Journal of Risk and Financial Management

19 pages, 443 KiB

Open AccessArticle

The Impact of Audit Committee Oversight on Investor Rationality, Price Expectations, Human Capital, and Research and Development Expense

by Rebecca Abraham, Venkata Mrudula Bhimavarapu and Hani El-Chaarani

J. Risk Financial Manag. 2025, 18(6), 321; https://doi.org/10.3390/jrfm18060321 (registering DOI) - 11 Jun 2025

Abstract

Audit committees monitor the actions of managers as they pursue the goal of shareholder wealth maximization. The purpose of this study is to measure the impact of audit committee oversight on novel aspects of firm performance, including investor rationality, price expectations, human capital, [...] Read more.

Audit committees monitor the actions of managers as they pursue the goal of shareholder wealth maximization. The purpose of this study is to measure the impact of audit committee oversight on novel aspects of firm performance, including investor rationality, price expectations, human capital, and research and development expenses. It extends the literature to non-financial outcomes of audit committee oversight. The literature thus far has focused on the financial effects of audit committee oversight, such as return on assets, return on equity, risk, debt capacity, and firm value. Data was collected from 588 publicly traded firms in the U.S. pharmaceutical industry and energy industry from 2010 to 2022. Audit oversight was measured by the novel measurement of the frequency of the term ‘audit committee’ in annual reports and Form 10Ks from the SeekEdgar database. COMPUSTAT provided the remainder of the data. Panel Data fixed-effects models were used to analyze the data. Audit committee oversight significantly increased investor rationality, significantly reduced price expectations, and significantly increased human capital investment. An inverted U-shaped relationship occurred for audit committee oversight and research and development expenses, with audit oversight first increasing research and development expenses, then decreasing them. The study makes several contributions. First, the study uses a novel measure of audit oversight. Second, the study predicts the effect of audit committee oversight on unexplored non-financial measures, such as human capital and research and development expense. Third, the study offers a current test of the Miller model, as the last tests were performed over 20 years ago. Fourth, the study examines the impact of auditing on market measures that have not been explored in the literature, such as investor rationality and short selling. Full article

(This article belongs to the Special Issue Emerging Trends and Innovations in Corporate Finance and Governance)

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15 pages, 1092 KiB

Open AccessReview

How Do Green Banking Practices Impact Banks’ Profitability? A Meta-Analysis

by Martin Kamau Muchiri, Maria Fekete-Farkas and Szilvia Kesmarki Erdei-Gally

J. Risk Financial Manag. 2025, 18(6), 320; https://doi.org/10.3390/jrfm18060320 (registering DOI) - 11 Jun 2025

Abstract

In light of the growing global emphasis on sustainability, understanding the nexus between green banking practices and banks’ profitability is both essential and timely. The main aim of this study was to conduct a meta-analysis examining this link. Based on 28 proxy relationships [...] Read more.

In light of the growing global emphasis on sustainability, understanding the nexus between green banking practices and banks’ profitability is both essential and timely. The main aim of this study was to conduct a meta-analysis examining this link. Based on 28 proxy relationships between green banking and green financing in terms of bank profitability, a random-effects meta-analytic model was used to synthesize the corresponding effect sizes. An overall positive effect size was established, but it was statistically insignificant, implying that green banking activities do not consistently translate into financial benefits. However, this study established the considerable heterogeneity of the results due to the application of diverse methodologies, the diverse geographical contexts, and the different green financing proxies used. It is strongly recommended that banks and policymakers adopt tailor-made, evidence-based green financing strategies to align their sustainability initiatives with market realities, regulatory frameworks, and institutional capacities. Such a strategy will promote the pursuit of both financial performance and environmental responsibility. Full article

(This article belongs to the Special Issue Banking Practices, Climate Risk and Financial Stability)

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20 pages, 1025 KiB

Open AccessArticle

Money Laundering in Global Economies: How Economic Openness and Governance Affect Money Laundering in the EU, G20, BRICS, and CIVETS

by Anas AlQudah, Mahmoud Hailat and Dana Setabouha

J. Risk Financial Manag. 2025, 18(6), 319; https://doi.org/10.3390/jrfm18060319 (registering DOI) - 11 Jun 2025

Abstract

Purpose—This study examines the interaction of economic openness, governance, and money laundering. The paper’s main objective is to analyze how trade openness, foreign direct investment, and anti-corruption measures influence the risk of money laundering in specific economic blocs. Design/methodology/approach—This study analyzes these economic [...] Read more.

Purpose—This study examines the interaction of economic openness, governance, and money laundering. The paper’s main objective is to analyze how trade openness, foreign direct investment, and anti-corruption measures influence the risk of money laundering in specific economic blocs. Design/methodology/approach—This study analyzes these economic blocs (EU, G20, BRICS, and CIVETS) using annual data from the Basel Institute on Governance and World Bank statistics for 2012–2021. A panel-corrected standard errors (PCSE) estimator is employed to examine the relationships among the variables, accounting for cross-sectional dependence and ensuring robust parameter estimation. The corruption control index is a proxy for governance effectiveness, though it does not directly measure regulatory strength. Future research should incorporate more specific variables to evaluate the regulatory impact. Findings—This study reveals significant variations in money laundering risks by a country’s income category and economic bloc influenced by economic openness and governance structures. Economic growth and foreign direct investment (FDI) inflows exhibit contrasting effects on money-laundering risks; they tend to exacerbate risks in middle-income countries, while high-income nations demonstrated a lower risk of money laundering, likely due to more robust governance structures. Trade openness and anti-corruption measures generally reduced risks in wealthier countries, highlighting the importance of strong governance frameworks. These insights suggest that anti-money-laundering policies should be tailored to fit different regions’ unique economic and institutional contexts for enhanced effectiveness. Originality—This study employs a structured approach to analyzing a decade of panel data from key economic blocs, providing insights into the intricate relationships between governance, economic openness, and money laundering risks. Bridging the gap between theoretical research and practical, actionable strategies serves as a valuable resource for improving the effectiveness of anti-money-laundering (AML) measures on a global scale. Full article

(This article belongs to the Section Economics and Finance)

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17 pages, 879 KiB

Open AccessArticle

The Impact of Self-Sufficiency in Basic Raw Materials of Metallurgical Companies on Required Return and Capitalization: The Case of Russia

by Sergey Galevskiy, Tatyana Ponomarenko and Pavel Tsiglianu

J. Risk Financial Manag. 2025, 18(6), 318; https://doi.org/10.3390/jrfm18060318 - 10 Jun 2025

Abstract

This article considers the impact of self-sufficiency in basic raw materials on the level of systematic risk, required return and capitalization on the example of Russian ferrous metallurgy companies. The methods applied include classical approaches to determining beta coefficient, required return and capitalization, [...] Read more.

