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J. Risk Financial Manag., Volume 17, Issue 1 (January 2024) – 41 articles

Cover Story (view full-size image): We explore how expansionary monetary policy (EMP) influences bank loan loss provisioning. We find that banks’ discretionary loan loss provisions (DLLPs) increase during EMP periods. This effect is stronger for banks with greater risk taking, more influential stakeholders, lower ex ante transparency, and more stringent bank regulation, which is consistent with external stakeholders requiring conservative and timely loan loss provisioning. We also find that both the timeliness and the validity of banks’ loan loss provisions (LLPs) increase during EMP periods. Our results are robust to the use of instrumental variable estimation and exogenous variations in monetary policy. Lastly, we show that conservative loan loss provisioning discipline banks from excessive risk taking during EMP periods. View this paper
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22 pages, 2710 KiB  
Article
A Comprehensive Approach to Bankruptcy Risk Evaluation in the Financial Industry
by Samar Issa, Gulhan Bizel, Sharath Kumar Jagannathan and Sri Sarat Chaitanya Gollapalli
J. Risk Financial Manag. 2024, 17(1), 41; https://doi.org/10.3390/jrfm17010041 - 22 Jan 2024
Viewed by 2258
Abstract
The study presents a comprehensive approach to examining the potential risk of bankruptcies in financial sector organizations. This investigation explores 20 financial sector entities and evaluates their fiscal history from 2000 to 2018. The developed model assesses the chance of these companies going [...] Read more.
The study presents a comprehensive approach to examining the potential risk of bankruptcies in financial sector organizations. This investigation explores 20 financial sector entities and evaluates their fiscal history from 2000 to 2018. The developed model assesses the chance of these companies going bankrupt by analyzing indicators like liquidity, profitability, debt composition, and operational effectiveness. These metrics are contrasted to regulatory requirements and assessed as having low, moderate, or elevated risk repercussions, ultimately contributing to an overall threat rating. Additionally, the model has a unique algorithm that compensates for excessive debt levels, strengthening the reliability of the risk appraisal grade. This straightforward instrument illustrates the demand to incorporate a variety of financial health indicators. According to the findings, excessive amounts of debt have a detrimental influence on profitability, leading to decreased stock returns and a greater probability of bankruptcy. These findings have practical implications for investors and stakeholders, providing insightful information to help inform decision-making, especially during periods of economic unpredictability such as pandemics. Furthermore, they encourage the enhancement of financial market efficiency. Full article
(This article belongs to the Special Issue Bankruptcy Prediction, Equity Valuation and Stock Returns)
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48 pages, 585 KiB  
Article
A Survey of Literature on the Interlinkage between Petroleum Prices and Equity Markets
by Miramir Bagirov and Cesario Mateus
J. Risk Financial Manag. 2024, 17(1), 40; https://doi.org/10.3390/jrfm17010040 - 22 Jan 2024
Viewed by 1529
Abstract
The multifaceted interrelationship between petroleum prices and equity markets has been a subject of immense interest. The current paper offers an extensive review of a plethora of empirical studies in this strand of literature. By scrutinising over 190 papers published from 1983 to [...] Read more.
The multifaceted interrelationship between petroleum prices and equity markets has been a subject of immense interest. The current paper offers an extensive review of a plethora of empirical studies in this strand of literature. By scrutinising over 190 papers published from 1983 to 2023, our survey reveals various research themes and points to diverse findings that are sector- and country-specific and contingent on employed methodologies, data frequencies, and time horizons. More precisely, petroleum price changes and shocks exert direct or indirect effects dictated by the level of petroleum dependency across sectors and the country’s position as a net petroleum exporter or importer. The interlinkages tend to display a time-varying nature and sensitivity to major market events. In addition, volatility is not solely spilled from petroleum to equity markets; it is also observed to transmit in the reverse direction. The importance of incorporating asymmetries is documented. Lastly, the summarised findings can serve as the basis for further research and reveal valuable insights to market participants. Full article
19 pages, 2425 KiB  
Article
Implementing Intraday Model-Free Implied Volatility for Individual Equities to Analyze the Return–Volatility Relationship
by Martin G. Haas and Franziska J. Peter
J. Risk Financial Manag. 2024, 17(1), 39; https://doi.org/10.3390/jrfm17010039 - 18 Jan 2024
Viewed by 1625
Abstract
We implement the VIX methodology on intraday data of a large set of individual equity options. We thereby consider approaches based on monthly option contracts, weekly option contracts, and a cubic spline interpolation approach. Relying on 1 min, 10 min, and 60 min [...] Read more.
We implement the VIX methodology on intraday data of a large set of individual equity options. We thereby consider approaches based on monthly option contracts, weekly option contracts, and a cubic spline interpolation approach. Relying on 1 min, 10 min, and 60 min model-free implied volatility measures, we empirically examine the individual equity return–volatility relationship on the intraday level using quantile regressions. The results confirm a negative contemporaneous link between stock returns and volatility, which is more pronounced in the tails of the distributions. Our findings hint at behavioral biases causing the asymmetric return–volatility link rather than the leverage and volatility-feedback effects. Full article
(This article belongs to the Special Issue Featured Papers in Mathematics and Finance)
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16 pages, 1138 KiB  
Article
Decentralized Data and Artificial Intelligence Orchestration for Transparent and Efficient Small and Medium-Sized Enterprises Trade Financing
by Marjan Alirezaie, William Hoffman, Paria Zabihi, Hossein Rahnama and Alex Pentland
J. Risk Financial Manag. 2024, 17(1), 38; https://doi.org/10.3390/jrfm17010038 - 18 Jan 2024
Viewed by 1592
Abstract
The complexities arising from disparate data sources, conflicting contracts, residency requirements, and the demand for multiple AI models in trade finance supply chains have hindered small and medium-sized enterprises (SMEs) with limited resources from harnessing the benefits of artificial intelligence (AI) capabilities, which [...] Read more.
