International Journal of Financial Studies

16 pages, 316 KB

Open AccessArticle

CSR Disclosure and the Zero-Leverage Phenomenon: Evidence from Pakistan Listed Firms

by Affaf Asghar Butt, Aamer Shahzad, Sadia Anis, Luís Miguel Marques and Flávio Morais

Int. J. Financial Stud. 2026, 14(2), 41; https://doi.org/10.3390/ijfs14020041 - 5 Feb 2026

The effect of corporate social responsibility (CSR) disclosure on zero-leverage policies is examined for listed firms at the Pakistan Stock Exchange (PSX) from 2010 to 2021. Binary logistic regression models show a statistically significant positive relationship between CSR disclosure and zero leverage. Increased [...] Read more.

The effect of corporate social responsibility (CSR) disclosure on zero-leverage policies is examined for listed firms at the Pakistan Stock Exchange (PSX) from 2010 to 2021. Binary logistic regression models show a statistically significant positive relationship between CSR disclosure and zero leverage. Increased CSR disclosure raises the propensity of firms to have zero leverage. Moreover, the negative effect of CSR disclosure on debt ratios further confirms these findings. Results show that highly disclosed CSR firms face less information asymmetry and prefer equity financing over bank debt. Regulators should develop incentive programs to increase their CSR disclosure and strengthen stakeholders’ relationships. Full article

17 pages, 379 KB

Open AccessArticle

Macro-Financial Blind Spots in Emerging Markets: Non-Bank Intermediation, Funding Liquidity, and the Persistence of Global Shock Transmission

by Gustavo Henrique Rodrigues Pessoa and Ricardo Ratner Rochman

Int. J. Financial Stud. 2026, 14(2), 40; https://doi.org/10.3390/ijfs14020040 - 5 Feb 2026

Abstract

Despite significant advances in bank regulation and the widespread adoption of macroprudential frameworks, emerging market economies remain persistently vulnerable to global financial shocks. Episodes such as the Global Financial Crisis, the COVID-19 market turmoil, and recent monetary tightening cycles reveal that financial stress [...] Read more.

Despite significant advances in bank regulation and the widespread adoption of macroprudential frameworks, emerging market economies remain persistently vulnerable to global financial shocks. Episodes such as the Global Financial Crisis, the COVID-19 market turmoil, and recent monetary tightening cycles reveal that financial stress originating in core markets continues to transmit rapidly and forcefully to emerging economies. This paper argues that such vulnerability reflects structural features of contemporary financial systems rather than deficiencies in domestic banking regulation alone. Adopting a conceptual and analytical approach, the article develops an integrated framework of macro-financial blind spots that links global financial cycles, non-bank financial intermediation, and regulatory fragmentation. The analysis highlights how funding liquidity, collateral valuation, margin dynamics, and market-based leverage amplify global shocks through channels that lie largely outside traditional, bank-centric macroprudential frameworks. As market-based finance expands, systemic risk increasingly originates in activities rather than institutions, limiting the effectiveness of entity-based regulation and reinforcing emerging markets’ role as price-takers in global portfolios. The paper contributes to the literature by synthesizing insights from macroprudential policy, market liquidity, and non-bank finance to explain the persistence of emerging market vulnerability in an era of globalized funding. It further derives policy implications for macro-financial governance, emphasizing the need for system-wide, activity-based approaches, improved data and transparency, and stronger domestic and international regulatory coordination. These findings are relevant for policymakers seeking to reconcile financial integration with systemic resilience in emerging markets. Full article

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28 pages, 764 KB

Open AccessArticle

How Does Artificial Intelligence Reshape Bank Profitability in China?—Evidence from a Multi-Period Difference-in-Differences Model

by Xiaoli Li, Dongsheng Zhang, Na Zeng and Defeng Meng

Int. J. Financial Stud. 2026, 14(2), 39; https://doi.org/10.3390/ijfs14020039 - 4 Feb 2026

Abstract

Artificial intelligence (AI) has become an integral driver of digital transformation in the banking sector, fundamentally influencing operational efficiency, resource allocation, and profitability. This study investigates how AI adoption affects the profitability of Chinese commercial banks and through which mechanisms these effects occur, [...] Read more.

