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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.


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Journal ArticleDOI
TL;DR: In this article, the authors have used the data of Slovak enterprises, obtained from annual financial reports covering the year 2015 and the calculated financial ratios of profitability, activity, liquidity and indebtedness that may affect the financial health of the company were applied in the regression analysis.
Abstract: Research background: Financial risk management is the task of monitoring financial risks and managing their impact. Financial risk is often perceived as the risk that a company may default on its debt payments. The issue of the debt, default or prosperity of the company are presented in the article as one of the ways of the risk management. A prediction of corporate default is an inseparable element of the risk management. Mainly the consequences of risk are the engine of research and development of methods and models, which enable to predict economic and financial situation in specific conditions of global economies. Purpose of the article: The main aim of the presented article is to assess financial risks of Slovak entities, realized by the identification of significant factors and determinants affecting the prosperity of Slovak companies. Methods: To conduct the research we have used the data of Slovak enterprises, obtained from annual financial reports covering the year 2015 and the calculated financial ratios of profitability, activity, liquidity and indebtedness that may affect the financial health of the company were applied in the regression analysis. Realizing the multiple regression analysis, the statistically significant determinants that affect the future financial development of the company are identified, as well as the regression model of the bankruptcy prediction. Findings & Value added: In the research aimed at the management of financial risks in Slovak enterprises, we focused on the revelation of significant economic risk factors using multiple regression. The results suggest that the most significant predictors are net return on capital, cash ratio, quick ratio, current ratio, net working capital, RE/TA ratio, current debt ratio, financial debt ratio and current assets turnover based on which the decision about the future company default can be made. These factors are significant enough to manage financial risks and to affect the profitability and prosperity of the company.

99 citations

Journal ArticleDOI
TL;DR: This article found that the changes in shorter-term and longer-term risk measures vary inversely with the strength of disclosure and governance characteristics of financial services firms, and that the financial market rewarded firms with stronger disclosure and stronger governance.
Abstract: This study finds significant changes in capital market measures of risk following the passage of Sarbanes-Oxley for US financial services firms. Shorter-term measures of risk shifts are positive, on average, and consistent with the mandatory nature of the disclosure and governance provisions. Longer-term total and unsystematic risk shifts are negative, on average, and consistent with reductions in investor uncertainty as transparency improved. We find that the changes in shorter-term and longer-term risk measures vary inversely with the strength of disclosure and governance characteristics. The financial market rewarded (punished) firms with stronger (weaker) disclosure and stronger (weaker) governance.

98 citations

Journal ArticleDOI
TL;DR: It is shown that, in general, a robust optimal allocation exists if and only if none of the underlying risk measures is a VaR, and several novel advantages of ES over VaR from the perspective of a regulator are revealed.
Abstract: We address the problem of risk sharing among agents using a two-parameter class of quantile-based risk measures, the so-called Range-Value-at-Risk (RVaR), as their preferences. The family of RVaR includes the Value-at-Risk (VaR) and the Expected Shortfall (ES), the two popular and competing regulatory risk measures, as special cases. We first establish an inequality for RVaR-based risk aggregation, showing that RVaR satisfies a special form of subadditivity. Then, the risk sharing problem is solved through explicit construction. Three relevant issues on optimal allocation are investigated: extra sources of randomness, comonotonicty, and model uncertainty. We show that, in general, a robust optimal allocation exists if and only if none of the underlying risk measures is a VaR. Practical implications of our main results for risk management and policy makers are discussed. In particular, in the context of the calculation of regulatory capital, we provide some general guidelines on how a regulatory risk measure can lead to certain desirable or undesirable properties of risk sharing among firms. Several novel advantages of ES over VaR from the perspective of a regulator are thereby revealed.