This article considers the impact of self-sufficiency in basic raw materials on the level of systematic risk, required return and capitalization on the example of Russian ferrous metallurgy companies. The methods applied include classical approaches to determining beta coefficient, required return and capitalization, as well as correlation–regression analysis performed in the Python programming language (version 3.0, libraries: Numpy, Pandas, Matplotlib, Datetime, Statistics, Scipy, Bambi). The study revealed an inverse relationship between the self-sufficiency of ferrous metallurgy companies in iron ore and coking coal and their systematic risk. That was confirmed by the developed regression model. The presence of this dependence directly indicates the need to consider self-sufficiency when assessing a company’s required return and capitalization. The acquisition of the Tikhov coal mine by PJSC Magnitogorsk Iron and Steel Works (MMK) led to an increase in capitalization not only due to additional profit from the new asset, but also due to a decrease in the required return caused by the growth of the company’s self-sufficiency in coking coal. The proposed approach contributes to a more accurate assessment of the company’s capitalization and creates additional incentives for vertical integration transactions. Full article

(This article belongs to the Special Issue Corporate Finance: Financial Management of the Firm)

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26 pages, 1093 KiB

Open AccessArticle

Qualitatively Pre-Testing a Tailored Financial Literacy Measurement Instrument for Professional Athletes

by Jaco Moolman and Christina Cornelia Shuttleworth

J. Risk Financial Manag. 2025, 18(6), 317; https://doi.org/10.3390/jrfm18060317 - 10 Jun 2025

Abstract

The aim of this study was to qualitatively pre-test a research instrument to assess the financial literacy skills of professional athletes who compete in a team sport environment. Questions were developed based on a review of the current literature and an analysis of [...] Read more.

The aim of this study was to qualitatively pre-test a research instrument to assess the financial literacy skills of professional athletes who compete in a team sport environment. Questions were developed based on a review of the current literature and an analysis of qualitative data from twelve structured expert interviews, selected using actor–network theory and purposive sampling. The findings showed how qualitative data can be considered and enumerated to guide the development of 28 validated questions to assess financial literacy within a specific group. This study helps to fill a gap in the literature since there is a paucity of qualitatively mediated research that focuses on specific target groups in the field of financial literacy. This research instrument could be of value to professional athletes, sports club management, players’ associations, educators, researchers, sports agents, and advisors by providing them with a greater understanding of their clients’ financial literacy skills and financial needs. Full article

(This article belongs to the Special Issue Behavioral Finance and Financial Management)

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18 pages, 819 KiB

Open AccessArticle

Spillovers Among the Assets of the Fourth Industrial Revolution and the Role of Climate Uncertainty

by Mohammed Alhashim, Nadia Belkhir and Nader Naifar

J. Risk Financial Manag. 2025, 18(6), 316; https://doi.org/10.3390/jrfm18060316 - 9 Jun 2025

Abstract

This research investigates the spillover effects between assets of the Fourth Industrial Revolution (4IR), focusing on the role of climate policy uncertainty in shaping these interactions. Using a time-varying parameter vector autoregressive (TVP-VAR) approach and a joint connectedness method, the analysis incorporates five [...] Read more.

This research investigates the spillover effects between assets of the Fourth Industrial Revolution (4IR), focusing on the role of climate policy uncertainty in shaping these interactions. Using a time-varying parameter vector autoregressive (TVP-VAR) approach and a joint connectedness method, the analysis incorporates five global indices representing key 4IR domains: the internet, cybersecurity, artificial intelligence and robotics, fintech, and blockchain. The findings reveal significant interdependencies among 4IR assets and evaluate the effect of risk factors, including climate policy uncertainty, as a critical driver of the determinants of returns. The results indicate the growing impact of climate-related risks on the structure of connectedness between 4IR assets, highlighting their implications for portfolio diversification and risk management. These insights are vital for investors and policymakers navigating the intersection of technological innovation and environmental challenges in a rapidly changing global economy. Full article

(This article belongs to the Special Issue Innovative Approaches to Managing Finance Risks in the FinTech Era)

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24 pages, 315 KiB

Open AccessArticle

Effect of ESG Financial Materiality on Financial Performance of Firms: Does ESG Transparency Matter?

by Adejayan Adeola Oluwakemi and Doorasamy Mishelle

J. Risk Financial Manag. 2025, 18(6), 315; https://doi.org/10.3390/jrfm18060315 - 9 Jun 2025

Abstract

Transparency in ESG financial materiality disclosure by corporations is now in doubt due to the inconsistent ESG framework that governs ESG disclosures, particularly in developing nations like South Africa. This is evident in the financial performance of banks and manufacturing firms as a [...] Read more.

Transparency in ESG financial materiality disclosure by corporations is now in doubt due to the inconsistent ESG framework that governs ESG disclosures, particularly in developing nations like South Africa. This is evident in the financial performance of banks and manufacturing firms as a result of the higher rate of susceptibility to ESG issues. Hence, this study empirically investigated the effect of ESG financial materiality disclosure on the financial performance of banks and manufacturing firms in South Africa from 2015 to 2024. Also, the moderating role of ESG transparency on the relationship between ESG financial materiality disclosure and financial performance was investigated. Descriptive analysis, a correlation matrix, and panel regression analysis were employed for analysis purposes. The financial metrics include ROA, ROE, and Tobin’s Q, while ESG financial materiality disclosure and the ESG disclosure score of the firms were the independent variable and moderating variable, respectively. The results show that ESG financial materiality exerts a significant adverse impact on ROA and ROE but an insignificant positive effect on Tobin’s Q in banks. For manufacturing firms, the impact is insignificant and negative on ROA, ROE, and Tobin’s Q. Also, the interactive effect of transparency insignificantly weakens the effect of ESG financial materiality disclosure on financial performance in both banks and manufacturing firms. This concludes that the transparency in ESG financial materiality disclosure is not sufficient to improve financial performance in both sectors but should be integrated in the core business objectives of firms. Also, it suggests that over-disclosure and greenwashing of ESG reports should be avoided. Full article

