Search Results (183)

This paper presents a macroeconomic approach to calculating Climate Value-at-Risk (CliVaR) for financial institutions, addressing critical limitations in existing commercial solutions and historical data availability. This methodology leverages the Network for Greening the Financial System (NGFS) scenarios to derive implied forward-looking means and volatilities from scenarios mapped to macroeconomic variables (MEVs), circumventing the reliance on insufficient historical data. Through regression analysis, we identify statistically significant relationships between climate-sensitive macroeconomic variables and bank equity values, based on the premise that climate risk is transmitted to bank balance sheets via its impact on the general economy. It is recognised that MEVs alone cannot explain the full variance in equity values and the regression of MEVs to equity is inherently inefficient. However, the purpose of the regression is to determine statistically significant MEVs and not to predict the share price. Along with the NGFS scenarios, this enables the Monte Carlo simulation and the calculation of CliVaR. To account for the regression inefficiency, a Post-Model Adjustment (PMA) equation is developed. The methodology is demonstrated in a practical case study, by calculating a CliVaR based climate risk Pillar 2A capital requirement for Standard Bank Group. This proof-of-concept demonstrates the feasibility of transparent, in-house CliVaR calculations. Full article

Financial forecasting remains essential for supporting strategic decisions and risk oversight in the banking sector. This study examines whether Adaptive Neuro-Fuzzy Inference Systems (ANFISs) can enhance Earnings per Share (EPS) prediction for European banks by integrating four core financial indicators: Return on Assets, Return on Equity, Capital Ratio, and Profit Margin. Using an annual panel of 25 institutions between 2013 and 2023, we benchmark multiple membership function shapes and granularities to identify robust model configurations. The empirical analysis combines chronological holdout testing with Leave-One-Out cross-validation to evaluate accuracy and stability. Findings highlight a sigmoid-based ANFIS specification with four fuzzy sets per input as the most consistent performer, offering interpretable rules that complement conventional forecasting techniques. Full article

Background: Global immunization against Haemophilus influenzae type b (Hib) has expanded with Gavi support. We estimated health, economic benefits, equity and cost-effectiveness in 159 countries (1990–2021), and projected effects of future introduction in China. Methods: We used a random forest model to simulate counterfactual scenarios without Hib vaccine introduction in 159 countries (1990–2021) and to project effects of Hib vaccine introduction in China over the next decade. Ten variables were sourced from the World Bank and WHO; Hib disease burden estimates were from the Global Burden of Disease Study 2021. We compared counterfactual and actual results to quantify benefits, equity, and cost-effectiveness. Extensive uncertainty analyses were performed. Results: Between 1990 and 2021, Hib immunization averted an estimated 1,321,123 (95% uncertainty interval [UI] 32,034–2,723,304) deaths and 90,973,504 (95% UI 3,573,718–197,099,799) disability-adjusted life-years globally. Greatest health and economic gains occurred in Africa and low- and middle-income countries (LMICs). Deaths averted decreased with later vaccine introduction (Pearson’s r = −0.56). Vaccination did not improve health equity, and access remains limited in Africa and LMICs. Hib immunization was cost-saving in all countries. In China, introduction at any point in the next decade would provide health and economic benefits and be cost-effective, with earlier introduction yielding greater gains. Conclusions: Hib immunization provide substantial, cost-effective health and economic benefits globally. Persistent inequities in vaccine access for LMICs require targeted solutions. Policymakers in China should consider these findings for future vaccine introduction. Full article

The methodology used to attribute greenhouse gas (GHG) emissions to nations profoundly influences perceived climate action burdens, raising critical questions about equity in global climate governance. This study systematically evaluates current production-based accounting (PBA) by comparing it with three alternative frameworks: consumption-based accounting (CBA), historical cumulative-based accounting (HBA), and per capita-based accounting (PCBA). We conducted a comprehensive SWOT analysis using multi-stream evidence synthesis, analyzing 23 major emitting countries representing over 80% of global emissions. Data sources included UNFCCC documents, historical emission datasets, consumption-based emission data, and World Bank population estimates. Results reveal dramatic redistributions of national positioning across frameworks, with countries experiencing extreme ranking volatility—India dropped 19 places from 4th under PBA to 23rd under PCBA, while Saudi Arabia rose from 11th to 1st. Our analysis demonstrates that while accounting frameworks provide factual measurements of different emissions dimensions, their selection for policy purposes constitutes a normative choice with distributional consequences. We explicitly map each framework to the responsibility principles it operationalizes, revealing that current over-reliance on PBA creates systematic blind spots in the policy context and climate governance. Full article