Artificial intelligence (AI) has become an integral driver of digital transformation in the banking sector, fundamentally influencing operational efficiency, resource allocation, and profitability. This study investigates how AI adoption affects the profitability of Chinese commercial banks and through which mechanisms these effects occur, within the context of the country’s broader financial digitalization process. Using panel data for 17 A-share listed banks in China from 2009 to 2022, we employ a multi-period difference-in-differences (DID) framework—whose validity rests on the parallel trend assumption, empirically verified through an event-study specification—and combine it with propensity score matching (PSM) and placebo simulations to ensure credible causal identification. The results indicate that AI adoption significantly improves bank profitability. Mechanism analyses suggest that AI enhances profitability through two overarching channels—operational efficiency and resource allocation—manifested in (i) higher cost elasticity of income, (ii) improved deposit–loan turnover adaptability via more efficient liquidity and funding-cycle management, and (iii) optimized cross-business capital allocation efficiency through better risk–return matching in diversified operations. The effects are stronger for banks with higher digital investment intensity and tighter customer stickiness–liability cost coupling, and vary systematically across ownership types, bank sizes, and policy cycles. Overall, the findings provide policy-relevant evidence on how AI-driven digital transformation can enhance bank performance and risk management in modern financial systems. This study contributes by constructing a disclosure-based AI adoption measure from bank annual reports and exploiting staggered adoption with a multi-period DID design to provide causal evidence from China’s listed banking sector. Full article

(This article belongs to the Special Issue Artificial Intelligence in Banking and Insurance)

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44 pages, 2282 KB

Open AccessArticle

Particle Swarm Optimization with Stretching and Clustering for Asset Allocation

by Julien Chevallier

Int. J. Financial Stud. 2026, 14(2), 38; https://doi.org/10.3390/ijfs14020038 - 4 Feb 2026

Abstract

This paper develops a novel hybrid framework that integrates clustering-enhanced Particle Swarm Optimization (PSO) with stretching techniques to solve Markowitz’s quadratic portfolio optimization problem. The proposed approach avoids local optima traps that plague traditional optimization methods, while the stretching function modifications enhance the [...] Read more.

This paper develops a novel hybrid framework that integrates clustering-enhanced Particle Swarm Optimization (PSO) with stretching techniques to solve Markowitz’s quadratic portfolio optimization problem. The proposed approach avoids local optima traps that plague traditional optimization methods, while the stretching function modifications enhance the algorithm’s global search capabilities. The framework comprises four distinct algorithmic variants: a baseline SWARM PSO with stretching algorithm, and three clustering-enhanced extensions incorporating Hierarchical, K-means, and DBSCAN techniques. These clustering enhancements strategically group assets based on risk–return characteristics to improve portfolio diversification and risk management. Implementation in R enables comprehensive analysis of portfolio weight allocation patterns and diversification metrics across varying market structures. Empirical validation using daily price data from six major international stock market indices spanning January 2020 to December 2025 demonstrates the framework’s generalization capability in constructing buy-and-hold investment portfolios. The results reveal significant market-specific algorithmic effectiveness, with K-means variants achieving competitive efficacy in Eurostoxx and Belgian markets, DBSCAN demonstrating strong effectiveness in Chinese equity markets, Hierarchical clustering showing robust results in Indian market conditions, and the baseline SWARM algorithm exhibiting relative efficiency in French and Danish indices. Performance evaluation encompasses comprehensive risk-adjusted metrics, including Portfolio Return, Volatility, Sharpe Ratio, Calmar Ratio, and Value at Risk, providing portfolio managers with an adaptive, market-responsive optimization toolkit. Full article

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20 pages, 372 KB

Open AccessArticle

Efficiency, Concentration, and Diversification: Portfolio Lessons from Indian Technology Equities

by Davinder K. Malhotra, Shaurya Batra and Rahul Singh

Int. J. Financial Stud. 2026, 14(2), 37; https://doi.org/10.3390/ijfs14020037 - 4 Feb 2026

Abstract

This study examines the extent to which Indian technology equities generate sufficient returns relative to their inherent volatility and assesses whether intra-sector diversification can improve outcomes in this dynamic, high-risk sector. Drawing on data from January 2020 to April 2025, ten leading firms [...] Read more.

