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Showing papers on "Financial risk published in 2019"


Journal ArticleDOI
TL;DR: In this article, the authors adapt simple tools from computational linguistics to construct a new measure of political risk faced by individual US firms: the share of their quarterly earnings conference calls that they devote to political risks.
Abstract: We adapt simple tools from computational linguistics to construct a new measure of political risk faced by individual US firms: the share of their quarterly earnings conference calls that they devote to political risks. We validate our measure by showing it correctly identifies calls containing extensive conversations on risks that are political in nature, that it varies intuitively over time and across sectors, and that it correlates with the firm's actions and stock market volatility in a manner that is highly indicative of political risk. Firms exposed to political risk retrench hiring and investment and actively lobby and donate to politicians. These results continue to hold after controlling for news about the mean (as opposed to the variance) of political shocks. Interestingly, the vast majority of the variation in our measure is at the firm level rather than at the aggregate or sector level, in the sense that it is neither captured by the interaction of sector and time fixed effects, nor by heterogeneous exposure of individual firms to aggregate political risk. The dispersion of this firm-level political risk increases significantly at times with high aggregate political risk. Decomposing our measure of political risk by topic, we find that firms that devote more time to discussing risks associated with a given political topic tend to increase lobbying on that topic, but not on other topics, in the following quarter.

272 citations


Journal ArticleDOI
TL;DR: In this paper, the authors take a novel perspective and review 96 empirical studies concerning the impact of policies on two key investor decision metrics: investment risk and investment return, and find that effective policies address risk and return simultaneously.

183 citations


Journal ArticleDOI
TL;DR: In this article, the authors use two waves of the Flash Eurobarometer survey on entrepreneurship (2009 and 2012), which contains information on start-up motivations, startup barriers, and risk perceptions of approximately 3000 (prospective) business owners across 33 countries.
Abstract: Entrepreneurs who start a business to serve both self-interests and collective interests by addressing unmet social and environmental needs are usually referred to as sustainable entrepreneurs. Compared with regular entrepreneurs, we argue that sustainable entrepreneurs face specific challenges when establishing their businesses owing to the discrepancy between the creation and appropriation of private value and social value. We hypothesize that when starting a business, sustainable entrepreneurs (1) feel more hampered by perceived barriers, such as the institutional environment and (2) have a different risk attitude and perception than regular entrepreneurs. We use two waves of the Flash Eurobarometer survey on entrepreneurship (2009 and 2012), which contains information on start-up motivations, start-up barriers, and risk perceptions of approximately 3000 (prospective) business owners across 33 countries. We find that sustainable entrepreneurs indeed perceive more institutional barriers in terms of a lack of financial, administrative, and informational support at business start-up than regular entrepreneurs. Further, no significant differences between sustainable and regular entrepreneurs are found in terms of their risk attitudes or perceived financial risks. However, sustainable entrepreneurs are more likely to fear personal failure than regular entrepreneurs, which is explained by their varied and complex stakeholder relations. These insights may serve as an important signal for both governments and private capital providers in enhancing the institutional climate.

149 citations


Journal ArticleDOI
TL;DR: In this paper, a review of existing and novel prudential approaches to incentivizing the decarbonization of banks' balance sheets and aligning finance with sustainable growth and development objectives is presented.

126 citations


Journal ArticleDOI
01 May 2019
TL;DR: In this article, the Sendai Framework for Disaster Risk Reduction (SFDRR) is reviewed and the implications for disaster risk management in low-lying countries and small island developing countries.
Abstract: This viewpoint reviews key assessments from the IPCC Special Report on Global Warming of 1.5 °C and examines the implications for the Sendai Framework for Disaster Risk Reduction (SFDRR). Disaster risks are expected to be higher at 1.5 °C and continue to increase at 2 °C. Current and future disaster risk management particularly those that deal with the impacts of coastal flooding, heat-related health impacts, sea level rise, and forest fires are to be strengthened, particularly the Arctic, Caribbean, SIDS and low-lying coastal areas are particularly at risk. SFRDRR implementation requires focusing on low-lying countries and Small Island Developing States, complemented with development of financial risk sharing and insurance mechanisms, and ensuring coherence between SFDRR, Paris Agreement and the Sustainable Development Goals.

