Journal of Risk and Financial Management

24 pages, 1931 KiB

Open AccessArticle

On Survivor Stocks in the S&P 500 Stock Index

by Klaus Grobys

J. Risk Financial Manag. 2022, 15(2), 95; https://doi.org/10.3390/jrfm15020095 - 21 Feb 2022

Cited by 2 | Viewed by 4110

This paper investigates the performance and characteristics of survivor stocks in the S&P 500 index. Using both in-sample and out-of-sample comparisons, survivor stocks outperformed this market index by a considerable margin. Relative to other S&P 500 index companies, survivor stocks tend to be [...] Read more.

This paper investigates the performance and characteristics of survivor stocks in the S&P 500 index. Using both in-sample and out-of-sample comparisons, survivor stocks outperformed this market index by a considerable margin. Relative to other S&P 500 index companies, survivor stocks tend to be small-value stocks that exhibit high profitability and invest conservatively. Surprisingly, survivor stocks tend to be loser stocks with negative exposure to the momentum factor. Further analyses show that the volatility of the survivor stocks portfolio is less exposed to tail risks and responds less to shocks in the innovation process. Full article

(This article belongs to the Special Issue Frontiers of Asset Pricing)

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14 pages, 330 KiB

Open AccessArticle

The Bucharest Stock Exchange: A Starting Point in Structuring a Valuable CSR Index

by Mirela Clementina Panait, Marian Catalin Voica, Eglantina Hysa, Alfonso Siano and Maria Palazzo

J. Risk Financial Manag. 2022, 15(2), 94; https://doi.org/10.3390/jrfm15020094 - 21 Feb 2022

Cited by 6 | Viewed by 2826

Abstract

The aim of this article was to identify the role and specific mechanisms of the stock exchange in promoting corporate social responsibility (CSR) and CSR communications among companies listed on the Romanian capital market given country membership of the European Union. Taking into [...] Read more.

The aim of this article was to identify the role and specific mechanisms of the stock exchange in promoting corporate social responsibility (CSR) and CSR communications among companies listed on the Romanian capital market given country membership of the European Union. Taking into account the quality of the Bucharest Stock Exchange (BSE) as a member of the Sustainable Stock Exchanges, as well as BSE’s concerns about promoting CSR, a CSR index was built to capture the specific actions of companies listed on this market. The public companies were considered representative for the promotion of CSR based on their size and other relevant features. The index can be seen by companies that can further develop it, test its validity, and employ it as a tool to reassure investors who will decide to spend their money to buy shares and stocks of organizations ranked in the BSE. Full article

(This article belongs to the Special Issue Sustainable Development and CSR – Perfect Match?)

19 pages, 353 KiB

Open AccessArticle

Market Misreaction? Evidence from Cross-Border Acquisitions

by CNV Krishnan and Jialun Wu

J. Risk Financial Manag. 2022, 15(2), 93; https://doi.org/10.3390/jrfm15020093 - 21 Feb 2022

Cited by 5 | Viewed by 2068

Abstract

Our goal in this paper is to answer this research question: Do investors understand the longer-term value-implications of cross border mergers and acquisitions, as at the time of their announcements? We examine acquirers’ operating efficiencies around and after cross-border acquisitions and relate this [...] Read more.

Our goal in this paper is to answer this research question: Do investors understand the longer-term value-implications of cross border mergers and acquisitions, as at the time of their announcements? We examine acquirers’ operating efficiencies around and after cross-border acquisitions and relate this to the announcement-period stock-market reaction. Using a dataset of cross-border mergers and acquisitions (M&A) entailing U.S. acquirers over the period 1990–2013, and using a bootstrapped-DEA (Data Envelopment Analysis) model because any one indicator may not reflect the whole performance of the merger, we find that the operating efficiency of the acquirers decreases around the acquisition, and up to three years after. However, we document evidence of stock market mis-reaction at announcement: the announcement-period acquirer abnormal stock-price return is not significantly associated with acquirer’s operating efficiency post-acquisition. Therefore, investors should be careful interpreting the announcement-period stock-price reaction in cross-border mergers and acquisitions as indicative of merger efficiency gains. Full article

(This article belongs to the Section Business and Entrepreneurship)

14 pages, 1499 KiB

Open AccessArticle

Is There Any Witching in the Cryptocurrency Market?

by Alex Plastun, Ludmila Khomutenko and Serhii Bashlai

J. Risk Financial Manag. 2022, 15(2), 92; https://doi.org/10.3390/jrfm15020092 - 21 Feb 2022

Cited by 1 | Viewed by 1758

Abstract

This paper explores price effects caused by the expiration of derivatives in the cryptocurrency market. Applying different statistical tests (ANOVA, Mann–Whitney, and t-tests) and econometric methods (the modified cumulative abnormal return approach, regression analysis with dummy variables, and the trading simulation approach) [...] Read more.

This paper explores price effects caused by the expiration of derivatives in the cryptocurrency market. Applying different statistical tests (ANOVA, Mann–Whitney, and t-tests) and econometric methods (the modified cumulative abnormal return approach, regression analysis with dummy variables, and the trading simulation approach) to daily and weekly Bitcoin data over the period 2018–2021, the following hypotheses are tested: (H1) Expiration days create patterns in price behavior in the cryptocurrency market; and (H2) Price patterns can be exploited to generate abnormal profits from trading. The results suggest that expiration effects are only nominally present in the cryptocurrency market. There are differences in returns between expiration-related periods and average returns, but these differences are statistically insignificant. The only case in which an anomaly was detected was related to abnormally high returns during the week of expiration: returns during such weeks were positive in 65% of cases, and were on average 5 times higher than during usual weeks. Trading strategies based on this fact were able to generate results different from those of random trading, with a Sharpe ratio above 1. This is evidence in favor of the existence of a real price anomaly, which contradicts the efficient market hypothesis, and this could be implemented in the practice of traders and investors by creating trading strategies based on detected price effects or special technical analysis indicators to generate trading signals. For academics, these results might provide an opportunity to improve time series forecasting analysis in the case of Bitcoin. Full article