The complexities arising from disparate data sources, conflicting contracts, residency requirements, and the demand for multiple AI models in trade finance supply chains have hindered small and medium-sized enterprises (SMEs) with limited resources from harnessing the benefits of artificial intelligence (AI) capabilities, which could otherwise enhance their business efficiency and predictability. This paper introduces a decentralized AI orchestration framework that prioritizes transparency and explainability, offering valuable insights to funders, such as banks, and aiding them in overcoming the challenges associated with assessing SMEs’ financial credibility. By utilizing an orchestration technique involving symbolic reasoners, language models, and data-driven predictive tools, the framework empowers funders to make more informed decisions regarding cash flow prediction, finance rate optimization, and ecosystem risk assessment, ultimately facilitating improved access to pre-shipment trade finance for SMEs and enhancing overall supply chain operations. Full article
(This article belongs to the Section Banking and Finance)
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32 pages, 2349 KiB  
Review
Portugal’s Crowdfunding: A Systematic Literature Review
by Bruno Torres, Zélia Serrasqueiro and Márcio Oliveira
J. Risk Financial Manag. 2024, 17(1), 37; https://doi.org/10.3390/jrfm17010037 - 16 Jan 2024
Viewed by 1631
Abstract
This study aims to analyze and classify the evolution of crowdfunding in Portugal from 2014 to 2020, addressing the central question, “What is the evolution of literature on crowdfunding and its research focuses in Portugal?”. Additionally, it investigates, through the sub-question, if crowdfunding [...] Read more.
This study aims to analyze and classify the evolution of crowdfunding in Portugal from 2014 to 2020, addressing the central question, “What is the evolution of literature on crowdfunding and its research focuses in Portugal?”. Additionally, it investigates, through the sub-question, if crowdfunding is perceived as an alternative form of financing. The methodology employs a systematic review, covering four thematic areas: (1) research focus—concepts; (2) research method—quantitative/qualitative identification; (3) geographical area—countries of study; (4) innovation—future research areas. The research begins with Google Scholar, followed by a more specific search of the B-On database, focusing on the Portuguese context. Results highlight the scarcity of research in Portugal, emphasizing the nascency of crowdfunding in the country. The study reveals the importance of investor behavior, influenced by platform security and regulations. Growth in crowdfunding in Portugal is anticipated, attracting multidisciplinary interest but emphasizing the need for more comprehensive studies. Despite limitations in data availability, the study provides valuable insights for entrepreneurs seeking alternative financing in Portugal, demonstrating crowdfunding as an alternative financing method. Integration of crowdfunding with technology, especially blockchain, is suggested as a potentially disruptive system, paving the way for future research and innovations. Full article
(This article belongs to the Section Financial Technology and Innovation)
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19 pages, 1080 KiB  
Article
Human Resource Investment and Early-Stage Career Choice: Evaluating Work–Life Income Paths in 21st-Century Canada
by Gordon Anderson
J. Risk Financial Manag. 2024, 17(1), 36; https://doi.org/10.3390/jrfm17010036 - 16 Jan 2024
Viewed by 1092
Abstract
Of necessity, people make many investment decisions regarding their human resource stock early in their life cycle, long before outcomes predicated upon those choices are realized. Different choices involve very different initial effort and financing outlays and issues arise as to how these [...] Read more.
Of necessity, people make many investment decisions regarding their human resource stock early in their life cycle, long before outcomes predicated upon those choices are realized. Different choices involve very different initial effort and financing outlays and issues arise as to how these alternative paths can be compared and evaluated. Here, techniques for the cardinal comparison of human resource contingent work–life-cycle income value profiles under alternative income valuation function assumptions are outlined and instruments for examining potential ambiguities in comparison developed. All are applied in an analysis of the impact of different levels of investment of human resources in 21st-century Canada. The results, with one notable exception (the choice for boys between a trade or a bachelor-level degree), indicate unambiguous life-cycle benefits to higher levels of human resource stock investment for both girls and boys. Within gender, best–worst relative magnitudes are increasing over time for both genders but more so for girls. Boys are enjoying a universal but diminishing premium over time, reflective of male–female income convergence. Full article
(This article belongs to the Special Issue Subjective Well-Being and Financial Decision Making)
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19 pages, 5686 KiB  
Article
The Financial Market of Indices of Socioeconomic Well-Being
by Thilini V. Mahanama, Abootaleb Shirvani, Svetlozar Rachev and Frank J. Fabozzi
J. Risk Financial Manag. 2024, 17(1), 35; https://doi.org/10.3390/jrfm17010035 - 16 Jan 2024
Viewed by 1370
Abstract
This study discusses how financial economic theory and its quantitative tools can be applied to create socioeconomic indices and develop a financial market for the so-called “socioeconomic well-being indices”. In this study, we quantify socioeconomic well-being by assigning a dollar value to the [...] Read more.
This study discusses how financial economic theory and its quantitative tools can be applied to create socioeconomic indices and develop a financial market for the so-called “socioeconomic well-being indices”. In this study, we quantify socioeconomic well-being by assigning a dollar value to the well-being factors of selected countries; this is analogous to how the Dow 30 encapsulates the financial health of the US market. While environmental, social, and governance (ESG) financial markets address socioeconomic issues, our focus is broader, encompassing national citizens’ well-being. The dollar-denominated socioeconomic indices for each country can be viewed as financial assets that can serve as risky assets for constructing a global index, which, in turn, serves as a “market of well-being socioeconomic index”. This novel global index of well-being, paralleling the Dow Jones Industrial Average (DJIA), provides a comprehensive representation of the world’s socioeconomic status. Through advanced financial econometrics and dynamic asset pricing methodologies, we evaluate the potential for significant downturns in both the socioeconomic well-being indices of individual countries and the aggregate global index. This innovative approach allows us to engineer financial instruments akin to portfolio insurance, such as index puts, designed to hedge against these downturn risks. Our findings propose a financial market model for well-being indices, encouraging the financial industry to adopt and trade these indices as mechanisms to manage and hedge against downturn risks in well-being. Full article
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25 pages, 735 KiB  
Article
Predicting Financial Inclusion in Peru: Application of Machine Learning Algorithms
by Rocío Maehara, Luis Benites, Alvaro Talavera, Alejandro Aybar-Flores and Miguel Muñoz
J. Risk Financial Manag. 2024, 17(1), 34; https://doi.org/10.3390/jrfm17010034 - 15 Jan 2024
Cited by 1 | Viewed by 1688
Abstract
Financial inclusion is a fundamental and multidimensional matter that has acquired importance on the global agenda in recent years. In addition, it is still a source of great interest and concern for lawmakers, international organizations, scholars, and financial institutions worldwide. In that regard, [...] Read more.
