Financial Economics Research Articles

Does Financial Expertise within the Audit Committee Mitigate Stock Price Crash Risk? Unraveling the Impact of Accounting Proficiency on Market Vulnerability.

Stock price crashes can have severe consequences for investors and the overall financial market. This study investigates whether financial expertise within the audit committee can effectively mitigate stock price crash risk, with a specific focus on the impact of accounting proficiency on market vulnerability. By incorporating a comprehensive empirical analysis and recent scientific references, we aim to shed light on the crucial question of how audit committees' composition influences market stability. Drawing upon recent scientific references, including Smith and Johnson (2023) in the Journal of Accounting and Finance Research, Chen, Wang, and Li (2022) in the Journal of Financial Economics, and Zhang and Lee (2021) in the International Journal of Accounting and Auditing Research, we explore the relationship between financial expertise within audit committees and their ability to act as a safeguard against stock price crashes. Our research methodology involves analyzing data from various financial markets to ascertain the potential effectiveness of audit committees with members possessing higher levels of financial expertise in preventing or mitigating stock price crashes. By integrating insights from these recent scientific articles, we present a comprehensive examination of the influence of accounting proficiency on market vulnerability. The findings of this study will contribute significantly to the existing literature on corporate governance and market stability. Policymakers, investors, and corporate boards will gain valuable insights into the role of financial expertise within the audit committee in managing stock price crash risk and promoting market resilience. Ultimately, these insights can inform decision-making processes and enhance corporate governance practices to foster more stable and sustainable financial markets.

Investigation of Causal Linkages Between Financial Development and Economic Growth: Evidence from Pakistan

Financial development is a driving factor for economic growth and is important in fostering growth. An efficient and effective financial system contributes to economic growth and fosters the performance of other economic measures. This study aims to investigate the influence of financial innovation on economic expansion to understand the correspondence between financial development and economic growth in Pakistan. Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) are used for stationarity. Auto Regressive Distributed Lag (ARDL) and Error Correction Model are employed to analyze the correlation between economic growth and financial development. The finding shows that financial development stimulates economic growth. The research explains that foreign direct investment and personal remittances adversely affect GDP growth. These understandings recommend that although financial development generally promotes, its results can vary extensively and depend on specific context-dependent conditions. Furthermore, applying CUSUM AND CUSUM of square tests to measure model stability convincingly confirms a long-term relation between financial development and economic expansion, disproving the null hypothesis of no co-integration and reinforcing that financial development is essential to domestic economies. Policymakers need to practice these understandings in actionable plans by highlighting financial innovations that advance access to credit and efficiently allocate resources so investment in education and agriculture can maximize economic growth.

Variable-order porous media equations: Application on modeling the S&P500 and Bitcoin price return.

This article reveals a specific category of solutions for the 1+1 variable order (VO) nonlinear fractional Fokker-Planck equations. These solutions are formulated using VO q-Gaussian functions, granting them significant versatility in their application to various real-world systems, such as financial economy areas spanning from conventional stock markets to cryptocurrencies. The VO q-Gaussian functions provide a more robust expression for the distribution function of price returns in real-world systems. Additionally, we analyzed the temporal evolution of the anomalous characteristic exponents derived from our study, which are associated with the long-term (power-law) memory in time series data and autocorrelation patterns.

Predicting Chinese Banking Policy incidence using a VAR model

In this exploratory research, we examine the effect of economic and noneconomic indicators on the creation of Chinese Banking and Insurance Regulatory Commission policies using a VAR model. We find that CBIRC policies are predicted by State Council construction policies and policies set by the State Administration of Foreign Exchange. This indicates that the CBIRC is inward-looking, observing what other regulators are doing rather than responding to changes in the real and financial economy. This may be a product of market distortions due to China’s unique blend of state-oriented and market-based institutions.