108 citations


Journal ArticleDOI
01 Jun 2019-Energy
TL;DR: In this article, the authors established an evaluation criteria system from eight dimensions which consists of a total of 39 criteria and determined these criteria weights through a combined analytic network process-entropy method.

91 citations


Journal ArticleDOI
TL;DR: The authors explored the non-linear effects of both finance development and country risks on income inequality when countries' risk changes through a broad sample of 59 countries over the period 1985-2015.

87 citations


Journal ArticleDOI
TL;DR: In this paper, a strategy for the realisation of potential benefits through commercially viable and scientifically robust blue carbon initiatives is presented alongside insights and guidance for the policy, research, civil society, and private sectors to achieve these important long-term outcomes.

80 citations


Journal ArticleDOI
TL;DR: In this paper, the influence of green product innovation performance (GPIP) on a firm's financial performance (i.e., a firm’s profitability and risk) is investigated.
Abstract: The purpose of this paper is to investigate the influence of green product innovation performance (GPIP) on a firm’s financial performance (i.e. a firm’s profitability and risk). In addition, it has adopted the resource-based view and contingency theory to explore how GPIP and a firm’s financial performance relationship is manifested when subject to the moderating role of a firm’s market resource intensity and certain environmental factors, such as technological turbulence and market turbulence.,Data were collected from 202 publicly listed Thai manufacturing firms. This research has used hierarchical regression analyses to empirically test the proposed research hypotheses.,The findings reveal that GPIP exerts a significant influence on a firm’s financial performance, i.e. higher the GPIP, higher the firm’s profitability and lower the firm’s financial risk. Moreover, findings support the theoretical assertions that the higher level of market resource intensity, market turbulence and technological turbulence further strengthens GPIP and a firm’s financial performance relationship.,By considering the independent moderating role of market resource intensity, market turbulence and technological turbulence, this research has contributed to reconcile the previously disparate findings regarding the GPIP and a firm’s financial performance relationship. Moreover, this research has highlighted the role of the essential moderators that business managers must understand and adjust to capitalize on and achieve superior financial performance.

77 citations


Journal ArticleDOI
TL;DR: In this article, the authors analyzed and compared the economic and financial risk sources in SMEs of the V4 (Visegrad Group: Czech Republic, Hungary, Poland and Slovakia) and Serbia, in the context of the business environment of the countries analyzed.
Abstract: Risk management is one of the most important internal process, not only in large companies but also in small and medium-sized enterprises (SMEs). To identify the source of risk can be crucial in all companies. The primary objective of this study is to analyze and compare the economic and financial risk sources in SMEs of the V4 (Visegrad Group: Czech Republic, Hungary, Poland and Slovakia) and Serbia, in the context of the business environment of the countries analyzed. To achieve this goal, a questionnaire-based survey was carried out involving 2110 SMEs from Hungary, Poland, Slovakia, the Czech Republic, and Serbia. The questionnaire included questions about the importance of risks and the concept of risk management in the company. To test the formulated hypotheses, the following statistical tools were used: contingency tables, a Z-value, and a general non-hierarchical log-linear model with three categorical variables and a continuous covariate. Finally, the differences among V4 countries and Serbia were identified. Serbia is more vulnerable to the financial risk sources studied than the V4 countries. The result of the research shows that insufficient profit is more hazardous compared to the other risk sources and all countries are more vulnerable in in this issue. The article concludes with a discussion and a comparison with previous international researches.