This study examines the extent to which Indian technology equities generate sufficient returns relative to their inherent volatility and assesses whether intra-sector diversification can improve outcomes in this dynamic, high-risk sector. Drawing on data from January 2020 to April 2025, ten leading firms are analyzed using an integrated approach that incorporates traditional risk-adjusted indicators, downside-sensitive metrics, and a six-factor model featuring momentum. The results show clear heterogeneity in performance. Mid-cap innovators such as Persistent Systems and Coforge deliver positive and, in some cases, statistically significant alphas, while large-cap stocks including Infosys, Tata Consultancy Services (TCS), and Wipro provide stability but limited excess returns. At the portfolio level, an equally weighted allocation improves downside protection. However, factor-model analysis finds no statistically significant portfolio alpha once systematic exposures are accounted for. These findings highlight the importance of active firm-level selection within the Indian technology sector, while also underscoring the role of intra-sector diversification in mitigating extreme losses. Full article

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30 pages, 1202 KB

Open AccessArticle

Exploring the Impact of Executives’ Digital Attention on Corporate Sustainable Development: Evidence from China

by Quan Zhang, Yichuan Wang, Le Zhu and Suying Song

Int. J. Financial Stud. 2026, 14(2), 36; https://doi.org/10.3390/ijfs14020036 - 4 Feb 2026

Abstract

Using the panel data of Chinese A-share firms from 2012 to 2023, we find that executives’ focus on digitalization is significantly and positively associated with corporate sustainability performance. The finding holds firm after a suite of endogeneity and robustness tests. Heterogeneity tests indicate [...] Read more.

Using the panel data of Chinese A-share firms from 2012 to 2023, we find that executives’ focus on digitalization is significantly and positively associated with corporate sustainability performance. The finding holds firm after a suite of endogeneity and robustness tests. Heterogeneity tests indicate that such a favorable impact is more salient for large enterprises, industry players with superior competitiveness, and entities situated in eastern China. The mechanism tests reveal that executives’ digital attention enhances corporate sustainable development by improving resource structuring capability, resource bundling capability, and resource leveraging capability. Additionally, financing constraints weaken, while media attention will enhance this promoting effect. Additional dimension-focused analyses demonstrate that the direct promotional impact of executives’ digital attention on corporate financial performance remains statistically insignificant, whereas it exerts a markedly positive catalytic effect on corporate environmental performance. This research offers novel theoretical interpretations and practical implications regarding the role of executive cognitive orientation in advancing corporate sustainable development against the backdrop of digital transformation. Full article

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19 pages, 503 KB

Open AccessArticle

Understanding Millennials’ Financial Behavior: The Role of Fintech Adoption, Financial Literacy, and the Mediating Effect of Financial Attitudes in a Crisis-Affected Emerging Economy

by Dani Aoun, Rita Rahal, Layal Sfeir and Nada Jabbour Al Maalouf

Int. J. Financial Stud. 2026, 14(2), 35; https://doi.org/10.3390/ijfs14020035 - 4 Feb 2026

Abstract

This study investigates how financial literacy, FinTech adoption, and financial attitudes shape economic decision-making among millennials in Lebanon, a crisis-affected emerging economy. The study examines whether enhancing financial literacy can strengthen economic resilience through improved financial behavior, with financial attitudes acting as a [...] Read more.

This study investigates how financial literacy, FinTech adoption, and financial attitudes shape economic decision-making among millennials in Lebanon, a crisis-affected emerging economy. The study examines whether enhancing financial literacy can strengthen economic resilience through improved financial behavior, with financial attitudes acting as a mediator. Guided by Behavioral Finance Theory, the study employs a quantitative approach using data from 390 Lebanese millennials collected via a structured questionnaire. Structural equation modeling was applied to test direct and mediating effects. Both financial literacy and FinTech adoption were found to significantly influence millennials’ financial behavior, with financial literacy emerging as the stronger predictor. The findings also revealed that financial attitude significantly mediates the link between literacy and behavior, suggesting that financial knowledge alone is insufficient without attitudinal reinforcement. This study fills a critical empirical gap in the MENA region by offering evidence from a highly under-researched, crisis-affected emerging market. It introduces an integrated model combining technological, cognitive, and attitudinal dimensions of financial behavior. The study offers practical implications for policymakers, financial institutions, and international development actors seeking to strengthen financial inclusion and household stability in similar turbulent contexts. Full article