This study investigated how banks’ balance sheet fundamentals shape their credit growth using panel co-integration methods and two estimation methods—pooled mean group (PMG) and dynamic fixed effects (DFE). Both approaches yielded consistent core results. First, weaker asset quality, proxied by higher non-performing loans (NPLs), was strongly and negatively related to credit growth: PMG produced a large negative long-run coefficient, and DFE’s error-correction form confirmed a significant adverse effect, consistent with higher provisioning, thinner capital buffers, and lower risk-taking. Second, capitalization (equity to assets) supported long-run growth under PMG, while DFE—imposing common slopes—did not, suggesting heterogeneous capitalization effects across banks that PMG captured but DFE muted. Third, operating expense intensity showed a positive long-run association with credit growth in both models, consistent with expansionary spending accompanying durable lending rather than costs causing lending. Long-run effects for liquidity and market-risk sensitivity were weaker or mixed: liquidity’s role was imprecise, and market-risk sensitivity was positive in PMG but not significant in DFE, again pointing to cross-sectional heterogeneity. Error-correction terms were large, negative, and highly significant in both models, indicating rapid convergence—near full adjustment within one period, with slight overshooting in DFE. Short-run results showed that higher liquidity and temporary cost spikes dampened contemporaneous growth. Policy implications emphasize sustained oversight of asset quality and prudent capital planning to support long-run credit supply. Full article

This research investigates the extent to which behavioral biases—specifically overconfidence and representativeness heuristic—affect linguistic tone, narrative structure, and predictive accuracy of financial reports produced by investment analysts operating across diverse global markets. Drawing upon a comprehensive dataset comprising 1575 equity recommendation reports authored by 15 analysts from four major international investment banks between 2019 and 2022, the study evaluates how cognitive tendencies shape report composition and forecast precision. A mixed-methods approach was employed, incorporating qualitative textual analysis and quantitative modeling through random-effects panel regressions. Key constructs assessed include narrative complexity, optimism, visual content usage, and forecast deviation metrics. Our findings reveal that overconfidence significantly influences the tone and detail of analyst reports but does not demonstrably impact projection accuracy. Conversely, representativeness heuristics were not found to consistently affect either report language or earnings-per-share forecast errors. Institutional affiliation emerged as a significant determinant of predictive success, while demographic factors such as gender, native language, and geographic region had limited explanatory power. These findings imply that investors should treat report tone as an indicator of analyst disposition rather than forecast quality, while financial institutions may benefit from training programs aimed at mitigating narrative and stylistic biases in analyst communication. Full article

Global biodiversity decreased by 69% from 1970 to 2022, representing a key risk to economic activity. However, the link between nature, biodiversity and finance has received little attention within the field of sustainable finance. This paper attempts to fill this gap. Nature finance aims to avoid biodiversity loss and promote nature-positive activities, such as the conservation and protection of biodiversity through market-based solutions with the proper measurement of impact. Measuring biodiversity impact remains a challenge for most companies and banks, with a fragmented landscape of nature frameworks. We conduct a bibliometric analysis of the literature on biodiversity finance and analyze a unique market dataset of five global investment funds as well as all corporate bonds issued in Brazil, the country with the largest biodiversity assets. First, we find that the literature on nature finance is recent with a tipping point in 2020, with the three most common concepts being ecosystem services, nature-based solutions and circular economy. Second, we find that sovereigns and two corporate sectors (food production, pulp & paper) represent the vast majority of issuers that currently incorporate biodiversity considerations into funding structures, suggesting an opportunity to expand accountability for biodiversity impacts across a greater number of sectors. Third, we find a disconnect between science and finance. Out of a catalogue of 158 biodiversity metrics proposed by the IFC, just 33 have been used in bond issuances and 32 by fund managers, suggesting an opportunity for technical assistance for companies and to simplify catalogs to create a common language. Lack of consensus around metrics, complexity, and cost explain this gap. Fourth, we identify a distinction between liquid markets and illiquid markets in their application of biodiversity impact management and measurement. Illiquid markets, such as private equity, bilateral lending, voluntary carbon markets or investment funds can develop complex bespoke mechanisms to measure nature, leveraging detailed catalogues of metrics. Liquid markets, including bonds, exhibit a preference for simpler metrics such as preserved areas or forest cover. Full article