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14 pages, 2142 KiB

Open AccessArticle

Price and Volatility Transmissions among Natural Gas, Fertilizer, and Corn Markets: A Revisit

by Zhengliang Yang, Xiaoxue Du, Liang Lu and Hernan Tejeda

J. Risk Financial Manag. 2022, 15(2), 91; https://doi.org/10.3390/jrfm15020091 - 21 Feb 2022

Cited by 8 | Viewed by 3376

Abstract

In this paper, we revisit price and volatility transmission among natural gas, fertilizer, and corn markets; an important issue was explored in previous work. An update of the results is urgently needed due to the recent enormous price volatility in the commodities, fertilizer, [...] Read more.

In this paper, we revisit price and volatility transmission among natural gas, fertilizer, and corn markets; an important issue was explored in previous work. An update of the results is urgently needed due to the recent enormous price volatility in the commodities, fertilizer, and energy markets. We followed the same methodology as previous work and used the vector error correction model and the multivariate generalized autoregressive heteroskedasticity model, but we adopted a new methodology to gather higher frequency data for fertilizer to estimate the interactions and examine the mechanisms between these market prices. Our results are consistent with previous research showing that natural gas price returns in the short-term are significantly affected by its lagged returns from itself and corn markets, and it will be affected by its lagged return sand fertilizer markets. However, we did not find a significant relationship among fertilizer, corn, and natural gas markets from May to November 2021. Moreover, the lagged conditional volatility of corn prices will affect the conditional volatility in the natural gas market but not vice versa. Full article

(This article belongs to the Special Issue Agribusiness Financial Risk Management)

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17 pages, 446 KiB

Open AccessArticle

Self-Weighted LSE and Residual-Based QMLE of ARMA-GARCH Models

by Shiqing Ling and Ke Zhu

J. Risk Financial Manag. 2022, 15(2), 90; https://doi.org/10.3390/jrfm15020090 - 19 Feb 2022

Cited by 1 | Viewed by 1908

Abstract

This paper studies the self-weighted least squares estimator (SWLSE) of the ARMA model with GARCH noises. It is shown that the SWLSE is consistent and asymptotically normal when the GARCH noise does not have a finite fourth moment. Using the residuals from the [...] Read more.

This paper studies the self-weighted least squares estimator (SWLSE) of the ARMA model with GARCH noises. It is shown that the SWLSE is consistent and asymptotically normal when the GARCH noise does not have a finite fourth moment. Using the residuals from the estimated ARMA model, it is shown that the residual-based quasi-maximum likelihood estimator (QMLE) for the GARCH model is consistent and asymptotically normal, but if the innovations are asymmetric, it is not as efficient as that when the GARCH process is observed. Using the SWLSE and residual-based QMLE as the initial estimators, the local QMLE for ARMA-GARCH model is asymptotically normal via an one-step iteration. The importance of the proposed estimators is illustrated by simulated data and five real examples in financial markets. Full article

(This article belongs to the Special Issue A Commemorative Issue in Honor of Professor Michael McAleer, 1952–2021)

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44 pages, 8488 KiB

Open AccessArticle

Statistical Analysis Dow Jones Stock Index—Cumulative Return Gap and Finite Difference Method

by Kejia Yan, Rakesh Gupta and Sama Haddad

J. Risk Financial Manag. 2022, 15(2), 89; https://doi.org/10.3390/jrfm15020089 - 19 Feb 2022

Viewed by 1772

Abstract

This study was motivated by the poor performance of the current models used in stock return forecasting and aimed to improve the accuracy of the existing models in forecasting future stock returns. The current literature largely assumes that the residual term used in [...] Read more.

This study was motivated by the poor performance of the current models used in stock return forecasting and aimed to improve the accuracy of the existing models in forecasting future stock returns. The current literature largely assumes that the residual term used in the existing model is white noise and, as such, has no valuable information. We exploit the valuable information contained in the residuals of the models in the context of cumulative return and construct a new cumulative return gap (CRG) model to overcome the weaknesses of the traditional cumulative abnormal returns (CAR) and buy-and-hold abnormal returns (BHAR) models. To deal with the residual items of the prediction model and improving the prediction accuracy, we also lead the finite difference (FD) method into the autoregressive (AR) model and autoregressive distributed lag (ARDL) model. The empirical results of the study show that the cumulative return (CR) model is better than the simple return model for stock return prediction. We found that the CRG model can improve prediction accuracy, the term of the residuals from the autoregressive analysis is very important in stock return prediction, and the FD model can improve prediction accuracy. Full article

(This article belongs to the Special Issue Emerging Markets)

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16 pages, 1377 KiB

Open AccessArticle

Optimum Structure of Corporate Groups

by Stylianos Artsidakis, Yiannis Thalassinos, Theofanis Petropoulos and Konstantinos Liapis

J. Risk Financial Manag. 2022, 15(2), 88; https://doi.org/10.3390/jrfm15020088 - 18 Feb 2022

Viewed by 2417

Abstract

Corporate groups consist of a set of companies, often described as subsidiaries, which are usually controlled by one single entity, the parent or holding company. The term control means the parent company’s rights to direct the relevant activities of other companies. A parent [...] Read more.