(This article belongs to the Special Issue Behavioral Insights into Financial Decision Making)

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16 pages, 795 KB

Open AccessArticle

Financial Information Quality Between Numerical Accuracy and Comprehensibility: Effects on Investment Decisions in the Context of the Bucharest Stock Exchange

by Daniela Mogîldea and Mihai Carp

Int. J. Financial Stud. 2026, 14(2), 34; https://doi.org/10.3390/ijfs14020034 - 3 Feb 2026

Abstract

The informational efficiency of stock prices is conditioned by the level of quality of financial reports, contributing to an accurate assessment of the company’s future performance. By approaching informational quality from two perspectives, we conducted an analysis of the impact of faithful representation [...] Read more.

The informational efficiency of stock prices is conditioned by the level of quality of financial reports, contributing to an accurate assessment of the company’s future performance. By approaching informational quality from two perspectives, we conducted an analysis of the impact of faithful representation and readability of annual reports on the reaction of the Romanian capital market, measured by annual stock returns (SR) and cumulative abnormal returns (CAR). The findings revealed an accentuated concern of investors regarding the faithful representation of the firm’s financial results (both at the time of financial statements’ publication and at the year-end) and a diminished significance of the comprehensibility level of financial information in the investment decision-making process. The annual reports of a sample of firms listed on the BSE between 2017 and 2023 have an increased level of linguistic complexity, which entails processing costs, and are intended for sophisticated users with financial expertise. Along with the specialized language, the extensive length of reports delays the incorporation of all information into the stock price, decreasing the informational efficiency of the market. This empirical study applies several indices to assess the readability and conciseness of financial information (FOG index, Flesch–Kincaid index, Flesch Reading Ease Score, and report length) and contributes to the expanding literature by providing a useful basis for future analysis of the influence of financial report quality on investors’ perceptions. Full article

(This article belongs to the Special Issue Accounting and Financial/Non-financial Reporting Developments)

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21 pages, 309 KB

Open AccessFeature PaperArticle

Online Search Activity and Market Reaction to Earnings Announcements

by Saurabh Ahluwalia

Int. J. Financial Stud. 2026, 14(2), 33; https://doi.org/10.3390/ijfs14020033 - 3 Feb 2026

Abstract

This paper leverages Google Trends search volume data from 2004 to 2008 as a proxy for investor information demand. The analysis documents that greater search activity prior to earnings announcements is positively associated with future market reaction to earnings announcements, pre-earnings announcement drift, [...] Read more.

This paper leverages Google Trends search volume data from 2004 to 2008 as a proxy for investor information demand. The analysis documents that greater search activity prior to earnings announcements is positively associated with future market reaction to earnings announcements, pre-earnings announcement drift, and buying pressure. The results are consistent with investors gathering value-relevant information through online research, which is subsequently incorporated into prices through trading around earnings announcements. Notably, search volume is positively associated with market reaction to earnings announcements and pre-announcement drifts for more obscure firms where data is scarce. Overall, this paper provides large-sample evidence validating theoretical models where dispersed private information is incorporated into stock prices. The findings suggest that broader data access may facilitate pricing efficiency by promoting more informed market participation. Full article

(This article belongs to the Special Issue Stock Market Developments and Investment Implications)

28 pages, 5924 KB

Open AccessArticle

Quantile–Frequency Connectedness Among Artificial Intelligence, FinTech, and Blue Economy Markets

by Imen Jellouli

Int. J. Financial Stud. 2026, 14(2), 32; https://doi.org/10.3390/ijfs14020032 - 3 Feb 2026

Abstract

Using a quantile–frequency connectedness framework, this study analyzes the regime-contingent and horizon-specific transmission of shocks among AI assets, FinTech markets, and Blue Economy financial instruments. The empirical results reveal a distinctly asymmetric connectedness structure, whereby high-frequency spillovers intensify in upper-quantile states associated with [...] Read more.