(This article belongs to the Special Issue Environmental, Social, and Governance (ESG), Corporate Social Responsibility (CSR), and Green Finance)

24 pages, 1417 KiB

Open AccessArticle

Oil Prices, Sustainability Initiatives, and Stock Market Dynamics: Insights from the MSCI UAE Index

by Hajer Zarrouk and Mohamed Khalil Ouafi

J. Risk Financial Manag. 2025, 18(6), 314; https://doi.org/10.3390/jrfm18060314 - 7 Jun 2025

Viewed by 206

Abstract

This study examines the interplay between oil price volatility, sustainability-driven initiatives, and the MSCI UAE Index, highlighting the challenges that oil-dependent economies face in balancing financial stability with sustainability transitions. Using a dataset of 2707 daily observations from 2014 to 2024, we applied [...] Read more.

This study examines the interplay between oil price volatility, sustainability-driven initiatives, and the MSCI UAE Index, highlighting the challenges that oil-dependent economies face in balancing financial stability with sustainability transitions. Using a dataset of 2707 daily observations from 2014 to 2024, we applied linear regression, ARCH, GARCH, and TARCH models to analyze volatility dynamics across two key periods: the 2014–2016 oil price collapse and the 2019–2023 phase marked by the COVID-19 pandemic and increasing sustainability efforts. Our findings indicate that oil price fluctuations significantly impact the MSCI UAE Index, with GARCH models confirming persistent volatility and TARCH models revealing asymmetrical effects, where negative shocks intensify market fluctuations. While the initial sustainability policy announcements contributed to short-term volatility and investor uncertainty, they ultimately fostered market confidence and long-term stabilization. Unlike previous studies focusing solely on oil price volatility in emerging markets, this research integrates sustainability policy announcements into financial modeling, providing novel empirical insights into their impact on financial stability in oil-exporting economies. The findings suggest that stabilization funds, dynamic portfolio strategies, and transparent regulatory policies can mitigate oil price volatility risks and enhance market resilience during sustainability transitions, offering valuable insights for investors, policymakers, and financial institutions navigating the UAE’s evolving economic landscape. Full article

(This article belongs to the Section Financial Markets)

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28 pages, 1213 KiB

Open AccessReview

Digital by Default? A Critical Review of Age-Driven Inequalities in Payment Innovation

by Ida Claudia Panetta, Elaheh Anjomrouz, Paola Paiardini and Sabrina Leo

J. Risk Financial Manag. 2025, 18(6), 313; https://doi.org/10.3390/jrfm18060313 - 7 Jun 2025

Viewed by 228

Abstract

This paper offers a systematic literature review of age-related disparities in the adoption of digital payment systems, a phenomenon that is becoming increasingly relevant as financial transactions become predominantly digital. Using the SPAR-4-SLR protocol, 66 scholarly contributions published between 2014 and 2024 are [...] Read more.

This paper offers a systematic literature review of age-related disparities in the adoption of digital payment systems, a phenomenon that is becoming increasingly relevant as financial transactions become predominantly digital. Using the SPAR-4-SLR protocol, 66 scholarly contributions published between 2014 and 2024 are examined and categorised into four thematic clusters: demographic determinants, behavioural drivers, structural barriers linked to the grey digital divide, and emerging insights from neurofinance. The review highlights a multifactorial set of barriers that limit older adults’ engagement with digital payments, including usability challenges, cognitive and physical limitations, digital skill gaps, and perceived security risks. These obstacles are further amplified by structural inequalities such as socio-economic status, geographic location, and infrastructural constraints. While digital payments are often presented as tools of inclusion, the findings underscore the risk of exclusion for ageing populations without tailored design and policy interventions. The review also identifies areas for further research, particularly at the intersection of ageing, cognitive function, and human–technology interaction, proposing a research agenda that supports more inclusive and age-responsive financial innovation. Full article

(This article belongs to the Special Issue Fintech, Business, and Development)

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19 pages, 320 KiB

Open AccessArticle

CEO Personal Characteristics and Investment-Cash Flow Sensitivity: An Analysis of Indian Independent (Non-Business-Group-Affiliated) Firms and Business Group-Affiliated Firms

by Gaurav Gupta

J. Risk Financial Manag. 2025, 18(6), 312; https://doi.org/10.3390/jrfm18060312 - 6 Jun 2025

Viewed by 190

Abstract

This study investigates the relationship between the CEO characteristics and investment–cash flow sensitivity (ICFS) of Indian manufacturing firms. By using the GMM technique, this study finds that CEO characteristics reduce ICFS. Further, this study examines the moderating role of business [...] Read more.

This study investigates the relationship between the CEO characteristics and investment–cash flow sensitivity (ICFS) of Indian manufacturing firms. By using the GMM technique, this study finds that CEO characteristics reduce ICFS. Further, this study examines the moderating role of business group-affiliated firms, independent firms (non-business group-affiliated firms), and firm size on the relationship between CEO characteristics and ICFS. The results reveal that group affiliation moderates the effectiveness of CEO characteristics in reducing ICFS. In addition to this, independent firms rely more heavily on the individual capabilities of CEOs to overcome financial constraints and mitigate ICFS, whereas group firms benefit from structural advantages that diminish the relative impact of CEO characteristics on ICFS. Additionally, this study finds that firm size also moderates the relationship between CEO characteristics and ICFS. The results reveal that CEO characteristics significantly reduce ICFS, with a more pronounced effect in small-sized independent firms compared to their larger counterparts. However, in group-affiliated firms, CEO characteristics have a minimal effect on ICFS, and this impact remains consistent across small and large group firms. These findings offer valuable insights for firms, lending institutions, and investors, emphasizing the role of CEO characteristics in shaping financial decision making, especially in independent and smaller firms. Full article

(This article belongs to the Section Business and Entrepreneurship)

18 pages, 425 KiB

Open AccessArticle

Relationships Between Corporate Control Environment and Stakeholders That Mediate Pressure on Independent Auditors in France

by Giemegerman Carhuapomachacon, Joshua Onome Imoniana, Cristiane Benetti, Vilma Geni Slomski and Valmor Slomski

J. Risk Financial Manag. 2025, 18(6), 311; https://doi.org/10.3390/jrfm18060311 - 5 Jun 2025

Viewed by 208

Abstract

The purpose of this research is to examine how relationships between corporate control environments and stakeholders mediate the different dimensions of pressure on auditor independence. In France, two (joint) auditors are required by law for listed companies. In this context, we analyze the [...] Read more.