In pursuit of sustainable development goal 5 (SDG5), this study underscores gender equity and women’s empowerment as pivotal themes in sustainable development. It examines the drivers of women’s empowerment, including education, economics, finance, and legal rights, using data from $n=223$ individuals, primarily women (68.4%) aged 20–30 (69.6%). The research methodology integrates descriptive statistical measures, machine learning (ML) algorithms, and graphical representations to systematically explore the fundamental research inquiries that align with SDG5, which focuses on achieving gender equity. The results indicate that higher educational levels, captured through ordinal encoding and correlation analyzes, are strongly linked to increased labor market participation and entrepreneurial activity. The random forest (RF) and support vector machine (SVM) classifiers achieved overall accuracies of 89% and 93% for the categorization of experience, respectively. Although 91% of women have bank accounts, only 47% reported financial independence due to gendered barriers. Logistic regression correctly identified financially independent women with a 93% recall, but the classification of non-independent participants was less robust, with a 44% recall. Access to legal services, modeled using a neural network, was a potent predictor of empowerment (F1-score 0.83 for full access cases), yet significant obstacles persist for those uncertain about or lacking legal access. These findings underscore that, while formal institutional access is relatively widespread among educated women literate in the digital world, perceived and practical barriers in the financial and legal realms continue to hinder empowerment. The results quantify these effects and highlight opportunities for tailored, data-driven policy interventions targeting persistent gaps. Full article

Sectoral vulnerability to distinct crisis types in small, open, and geopolitically exposed markets—such as Jordan—remains insufficiently quantified, constraining targeted policy design and portfolio allocation. This study’s primary purpose is to establish a transparent, comparable metric of sector-level market resilience that reveals how crisis typology reorders vulnerabilities and shapes recovery speed. Applying this framework, we assess Jordan’s equity market across three archetypal episodes—the Global Financial Crisis, the Arab Spring, and COVID-19—to clarify how shock channels reconfigure sectoral risk. Using daily Amman Stock Exchange sector indices (2001–2025), we estimate $GARCH\left(\mathrm{1,1}\right)$ models for each sector–crisis window and summarize volatility dynamics by persistence $(\alpha +\beta )$, interpreted as an inverse proxy for resilience; complementary diagnostics include maximum drawdown and days-to-recovery, with nonparametric (Kruskal–Wallis) and rank-based (Spearman, Friedman) tests to evaluate within-crisis differences and cross-crisis reordering. Results show pronounced heterogeneity in every crisis and shifting sectoral rankings: financials—especially banking—display the highest persistence during the GFC; tourism and transportation dominate during COVID-19; and tourism/electric-related industries are most persistent around the Arab Spring. Meanwhile, food & beverages, pharmaceuticals/medical, and education recurrently exhibit lower persistence. Higher persistence aligns with slower post-shock normalization. We conclude that resilience is sector-specific and contingent on crisis characteristics, implying targeted policy and portfolio responses; regulators should prioritize liquidity backstops, timely disclosure, and contingency planning for fragile sectors, while investors can mitigate crisis risk via dynamic sector allocation and volatility-aware risk management in emerging markets. Full article

Supply chain financing offers advantages over traditional channels such as bank loans and equity financing, including greater flexibility, lower transaction costs, and simplified approval procedures. However, when a firm’s sustainability faces uncertainty, access to supply chain financing may become constrained by multiple factors, including the risk tolerance of supply chain partners, market transparency, and corporate reputation. ESG, representing Environmental, Social, and Governance standards, is a critical framework for assessing corporate sustainability performance. Given that divergent ESG evaluations reflect disparate market assessments of a firm’s sustainable development capabilities, such divergence may affect supply chain financing by altering stakeholder trust dynamics. This research examines A-share listed firms in China (2016–2022) and reveals that divergence in ESG evaluations significantly inhibits firms’ access to supply chain financing. Mechanism validation suggests that divergent ESG evaluations amplify informational opacity, operational risks, and negative reputation, thereby influencing supply chain partners’ risk perceptions and trust levels. Heterogeneity analysis shows that corporate governance quality, regional trust levels, and ESG awareness modulate the negative impact of divergent ESG evaluations on supply chain financing. The asymmetric effects of divergent ESG evaluations on supply chain financing are further confirmed, with distinct manifestations between upstream suppliers and downstream customers. By bridging gaps in existing research on divergent ESG evaluations and supply chain finance, this work offers regulatory guidelines, operational recommendations for firms, and investment decision frameworks. Full article

This study examines the moderating effect of bank capitalization on the relationship between economic freedom and banking performance, offering comparative evidence from both advanced and emerging economies. Using an unbalanced panel of 213 countries from 1993 to 2018, this study applies a two-step System Generalized Method of Moments approach to address dynamic effects, endogeneity, and unobserved heterogeneity. The results show that economic freedom exerts a negative and significant impact on bank profitability (ROA and ROE), particularly in emerging markets with weaker institutional safeguards. Strong internal capital buffers, on the other hand, mitigate these adverse effects and enhance resilience, supporting stable profitability under liberalized conditions. Regulatory capital shows a less consistent and sometimes restrictive role. Disaggregated results indicate that equity buffers most effectively cushion the risks of financial and investment freedom, whereas trade freedom is less sensitive to capital levels. The findings emphasize that successful liberalization depends on institutional capacity and capitalization strength, highlighting the importance of tailored prudential frameworks. The study contributes to debates on financial liberalization, Basel III, macroprudential regulation, and bank risk management, underscoring that a “one-size-fits-all” liberalization strategy may undermine stability and efficiency unless supported by robust capital buffers. Full article

