Journal of Risk and Financial Management

Even though several studies have been done on intellectual capital, ownership structure, and firm performance, their status has remained uncertain in developing countries like Malaysia. Prior studies have generally focused on a single industry and overlooked the input of all Malaysian non-financial firms. This study investigates the impact of intellectual capital, its components, and ownership structure on firm performance. This study employs a balanced panel data examination for the data of 409 non-financial firms from 11 sectors listed on Bursa, Malaysia for five years (2016–2020). The modified value-added intellectual coefficient model was applied to examine the effect of IC efficiency on firm performance. The empirical findings revealed that IC efficiency, human capital efficiency, structural capital efficiency, capital employed efficiency, and relational capital efficiency are positively and significantly related to firm performance. However, physical and structural capital is the most substantial element of intellectual capital efficiency in augmenting profitability. In addition, government and foreign ownership positively affect firm performance. The research will help managers, policymakers, and investors understand how IC investments increase performance and make prudent investment choices in government and foreign ownership firms. Full article

Movements in the India VIX are an important gauge of how the market’s risk perception shifts from day to day. This research attempts to forecast movements one day ahead of the India VIX using logistic regression and 11 ensemble learning classifiers. The period of study is from April 2009 to March 2021. To achieve the stated task, classifiers were trained and validated with 90% of the given sample, considering two-fold time-series cross-validation for hyper-tuning. Optimised models were then predicted on an unseen test dataset, representing 10% of the given sample. The results showed that optimal models performed well, and their accuracy scores were similar, with minor variations ranging from 63.33% to 67.67%. The stacking classifier achieved the highest accuracy. Furthermore, CatBoost, Light Gradient Boosted Machine (LightGBM), Extreme Gradient Boosting (XGBoost), voting, stacking, bagging and Random Forest classifiers are the best models with statistically similar performances. Among them, CatBoost, LightGBM, XGBoost and Random Forest classifiers can be recommended for forecasting day-to-day movements of the India VIX because of their inherently optimised structure. This finding is very useful for anticipating risk in the Indian stock market. Full article

This study examined the disclosure of risks and opportunities in the integrated reports (IRs) of the top five banks in South Africa. It assesses whether the risk and opportunity disclosures provided comply with the requirements of the International Integrated Reporting Framework (IIRF), as well as the nature of the risks and opportunities disclosed in the IR. This study takes a qualitative approach and employs an interpretivist paradigm. The information for this study was obtained through content analysis of the individual banks’ latest available IRs. A checklist was created as a measuring tool to evaluate disclosure practices. The findings showed that three of the selected banks disclosed all the requirements contained in the IIRF regarding risks and opportunities, while two banks only partially complied as they did not provide disclosures about their opportunities. The findings concerning the nature of risk disclosures show that the selected banks disclosed 38 themes related to risks, and the findings concerning the nature of opportunity disclosures show that the selected banks disclosed 14 themes related to opportunities. Furthermore, the results show that those in charge of preparing the IRs provide a thorough disclosure of risks, while there is room for improvement concerning disclosure of opportunities. Full article

Our research investigates the moderating roles of various board characteristics (independence, gender diversity, tenure, duality, and size) on the curvilinear relationship between board directorships and carbon emissions using a two-step generalized method of moments (GMM) system approach. We use a total of 1582 observations from 391 firms listed in the US Standard and Poor 500 (S&P 500) index collected from 2015 to 2021. Our findings provide empirical evidence in four aspects: (1) there is a U-shaped curvilinear relationship between board directorships and carbon emissions; (2) board directors should not go over two directorships because carbon emissions are likely to increase; (3) board independence, duality, and size positively moderate curvilinear relationships between board directorships and carbon emissions; and (4) board tenure and gender diversity negatively moderate curvilinear relationships. Our study contributes to expanding the existing literature related to sustainable corporate governance in the US market, and also has implications for regulatory issues, business practice, and further research. Full article

In this study, we analyze portfolio performance under different methods and scenarios for the small island economy of Fiji. In addition to documenting the historical performance and the smallness of the stock market, the study looks at the possibility of opting for an equally weighted (naïve) portfolio against market and minimum variance portfolios. To this end, we extract monthly stock price data of 17/19 listed companies from August 2019 to July 2022 and invoke different approaches to develop portfolios under different scenarios. We consider the mean-variance, minimum variance, semi-variance, utility maximization, and minimum turbulence portfolios, based on beta-adjusted (CAPM-based) returns. The different portfolios presented in the study should provide some insights on asset allocation in Fiji’s stock market. Interestingly, unlike average returns, the beta-adjusted returns indicate that an equally weighted portfolio can yield relatively higher expected returns than market portfolios, although, with a relatively higher standard deviation and lower Sharpe ratio than the optimized results. In a semi-variance analysis (where we account for downside risk only), equally weighted portfolio yields superior returns, albeit with a relatively lower Sortino ratio. Given that Fiji’s stock market is currently a small, with a relatively small number of listed companies, potential and less sophisticated investors and analysts considering portfolios based on beta-adjusted returns, may simply opt for 1/N (naïve) portfolios as a diversification strategy while realizing decent expected returns. The optimized portfolio under mean-variance, semi-variance, and utility are presented as alternative considerations for nuanced investors. Additionally, equally weighted turbulence-adjusted and minimum-turbulence portfolios are constructed to capture periods of unusualness and calmness in the market. The methodologies and the results presented can be adjusted and applied to other small markets and hence can influence investment decisions of investors in creating diversified portfolios under different scenarios. Full article

