Journal of Risk and Financial Management

25 pages, 2863 KiB

Open AccessArticle

Trading Volume Concentration across S&P 500 Index Constituents—A Gini-Based Analysis and Concentration-Driven (Daily Rebalanced) Portfolio Performance Evaluation: Is Chasing Concentration Profitable?

by Dominik Metelski and Janusz Sobieraj

J. Risk Financial Manag. 2024, 17(8), 325; https://doi.org/10.3390/jrfm17080325 - 26 Jul 2024

Abstract

The period from January 2020 to December 2022 was marked by a confluence of major events, including the COVID-19 pandemic, the Russia–Ukraine war, the energy crisis, surging inflation, Federal Reserve policy shifts, and banking turmoil, which collectively fueled heightened market volatility, risk management [...] Read more.

The period from January 2020 to December 2022 was marked by a confluence of major events, including the COVID-19 pandemic, the Russia–Ukraine war, the energy crisis, surging inflation, Federal Reserve policy shifts, and banking turmoil, which collectively fueled heightened market volatility, risk management needs, and speculative trading opportunities, leading to volatile swings in trading volume concentration across financial markets, with periods of significant increases followed by rapid declines. This paper examines the variation in the concentration of trading volume across the full spectrum of S&P 500 companies, with a focus on explaining the reasons behind the stochastic changes in trading volume concentration. We analyze different concentration measurement methods, including the power law exponent, the Herfindahl–Hirschman Index, and the Gini-based Trading Concentration Index (TCI). The research employs a novel experimental design, comparing a concentration-driven portfolio, rebalanced daily based on the top 30 stocks by trading volume, against the S&P 500 benchmark. Our findings reveal that the Gini-based TCI fluctuated between 55.98% and 77.35% during the study period, with significant variations coinciding with major market events. The concentration-driven portfolio outperformed the S&P 500, achieving an annualized return of 10.66% compared to 5.89% for the index, with a superior Sharpe ratio of 0.325 versus 0.19. This performance suggests that following trading volume concentration can yield above-average results. However, this study also highlights the importance of understanding and managing the risks associated with concentrated portfolios. This study contributes to the literature on market dynamics and offers practical insights for investors and fund managers on optimizing portfolio strategies in response to evolving concentration patterns in financial markets. Full article

(This article belongs to the Special Issue Financial Markets, Financial Volatility and Beyond (Volume III))

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23 pages, 477 KiB

Open AccessArticle

Regulations and Fintech: A Comparative Study of the Developed and Developing Countries

by Preethi Vijayagopal, Bhawana Jain and Shyam Ayinippully Viswanathan

J. Risk Financial Manag. 2024, 17(8), 324; https://doi.org/10.3390/jrfm17080324 - 26 Jul 2024

Abstract

Financial technology (Fintech) has influenced business by helping create better services for consumers and businesses. Fintech, however, brings new challenges for regulators, who struggle to keep pace with the constant evolution of technology and the resulting disruption. The progress of technology and regulations [...] Read more.

Financial technology (Fintech) has influenced business by helping create better services for consumers and businesses. Fintech, however, brings new challenges for regulators, who struggle to keep pace with the constant evolution of technology and the resulting disruption. The progress of technology and regulations in the Fintech industry has been uneven across developed and developing countries, resulting in numerous opportunities and challenges. Considerable progress has recently been made in the adoption of Fintech and the subsequent development and implementation of regulations in the US, the UK, and India. While the United States (US) and the United Kingdom (UK) are global leaders in Fintech innovation, India has shown fast-paced growth in adopting and utilizing Fintech services. This paper examines the growth and evolution of Fintech in the US, the UK, and India and also explores how the regulatory agencies across these countries have responded to the evolution of Fintech. This paper finds that economies should work towards improving digital infrastructure, financial inclusion, and financial literacy and enhance the collaboration among regulators, Fintech firms, and other stakeholders. Full article

(This article belongs to the Special Issue Financial Technologies (Fintech) in Finance and Economics)

19 pages, 2541 KiB

Open AccessArticle

Enhancing Model Selection by Obtaining Optimal Tuning Parameters in Elastic-Net Quantile Regression, Application to Crude Oil Prices

by Abdullah S. Al-Jawarneh, Ahmed R. M. Alsayed, Heba N. Ayyoub, Mohd Tahir Ismail, Siok Kun Sek, Kivanç Halil Ariç and Giancarlo Manzi

J. Risk Financial Manag. 2024, 17(8), 323; https://doi.org/10.3390/jrfm17080323 - 26 Jul 2024

Abstract

Recently, there has been an increased focus on enhancing the accuracy of machine learning techniques. However, there is the possibility to improve it by selecting the optimal tuning parameters, especially when data heterogeneity and multicollinearity exist. Therefore, this study proposed a statistical model [...] Read more.

