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Article
Publication date: 10 July 2024

Japan Huynh

This paper investigates the moderating role of uncertainty in the impact of monetary policy on bank liquidity creation.

Abstract

Purpose

This paper investigates the moderating role of uncertainty in the impact of monetary policy on bank liquidity creation.

Design/methodology/approach

Utilizing data from Vietnam spanning 2007–2022, the paper measures uncertainty in the banking industry through the dispersion of shocks to crucial bank-level variables and considers both interest rate- and quantity-based tools of the monetary policy regime. The study regresses economic models using different econometric methods, including the generalized method of moments (GMM) estimator in the main section and the least squares dummy variable corrected (LSDVC) estimator for the robustness check.

Findings

Monetary expansion enhances banks’ ability to create liquidity, affirming the existence of the bank liquidity creation channel. Further analyses suggest that monetary policy adjustments aimed at regulating bank liquidity creation may be less effective in the presence of higher uncertainty in the banking system. This observation holds for both interest rate- and quantitative-based monetary policy tools, emphasizing the functioning of the monetary policy transmission mechanism through bank liquidity creation and the mitigating effect of uncertainty.

Originality/value

This study contributes novel insights to the existing literature by presenting the first attempt to explore the dynamics of monetary policy transmission through the bank liquidity creation channel in the context of banking sector uncertainty. Moreover, our contribution extends to examining a multi-tool environment, incorporating both interest rate- and quantitative-based indicators.

Details

Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 20 May 2024

Dai Binh Tran and Hanh Thi My Tran

This study examines the impact of schooling on risk perceptions and the moderation role of a non-cognitive skill, locus of control.

Abstract

Purpose

This study examines the impact of schooling on risk perceptions and the moderation role of a non-cognitive skill, locus of control.

Design/methodology/approach

Using information from the Thailand Vietnam Socio Economic Panel data set, the study employs Generalised Method of Moments (GMM) to address the potential endogeneity problem of the schooling variable.

Findings

The findings indicate that a higher level of willingness to take risks is correlated with additional schooling years. In other words, those with higher levels of education are more prone to take more risks. The result demonstrates that the association between education and risk attitudes is moderated by locus of control.

Originality/value

This study contributes to the growing literature on education in emerging countries by addressing the endogeneity problem of schooling variables using the GMM method. Moreover, this study examines the mediating role of personal non-cognitive skills, namely locus of control, in the relationship between education and risk attitudes.

Details

Journal of Economic Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 17 April 2024

Asif Saeed, Komal Kamran, Thanarerk Thanakijsombat and Riadh Manita

This paper aims to examine the relationship between board structure and risk-taking, exploring how this association is influenced by advanced technologies in the banking sector.

Abstract

Purpose

This paper aims to examine the relationship between board structure and risk-taking, exploring how this association is influenced by advanced technologies in the banking sector.

Design/methodology/approach

This study uses a panel sample of 22 Pakistani banks from 2011 to 2018. To test the authors’ hypothesis, the authors use regression analysis with two-way cluster robust standard errors. Further, the authors also check the robustness of the authors’ findings using alternate proxies of board structure and bank risk-taking behavior. To address endogeneity concerns, the authors use the two-stage least square technique.

Findings

In the era of the Fourth Industrial Revolution, Pakistani banks’ digitalization is modeled by the presence of Temenos-T24/Oracle as their core banking system (software providing end-to-end operational integration). Its interactional effect with corporate governance is evaluated to implicate informed risk-taking by the board as a result of improved information access and analysis. The authors find that board size has a positive association with risk-taking, and the use of modern technology reshapes this association in the banking sector.

Originality/value

The contribution of this paper is twofold. First, the impact of board structure on bank risk-taking has not been extensively researched in Pakistan – a highly volatile and unpredictable economy. Second, the evaluation of the role of technology on bank risk is being researched for the very first time – a uniqueness of this paper.