Corporate groups consist of a set of companies, often described as subsidiaries, which are usually controlled by one single entity, the parent or holding company. The term control means the parent company’s rights to direct the relevant activities of other companies. A parent company can control a subsidiary either directly or indirectly through its voting power. Groups’ structure can be very complex usually with multiple crossholding and loop participations driving to not observable sharing rights. The aim of this paper is to examine how the parent company of a group with given participation rates can increase its capital by changing the share structure of the group and maintain management control over the group while the least capital comes from the majority. Furthermore, using evolver software we derive to the new optimal structure of the group and the maximum parent’s cash inflow from shares exchange. The value of this research to show the possibility for a parent company to create additional capital, by maximizing the minority interest, and at the same time direct voting rights in its favor. Full article

(This article belongs to the Special Issue Recent Developments in Risk and Financial Management, Economic Methods, Financialization and Commercialization of Risk)

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12 pages, 401 KiB

Open AccessArticle

Urban Leverage and Housing Price in China

by Wanying Lu and Jianfu Shen

J. Risk Financial Manag. 2022, 15(2), 87; https://doi.org/10.3390/jrfm15020087 - 18 Feb 2022

Cited by 1 | Viewed by 2212

Abstract

This paper examines whether urban leverage, defined by the bank loan-to-deposit ratio in a city, affects housing prices in China. Using a panel dataset of 236 cities and hedonic models, we find a depressing effect of urban leverage on housing price in first- [...] Read more.

This paper examines whether urban leverage, defined by the bank loan-to-deposit ratio in a city, affects housing prices in China. Using a panel dataset of 236 cities and hedonic models, we find a depressing effect of urban leverage on housing price in first- and second-tier cities while leaving third- and fourth-tier cities unaffected. Urban leverage negatively affects housing prices by influencing credit supply. Moreover, the difference-in-differences analysis indicates that purchase restriction policies amplify the depressing effect of urban leverage on housing prices. Overall, we show that urban leverage is an important determinant of housing prices in China. Full article

(This article belongs to the Special Issue Real Estate Economics and Finance)

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19 pages, 1010 KiB

Open AccessArticle

An Assessment of the Impact of Legal Regulation on Financial Security in OECD Countries

by Robertas Vaitkus and Asta Vasiliauskaitė

J. Risk Financial Manag. 2022, 15(2), 86; https://doi.org/10.3390/jrfm15020086 - 18 Feb 2022

Cited by 5 | Viewed by 4423

Abstract

The recurrent economic and financial crises expose the state, enterprises, and households to a range of financial risks and negative financial consequences. As a result, governments are seeking the most efficient measures of legal regulation and other measures ensuring financial security in order [...] Read more.

The recurrent economic and financial crises expose the state, enterprises, and households to a range of financial risks and negative financial consequences. As a result, governments are seeking the most efficient measures of legal regulation and other measures ensuring financial security in order to address financial insecurity. The financial security can be considered from a variety of perspectives, and this research proposes that microeconomic and macroeconomic indicators be taken into account when assessing the financial security situation. The results of this research confirmed that legal regulation has a significant positive impact on financial security in OECD countries during the analysis period. Based on the results of the study, it can be argued that legal regulation, including anti-corruption measures, must be an essential part of the financial security strategies being developed. The studies carried out provide a platform for further research, which will allow identification of regulatory measures that would most effectively contribute to financial security needs in individual OECD countries. Full article

(This article belongs to the Special Issue Social, Economic, Legal and Educational Challenges of Network Economics)

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27 pages, 1293 KiB

Open AccessArticle

A Comparative Analysis of the Nature of Stock Return Volatility in BRICS and G7 Markets

by Lorraine Muguto and Paul-Francois Muzindutsi

J. Risk Financial Manag. 2022, 15(2), 85; https://doi.org/10.3390/jrfm15020085 - 18 Feb 2022

Cited by 10 | Viewed by 3963

Abstract

Through globalization and financial market liberalization, the opening up of markets has increased cross-border investments as investors search for higher risk-adjusted returns. This ability to invest internationally has raised the attention given to emerging markets that offer higher risk-adjusted returns relative to developed [...] Read more.

Through globalization and financial market liberalization, the opening up of markets has increased cross-border investments as investors search for higher risk-adjusted returns. This ability to invest internationally has raised the attention given to emerging markets that offer higher risk-adjusted returns relative to developed markets. However, despite the growing importance of emerging markets, the literature on the nature of volatility in global markets is typified by generalizations of findings from developed markets. To fill this gap, this study comparatively examined the nature of stock return volatility in developed G7 and emerging BRICS markets. Broad market index data and GARCH models over the period 2003:01–2020:08 were employed. The study found evidence of volatility persistence, asymmetry, mean reversion and weak evidence of a risk premium in both emerging and developed markets. There was also evidence of significant differences in the nature of volatility within the two sets of markets. These volatility patterns in both groups cast doubt on the assertion that developed markets are more informationally efficient than emerging markets. Thus, markets in the same group may not always have the same nature of volatility, especially in the wake of structural events such as the COVID-19 global pandemic. Full article

(This article belongs to the Special Issue Financial Markets in Times of Crisis)

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10 pages, 790 KiB

Open AccessArticle

State Health Insurance Benefit Mandates and Health Care Affordability

by James Bailey

J. Risk Financial Manag. 2022, 15(2), 84; https://doi.org/10.3390/jrfm15020084 - 17 Feb 2022

Cited by 1 | Viewed by 2224

Abstract

Every US state requires private health insurers to cover certain conditions, treatments, and providers. These benefit mandates were rare as recently as the 1960s, but the average state now has more than forty. These mandates are intended to promote the affordability of necessary [...] Read more.