Recently, there has been an increased focus on enhancing the accuracy of machine learning techniques. However, there is the possibility to improve it by selecting the optimal tuning parameters, especially when data heterogeneity and multicollinearity exist. Therefore, this study proposed a statistical model to study the importance of changing the crude oil prices in the European Union, in which it should meet state-of-the-art developments on economic, political, environmental, and social challenges. The proposed model is Elastic-net quantile regression, which provides more accurate estimations to tackle multicollinearity, heavy-tailed distributions, heterogeneity, and selecting the most significant variables. The performance has been verified by several statistical criteria. The main findings of numerical simulation and real data application confirm the superiority of the proposed Elastic-net quantile regression at the optimal tuning parameters, as it provided significant information in detecting changes in oil prices. Accordingly, based on the significant selected variables; the exchange rate has the highest influence on oil price changes at high frequencies, followed by retail trade, interest rates, and the consumer price index. The importance of this research is that policymakers take advantage of the vital importance of developing energy policies and decisions in their planning. Full article

(This article belongs to the Special Issue Featured Papers in Mathematics and Finance)

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22 pages, 2526 KiB

Open AccessArticle

Enhancing and Validating a Framework to Curb Illicit Financial Flows (IFFs)

by Ndiimafhi Norah Netshisaulu, Huibrecht Margaretha van der Poll and John Andrew van der Poll

J. Risk Financial Manag. 2024, 17(8), 322; https://doi.org/10.3390/jrfm17080322 - 26 Jul 2024

Abstract

This article examines illicit financial flows (IFFs) perpetuated in financial statements to develop a framework to curb IFFs. IFFs create opacity, impeding economic progress through investment deterrents and financial uncertainty. Through a comprehensive literature review and the synthesis of sets of qualitative propositions, [...] Read more.

This article examines illicit financial flows (IFFs) perpetuated in financial statements to develop a framework to curb IFFs. IFFs create opacity, impeding economic progress through investment deterrents and financial uncertainty. Through a comprehensive literature review and the synthesis of sets of qualitative propositions, the researchers previously developed a conceptual framework to address IFFs, and the purpose of the present article is to strengthen and validate the framework among stakeholders in the financial and audit sectors. Following a mixed inductive and deductive research approach and a qualitative methodological choice, the researchers conducted interviews among practitioners to enhance the framework, followed by a focus group to validate the framework. IFF challenges that emerged are tax evasion, for example, investments in untraceable offshore accounts, harming the economy, and bitcoins not being subject to regulation everywhere in the world and being used by cryptocurrency criminals to transfer IFFs to nations with lax regulations. Internationally, IFF risks are also determined by geographical position, trade links, and porous borders among countries that emerged as further challenges, calling for entities to execute existing policies, improve tax enforcement methods, apply cross-border coordination, and practice financial reporting transparency aimed at combatting IFF practices. On the strength of these, the industry surveys significantly enhanced the conceptual framework. Full article

(This article belongs to the Special Issue Financial Accounting, Reporting and Disclosure)

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19 pages, 775 KiB

Open AccessReview

Challenges for Customs Risk Management Today: A Literature Review

by Sandra Karklina-Admine, Aldis Cevers, Arturs Kovalenko and Armands Auzins

J. Risk Financial Manag. 2024, 17(8), 321; https://doi.org/10.3390/jrfm17080321 - 25 Jul 2024

Abstract

Changes and uncertainty in the customs operating environment and the growth of trade and travel volumes have affected how customs administrations manage and approach their tasks. As a result of technological development, the role of customs in border control has changed dramatically. Thus, [...] Read more.