Financial inclusion is a fundamental and multidimensional matter that has acquired importance on the global agenda in recent years. In addition, it is still a source of great interest and concern for lawmakers, international organizations, scholars, and financial institutions worldwide. In that regard, this research focuses on Peru to assess the country’s financial inclusion condition, which continues to face significant hurdles in providing financial services to its whole population despite economic improvement. The aim of this article is twofold, based on recent data on demand for financial services and financial culture in the country: (1) to empirically test how machine learning methods, such as decision trees, random forests, artificial neural networks, XGBoost, and support vector machines, can be a valuable complement to standard models (i.e., generalized linear models like logistic regression) for assessing financial inclusion in Peru, and (2) to identify the most influential sociodemographic factors on financial inclusion assessment in the country. The results may catalyze the integration of machine learning techniques into the Peruvian financial system, garnering the interest of finance researchers and policymakers committed to augmenting financial access and utilization among Peruvian consumers. Full article
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25 pages, 1246 KiB  
Article
Stockholder Wealth Maximization during the Troubled Asset Relief Program Period: Is Executive Pay Harmful?
by Eddy Junarsin, Rizky Yusviento Pelawi, Jeffrey Bastanta Pelawi and Jordan Kristanto
J. Risk Financial Manag. 2024, 17(1), 33; https://doi.org/10.3390/jrfm17010033 - 15 Jan 2024
Viewed by 1282
Abstract
This study investigates governance mechanisms and their relation to firm value, i.e., executive compensation restrictions during the regulatory period and their effects on the performance of firms that received Troubled Asset Relief Program (TARP) funds. We employ an event study to investigate the [...] Read more.
This study investigates governance mechanisms and their relation to firm value, i.e., executive compensation restrictions during the regulatory period and their effects on the performance of firms that received Troubled Asset Relief Program (TARP) funds. We employ an event study to investigate the market reactions for TARP recipients, followed by OLS regression to examine the stock return effects of 10 announcements. For comparison, we also employ a multivariate regression model (MVRM) based on a system of equations with seemingly unrelated regressions (SURs). Our evidence shows that changes in firm value have a negative and significant relationship with changes in total compensation for TARP companies that have paid back their debts to the government. However, the relationship is weaker than that for TARP companies that have not paid back the bailout money. Full article
(This article belongs to the Special Issue Corporate Governance in Global Shocks and Risk Management (Volume II))
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18 pages, 1568 KiB  
Article
Statistical Analysis of Minsky’s Financial Instability Hypothesis for the 1945–2023 Era
by Linh N. Phan, Mario G. Beruvides and Víctor G. Tercero-Gómez
J. Risk Financial Manag. 2024, 17(1), 32; https://doi.org/10.3390/jrfm17010032 - 15 Jan 2024
Viewed by 1200
Abstract
Following the 2008 financial crisis, Hyman Minsky’s Financial Instability Hypothesis (FIH) emerged as a prominent financial theory to explain the occurrence of business cycles in the U.S. economy. There have been many theoretical, but few empirical studies dedicated to FIH. The current literature [...] Read more.
Following the 2008 financial crisis, Hyman Minsky’s Financial Instability Hypothesis (FIH) emerged as a prominent financial theory to explain the occurrence of business cycles in the U.S. economy. There have been many theoretical, but few empirical studies dedicated to FIH. The current literature also lacks the statistical support to confirm the necessary conditions leading to financial instability and whether FIH concepts remains applicable in the post 1980s periods. This article presents a statistical methodology to analyze the financial debt ratios related to FIH for the 1945–2023 periods through the use of nonparametric statistical analyses of ordered alternatives and a binomial test for meta-analysis. The results indicated that the conditions leading to financial instability such as debt ratios did increase prior to the onset of a recession as prescribed by FIH during the 1945–1980s era. Furthermore, such conditions also repeated prior to some recessions occurred in the 2001–2023 periods. This study provides statistical support for Minsky’s FIH theory. Full article
(This article belongs to the Section Financial Markets)
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17 pages, 311 KiB  
Article
What Are the Differences in the Area of Profitability and Efficiency When Early and Late Adopters Are Analyzed Regarding the Basel III Leverage Ratio?
by Martin Bolfek, Karmen Prtenjača Mažer and Berislav Bolfek
J. Risk Financial Manag. 2024, 17(1), 31; https://doi.org/10.3390/jrfm17010031 - 14 Jan 2024
Viewed by 1194
Abstract
This research investigates whether banks that adopted new regulatory requirements earlier, such as Basel III, are more profitable, as well as more efficient, than banks that adopted these requirements later. In addition, all 138 banks are based in the G7 member countries, which [...] Read more.
This research investigates whether banks that adopted new regulatory requirements earlier, such as Basel III, are more profitable, as well as more efficient, than banks that adopted these requirements later. In addition, all 138 banks are based in the G7 member countries, which are the most developed countries in the world. Also, banks are categorized into early and late adopters based on Basel III Leverage Ratio performance by using Fitch Connect. Moreover, profitability ratios, such as the Return on Equity, Return on Assets and efficiency ratio Operating Efficiency, were collected from Fitch Connect to analyze if early adopters were more profitable and efficient than the late adopters. Also, STATA is used to analyze descriptive statistics and a univariate analysis of both groups. Furthermore, the finding is that early adopters of the Basel III Leverage Ratio are not the more profitable or efficient firms compared to late adopters as anticipated. In addition, the results of early and late adopters do not differ that much in the analysis regarding profitability and efficiency ratios. This implies that it is not necessarily correct to assume that stricter regulation, such as Basel III, will negatively affect the profitability or efficiency of banks. In addition, these results are useful to regulators and policymakers of the G7 member countries for two reasons. Also, regulators can clearly see how banks are adopting new stricter regulation. Full article
(This article belongs to the Section Banking and Finance)
12 pages, 282 KiB  
Article
Can Investment Views Explain Why People Insure Their Cell Phones But Not Their Homes?—A New Perspective on the Catastrophe Insurance Puzzle
by Annette Hofmann and Peter Zweifel
J. Risk Financial Manag. 2024, 17(1), 30; https://doi.org/10.3390/jrfm17010030 - 12 Jan 2024
Viewed by 1306
Abstract
The consistently missing demand for catastrophe insurance and for coverage of other low-probability–high-consequence risks is often referred to as the catastrophe insurance puzzle. People show reluctance to insure low-probability–high-consequence events, even with some disastrous consequences, yet insure against small high-probability–low-consequence events. There has [...] Read more.
