Finance Literature Research Articles

Analysis of Factor that Affect Financial Performance of PD. BPR Bahteramas Konawe

This study aims to analyze the effect of Capital Adequacy Ratio (CAR), Loan to Deposit Ratio (LDR), Non Performing Loan (NPL), and Operating Costs and Operating Income (BOPO) on financial performance, as measured by Return On Assets (ROA), at PD. BPR Bahteramas Konawe. Using secondary data from the annual report of PD. BPR Bahteramas Konawe during the 2018-2022 period, this study applies multiple linear regression analysis with classical assumption tests and hypothesis testing to evaluate the effect of these variables, both simultaneously and partially, on ROA. The analytical tool used in this research is SPSS version 25. The results showed that CAR, LDR, NPL, and BOPO together had a positive and significant influence on the ROA of PD. BPR Bahteramas Konawe, indicating that increasing these values in accordance with the BPR health standards set by the Financial Services Authority (OJK) contributes to increasing bank profitability. Partially, CAR has a positive but insignificant effect on ROA, while LDR and NPL have a negative but insignificant effect. The significant negative effect of BOPO on ROA indicates that higher operational efficiency contributes to improved bank financial performance. This research provides new insights in banking finance literature regarding the importance of managing capital, liquidity, credit, and operational efficiency in improving bank financial performance, especially for PD. BPR Bahteramas Konawe in the context of OJK regulations.

How does digital finance affect rural capital misallocation? Evidence from China

ABSTRACT Digital finance can take advantage of new financial services to support economic growth. Its effect on rural capital misallocation is valuable to be discussed as rural capital misallocation has severely restricted rural development worldwide. This paper, with data from Chinese counties, studies the effect of digital finance on rural capital misallocation and further analyzes how it acts by exploring the moderating role of industrial structure upgrading. The system GMM method is applied to resolve the path dependence and identify the dynamic effects of capital misallocation. The findings include that (1)rural digital finance has reduced the capital misallocation for the rural area in China; (2)industrial structure upgrading will strengthen the negative effect of digital finance on capital misallocation which is more significant in the eastern and western regions, as well as in the capital over-allocation regions in rural China; (3)the impact of rural digital finance on rural capital misallocation has a spatial spillover effect, and digital finance has reduced capital misallocation not only in the local but also in neighbouring regions. This study contributes to the existing rural digital finance literature and will help regions reduce capital misallocation by improving rural digital finance.

How the use of alternative information in risk management fintech platforms influences SME lending: a qualitative case study

Purpose The purpose of the study is to examine the use of alternative information in bank lending to small and medium enterprises (SMEs). Understanding alternative information and its use in bank lending to SMEs is important because it has become a growing part of the future of SME finance. The results and findings of my study not only enrich the finance literature but, more importantly, also address the use of Fintech in the risk management of SME lending, a new and complex problem that is specific to both the information technology and finance field. Design/methodology/approach To answer the research question, the author used a case study approach that relies upon qualitative data and analysis. By iterating between the existing literature, theoretical pieces and empirical findings, the author explain and interpret in detail how the use of alternative information impacts loan outcomes and develop insights to guide future research. Findings The case is outlined in two time periods including the prepartnership period and the postpartnership period. It highlights the establishment of a partnership between LoanBank and FintechInc (pseudonym), aimed at SME-focused Fintech lending. The findings underscore how the partnership has enabled a mutually beneficial situation where LoanBank and FintechInc leverage each other’s strengths to provide efficient and effective lending services. The adoption of alternative information in the risk management Fintech (RMF) platform of FintechInc has transformed LoanBank’s lending processes, showcasing how technological innovations can enhance SME lending practices. Originality/value The study’s originality mainly lies in the three detailed insights regarding alternative information’s impact on SME lending: information, platform properties and financial inclusion. The information part demonstrates that RMF platforms expand the information used for lending decisions, shifting from traditional hard and soft data to incorporating various alternative information sources. The platform properties part suggests that location, openness and technology also play a pivotal role in shaping lending outcomes. Finally, the financial inclusion part proposes that the use of alternative information has the potential to improve financial inclusion and offer better credit terms to previously underserved borrowers.

