Showing papers on "Financial risk published in 2021"
TL;DR: Using a novel dataset covering China’s CSI300 constituents, it is shown high-ESG portfolios generally outperform low- ESG portfolios and the role of ESG performance is attenuated in ’normal’ times, confirming its incremental importance during crisis.
374 citations
TL;DR: In this paper, the authors investigate the relationship between financial risk and carbon emissions and explore the mediation effect of technological innovation on the financial risk-emission nexus. But, their results show that technological innovation and financial risk have a significant inhibitory effect on global carbon emissions only in the 10th quantile, while promoting carbon emissions in other quantiles.
187 citations
TL;DR: In this paper, the authors employed long span daily data from April 1, 1983 to December 30, 2019 and found that both natural and human extreme events significantly increase oil price risk.
84 citations
TL;DR: In this article, a special issue devoted to the relation between climate risks and financial stability is presented, which represents the first comprehensive attempt to fill methodological gaps in this area and to shed light on the financial implications of climate change.
77 citations
TL;DR: In this paper, the role of financial development along with output, financial risk index, renewable energy electricity and human capital on carbon emissions was examined, and the negative association between financial development and carbon emissions supported the positive school of thoughts of financial developing that promotes a sustainable environment.
77 citations
TL;DR: Wang et al. as discussed by the authors investigated the role of remittances and institutional quality in promoting private investment for emerging seven (E7) economies and further analyzed whether the private investment is crow-out due to Dutch disease phenomena or a crow-in.
72 citations
TL;DR: In this paper, an alternative "precautionary" financial policy approach is proposed that offers an intellectual framework for legitimizing more ambitious financial policy interventions in the present to better deal with these long-term risks.
72 citations
TL;DR: In this article, the authors investigate the importance of digital financial inclusion, utilizing information and communications technology (DFI-ICT) techniques to promote sustainable growth via economic stability, and the experimental result shows that the classification risk level ratio is achieved to 18.9%, and the error rate of classification of the model is checked.
Abstract: Financial risk is unintended to lose money on an enterprise or investment. Credit risk, Liquidity risk, and operational risk are some more prevalent and unique financial concerns. This is a form of risk that can lead to a capital loss for stakeholders. Building a company from the bottom up is expensive. Any firm may need to go for cash outside to develop at some time in their lives. Financial hazards occur and influence almost every person in various forms and sizes. Digital Financial Services are financial services that rely on customer distribution and the use of digital technologies. While digital financial inclusion (DFI) is important in stimulating economic growth, there is only relatively little empirical data. But whether digital finance is the solution both the bad and the good results of financial inclusion raise. This essay will investigate the importance of digital financial inclusion, utilizing information and communications technology (DFI-ICT) techniques to promote sustainable growth via economic stability. Fast digital technology is currently being used to deliver financial services considerably reduced cost, thereby enhancing financial inclusion and allowing large-scale economic productivity improvements. Although there has been a broad-ranging mention of the benefits of digital finance—financial services offered through mobile telephones, the internet, or cards—we try to measure the size of the economic effect. The experimental result shows that the classification risk level ratio is achieved to 18.9%, and the error rate of classification of the model is checked.
72 citations
TL;DR: In this article, the authors examined the effect of environmental, social, and governance performance on oil and gas firms' financial risk and found that the firms that perform reasonably on ESG have lower total risk.
65 citations
TL;DR: The supply chain financial risk assessment of SMEs is mainly explored from the perspective of banks and can provide theoretical support for reducing the probability of bank's profit damage and increasing the bank’s profitability.
65 citations
TL;DR: In this article, investment risk factors of renewable energies in these countries are identified and categorized into five groups as economic, technical, environmental, social, and political using TODIM (Portuguese acronym for Interactive Multi-Criteria Decision Making) method.
TL;DR: In this paper, the authors employed dynamic connectedness as a measure of financial risk synchronization considering government bond yields in 11 EMU member states and found that core countries appear to transmit shocks to periphery countries although, occasionally, there are noteworthy disparities.
TL;DR: In this article, the authors summarize the demands by the business and finance community for reliable climate information, and the potential and limitations of such information in the context of what climate models can and cannot currently provide.
Abstract: Emerging awareness of climate-related financial risk has prompted efforts to integrate knowledge of climate change risks into financial decision-making and disclosures Assessment of future climate risk requires knowledge of how the climate will change on time and spatial scales that vary between business entities The rules by which climate science can be used appropriately to inform assessments of how climate change will impact financial risk have not yet been developed In this Perspective, we summarize the demands by the business and finance community for reliable climate information, and the potential and limitations of such information in the context of what climate models can and cannot currently provide Assessing future climate-related financial risk requires knowledge of how the climate will change at various spatial and temporal scales This Perspective examines the demand for climate information from business and finance communities, and the extent to which climate models can meet these demands
TL;DR: In this article, the effects on financial stability of the interplay between climate transition risk and market conditions, such as recovery rate and asset price volatility, are analyzed for an ex-ante network valuation of financial assets.
TL;DR: In this paper, the authors looked at the validity of income-environmental degradation (Environmental Kuznets Curve, EKC) hypothesis especially amidst risk to investment in the United States over the period 1984-2017.