Changes and uncertainty in the customs operating environment and the growth of trade and travel volumes have affected how customs administrations manage and approach their tasks. As a result of technological development, the role of customs in border control has changed dramatically. Thus, the massive volume of goods, the way they are traded worldwide, and the speed of such transactions create additional fiscal, security, financial, and safety risks, affecting the resources available to customs services. The current geopolitical situation has significantly impacted the role of customs services. The topic is relevant to simultaneously assure both the quality of the services provided by the customs and compliance with the requirements set in the framework of limited resources. This study focuses on customs risk management (CRM) issues. It acknowledges that the customs services must continuously improve their operational methods, including promoting a more structured, integrated, and systematic way to manage customs risks. Based on the literature review, we examine the CRM-related challenges and how scholars address them in the scientific literature. This study aims to identify and analyse the contemporary challenges in CRM from its effectiveness point of view. We employ a systematic literature review, searching in most recognised databases and covering the period of 2005–2024. We follow this with a qualitative content analysis and synthesis, summarising and discussing the study results. We identify and discuss relevant key factors contributing to effective CRM. Finally, we conclude with the implications of the findings for CRM practice and policy, as well as with various potential developments in CRM that we suggest for further work. Full article

(This article belongs to the Special Issue Globalization and Economic Integration)

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33 pages, 579 KiB

Open AccessArticle

Are Regulatory Short Sale Data a Profitable Predictor of UK Stock Returns?

by Michael Ashby

J. Risk Financial Manag. 2024, 17(8), 320; https://doi.org/10.3390/jrfm17080320 - 25 Jul 2024

Abstract

Regulator-required public disclosures of net short positions do not provide a profitable investment signal for UK stocks across a variety of portfolio formation methodologies. While long-short (zero initial outlay) portfolios based on this signal usually make a profit on average, it is rarely [...] Read more.

Regulator-required public disclosures of net short positions do not provide a profitable investment signal for UK stocks across a variety of portfolio formation methodologies. While long-short (zero initial outlay) portfolios based on this signal usually make a profit on average, it is rarely statistically significant in either gross or risk-adjusted terms. The issue is that the short sides of the portfolios make substantial losses. Unit initial outlay portfolios based on the disclosures do not generally significantly outperform the market, either. Where they do significantly outperform the market, this outperformance is economically modest. Full article

(This article belongs to the Special Issue Empirical Research on Asset Pricing and Portfolio Selection)

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26 pages, 2964 KiB

Open AccessArticle

Fintech Adoption and Banks’ Non-Financial Performance: Do Circular Economy Practices Matter?

by Ywana Maher Lamey, Omar Ikbal Tawfik, Omar Durrah and Hamada Elsaid Elmaasrawy

J. Risk Financial Manag. 2024, 17(8), 319; https://doi.org/10.3390/jrfm17080319 - 25 Jul 2024

Abstract

This study draws insights from practice-based view theory (PBV) to investigate the impact of fintech adoption (FA) on the non-financial performance (NFP) of banking institutions in developing countries, considering the mediating role of circular economy practices (CEPs). A structured questionnaire was distributed to [...] Read more.

This study draws insights from practice-based view theory (PBV) to investigate the impact of fintech adoption (FA) on the non-financial performance (NFP) of banking institutions in developing countries, considering the mediating role of circular economy practices (CEPs). A structured questionnaire was distributed to collect primary data from banks’ staff in Iraq, Egypt, Oman, and Jordan using a convenience sampling method with a sample size of 397. Subsequently, the structural equation model was utilized to test the research hypotheses of the proposed conceptual model. The study’s findings revealed that FA positively and significantly impacts CEPs and banks’ NFP (customer satisfaction, internal processes, and learning and growth perspectives). Moreover, CEPs mediate the relationship between FA and banks’ NFP in a positive and significant way. Given the dearth of the literature, this is the first study to fill the research gaps by investigating the impact of FA on the NFP of banking institutions in developing countries, considering CEPs as a mediator, and yielding critical theoretical and practical implications. The study’s findings provide banks’ managers with valuable insights about how to enhance their NFP through FA and CEPs during and after crises and support policymakers and regulators in developing a legislative framework that guides banks to invest in CE models and provides reward systems to encourage them. Full article

(This article belongs to the Special Issue Fintech, Financial Markets, Supply Chain Management & Leadership Risk, Financial Management)

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20 pages, 365 KiB

Open AccessArticle

The Determinants of the Efficiency of Microfinance Institutions in Africa

by Maroua Zineelabidine, Fadwa Nafssi and Hamza Ayass

J. Risk Financial Manag. 2024, 17(8), 318; https://doi.org/10.3390/jrfm17080318 - 24 Jul 2024

Abstract

Over the past few decades, microfinance institutions have attracted the interest of governments and academics alike, given their unique nature of being financial institutions with a dual mission of promoting social development and reducing poverty. However, concerns have been raised about their effectiveness [...] Read more.