The purpose of this research is to examine how relationships between corporate control environments and stakeholders mediate the different dimensions of pressure on auditor independence. In France, two (joint) auditors are required by law for listed companies. In this context, we analyze the experiences of higher-echelon professionals of audit firms, controllers, and managers who could elucidate the essence of pressure on auditor independence in their lived environment. An interpretative approach and empirical analysis were adopted for this study to expand on the literature and proffer an answer to the following research question: How does the relationship between a control environment and a stakeholder mediate the pressures on auditor independence? Interviews involved seven participants, mainly higher-echelon professionals of Big Four firms, as well as two members of auditee organizations, and a member of an audit committee. In addition, the narratives from the documents gathered from the EU audit legislation implementation database constitute our data corpus. Thematic coding was used to organize the results. The findings reveal that control environment best practices and down-to-earth corporate governance policies, participated in by both auditors and audited organizations, cushion the pressures on auditors. This, in turn, presents a positive and significant impact on auditor independence. Overall, the dimensions that mediate the pressures on auditors are as follows: the consciousness of pressure in itself; the reputation and experience of the audit firm; and the interactions between the auditors and corporate governance. Other factors include the cordiality of the relationship between the auditor and corporate management and the resulting healthy end of the negotiation between auditors and auditees. This study contributes to the theory and practical discussion of the relationships between the corporate control environment, corporate governance, auditing, and pressure on auditor independence. Full article

(This article belongs to the Section Business and Entrepreneurship)

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17 pages, 294 KiB

Open AccessArticle

Exchange Rate Risk and Relative Performance Evaluation

by Bing Chen, Wei Chen and Xiaohui Yang

J. Risk Financial Manag. 2025, 18(6), 310; https://doi.org/10.3390/jrfm18060310 - 5 Jun 2025

Viewed by 111

Abstract

The relative performance evaluation (RPE) hypothesis posits that executive compensation should not be influenced by uncontrollable exogenous shocks. However, prior studies often find limited empirical support for this hypothesis, partly because identifying peers exposed to the same exogenous shocks is challenging. We propose [...] Read more.

The relative performance evaluation (RPE) hypothesis posits that executive compensation should not be influenced by uncontrollable exogenous shocks. However, prior studies often find limited empirical support for this hypothesis, partly because identifying peers exposed to the same exogenous shocks is challenging. We propose a new method for identifying peers and testing the RPE hypothesis within the context of exchange rate risk. Specifically, we select peers based on the sensitivity of their stock returns to exchange rate fluctuations. We find evidence that firms respond to significant exchange rate movements by ex post adjusting their peer selection to include peers with similar exchange rate risk exposure. Furthermore, after accounting for ex post peer group adjustments, we find much stronger support for the RPE hypothesis than prior studies. Full article

(This article belongs to the Section Financial Markets)

13 pages, 301 KiB

Open AccessArticle

Does Economic Freedom Influence Economic Growth? Evidence from Latin America

by Vanessa Arce and Freddy Naula

J. Risk Financial Manag. 2025, 18(6), 309; https://doi.org/10.3390/jrfm18060309 - 5 Jun 2025

Viewed by 134

Abstract

This paper investigates the relationship between economic freedom and economic growth in Latin America and the Caribbean over the period 1997–2023, using data from 14 countries. To capture the multidimensional nature of economic freedom, two widely recognized indices—Heritage and Fraser—are incorporated into an [...] Read more.

This paper investigates the relationship between economic freedom and economic growth in Latin America and the Caribbean over the period 1997–2023, using data from 14 countries. To capture the multidimensional nature of economic freedom, two widely recognized indices—Heritage and Fraser—are incorporated into an extended Solow-type growth model. The empirical strategy relies on a dynamic panel data approach using the Arellano–Bond estimator, which allows for the control of unobserved heterogeneity, autocorrelation, and potential reverse causality. Robustness is assessed through alternative model specifications and in-sample forecasting using rolling-window techniques and Theil’s U-statistic. The results reveal a negative and statistically significant relationship between economic growth and the Heritage Index, while the Fraser Index shows a positive but generally non-significant effect. These findings highlight the methodological sensitivity of the economic freedom–growth nexus and suggest that context-specific institutional factors may shape how liberalization policies translate into development outcomes. The study contributes to the literature by jointly evaluating the impact of both indices in a unified dynamic framework, providing new evidence for a region marked by institutional heterogeneity and growth volatility. Full article

(This article belongs to the Section Economics and Finance)

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25 pages, 329 KiB

Open AccessArticle

Performance of Islamic Banks During the COVID-19 Pandemic: An Empirical Analysis and Comparison with Conventional Banking

by Umar Butt and Trevor Chamberlain

J. Risk Financial Manag. 2025, 18(6), 308; https://doi.org/10.3390/jrfm18060308 - 5 Jun 2025

Viewed by 193

Abstract

This study examines the performance and resilience of Islamic banks during the COVID-19 pandemic, a period marked by unprecedented global economic disruption. Drawing on empirical data and a comparative analysis with conventional banking institutions, the research evaluates key financial indicators—liquidity, profitability, asset quality, [...] Read more.