TL;DR: In this paper, the authors examined the impact of digitalization in the economy on technological innovation in the presence of business financed R&D expenditures, income, and financial risk for G7 economies for the time period 1990 to 2017.
TL;DR: The authors empirically explored the economic-, tourism-, and country risk ratings-induced Environmental Kuznets Curve (EKC) hypothesis by employing ecological footprints (EFs) as indicators of international environmental degradation.
TL;DR: In this paper, the impact of financial, economic, political, and composite risk on consumption-based carbon dioxide emissions (CCO2) in selected RCEP economies during the period of 1990 to 2020 was investigated.
Abstract: To tackle the issue of climate change and environmental degradation debates regarding carbon neutrality is on the rise. Regional Comprehensive Economic Cooperation (RCEP), the leading trading union, covers nearly third of global economy, world population, is responsible for thirty percent of global trade and global gross domestic product. The existent study tests the impact of financial, economic, political, and composite risk on consumption-based carbon dioxide emissions (CCO2) in selected RCEP economies during the period of 1990 to 2020. The empirical analysis consists of cross-sectional dependence, slope heterogeneity, cross-sectional augmented panel unit root test, Westerlund cointegration, second-generation cross-section augmented autoregressive distributed lags model (CS-ARDL), and panel causality test. Further, we explore the role of imports, renewable energy supply, exports, and gross domestic product per-capita on CCO2. The empirical results suggest that the less political risk help to mitigate while the lower financial, economic, and composite risk increase CCO2 emissions in selected RCEP economies. Moreover, exports and renewable energy supply show mitigating effect, whereas imports show upsurge in CCO2. Additionally, a bidirectional causality exists between exports and CCO2, imports and CCO2, GDP per-capita and CCO2, political risk and CCO2, and renewable energy and CCO2 emissions, while a one-way causality from financial risk, composite risk, and economic risk to CCO2. Renewable energy supplies along with the improvement in sub-components of political risk, for instance, corruption, government stability, would help to effectively tackle the issue of CCO2 emissions.
TL;DR: In this article, the Granger causalities of stock markets of 20 different countries are estimated from Aug 2019 to Mar 2020, and the complex network for global stock markets is established based on the data.
Abstract: In this paper, Granger causalities of stock markets of 20 different countries are estimated from Aug 2019 to Mar 2020. Also, the complex network for global stock markets is established based on the data. Financial risks are identified by comparing the various characteristics of the topology of a complex financial network and the centrality of the stabilization and fluctuation periods. The results demonstrate that COVID-19 leads to close relation of financial connections between various countries, the impact spreads in a shorter distance, and the crisis transmission is faster. Overall, financial crises can be identified using network topological structure and centrality analysis based on network connectivity measurements. The Granger complex network can be employed for measuring and warning the systemic risk.
TL;DR: Wang et al. as mentioned in this paper studied the financial risk of mining enterprises and found that companies with good financial status can effectively control the cost and have good debt paying ability while earning income.
TL;DR: In this paper, the authors focus on identifying and analysing the risks to promote effective circular initiatives in supply chains in the context of the manufacturing industry, thus minimising the negative environmental impact.
Abstract: The concept of circular economy (CE) has proven its worth due to the scarcity of natural resources and huge amounts of wastage which impacts the environment. Thus, the adoption of the CE concept in the supply chain becomes critical. However, due to the complex nature of processes/activities in the circular supply chain (CSC), managing risk has become a priority to avoid disruption. In current literature, no discussion has been conducted on how to analyse the risks in the context of CSC. Therefore, to fill this literature gap, this study concentrates on identifying and analysing the risks to promote effective circular initiatives in supply chains in the context of the manufacturing industry, thus minimising the negative environmental impact. A total of 31 risks were identified through an extensive literature review and discussions with experts. A grey‐based decision‐making trial and evaluation laboratory (DEMATEL) method is applied by incorporating the experts' knowledge to compute prominence and cause/effect scores to develop an interrelationship map. Finally, a vulnerability matrix for risk categories is developed using the average of prominence and cause/effect scores of risks. The results show that transparent process is the most prominent risk and branding is the least significant risk. By using the average prominence and cause/effect score, a risk category, namely, financial risk, is identified as most vulnerable to CSC. These findings will help industry managers not only to prepare business strategies in the adoption of CE initiatives in supply chains by eliminating risks but also in minimising negative environmental impact.
TL;DR: In this paper, the authors investigate the relationship between ESG disclosure and performance in the first public offering of common stock to the wider public and show that ESG performance and disclosure help companies build their reputation capital with investors after going public.