Over the past few decades, microfinance institutions have attracted the interest of governments and academics alike, given their unique nature of being financial institutions with a dual mission of promoting social development and reducing poverty. However, concerns have been raised about their effectiveness in achieving these goals while remaining financially sustainable. In this study, we attempt to examine the factors that have the greatest impact on the social, financial, and overall efficiency of microfinance institutions in African regions. We adopt a two-step approach: First, we assess the efficiency scores of 95 microfinance institutions in Africa between 2005 and 2018 using a data envelopment analysis (DEA) approach. We then regress their efficiency scores on a set of determinant variables, capturing the microfinance institutions’ characteristics. Our findings suggest that a majority of institutions prioritize profitability over social outreach. Furthermore, the panel data regression indicates that factors such as profitability, equity capitalization, types of loans, and low gross domestic product (GDP) have a positive influence on microfinance institutions’ efficiency. Conversely, variables including their risk portfolio, grants, microfinance institution status (Non-Governmental Organization (NGO), cooperative, etc.), operational area, political environment, and size exert a negative impact on efficiency. Through this study, we seek to enhance our understanding of microfinance institutions and to identify the factors that impact their operational efficiency, thereby reinforcing their crucial role in advancing financial inclusion, empowering marginalized communities, and fostering inclusive economic growth. Full article

(This article belongs to the Special Issue Financial Econometrics and Quantitative Economic Analysis)

13 pages, 268 KiB

Open AccessArticle

Determinants of Zombie Firms: The Impact of Corporate Insolvency Efficiency and Cultural Factors

by Yongcuo Zhaxi and Yukihiro Yasuda

J. Risk Financial Manag. 2024, 17(8), 317; https://doi.org/10.3390/jrfm17080317 - 24 Jul 2024

Abstract

By examining a broad range of companies from both developed and developing nations from 2015 to 2021, we gather evidence on the occurrence and factors contributing to the existence of zombie firms. Approximately 10% of our observations are identified as zombie firms, and [...] Read more.

By examining a broad range of companies from both developed and developing nations from 2015 to 2021, we gather evidence on the occurrence and factors contributing to the existence of zombie firms. Approximately 10% of our observations are identified as zombie firms, and there is significant variability in the proportion of zombie firms across different countries. We find that countries with more efficient corporate insolvency rules tend to have a lower incidence of zombie firms. We also establish that a nation’s culture plays a vital role in determining the prevalence of zombie firms. More specifically, our findings indicate that countries with higher levels of individualism culture tend to have lower numbers of zombie firms. Full article

(This article belongs to the Special Issue Financial Markets and Institutions)

17 pages, 283 KiB

Open AccessArticle

Does Investors’ Online Public Opinion Divergence Increase the Trading Volume? Evidence from the CSI 300 Index Constituents

by Zihuang Huang, Qing Xu and Xinyu Wang

J. Risk Financial Manag. 2024, 17(8), 316; https://doi.org/10.3390/jrfm17080316 - 24 Jul 2024

Abstract

We collected online public opinions on the CSI 300 index constituents and investigated the different impacts of online public opinion divergence on trading volume. Here, we find that online public opinions are helpful in improving the trading volume, but the online public opinion [...] Read more.

We collected online public opinions on the CSI 300 index constituents and investigated the different impacts of online public opinion divergence on trading volume. Here, we find that online public opinions are helpful in improving the trading volume, but the online public opinion divergence of investors reduces the expected trading volume. In particular, non-financial and mid-cap stocks with high levels of discussion are more significantly influenced by online public opinion divergence. Through the classification of investors’ influence levels, we find that the divergence among high-level investors increases the trading volume, while the divergence among low-level investors exacerbates the decrease in trading volume. A reduction in divergence for both levels will have a greater impact. We believe that attention should be paid to regulating and guiding the online public opinions of “newcomers”. This will not only improve the quality of Guba but also contribute to the steady development of the Chinese stock market. Full article

(This article belongs to the Special Issue Advances in Macroeconomics and Financial Markets)

19 pages, 1060 KiB

Open AccessArticle

Unveiling the Path to Mobile Payment Adoption: Insights from Thai Consumers

by Chuleeporn Changchit, Robert Cutshall and Long Pham

J. Risk Financial Manag. 2024, 17(8), 315; https://doi.org/10.3390/jrfm17080315 - 24 Jul 2024

Abstract

Mobile payment, replacing traditional methods like cash and cards, offers users convenience and accessibility, benefiting individuals, businesses, and governments. However, most research on mobile payment adoption has primarily focused on developed countries, leaving a gap in understanding the adoption factors in developing nations. [...] Read more.