The agricultural sector, which has long been overshadowed by industrialization, has reemerged with renewed strategic significance in the face of global crises, including pandemics and armed conflicts. This study examines the causal relationship between institutional quality and agricultural credit orientation in the Developing-Eight countries from 2002 to 2023. Using the agriculture orientation index for credit as a key indicator, this study investigates how disaggregated institutional dimensions—control of corruption, government effectiveness, political stability and absence of violence, rule of law, regulatory quality, and voice and accountability—affect the allocation of commercial bank credit to agriculture. Both the standard Kónya panel causality test and its time-varying extension are employed to capture static and dynamic causal patterns. The findings demonstrate that institutional quality exerts a substantial effect on credit orientation, although the magnitude and characteristics of this influence differ across countries. Türkiye, Indonesia, Nigeria, and Egypt exhibit consistent causal relationships, whereas other countries reveal episodic or latent effects linked to specific political or legal shifts. By combining dynamic methodology with a policy-relevant indicator, this study offers novel insights into how governance shapes agricultural finance. The results underscore the need for country-specific and institution-sensitive credit strategies to increase resilience and equity in financial systems. Full article

This study looks at how oversight committees affect CEO compensation governance and how this affects publicly traded banks’ financial performance. It specifically looks at how compensation committee mandates and structural traits affect how CEO compensation is matched to company performance results. The research employs a panel dataset of sample firms across the study period, combining financial performance metrics like return on equity (ROE) and return on assets (ROA). It draws on agency theory and corporate governance theories. In addition to firm-level controls, the research takes into account committee-level factors such independence, experience, frequency of meetings, and ownership. The findings obtained through panel regression methods and testing show that improved pay-performance sensitivity and improved financial performance do not correlate with committee influence, independence, or financial expertise. The importance of empowered oversight committees in reducing interagency conflicts of interest and fostering efficient governance is demonstrated by these findings. By emphasizing how internal governance frameworks can be used to produce long-term organizational goals, the study adds to the discussion surrounding executive compensation. Full article

In Ecuador’s financial system, private banks and savings and credit cooperatives coexist, both playing a key role in financial intermediation and the economic inclusion of traditionally underserved sectors. During the COVID-19 pandemic, these institutions faced unprecedented challenges that tested their adaptability and operational efficiency. In this context, the present study evaluates the technical efficiency of banks and cooperatives in Ecuador over the 2015–2023 period, using a combined approach involving Data Envelopment Analysis (DEA) and mixed linear models (MLMs). A longitudinal and comparative methodology is adopted, allowing for the analysis of efficiency trends over time and the identification of their main structural determinants. The results show that cooperatives exhibit a higher average technical efficiency than banks, as well as greater resilience during the health crisis. The analysis reveals that operating expenses negatively impact efficiency, while equity and social capital show no significant effects. By combining DEA and MLMs, the study offers a more comprehensive and nuanced understanding of the factors influencing efficiency, underscoring the importance of tailored policies and institutional strategies focused on resource optimization and continuous improvement. The study concludes that efficiency does not rely solely on size or asset volume, but rather on managerial capacity and organizational adaptability in complex and changing environments. Full article

Access to business financing in Europe has historically been a challenge for small and medium-sized enterprises (SMEs), which represent a significant share of economic activity and employment in Europe. This issue has been significantly intensified since the global financial crisis, disproportionately affecting this segment. This study analyzes firm-level determinants influencing access to alternative financing sources, including crowdfunding, venture capital, and other non-bank channels, using data from the 2023 SAFE covering 15,855 firms across Europe. Results indicate that firm size significantly affects access, with larger, established firms more likely to secure such funding. However, younger, innovation-driven firms demonstrate a higher propensity to pursue equity and crowdfunding options, driven by their need for flexible and early-stage capital. Sectoral patterns also emerge: industrial firms more often obtain public grants, while service-sector firms lead in adopting equity-based and crowdfunding models. The findings highlight the critical role of innovation capacity and international orientation in broadening financial access. Digital platforms are identified as key enablers in democratizing funding, particularly for SMEs. This research advances understanding of SME financing dynamics within evolving financial landscapes and provides actionable insights for policymakers and practitioners aiming to promote inclusive and sustainable access to finance. Full article