77 citations


Journal ArticleDOI
TL;DR: In this paper, the authors constructed an integrated model to examine the impact of financial literacy, access to finance and financial risk attitude on SMEs' sustainability, and found that financial literacy was a predictor of access and risk attitude.
Abstract: Role of the knowledge-based resources in promoting sustainability in small and medium enterprises (SMEs) is currently a topic of debate. Financial literacy has been identified as a vital knowledge resource for financial decision making, but insufficient attention has been given to how SMEs’ financial literacy affects their sustainability. Drawing upon a knowledge-based perspective, peaking order theory and dual process theory, we constructed an integrated model to examine the impact of financial literacy, access to finance and financial risk attitude on SMEs’ sustainability. The sample included 291 chief financial officers (CFOs) of SMEs in Sri Lanka. The output of structural equation modelling revealed direct positive effects of financial literacy, access to finance and financial risk attitude on sustainability. Financial literacy also emerged as a predictor of access to finance and financial risk attitude. Moreover, access to finance and financial risk attitude were found to be partial mediators of the relationship between financial literacy and SMEs’ sustainability. Theoretical implications and practical implications for policymakers, industry practitioners and academics interested in promoting sustainability amongst SMEs are discussed.

Journal ArticleDOI
TL;DR: The authors decompose news conveyed by central-bank communication into monetary policy (monetary news), as well as non-monetary (economic growth and news affecting financial risk premia), using evidence from four major central banks.

Journal ArticleDOI
TL;DR: Li et al. as mentioned in this paper examined the role of a firm's life cycle stage on the relationship between corporate social responsibility (CSR) and financial constraints, and found that for firms in the growth, mature, and declining phases of the life cycle the CSR engagement is negatively correlated with financial constraints.

Journal ArticleDOI
TL;DR: In this paper, the authors systematically reviewed the literature on supply chain finance with the objective of clarifying the relationship between SCF actors, instruments, and contextual factors, and identified three main archetypes for this relationship: fixed-asset financing, inventory financing, and accounts receivable/accounts payable financing.

Journal ArticleDOI
TL;DR: In this paper, the authors explore both risk tolerance and risk perception in the investment decision-making context and reveal that risk tolerance influences risky-asset allocation directly and indirectly through risk perception.
Abstract: The increasing complexity of the investment environment has accelerated the need for better quality financial advice services. Central to quality advice is advisers’ accurate assessment of their clients’ risk characteristics. Typically a client's risk characteristic is assessed by measuring the client's risk tolerance but not risk perception. To assess whether this practice fails to fully capture the client's risk profile, we explore both risk tolerance and risk perception in the investment decision‐making context. Using Australian online survey data of financial adviser clients (n = 364), our results reveal that risk tolerance influences risky‐asset allocation directly and indirectly through risk perception. These results thus clarify the joint role of both risk constructs in the investment making decision and highlight the importance of assessing both in the provision of client financial advice services. Importantly, our results validate a new comprehensive risk perception measure applicable in the financial advice context.

Journal ArticleDOI
TL;DR: The results of empirical data analysis show that the model has good piecewise fit for financial risk management and management of supply chain under Internet financial model, and the accuracy of data evaluation is high.


Journal ArticleDOI
TL;DR: In this paper, the authors present a special issue of the European Association of Evolutionary Political Economy (EAEPE) 2016 Special Session of the Research Area “Environment-Economics Interactions” of the EAEPE's conference 2016, which collected nine papers applying evolutionary and complex systems approaches, and agent-based and network models to climate change economics.

Journal ArticleDOI
TL;DR: In this paper, a negative relationship between economic activity and an external financial indicator was found for several emerging economies using micro-level data on spreads of bonds issued by EMEs' corporations in foreign capital markets.