Mobile payment, replacing traditional methods like cash and cards, offers users convenience and accessibility, benefiting individuals, businesses, and governments. However, most research on mobile payment adoption has primarily focused on developed countries, leaving a gap in understanding the adoption factors in developing nations. This study addresses this gap by investigating the determinants of mobile payment adoption in Thailand, an emerging economy experiencing significant smartphone adoption and e-commerce growth. Through a quantitative approach and a survey of 475 Thai consumers, this research applies an extended Unified Theory of Acceptance and Use of Technology (UTAUT) model as a theoretical foundation to examine Thai consumers’ mobile payment adoption. Data analysis using SPSS 28.0 and AMOS 28.0 identifies key factors influencing Thai consumers to adopt mobile payment. By offering a comprehensive research model and considering evolving smartphone technology, this study aims to guide policymakers and stakeholders in promoting mobile payment adoption, ultimately enhancing Thailand’s economic development and tourism industry. Full article

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

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17 pages, 567 KiB

Open AccessArticle

Personal Networks, Board Structures and Corporate Fraud in Japan

by Takeshi Osada, David Vera and Taketoshi Hashimoto

J. Risk Financial Manag. 2024, 17(8), 314; https://doi.org/10.3390/jrfm17080314 - 23 Jul 2024

Abstract

We examine the impact of corporate governance and personal networks on corporate fraud in Japanese companies, using panel logit and Cox proportional hazard models to analyze fraud occurrence and detection. This study focuses on the effects of Japan’s recent corporate governance reform and [...] Read more.

We examine the impact of corporate governance and personal networks on corporate fraud in Japanese companies, using panel logit and Cox proportional hazard models to analyze fraud occurrence and detection. This study focuses on the effects of Japan’s recent corporate governance reform and explores the unique influence of personal networks. Our key findings indicate that recent changes in corporate governance in Japan have been effective in preventing the occurrence of fraud and accelerating its detection. Additionally, stronger personal networks among board members help prevent fraud concealment, highlighting cultural differences in the effectiveness of personal networks in corporate governance compared to findings from Europe and the US. Full article

(This article belongs to the Special Issue Financial Markets and Institutions)

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16 pages, 244 KiB

Open AccessFeature PaperArticle

Does Managerial Overconfidence Change with Market Conditions? Risk Management for Financial Institutions

by Jan P. Voon, Wai Lan Victoria Yeung and Sze Nam Chan

J. Risk Financial Manag. 2024, 17(8), 313; https://doi.org/10.3390/jrfm17080313 - 23 Jul 2024

Abstract

Overconfidence (hubris or overestimation of one’s ability to perform) has been viewed in the finance literature as a character trait that is stable over time, e.g., assuming that if a manager is overconfident, he/she is overconfident all the time. In this paper, we [...] Read more.

Overconfidence (hubris or overestimation of one’s ability to perform) has been viewed in the finance literature as a character trait that is stable over time, e.g., assuming that if a manager is overconfident, he/she is overconfident all the time. In this paper, we aim to show that managerial overconfidence can be state-contingent, i.e., the level of managerial overconfidence could be influenced by an external economic shock such as the global financial crisis in 2008. A novelty of this paper is to provide evidence for and application of the concept of state-based managerial overconfidence, which is new in the finance literature. Two empirical studies were reported. In the first study (Study 1), we analyzed real market data by linear regression. We found that managerial overconfidence could vary according to changes in the state of the macroeconomy or tightening of corporate governance policies. In the second study (Study 2), we conducted a lab experiment simulating how external manipulations could alter participants’ confidence level. Both our empirical studies provide strong evidence of state-contingent overconfidence by Student’s t-test and contribute to the current finance literature, which assumes overconfidence as a personality trait. Our findings have important practical implications for the credit market. According to the state-contingent overconfidence hypothesis, creditors might reduce the loan amount or the loan duration (or other loan contract terms) too excessively by more than the efficient level during an economic downturn if the offsetting effect of state-contingent overconfidence is ignored. Full article