Every US state requires private health insurers to cover certain conditions, treatments, and providers. These benefit mandates were rare as recently as the 1960s, but the average state now has more than forty. These mandates are intended to promote the affordability of necessary health care. This study aims to determine the extent to which benefit mandates succeed at this goal. Using fixed effects and difference-in-difference research designs with data from the restricted Medical Expenditure Panel Survey—Household Component (MEPS-HC), it provides the first empirical estimates of how health insurance benefit mandates affect out-of-pocket costs and total spending on health care. Both strategies find that mandates significantly reduce out-of-pocket spending, but they are divided on whether mandates also reduce overall health care spending and spending by private insurers. Full article

(This article belongs to the Section Applied Economics and Finance)

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17 pages, 372 KiB

Open AccessArticle

The Impact of Foreign Capital on the Level of ERM Implementation in Czech SMEs

by Lenka Syrová and Jindřich Špička

J. Risk Financial Manag. 2022, 15(2), 83; https://doi.org/10.3390/jrfm15020083 - 17 Feb 2022

Cited by 5 | Viewed by 1983

Abstract

The COVID-19 pandemic has had a devastating impact on many small and medium-sized businesses around the world. Enterprise risk management (ERM) is a conceptual framework that encompasses the systematic and comprehensive identification, analysis, and management of risks in an enterprise. In the post-communist [...] Read more.

The COVID-19 pandemic has had a devastating impact on many small and medium-sized businesses around the world. Enterprise risk management (ERM) is a conceptual framework that encompasses the systematic and comprehensive identification, analysis, and management of risks in an enterprise. In the post-communist countries of Central Europe, the level of ERM is still relatively low, especially in small and medium-sized enterprises (SMEs). This study fills a gap in the existing knowledge on ERM by shedding light on the influence of foreign capital on the level of ERM implementation in Czech SMEs. The aim of the study is to assess the influence of the share of foreign capital in Czech SMEs on the level of ERM implementation. A validated self-report of 296 non-financial SMEs in the Czech Republic was analyzed using latent class analysis (LCA) and multiple linear regression. The results of the study contribute to the literature by enriching the empirical analysis of ERM in emerging markets. The originality of the results lies in the identification of three distinct groups of firms according to the combination of implemented ERM elements—“no ERM”, “best practice ERM”, and “pretended ERM”—and the finding that the share of foreign capital, age, and firm size influence the level of ERM implementation. In particular, the positive influence of foreign capital in younger companies makes it possible to overcome the barrier of traditionalist thinking of old-school Czech managers influenced by the period of economic transition in post-communist countries. The paper builds on the existing evidence with new empirical conclusions and argues for a greater inflow of foreign direct investment into emerging markets. Full article

(This article belongs to the Section Risk)

21 pages, 702 KiB

Open AccessArticle

The Impact of Corporate Governance on the Financial Performance of the Banking Sector in the MENA (Middle Eastern and North African) Region: An Immunity Test of Banks for COVID-19

by Hani El-Chaarani, Rebecca Abraham and Yahya Skaf

J. Risk Financial Manag. 2022, 15(2), 82; https://doi.org/10.3390/jrfm15020082 - 16 Feb 2022

Cited by 48 | Viewed by 15253

Abstract

The purpose of this paper is to measure the impact of internal and external corporate governance mechanisms on the financial performance of banks in the under-researched Middle Eastern and North African (MENA) region during the COVID-19 pandemic period. Bank annual reports, the Orbis [...] Read more.

The purpose of this paper is to measure the impact of internal and external corporate governance mechanisms on the financial performance of banks in the under-researched Middle Eastern and North African (MENA) region during the COVID-19 pandemic period. Bank annual reports, the Orbis Bank Focus database, and World Bank reports were used to collect both financial and non-financial information on the banking sector, followed by fixed effects regressions and two-stage least squares. Results showed that the corporate governance measures of presence of independent members on the board of directors, high ownership concentration, lack of political pressure on board members, and strong legal protection, had positive effects on bank financial performance. Corporate governance mechanisms, such as performance-based compensation, the presence of women on boards, moderate size of the board, and anti-takeover mechanisms had no significant impact on bank performance during the crisis period. An effective internal and external corporate governance mechanism could improve the financial performance of banks in MENA countries in times of pandemics and crises. Full article

(This article belongs to the Section Financial Markets)

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15 pages, 303 KiB

Open AccessArticle

Do Ethical Companies Have High Stock Prices or High Returns?

by Bing Yu, Shengxiong Wu and Mary Jane Lenard

J. Risk Financial Manag. 2022, 15(2), 81; https://doi.org/10.3390/jrfm15020081 - 14 Feb 2022

Cited by 3 | Viewed by 3748

Abstract

In this paper, we examine the performance of an impact investing strategy using the most ethical companies to build an impact investing portfolio. We test the time-series and cross-sectional returns of the impact portfolio, explore the financial analyst coverage of the most ethical [...] Read more.

In this paper, we examine the performance of an impact investing strategy using the most ethical companies to build an impact investing portfolio. We test the time-series and cross-sectional returns of the impact portfolio, explore the financial analyst coverage of the most ethical firms, and run regressions to analyze the valuation of the most ethical firms. Our empirical results reveal that the portfolio consisting of the most ethical firms has a higher risk-adjusted return and that the most ethical firms have lower stock valuations than comparable stocks. We attribute our findings to the incomplete information in business ethics norms. Full article

(This article belongs to the Special Issue Advances in Sustainable Finance)

31 pages, 427 KiB

Open AccessArticle

Predictors of Excess Return in a Green Energy Equity Portfolio: Market Risk, Market Return, Value-at-Risk and or Expected Shortfall?

by Rebecca Abraham, Hani El-Chaarani and Zhi Tao

J. Risk Financial Manag. 2022, 15(2), 80; https://doi.org/10.3390/jrfm15020080 - 14 Feb 2022

Cited by 1 | Viewed by 2832

Abstract

The rapid growth of electric vehicles, solar roofs, and wind power suggests that the potential growth in green equity investments is an emerging trend. Accordingly, this study measured the predictors of excess equity returns in a portfolio of global green energy producers, from [...] Read more.

