily volatility of the loser portfolio has a stronger relationship with large negative momentum returns than the daily volatility of the momentum portfolio. The daily volatility of the loser portfolio also has a weaker relationship with larger positive monthly returns, and it is more predictable because it has a higher volatility persistence. The negative effects of transaction costs on the CLvg strategy are measured using bid and ask prices reported by CRSP from 1992 to 2021. During this period, the stock market presented an average excess return of 9.19% and a Sharpe ratio of 0.61, and 9.74% of its returns were crashes, which is a better performance than the momentum portfolio. The CLvg adjusted by transaction costs presented excess returns of 16.93% and a Sharpe ratio of 0.84, and only 8.31% of its returns were crashes.
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(This article belongs to the Special Issue Accounting and Financial/Non-financial Reporting Developments)
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Open AccessArticle
The Effect of COVID-19 on Public and Private Sector Earnings Management: Evidence from Korea
by
Woo-sahng Kim, Bo-young Moon and Dong-goo Jung
Int. J. Financial Stud. 2024, 12(2), 54; https://doi.org/10.3390/ijfs12020054 - 4 Jun 2024
Abstract
This study investigated how the COVID-19 pandemic impacted earnings management practices within both public and private firms in Korea. Amid active government efforts and policies to overcome the pandemic crisis, we anticipate that the earnings management of public sector managers, prioritizing public benefit
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This study investigated how the COVID-19 pandemic impacted earnings management practices within both public and private firms in Korea. Amid active government efforts and policies to overcome the pandemic crisis, we anticipate that the earnings management of public sector managers, prioritizing public benefit as their key sustainability objective, will distinctly differ from those of private sector managers, who are influenced by a different set of pressures and incentives. Empirical analysis revealed a notable decrease in earnings management in the public sector post-COVID-19, with no significant change in the private sector. Our study distinguishes how public and private firms react to identical economic crises, deepening our insight into the ways different organizations handle financial reporting amid government intervention and economic stress. Such differentiation not only broadens our comprehension of strategies for managing earnings but also offers vital perspectives on the dynamics among corporate governance, regulatory environments, and sustainability.
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Open AccessArticle
Comparative Analysis of Spillover Effects in the Global Stock Market under Normal and Extreme Market Conditions
by
Qiang Liu, Chen Xu and Jane Xie
Int. J. Financial Stud. 2024, 12(2), 53; https://doi.org/10.3390/ijfs12020053 - 30 May 2024
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Using the volatility spillover index method based on the quantile vector autoregression (QVAR) model, this paper systematically examines structural changes and corresponding spillover effects within 20 major stock markets under both extreme and normal market conditions, using data spanning from January 2005 to
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Using the volatility spillover index method based on the quantile vector autoregression (QVAR) model, this paper systematically examines structural changes and corresponding spillover effects within 20 major stock markets under both extreme and normal market conditions, using data spanning from January 2005 to January 2023. The results show that, compared to the traditional volatility spillover index method, which focuses mainly on average spillover effects, the QVAR model-based spillover index better captures spillover effects under extreme and various market conditions among global stock markets. The connections between stock markets are closer in extreme market conditions. The total spillover index of major global stock markets significantly increases in extreme conditions compared to normal conditions. In extreme market conditions, inflow indices show varying degrees of increase, with emerging economy stock markets displaying more significant increases. The outflow indices exhibit heterogeneity; emerging economies show consistent increases, while developed economies show mixed changes.