This study examines the performance and resilience of Islamic banks during the COVID-19 pandemic, a period marked by unprecedented global economic disruption. Drawing on empirical data and a comparative analysis with conventional banking institutions, the research evaluates key financial indicators—liquidity, profitability, asset quality, and capital adequacy—to assess how Islamic banks responded to the crisis. The unique principles of Islamic finance, including risk-sharing, asset-backed financing, and the prohibition of interest and speculative activities, provide a distinct framework for crisis response. By analyzing how these features influenced bank performance during the pandemic, the study offers valuable insights into the relative robustness of Islamic versus conventional banking models. The findings contribute to the academic discourse on financial stability and risk management, offering practical implications for policymakers, regulators, and stakeholders to strengthen financial systems against future global shocks. Full article

(This article belongs to the Special Issue Disclosure and Accountability in Islamic Banking)

20 pages, 1240 KiB

Open AccessArticle

Modelling Insurance Claims During Financial Crises: A Systemic Approach

by Francis Agana and Eben Maré

J. Risk Financial Manag. 2025, 18(6), 307; https://doi.org/10.3390/jrfm18060307 - 5 Jun 2025

Viewed by 131

Abstract

In this paper, we introduce a generalised mutually exciting Hawkes process with random and independent jump intensities. This model provides a robust theoretical framework for modelling complex point processes and appropriately characterises the financial system, especially during periods of crisis. Based on this [...] Read more.

In this paper, we introduce a generalised mutually exciting Hawkes process with random and independent jump intensities. This model provides a robust theoretical framework for modelling complex point processes and appropriately characterises the financial system, especially during periods of crisis. Based on this extended Hawkes process, we propose an insurance claim process and demonstrate that claim processes modelled as an aggregated process enable early detection of crises and inform optimal investment strategies in a financial system. Full article

(This article belongs to the Section Mathematics and Finance)

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6 pages, 184 KiB

Open AccessEditorial

Sustainable Tax and Accounting Reporting in Building a New Tax Culture

by Lidija Hauptman and Ivana Pavić

J. Risk Financial Manag. 2025, 18(6), 306; https://doi.org/10.3390/jrfm18060306 - 4 Jun 2025

Viewed by 168

Abstract

Achieving the Sustainable Development Goals (SDGs) depends significantly on enhancing tax revenue mobilization and transforming tax culture among both institutional and individual taxpayers [...] Full article

(This article belongs to the Special Issue Sustainable Tax and Accounting Reporting in Building a New Tax Culture)

13 pages, 585 KiB

Open AccessArticle

Supply Chain Risk in Eyeglass Manufacturing: An Empirical Case Study on Lens Inventory Management During Global Crises

by Sarot Kankoon and Sataporn Amornsawadwatana

J. Risk Financial Manag. 2025, 18(6), 305; https://doi.org/10.3390/jrfm18060305 - 4 Jun 2025

Viewed by 236

Abstract

The eyeglass lens manufacturing industry has become increasingly vulnerable to supply chain risks due to overlapping global disruptions, including the COVID-19 pandemic, the Suez Canal blockage, the Russia–Ukraine conflict, Red Sea shipping insecurity, and recent U.S. import tariffs. These events have challenged inventory [...] Read more.

The eyeglass lens manufacturing industry has become increasingly vulnerable to supply chain risks due to overlapping global disruptions, including the COVID-19 pandemic, the Suez Canal blockage, the Russia–Ukraine conflict, Red Sea shipping insecurity, and recent U.S. import tariffs. These events have challenged inventory planning, supplier coordination, and cost control across the industry. This study aims to evaluate how five operational constructs—stock system, inventory optimization, standardized methodology, production capability, and logistics performance—influence inventory resilience during global crises. Using an empirical case study, data were collected from 215 supply chain professionals at a multinational lens manufacturer in Southeast Asia and analyzed via Structural Equation Modeling (SEM). The results show that inventory optimization (β = 0.93) is the most influential factor in mitigating supply–demand imbalances, followed by logistics performance and production capability. This study offers practical recommendations, including real-time demand tracking, modular production systems, and scalable logistics strategies, to enhance inventory resilience. These findings contribute to both theory and practice by providing a validated framework tailored to high-precision manufacturing under persistent global risk. Full article

(This article belongs to the Special Issue Business, Finance, and Economic Development)

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16 pages, 1319 KiB

Open AccessArticle

Dirichlet Mixed Process Integrated Bayesian Estimation for Individual Securities

by Phan Dinh Khoi, Thai Minh Trong and Christopher Gan

J. Risk Financial Manag. 2025, 18(6), 304; https://doi.org/10.3390/jrfm18060304 - 4 Jun 2025

Viewed by 184

Abstract

Bayesian nonparametric methods, particularly the Dirichlet process (DP), have gained increasing popularity in both theoretical and applied research, driven by advances in computing power. Traditional Bayesian estimation, which often relies on Gaussian priors, struggles to dynamically integrate evolving prior beliefs into the posterior [...] Read more.

Bayesian nonparametric methods, particularly the Dirichlet process (DP), have gained increasing popularity in both theoretical and applied research, driven by advances in computing power. Traditional Bayesian estimation, which often relies on Gaussian priors, struggles to dynamically integrate evolving prior beliefs into the posterior distribution for decision-making in finance. This study addresses that limitation by modeling daily security price fluctuations using a Dirichlet process mixture (DPM) model. Our results demonstrate the DPM’s effectiveness in identifying the optimal number of clusters within time series data, leading to more accurate density estimation. Unlike kernel methods, the DPM continuously updates the prior density based on observed data, enabling it to better capture the dynamic nature of security prices. This adaptive feature positions the DPM as a superior estimation technique for time series data with complex, multimodal distributions. Full article

(This article belongs to the Special Issue Featured Papers in Mathematics and Finance, 2nd Edition)

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17 pages, 4962 KiB

Open AccessArticle

Examining the Research Taxonomy of Credit Default Swaps Literature Through Bibliographic Network Mapping

by Tabassum, Jasvinder Sidhu and Najul Laskar

J. Risk Financial Manag. 2025, 18(6), 303; https://doi.org/10.3390/jrfm18060303 - 4 Jun 2025

Viewed by 238

Abstract

This study presents a bibliometric analysis, using spatial approach, of 943 articles from 2003 to March 2025 showing the growing importance of CDSs in the literature and their role in credit risk management. The Web of Science’s Core Collection database was used for [...] Read more.