This article investigates the determinants of dividend policy on the Casablanca stock exchange. The variables tested were based on the main theories of dividend policy, and the fixed effect model was used to test panel data over a period of 16 years from 2003 to 2018. The eight independent variables tested were profitability, firm size, retained earnings, firm age, leverage, growth opportunities, price to earnings (P/E) and a dummy variable introduced for financial companies. To corroborate the results, two proxies were used to test the dependent variable: dividend yield and payout ratio. The results led to the identification of three significant determinants of dividend policy, which are firm age, growth opportunities and firm size. The negative correlation between the variables of firm size and firm age with dividend policy is explained by signaling theory. On the other hand, the negative correlation between growth opportunities and dividend payments is predicted by different theories, such as agency theory, financial flexibility theory and life cycle theory. This study provides insights for investors, analysts and researchers into dividend policy determinants on the Casablanca stock exchange based on firms’ characteristic variables. Full article

Despite a large amount of assets under management and a strong influence on the sustainable investment movement, very little is known about what ethical investing looks like from a Christian perspective. We therefore analyzed the ethical investment policies of a unique dataset of Christian-influenced mutual fund providers using a structured–thematic content analysis. In detail, we looked at investment screens, investment techniques, and the public presentation of non-financial investment objectives. We note that, by and large, there is no “Christian investing” in the sense of an ethical investment policy that most fund providers have similarly implemented. The proposed explanation for the diversity is that the policies are determined by differing approaches to interpreting biblical texts and by divergent social and political influence factors. However, we have detected a unifying element among most Christians-influenced mutual fund providers: the intention to positively influence their portfolio companies’ sustainability indicators. Full article

This article classifies petrol retail companies in Spain based on their financial ratios using the compositional data analysis (CoDA) methodology. This methodology solves the most common distributional problems encountered in the statistical analysis of financial ratios. The main purpose of this article is to show that with the CoDA methodology, accounting figures presenting low values can have a disproportional influence on classification. This problem can be attenuated by applying weighted CoDA, which is a novelty in the financial statement analysis field. The suggested weight of each accounting figure is proportional to its arithmetic mean. The results of Ward clustering show that after weighting, the contributions of the accounting figures to the total variance and to the clustering solution are more balanced, and the clusters are more interpretable. Four distinct financial profiles are identified and related to non-financial variables. Only one of the profiles represents companies in financial distress, with low turnover, low return on assets, high indebtedness, and low liquidity. Further developments include alternative weighting schemes. Full article

This research aimed to determine the mediating effect of innovative behavior on the relationship between transactional leadership and emotional intelligence in a SARS-CoV-2 context. During this period, behavioral issues among and between employees have been modified in a way that transactional leadership and innovative behavior were considered differently as factors explaining emotional intelligence. This research gap gave room for additional research to re-define the hypothesis of an existing mediating effect between these issues. In fact, as the empirical part of the research has proven, there is evidence of a mediating effect on the relationship of these variables in the sample used. A random sample of 403 owners of textile companies from the Gamarra Commercial Emporium in the district of La Victoria in Lima, Peru, was used to test the existing model regarding the factors explaining emotional intelligence. Data were evaluated by partial least squares structural equation modeling (PLS-SEM). It was determined that innovative behavior has a total mediating effect on the relationship between transactional leadership and emotional intelligence and that 15.9% of the variance of the emotional intelligence variable is explained by the model. This study theoretically contributes to the literature and provides empirical evidence of the relationship between the variables included in the model. Likewise, the model of the variables generated is useful both for the academic and business worlds; yet it must be strengthened and improved by adding more variables. This research contributes to deepening the understanding of the relationship between emotional intelligence, transactional leadership, and innovative behavior in the textile field during the SARS-CoV-2 period. Full article