Book
04 Oct 2019
TL;DR: In this article, the authors focus on the policy interventions made to help people manage risk, uncertainty and the losses from events whose impacts are channeled primarily through the labor market and propose alternative risk-sharing policies, or ways to augment and improve current policies to be more relevant and responsive to peoples' needs.
Abstract: This white paper is a contribution to the broader, global discussion of the changing nature of work and how policy can shape its implications for the wellbeing of people. It focusses on the policy interventions made to help people manage risk, uncertainty and the losses from events whose impacts are channeled primarily through the labor market. The objectives of the white paper are: to scrutinize the relevance and effects of prevailing risk-sharing policies in low- and middle-income countries; take account of how global drivers of disruption shape and diversify how people work; in light of this diversity, propose alternative risk-sharing policies, or ways to augment and improve current policies to be more relevant and responsive to peoples' needs; and map a reasonable transition path from the current to an alternative policy approach that substantially extends protection to a greater portion of working people and their families. The term risk-sharing policies is used broadly in reference to the set of institutions, regulations and interventions that societies put in place to help households manage shocks to their livelihoods. Effective risk-sharing policies are foundational to building equity, resilience and opportunity. These policies include formal rules and structures that regulate market interactions (worker protections and other labor market institutions), that help people pool risks (social assistance and social insurance), to save and insure affordably and effectively (mandatory and incentivized individual savings and other financial instruments), and to recover from losses in the wake of livelihood shocks ('active' reemployment measures).

21 May 2019
TL;DR: In this paper, the authors examined CAC 40 firms' compliance with the recommendations of the Task Force on Climate-related financial disclosure (TCFD) by building a new index (Comprehensive Compliance Index-CCI) to measure the disclosure of environmental information.
Abstract: Climate change is introducing greater risk and uncertainty into the economy and financial system. Despite wide acceptance of the need to reduce emissions, information failures limit understanding of the financial risks. As a result, the Financial Stability Board is pushing for greater disclosure via an international initiative: the Task Force on Climate-related Financial Disclosures (TCFD). Based on content analysis of firms' reference documents over 2015-2017, this article examines CAC 40 firms' compliance with the recommendations of TCFD by building a new index (Comprehensive Compliance Index-CCI) to measure the disclosure of environmental information. Our results highlight a gradual improvement in environmental disclosure by CAC 40 companies over the three years. CCI levels were relatively satisfactory in 2015 and 2016 to the extent that the TCFD report had not yet been published, but it masks discrepancies. Sectors with high environmental impact have higher index scores than low impact sectors. In 2017, CAC 40 companies communicated the most in the areas of risk management, metrics and governance, far ahead of strategy, and there was an improvement in the environmental disclosure in each area. Finally, our content analysis allows us to develop a matrix of climate risks and opportunities per sector. JEL: M40, M14

Proceedings ArticleDOI
01 Jul 2019
TL;DR: A multimodal deep regression model (MDRM) is proposed that jointly model CEO’s verbal (from text) and vocal (from audio) information in a conference call and shows significant and substantial prediction error reduction.
Abstract: Predicting financial risk is an essential task in financial market. Prior research has shown that textual information in a firm’s financial statement can be used to predict its stock’s risk level. Nowadays, firm CEOs communicate information not only verbally through press releases and financial reports, but also nonverbally through investor meetings and earnings conference calls. There are anecdotal evidences that CEO’s vocal features, such as emotions and voice tones, can reveal the firm’s performance. However, how vocal features can be used to predict risk levels, and to what extent, is still unknown. To fill the gap, we obtain earnings call audio recordings and textual transcripts for S&P 500 companies in recent years. We propose a multimodal deep regression model (MDRM) that jointly model CEO’s verbal (from text) and vocal (from audio) information in a conference call. Empirical results show that our model that jointly considers verbal and vocal features achieves significant and substantial prediction error reduction. We also discuss several interesting findings and the implications to financial markets. The processed earnings conference calls data (text and audio) are released for readers who are interested in reproducing the results or designing trading strategy.

