Financial Downturn Research Articles

The effects of financial frictions on Slovenian companies: A panel VAR approach

In this paper, we investigate the impact of imperfect financial markets on the business investment of Slovenian non-financial companies. We focus on exploring the borrower's balance sheet channel, through which companies’ worsening balance sheets, reduce the availability of external finance. The effects of exogenous shocks are, therefore, amplified through the financial accelerator mechanism and affect the overall economy. Using data from annual reports of Slovenian non-financial companies from 2005 to 2020, we estimate a panel VAR model on various sample definitions. The results confirm the existence of the balance sheet channel, as the impulse response of investment to cash flow shocks is statistically significant. This effect is especially noticeable during the period from 2006 to 2012. Our findings suggest that financial frictions affect the availability of external financing and, consequently, the investment activity of Slovenian non-financial companies. Policymakers should prioritize measures to ensure adequate external financing, particularly for financially constrained firms, to mitigate the negative impact of reduced economic activity during periods of financial distress and economic downturns.

Economic sentiment and the cryptocurrency market in the post-COVID-19 era

This paper analyzes the interactions, dependence and dynamic network connectedness among economic based-news sentiment index (ESI) and the top eight crypto-currencies with particular attention on the post-COVID-19 pandemic era. We explore these features by applying novel econometric frameworks such as wavelets coherence, cross quantilogram, and DCC-GARCH-based connectedness techniques on a dataset that covers both the first and second waves of the COVID-19 outbreak. First, results from the wavelets approach show convincing evidence of low covariances between ESI and both returns and volume while results of correlations highlight the potential diversification opportunities of some crypto-currencies, especially during bullish market condition since the COVID-19 pandemic. Results from the directional predictability show that across all market conditions, there are strong evidence that ESI can predict the price return of stable-coins (Tether and USD) compared to the price return of Bitcoin, Ethereum and Dogicoin that ESI predicts only under bullish market condition. For changes in volume, we find that the predictive power of ESI is more pronounced and heterogeneous, cutting across different quantiles of the different classes of cryptocurrencies, especially Bitcoin (BTC) and Dogicoin (DOG). The analysis of dynamic connectedness show that the level of connectedness among ESI and both price return and changes in volume of trade of the chosen cryptocurrencies increased sharply during the peak of the COVID-19 pandemic. In both cases, Tether and ESI are the main destination of volatility shocks Ripple and Bitcoin are the dominant sources of shocks. We document the importance of economic sentiment for investors in the management of their cryptocurrency assets during periods of financial downturns as witnessed since the COVID-19 pandemic.

Macro-prudential policies to contain the effect of structural risks on financial downturns

We investigate the extent to which various structural risks exacerbate the materialization of credit risk and affect financial cycle downturns. We use a large database covering all sorts of cyclical and structural features of the financial sector and the real economy for a panel of 30 countries over the period 2006Q1–2019Q4. We show that elevated levels of structural risks may have an important role in explaining the severity of credit risk materialization during financial cycle contractions. Among these risks, private and public sector indebtedness, banking sector resilience and concentration of real estate exposures stand out. Moreover, we show that the elevated levels of some of the structural risks identified may be related to long-standing accommodative economic policy. Our evidence implies a stronger role for macroprudential policy, especially in countries with higher levels of structural risks.

A Review on the Impact of Shadow Banking on Financial Markets Prudential Regulation

Abstract The evolution of shadow banking sector in terms of structure (concentration of institutions), expanded connections with banks, and in terms of activities there was an increase of the systemic relevance of these entities. The aim of this paper is to review the relevant literature on the topic and the progress that has been made regarding the implementation of macro-prudential policies since the global financial crisis of 2008. As the financial crisis highlighted, shadow banking sector should be considered a source of systemic risk and it is essential to identify its potential effects to the financial sector downturn. We examine the empirical studies that have been carried out in the recent literature on the structure and effects of nonbank financial sector regulation. Based on our findings, the main results pointed out that the academic research conducted in this field focused on the link between shadow banking and systemic risk. The collapse of one financial institution has the potential to have widespread effects and could trigger a series of failures that directly threatens the stability of the whole financial system.