The rapid growth of electric vehicles, solar roofs, and wind power suggests that the potential growth in green equity investments is an emerging trend. Accordingly, this study measured the predictors of excess equity returns in a portfolio of global green energy producers, from 2010 to 2019. Fixed-effects panel data regressions of daily returns, followed by quantile regressions, were performed. There was some support for the explanation of green equity returns by market returns and market risk (beta), as indicated by the single-factor Capital Asset Pricing Model (CAPM), and the multifactor Fama–French Three-Factor and Fama–French Five-Factor Models. The most significant predictors of green equity returns were Value-at-Risk at a 95% confidence level, and Value-at-Risk at a 99% confidence level. Expected Shortfall was another extreme risk value measure. The importance of extreme value measures suggests the presence of fat-tailed leptokurtic distributions, whereby excess returns were explained by the risk of loss given adverse conditions, primarily at 95% confidence. We conclude that the proliferation of small firms and new entrants in the renewable energy sector has led to the explanation of returns by extreme values of risk. Full article

(This article belongs to the Special Issue International Finance)

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23 pages, 298 KiB

Open AccessArticle

Testing Stock Market Efficiency from Spillover Effect of Panama Leaks

by Adeel Nasir, Ștefan Cristian Gherghina, Mário Nuno Mata, Kanwal Iqbal Khan, Pedro Neves Mata and Joaquim António Ferrão

J. Risk Financial Manag. 2022, 15(2), 79; https://doi.org/10.3390/jrfm15020079 - 14 Feb 2022

Viewed by 2506

Abstract

On 3 April 2016, Mossack Fonseca provided the historically most significant leak of its shareholder’s data for owning offshore companies. Shareholders include many political and influential figures around the globe, which causes a moral hazard. The study analyses the effects of Panama leak [...] Read more.

On 3 April 2016, Mossack Fonseca provided the historically most significant leak of its shareholder’s data for owning offshore companies. Shareholders include many political and influential figures around the globe, which causes a moral hazard. The study analyses the effects of Panama leak events on five stock exchanges to ensure the market efficiency and investor perception related to the Panama leaks. Event study methodology is used on five occasions associated with Panama papers, i.e., the resignation of the Prime Minister of Iceland on 5 April 2016, Jurgen Mossack’s resignation on 7 April 2016, the resignation of the Spanish Minister of Industry on 15 April 2016, the 450 personalities of Pakistan that were nominated in Panama papers on 15 April 2016, and the formation of an inquiry commission to inquire into the matter. The market efficiency of five stock exchanges was checked, i.e., the KSE 100 of Pakistan, the OMXIPI exchange of Iceland, the IBEX 35 of Spain, the New York stock exchange (NYSE), and S&P 500. The market remains efficient for most events and investor behaviour changes for one or two days around the event day (this event has concise term significant abnormal returns in all stock exchanges or concise term significant abnormal macroeconomic effects are observed in all stock exchanges). Full article

(This article belongs to the Special Issue A Commemorative Issue in Honor of Professor Michael McAleer, 1952–2021)

15 pages, 454 KiB

Open AccessFeature PaperArticle

Fight Alone or Together? The Influence of Risk Perception on Helping Behavior

by Liping Yin and Yen-Chun Jim Wu

J. Risk Financial Manag. 2022, 15(2), 78; https://doi.org/10.3390/jrfm15020078 - 13 Feb 2022

Cited by 2 | Viewed by 2264

Abstract

Will there be a greater sense of solidarity and friendship during public crises? This study aims to determine whether risk perception influences employees’ willingness to assist in times of public crisis, taking COVID-19 as a specific research scenario and based on the theory [...] Read more.

Will there be a greater sense of solidarity and friendship during public crises? This study aims to determine whether risk perception influences employees’ willingness to assist in times of public crisis, taking COVID-19 as a specific research scenario and based on the theory of “tend and befriend”. This study hypothesized that risk perception will influence employees’ helping behavior via the in-group identity, with the degree of impact dependent on the COVID-19 pandemic’s severity. A questionnaire survey of 925 practitioners from various industries in the pandemic area revealed that: risk perception has a positive influence on employees’ helping behavior; in-group identity plays a certain mediating role in the process of risk perception that influences employees’ helping behavior; and the severity of a local pandemic negatively moderates the relationship between risk perception and helping behavior, but positively moderates the relationship between risk perception and in-group identity. Specifically, employees in high-risk areas are more likely to “align” (higher degree of recognition by the in-group) but demonstrate less helping behavior, compared with those in areas with moderate and low risk from the COVID-19. By contrast, employees in low-risk areas display more helping behavior but have less in-group identity, compared with those in areas with moderate and high risk from the COVID-19. This study expands the research on the relationship between risk perception and helping behavior, enriches the research results on risk management theory, and provides a practical reference for risk governance. Full article

(This article belongs to the Special Issue Risk and Financial Consequences)

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37 pages, 3354 KiB

Open AccessArticle

Opportunities and Barriers for FinTech in SAARC and ASEAN Countries

by Tasadduq Imam, Angelique McInnes, Sisira Colombage and Robert Grose

J. Risk Financial Manag. 2022, 15(2), 77; https://doi.org/10.3390/jrfm15020077 - 13 Feb 2022

Cited by 16 | Viewed by 6434

Abstract

This article assesses the opportunities and challenges for different categories of FinTechs in the SAARC and ASEAN regions. We consider the global financial inclusion data released by the World Bank and map the responses to gain insights into the opportunities and challenges for [...] Read more.