A Sociology of Real Estate: Polanyi, Du Bois, and the Relational Study of Commodified Land in a Climate-Changed Future

Real estate plays an essential part in various sociological theories of political economy, state capacity, racecraft, stratification, and urbanization. However, since foundational insights about the novelty of commodified, emplaced private property from theorists like Du Bois and Polanyi, these disparate threads have not been tied together into a coherent field of study. Here, we review three areas of recent scholarship relevant to understanding real estate—the political economy of place, property rights, and financialization—in order to draw out key insights from each. Overall, the political-economic and socio-legal aspects of real estate have been well-studied, but contemporary research has been limited by its parochialism. We argue that for a sociology of real estate to move forward, it must take a broader, more relational perspective; must become more international; and must confront the climate crisis—and that Polanyi's and Du Bois's contributions can be effectively mobilized toward these ends.

The Credit Suisse bailout in hindsight: not a bitter pill to swallow, but a case to follow

In March 2023, Credit Suisse (CS) was bailed out based on the implementation of emergency law to the exclusion of all shareholder rights of the involved banks, likely violating basic principles of monetary order. However, this paved the way for a support plan amounting to 209 billion Swiss francs and the implementation of a state-orchestrated emergency merger with UBS. By the end of August 2023, UBS had fully paid back the support plan and reported the biggest-ever quarterly profit for a bank, amounting to 29 billion US dollars. UBS also started to absorb CS’s domestic business, thereby abandoning the branding of an institution with a history of 167 years. Popular accounts claim the plan could be considered a success and that there was no cost because the money was repaid. We critically evaluate the CS bailout, shedding light on key issues such as bailout-induced wealth transfers, the “too-big-to-fail” challenge, the likelihood of bank bailouts, the optimal level of bank equity, the doctrinal separation of solvency and liquidity, and the benefits of ex-ante market-based bank fragility indicators rather than ex-post accounting indicators. We infer a financial economist’s perspective, in which supervision is expanded by ex-ante market-based risk indicators, unweighted capital ratios are increased to adequately reflect large bank risks, and ex-ante paid liquidity options are introduced. Finally, we call for a public debate on the willingness of taxpayers to implicitly finance the too-big-to-fail risk of large banks.

Text Analytics on Green Economy using Bibliometrix

Environmental damage, global warming and climate change are increasingly serious and frightening, and have caused tremendous negative impacts on the lives of mankind and become a frightening specter for the international community. Environmental damage and socio-environmental crises have been the result of development strategies and policies that are not environmentally friendly and pro-people. The government formulated strategic and operational measures to "green Indonesia" through a green economy approach. This study aims to determine the development of green economy research trends published by leading journals on Islamic financial economics. The data analyzed consisted of 1183 indexed research publications. The data is then processed and analyzed using R-studio and biblioshiny applications to determine the text analytic development of green economy research.

When is cross impact relevant?

Trading pressure from one asset can move the price of another, a phenomenon referred to as cross impact. Using tick-by-tick data spanning 5 years for 500 assets listed in the United States, we identify the features that make cross-impact relevant to explain the variance of price returns. We show that price formation occurs endogenously within highly liquid assets. Then, trades in these assets influence the prices of less liquid correlated products, with an impact velocity constrained by their minimum trading frequency. We investigate the implications of such multidimensional price formation mechanism on interest rate markets. We find that the 10-year bond future serves as the primary liquidity reservoir, influencing the prices of cash bonds and futures contracts within the interest rate curve. Such behaviour challenges the validity of the theory in Financial Economics that regards long-term rates as agents anticipations of future short term rates.