Strategic factors conferring organizational resilience in SMEs during economic crises: a measurement scale

PurposeThe paper aims to develop a strategic conceptualization and measurement scale of organizational resilience to support researchers examining how small firms prepare and respond deliberately to general disruptions in the operating environment over more extended time frames.Design/methodology/approachThe paper uses a four-step process to develop, present and test (for predictive validity) a scale of strategic organizational resilience for frequent events or those needing long-term responses.FindingsThe resulting seven-factor measurement scale of organizational resilience consists of readiness, slack, problem-solving, flexibility, connectedness, adaptiveness and proactiveness.Originality/valueThe literature on organizational resilience explains how organizations recover from rare but catastrophic events by focusing on adaptation principles and short-term survival. The broader conceptualization presented here enables the study of organizational resilience in small-medium size enterprises (SMEs) across more frequent and pervasive events, such as financial crises, industry downturns and other forms of structural change and technological disruption. This is operationalized in a measure that includes new strategic factors associated with forward-planning and more traditional operationally focused elements.

Literature Review: Analisa Dampak Dari Financial Ratio Dan Firm Size Terhadap Kondisi Financial Distress

Financial distress is an event of financial downturn of the company which is the beginning of the liquidation of the company. The purpose of this study is to analyze the effect of financial ratio and firm size variables on the company's financial distress. Leverage, profitability, and liquidity are the types of ratios to use. The research method used was with literature review and used 12 relevant journal articles. The conclusion of this study is that profitability variable that influence financial distress conditions while liquidity and leverage variables do not affect these conditions. Company size as the last variable also does not have a significant influence on financial distress.

Predicting Apple stock prices based on ARIMA

The volatility of the global financial market under the influence of the epidemic is a hot issue of concern to the whole society. Most tech company stocks have been affected to varying degrees, including Apple. However, Apple's future stock price trend under the influence of the epidemic has not yet been studied. Whether Apple stock is still worth buying has become a concern for many. Therefore, this article collects data on Apple's stock price from the time it went public until 2022. After cleaning and analyzing the data, an ARIMA model is established to analyze and predict Apple's stock. This paper will explore the relationship between the global financial market downturn and Apple's stock price volatility under the impact of the epidemic based on model results and data. According to the model's prediction of Apple's stock price, Apple's stock price will continue to increase in the next six months after June 2022. This article obtains the forecast data, and then combines the analysis of the impact events that have significantly fluctuated the price of Apple's stock in the past. It was found that although Apple's stock price will be affected by the big environment, its strong and unique product power will help it maintain a long-term increase in stock prices. Apple stock still has a high purchase value.

Towards a macroprudential regulatory framework for mutual funds?

AbstractThis paper highlights the procyclical and unstable behaviour of mutual funds, characterized by a varying sensitivity on common asset pricing factors. It proposes a novel factor model that allows for regime changes associated with macroeconomic and financial state variables. Estimated on a panel covering 825 US equity mutual funds over a period of 30 years, it appears that the yield curve, the dividend yield, short term interest rates and the industrial production coincide with regimes switches in the Fama–French factors. Furthermore, the estimated regimes coincide with financial crises and economic downturns, thus confirming the procyclical behaviour of mutual funds' returns. These findings, coupled with the emerging systemic role of mutual funds, promote the consideration for a specific macroprudential regulatory framework targeted at the mutual fund industry.

The Determinants of Unemployment Insurance Participation: An Application of Theory Of Planned Behaviour

Unemployment is one of the economic disorders that affect the economic growth rate. In addition, the recent pandemic outbreak has turned the medical crisis into a global financial downturn, threatening the health and employment of people around the world. Unemployment insurance is intended to assist workers with partial and momentary income replacement, access to skill training, and job placement assistance during their unemployment period. The scheme was launched in Indonesia on March 2021. This study analyzed the intention effect toward participation and the effect of attitude, subjective norms, and perceived behavioral control towards the intention to participate using the Theory of Planned Behaviour. The total number of registered companies in DKI Jakarta Regional is 111.855, while the registered workers are 5.853.717. The quantity of samples based on the minimum sample calculation findings with the minimum number of samples obtained is 170 respondents. There were 200 participants of BPJS Ketenagakerjaan in the DKI Jakarta regional office who participated as respondents during the research period. SEM analysis methods are used in this study. The result showed that attitude toward behavior, subjective norms, and perceived behavioral control positively and significantly influence the intention to participate. Subjective norm is significant as an intervening variable between attitude and perceived behavioral control toward the intention to participate. Thus, strategies focusing on these factors can increase participation in the unemployment insurance scheme. Keywords: attitude toward behavior, participation intention, perceived behavioral control, subjective norm, unemployment insurance