This article assesses the opportunities and challenges for different categories of FinTechs in the SAARC and ASEAN regions. We consider the global financial inclusion data released by the World Bank and map the responses to gain insights into the opportunities and challenges for FinTechs in the respective regions. We develop a new index, termed the FinTech Opportunity Index (FOI), to conceptualise the opportunities and barriers based on individual savings, borrowings, purchasing behaviour, and payment preferences. We note that FinTech services have potential opportunities for expansion in the ASEAN regions but less so in the SAARC regions. The need for different types of FinTech services varies between regions. Services such as crowdfunding, neobanks, and InsurTech have potential in the ASEAN regions, especially with the positive attitude towards entrepreneurship and asset investments. In the SAARC regions, InsurTechs linked to health care has potential along with LendTechs and neobanks. We further note that males, and the young are more likely adopters of FinTechs in both regions. The analysis suggests the need for innovative promotions and education to motivate the more sceptical, especially women and the elderly population, to adopt FinTech services. Full article

(This article belongs to the Special Issue Financial Technology (Fintech) and Sustainable Financing)

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11 pages, 484 KiB

Open AccessArticle

Certificate of Need Laws and Health Care Use during the COVID-19 Pandemic

by Agnitra Roy Choudhury, Sriparna Ghosh and Alicia Plemmons

J. Risk Financial Manag. 2022, 15(2), 76; https://doi.org/10.3390/jrfm15020076 - 13 Feb 2022

Cited by 2 | Viewed by 3409

Abstract

This paper investigates the impact of state-level Certificate-of-Need (CON) laws on COVID and non-COVID deaths in the United States during the SARS-CoV-2 pandemic. CON laws limit the expansion and acquisition of new medical services, such as new hospital beds. The coronavirus pandemic created [...] Read more.

This paper investigates the impact of state-level Certificate-of-Need (CON) laws on COVID and non-COVID deaths in the United States during the SARS-CoV-2 pandemic. CON laws limit the expansion and acquisition of new medical services, such as new hospital beds. The coronavirus pandemic created a surge in demand for medical services, which might be exacerbated in some states that have CON laws. Our investigation focuses on mortality due to COVID and non-COVID reasons and understanding how these laws affect access to healthcare for illnesses that might require similar medical equipment to COVID patients. We find that states with high healthcare use due to COVID that reformed their CON laws during the pandemic had a reduction in mortality resulting from COVID-19, septicemia, diabetes, chronic lower respiratory disease, influenza or pneumonia, and Alzheimer’s Disease, relative to non-reforming CON states. Full article

(This article belongs to the Special Issue Health Economics and Insurance)

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16 pages, 457 KiB

Open AccessArticle

Role of Service Quality, Price, and Firm Image on Customer Satisfaction in Philippine Accounting Firms

by Sandra Brucal, Cris Corpuz, Indra Abeysekera and Raul David

J. Risk Financial Manag. 2022, 15(2), 75; https://doi.org/10.3390/jrfm15020075 - 11 Feb 2022

Cited by 1 | Viewed by 12130

Abstract

This study examines the service quality of accounting firms in Pampanga, Philippines, and their customers’ satisfaction. Using the SERVQUAL model, the study explores the effect of service quality, price, and firm image on client satisfaction of accounting firms. The study conducted a field [...] Read more.

This study examines the service quality of accounting firms in Pampanga, Philippines, and their customers’ satisfaction. Using the SERVQUAL model, the study explores the effect of service quality, price, and firm image on client satisfaction of accounting firms. The study conducted a field survey questionnaire using convenience sampling and collected 59 client-firm responses. The findings suggest that accounting firm clients are satisfied with the services they receive from their respective providers. Regression analysis indicates that service quality significantly affects only customer satisfaction. Price has a significant effect on service quality. The duration a client stays with the firm and services provided to the client also significantly impact controlling service quality. Additional testing shows that service quality mediates the influence of service price on customer satisfaction. The findings guide accounting firms to improve their client service quality. Full article

(This article belongs to the Section Business and Entrepreneurship)

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10 pages, 616 KiB

Open AccessArticle

Forecasting the Price of the Cryptocurrency Using Linear and Nonlinear Error Correction Model

by Jong-Min Kim, Chanho Cho and Chulhee Jun

J. Risk Financial Manag. 2022, 15(2), 74; https://doi.org/10.3390/jrfm15020074 - 10 Feb 2022

Cited by 8 | Viewed by 4489

Abstract

We employed linear and nonlinear error correction models (ECMs) to predict the log returns of Bitcoin (BTC). The linear ECM is the best model for predicting BTC compared to the neural network and autoregressive models in terms of RMSE, MAE, and MAPE. Using [...] Read more.

We employed linear and nonlinear error correction models (ECMs) to predict the log returns of Bitcoin (BTC). The linear ECM is the best model for predicting BTC compared to the neural network and autoregressive models in terms of RMSE, MAE, and MAPE. Using a linear ECM, we are able to understand how BTC is affected by other coins. In addition, we performed Granger-causality tests on fourteen cryptocurrencies. Full article

(This article belongs to the Special Issue Machine Learning Applications in Finance)

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21 pages, 317 KiB

Open AccessArticle

Effects of Real Exchange Rate Volatility on Trade: Empirical Analysis of the United States Exports to BRICS

by E. M. Ekanayake and Amila Dissanayake

J. Risk Financial Manag. 2022, 15(2), 73; https://doi.org/10.3390/jrfm15020073 - 10 Feb 2022

Cited by 7 | Viewed by 3360

Abstract

This paper analyzes the effects of real exchange rate volatility on the United States’ exports to BRICS. It focuses on the top 20 export products (defined by the 2-digit Harmonized System codes) from the United States to Brazil, Russia, India, China, and South [...] Read more.

