Financial risk

About: Financial risk is a research topic. Over the lifetime, 11899 publications have been published within this topic receiving 231404 citations. The topic is also known as: economic risk.

Voluntary risk reporting to enhance institutional and organizational legitimacy: Evidence from Portuguese banks

Abstract: Purpose – This paper aims to explore the factors that affected the voluntary risk‐related disclosures (RRD) in the individual annual reports for 2006 of Portuguese banks. It also explores the extent to which those reports conformed to Basel II requirements in terms of the voluntary disclosure of operational risk and capital structure and adequacy matters.Design/methodology/approach – The authors conduct a content analysis of the annual reports of a sample of 111 banks. Voluntary operational risk and capital structure and adequacy disclosures were assessed using a list of disclosure categories that were developed from the Third Pillar disclosure requirements of the Basel II Accord.Findings – Stakeholder monitoring and corporation reputation are crucial factors that explain the risk reporting practices observed. Voluntary risk reporting appears to enhance legitimacy for two major reasons: first, by fulfilling institutional pressures to assure the effectiveness of market discipline; and second, by managing s...

Corporate financial strategies and market measures of risk and return

Abstract: where ri, represents the total return of a company's security; ai measures the return arising from specific company effects; R1I represents the return of a broadly based pool of assets characteristic of general business, and 1int is a random variable with zero mean and zero intertemporal and intercompany covariance. When the assumptions of the capital asset pricing model are fulfilled a company's risk premium, i.e. its expected return less the pure rate of interest, is proportional to the risk premium of the market as a whole. P is the factor of proportionality for it can be shown that:2

Counting the investor vote: political business cycle effects on sovereign bond spreads in developing countries

Abstract: International business research has paid scant attention to whether and how electoral politics and economic policies affect foreign investment risk assessment, particularly in developing countries, where the last decade has seen both considerable foreign investment and domestic progress toward democratization and electoral competitiveness. We respond with development and testing of a framework using partisan and opportunistic political business cycle (PBC) theory to predict the investment risk perceived by investors holding sovereign bonds during 19 presidential elections in 12 developing countries from 1994 to 2000. Consistent with our framework, we find that bondholders perceive higher (lower) investment risk in the form of higher (lower) credit spreads on their sovereign bonds as right-wing (left-wing) political incumbents appear more likely to be replaced by left-wing (right-wing) challengers. For international business research, our findings illustrate the promise of PBC theory in explaining the election-period behavior of sovereign bondholders and, perhaps, other investors who also ‘vote’ in developing country elections and can substantially influence the price and availability of capital there. For developing country investors and states, our findings highlight the financial effects of democracy in action, and underscore the importance of state communication with investors during election periods.