Using a quantile–frequency connectedness framework, this study analyzes the regime-contingent and horizon-specific transmission of shocks among AI assets, FinTech markets, and Blue Economy financial instruments. The empirical results reveal a distinctly asymmetric connectedness structure, whereby high-frequency spillovers intensify in upper-quantile states associated with liquidity stress and sentiment-driven trading, while low-frequency connectedness remains comparatively muted, thereby preserving cross-segment diversification potential. AI assets emerge as dominant net transmitters in short-horizon dynamics, reflecting rapid innovation cycles and speculative adjustments. FinTech markets exhibit stabilizing properties under median regimes but transition into net propagation roles when risk conditions escalate. Blue finance instruments act as conditional net absorbers, attenuating volatility originating from digital innovation-driven markets, particularly during adverse market states. By decomposing spillover intensities across quantiles and spectral bands, the analysis highlights a structural differentiation between innovation-sensitive digital assets and the comparatively stable behavior of blue-themed financial assets. These findings advance the understanding of nonlinear dependence, asymmetric contagion, and state-dependent co-movements in emerging financial ecosystems. The results provide actionable insights for systemic-risk measurement, cross-market shock diagnostics, and multi-asset portfolio construction in an increasingly interconnected global financial system. Full article

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46 pages, 1262 KB

Open AccessSystematic Review

Financial Risk Prediction Models Integrating Environmental, Social and Governance Factors: A Systematic Review

by Cristina Caro-González, Daniel Jato-Espino and Yudith Cardinale

Int. J. Financial Stud. 2026, 14(2), 31; https://doi.org/10.3390/ijfs14020031 - 3 Feb 2026

Abstract

This systematic review explores the incorporation of Environmental, Social, and Governance (ESG) factors within financial risk prediction models, with a particular focus on Machine Learning (ML), Natural Language Processing (NLP), and Large Language Models (LLM). Adhering to the Preferred Reporting Items for Systematic [...] Read more.

This systematic review explores the incorporation of Environmental, Social, and Governance (ESG) factors within financial risk prediction models, with a particular focus on Machine Learning (ML), Natural Language Processing (NLP), and Large Language Models (LLM). Adhering to the Preferred Reporting Items for Systematic Reviews and the Meta-Analyses (PRISMA) and PICOC frameworks, we identified 74 peer-reviewed publications disseminated between 2009 and March 2025 from the Scopus database. After excluding 10 systematic and literature reviews to avoid double-counting of evidence, we conducted quantitative analysis on 64 empirical studies. The findings indicate that traditional econometric methodologies continue to prevail (48%), followed by ML strategies (39%), NLP methodologies (8%), and Other (5%). Research that concurrently focuses on all three dimensions of ESG constitutes the most substantial category (44%), whereas the Social dimension, in isolation, receives minimal focus (5%). A geographic analysis reveals a concentration of research activity in China (13 studies), Italy (10), and the United States and India (6 each). Chi-square tests reveal no statistically significant relationship between the methodological approaches employed and the ESG dimensions examined (p = 0.62). The principal findings indicate that ML models—particularly ensemble methodologies and neural networks—exhibit enhanced predictive accuracy in the context of credit risk and default probability, whereas NLP methodologies reveal significant potential for the analysis of unstructured ESG disclosures. The review highlighted ongoing challenges, including inconsistencies in ESG data, variability in ratings across different providers, insufficient coverage of emerging markets, and the disparity between academic research and practical application in model implementation. Full article

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23 pages, 2448 KB

Open AccessFeature PaperArticle

Taxes, Growth, and Equity: The Illusions of Fiscal Policy

by Anil Hira, Tim Swartz and Jiguo Cao

Int. J. Financial Stud. 2026, 14(2), 30; https://doi.org/10.3390/ijfs14020030 - 2 Feb 2026

Abstract

For over a century now, one of the central debates of economic policy has been around fiscal policy. Taxation and government spending have been a feature of most political campaigns, with one (more vocal) side claiming that taxation chokes economic growth and benefits [...] Read more.