The consistently missing demand for catastrophe insurance and for coverage of other low-probability–high-consequence risks is often referred to as the catastrophe insurance puzzle. People show reluctance to insure low-probability–high-consequence events, even with some disastrous consequences, yet insure against small high-probability–low-consequence events. There has been no convincing explanation of this puzzle to this date. This article points out that the underlying rationale may be that individuals interpret insurance contracts with low payout probability as an investment with negative expected net present value. While premium payments start with the conclusion of the contract, usually there is only one loss payment in the near or far future. Using a simple annuity model with fixed annual premiums and expected indemnity payouts, it is found that even an individual characterized by the degree of risk aversion found in the literature is unlikely to purchase insurance with these characteristics. To alleviate this unfavorable insurance purchase syndrome, combining a low-probability with a high-probability loss insurance contract may be a way to incentivize individuals to purchase catastrophe risk coverage. Full article
11 pages, 1391 KiB  
Article
Russia–Ukraine Conflict, Commodities and Stock Market: A Quantile VAR Analysis
by Alberto Manelli, Roberta Pace and Maria Leone
J. Risk Financial Manag. 2024, 17(1), 29; https://doi.org/10.3390/jrfm17010029 - 11 Jan 2024
Viewed by 3326
Abstract
The Russia–Ukrainian war, which began in 2014 and exploded with the invasion of the Russian army on 24 February 2022, has profoundly destabilized the political, economic and financial balance of Europe and beyond. To the humanitarian emergency associated with every war has been [...] Read more.
The Russia–Ukrainian war, which began in 2014 and exploded with the invasion of the Russian army on 24 February 2022, has profoundly destabilized the political, economic and financial balance of Europe and beyond. To the humanitarian emergency associated with every war has been added the deep crisis generated by the strong energy and food dependence that many European countries, and not only European, have developed over decades on Ukraine (especially for wheat) and Russia (especially for natural gas). The aim of this article is to verify the existence of a link between the performance of the Eurostoxx index and the price of wheat futures and TTF natural gas, from 25 February 2019 to 28 September 2023. Through a quantile VAR analysis, a link is sought between the Eurostoxx 50 index, and wheat and TTF gas futures prices. Furthermore, the analysis intends to understand whether the presence of such relationship only manifested itself following the war events, or whether it was already present in the market. The analysis carried out also shows that the relationship between the stock market and raw material prices was present even before the conflict. Full article
(This article belongs to the Special Issue International Financial Markets and Risk Finance)
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39 pages, 6633 KiB  
Article
Preferential Regime of the Russian Arctic: Tendencies and First Results from Realization of the World’s Largest Special Economic Zone
by Alexander D. Volkov, Natalia A. Roslyakova, Anastasia V. Vasilieva, Alexander O. Averyanov, Sergey V. Tishkov and Ekaterina V. Nalivaychenko
J. Risk Financial Manag. 2024, 17(1), 28; https://doi.org/10.3390/jrfm17010028 - 11 Jan 2024
Viewed by 1435
Abstract
The preferential regime of the Arctic Zone of the Russian Federation is the latest regulatory mechanism designed to overcome negative socio-economic trends in the macroregion. The accumulated factual data over the three-year period of this work have made it possible to make the [...] Read more.
The preferential regime of the Arctic Zone of the Russian Federation is the latest regulatory mechanism designed to overcome negative socio-economic trends in the macroregion. The accumulated factual data over the three-year period of this work have made it possible to make the first reasonable estimates of its effects on the regional economy. The purpose of this study is to investigate the presence of transformational changes in the relationship between employment and investment due to the introduction of the preferential regime for key sectors in the regions that are fully or partially included in the Russian Arctic. The relationship between investment and employment in regional industries was studied using least squares regression analysis using Advanced Grapher 2.2 software. The results show, firstly, significant differences in trends in the implementation of preferential treatment: increased economic specialization of some regions and diversification of the economies of other regions. Secondly, there is a slowdown in the emergence of new projects. Thirdly, the markedly different employment effects across industries and regions of the Russian Arctic, as well as the changing nature of the relationship between investment and employment, require a significant revision of regulatory measures and economic policies to maximize regime effects and achieve sustainable long-term regional development. Full article
(This article belongs to the Special Issue Realizing Economic Diversification from Diverse Economic Perspectives)
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15 pages, 1934 KiB  
Article
The Effect of Technology Readiness on Adopting Artificial Intelligence in Accounting and Auditing in Vietnam
by Nguyen Thi Mai Anh, Le Thi Khanh Hoa, Lai Phuong Thao, Duong Anh Nhi, Nguyen Thanh Long, Nguyen Thanh Truc and Vu Ngoc Xuan
J. Risk Financial Manag. 2024, 17(1), 27; https://doi.org/10.3390/jrfm17010027 - 11 Jan 2024
Cited by 3 | Viewed by 3377
Abstract
This research article focuses on investigating the impact of technology readiness (TR) on the adoption of artificial intelligence (AD) by accountants and auditors, utilizing intermediary factors, such as perceived usefulness (PU) and perceived ease-of-use (PEOU), within companies in Vietnam. Based on 143 survey [...] Read more.
This research article focuses on investigating the impact of technology readiness (TR) on the adoption of artificial intelligence (AD) by accountants and auditors, utilizing intermediary factors, such as perceived usefulness (PU) and perceived ease-of-use (PEOU), within companies in Vietnam. Based on 143 survey responses, the results demonstrate a positive relationship between TR and AI adoption among professionals in the accounting and auditing industry. Additionally, the analysis reveals that the intermediary factors PU and PEOU positively influence AI adoption. TR consistently relates with PU and PEOU in applying artificial intelligence in accounting and auditing. The result of the experiment study is that technology readiness positively impacts the AI adoption of accountants and auditors from companies in Vietnam. Hence, perceived usefulness and ease of use mediate the relationship between technology readiness and the adoption of AI technologies by workers in the accounting and auditing industry. This study contributes not only academically by enriching scientific knowledge on AI adoption but also holds practical significance by suggesting training and development policies from a business perspective in the future. Full article
(This article belongs to the Section Business and Entrepreneurship)
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18 pages, 674 KiB  
Article
Tax Tightrope: The Perils of Foreign Ownership, Executive Incentives and Transfer Pricing in Indonesian Banking
by Vidiyanna Rizal Putri, Nor Balkish Zakaria, Jamaliah Said, Farha Ghapar and Rizqa Anita
J. Risk Financial Manag. 2024, 17(1), 26; https://doi.org/10.3390/jrfm17010026 - 11 Jan 2024
Viewed by 1543
Abstract
Despite being a crucial source of funding for the government, tax revenue collection in Indonesia has yet to reach its ideal and satisfying level for the economy. Therefore, this study explores the impact of executive incentives, foreign ownership, and transfer pricing on tax [...] Read more.