Details

Review of Accounting and Finance, vol. 23 no. 4
Type: Research Article
ISSN: 1475-7702

Keywords

Book part
Publication date: 26 March 2024

Vikas Sharma, Munish Gupta and Kshitiz Jangir

Introduction: Commercial banks play a vital role in the global economy, facilitating economic growth and providing essential financial services. As key intermediaries between…

Abstract

Introduction: Commercial banks play a vital role in the global economy, facilitating economic growth and providing essential financial services. As key intermediaries between savers and borrowers, these institutions operate in a dynamic and complex environment characterised by various risk factors that can significantly impact their profitability and overall stability. Understanding the interconnected relationships between credit risk, interest rate risk, liquidity risk, and profitability is crucial for effective risk management strategies and the development of appropriate regulatory frameworks.

Purpose: Commercial banks play a critical role in the global economy by facilitating economic growth and providing financial services. This study examines the interconnected relationships between credit risk, interest rate risk, liquidity risk, and profitability in commercial banking.

Methodology: The sample consists of licenced scheduled commercial banks on the Bombay Stock Exchange (BSE) from 2015 to 2022. Using the Smart PLS-SEM 3.0 path analysis technique, the study evaluates the combined influence of these risk factors on profitability and provides evidence-based recommendations for risk management strategies.

Findings: The findings can assist banks in enhancing their risk management practices, and regulators in developing appropriate regulatory frameworks. By understanding the key risk factors and their impact on profitability, banks and regulators can mitigate risks, enhance transparency, and promote stability within the banking sector.

Significance/value: The value of this study lies in its focus on the interconnectedness of risk factors, profitability, and the potential implications for decision-making, risk management strategies, regulatory frameworks, and the overall stability of the commercial banking sector.

Details

The Framework for Resilient Industry: A Holistic Approach for Developing Economies
Type: Book
ISBN: 978-1-83753-735-8

Keywords

Book part
Publication date: 28 September 2023

Georgiana Ioana Tircovnicu and Camelia-Daniela Hategan

The need for an efficient enterprise risk management (ERM) has never been greater than today when organisations face complex and interconnected risks targeting their business…

Abstract

The need for an efficient enterprise risk management (ERM) has never been greater than today when organisations face complex and interconnected risks targeting their business models. Macroeconomics and geopolitical uncertainties, digital transformations of industries and sectors, cybersecurity, and climate change, among other trends, present significant uncertainties. This article aims to analyse the scientific papers on research specific to ERM and review the links between the researched area and market or corporate governance topics. Risk management is underdeveloped in many organisations; the current standard for risk management is a reactive approach. It is usually treated in isolation rather than as a core competency and a strategic asset. As a result, risk management processes are ineffective and seen as adding value to decision-making and responding to uncertainties. Based on the literature, the scope is to set up the framework for future research on ERM by building a bibliometric analysis and examining articles collected from the Web of Science Core Collection database. The study identified the essential research on this topic based on the citations of the papers and the author’s countries with the highest number of publications and citations. VOSviewer software analysed the ERM system based on keywords, citations, geographical distribution, and authorships. The research proves a strong connection between the ERM and corporate governance topics considering the stage where most countries are regarding this subject.

Details

Digital Transformation, Strategic Resilience, Cyber Security and Risk Management
Type: Book
ISBN: 978-1-80455-254-4

Keywords

Article
Publication date: 29 September 2023

Nedal Assad, Aziz Jaafar and Panagiotis D. Zervopoulos

This study aims to comprehensively examine the relationship between financial reporting quality (FRQ) and investment efficiency (IE). The central thrust of this research endeavor…

Abstract

Purpose

This study aims to comprehensively examine the relationship between financial reporting quality (FRQ) and investment efficiency (IE). The central thrust of this research endeavor is to empirically analyze the impact of FRQ on diverse facets of investment, including overinvestment, underinvestment and overall IE.

Design/methodology/approach

Using a sample of 13,902 firm-year observations from publicly listed US companies, this study uses the generalized method of moment (GMM) in conjunction with three distinct measures for FRQ under three different investment settings, considering firm liquidity and industry performance.