Governance Failure and Governance Under Failure: Reviewing the Role of Directors in Organizational Misconduct

Research on organizational misconduct has mostly evolved independently from the literature on corporate governance. Yet, our survey of research on the role of directors in organizational misconduct contexts yielded more than 110 articles in the last 17 years across the management, accounting, marketing, operations, public relations, and finance literatures, showing that research on the role of corporate governance in organizational misconduct has increasingly become a distinct domain of inquiry. With its own scholarly audience, including scholars working in strategy, ethics, decision-making, and leadership, this research has employed diverse theories and investigated different antecedents, reactions, and outcomes. It has also focused on how directors both influence and are affected by organizational misconduct. Consequently, this literature is currently fragmented in several respects. Our aim in this review is to generate conceptual integration that brings coherence to this growing body of research and to facilitate future research in this important domain. The review offers a cohesive view of the effects of corporate governance on misconduct and of misconduct on corporate governance and provides frameworks for integrating the disparate macrolevel theories that currently characterize this work.

Mediating Role of Financial Literacy in Relationship of Factors Affecting the Money Management Skills

In the contemporary era characterized by rapidity, it is anticipated that undergraduate students will assume leadership positions across several domains, including business and Nations. To excel in these positions, individuals must demonstrate robust financial decision-making abilities. These abilities are crucial for making prudent financial choices that may significantly influence their professional and personal life. Nevertheless, it is worth noting that the emphasis on money-management skills in developing nations is often confined to functional financial literature. This body of literature provides technical knowledge about budgeting and investing, although it may not include other variables that influence the process of making financial decisions. This study aims to determine the mediating role of financial literacy in factors affecting money management skills. The research used a quantitative methodology. A questionnaire was administered to three distinct groups of students, including computer science, English Language and Literature, and business students, at the Sindh University campus in Larkano, Pakistan. The results showed that economic and psychological factors rather than social factors significantly impact money management skills. The mediation results show that financial literacy has a mediating relationship between psychological factors and money management skills rather than economic and social factors.

Conscientiousness and entrepreneurship

PurposeThe purpose of this study is to examine the influence of conscientiousness on entrepreneurship over and above the impact of other factors that are associated with entrepreneurship in the literature.Design/methodology/approachThe design uses household responses from the Panel Study of Income Dynamics (PSID) biennial survey that follows the same heads of households over time to measure their conscientiousness, businesses owned and other demographic and financial characteristics. Ordinary least squares (OLS), Probit and Poisson regression techniques are applied at the head of household and state level to examine the relationship.FindingsThe results show heads of households’ conscientiousness positively relating to the average number of businesses owned, beyond other Big Five traits and the impact of other characteristics. A one-standard deviation increase in conscientiousness is significantly associated with a 0.012 increase in the number of businesses owned. This association is robust to alternative regression specifications and variable measurements.Originality/valueThe results are original to the finance literature, complementing studies by linking intrinsic head of household-level traits to entrepreneurship while controlling for external financial and demographic factors. The study also attempts to externally validate previous findings using aggregate-level outcomes. The data and setting used to measure personality traits as well as entrepreneurial outcomes are original to the entrepreneurship literature, validating previous findings.

Text‐based sentiment analysis in finance: Synthesising the existing literature and exploring future directions

SummaryAdvances in Deep Learning have drastically improved the abilities of Natural Language Processing (NLP) research, creating new state‐of‐the‐art benchmarks. Two research streams at the forefront of NLP analysis are transformer architecture and multimodal analysis. This paper critically evaluates the extant literature applying sentiment analysis techniques to the financial domain. We classify the financial sentiment analysis literature according to the most used techniques in the area, with a focus on methods used to detect sentiment within corporate earnings conference calls, because of their dual modality (text‐audio) nature. We find that the financial literature follows a similar path to NLP sentiment literature, in that more advanced techniques to define sentiment are being used as the field progresses. However, techniques used to determine financial sentiment currently fall behind state‐of‐the‐art techniques used within NLP. Two future directions stem from this paper. Firstly, we propose that the adoption of transformer architecture to create robust representations of textual data could enhance sentiment analysis in academic finance. Secondly, the adoption of multimodal classifiers in finance represents a new, currently underexplored area of study that offers opportunities for finance research.

Fintech in islamic finance literature: A review

This literature review examines the role of fintech in the context of Islamic finance. Through a systematic analysis of relevant literature, this research highlights the contribution of fintech in improving Islamic financial services as well as the challenges faced in the integration process. These findings indicate that although fintech has opened the door to innovation in the Islamic finance industry, there is still a need to overcome barriers related to sharia compliance and consumer protection. Therefore, this research underlines the importance of a careful and planned approach in integrating fintech with Islamic finance principles.