For over a century now, one of the central debates of economic policy has been around fiscal policy. Taxation and government spending have been a feature of most political campaigns, with one (more vocal) side claiming that taxation chokes economic growth and benefits special interests, while leaving a legacy of debt. Another side sees taxation as a necessary tool for creating equal opportunity and ensuring adequate investment in collective public goods, including human capital. Using newly constructed datasets that we will make available, we take a fresh look at fiscal policy on the global level and across U.S. states, measuring its effects on growth and equity. We utilize a new technique, functional data analysis (FDA). We find limited evidence for both the conservative and progressive arguments around fiscal policy in the short term. Rather, the data suggest persistent fiscal patterns across space and time that reflect long-term social value choices around the tradeoffs of growth vs. public investment and equity. Full article

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19 pages, 1282 KB

Open AccessArticle

Drivers of Net Interest Margin in Ethiopia’s Banking Sector

by Seid Muhammed, Douglas Mwirigi and Prihoda Emese

Int. J. Financial Stud. 2026, 14(2), 29; https://doi.org/10.3390/ijfs14020029 - 2 Feb 2026

Abstract

This study examines the drivers of net interest margin (NIM) in developing economies, with a particular emphasis on Ethiopian commercial banks. It adopts an explanatory research design, analyzing quantitative data from the audited financial statements of 13 banks over 13 years (2012–2024), totaling [...] Read more.

This study examines the drivers of net interest margin (NIM) in developing economies, with a particular emphasis on Ethiopian commercial banks. It adopts an explanatory research design, analyzing quantitative data from the audited financial statements of 13 banks over 13 years (2012–2024), totaling 169 observations. Both Driscoll–Kraay fixed- and random-effects standard errors were computed in RStudio (version 4.5). The primary analysis relied on Driscoll–Kraay random regression outcomes, though fixed regression results were included for robustness checks. Findings indicate that the loan-to-deposit ratio, bank size, capital adequacy, and foreign direct investment (FDI) inflows have a significant positive impact on NIM, underscoring their role in enhancing profitability and stability. Conversely, inflation significantly reduces margins, while no substantial effects were observed for operational efficiency or GDP. These insights suggest that Ethiopian banks should focus on asset growth, maintaining strong capital reserves, increasing the loan-to-deposit ratio, and attracting FDI. Policymakers are encouraged to stabilize inflation and create a conducive environment to FDI to support sectoral growth. Future research could investigate operational efficiency alongside industry-specific indexes, such as the Herfindahl–Hirschman index for loans, assets, and income, to better understand variations in NIM. Full article

(This article belongs to the Topic The Future of Banking and Financial Risk Management)

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31 pages, 1617 KB

Open AccessReview

Creative Accounting Practices and Their Perceived and Actual Impact on Financial Reporting: Evidence from Romanian Listed Companies

by Adriana Horaicu, Victor Munteanu, Marilena-Roxana Zuca, Gabriel Cucui, Luiza Ionescu, Mihaela-Denisa Coman and Aura-Oana Mustățea

Int. J. Financial Stud. 2026, 14(2), 28; https://doi.org/10.3390/ijfs14020028 - 2 Feb 2026

Abstract

This study investigates creative accounting practices and their effects on reported financial position, performance, and risk indicators in Romanian listed companies. Using a mixed research design, the analysis combines a perception-based survey of financial–accounting professionals with a scenario-based financial case study, allowing for [...] Read more.

This study investigates creative accounting practices and their effects on reported financial position, performance, and risk indicators in Romanian listed companies. Using a mixed research design, the analysis combines a perception-based survey of financial–accounting professionals with a scenario-based financial case study, allowing for a comparison between perceived and actual effects of discretionary accounting techniques. The survey results indicate that professionals perceive creative accounting practices as having a significant influence on financial reporting outcomes, particularly in areas characterized by high managerial discretion, such as provisions, depreciation policies, inventory valuation methods, asset revaluation, and capitalization of research and development expenditures. The empirical case study confirms that these techniques generate observable changes in key financial indicators; however, the magnitude and direction of their effects vary across accounting methods and reporting periods. A key contribution of this study lies in highlighting a discrepancy between perceived and measured effects of creative accounting. While practitioners accurately identify the accounting areas most exposed to discretion, the empirical results suggest that the financial impact of creative accounting practices is often more moderate and context-dependent than commonly assumed. In addition, a descriptive assessment of fraud risk indicators suggests that extensive use of discretionary accounting practices may be associated with elevated risk exposure, without constituting direct evidence of fraudulent behavior. Full article

(This article belongs to the Special Issue Advances in Financial Econometrics)

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26 pages, 887 KB

Open AccessArticle

Index of the Cycle of Money: The Case of Cyprus

by Constantinos Challoumis, Nikolaos Eriotis and Dimitrios Vasiliou

Int. J. Financial Stud. 2026, 14(2), 27; https://doi.org/10.3390/ijfs14020027 - 2 Feb 2026

Abstract

This research aims to evaluate the effectiveness of monetary circulation in Cyprus by applying the Index of the Cycle of Money, derived from the Theory of the Cycle of Money. The analysis focuses exclusively on the Cypriot economy over the period of 2012–2017, [...] Read more.