Investment in renewable energy and electricity output: Role of green finance, environmental tax, and geopolitical risk: Empirical evidence from China

The global financial downturn induced by COVID-19 has hampered the effectiveness of renewable energy developments, impeding the accomplishment of the United Nations' sustainable development targets. Green finance is a significant means for promoting renewable energy investment and achieving sustainability. Using data from 2012 to 2021 from fifty energy firms in China, this study highlights the starring part of geopolitical risk, green finance, and environmental tax in investment in renewable energy (IRE) sources. It also investigated how IRE impacts the studied firms' electricity output. The data were analyzed through quantile regression and dynamic analysis techniques. The results indicated that green financing and environmental tax significantly impact IRE sources with 0.137*** and 0.428*** beta values, respectively. However, geopolitical risk significantly impedes such projects. Similarly, IRE significantly increases the electricity output of Chinese energy firms. This research is unique in the sense of studying green financing, geopolitical risk, and environmental tax nexus in renewable energy investments leading to electricity generation, which shows a pivotal role in achieving environmental sustainability and provides valuable insights to environmentalists and policymakers to design and implement ecological strategies leading to achieving sustainable development goals.

The US Congress 118th: a Gender Portrait

Senator Patty Murray of Washington was solemnly sworn in by Vice President Kamala Harris in the Old Senate Hall on Capitol Hill in Washington on January 3, 2023, in front of Murray's husband, Rob Murray. She became the first woman to temporarily become President of the Senate. The episode is like a historical symbol of the conquest of heights of power by American women in the first quarter of the 21st century: a duet of American women perform a "routine" action in the procedure for transferring power. The American press, not without reason, interprets the results of the election of women to various levels during the 2022 midterm elections as “new records”. The 118th US Congress (2022-2024) has a record number of women. The point of view that it was the issue of abortion that helped "limit the losses of the Democrats" in the last election cycle was widely accepted among specialists. The Supreme Court's dismissal of Roe v. Wade has placed abortion at the center of the election debate, along with the economy, inflation and immigration. The election took place amid a global financial downturn and a notable rise in the cost of living in the United States. In addition, they are the first since the June 2022 Supreme Court ruling overturned the 1973 Roe v. Wade decision. The Democrats retained control of the Senate. The Republican Party won a majority in the House of Representatives. In thinking about expanding the political power and representation of American women, it is necessary to consider the barriers to women's retention in office and how to remove those barriers, recognizing the full range of diversity among them—and, in particular, the diversity of their political experiences and opportunities—in political institutions. The gubernatorial level of power demonstrates the same trend. Nearly a quarter of all US governors are women. Moreover, there are twice as many women democrats among them. In total, 12 American women occupy this level of office: 8 of them are Democrats, 4 - Republicans.

Investor bias, risk and price volatility

PurposeThis study proposes a framework based on salience theory and shows that focusing on one type of risk (idiosyncratic or systemic) can explain overpricing of securities ex ante, and resales at low prices during crisis periods.Design/methodology/approachThe author consider an overlapping generations (OLG) model where each generation lives for two periods and there is no population growth. Agents (investors) start their lives with an endowment W > 0 and have mean-variance utility. They invest their endowment when young and consume when old. Each period, the young investors optimally choose their portfolio from different risky assets acquired from the old generation, all assumed to be in fixed supply.FindingsThe author show that investor salience bias can explain excess volatility of asset prices and the resulting fire-sales in periods of financial turmoil. A change in salience – from one component (idiosyncratic) to the other (systemic) – will generate excess volatility. Interestingly, higher risk aversion generally exacerbates the excess volatility of prices. Moreover, the model predicts that if a big systemic shock hits the financial system, due to salience bias the price of systemic assets falls sharply. This relates to the observed fire-sales of assets during the global financial crisis.Practical implicationsThe proposed model and results suggest that there may be a scope for intervention in financial markets during turbulences. In terms of ex ante policies the study suggests that investors and regulator should use better risk assessment technologies.Originality/valueThis is the first study constructing a tractable model based on the argument that investor salience may exacerbate the excess volatility of prices during financial downturns. The author relate salience to two types of risk; idiosyncratic and systemic and assume that investors' risk perception is biased towards the type of risk that is currently salient based on prior beliefs or past data. The author show that the diversification fallacy of the precrisis period, where seemingly safe assets were overpriced, can be explained by agents overweighing idiosyncratic risk and ignoring systemic risk.