98 citations

Journal ArticleDOI
TL;DR: The role of corporate governance in precipitating or exacerbating the financial crisis of 2008-09 was discussed in a special issue of the Journal of Corporate Governance as discussed by the authors, where 87 papers were presented, including five articles by governance researchers and three articles by prominent governance participant-observers.
Abstract: The financial crisis of the late 2000s resulted in enormous costs to the economies of many countries and the fortunes of millions of families, and it challenged a host of our conceptions and theories of corporate governance The governing boards of many financial-services firms seemed unable to prevent the risky and ill-fated decisions that jeopardized their firms, devastated their investors, and helped precipitate a financial meltdown that morphed into global recession Company boards were also directly responsible through their compensation committees and consultant advisors for a sharp rise in executive compensation during the 2000s that may have contributed to undue short-term risk-taking among the financial-service companies that helped spark the recession The macroeconomic environment also changed Historically low interest rates, and the development of new ways of financing mortgage products led to an irrationally exuberant mind-set of lending and borrowing in the housing market The quality of some loans was questionable, but home asset prices continued to increase – until they collapsed in 2008 The boom and bust in the housing market was an important contributor – one of many including inadequate corporate governance – to the perfect financial storm of 2008–09 From a conference with 87 papers on the role of corporate governance in precipitating or exacerbating the financial crisis, and from five articles by governance researchers and three articles by prominent governance participant-observers included in this special issue, it is evident that governance played a contributing role An article by Muller-Kahle and Lewellyn finds that directors of sub-prime lenders compared with other lenders served on a larger number of other company boards, presumably allowing then less time to monitor the sub-prime lender's risky practices, and they served for fewer years on the sub-prime lender's board, suggesting that they were less experienced in evaluating the financial risks of the sub-prime markets A second article by Grove, Patelli, Victoravich, and Xu report that the higher the levels of debt held by banks, a policy presumably monitored and approved by directors, the lower bank financial and operating performance during the financial crisis A third article by Yeh, Liu, and Chung finds that director independence on the auditing and risk management committees affected risk taking behaviors and subsequent performance In the pursuit of productive avenues for reform, a fourth article Pirson and Turnbull argue for a network of boards representing multiple constituencies, convened through a “stakeholder congress,” that would bring more sources of information to the attention of more actors who could make more effective use of the information in guiding company risk management A fifth article by Nicholson, Kiel, and Kiel-Chisholm argue for the re-establishment of professional restraints and creation of a new set of more responsible social norms within the financial sector to avoid the next financial meltdown Three well-informed participant observers corroborate these findings and direct special attention to both company and country governance issues at they help foster the financial meltdown Berglof finds that the absence of both micro and macro protections against excessive and systemic risk may have opened the way for the perfect storm Feinberg concludes that distortions from economically-rational pay practices – ultimately the responsibility of the board – may have contributed to the financial crisis as executives sought to optimize their pay in ways that were not optimal for the firm nor its investors, customers, or lenders Johnson places some of the blame for the crisis indirectly on the governance door step – directors who hired and monitored the bankers at center of the crisis had helped foster a culture of short-term greed and narrow self-interest that became toxic when it became systemic and no longer limited to a few aberrant players Taken together, the five articles and three commentaries in this issue point to the importance and interplay of both micro and macro governance factors in contributing to the financial crisis of 2008–09 – and to the importance of reforming those factors to help avert another financial crisis in the future

98 citations

01 Jan 1997
TL;DR: In this article, the authors present a systematic examinati on of an emerging methodology for managing financial risk in business by applying multivariate data and multicriteri a analyses to the problem of portfolio selection.
Abstract: risk. The book is organized into five sections. The first section applies multivariate data and multicriteri a analyses to the problem of portfolio selection. Articles in thi s section combine classical approaches with newer methods. The second section expands the analysis in the firs t section to a variety of financial problems: busin ess failure, corporate performance and viability, bankruptcy, et c. The third section examines the mathematical prog ramming techniques including linear, dynamic, and stochasti c programming to portfolio management's. The fourth section introduces fuzzy set and artificial intelligence te chniques to selected types of financial decisions. The final section explores the contribution of several multic riteria methodologies in the assessment of country financial risk. In total, this book is a systematic examinati on of an emerging methodology for managing financial risk in business.

98 citations


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Performance
Metrics
No. of papers in the topic in previous years
YearPapers
2023122
2022250
2021643
2020658
2019673
2018541