This study presents a bibliometric analysis, using spatial approach, of 943 articles from 2003 to March 2025 showing the growing importance of CDSs in the literature and their role in credit risk management. The Web of Science’s Core Collection database was used for bibliometric mapping. The bibliographic data were grouped and analyzed using VOSviewer to create network visualization maps that included country-wise, document-wise, and source-wise citations analysis, bibliographic coupling, and the co-occurrence of keywords. Subsequently, significant terms were identified through the analyses where risk assessment, risk management, and credit derivatives were found to be the most used keywords. Further, USA turns out to be the country where the most research was published on CDSs with maximum citations, highlighting the growing popularity of this research topic in this region. In addition, bibliographic coupling appears to capture information from 13 clusters formed during the analysis on bibliographically linked documents with their link strength. The bibliometric analysis of the CDS literature illustrates the intellectual framework of research on this topic, traces the progression of the research topic over time, and identifies the areas where this research field might develop in the future. Full article

(This article belongs to the Special Issue Emerging Trends and Innovations in Corporate Finance and Governance)

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21 pages, 1821 KiB

Open AccessArticle

The Feedback Effects of Sovereign Debt in a Country’s Economic System: A Model and Application

by Yaseen Ghulam and Sheen Liu

J. Risk Financial Manag. 2025, 18(6), 302; https://doi.org/10.3390/jrfm18060302 - 1 Jun 2025

Viewed by 312

Abstract

Many of the existing theoretical and empirical studies ignore the two-way relationship between a sovereign’s credit risk and economy. To address this gap, we develop a theoretical model that incorporates the feedback effects of sovereign-debt credit risk on a country’s economy and then [...] Read more.

Many of the existing theoretical and empirical studies ignore the two-way relationship between a sovereign’s credit risk and economy. To address this gap, we develop a theoretical model that incorporates the feedback effects of sovereign-debt credit risk on a country’s economy and then provide empirical implications. The model links the risks of sovereign debt and economic fundamentals through a two-way transmission mechanism. In doing so, it demonstrates how economic-fundamentals-driven sovereign-debt credit risk can have a significant impact on economic fundamentals through a feedback effect that has the potential to significantly raise the sensitivity of a country’s economic performance to shocks from both the credit risk associated with sovereign debt and economic fundamentals. The outcomes of the theoretical model are then verified by empirically testing the feedback effects using a structural equation model (SEM) framework on data covering sovereign debt defaults worldwide. We demonstrate how disregarding feedback effects may result in information that is insufficient and less helpful to public-debt-management policymakers. Full article

(This article belongs to the Special Issue Lending, Credit Risk and Financial Management)

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16 pages, 415 KiB

Open AccessArticle

Enhancing Fraud Detection Performance: The Interplay of Red Flag Awareness, Self-Efficacy, and Professional Skepticism

by Andi Auliya Ramadhany, Erlina Erlina, Isfenti Sadalia and Khaira Amalia Fachrudin

J. Risk Financial Manag. 2025, 18(6), 301; https://doi.org/10.3390/jrfm18060301 - 1 Jun 2025

Viewed by 293

Abstract

This study aimed to examine the influence of red flag awareness and self-efficacy on the ability to detect fraud through professional skepticism. This study was conducted on commercial banks in Indonesia, due to the high level of fraud that occurs in the banking [...] Read more.

This study aimed to examine the influence of red flag awareness and self-efficacy on the ability to detect fraud through professional skepticism. This study was conducted on commercial banks in Indonesia, due to the high level of fraud that occurs in the banking sector. This study used a quantitative method, and data were obtained from the results of a survey that distributed questionnaires to all internal auditors of commercial banks in Indonesia. The analysis tool used in this study was Smart PLS. The results show that red flag awareness and self-efficacy has an influence on the ability to detect fraud directly or through professional skepticism. This research contributes to bank managers and regulators improvement of the quality of internal auditor training, as well as strengthening the fraud detection system through the development of professional skepticism. Full article

(This article belongs to the Section Business and Entrepreneurship)

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20 pages, 3122 KiB

Open AccessArticle

Forecasting Sovereign Credit Risk Amidst a Political Crisis: A Machine Learning and Deep Learning Approach

by Amira Abid

J. Risk Financial Manag. 2025, 18(6), 300; https://doi.org/10.3390/jrfm18060300 - 1 Jun 2025

Viewed by 271

Abstract

The purpose of this paper is to forecast the sovereign credit risk for Egypt, Morocco, and Saudi Arabia during political crises. Our approach uses machine learning models (Linear Regression, Ridge Regression, Lasso Regression, XGBoost, and Kernel Ridge) and deep learning models (RNN, LSTM, [...] Read more.

The purpose of this paper is to forecast the sovereign credit risk for Egypt, Morocco, and Saudi Arabia during political crises. Our approach uses machine learning models (Linear Regression, Ridge Regression, Lasso Regression, XGBoost, and Kernel Ridge) and deep learning models (RNN, LSTM, BiLSTM, and GRU) to predict CDS-based implied default probabilities. We compare the predictive accuracy of the tested models with the results showing that Linear Regression outperforms all other techniques, while deep learning architectures, such as RNN and GRU, demonstrate a competitive performance. To validate the sovereign credit risk prediction, we use the forecasted implied default probability from the Linear Regression model to determine the corresponding forecasted implied rating according to the Thomson Reuters StarMine Sovereign Risk model. The results reveal significant differences in the perceived creditworthiness of Egypt, Morocco, and Saudi Arabia, reflecting each country’s economic fundamentals and their ability to manage global shocks, particularly those related to the Russo-Ukrainian war. Specifically, Egypt is perceived as the most vulnerable, Morocco occupies an intermediate position, and Saudi Arabia is seen as having a low credit risk. This study provides valuable managerial insights by enhancing tools for the sovereign credit risk analysis, offering reliable decision-making in volatile global markets. The alignment between forecasted ratings and default probabilities underscores the practical relevance of the results, guiding stakeholders in effectively managing credit risks amidst economic uncertainty. Full article

(This article belongs to the Special Issue Forecasting and Time Series Analysis)

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21 pages, 313 KiB

Open AccessArticle

Labor Supply as a Buffer: The Implication of Credit Constraints in the US

by Muhammad Nawaz, Niraj P. Koirala and Hassan Butt

J. Risk Financial Manag. 2025, 18(6), 299; https://doi.org/10.3390/jrfm18060299 - 1 Jun 2025

Viewed by 223

Abstract

The credit constraint, an example of an incomplete credit market, provides an incentive to intensify the extensive and intensive margins related to labor force participation and work hours, respectively. This study uses the cross-section data from the Survey of Consumer Finance (SCF) and [...] Read more.