Despite being a crucial source of funding for the government, tax revenue collection in Indonesia has yet to reach its ideal and satisfying level for the economy. Therefore, this study explores the impact of executive incentives, foreign ownership, and transfer pricing on tax avoidance. The conventional banks of Indonesia that were listed on the Indonesia Stock Exchange (IDX) between 2015 and 2019 are the subject of this study. This study employed a purposive selection technique, with a final sample of 17 banks chosen after screening to ensure they met the requirements of having foreign ownership and not having suffered losses during the study year. The results of this study show that while CEO incentives harm tax avoidance, foreign ownership has a beneficial effect. Furthermore, tax avoidance is not significantly impacted by transfer pricing. The findings of this investigation open the door for accountable authorities in the economy. Full article
(This article belongs to the Special Issue Financial Reporting, Managing Risk and Banking)
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23 pages, 1184 KiB  
Article
Exploratory Dividend Optimization with Entropy Regularization
by Sang Hu and Zihan Zhou
J. Risk Financial Manag. 2024, 17(1), 25; https://doi.org/10.3390/jrfm17010025 - 10 Jan 2024
Viewed by 1199
Abstract
This study investigates the dividend optimization problem in the entropy regularization framework in the continuous-time reinforcement learning setting. The exploratory HJB is established, and the optimal exploratory dividend policy is a truncated exponential distribution. We show that, for suitable choices of the maximal [...] Read more.
This study investigates the dividend optimization problem in the entropy regularization framework in the continuous-time reinforcement learning setting. The exploratory HJB is established, and the optimal exploratory dividend policy is a truncated exponential distribution. We show that, for suitable choices of the maximal dividend-paying rate and the temperature parameter, the value function of the exploratory dividend optimization problem can be significantly different from the value function in the classical dividend optimization problem. In particular, the value function of the exploratory dividend optimization problem can be classified into three cases based on its monotonicity. Additionally, numerical examples are presented to show the effect of the temperature parameter on the solution. Our results suggest that insurance companies can adopt new exploratory dividend payout strategies in unknown market environments. Full article
(This article belongs to the Section Mathematics and Finance)
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3 pages, 186 KiB  
Editorial
Special Issue: Advances in International Management Research
by Juan Manuel Ramon Jeronimo and Raquel Flórez López
J. Risk Financial Manag. 2024, 17(1), 24; https://doi.org/10.3390/jrfm17010024 - 9 Jan 2024
Viewed by 1189
Abstract
Departing from barriers faced by firms in their international entrepreneurship strategies, the establishment of collaborative networks has proven to be a facilitating mechanism of these processes, having in recent years overcome the focus on the supply chain (i [...] Full article
(This article belongs to the Special Issue Advances in International Management Research)
23 pages, 353 KiB  
Article
Exploring the Affiliation of Corporate Social Responsibility, Innovation Performance, and CEO Gender Diversity: Evidence from the U.S.
by Abeer Hassan, Sehrish Atif and Jiayi Zhang
J. Risk Financial Manag. 2024, 17(1), 23; https://doi.org/10.3390/jrfm17010023 - 9 Jan 2024
Cited by 1 | Viewed by 1428
Abstract
This paper examines the relationship between CSR activities and innovation performance with the moderating effect of CEO gender in the U.S. market. This paper provides evidence about the relationship between CSR and innovation performance from the resources-based views by replacing the common measurements [...] Read more.
This paper examines the relationship between CSR activities and innovation performance with the moderating effect of CEO gender in the U.S. market. This paper provides evidence about the relationship between CSR and innovation performance from the resources-based views by replacing the common measurements of innovation and R&D expenditures with the number of patents and citations to better measure the innovation quality rather than quantity. The current paper verifies the relationship between CSR and innovation in S&P 500 U.S. listed companies and fills the gaps in the current research on the moderating effect of CEO gender on this relationship. The paper analyzed the panel data for 1204 observations from various databases (Compustat, KLD, U.S. patents by words and Excompustat) from 2014 to 2018. Specifically, the number of patents and citations is set as the measurement of the explanatory variable; innovation performance and CSR scores from KLD are treated as the dependent variable and the proportion of female directors in the top management as the method of moderating indicator. The result in this paper shows a positive correlation between CSR and innovation performance in the U.S. At the same time, the moderating effect of CEO gender has an insignificant impact on this relationship. The findings suggest that the female CEOs do not have a positive relationship with corporate innovation. These results will help companies realize the importance of CSR activities and how to balance gender diversity in their strategies. Full article
(This article belongs to the Special Issue Durable, Inclusive, Sustainable Economic Growth and Challenge)
16 pages, 883 KiB  
Article
An Investigation into the Spatial Distribution of British Housing Market Activity
by David Paul Gray
J. Risk Financial Manag. 2024, 17(1), 22; https://doi.org/10.3390/jrfm17010022 - 6 Jan 2024
Viewed by 1270
Abstract
This paper sets out to consider how a simple and easy-to-estimate power-law exponent can be used by policymakers to assess changes in economic inequalities, where the data can have a long tail—common in analyses of economic disparities—yet does not necessarily deviate from log-normality. [...] Read more.