Enhancing R&D employment slack during environmental turbulence: Triggers and firm performance consequences for R&D-active SMEs

We provide guidance for the management of R&D employment slack in small- and medium-sized enterprises during crisis, and in view of post-recession firm performance. A multi-dimensional R&D related financial resources approach including overall available financial slack, sources of financing for R&D, type of R&D, and R&D cooperation is adopted. A triangulation of regression and qualitative comparative analyses of data for R&D-active SMEs in the small open Belgian economy in the period 2007–2013 is relied upon. From a managerial perspective, to weather the storm of a financial and economic downturn, we highlight the need for R&D-active SMEs to engage in knowledge development – rather than knowledge exchange – in R&D cooperation in view of post-recession firm performance, and to get familiarized with access to external finance for R&D prior to crisis to strengthen or safeguard R&D employment slack during crisis. A high level of available financial slack prior to crisis has limited influence on R&D employment slack during crisis, but positively moderates the relation between R&D employment slack enhancement during crisis and post-crisis firm performance.

Borrower- and lender-based macroprudential policies: What works best against bank systemic risk?

This paper investigates the complementarity between the different macroprudential policies to contain bank systemic risk. We use a newly updated version of the IMF survey on Global Macroprudential Policy Instruments (GMPI). By disentangling the aggregate macroprudential policy index, we assess the complementarity between borrower-targeted and lender-targeted instruments in mitigating systemic risk arising from intra-financial system vulnerabilities. We investigate the effect of boom-bust cycle on such a relationship by analyzing the financial upturns and downturns and show the effectiveness of the macroprudential policies during calm period. We also show that their efficacy in mitigating instability is quite heterogeneous and may vary depending on the set of tools implemented, as well as bank’ size, TBTF, leverage, liquidity and concentration.Our results bear critical policy implications for implementing optimal macroprudential tools and provide insights into the trade-off between financial vis-à-vis price stability.

The potency of natural resources on ecological sustainability in PIIGS economies

The current study assesses nonlinear/asymmetric influences of natural resources (NR) on the ecological footprint (EF) at both the lower and higher tails for the case of PIIGS countries (Portugal, Ireland, Italy, Greece, and Spain) using quarterly data between 1970 and 2018. The PIIGS grew in popularity during the 2008 eurozone financial downturn, alluding to the nations impacted the hardest by the crisis. The study utilizes the sophisticated “quantile-on-quantile (QQ)" technique initiated by Sim and Zhou (2015) which can estimate the dependence of the time series in each nation individually to offer country-specific indication for the interrelationship between the series. Furthermore, we utilize the quantile causality proposed by Troster et al. (2018) to identify the causal association between series at the lower and higher tails of the data distribution. The outcomes of the quantile cointegration revealed the long-run association between NR and EF in each sample country. Moreover, the results from the QQR disclosed that NR impacted EF negatively in Greece, Portugal, Ireland, and Spain across most of the quantiles. In contrast, positive connections between EF and NR surfaced in most of the quantiles for the case of Italy. Furthermore, the quantile causality revealed bidirectional causality between EF and NR for the PIIGS nations across major quantiles. This demonstrates that any policy initiated on NR will have a substantial but heterogeneous effect on EF and vice versa in the PIIGS countries.

Bank’s Effectiveness as a Credit Provider for SMEs During Economic or Financial Downturns

The purpose of this research is to contribute forward to resolving a thoughtful tension for many developing economies on small and medium-sized enterprises (SMEs) and entrepreneur businesses’ credit accessibility and discontinuity during economic or financial downturns. This work is motivated by the global financial crisis (GFC) in 2008 and the COVID-19 pandemic which have created a shortage of financial credits and have tested the ability of banks to respond to crises. Our work is focused on Gulf Cooperation Council countries (GCC). Through our integrative literature review, we found that some factors more influential on credit providing to this segment than others mainly; the lack of reliable financial information, length of relationship with the main bank, and credit rationing with significant interaction and impact among them, our research will focus on those factors. This research considers the regulators’ intervention with the dilemma and possible trade-offs between the objective of maintaining a robust financial system through intensified regulations and the real impact on the economic growth which becomes more critical during challenging times.