Abstract: Although legitimacy theory provides strong arguments that environmental, social and governance (ESG) disclosure and performance can help mitigate firm-specific (idiosyncratic) risks, this relationship has been repeatedly challenged by conceptual arguments, such as ‘transparency fallacy’ or ‘impression management’, and mixed empirical evidence. Therefore, we investigate this relationship in the revelatory case of initial public offerings (IPOs), which represent the first sale of common stock to the wider public. IPOs are characterised by strong information asymmetry between firm insiders and society, while at the same time suffering from uncertainty in firm legitimacy, culminating in amplified financial risks for both issuers and investors in aftermarket trading. Using data from the United States, we demonstrate that (1) voluntary ESG disclosure reduces idiosyncratic volatility and downside tail risk and (2) higher ESG ratings have lower associated firm-specific volatility and downside tail risk during the first year of trading in the aftermarket. We provide theoretical arguments for the relationships observed, suggesting that companies striving for ESG performance and communicating their efforts signal their compliance with sustainability-related norms, thus acquiring and upholding a societal license to operate. ESG performance and disclosure help companies build their reputation capital with investors after going public. We also report that ESG disclosure is a more consistent proxy for ex-ante uncertainty as an indicator of aftermarket risk, thereby replacing some of the more conventional measures, such as firm age, offered in the existing literature.
TL;DR: The work selected the multiple financial indicators based on big data mining in Internet of Things based on fuzzy association rules that satisfy the minimum fuzzy credibility and found the rules between all financial indicators were found to choose more representative financial risk indicators.
Abstract: As the big data, Internet of Things, cloud computing, and other ideas and technologies are integrated into social life, the big data technology can improve the corporate financial data processing. At the same time, with the fiercer competition between enterprises, investors and enterprises have paid more attention to the role of financial crisis warning in corporate management. The work selected the multiple financial indicators based on big data mining in Internet of Things. The rules between all financial indicators were found to choose more representative financial risk indicators. Then the frequent fuzzy option set was determined by FCM (fuzzy cluster method), parallel rules, and parallel mining algorithm, thus obtaining the fuzzy association rules that satisfy the minimum fuzzy credibility. Finally, the relevant data of listed companies were selected to analyze the corporate financial risks, which verified the method proposed in the work.
TL;DR: In this article, a deep neural language model called ClimateBert is trained on thousands of sentences related to climate-risk disclosures aligned with the Task Force for Climate-related Financial Disclosures (TCFD) recommendations.
Abstract: Disclosure of climate-related financial risks greatly helps investors assess companies' preparedness for climate change. Voluntary disclosures such as those based on the recommendations of the Task Force for Climate-related Financial Disclosures (TCFD) are being hailed as an effective measure for better climate risk management. We ask whether this expectation is justified. We do so with the help of a deep neural language model, which we christen ClimateBert. We train ClimateBert on thousands of sentences related to climate-risk disclosures aligned with the TCFD recommendations. In analyzing the disclosures of TCFD-supporting firms, ClimateBert comes to the sobering conclusion that the firms' TCFD support is mostly cheap talk and that firms cherry-pick to report primarily non-material climate risk information. From our analysis, we conclude that the only way out of this dilemma is to turn voluntary reporting into regulatory disclosures.
TL;DR: In this paper, the authors examined the relationship between environmental, social, and governance factors and corporate financial performance and found that corporate governance has the most significant impact, particularly for firms with weak governance.
Abstract: This study examines the relationship between environmental, social, and governance (ESG) factors and corporate financial performance. Specifically, we study various individual ESG categories, both ESG strengths and concerns, and aggregate ESG factor and their impact on corporate financial performance including profitability and financial risk. We find a positive effect of ESG factors on corporate profitability, and the effect is more pronounced for larger firms. Among different ESG categories, corporate governance has the most significant impact, particularly for firms with weak governance. We also find that ESG variables generally have a positive influence on credit rating. In particular, the social factor has the most significant impact on credit rating, while environmental score surprisingly has a negative effect. Overall, this research provides a rationale for ESG integration in the context of investment management and portfolio construction to maximize value and minimize risk.
TL;DR: In this article, the joint effect of capital structure and corporate social responsibility (CSR) activities on firm risk during COVID-19 was examined, and the effect was more prevalent among firms with poor CSR performance.
Abstract: COVID-19 has severely constricted the global economic activities. This paper examines the joint effect of capital structure and corporate social responsibility (CSR) activities on firm risk during COVID-19. We find that firms having excessive debt beyond the optimal level experienced high firm risk during the pandemic and the effect is more prevalent among firms with poor CSR performance. In contrast, firms with a debt level below the optimum are self-protected regardless of their CSR practices. Our study provides businesses with insights of post-pandemic directions on capital structure and CSR policies to build up sustainability and resilience in a volatile market.
TL;DR: The subtier network structure is uncovered as an important risk source for the focal firm, with the degree of tier-2 sharing as the main moderator, and the importance of incorporating the effect of subtier supply network structure in the portfolio-optimization process is suggested.
Abstract: Using a multitier mapping of supply-chain relationships constructed from granular global, firm-to-firm supplier–customer linkages data, we quantify the degree of financial risk propagation from the...
TL;DR: Considering the frequency domain and nonlinear characteristics of financial risks, the authors measured the multiscale financial risk contagion by constructing EMD-Copula-CoVaR models.
TL;DR: All G20 countries have adopted policies to tame financial instability in response to the COVID-19 pandemic as mentioned in this paper, and post-pandemic financial measures are designed to support bank lending, boost financial ma...