This paper sets out to consider how a simple and easy-to-estimate power-law exponent can be used by policymakers to assess changes in economic inequalities, where the data can have a long tail—common in analyses of economic disparities—yet does not necessarily deviate from log-normality. The paper finds that the time paths of the coefficient of variation and the exponents from Lavalette’s function convey similar inferences about inequalities when analysing the value of house purchases over the period 2001–2022 for England and Wales. The house price distribution ‘steepens’ in the central period, mostly covering the post-financial-crisis era. The distribution of districts’ expenditure on house purchases ‘steepens’ more quickly. This, in part, is related to the loose monetary policy associated with QE driving a wedge between London and the rest of the nation. As prices can rise whilst transactions decline, it may be better for policymakers to focus on the value of house purchases rather than house prices when seeking markers of changes in housing market activity. Full article
(This article belongs to the Special Issue Featured Papers in Mathematics and Finance)
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29 pages, 2595 KiB  
Article
Is Foreign Direct Investment Resilient Post the COVID-19 Pandemic? The Case of a Subnational Economy
by Roxana Wright and Chen Wu
J. Risk Financial Manag. 2024, 17(1), 21; https://doi.org/10.3390/jrfm17010021 - 5 Jan 2024
Viewed by 1659
Abstract
The disruption brought about by the COVID-19 pandemic has been unprecedented in its global reach and unique impacts. While the literature has addressed the disruption effect on FDI at the country level, we provide a unique dive into the presence and development of [...] Read more.
The disruption brought about by the COVID-19 pandemic has been unprecedented in its global reach and unique impacts. While the literature has addressed the disruption effect on FDI at the country level, we provide a unique dive into the presence and development of FDI at a subnational location. We use detailed data on spatial and industrial distributions of FDI in the U.S. state of New Hampshire and find support for all our hypotheses related to post-disruption recovery and resilience. Given the varied impact of the pandemic on FDI across locations, and the heterogeneity in local conditions, we contend that the subnational recovery depends on the impact of the disruption and happens at varying levels and timelines. While the literature documented that foreign businesses choose to embed in their local host environments, few studies have considered empirically how the level of local integration affects FDI recovery after disruption. We propose that subnational locations with a high level of integration maintain relative strength in FDI post-disruption. The COVID-19 pandemic disruption presents an opportunity to evaluate FDI resilience. We postulate that existing FDI and spatial agglomerations of FDI-related activities impact the post-disruption resilience of FDI at a subnational location. The analysis concludes on actionable insights for researchers and practitioners regarding how to navigate the FDI inflows and activities at their specific location. Full article
(This article belongs to the Special Issue Foreign Direct Investment & International Trade)
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27 pages, 590 KiB  
Article
Board Gender Diversity and Firm Performance: Recent Evidence from Japan
by Kangyi Wang, Jing Ma, Chunxiao Xue and Jianing Zhang
J. Risk Financial Manag. 2024, 17(1), 20; https://doi.org/10.3390/jrfm17010020 - 5 Jan 2024
Cited by 1 | Viewed by 2957
Abstract
Gender diversity is increasingly recognized as a critical element in corporate management. However, existing research on its impact on firm performance demonstrates inconsistency in a global context. This study employs 1990 publicly listed Japanese companies from 2006 to 2023 and examines the effect [...] Read more.
Gender diversity is increasingly recognized as a critical element in corporate management. However, existing research on its impact on firm performance demonstrates inconsistency in a global context. This study employs 1990 publicly listed Japanese companies from 2006 to 2023 and examines the effect of board gender diversity on firm performance in Japan. Findings from the fixed-effects regression model revealed a significant negative impact of board gender diversity on firm performance. This adverse correlation is more pronounced in smaller firms, those with greater leverage and reduced institutional ownership, and regulated and consumer-focused industries, particularly pre-COVID-19. The detrimental impact of board gender diversity on firm performance is transmitted via corporate social responsibility and firm innovation instead of board independence or CEO duality. Notably, the two-stage least squares estimation addresses potential endogeneity, employing an equal opportunity policy as an instrumental variable. Moreover, the robustness of our results is affirmed via the substitution of return on equity for return on assets as an indicator of firm performance. Lastly, our analysis does not reveal a U-shaped nonlinear relationship between board gender diversity and corporate performance. As Japan progressively promotes women’s participation in corporate governance, this research bears significant implications for corporate leaders, investors, and policymakers in Japan. Full article
(This article belongs to the Special Issue Financial Data Analytics and Statistical Learning)
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28 pages, 5884 KiB  
Article
Time-Varying Bidirectional Causal Relationships between Transaction Fees and Economic Activity of Subsystems Utilizing the Ethereum Blockchain Network
by Lennart Ante and Aman Saggu
J. Risk Financial Manag. 2024, 17(1), 19; https://doi.org/10.3390/jrfm17010019 - 4 Jan 2024
Cited by 2 | Viewed by 1945
Abstract
The Ethereum blockchain network enables transaction processing and smart-contract execution through levies of transaction fees, commonly known as gas fees. This framework mediates economic participation via a market-based mechanism for gas fees, permitting users to offer higher gas fees to expedite processing. Historically, [...] Read more.
The Ethereum blockchain network enables transaction processing and smart-contract execution through levies of transaction fees, commonly known as gas fees. This framework mediates economic participation via a market-based mechanism for gas fees, permitting users to offer higher gas fees to expedite processing. Historically, the ensuing gas fee volatility led to critical disequilibria between supply and demand for block space, presenting stakeholder challenges. This study examines the dynamic causal interplay between transaction fees and economic subsystems leveraging the network. By utilizing data related to unique active wallets and transaction volume of each subsystem and applying time-varying Granger causality analysis, we reveal temporal heterogeneity in causal relationships between economic activity and transaction fees across all subsystems. This includes (a) a bidirectional causal feedback loop between cross-blockchain bridge user activity and transaction fees, which diminishes over time, potentially signaling user migration; (b) a bidirectional relationship between centralized cryptocurrency exchange deposit and withdrawal transaction volume and fees, indicative of increased competition for block space; (c) decentralized exchange volumes causally influence fees, while fees causally influence user activity, although this relationship is weakening, potentially due to the diminished significance of decentralized finance; (d) intermittent causal relationships with maximal extractable value bots; (e) fees causally influence non-fungible token transaction volumes; and (f) a highly significant and growing causal influence of transaction fees on stablecoin activity and transaction volumes highlight its prominence. These results inform strategic considerations for stakeholders to more effectively plan, utilize, and advocate for economic activities on Ethereum, enhancing the understanding and optimization of within the rapidly evolving economy. Full article
(This article belongs to the Special Issue Blockchain in Financial Markets)
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16 pages, 516 KiB  
Article
How Does Age Moderate the Determinants of Crowdfunding Adoption by SMEs’s: Evidences from Morocco?
by Soukaina Laaouina, Sara El Aoufi and Mimoun Benali
J. Risk Financial Manag. 2024, 17(1), 18; https://doi.org/10.3390/jrfm17010018 - 4 Jan 2024
Cited by 2 | Viewed by 2298
Abstract
In recent years, crowdfunding has emerged as a new fundraising technique for start-up ventures; however, Moroccan small and medium-sized businesses are still wary of this novel source of funding. This is confirmed by the low adoption rate of this financial innovation as well [...] Read more.