Decoding Corporate Financial Health: A Comprehensive Quantitative Analysis of Annual Accounts and Financing Strategies

Abstract
 This study navigates the intricate landscape of corporate finance within publicly traded Indonesian companies, aiming to comprehensively grasp their financial health. A holistic approach merges quantitative analyses of annual accounts with qualitative insights from corporate finance, focusing on unraveling the nuanced relationship between financing techniques and financial performance indicators, considering diverse variables such as industry characteristics and company sizes. Employing robust methodologies including regression analysis, correlation analysis, and panel data analysis, the study uncovers significant trends. Noteworthy findings include a burgeoning reliance on debt financing, the emergence of hybrid financing structures, and industry-specific variations in financing preferences. The positive correlation between equity financing and profitability aligns seamlessly with agency theory, underlining its potential for aligning management interests with long-term value creation. Meanwhile, the nuanced impact of debt financing emphasizes the imperative for companies to delicately balance the benefits and risks associated with financial leverage. Implications derived from the research extend practical advice to industry practitioners, emphasizing the need for tailored financing strategies, strengthened corporate governance, and industry-specific considerations. Policymakers are encouraged to play a pivotal role in fostering equity market development, implementing responsible regulatory measures, and championing transparency in financial reporting. This research not only contributes to the existing financial literature by enriching academic discourse but also provides actionable insights for businesses navigating the intricate terrain of corporate finance in Indonesia.

The comparison of RBV-based competitiveness of Hungarian family-owned and non-family-owned SMEs

PurposeThe purpose of this paper is to identify the differences between Hungarian family-owned businesses (FOBs) and non-family-owned businesses (NFOBs) concerning the elements of SME competitiveness and financial performance.Design/methodology/approachThe research covers the Hungarian data set of the Global Competitiveness Project (GCP, www.sme-gcp.org) of 738 (data collection between 2018 and 2020) non-listed SMEs, of which 328 were FOBs. The study uses the comprehensive, multidimensional competitiveness measurement of the GCP built on the resource-based view (RBV) and the configuration theory. Financial performance was captured with two composite indicators: short-term and long-term financial performance (LTFP). The comparative analysis between FOBs and NFOBs was conducted using binary logistic regression.FindingsThe results show that FOBs are more prone to focusing on local niche markets with higher longevity and LTFP than NFOBs. However, FOBs have lower innovation intensity and less organised administrative procedures. The most contradicting finding is that the FOBs’ higher LTFP is accompanied by significantly lower competitiveness than in the case of NFOBs.Originality/valueThis study goes beyond other GCP studies by including composite financial performance measures among the variables examined. The combination of performance-causing (resources and capabilities) and performance-representing (financial performance) variables provides a better understanding of the non-listed SMEs in terms of family ownership. The results help academia to enrich the RBV-competitiveness, the non-listed SME management and finance literature, and policymakers to design business development and support schemes. They also show future entrepreneurs the impact of family ownership on entrepreneurial success.

Comparative Welfare Analysis of German Public Policies

This paper implements the comparative welfare analysis method Marginal Value of Public Funds (MVPF) developed by Hendren and Sprung-Keyser (2020) for historical public policies in Germany between 1990–2018 across the domains of taxation, job training, social insurance, and infrastructure. It contributes to the public finance literature by constructing among the first MVPF collections of public policies outside the United States, identifying key similarities and differences between MVPF results of the two nations, expanding the MVPF framework into the field of public infrastructure, and shedding light on the approach’s particular weaknesses. German tax reforms generated positive and significant MVPFs; retirement and unemployment insurance policies yielded relatively small MVPFs, and child treatment scored the largest MVPF among health insurance programs. Keywords: public policy, policy evaluation, welfare analysis JEL : H21, H41, H50, I38

Exchange Rate Management Policies Options Towards Strengthening the Naira for Economic Transformation

Close to two decades, the Nigerian Naira has witnessed tremendous fall in its value against major currencies in the global market, giving rise to fast climbing inflation rate and its attendant consequences. Effort by various governments at federal and state levels to remedy the Naira and ensure its stability have shown no signs of fruitfulness. The Central Bank of Nigeria (CBN), at different times, has adopted several measures in this regard including currency devaluation, stringent monetary and fiscal policies, Naira redesign, and the newest, being the effort to collapse into one, the parallel exchange market. These measures, from all indications, were unable to stem the tide of the Naira fall. This study, therefore, adopts a narrative review of economic and finance literature to suggest policy options that could redeem the Naira and strengthens its exchange value in the global market. Inputs from scholarly literature were sought and reviewed around issues such as the working mechanisms of the foreign exchange market, continuous demand and consumption of foreign made goods, and short- and long-term monetary policies. The measures to restore the value of the Naira were then suggested in the paper. Keywords: Exchange rate; Naira fall; Currency Devaluation; Monetary Policy; CBN