Behavioral Biases Influencing Individual Investors Decision Making in Bearish Trend at Nepse

The discipline of financial economics has seen a paradigm shift over the past 25 years, moving from traditional finance to a new area of the study known as behavioral finance. Due to a multitude of behavioral biases and emotional attachments, professional investors make bad financial decisions that hinder their investing performance. Due to the increase in individual investors over the past several years, which is predicted to continue in the years to come, the problem of behavioral biases may become more and more important. Overconfidence bias, representativeness bias, disposition bias, loss aversion bias, herding bias and market factors are the independent variables, whereas investment decision making is the dependent variable. Questionnaires were used to collect primary data. 200investors were sampled using the convenience sampling technique, and data obtained was subjected to regression analysis. The SPSS was used to analyze data collected in order to generate descriptive statistics for the study. The extent to which the dependent variables could be explained by the independent variable was described using regression analysis. The study thus suggests that individual investors be educated how to avoid poor investment outcomes caused on by behavioral biases. Furthermore, individual investors should seek the advice of stock brokers/fund managers to guide them accordingly in terms of performance of a specific security in which an investor would wish to invest in.

Market Behaviors and Economic Crisis: Insights from Financial Economics

The research abstract encapsulates a comprehensive exploration of market behaviors during economic crises within financial economics. The study aims to elucidate the intricate dynamics of market behaviors amidst crises and their implications for theory and practice in financial economics. Employing a mixed-methods approach, the research integrates theoretical frameworks with empirical evidence to offer insights into the complexities of market dynamics. The study design thoroughly examines theoretical constructs and empirical investigations, drawing upon established frameworks such as the Efficient Market Hypothesis and behavioral finance theories. The research unravels the interplay between rational and irrational factors driving market outcomes during crises through empirical studies, including analysis of historical market data and examination of investor behavior. The findings underscore the need for a nuanced understanding of market behaviors, emphasizing the integration of rational and behavioral perspectives in financial economics theory and practice. The study's implications extend to policymakers, investors, and market participants, providing actionable insights to navigate turbulent economic environments effectively and foster stability in global financial markets.

Application Analysis of Main Project Evaluation Tools

With the development of financial economy, the toolbox of project appraisal has become more and more abundant, and many decision makers do not know how to choose the most appropriate tool when they are faced with a large number of project appraisal tools when evaluating a project. In the project evaluation toolbox, Net Present Value (NPV), Internal Rate of Return (IRR), Modified Internal Rate of Return (MIRR), and Economic Value Added (EVA) are the four most widely used project appraisal tools nowadays, which are required by almost all decision makers in project appraisal. This paper provides an overview of the concepts, forms, limitations, and applications of NPV, IRR, MIRR, and EVA with the aim of providing the audience with a general understanding of these four program evaluation tools. Based on this, the paper further discusses a comparison of the application of these four project appraisal tools in different situations, showing the differences in their applicability in different situations. The purpose of this paper is to provide decision makers with some basis for the selection of appraisal tools.

Innovative finance and circular economy Financing for sustainable development

Innovative finance and circular economy Financing for sustainable development

Financial capital and ghosts of empire: editorial

ABSTRACT In this special issue, we take up the metaphor of the ghost to identify the seemingly intangible yet undeniable persistence of racism, empire and colonialism in finance and the global capitalist economy. In the aftermath of a world system built through colonialism, imperialism and their race-making projects, we all emerge haunted by racial colonialism. Despite this differently-expressed but shared global condition, we also live in a world marked by a willed forgetfulness, occurring more broadly, and especially in fields like economics and political economy. We argue that in order to understand the cultural economy one must confront the ghostly aspects of it. This special issue contributes to the cultural economy of finance by demonstrating pivotal ways in which finance actually works. We do so by refracting the lens of contemporary financial activity to reveal hidden ghostly power relations connecting the past of empire and colonialism with the present of financialisation and coloniality.

Exploration of the Methods of Using Mathematics in the Financial Economy of the Enterprise

As a matter of fact, with the development of the times and the advancement of economic system reform, the activity of China's financial market has increased. As a consequence, the financial and economic development is facing new opportunities. In this case, it is necessary to give full play to the role of economic mathematics knowledge. Enterprises in their own business development, need to focus on how to strengthen the financial and economic analysis, a comprehensive display of the advantages of economic mathematics, the use of economic as well as mathematical theories, the financial and economic value of the enterprise for a period of time, usually involving the derivative, differential, function models and other knowledge, can provide support for the formation of the results of the enterprise's financial and economic analysis, which in turn helps enterprises to adapt to the changes in the financial market in a more comprehensive manner contemporarily.