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Open AccessArticle
Guidance Certification Effect and Governance Supervision Effect of Government Investment Funds
by
Sheng Xu, Yaoxiong Li and Durell Esperance Manguet Ndinga
Int. J. Financial Stud. 2024, 12(2), 52; https://doi.org/10.3390/ijfs12020052 - 28 May 2024
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The establishment of government investment funds serves as a crucial measure for governments at all levels to leverage their certification role and financial resources in attracting social capital to support enterprise development. This paper empirically examines the guiding certification effect and governance supervision
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The establishment of government investment funds serves as a crucial measure for governments at all levels to leverage their certification role and financial resources in attracting social capital to support enterprise development. This paper empirically examines the guiding certification effect and governance supervision effect of government investment funds on enterprise value enhancement, utilising panel data from listed companies and government investment fund investment event data spanning the period from 2011 to 2021. The research findings reveal that government investment funds significantly enhance the value of recipient enterprises. By leveraging their guidance and certification effects and governance supervision effects, these funds alleviate financing constraints, actively participate in corporate governance, and ultimately enhance corporate value. The impact of government investment funds is negatively moderated by the age and size of the enterprise, indicating that the “invest in early-stage and small businesses” investment strategy yields better results in promoting value enhancement. Furthermore, heterogeneity analysis demonstrates that government investment funds have a more pronounced impact on the value of non-heavily polluting industries, enterprises located in the eastern and southern regions of China, and non-state-owned enterprises. This article expands the research scope of government investment funds at the micro level, providing empirical evidence and theoretical support for optimising government investment funding policies and fostering the development of a modern capital market with distinctive Chinese characteristics.
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Open AccessArticle
The Impact of Political Risks on Financial Markets: Evidence from a Stock Price Crash Perspective
by
Yanping Ma, Qian Wei and Xiang Gao
Int. J. Financial Stud. 2024, 12(2), 51; https://doi.org/10.3390/ijfs12020051 - 27 May 2024
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Political risk, one of the most significant uncertainty shocks, affects firms’ future attitudes toward risks and plays a crucial role in their decision making. A stock price crash risk is a classical topic in financial markets; therefore, this paper probes the relationship between
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Political risk, one of the most significant uncertainty shocks, affects firms’ future attitudes toward risks and plays a crucial role in their decision making. A stock price crash risk is a classical topic in financial markets; therefore, this paper probes the relationship between firm-level political risk and stock price crash risk based on a sample of Chinese listed firms from 2011 to 2020. This paper collects the MD&A textual material of Chinese listed firms and calculates the firm-level political risk of Chinese listed firms. Our results show that a firm’s stock price crash risk is positively associated with its firm-level political risk exposure. Our findings hold after conducting various robustness tests, including instrument variable regression and altering the measurement of stock price crash risk. Further discussion reveals that political involvement mitigates the positive effect of firm-level political risk on the risk of a stock price jump.
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Open AccessArticle
Bank Accessibility and Entrepreneurial Activity: Evidence from Brazil
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Rodrigo de Oliveira Leite, Matheus Moura, Layla Mendes and Leonardo Henrique Lima de Pilla
Int. J. Financial Stud. 2024, 12(2), 50; https://doi.org/10.3390/ijfs12020050 - 24 May 2024
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A robust body of research suggests that entrepreneurial activities benefit from financial development and external financing access. However, there is a gap in understanding how and the extent to which the accessibility to financial services is associated with entrepreneurial activity. Based on an
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A robust body of research suggests that entrepreneurial activities benefit from financial development and external financing access. However, there is a gap in understanding how and the extent to which the accessibility to financial services is associated with entrepreneurial activity. Based on an unbalanced panel of 2104 Brazilian municipalities spanning 2010–2021 and comprising 23,769 municipality-year observations, our results not only confirm that bank accessibility, proxied by the number of bank branches in a municipality, is positively correlated with the number of firms but also that the relationship is nonlinear, being stronger for larger firms. By estimating a model using first differences, we find a positive causal impact of an additional bank branch on the number of firms in a municipality of 0.2% (about 26 extra firms on average). Our study contributes to the literature by corroborating that access to external financing services shapes entrepreneurial activities.