Findings

This study offers interesting insights into the intricate relationship between FRQ and IE. The results indicate a strong positive relation between the two constructs. In particular, the research reveals a negative link between FRQ and underinvestment, and an inverse relationship between FRQ and overinvestment. These findings suggest that FRQ is one of the key drivers of IE and that by enhancing FRQ, businesses can better optimize their investments.

Practical implications

This study highlights the significant implication of the effect of FRQ on IE, as it enables businesses to optimize their investments by improving their decision-making processes and better risk assessment of associated projects, resulting in more efficient capital allocation. A higher degree of FRQ increases investors’ confidence in a company’s financial statements, resulting in higher liquidity. It can benefit regulators to set higher standards and promote transparency.

Originality/value

The study examines the relationship between FRQ and IE. The study finds a strong positive relation between FRQ and IE, with FRQ being a key driver of IE. The paper’s original contribution lies in its comprehensive examination of the complex relationship between FRQ and IE, using robust analytical techniques by applying GMM and taking into consideration firms liquidity and industry performance.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

Keywords

Open Access
Article
Publication date: 1 November 2023

Malihe Ashena, Hamid Laal Khezri and Ghazal Shahpari

This paper aims to deepen the understanding of the relationship between global economic uncertainty and price volatility, specifically focusing on commodity, industrial materials…

Abstract

Purpose

This paper aims to deepen the understanding of the relationship between global economic uncertainty and price volatility, specifically focusing on commodity, industrial materials and energy price indices as proxies for global inflation, analyzing data from 1997 to 2020.

Design/methodology/approach

The dynamic conditional correlation generalized autoregressive conditional heteroscedasticity model is used to study the dynamic relationship between variables over a while.

Findings

The results demonstrated a positive relationship between commodity prices and the global economic policy uncertainty (GEPU). Except for 1999–2000 and 2006–2008, the results of the energy price index model were very similar to those of the commodity price index. A predominant positive relationship is observed focusing on the connection between GEPU and the industrial material price index. The results of the pairwise Granger causality reveal a unidirectional relationship between the GEPU – the Global Commodity Price Index – and the GEPU – the Global Industrial Material Price Index. However, there is bidirectional causality between the GEPU – the Global Energy Price Index. In sum, changes in price indices can be driven by GEPU as a political factor indicating unfavorable economic conditions.

Originality/value

This paper provides a deeper understanding of the role of global uncertainty in the global inflation process. It fills the gap in the literature by empirically investigating the dynamic movements of global uncertainty and the three most important groups of prices.

Article
Publication date: 16 June 2022

Ilona Bartuseviciene, Mindaugas Butkus and Giovanni Schiuma

This paper aims to model organizational resilience structure. Based on the central insights of the scientific literature, organizational resilience is modelled as the result of an…

1112

Abstract

Purpose

This paper aims to model organizational resilience structure. Based on the central insights of the scientific literature, organizational resilience is modelled as the result of an organizational capacity to bounce-back and bounce-forward.

Design/methodology/approach

The paper is based on a quantitative empirical study to support the structural perspective of organizational resilience and investigate the relationships among the dimensions to test the above hypothesis by applying confirmatory factor analysis (CFA) and structural equation modelling (SEM) methods.

Findings

The results confirmed three models that could be adopted to assess organizational resilience. The first model endorsed endogenous positive interrelationship among all three dimensions. The second model indicated that bounce-back dimensions, i.e. network and leadership and culture, have endogenous effects. Only the leadership and culture dimension is positively associated with a bounce-forward, i.e. change-ready and learning dimension. And the third model demonstrated that the network dimension is linked to leadership and culture, which is linked to the change ready and learning dimension.

Originality/value

This study attempts to provide empirical evidence identifying the links between the bounce-back and bounce-forward stages of organizational resilience. These results contribute to the development of organizational resilience theory, confirming the conceptual statements that resilience is the ability to return to the routine and to adapt to the changing environment by overcoming dynamic events, stressing the idea of the importance of enhanced learning capacity, which allows for growth by constantly learning from oneself by gaining unique experiences.