Journal ArticleDOI
Chu Chen1, Jay Pan1
TL;DR: This study demonstrates that the health poverty alleviation project significantly improves financial risk protection by reducing out-of-pocket payments and decreasing the probability of incurring catastrophic or impoverishing levels of health expenditure.
Abstract: Illness is the leading cause (44%) of poverty in China. Since 2016, The health poverty alleviation project, an integral component of the Targeted Poverty Alleviation in China, was implemented in 2016 to strengthen financial risk protection against illness for financially backward segments of the population. However, the effects of the health poverty alleviation project on financial risk protection have not been explored in the literature, this paper aims to bridge the gap. Using panel data on 63,426 rural households in Chishui City, China, from 2014 to 2017, the difference-in-differences with propensity score matching method was employed. The health poverty alleviation project reduces out-of-pocket payments by 15% on average and decreases the probability of catastrophic health expenditure (annual out-of-pocket payments exceeding 10% of annual household income) and impoverishing health spending occurrence (out-of-pocket payments are forcing a household into poverty or into deeper poverty) by 7.7 and 11.7%, respectively. Additionally, the project increases the number of annual hospitalizations per household by 0.035. Our study demonstrates that the health poverty alleviation project significantly improves financial risk protection by reducing out-of-pocket payments and decreasing the probability of incurring catastrophic or impoverishing levels of health expenditure. Our study has implications for the poverty reduction policies and reform of the Chinese health financing system.

Journal ArticleDOI
TL;DR: A mathematical model is proposed to consider the risk in the optimal RCS deployment problem such that the expected profit is maximized while financial risk is minimized and is applied to the RBTS-Bus4 and a real distribution network.
Abstract: The great share of interruptions in distribution networks motivates distribution decision makers to establish various reliability enhancement strategies. Amongst these strategies, deploying remote controlled switch (RCS) can make a crucial contribution to the reduction of interruption costs. Nevertheless, the stochastic nature of contingencies affects RCS worth and imposes substantial financial risk to RCS deployment projects. This paper proposes a mathematical model to consider the risk in the optimal RCS deployment problem. The model determines the number and location of RCSs such that the expected profit is maximized while financial risk is minimized. The risk is modeled through conditional value-at-risk (CVaR) as one of the most applied risk indices. The risk preference of distribution companies is considered via integrating the weighted risk index and the expected profit in the objective function. The model is formulated in the format of mixed integer programming (MIP) which enables solving the problem in an effective runtime. The model is applied to the RBTS-Bus4 and a real distribution network. Various studies and sensitivity analyses reveal the importance of considering financial risk in the problem and the performance of the proposed model.

Journal ArticleDOI
TL;DR: Although path dependence played a significant role in exerting pressure to resist change, the reform team’s capacity to generate and effectively utilize evidence to guide policy decision-making process enabled the reform to be placed on a “good path” that overcame opposition.
Abstract: Thailand achieved full population coverage of financial protection for health care in 2002 with successful implementation of the Universal Coverage Scheme (UCS). The three public health insurance schemes covered 98.5% of the population by 2015. Current evidence shows a high level of service coverage and financial risk protection and low level of unmet healthcare need, but the path toward UHC was not straightforward. Applying the Political Economy of UHC Reform Framework and the concept of path dependency, this study reviews how these factors influenced the evolution of the UHC reform in Thailand. We highlight how path dependency both set the groundwork for future insurance expansion and contributed to the persistence of a fragmented insurance pool even as the reform team was able to overcome certain path inefficient institutions and adopt more evidence-based payment schemes in the UCS. We then highlight two critical political economy challenges that can hamper reform, if not managed well, regarding the budgeting processes, which minimized the discretionary power previously exerted by Bureau of Budget, and the purchaser-provider split that created long-term tensions between the Ministry of Public Health and the National Health Security Office. Though resisted, these two changes were key to generating adequate resources to, and good governance of, the UCS. We conclude that although path dependence played a significant role in exerting pressure to resist change, the reform team's capacity to generate and effectively utilize evidence to guide policy decision-making process enabled the reform to be placed on a "good path" that overcame opposition.

Journal ArticleDOI
TL;DR: In this article, a taxonomy, a framework and a research agenda are proposed to support future works on social supply chain risks, and a systematic literature review is conducted, and after analysing 77 abstracts and 43 full papers, they identify twenty-four social risks and thirteen consequences that those risks can generate for the company and consequently affect the entire supply chain.