This paper analyzes the effects of real exchange rate volatility on the United States’ exports to BRICS. It focuses on the top 20 export products (defined by the 2-digit Harmonized System codes) from the United States to Brazil, Russia, India, China, and South Africa, and uses quarterly data for period from 1993Q1 to 2021Q2. The specified panel regression model was first estimated using three estimation methods, namely, the Panel Least Squares, the Panel Fully Modified Least Squares (FMOLS), and Panel Dynamic Least Squares (DOLS). In addition, to estimate the short-run and long-run effects of real exchange rate volatility on exports, it also uses the method of the Autoregressive Distributed Lag (ARDL) approach to cointegration analysis and error-correction models. Two measures of exchange rate volatility are used in this study. According to our findings, the levels of foreign economic activity have a positive effect on exports while the real exchange rate has a negative effect on exports. In addition, exchange rate volatility has a negative effect on exports in the long run in all five countries. However, the effects of exchange volatility are found to yield mixed results in the short run regardless of which measure of exchange rate volatility was used. Full article

(This article belongs to the Special Issue International Trade and Financial Management)

21 pages, 717 KiB

Open AccessArticle

Board Information Technology Governance Mechanisms and Firm Performance among Iraqi Medium-Sized Enterprises: Do IT Capabilities Matter?

by Ibrahim M. Menshawy, Rohaida Basiruddin, Raihana Mohdali and Nazahan Qahatan

J. Risk Financial Manag. 2022, 15(2), 72; https://doi.org/10.3390/jrfm15020072 - 10 Feb 2022

Cited by 4 | Viewed by 2973

Abstract

This paper aims to investigate the perceptions of Iraqi medium-sized enterprises’ board members on how board information technology governance mechanisms affect their companies’ performance with the help of IT capabilities as a mediator. The study is based on a survey of 223 board [...] Read more.

This paper aims to investigate the perceptions of Iraqi medium-sized enterprises’ board members on how board information technology governance mechanisms affect their companies’ performance with the help of IT capabilities as a mediator. The study is based on a survey of 223 board members using a stratified random sampling technique. The Structural Equation Model (SEM) method results show that board IT governance structure and board IT governance relational have a significant direct and indirect positive relationship with firm performance through IT capabilities. Contrariwise, IT capabilities do not interfere with the relationship between board IT governance processes mechanisms and firm performance. Our study contributes to the IT business literature by addressing new relationships and providing empirical evidence that explains the inconsistent and mixed results of prior studies. Moreover, it extends and complements these prior studies by considering three board IT governance mechanisms, four IT capabilities, and merges the two dimensions of firm performance in a developing country that offers different institutional settings and litigation environment. The study findings offer notable implications for business practitioners and industry leaders to enhance the IT environment and maximize their corporate outcomes. In addition, these findings draw the attention of the board members, management, and corporate general assemblies to recognize the importance of intensifying the investment in IT capabilities to gain superior firm performance. Full article

(This article belongs to the Special Issue Contemporary Issues on Auditing and Financial Reporting)

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30 pages, 10926 KiB

Open AccessFeature PaperArticle

Machine Learning the Carbon Footprint of Bitcoin Mining

by Hector F. Calvo-Pardo, Tullio Mancini and Jose Olmo

J. Risk Financial Manag. 2022, 15(2), 71; https://doi.org/10.3390/jrfm15020071 - 05 Feb 2022

Cited by 6 | Viewed by 4404

Abstract

Building on an economic model of rational Bitcoin mining, we measured the carbon footprint of Bitcoin mining power consumption using feed-forward neural networks. We found associated carbon footprints of 2.77, 16.08 and 14.99 MtCO₂e for 2017, 2018 and 2019 based on [...] Read more.

Building on an economic model of rational Bitcoin mining, we measured the carbon footprint of Bitcoin mining power consumption using feed-forward neural networks. We found associated carbon footprints of 2.77, 16.08 and 14.99 MtCO₂e for 2017, 2018 and 2019 based on a novel bottom-up approach, which (i) conform with recent estimates, (ii) lie within the economic model bounds while (iii) delivering much narrower prediction intervals and yet (iv) raise alarming concerns, given recent evidence (e.g., from climate–weather integrated models). We demonstrate how machine learning methods can contribute to not-for-profit pressing societal issues, such as global warming, where data complexity and availability can be overcome. Full article

(This article belongs to the Section Sustainability and Finance)

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13 pages, 301 KiB

Open AccessArticle

Sustainable Blueprint: Do Stock Investors Increase Emissions?

by Olatunji Abdul Shobande and Lawrence Ogbeifun

J. Risk Financial Manag. 2022, 15(2), 70; https://doi.org/10.3390/jrfm15020070 - 04 Feb 2022

Cited by 5 | Viewed by 2378

Abstract

The lack of agreement on climate policies among stock-market investors has raised significant concerns about GHG-emission levels, likely reflected in asset pricing. This study uses annual data sourced from the World Bank from 1980 to 2019 to examine whether stock-market investments increase GHG [...] Read more.

The lack of agreement on climate policies among stock-market investors has raised significant concerns about GHG-emission levels, likely reflected in asset pricing. This study uses annual data sourced from the World Bank from 1980 to 2019 to examine whether stock-market investments increase GHG emissions in Organization for Economic Co-operation and Development (OECD) countries. The study employs the panel-standard fixed effects and the Arellano-Bover and Blundell–Bond dynamic methods and shows that stock-investor confidence is critical for emissions reduction in OECD countries. Additionally, the results highlight the potential mechanism through which the stock market can influence emissions in the OECD countries. We recommend that investors re-evaluate the emissions criteria before selecting long stock portfolios. Additionally, there is a need for policymakers to promote the preservation of environmental quality by carefully redesigning policies for stock-market investments. Full article

(This article belongs to the Special Issue Advances in Sustainable Finance)

24 pages, 1468 KiB

Open AccessArticle

Sovereign Exposures of European Banks: It Is Not All Doom

by Martien Lamers, Thomas Present and Rudi Vander Vennet

J. Risk Financial Manag. 2022, 15(2), 69; https://doi.org/10.3390/jrfm15020069 - 03 Feb 2022

Cited by 3 | Viewed by 2212

Abstract

We investigate whether sovereign bond holdings of European banks are determined by a risk–return trade-off. Using data between 2011 and 2018 for 75 European banks, we confirm that banks exhibited risk-taking behavior during the sovereign debt crisis, e.g., due to moral suasion. In [...] Read more.