Causal Link between Financial Globalisation Uncertainty, Economic Growth, Environmental Degradation and Energy Consumption in ASEAN+3 Countries

This paper aims to examine the causal linkage of financial globalisation uncertainty, Environmental Degradation, economic growth and energy consumption for ASEAN+3 countries using second-generation approach for the period between 1970–2019. The results of second-generation unit root test revealed that economic growth and financial globalisation uncertainty were stationary at level, while energy consumption and environmental degradation were stationary at first difference. In addition, the Larson cointegration test showed that long-run cointegration exists between the variables. Similarly, we found that economic growth and environmental degradation have significant positive influence on energy consumption. However, financial globalisation uncertainty has insignificant influence on energy consumption. The results of causal relationship indicated a bidirectional causal relationship between financial globalisation uncertainty and energy consumption; environmental degradation and energy consumption; and economic growth and energy consumption.

Pricing levered warrants under the CEV diffusion model

Much of the work on the valuation of levered (and unlevered) warrants assumes that the volatility of the underlying state variable is constant. This paper extends the literature on warrant pricing to a more general assumption for the state variable process, the so-called constant elasticity of variance (CEV) process. The CEV model is well-known for its ability to capture some empirical observations found in the financial economics literature, namely the asymmetry between equity returns and volatility and the implied volatility skew. Using the CEV process, we are able to reduce pricing bias as the volatility becomes a function of the underlying state variable. We price European-style call warrants without restrictions on the debt maturity. When warrants have the same maturity as debt, it is possible to obtain closed-form solutions for warrants prices. When the maturity of warrants is different from the maturity of debt, prices can be computed numerically through very efficient and simple to implement valuation methodologies.

What is Financial Exclusion? A Review

The Central Bureau of Statistics (BPS) recorded that the Indonesian population living below the poverty line as of March 2016 reached 28.01 million people. Although Indonesia's poverty tended to decline in 2016, the World Bank considers that Indonesia's economic inequality has widened in the last 15 years. Poverty in Indonesia is motivated by financial exclusion. Financial exclusion is the lack of access, faced by those most in need, to cheap, fair and safe financial services from mainstream service providers. This study aims to determine the development of Financial Exclusion research trends published by leading journals on Islamic financial economics. The data analyzed consisted of 597 indexed research publications. The data is then processed and analyzed using the VoSviewer application to determine the bibliometric map of Financial Exclusion research development.

Finametric Analysis of Financial Innovation and Economic Growth in Nigeria

The study empirically investigates the effect of financial innovation on economic growth in Nigeria using quarterly time series data spanning through the periods of 2010 to 2021 while historical data design was adopted for the study. The Gross Domestic Product was used as proxy for the dependent variable while Automated teller machine, Web banking, Mobile banking and Point of sale transactions were adopted as proxies for the independent variables. The Augmented Dickey Fuller (ADF), Phillips-Perron, Breusch-Pagan-Godfrey heteroskedasticity test, CUSUM test, Johansen cointegration test, Parsimonious Error Correction model and the fully modified Least Square were used for the data analysis. The outcome of the Johansen Cointegration and the fully modified least squares indicated evidence of long-run relationship between financial innovation and economic growth in Nigeria. From the foregoing, the study concludes that the adoption of financial innovation enhances economic growth in Nigeria. Based on the findings, the study suggests that appropriate policies should be formulated to build the confidence of customers regarding the reliability of financial innovation products.

A Cross Country Empirical Investigation of Association between the Financial Inclusion and Economic Growth

A Cross Country Empirical Investigation of Association between the Financial Inclusion and Economic Growth

The Financial Markets Development and Economic Growth in Rwanda: A Causality Test

The Financial Markets Development and Economic Growth in Rwanda: A Causality Test