The Role of Strategic Financial Management in Enhancing Corporate Value and Competitiveness in the Digital Economy

This study examines how strategic financial management boosts SMEs' corporate value and competitiveness in the fast-changing digital economy. As digital technologies change market landscapes, SMEs face unique challenges and opportunities in aligning their financial strategies with digital transformation. This mixed-methods study combines quantitative regression analysis with qualitative interviews with senior management from technology, finance, retail, and manufacturing. Quantitative findings from 129 SMEs show a positive correlation between strategic alignment, innovation culture, and corporate value and financial performance, highlighting the complex but crucial role of digital technology investments and risk management. Qualitative insights emphasise the need to align these investments with strategic goals and foster innovation. This study contributes twice. First, it empirically shows how strategic financial management practises help navigate the digital economy, enriching strategic management and finance literature. Second, it advises SMEs to take a holistic approach to strategic financial management that prioritises digital technology investments and ensures they are strategically aligned, culturally ingrained, and risk-averse. This research shows how financial strategy and digital innovation interact to drive SME competitiveness and value creation in the digital age.

Non-monotonicity of risk-expected return trade-off in pricing of equity securities: the case of premium board of Nigerian Stock Exchange

PurposeA stylized fact in finance literature is the belief in positive relationship between ex ante return and risk. Hence, a rational investor, by utility preference axiom can only consider committing fund in asset which promises commensurate higher return for higher risk. Questions have been asked as to whether this holds true across securities, sectors and markets. Empirical evidence appears less convincing, especially in developing markets. Accordingly, the author investigates the nature of reward for taking risk in the Nigerian Capital Market within the context of individual assets and markets.Design/methodology/approachThe author employed ex post design to collect weekly stock prices of firms listed on the Premium Board of Nigerian Stock Exchange for period 2014–2022 to attempt to answer research questions. Data were analyzed using a unique M Vec TGarch-in-Mean model considered to be robust in handling many assets, and hence portfolio management.FindingsThe study found that idea of risk-expected return trade-off is perhaps more general than as depicted by traditional finance literature. The regression revealed that conditional variance and covariance risks reveal minimal or no differences in sign and sizes of coefficients. However, standard errors were also found to be large suggesting somewhat inconclusive evidence of existence of defined incentive structure for taking additional risk in the market.Originality/valueIn terms of choice of methodology and outcomes, this research adds substantial value to body of knowledge. The adapted multivariate model used in this paper is a rare approach especially for management of portfolios in developing markets. Remarkably, the research found empirical evidence that positive risk-expected return trade-off, as known in mainstream literature, is not supported especially using a typical developing country data.

Multiperiod peer‐to‐peer risk sharing

AbstractRisk sharing has been practiced in various forms in the financial industry. This paper is the first to study both dynamic and static risk‐sharing mechanisms for a group of participants over multiple periods. The design of risk‐sharing strategies is based on the Pareto optimization of quadratic utilities of participants' reserves. Such a framework builds a connection between portfolio optimization in the finance literature and that for risk sharing in the insurance literature. Building on the most common form of reinsurance—pro rata treaties, we propose a peer‐to‐peer (P2P) network for risk sharing. Assuming independent multivariate losses over time, we find that the optimal risk‐sharing allocation exhibits a three‐component structure with the long‐term limit and two correction terms. This allows us to show convergence of the risk‐sharing solution and the ratios of long‐term reserves. Furthermore, we study the impact of actuarial fairness on various risk‐sharing strategies and their long‐term limits.

Impact of social networking sites (SNSs) on stock market: Review, synthesis and direction for future research

Social networking sites (SNSs) provide a platform for disseminating different types of information, including stock market information. Many studies in the literature discuss the influence of social media on the stock market. However, little effort has been made in the past to present a literature review. This exploratory study aims to review the literature on social media and the stock market published from 2004 to 2018 and present insights and directions for future research. The study collects data from Scopus and ISI Web of Science databases and subjectively selects 126 papers, and conducts metadata analysis. In addition, the selected papers were analyzed to present the insights and classifications of the literature based on content analysis. This review classified the selected papers into different domains: reaction (e.g., investor behavior, market behavior, corporate governance and financial performance), data analysis techniques (mathematical, econometric models, data and text mining), and application of pre-established models. It identifies influential authors, top journals, top contributing nations, top contributing institutions, top citations, most used words, top publishers and contributions by fields. It develops a framework showing how the information of SNSs is disseminated, processed and responded to. It also finds that most of the paper outcomes support online social media as important information dissemination platforms for investment decisions in the stock market. The study will offer a novel opportunity for future assessment and contribution to the behavioral finance literature.