We investigate whether sovereign bond holdings of European banks are determined by a risk–return trade-off. Using data between 2011 and 2018 for 75 European banks, we confirm that banks exhibited risk-taking behavior during the sovereign debt crisis, e.g., due to moral suasion. In the period 2015–2018, however, banks’ investments in sovereign bonds are characterized by sound risk–return considerations, suggesting a lessening of the doom loop. This result is mainly driven by banks in the core European countries, as banks in the GIPS countries do not exhibit such behavior, nor do they avoid riskier bonds following the sovereign debt crisis. Full article

(This article belongs to the Special Issue Banking during the COVID-19 Pandemia)

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18 pages, 378 KiB

Open AccessFeature PaperArticle

The Presence of Foreign Capital and the Internationalization of Portuguese Industrial SMEs

by Luís Pacheco, Carla Lobo and Isabel Maldonado

J. Risk Financial Manag. 2022, 15(2), 68; https://doi.org/10.3390/jrfm15020068 - 02 Feb 2022

Cited by 2 | Viewed by 2200

Abstract

The objective of this paper is to empirically examine the relationship between the firms’ ownership and control structure, in particular the presence of foreign capital, and their internationalization levels, measured in terms of intensity and diversification. The international performance of Portuguese SMEs, which [...] Read more.

The objective of this paper is to empirically examine the relationship between the firms’ ownership and control structure, in particular the presence of foreign capital, and their internationalization levels, measured in terms of intensity and diversification. The international performance of Portuguese SMEs, which is crucial for the domestic economy’s growth, depends on a multitude of factors, with the existence of foreign investment inflows directed to industrial SMEs being a usually forgotten factor. This paper fills that gap using a balanced panel data of 5722 firms for the period from 2010 to 2017, researching if the presence of foreign capital influences the level and scope of internationalization, and controlling the effects of other variables such as profitability, age, size, indebtedness and sector of activity. The origin of foreign capital is also considered, being researched if issues of institutional or development differences exert any influence over firms’ internationalization. The results evidence that the presence of foreign shareholders in SMEs positively influences internationalization and that the distance variable positively correlates with the internationalization measures. Moreover, there seems to exist a non-linear relationship between the development level of the country of origin of the share capital and internationalization, with the results indicating that firms with share capital originating from more advanced countries attain a higher degree of internationalization. As SMEs in Portugal face increasing competition, joining hands with resource-rich investors such as foreign corporations and institutional investors would be a fruitful strategy to enhance the international competitiveness of Portuguese firms. Full article

(This article belongs to the Section Financial Markets)

9 pages, 259 KiB

Open AccessArticle

The Drivers of Policies to Limit the Spread of COVID-19 in Europe

by Sebastien Bourdin, Slimane Ben Miled and Jamil Salhi

J. Risk Financial Manag. 2022, 15(2), 67; https://doi.org/10.3390/jrfm15020067 - 01 Feb 2022

Cited by 18 | Viewed by 2640

Abstract

While many articles have analyzed the effectiveness of the policies that aimed to limit the spread of COVID-19, very little research work has examined the determinants that drove these policies. Therefore, we proposed to study the determinants that led government authorities to implement [...] Read more.

While many articles have analyzed the effectiveness of the policies that aimed to limit the spread of COVID-19, very little research work has examined the determinants that drove these policies. Therefore, we proposed to study the determinants that led government authorities to implement more or less restrictive policies to limit the spread of the pandemic. Using the COVID-19 stringency index, we highlighted a positive effect of the incidence rate on the stringency level. Patient capacity in intensive care units was also a key variable. This is indicative of the capacity of countries to have a sufficient and appropriate health system to absorb such pandemic crises. On the other hand, we show that epidemiological data regarding the risk of excess mortality (diabetes, cancer, and cardiovascular pathologies) had a negative effect. We conclude by recalling the importance of policy coordination between countries when it comes to lowering the stringency levels of measures, in order to avoid a resurgence of the epidemic. Full article

(This article belongs to the Special Issue Systemic Recovery: Lessons from COVID-19, Modeling, Analysis, and Policy Implications)

25 pages, 649 KiB

Open AccessArticle

The Dynamic Relationship between Investor Attention and Stock Market Volatility: International Evidence

by Imene Ben El Hadj Said and Skander Slim

J. Risk Financial Manag. 2022, 15(2), 66; https://doi.org/10.3390/jrfm15020066 - 01 Feb 2022

Cited by 3 | Viewed by 2877

Abstract

This paper investigates the role of investor attention in forecasting realized volatility for fourteen international stock markets, by means of Google Trends data, over the sample period January 2004 through November 2021. We devise an augmented Empirical Similarity model that combines three volatility [...] Read more.

This paper investigates the role of investor attention in forecasting realized volatility for fourteen international stock markets, by means of Google Trends data, over the sample period January 2004 through November 2021. We devise an augmented Empirical Similarity model that combines three volatility components, defined over different time horizons, using the similarity measure between lagged Google search queries and volatility. Results show that investor attention positively affects future volatility in the short-run. The effect of investor attention is likely to reverse in the long-run, consistently with the price pressure hypothesis. The proposed model demonstrates important gains in terms of volatility forecast accuracy and outperforms highly competitive models. Full article

(This article belongs to the Special Issue Mathematical and Empirical Finance)

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J. Risk Financial Manag., Volume 15, Issue 2 (February 2022) – 57 articles

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