As a growing industry in Iran, the insurance industry has dramatically grasped researchers’ and managers’ attention. Among the various issues in this industry, measuring and evaluating the efficiency and performance of its units and branches has always been considered by relevant experts because such evaluation can help us take adequate steps to improve this area. Through securitisation, insurance companies may mitigate the cost of their capital, increase the return on equity, and improve other metrics that affect their operating performance. Securitisation increases capital productivity in the insurance industry. Therefore, the present study was conducted in 2020 to review and develop a model of insurance securitisation in Iran. The present study is exploratory research. Thus, 13 experts and commentators in insurance securities were interviewed. Second, based on the theme analysis, the content of the interviews was analysed, and a proposed model was developed. Then, according to the obtained model, a questionnaire was designed and distributed among insurance industry experts. Two concepts of validity and reliability were used to validate the questionnaire. Based on the model, 10 main factors were identified as influencing insurance securitisation. Insurance securitisation, management of Iran’s environmental conditions, the role of the capital market in insurance, financing, economic development, optimal risk management, risk transfer process in insurance securitisation, investment culture, support of regulatory bodies and facilities in the securities issuance process, utilisation of technical knowledge and specialised human resources are the factors identified in the research. The results showed that all these factors identified from the interviews were confirmed, and the model was sufficiently valid. Full article

Few can argue with the notion that corporations should at least consider corporate social responsibility (CSR) to better understand the impact of their operations on society. However, recent empirical tests suggest CSR has an ambiguous impact on firm performance. To shed new light on this debate, we examine the extent to which voting support for nonbinding shareholder-initiated CSR proposals is empirically linked to changes in firms’ underlying systematic risks. Using a rich dataset of proposals in the US from 1998 to 2011, we contribute several novel findings. First, we show that shareholder voting support is nonlinearly linked to changes in systematic risk. Specifically, proposals with low voting support increase risk while those with high support decrease risk. This nonlinearity is particularly pronounced for consumer-sensitive firms that cater primarily to individual consumers rather than for firms in non-consumer-sensitive industries that produce goods or services meant for industrial or governmental use. Second, the 2007–2009 financial crisis exacerbated increases in firms’ systematic risks for proposals with low voting support. Our results, which highlight asymmetry regarding firms’ CSR initiatives, remain robust when controlling for firm-specific factors as well as shifts in investor sentiment. From a risk management perspective, our findings suggest that CSR initiatives need strong shareholder support to realize benefits from the so-called ‘risk-reduction hypothesis’. Full article

The COVID-19 crisis was remarkable because no global recession model could predict or provide early notice of when the coronavirus pandemic would happen and damage the global economy. Resilience to financial shocks is crucial for households as future crises like COVID-19 are inevitable. Therefore, the current study aims to examine the effects of financial literacy and accessibility to financial information on the financial resilience of Vietnamese households through the lens of an information-processing perspective. The Bayesian Mindsponge Framework (BMF) analytics was employed on a dataset of 839 samples for the investigation. We found that households of respondents with better financial knowledge and investment skills are less likely to be financially affected during the peak of the COVID-19 crisis, but the effect of investment skills is weakly reliable. Accessibility to financial information through informal sources (having a household member working in the financial sector) and formal sources (participating in a financial course) is positively associated with the respondents’ financial knowledge and investment skills. This finding suggests that the spillover effect of financial knowledge and skills among residents exists, leading to better resilience toward financial shocks. However, if the financial information is inaccurate, it might lead to misinformation, false beliefs, and poor economic decisions on a large scale. Full article

This paper aims to assess the impact of ISIS’s presence in Iraq on the reputation of listed firms on the Iraq Stock Exchange. This paper’s method is descriptive–correlational, and the selected sample includes 35 listed firms on the Iraq Stock Exchange during 2014–2019. This study measures the reputation of listed firms on the Iraq Stock Exchange. The presence of ISIS in Iraq is analyzed using a regression model and a dummy variable. Research hypotheses were tested using a multivariate regression model based on panel data. The obtained results show a significant relationship between the presence of ISIS in Iraq and the reputation of listed firms on the Iraq Stock Exchange, which means the presence of ISIS in Iraq has declined listed firms’ reputation on the Iraq Stock Exchange. Since the present study is a pioneer in examining this issue in an emerging economy, especially ISIS’s existence, the current study results may give academia and practitioners a profound insight. Full article

The changes in distribution channels of the crop protection industry are accelerating the influence of crop protection retailers on farmers’ product purchase decisions. This study aims to identify the critical competitive factors; ‘product quality’, ‘supply price’, ‘brand awareness’, ‘flexibility’, and ‘promotion support’; of crop protection manufacturers. And it empirically analyzes effects of the critical factors on relationship performance and product recommendation of crop protection retailers. This research also examined the difference among these major factors according to the level of trust of crop protection companies as suppliers. Survey data were collected from 660 retailers by the crop protection distribution market in South Korea. As for the results, the five factors were defined as the crop protection suppliers’ competitive factors. Supply price, promotion support, brand awareness, and flexibility had a positive (+) effect on relationship performance. Brand awareness, promotion support, product quality, and flexibility had a positive (+) effect on customer recommendation. Furthermore, supply price significantly affected relationship performance in a group with high trust, and promotion support significantly affected a group with low trust. Full article