This research aims to evaluate the effectiveness of monetary circulation in Cyprus by applying the Index of the Cycle of Money, derived from the Theory of the Cycle of Money. The analysis focuses exclusively on the Cypriot economy over the period of 2012–2017, a timeframe marked by severe financial stress following a domestic banking crisis. Using national GDP and bank deposits as core inputs, the study computes the country-specific cycle-of-money index and compares it to the global benchmark. The results show that Cyprus consistently exhibits a cycle-of-money index significantly above the global average, indicating a highly efficient internal redistribution and reuse of money. This finding suggests that the Cypriot economic structure possesses strong resilience and recovery capacity, even under adverse monetary and fiscal conditions. The analysis contributes to the comparative literature on monetary circulation by providing a clearly delimited single-country application and by reinforcing the explanatory power of the cycle-of-money framework in crisis contexts. Full article

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27 pages, 1175 KB

Open AccessArticle

ESG Integration and the Financial Stability Trade-Off in Emerging Markets

by Luis Ángel Meneses Cerón, Julián Mauricio Gómez López, Yudith Cristina Caicedo Domínguez and Juana Patricia Diaz Olaya

Int. J. Financial Stud. 2026, 14(2), 26; https://doi.org/10.3390/ijfs14020026 - 2 Feb 2026

Abstract

This study investigates the impact of ESG practices on the financial stability in a multisector sample of 86 publicly listed Brazilian firms, focusing on the Weighted Average Cost of Capital (WACC) and Altman Z-Score (AZS) as a proxy for insolvency risk. Using Bloomberg [...] Read more.

This study investigates the impact of ESG practices on the financial stability in a multisector sample of 86 publicly listed Brazilian firms, focusing on the Weighted Average Cost of Capital (WACC) and Altman Z-Score (AZS) as a proxy for insolvency risk. Using Bloomberg data from 2010 to 2021, this research applies advanced econometric methods, including Ordinary Least Squares (OLS), Vector Autoregression (VAR) and Fully Modified Ordinary Least Squares (FMOLS), to capture both short- and long-term effects. The findings reveal a financial learning curve: in the short term, ESG adoption can temporarily increase WACC and insolvency risk due to initial implementation costs, whereas in the long term, it reduces financial risk, enhances operational efficiency, and strengthens corporate resilience. These results underscore ESG practices as a strategic determinant of long-term value creation and financial stability. This study offers actionable insights for policymakers, investors, and corporate leaders aiming to align sustainability initiatives with financial performance in emerging market contexts. Full article

(This article belongs to the Special Issue Emerging Trends in Corporate Finance: ESG, Climate Risk, and Other Contemporary Issues)

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22 pages, 852 KB

Open AccessArticle

Digital Financial Literacy and Investment Grip: A Study of Japanese Active Investors

by Aliyu Ali Bawalle, Sumeet Lal, Mostafa Saidur Rahim Khan and Yoshihiko Kadoya

Int. J. Financial Stud. 2026, 14(2), 25; https://doi.org/10.3390/ijfs14020025 - 27 Jan 2026

Abstract

Investors’ ability to retain investments during bearish and uncertain market periods is a crucial behavioral trait for long-term wealth accumulation and reduces market instability. Nevertheless, little is understood about how digital financial literacy (DFL) shapes the capacity of increasingly digitalized financial environments. This [...] Read more.