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Open AccessArticle
The Effects of Interest Rates on Bank Risk-Taking in South Africa: Do Cyclical and Location Asymmetries Matter?
by
Clement Moyo and Andrew Phiri
Int. J. Financial Stud. 2024, 12(2), 49; https://doi.org/10.3390/ijfs12020049 - 20 May 2024
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We examine the nonlinear relationship between interest rates on bank risk-taking behavior in South Africa between 2008:q1 and 2022:q3 using nonlinear autoregressive distributive lag (NARDL) and quantile autoregressive distributive lag (QARDL) models. Whilst the preliminary estimates from linear ARDL produce results adhering to
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We examine the nonlinear relationship between interest rates on bank risk-taking behavior in South Africa between 2008:q1 and 2022:q3 using nonlinear autoregressive distributive lag (NARDL) and quantile autoregressive distributive lag (QARDL) models. Whilst the preliminary estimates from linear ARDL produce results adhering to conventional theory, the NARDL and QARDL analysis shows that the relationship between the variables is more complex. On one hand, the NARDL model shows that the phase of monetary policy (cyclical asymmetries) is important in determining the pass-through effects of interest rates on bank risk behavior. We find that both contractionary and expansionary monetary policy increases long-term risk through decreased liquidity for the former and increased non-performing loans for the latter. On the other hand, the QARDL model shows that the level of bank risk behavior (location asymmetries) is also important in determining the impact of interest rates on bank risk behavior. We find that interest rates affect bank risk behavior in ‘medium-to-high risk environments’ for unsecured loans and lending and in ‘medium-to-low risk environments’ for liquidity. Overall, these results enable us to recommend ways in which the SARB can strengthen its monitoring mechanisms given the multifaceted impact of interest rates on bank risk-taking.
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Open AccessArticle
Sovereign Green Bond Market: Drivers of Yields and Liquidity
by
Kamila Tomczak
Int. J. Financial Stud. 2024, 12(2), 48; https://doi.org/10.3390/ijfs12020048 - 20 May 2024
Abstract
The aim of this study is to analyse and assess the yields and liquidity of sovereign green bonds in selected countries and to compare the yields between sovereign green bonds and conventional bonds. Sovereign green bonds are issued by governments to finance environmental
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The aim of this study is to analyse and assess the yields and liquidity of sovereign green bonds in selected countries and to compare the yields between sovereign green bonds and conventional bonds. Sovereign green bonds are issued by governments to finance environmental and social projects and represent a relatively new and growing asset class. This study seeks to analyse the financial performance of sovereign green bonds by examining yields and liquidity metrics, such as bid–ask spreads. The findings of this research suggest that the yield to maturity (YTM) of sovereign green bonds is influenced by conventional bond return, while conventional sovereign bonds are affected by the financial market return. Furthermore, the results confirm that the liquidity of sovereign green bonds can be explained by bond maturity.
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(This article belongs to the Special Issue Green Bonds and Climate Change Mitigation)
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Open AccessArticle
International Diversification and Stock-Price Crash Risk
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Alireza Askarzadeh, Mostafa Kanaanitorshizi, Maryam Tabarhosseini and Dana Amiri
Int. J. Financial Stud. 2024, 12(2), 47; https://doi.org/10.3390/ijfs12020047 - 15 May 2024
Abstract
Despite the recent proliferation of research on internationalization, little attention has been paid to understanding the reasons behind the decrease in firm value accompanying international expansion. By delving into the underlying mechanisms and applying the concept of agency theory to a sample of
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Despite the recent proliferation of research on internationalization, little attention has been paid to understanding the reasons behind the decrease in firm value accompanying international expansion. By delving into the underlying mechanisms and applying the concept of agency theory to a sample of US firms spanning from 2000 to 2022, we posit that an increased level of information asymmetry in internationally diversified firms incentivizes managers to prioritize their own interests. To protect their careers, CEOs of internationally diversified firms often suppress bad news. This behavior can lead to the accumulation of negative news and heighten the risk of a stock-price crash. Furthermore, we propose that higher levels of international experience, enhanced monitoring effectiveness, and efficient investment practices will negatively moderate the positive relationship between internationalization and stock-price crash risk.