Journal ArticleDOI
TL;DR: In this paper, the authors re-examine risk management theories in the airline context and investigate whether financial hedging (fuel, foreign exchange and interest rates) is an effective strategy for enhancing operational profitability.
Abstract: This paper re-examines risk management theories in the airline context and investigates whether financial hedging (fuel, foreign exchange and interest rates) is an effective strategy for enhancing operational profitability. Based on data from 100 international airlines over six years, we evaluate the impact of hedging on financial airline performance. Our results suggest that fuel price hedging significantly decreases EBIT margin volatility (hence effective in mitigating financial risks) but has no significant effects on profitability (hence ineffective as a speculative tool) and operating costs. Low current ratios are shown to increase operating profits, highlighting the importance of liquidity in capital-intensive industries.

Journal ArticleDOI
TL;DR: In this paper, the authors investigate the association between board gender diversity and firms' reputation risk and financial risk using S&P data from 1997 to 2013 and find that gender diversity is negatively associated with tax avoidance, suggesting firms with gender-diverse boards are more cautious about potential reputation risks associated with aggressive tax strategies.
Abstract: We study whether board gender diversity (BGD) affects corporate risk strategies. Specifically, we investigate the association between BGD and firms’ reputation risk and financial risk. Using S&P data from 1997 to 2013, we find that BGD is negatively associated with tax avoidance, suggesting firms with gender-diverse boards are more cautious about potential reputation risks associated with aggressive tax strategies. However, we find that BGD is positively associated with firms’ financial risk. The combined findings illustrate that BGD aligns a firm's risk exposure closer to risk-neutral shareholders’ preferences by reducing reputation risk exposure while enabling necessary financial risk exposure.

Book ChapterDOI
01 Jan 2019
TL;DR: In this paper, the authors discuss strengths, weaknesses, opportunities and risks of robo-advisors, and suggest that roboadvisors have a huge potential to shape the future of the financial advisory industry, despite the fact that there is still a lot of potential yet to be exploited.
Abstract: Without professional advisors, taking financial risks is a challenging task for most private households (retail investors). Across countries, digital financial advisory services, in particularly robo-advisors, are becoming more popular in retail and private banking. These tools support their users in financial decision-making, like risk-measurement, portfolio selection, or rebalancing. Recent studies suggest that in the long-term, they could supplement human financial advisory. This work illustrates the key concepts of this (r)evolution, and discusses strengths, weaknesses, opportunities and risks of robo-advisory. The results suggest that robo-advisors have a huge potential to shape the future of the financial advisory industry, despite the fact that there is still a lot of potential yet to be exploited.

Journal ArticleDOI
TL;DR: A new financing mode of inventory pledge was designed based on the special function of Internet of Things (IoT) technology and the business process of inventory financing mode effectively reduced the operation risk.
Abstract: The objective of this paper is to analyze the problems of information asymmetry, mode lag, and high operational risk between banks and enterprises in the practice of supply chain finance business. In this paper, first, the concept and function of supply chain finance were elaborated, and the theoretical basis of supply chain financial risk control was studied. The implement of principal agent, information asymmetry theory, and self-compensated trade finance theory on realizing the risk avoidance in the actual development process was analyzed. Then, the business processes of the three basic financing models of supply chain finance and the shortcomings in the operation of each model were proposed. On this basis, risk sources and influencing factors of supply chain finance were analyzed, and operational risks were emphasized. Finally, a new financing mode of inventory pledge was designed based on the special function of Internet of Things (IoT) technology and the business process of inventory financing mode. The results showed that there was a big gap in the value of risk loss caused by various types of loss events in the operation risk of supply chain finance inventory pledge financing mode; among them, the biggest losses were from external fraud. By comparing the expected loss (ES) value of inventory pledge financing mode based on the IoT with the operation risk of traditional mode, it could be found that the supply chain finance mode based on the IoT technology effectively reduced the operation risk. Therefore, the system designed in this paper has certain reference and practical significance for financial risk management.