Using Real-Time Dashboards to Monitor the Impact of Disruptive Events on Real Estate Market. Case of COVID-19 Pandemic in Australia

Real estate markets are complex both in terms of structure and dynamics: they are both influenced by and influence almost all aspects of the economy and are equally vulnerable to the shocks experienced by the broader economy. Therefore, understanding the extent and nature of the impact of large-scale disruptive events such as natural disasters and economic financial downturns on the real estate market is crucial to policy makers and market stakeholders. In addition to anticipating and preparing for long-term effects, it has become imperative for stakeholders to monitor and manage the short-term effects as well due to the emergence of ‘PropTech’ and ‘platform real estate’. In this work, we explore the use of online, real-time dashboards which have been used extensively in the context of urban management, policymaking, citizen engagement and disaster response as an appropriate tool for the purpose of monitoring real estate markets. We describe the process of designing, building, and maintaining an operational dashboard for monitoring the residential real estate market in Australia during the COVID-19 pandemic in 2020. We detail the techniques and methods used in creating the dashboard and critically evaluate their feasibility and usefulness. Finally, we identify the major challenges in the process, such as the spatial and temporal availability and veracity of the real estate market data, and we identify possible avenues for consistent, high-quality data; methodology; and outputs for further research.

Financial distress, value of firm, trilemma index dan investment decision studi pada perusahaan pertambangan global besar

The purpose of this study was to determine the relationship between financial distress, value of firm and investment decision in the world's largest mining companies. Investment decision in a company is very important in developing the company, it can be by doing business expansion or other things. This research uses quantitative methods. The independent variables in this study are financial distress, firm value and trilemma index. the financial distress coefficient is negative -0.04 significant with a p-value of 0.021 for investment decisions. Financial distress has a negative influence on investment decisions in large mining companies around the world in 2010-2019, which means that in the world's large mining companies, companies that have a financial downturn in their companies tend to make investment decisions with the aim of restoring the company's financial condition. The point is, financial distress here can also occur not because after the company makes an investment decision, the company will experience a financial downturn, this can happen one of them because by making an investment decision it can make the company's finances seem to be reduced but financial conditions can be reduced. by the company in making investments.

Covid-19 Pandemic- A Ray of Hope Towards Sustainable Nature-Based Tourism

As the world wrestles with the pandemic and the travel industry comes to a standstill, stories via online media are surfacing that guarantee untamed life is getting back to isolated urban areas and that the Earth is recuperating itself. Millions are confronting the possibility of joblessness, a worldwide financial downturn is on the cards, medical services frameworks are being over-burden as contaminations develop dramatically, and disease transmission experts caution that, conceivably, a great many individuals could bite the dust. The travel and tourism industry and the environment are firmly connected.The travel industry research is beginning to look into especially as it connects with environmental change. Since the COVID-19 pandemic carried the travel industry to an edge, this is beneficial for the recuperation of the environment for the time being, because of pandemic-related travel limitations queues to observe nature have vanished. But, amid the entirety of this catastrophe, a brief look at something positive has shown up.

Higher order risk attitudes in the time of COVID-19: an experimental study

Abstract The coronavirus disease (COVID-19) represents a large increase in background risk for individuals. Like the COVID-19 pandemic, extreme events (e.g. financial downturns, natural disasters, and war) have been shown to change attitudes towards risk. Using a risk apportionment approach, we examine whether risk aversion as well as higher order risk attitudes (HORAs) (prudence and temperance) have changed during COVID-19. This methodology allows us to measure model-free HORAs. We include prudence and temperance as higher order measures, as these two have been largely understudied under extreme events but are determinants of decisions related to the health and financial domains. Once we account for socio-demographic characteristics, we find an overall increase in risk aversion during COVID-19. We also find similar results using a hypothetical survey question which measures willingness to take risks. We do not find changes in prudence and temperance using the risk apportionment methodology.