The credit constraint, an example of an incomplete credit market, provides an incentive to intensify the extensive and intensive margins related to labor force participation and work hours, respectively. This study uses the cross-section data from the Survey of Consumer Finance (SCF) and analyzes the impact of credit constraints on labor supply decisions, time to search for employment, and work hours. The empirical findings using the IV-probit and 2SLS models suggest that credit constraints and their various measures encourage households to increase both labor force participation and work hours to offset the negative impact of financial constraints. The intensity of working hours increases when we introduce both the alternate form of credit constraint and various age bands. Credit-constrained individuals effectively search for jobs and are most likely to accept employment in a short period, but their job search process takes more time than non-constrained individuals. Full article

(This article belongs to the Special Issue Business, Finance, and Economic Development)

20 pages, 1328 KiB

Open AccessArticle

Exporting Under Political Risk: Payment Term Selection in Global Trade

by Veysel Avsar and Oguzhan Batmaz

J. Risk Financial Manag. 2025, 18(6), 298; https://doi.org/10.3390/jrfm18060298 - 1 Jun 2025

Viewed by 189

Abstract

This paper investigates the extent to which political risk affects exporter-financed trade transactions. Using industry-level trade finance data from Turkey, we show that export transactions executed under open-account terms decrease with the political risk in the export markets. Further, we also document that [...] Read more.

This paper investigates the extent to which political risk affects exporter-financed trade transactions. Using industry-level trade finance data from Turkey, we show that export transactions executed under open-account terms decrease with the political risk in the export markets. Further, we also document that the effect of political risk on trade finance is disproportionately higher for industries that export complex products. This paper contributes to the literature by examining how political risk interacts with product complexity to influence exporters’ trade finance decisions—an effect that has been previously overlooked in empirical studies. Full article

(This article belongs to the Section Financial Markets)

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22 pages, 816 KiB

Open AccessArticle

Sophisticated Capital Budgeting Decisions for Financial Performance and Risk Management—A Tale of Two Business Entities

by Asep Darmansyah, Qaisar Ali and Shazia Parveen

J. Risk Financial Manag. 2025, 18(6), 297; https://doi.org/10.3390/jrfm18060297 - 29 May 2025

Viewed by 329

Abstract

Capital budgeting, particularly sophisticated decisions, is key to the financial performance and risk management of firms, yet academic studies have documented their relationship inconsistently. This study employs the fundamentals of resource-based view (RBV) and agency theories to investigate the impact of sophisticated capital [...] Read more.

Capital budgeting, particularly sophisticated decisions, is key to the financial performance and risk management of firms, yet academic studies have documented their relationship inconsistently. This study employs the fundamentals of resource-based view (RBV) and agency theories to investigate the impact of sophisticated capital budgeting decisions on financial performance and risk management of the firms of two different sizes, classified as small and medium enterprises (SMEs) and multinational corporations (MNCs). The empirical data of 590 Indonesian firms from between 2014 and 2023 were obtained and analyzed through the Generalized Method of Moments (GMM) technique. The results show that the usage of sophisticated capital budgeting decisions in investment appraisals of classified firms significantly improves their financial performance. Further analyses confirm that although sophisticated capital budgeting decisions are robust in resolving solvency issues, they appear less effective in reducing liquidity risks. The findings also elucidate that sampled firms may realize the financial benefits of sophisticated risk management. The mediation results highlighted that risk management has a significant and positive effect on the relationship between sophisticated capital budgeting decisions and financial performance. The present study contributes to corporate finance by validating the relevance of SCBDs in strategic financial planning and stable investments in firms of different sizes. Full article

(This article belongs to the Section Business and Entrepreneurship)

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22 pages, 1792 KiB

Open AccessArticle

Ensemble Multi-Expert Forecasting: Robust Decision-Making in Chaotic Financial Markets

by Alexander Musaev and Dmitry Grigoriev

J. Risk Financial Manag. 2025, 18(6), 296; https://doi.org/10.3390/jrfm18060296 - 29 May 2025

Viewed by 219

Abstract

Financial time series in volatile markets often exhibit non-stationary behavior and signatures of stochastic chaos, challenging traditional forecasting methods based on stationarity assumptions. In this paper, we introduce a novel multi-expert forecasting system (MES) that leverages ensemble machine learning techniques—including bagging, boosting, and [...] Read more.

Financial time series in volatile markets often exhibit non-stationary behavior and signatures of stochastic chaos, challenging traditional forecasting methods based on stationarity assumptions. In this paper, we introduce a novel multi-expert forecasting system (MES) that leverages ensemble machine learning techniques—including bagging, boosting, and stacking—to enhance prediction accuracy and support robust risk management decisions. The proposed framework integrates diverse “weak learner” models, ranging from linear extrapolation and multidimensional regression to sentiment-based text analytics, into a unified decision-making architecture. Each expert is designed to capture distinct aspects of the underlying market dynamics, while the supervisory module aggregates their outputs using adaptive weighting schemes that account for evolving error characteristics. Empirical evaluations using high-frequency currency data, notably for the EUR/USD pair, demonstrate that the ensemble approach significantly improves forecast reliability, as evidenced by higher winning probabilities and better net trading results compared to individual forecasting models. These findings contribute both to the theoretical understanding of ensemble forecasting under chaotic market conditions and to its practical application in financial risk management, offering a reproducible methodology for managing uncertainty in highly dynamic environments. Full article

(This article belongs to the Special Issue Innovative Approaches in Econometrics, Financial Market and Business Analytics)

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22 pages, 334 KiB

Open AccessArticle

The Impact of Family Firms on Financial Reporting Quality: The Mediating Role of High-Quality Auditors

by Hendra Susanto, Nyoman Adhi Suryadnyana, Emita Astami and Rusmin Rusmin

J. Risk Financial Manag. 2025, 18(6), 295; https://doi.org/10.3390/jrfm18060295 - 28 May 2025

Viewed by 296

Abstract

This study empirically examines how Big4 audit firms mediate the relationship between family-controlled enterprises and their earnings management practices. Analyzing a dataset of 61 non-financial family-listed companies listed on the Indonesia Stock Exchange from 2017 through 2019 reveals that family-controlled businesses and Big4 [...] Read more.