In recent years, crowdfunding has emerged as a new fundraising technique for start-up ventures; however, Moroccan small and medium-sized businesses are still wary of this novel source of funding. This is confirmed by the low adoption rate of this financial innovation as well as the limited number of crowdfunding platforms in Morocco. This study aims to identify the impact of performance expectancy (PE), effort expectancy (EE), social influence (SI), facilitating conditions (FC), and perceived risk (PR) on SMEs’s intention to use crowdfunding platforms using a research model based on the Unified Theory of Acceptance and Use of Technology (UTAUT). Empirical data were collected from 241 respondents through a survey, and structural equation modelling was used to analyze the findings. The results show that performance expectancy (PE), effort expectancy (EE), and facilitating conditions (FE) affect SMEs’s intentions to use crowdfunding. However, social influences (SI) and perceived risk (PR) were not found to be significant determinants. Regarding the moderating effect of age, our study has highlighted that this variable has moderated the relationship between the three independents variables: performance expectancy, facilitating conditions and perceived risk. Finally, this paper offers recommendations for how to increase SMEs’s intention to use crowdfunding platforms. Full article
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21 pages, 369 KiB  
Article
The Impact of Adherence to Sustainable Development, as Defined by the Global Reporting Initiative (GRI-G4), on the Financial Performance Indicators of Banks: A Comparative Study of the UAE and Iraq
by Ali Mohammed Abbas AL-Janabi, Mohammad Javad Saei and Reza Hesarzadeh
J. Risk Financial Manag. 2024, 17(1), 17; https://doi.org/10.3390/jrfm17010017 - 4 Jan 2024
Viewed by 1818
Abstract
Based on stakeholder theory, disclosing sustainable development information is fundamental to achieving a competitive advantage and improving a company’s financial performance. There has been a notable absence of studies examining the degree of adherence to sustainability based on the latest indicators from the [...] Read more.
Based on stakeholder theory, disclosing sustainable development information is fundamental to achieving a competitive advantage and improving a company’s financial performance. There has been a notable absence of studies examining the degree of adherence to sustainability based on the latest indicators from the Global Reporting Initiative (GRI-G4) Guidelines and its impact on financial performance, specifically within the banking sector in emerging Arab economies. Consequently, this study explores the correlation between the degree of adherence to sustainability and its dimensions (economic, social, and environmental) as defined by GRI-G4 and financial performance within a sample of banks in Arab nations (the United Arab Emirates “UAE” and Iraq) from 2019 to 2021. The research hypotheses were examined using a multiple linear regression model. The empirical findings reveal that, on average, UAE banks exhibit a sustainability adherence level of 57% according to GRI-G4, while their Iraqi counterparts demonstrate a significantly lower adherence of 17%. Notably, the degree of sustainability adherence substantially impacts the financial performance of banks in both countries. Furthermore, the results also indicated that the economic dimension of sustainability has a positive impact, while the environmental dimension has a negative impact, and in contrast, the social dimension does not significantly affect the financial performance of banks in both countries. This study provides insights for banks and policymakers to enhance their sustainability practices and elevate the level of disclosure, especially within Arab nations. This, in turn, can lead to greater compliance with sustainability standards, improved transparency, and reduced information asymmetry. Full article
14 pages, 756 KiB  
Article
Firm Performance of Saudi Manufacturers: Does the Management of Cash Conversion Cycle Components Matter?
by Amel Kouaib and Mohammed Ibrahim Bu Haya
J. Risk Financial Manag. 2024, 17(1), 16; https://doi.org/10.3390/jrfm17010016 - 1 Jan 2024
Cited by 1 | Viewed by 1788
Abstract
The purpose of this study is to examine the liquidity management of a corporation. It aims to examine how managing cash conversion cycle components affects corporate performance. A dataset of 88 firms listed on the Saudi Stock Exchange between 2018 and 2022 was [...] Read more.
The purpose of this study is to examine the liquidity management of a corporation. It aims to examine how managing cash conversion cycle components affects corporate performance. A dataset of 88 firms listed on the Saudi Stock Exchange between 2018 and 2022 was analyzed using both pooled OLS and fixed effects regression models. A sample of 84 firms listed on the Saudi Stock Exchange for the period from 2018 to 2022 was used. Both the pooled OLS and the fixed effects regression models were used. This study’s key findings are: (1) there is a strong negative correlation between the time it takes to convert inventory into sales (inventory conversion period) and firm performance. If inventory does not sell quickly, profit tends to be lower. (2) Firm performance demonstrates a strong inverse relationship with the duration it takes for companies to collect cash from customers, commonly known as the accounts receivable collection period. A short accounts receivable collection period may become collectible and increase a business’s profitability and performance. (3) There is a highly significant negative link between the time taken to pay creditors (days payable outstanding) and firm performance. A short average payment period, indicated by a low payment period, suggests that the firm is promptly settling its bills and obligations without any delays. Full article
(This article belongs to the Special Issue Business Performance)
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18 pages, 2316 KiB  
Article
Potential Integration of Metaverse, Non-Fungible Tokens and Sentiment Analysis in Quantitative Tourism Economic Analysis
by Sergej Gričar, Violeta Šugar, Tea Baldigara and Raffaella Folgieri
J. Risk Financial Manag. 2024, 17(1), 15; https://doi.org/10.3390/jrfm17010015 - 27 Dec 2023
Viewed by 1606
Abstract
With the emergence of the metaverse, countries’ digital efforts to create tourism opportunities have given rise to the possibility of capitalising on digital content which, along with physical tourism experiences, can generate further income and enhance a country’s reputation. Non-fungible tokens (NFTs), a [...] Read more.