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Open AccessArticle
Navigating Risk Aversion and Regret
by
Miwaka Yamashita
Int. J. Financial Stud. 2024, 12(2), 46; https://doi.org/10.3390/ijfs12020046 - 11 May 2024
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This study investigates the distinctive modeling of regret utility when compared with common utility. I also introduce the interplay between common utility and regret utility. Using this model, I examine the differences in decision making, which encompasses issues such as risk sharing and
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This study investigates the distinctive modeling of regret utility when compared with common utility. I also introduce the interplay between common utility and regret utility. Using this model, I examine the differences in decision making, which encompasses issues such as risk sharing and principal–agent dilemmas. Regret utility is set so that its risk aversion shows common utility’s prudence (i.e., downside risk aversion). This paper reveals, both qualitatively and quantitively and with a concrete model, that regret utility leads to a more balanced and optimal ratio of agent payouts to outputs compared with common utility, meaning when major outputs are kept by principal, there are relatively larger agent payouts, and when major outputs are kept by the agent, there are relatively smaller agent payouts. This means that regret makes a more balanced distribution, and regret utility is more conservative (not biased). In addition, preliminary empirical research was performed in which people were asked risk preference or averseness questions, and their risk averseness was calculated by using the CRRA (Constant Relative Risk Aversion) utility function. The regret condition leads to a more conservative attitude. Furthermore, the regret model can be used in other areas, like in conservative investment portfolio optimization.
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Open AccessArticle
Determinants of Remuneration Committee Chairman’s Pay: Evidence from the UK
by
Fadi Shehab Shiyyab
Int. J. Financial Stud. 2024, 12(2), 45; https://doi.org/10.3390/ijfs12020045 - 10 May 2024
Abstract
This study investigates the association between the compensation of Remuneration Committee Chairpersons (RCCs) and their characteristics. Utilizing data from firms listed on the UK FTSE350 index between 2010 and 2020, the research unveils that RCC remuneration is influenced by factors such as observable
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This study investigates the association between the compensation of Remuneration Committee Chairpersons (RCCs) and their characteristics. Utilizing data from firms listed on the UK FTSE350 index between 2010 and 2020, the research unveils that RCC remuneration is influenced by factors such as observable efforts, time commitment, and accumulated experience. Notably, the analysis reveals a substantial gender gap in RCCs’ pay. The results suggest that the contractual pricing of individual director-level attributes plays a role in explaining disparities in compensation for roles with similar responsibilities. Furthermore, the study sheds light on the intricate process of determining compensation within the directorial hierarchy. It delves into how differences in pay among individuals occupying similar positions across various companies can be elucidated by the distinct attributes and qualifications of each individual. Ultimately, the findings advocate for a nuanced examination of directorial roles, highlighting the necessity of distinguishing between different director roles rather than treating them as a homogeneous entity.
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(This article belongs to the Special Issue Cross-Cultural Corporate Governance, Firm Performance and Firm Value)
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The Impact of Value Creation (Tobin’s Q), Total Shareholder Return (TSR), and Survival (Altman’s Z) on Credit Ratings
by
Nazário Augusto de Oliveira and Leonardo Fernando Cruz Basso
Int. J. Financial Stud. 2024, 12(2), 44; https://doi.org/10.3390/ijfs12020044 - 8 May 2024
Abstract
This research explores the impact of financial indicators on the credit ratings of companies listed on the S&P 500, employing a Sys-GMM model to address endogeneity concerns. Three independent variables categorized as market and survival factors alongside seven control variables sourced from leverage,
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This research explores the impact of financial indicators on the credit ratings of companies listed on the S&P 500, employing a Sys-GMM model to address endogeneity concerns. Three independent variables categorized as market and survival factors alongside seven control variables sourced from leverage, liquidity, interest coverage, profitability, market, survival, and macroeconomic domains were investigated. The sample consisted of 2398 observations from Capital IQ Pro, spanning nine years (2013 to 2021) and encompassing 240 public companies. The findings suggest that neither Tobin’s Q (TQ) nor Total Shareholder Return (TSR) lack significant correlations with credit ratings, implying that stock market performance and total shareholder return do not directly impact credit ratings. In contrast, the Altman Z-score (AZS) emerged as a significant predictor, indicating its importance in assessing credit risk. These insights enhance the understanding of financial indicators’ impacts on credit ratings, aiding financial institutions and companies in prudent lending and financing decisions.
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(This article belongs to the Special Issue Accounting and Financial/Non-financial Reporting Developments)
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