(This article belongs to the Section Financial Markets)

17 pages, 1681 KiB

Open AccessReview

Potential Predictors of Psychologically Based Stock Price Movements

by Robert East and Malcolm Wright

J. Risk Financial Manag. 2024, 17(8), 312; https://doi.org/10.3390/jrfm17080312 - 23 Jul 2024

Abstract

Investment in stocks is increasingly dependent on artificial intelligence (AI), but the psychological and social factors that affect stock prices may not be fully covered by the measures currently used in AI training. Here, we search for additional measures that may improve AI [...] Read more.

Investment in stocks is increasingly dependent on artificial intelligence (AI), but the psychological and social factors that affect stock prices may not be fully covered by the measures currently used in AI training. Here, we search for additional measures that may improve AI predictions. We start by reviewing stock price movements that appear to be affected by social and psychological factors, drawing on stock market behaviour during the COVID-19 pandemic. A review of processes that are likely to produce such stock market movements follows: the disposition effect, momentum, and the response to information. These processes are then explained by regression to the mean, negativity bias, the availability mechanism, and information diffusion. Taking account of these processes and drawing on the consumer behaviour literature, we identify three factors which may not be covered by current AI training data that could affect stock prices: publicity in relation to capitalization, stock-holding penetration in relation to capitalization, and changes in the penetration of stock holding. Full article

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17 pages, 297 KiB

Open AccessArticle

Corporate Cash Holdings and Investment Efficiency: Do Women Directors and Financial Crisis Matter?

by Ardianto Ardianto and Noor Adwa Sulaiman

J. Risk Financial Manag. 2024, 17(7), 311; https://doi.org/10.3390/jrfm17070311 - 22 Jul 2024

Abstract

This study investigates the relationship between corporate cash holdings and investment efficiency, with a focus on how COVID-19 and the presence of women directors may influence this relationship. Using data from Indonesian public companies during the COVID-19 period, comprising 2350 firm-year observations, we [...] Read more.

This study investigates the relationship between corporate cash holdings and investment efficiency, with a focus on how COVID-19 and the presence of women directors may influence this relationship. Using data from Indonesian public companies during the COVID-19 period, comprising 2350 firm-year observations, we employ fixed-effect regression models with industry and year controls to test our hypotheses. Robustness and endogeneity tests are conducted to ensure the reliability of our findings. Our research reveals that companies with larger cash reserves tend to experience decreased investment efficiency during the COVID-19 crisis. Moreover, the negative impact of substantial cash reserves on investment efficiency is exacerbated by the presence of female directors on the board. However, our findings also suggest that female directors can mitigate the adverse effects of excessive cash reserves on a company’s investment efficiency, particularly during unforeseen economic challenges such as the pandemic. Full article

(This article belongs to the Special Issue Risk Management in Capital Markets)

26 pages, 2075 KiB

Open AccessArticle

Estimation of Optimal Hedge Ratio: A Wild Bootstrap Approach

by Phong Minh Nguyen, Darren Henry, Jae H. Kim and Sisira Colombage

J. Risk Financial Manag. 2024, 17(7), 310; https://doi.org/10.3390/jrfm17070310 - 20 Jul 2024

Abstract

This paper proposes a new approach to estimating the minimum variance hedge ratio (MVHR) based on the wild bootstrap and evaluates the approach using a spectrum of conservative to aggressive alternative hedging strategies associated with the percentiles of the MVHR’s bootstrap distribution. This [...] Read more.

This paper proposes a new approach to estimating the minimum variance hedge ratio (MVHR) based on the wild bootstrap and evaluates the approach using a spectrum of conservative to aggressive alternative hedging strategies associated with the percentiles of the MVHR’s bootstrap distribution. This approach is suggested to be more informative and effective relative to the conventional method of hedging solely based on a single-point estimate. Furthermore, the percentile-based MVHRs are robust to influential outliers, non-normality, and unknown forms of heteroskedasticity. The bootstrap percentile-based hedging strategies’ effectiveness is compared with those from the naïve method and the asymmetric DCC-GARCH model for a range of financial assets and commodities. The bootstrap percentile-based hedging technique is identified to outperform its alternatives in terms of hedging effectiveness, downside risk, and return variability, suggesting its superiority to other methods in both the literature and in practice. Full article

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

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18 pages, 1562 KiB

Open AccessReview

Factors Influencing Sustainable Poverty Reduction: A Systematic Review of the Literature with a Microfinance Perspective

by Salvador Fonseca, António Moreira and Jorge Mota

J. Risk Financial Manag. 2024, 17(7), 309; https://doi.org/10.3390/jrfm17070309 - 19 Jul 2024

Abstract

This research examined factors that help microfinance achieve sustained poverty reduction based on a systematic literature review (SLR). A search was conducted on the SCOPUS database up to December 2023. After analyzing hundreds of documents, a subset of 30 articles was subject to [...] Read more.