Investors’ ability to retain investments during bearish and uncertain market periods is a crucial behavioral trait for long-term wealth accumulation and reduces market instability. Nevertheless, little is understood about how digital financial literacy (DFL) shapes the capacity of increasingly digitalized financial environments. This study investigates the links between DFL and investment grip among Japanese active investors—defined here, following conventional Japanese regulatory and research practice, as individuals who maintain a securities account and have engaged with an online brokerage within the past year—building on several theoretical perspectives from behavioral science. Using survey data from 149,261 individuals with an active account at Rakuten Securities, we estimated ordered probit regression models as the main specification. The findings showed a strong positive association between DFL and investment grip, even after accounting for demographic, socioeconomic, as well as cognitive attributes. These results are supported by robustness tests employing a probit model with a binary outcome. The sample consists exclusively of digitally active retail investors; the findings are therefore most directly applicable to this subpopulation. Overall, the evidence suggests that DFL fosters investors’ capacity to endure market volatility by promoting rational decision-making and reducing panic-driven selloffs. This study offers new empirical findings that will help promote financial resilience in technology-driven markets. Full article

(This article belongs to the Special Issue Stock Market Developments and Investment Implications)

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17 pages, 1201 KB

Open AccessArticle

Corporate Governance Structures and Firm Value: The Mediating Role of Financial Distress in ASEAN Construction Companies

by Anton Firdaus, Nunuy Nur Afiah, Harry Suharman and Tettet Fitrijanti

Int. J. Financial Stud. 2026, 14(1), 24; https://doi.org/10.3390/ijfs14010024 - 21 Jan 2026

Abstract

This study tests the connectionbetween corporate governance structures and firm value, incorporating financial distress as a mediating mechanism among construction companies listed in ASEAN markets. Utilizing a sample of 58 firms drawn from an initial population of 169 companies over the 2018–2021 period, [...] Read more.

This study tests the connectionbetween corporate governance structures and firm value, incorporating financial distress as a mediating mechanism among construction companies listed in ASEAN markets. Utilizing a sample of 58 firms drawn from an initial population of 169 companies over the 2018–2021 period, this study measures governance mechanisms through managerial ownership, institutional ownership, independent commissioners, audit committees, and litigation risk. Firm value is proxied by Tobin’s Q, while financial distress is assessed utilizing the Altman Z-Score. Panel data regression is employed to test the direct connections, and the Sobel test is used to evaluate the mediating role of financial distress. The outcome describes that managerial ownership and audit committees have a favorable effect on firm value, whereas independent commissioners and litigation risk exert a negative influence. Institutional ownership shows no significant association with firm value. Moreover, institutional ownership significantly affects financial distress, whereas the other governance mechanisms show no significant association with financial distress, although financial distress itself has a detrimental impact on firm value. The mediation analysis describes that financial distress mediates only the connection between institutional ownership and firm value. These outcomes help clarify prior inconsistencies in the literature and underscore the importance of strengthening managerial ownership and audit committees, optimizing the role of independent commissioners, and mitigating litigation risk to sustain firm value. Full article

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24 pages, 479 KB

Open AccessArticle

How Environmental Uncertainty Drives Asymmetric Mispricing in China: Dual Channels and Heterogeneous Media Effect

by Shuya Hu and Shengnian Wang

Int. J. Financial Stud. 2026, 14(1), 23; https://doi.org/10.3390/ijfs14010023 - 14 Jan 2026

Abstract

The essay delves into the impact of environmental uncertainty on asymmetric mispricing, utilizing the data from listed firms in China spanning from 2007 to 2023. Our analysis reveals that environmental uncertainty amplifies stock mispricing within capital markets, whether upward or downward. Diverging from [...] Read more.

The essay delves into the impact of environmental uncertainty on asymmetric mispricing, utilizing the data from listed firms in China spanning from 2007 to 2023. Our analysis reveals that environmental uncertainty amplifies stock mispricing within capital markets, whether upward or downward. Diverging from prior research, we distinguish between upward and downward mispricing and reveal the black box of environmental uncertainty affecting stock mispricing from dual channels. Specifically, environmental uncertainty intensifies upward mispricing through heightened earnings management and exacerbates downward mispricing by boosting investor irrationality. Furthermore, we explore the heterogeneous impact of different media coverage. In the downward mispricing sample, negative media exacerbated the relationship between the two, while positive coverage played a mitigating role. In the upward mispricing sample, only negative reports have a significant impact and mitigate the impact of uncertainty on mispricing. Our research on media heterogeneity once again proves that it is a double-edged sword. Our research indicates that improving the capacity to recognize different mispricing mechanisms in various market directions can greatly boost decision-making efficiency. Meanwhile, it is vital to strengthen professional ethics in media organizations and encourage more objective reporting. These efforts can jointly contribute to improving the efficiency of emerging capital markets. Full article

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