Article
Publication date: 16 September 2024

Guanming He and Dongxiao Shen

We examine how superstition shapes corporate tax avoidance and do so by taking a risk perspective and focusing on the zodiac-year belief prevalent in China.

Abstract

Purpose

We examine how superstition shapes corporate tax avoidance and do so by taking a risk perspective and focusing on the zodiac-year belief prevalent in China.

Design/methodology/approach

We adopt a difference-in-differences research design to compare the degree of corporate tax avoidance in the CEOs’ zodiac year with that in the adjacent years. We do propensity-score matching to form a sample of Chinese listed firms for the regression analysis.

Findings

We find causal evidence that firms exhibit a greater magnitude of tax avoidance in the CEOs’ zodiac years, a result attributable to relatively weak tax enforcement in the Chinese context. We also find that the zodiac-year effect on corporate tax avoidance is more pronounced for firms with tight financial constraints, firms with high business risk, firms headquartered in regions with a high degree of superstition and non-state-owned firms.

Originality/value

This study is the first to show that superstition is a determinant factor of tax avoidance and contributes to the tax literature by shedding light on the behavioral risk factors that shape corporate tax avoidance. We take the perspective of CEOs’ risk appetite to analyze how tax avoidance is influenced by the CEOs’ trade-off between the costs and benefits of avoiding taxes. Our results suggest that, when CEOs are more risk-averse, they attach more importance to financial risk than the risk of reputational losses and litigation associated with corporate tax avoidance. The findings imply that tax avoidance can be curbed by increasing (or decreasing) the tax (financial) risk confronting the CEOs.

Details

Journal of Accounting Literature, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 17 September 2024

Hend Monjed, Salma Ibrahim and Bjørn N. Jørgensen

This paper aims to examine the association between perceived firm risk and two reporting mechanisms: risk disclosure and earnings smoothing in the UK context.

Abstract

Purpose

This paper aims to examine the association between perceived firm risk and two reporting mechanisms: risk disclosure and earnings smoothing in the UK context.

Design/methodology/approach

This study juxtaposes three competing views, the “null”, the “divergence” and the “convergence” hypotheses, and empirically investigates whether risk disclosure and earnings smoothing affect firm perceived risk for a sample of large UK firms with rich and poor information environments. This study also uses the global financial crisis as an external shock on overall risk in the economy to investigate when and how managers use these two reporting mechanisms to shape the firm perceived risk.

Findings

This paper documents that risk disclosures have no significant effect on investors’ risk perceptions, consistent with risk disclosures containing boilerplate and generic statements about firm risk. This paper also finds that earnings smoothing reduces investors’ risk perceptions, reflecting investors’ interpretations about future firm performance. Additional tests reveal that earnings smoothing is not associated with perceived firm risk for firms with rich information environments and expanded risk disclosures. Furthermore, reporting smooth earnings decreases perceived firm risk following the global financial crisis. These findings are robust to alternative specifications and measures of earnings smoothing as well as post-filing perceived firm risk.

Research limitations/implications

This study does not distinguish between the garbling role and the informational role of earnings smoothing. The risk disclosure measurement used in this study, developed based on UK annual reports, may limit the generalizability of findings to other countries.

Practical implications

The findings suggest that managers should revise their risk disclosure strategies to provide in-depth details on firm risk. Investors might require information and thorough assessment to evaluate investment risks when firms provide generic risk disclosures and smoothed earnings by consulting sources like financial intermediaries. Regulators should keep an eye on firms reporting boilerplate risk disclosures and on how smoothing earnings impacts the firm perceived risk following economic turmoil, to guide interventions that promote market stability.

Originality/value

The findings provide new insights into when and how managers use their financial reporting discretion to make firms appear less risky and, therefore, influence investors’ risk perceptions.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

Keywords

1 – 10 of 18