This research examined factors that help microfinance achieve sustained poverty reduction based on a systematic literature review (SLR). A search was conducted on the SCOPUS database up to December 2023. After analyzing hundreds of documents, a subset of 30 articles was subject to in-depth analysis, exploring factors and corresponding measurement indicators for sustainable poverty reduction in microfinance contexts. This article emphasizes that sustained poverty reduction is a gradual process requiring ongoing efforts from both Microfinance Institutions (MFIs) and governments. Two key success factors are empowering borrowers and ensuring the microfinance programs themselves are profitable. When implemented in an integrated and coordinated manner, these factors can empower individuals to escape poverty by fostering self-employment and income generation, ultimately reducing dependence on external support. Additionally, the study highlights the role of personality traits in influencing long-term entrepreneurial success. The findings provide valuable tools for MFIs and policymakers. MFIs gain a practical framework to guide their interventions towards sustained poverty reduction. Policymakers can leverage the identified factors and indicators when designing and implementing microfinance policies with a long-term focus on poverty alleviation. This study breaks new ground by presenting an operational framework that categorizes and integrates two critical factor groups: empowerment and beneficiary profitability. Furthermore, it links these factors to corresponding measurement indicators within a unified framework, enabling a more holistic assessment of poverty reduction efforts. Full article

(This article belongs to the Special Issue Building an Inclusive and Responsive Financial Ecosystem for Sustainable Development)

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6 pages, 201 KiB

Open AccessEditorial

Corporate Finance and Environmental, Social, and Governance (ESG) Practices

by Ștefan Cristian Gherghina

J. Risk Financial Manag. 2024, 17(7), 308; https://doi.org/10.3390/jrfm17070308 - 18 Jul 2024

Abstract

As global warming progresses, implementing green finance to redirect resources into sustainable initiatives has emerged as a crucial strategy for governments to develop financial systems that are carbon-free, green, and sustainable (Jin et al [...] Full article

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

38 pages, 515 KiB

Open AccessArticle

Navigating the Storm: How Economic Uncertainty Shapes Audit Quality in BRICS Nations Amid CEO Power Dynamics

by Antonios Persakis and Ioannis Tsakalos

J. Risk Financial Manag. 2024, 17(7), 307; https://doi.org/10.3390/jrfm17070307 - 18 Jul 2024

Abstract

This study investigates the association between economic uncertainty and audit quality in the BRICS nations, examining both input-based (e.g., audit fees, auditor tenure) and output-based (e.g., restatements, total accruals) measures of audit quality. Utilizing a dataset of 83,511 firm-year observations from 1995–2022, it [...] Read more.

This study investigates the association between economic uncertainty and audit quality in the BRICS nations, examining both input-based (e.g., audit fees, auditor tenure) and output-based (e.g., restatements, total accruals) measures of audit quality. Utilizing a dataset of 83,511 firm-year observations from 1995–2022, it reveals a significant negative impact of economic uncertainty on audit quality. Additionally, the research explores the moderating role of CEO power, employing principal component analysis to merge various indicators of CEO influence. Findings indicate that powerful CEOs can mitigate the adverse effects of economic uncertainty on audit quality, suggesting a U-shaped relationship between CEO power and audit quality. Methodologically robust, employing techniques like two-stage least squares (2SLS) and two-stage system generalized method of moments (system GMM) to address endogeneity, the study offers a comprehensive analysis of audit quality in the context of economic fluctuations and corporate governance, contributing significantly to the understanding of these dynamics in emerging economies, particularly in the diverse and influential BRICS nations. This study’s findings have significant implications for stakeholders and policymakers, providing insights that can inform policy decisions and enhance corporate governance frameworks. Full article

(This article belongs to the Special Issue Featured Papers in Corporate Finance and Governance)

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