The current study investigates the relationship between tax avoidance, management ability, and firm value. Three hypotheses are proposed to meet the paper’s objective. For conducting such a practical study based on a post-event descriptive correlational approach, data are gathered from the website of the Tehran Stock Exchange during 2014–2020. A total of 183 companies were selected through the systematic elimination method and analyzed using the R statistical software. The results indicated a negative relationship between managerial ability and tax avoidance. Moreover, we find a significant negative relationship between tax avoidance and firm value. Finally, the findings argue that in companies with high-ability managers, the intensity of the negative relationship between tax avoidance and firm value is mitigated. Full article

The literature on the relationship between ESG disclosure and economic growth is relatively non-existent. Thus, this paper highlights the importance of taking this relationship into account in current sustainable policies. The main objective of extra-financial Disclosure is to mitigate Information Asymmetry. During this discussion, we show that ESG disclosure may not reduce information asymmetry as intended. We also show that complete extra-financial disclosure targeted by current policies is not optimal. There is an optimal disclosure threshold depending on the level of sustainable development of the country, the size of the companies and their development potential. Moreover, current ESG disclosure policies direct economies towards less polluting sectors, which is not necessarily optimal from an economic standpoint and could negatively affect economic activity and, therefore, the population’s well-being. We also provide some policy implications and suggestions for future research on the ESG disclosure literature. Full article

This study has two objectives, first, to investigate if the lending behaviour of banks exhibits moral hazard in the Indian Banking Industry, and second, to investigate whether banks’ moral hazard behaviour changes when the systemic importance of the banks is taken into consideration. We studied banks’ moral hazard behaviour by observing the impact of their level of Net Non-Performing Loans (NNPL) on their lending behaviour. This study used threshold panel regression by using 1 year lagged values of NNPL as the threshold variable to find its endogenously determined value that impacts the lending behaviour of the banks. The 1 year lagged value of the NNPL (threshold variable) has been used to depict the level of distress faced by a bank. Assuming that loans may turn bad any year after they are granted, a banks’ lending behaviour has been shown through the relationship between various lags of Loan Growth Rate (LGR) and the contemporaneous values of Net Non-Performing Loans (NNPL). As per our analysis, the loan growth ratio raises NPLs with a relatively higher value when banks are experiencing prior sizable loan losses as compared to when banks are relatively safe, indicating moral hazard behaviour in the Indian banking industry. However, when the systemic importance of the bank is considered, the systemically important banks are found to be engaged in risky lending irrespective of their level of distress, whereas the opposite results are found for the least important banks. Full article

In accordance with ISA 240, it is the responsibility of external auditors to obtain reasonable assurance that financial statements are free from material misstatement, whether caused by fraud or error. Recently, the auditing profession in Malaysia has been significantly challenged by the explosion of fraud cases and by auditors’ failure to determine the “true and fair view” of the financial statement. This incident has tarnished the reputation of the audit profession. The effectiveness of the external auditor function, especially when related to fraud risk assessment, is commonly called into question. Hence, this study aims to assess individual factors (personality traits, digital technology skills, and competency) that may contribute to the effectiveness of fraud risk assessment among external auditors. A total of 455 questionnaires were distributed to external auditors, and a total of 150 (32.96%) responses were received. Data were thoroughly analyzed using Smart-PLS 4.0. This study found that digital technology skills contribute to the effectiveness of fraud risk assessment, whereas personality traits and competency do not. The findings implied that an effective technique of fraud risk assessment among external auditors requires digital technology skills. This study contributes to the literature by confirming the critical role of digital technology skills in enhancing the effectiveness of fraud risk assessments. Full article

Machine learning (ML) is a novel method that has applications in asset pricing and that fits well within the problem of measurement in economics. Unlike econometrics, ML models are not designed for parameter estimation and inference, but similar to econometrics, they address, and may be better suited for, problems of prediction. While some ML methods have been applied in econometrics for decades, their success in prediction has been limited, and examples of this abound in the asset pricing literature. In recent years, the ML literature has advanced new, more efficient, computation methods for regularization, modeling nonlinearity, and improved out-of-sample prediction. This article conducted a comprehensive, objective, and quantitative bibliometric analysis of this growing literature using Web of Science (WoS) data. We identified trends in the literature over the past decade, the geographical distribution of articles, authorship, and institutional contributions worldwide. The paper also identifies the dominant literature using citations in WoS and discusses computational algorithms that are expanding the econometric frontiers in asset pricing. The top cited papers were reviewed, highlighting their contribution. The limitations of ML learning methods and recent advances in ML were used to provide a conic view to future ML econometric practice. Full article