Research methodology in finance

Purpose- Our research aims to explore the different philosophical and epistemological concepts and approaches in traditional finance and behavioral finance, based on the analysis of scientific articles. We aim to provide a comprehensive insight into the theoretical foundations that guide these two branches of finance, with particular emphasis on the epistemological and methodological nuances that distinguish them. Methodology- Our research is based on a careful analysis of the relevant scientific literature in traditional and behavioural finance. By giving specific importance to epistemological aspects, we try to discover the paradigms of thought that influence the understanding and interpretation of financial phenomena within these two fields. Similarly, our meticulous examination of this research aims to identify the preferred methodological approaches. Findings- The results of the analysis show that traditional and behavioural finance have different epistemological and methodological approaches. most traditional financiers follow a quantitative research approach based on numerical data and a purely statistical analysis. However, behaviorists have opted for methodological triangulation, which further explains the combination of qualitative and quantitative approaches to achieve stronger results and that one can modify or complement the other. Behaviorists recognize the importance of cognitive and emotional biases in the decision-making process of individuals, leading to more holistic models and approaches. With regard to epistemology, most research in Finance on the positivist paradigm, on objectivity and on the relationship of cause and effect. Conclusion- In conclusion, our study highlights the importance of developing research methodologies adapted to each discipline of management sciences, taking into account the specificities of each field. Moreover, the analysis of the scientific literature in traditional and behavioural finance shows that researchers must be aware of the different epistemological and methodological perspectives in order to conduct rigorous and valid research. Keywords: Epistemology, methodology, management sciences, traditional finance, behavioural finance. JEL Codes: B40, G10, G40

The Early Warning of Financial Failure for Iraqi Banks Based on Robust Adaptive Lasso Logistic Regression

It is well known that there are many mathematical financial failure models that have been proposedin the financial literature for specific stock markets. Some researchers are not aware these mathematical modelswere constructed to be fitted for that market data, not for other markets. Iraq stock market exchange is one of thesemarkets in which the researchers used imported models such as Kida, Sherrod, Altman, and others to predictfinancial failure. Therefore, the development of a financial failure warning model for banks has become verycrucial for the Iraqi bank sector in the stock market exchange. Unfortunately, there is no clear information aboutthe financial failure of Iraqi banks as a response variable, and the financial indicators contain outliers. Theobjective of this paper is to propose an algorithm to know the performance of efficient and inefficient banks basedon their indicators during specific time periods. The output of this algorithm will be considered as responsevariables. Then, a weighted adaptive lasso logistic regression algorithm that has a high breakdown point is used totackle outliers’ problem. Thirteen banks have been chosen as the most traded during the period (2010-2017), andfor each bank (27) financial indicators were collected. Our proposed model is compared with adaptive lassologistic regression by using Deviance, Misclassification, Area Under Curve, Mean Square Errors, and MeanAbsolute Errors. Consequently, the results showed that the weighted Adaptive Lasso Logistic Regression model ismore robust and relevant than others to be a financial model to warn of the failure of the banks in Iraq's stockmarket.

Conservatism and representativeness heuristic in peer reviews: Evidence from the finance literature 1946–2020

This paper explores whether journal referees take into account the author's scholarly credentials in their decisions using the stochastic process underlying the Yule-Simon distribution as a descriptive model of the peer-review process. We provide evidence that referees consider the author's publication record valuable information in their decision-making, and such referee behavior helps improve the efficacy of the peer-review process. We show that the probability that a newly accepted paper in a given journal is written by authors with no prior publications is lower for top journals, specialty journals, journals with higher Eigenfactor or Article Influence Score, and journals with more publications.

What factors are economically important in the capital structure decision of European firms?

ABSTRACT Several factors previously identified in the finance literature are statistically significant in determining the long-term debt ratio of European firms. However, only age, size, current assets, and tangible assets have a meaningful economic impact. Tangible assets and firm size play a role in tradeoff theory and age is mentioned in pecking order theory, but our results provide only moderate support for these two theories of capital structure.