This study empirically examines how Big4 audit firms mediate the relationship between family-controlled enterprises and their earnings management practices. Analyzing a dataset of 61 non-financial family-listed companies listed on the Indonesia Stock Exchange from 2017 through 2019 reveals that family-controlled businesses and Big4 auditors are associated with lower earnings management, resulting in improved financial reporting quality. The study also shows that family-owned enterprises are more inclined to hire a higher-quality auditing firm for their financial statement assessments. Moreover, our results suggest that Big4 auditors partially mediate the relationship between family businesses and their earnings management practices. The additional tests conducted in this study highlight the significant role of family-run firms and Big4 auditors in curbing earnings management, primarily when corporate management is prone to decrease reported earnings. Robustness tests validate the reliability of the conclusions drawn from the primary findings. Our study shows that family managers align their goals with the firm and shareholders, enhancing company financial reporting integrity. Our finding also emphasizes the crucial role of Big4 auditors in minimizing intra-family agency conflicts in family firms, promoting transparency, and aligning family managers’ interests with external stakeholders. Full article

(This article belongs to the Section Financial Technology and Innovation)

18 pages, 686 KiB

Open AccessArticle

The Effect of Successful Value-Based Management on Decision-Making Effectiveness, Business Value Creation, Corporate Competency, and Corporate Sustainability Based on the Perceptions of Accounting Directors of Thai Listed Companies

by Nattawut Tontiset

J. Risk Financial Manag. 2025, 18(6), 294; https://doi.org/10.3390/jrfm18060294 - 28 May 2025

Viewed by 247

Abstract

The aim of this study is to examine the impact of VBM success on the corporate sustainability of Thai listed firms. The effects of successful VBM on decision-making effectiveness, business value creation, and corporate competency are also investigated. Both contingency theory and the [...] Read more.

The aim of this study is to examine the impact of VBM success on the corporate sustainability of Thai listed firms. The effects of successful VBM on decision-making effectiveness, business value creation, and corporate competency are also investigated. Both contingency theory and the relevant literature are utilized to aid in effectively comprehending the consequences of successful VBM. Thai listed companies were selected as the sample for this study, and data collected from 101 accounting directors through questionnaires were used as the research instrument. PLS-SEM was employed to test the hypothesized relationships. The results found that successful VBM has a considerable impact on company sustainability, owing primarily to indirect effects through mediating variables, such as business value generation and corporate competence, rather than direct effects, which are not significant. As a result, it is possible to conclude that good VBM implementation will increase business sustainability through processes or mediating variables, rather than directly affecting it. In addition, the success of VBM significantly improves the business value creation and corporate competency. Lastly, effective decision-making, the creation of company value, and corporate competency all significantly enhance corporate sustainability. Contributions from management and theoretical perspectives are openly provided. Recommendations, conclusions, and future study directions are also highlighted and discussed herein. Full article

(This article belongs to the Collection Business Performance)

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28 pages, 2537 KiB

Open AccessArticle

The Nonlinear Impact of Environmental, Social, Governance on Stock Market Performance Among US Manufacturing and Banking Firms

by Yan Wang and Ralph Sonenshine

J. Risk Financial Manag. 2025, 18(6), 293; https://doi.org/10.3390/jrfm18060293 - 28 May 2025

Viewed by 336

Abstract

Results of studies have varied significantly regarding the effect of ESG investment on firm value. This paper weighs in on this issue by analyzing how changes in ESG scores impact excess stock market returns (alpha) and risk-adjusted returns (Sharpe ratio). We also analyze [...] Read more.

Results of studies have varied significantly regarding the effect of ESG investment on firm value. This paper weighs in on this issue by analyzing how changes in ESG scores impact excess stock market returns (alpha) and risk-adjusted returns (Sharpe ratio). We also analyze the differential impact of ESG investments on financial performance among US manufacturing and banking firms. Using quantile regression analysis, our results show a nonlinear relationship, characterized by a U-shaped relationship between ESG ratings and alpha but an inverted U-shaped relationship between ESG and the Sharpe ratio. These findings, along with results pertaining to the impact of ESG components, help explain conflicts in the literature regarding the effect of ESG investment on firm value. Full article

(This article belongs to the Section Financial Markets)

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18 pages, 887 KiB

Open AccessArticle

Firm Strategy and Outcome Uncertainty in R&D Firms

by Ozer Asdemir, Zhiyan Cao, Ali Coskun and Arindam Tripathy

J. Risk Financial Manag. 2025, 18(6), 292; https://doi.org/10.3390/jrfm18060292 - 23 May 2025

Viewed by 355

Abstract

We evaluate the impact of firm strategy on the variability of future performance for R&D firms and how firm strategy mediates the relation between R&D expenditures and firm outcome uncertainty of sales revenue, earnings, and operating cash flows. Following prior literature, we run [...] Read more.

We evaluate the impact of firm strategy on the variability of future performance for R&D firms and how firm strategy mediates the relation between R&D expenditures and firm outcome uncertainty of sales revenue, earnings, and operating cash flows. Following prior literature, we run exploratory factor analysis using resource allocations in the past towards intended strategy to measure the realized strategy pursued by firms. We find that, in R&D firms, differentiation strategy leads to lower variability of future sales, earnings, and operating cash flows. In contrast, cost leadership strategy leads to higher variability of future sales and operating cash flows, and lower variability of future earnings. Our study is the first, to our knowledge, to empirically document the impact of firm strategy of R&D firms on the variability of various future performance measures. Using mediation analysis, we further document that differentiation strategy negatively mediates the association between R&D expenditures and variability of sales revenue, earnings, and operating cash flows. While cost leadership strategy negatively mediates the association between R&D expenditures and variability of sales and variability cash flows, it positively mediates the association between R&D expenditures and variability of earnings. Full article

(This article belongs to the Special Issue Corporate Governance and Earnings Management)

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J. Risk Financial Manag., Volume 18, Issue 6 (June 2025) – 36 articles

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