With the emergence of the metaverse, countries’ digital efforts to create tourism opportunities have given rise to the possibility of capitalising on digital content which, along with physical tourism experiences, can generate further income and enhance a country’s reputation. Non-fungible tokens (NFTs), a unique application of blockchain technology, offer an enabling technology in several sectors, including tourism. Therefore, this study aims to explore the official tourism websites of Croatia and Slovenia and analyse current NFT applications in tourism economics. The methodology focuses explicitly on sentiment analysis, blockchain and machine learning. The paper introduces various applications currently in place, including Slovenia’s “I Feel Nft” project. The research shows that the main benefits of using NFT and sentiment analysis in the tourism economy are the promotion and presentation of major tourist destinations, exhibitions, works of art, and companies’ products in tokens, digital content and souvenirs. The adoption of sentiment analysis and NFTs in the tourism economy is still open to proposals for implementing public quantitative data metrics. Therefore, the scientific contribution of this research is essential in terms of operational recommendations and defining metrics for measuring the effectiveness of those methodologies and their applications in the tourism economy. On top of that, the practical contribution lies in monitoring the influx of tourists, and highlighting their increase over time and the significance of new technology in time series tourism research. Full article
(This article belongs to the Section Economics and Finance)
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23 pages, 284 KiB  
Article
Compliance with the Requirements of the Greek Legislation for Reporting on ESG Issues: The Case of the Paper Processing Sector
by Evangelos Soras and Apostolos G. Christopoulos
J. Risk Financial Manag. 2024, 17(1), 14; https://doi.org/10.3390/jrfm17010014 - 27 Dec 2023
Viewed by 1438
Abstract
We examined the extent to which companies in the paper processing sector, operating in printing, packaging, labeling, and paper bagging, comply with the requirements of Greek legislation for reporting information on ESG issues. The overall average compliance rating of the sector, which is [...] Read more.
We examined the extent to which companies in the paper processing sector, operating in printing, packaging, labeling, and paper bagging, comply with the requirements of Greek legislation for reporting information on ESG issues. The overall average compliance rating of the sector, which is 45.86% for the year 2021 and 46.20% for the year 2020, is below 50% (baseline), which means that the sector should improve in reporting on ESG issues. It should also be noted that there has been a deterioration in the average compliance rating between the two years. There is a very high statistically significant correlation between the compliance rating average and the average total assets (r2 = 0.897) and the average number of employees (r2 = 0.922), a high correlation, though not statistically significant, between the compliance rating average and the average results (r2 = 0.648), and a moderate statistically significant correlation between the compliance rating average and the average revenues (r2 = 0.570). There is an obvious positive relationship between holding ISO certificates and external auditor involvement and the average compliance rating of companies; these are both qualitative features favorable to effective governance. The companies that are active in paper bagging and cardboard box (food packaging) usage have also developed a greater environmentally friendly culture, which results in a higher average compliance rating in comparison with the other two activities of the sector. The companies in the region of Attica have a higher compliance rating than the companies in other regions because they operate in an environment that is much more polluted than the rest of Greece, due to its high concentration of people and companies; thus, they have become more sensitive to ESG issues. The companies that have been operating longer have also achieved a higher average compliance rating because younger companies are trying to gain market share and are not devoting their time and resources to ESG issues. Full article
(This article belongs to the Special Issue Global Trends and Challenges in Economics and Finance)
19 pages, 320 KiB  
Article
Unveiling the Nexus: Exploring the Impact of Corporate Governance on the Financial Performance of Acquiring Companies in the Indian Context
by Debi Prasad Satapathy, Tarun Kumar Soni and Pramod Kumar Patjoshi
J. Risk Financial Manag. 2024, 17(1), 13; https://doi.org/10.3390/jrfm17010013 - 27 Dec 2023
Viewed by 1437
Abstract
This study investigates the effect of corporate governance characteristics on the financial performance of 124 listed Indian companies that have undergone mergers and acquisitions between 2014 and 2020. It employs several performance measures, such as short-term capital market performance, long-term capital market performance, [...] Read more.
This study investigates the effect of corporate governance characteristics on the financial performance of 124 listed Indian companies that have undergone mergers and acquisitions between 2014 and 2020. It employs several performance measures, such as short-term capital market performance, long-term capital market performance, accounting- and market-based measures, and firm-level control factors. The study finds board size to be a positive and significant factor affecting short-term market performance. Furthermore, it also documents weak linkages with other corporate governance variables, such as board independence and CEO duality. Regarding control variables, leverage, company age, price-to-book ratio, and research and development expenses significantly impact acquiring companies’ financial returns. The findings add to our understanding of corporate governance’s impact on performance in cases such as mergers and acquisitions. Full article
22 pages, 2274 KiB  
Article
Unveiling the Influencing Factors of Cryptocurrency Return Volatility
by Andromahi Kufo, Ardit Gjeci and Artemisa Pilkati
J. Risk Financial Manag. 2024, 17(1), 12; https://doi.org/10.3390/jrfm17010012 - 25 Dec 2023
Cited by 1 | Viewed by 2522
Abstract
The blossoming of cryptocurrencies during the last decade has largely influenced both the financial and the technological world. Bitcoin emerged on the edge of the financial crisis in 2008, signaling the very beginning of a financial and technological innovation, which in continuance would [...] Read more.
The blossoming of cryptocurrencies during the last decade has largely influenced both the financial and the technological world. Bitcoin emerged on the edge of the financial crisis in 2008, signaling the very beginning of a financial and technological innovation, which in continuance would eventually create a lot of questions and debate previously unforeseeable. This paper aims to explore the impact of factors such as trading volume, information demand, stock returns, and exchange rates on the volatility of returns for decentralized and unbacked cryptocurrencies from 2016 to 2022 by employing the GARCH model. Based on each coin’s innate functional characteristics and market performance quantified by their respective market capitalization, the selection included Bitcoin, Ether, and XRP as representative crypto coins for the category of decentralized and unbacked cryptocurrencies. The implementation of correlation analysis and the use of the GARCH model on influencing factors for each coin revealed that decentralized and unbacked cryptocurrencies are positively related to trading volume, information demand, and exchange rates while being indifferent to a certain extent to the stock market returns of the world stock index MSCI ACWI. The results of this study provide further insight into the behavior of cryptocurrency return volatility in the new, ever-changing, and highly unpredictable crypto market as well as aid investors in their decision-making process concerning portfolio optimization. Full article
(This article belongs to the Special Issue Emerging Issues in Economics, Finance and Business)
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