Financial Firms Research Articles

The Impact of FinTech Merge Operation on Financial Performance: Evidence from a Banking International Sample

The FinTech phenomenon has recently had a significant impact on the financial sector, opening up new potential for cost-saving measures and providing increasingly sophisticated financial services. On the other hand, FinTech has helped new players—typically technology companies—enter the financial sector and financial intermediation. Financial institutions have started cooperative and merging operations. As a result, to incorporate the new technology created in the market into their business model. This study aims to determine whether banks engaged in a FinTech merger experience improved financial performance. The research hypothesis is tested using an international sample composed of 106 financial intermediaries that implemented FinTech mergers from 2010 to 2018. The methodology employed is the Propensity-Score-Matching (PSM) technique which provides empirical results using a control group of 8,886 financial firms, with a total of 79,974 observations. The results demonstrate how a FinTech merger enhances intermediaries' financial performance. This evidence highlights the strategic value of FinTech fusion in the modern financial system. This study offers important insights for future research on the topic, as it contributes to combining two distinct outfits of literature, FinTech and M&A, into one that has been little addressed in the financial sector.

How career hubs shape the global corporate elite

AbstractIn this contribution, we introduce ‘career hubs’ as an alternative to interlocking directorates and propose to study transnational corporate elite networks with this new concept. Career hubs, the most frequent common career organizations, put emphasis on knowledge brokering and allow us to study a larger variety of organizations to understand the form and the spread of elite networks. We use a sample of 1366 firms on the Forbes 2000 list of 2018 and investigate the careers of 16,500 top executives by linking these data to the BoardEx database. We find three types of career hubs: global audit and consulting firms, financial firms participating in a transatlantic banking alliance and large US consumer goods conglomerates – and highlight the mechanisms through which they shape the spatial structures of finance led capitalism. In the conclusion, we consider the implication of our results for the literature on corporate networks and propose a series of future research avenues in the career hub perspective.

Financial Structure, Firm Size and Financial Growth of Non-Financial Firms Listed at the Nairobi Securities Exchange

A significant number of the non-financial firms listed at the Nairobi Securities Exchange (NSE) have been experiencing declining financial performance and financial growth, which deter investors from investing in such firms. Hence, the study aimed at establishing the effect of financial structure on the financial growth of non-financial firms listed at the NSE. The study was guided by the Modigliani-Miller theory, Agency Theory, Pecking Order Theory, Trade-off Theory, Market Timing Theory, and Theory of Growth of the Firm. An explanatory research design was adopted. The study’s target population comprised 45 non-financial firms listed at the NSE for a period of ten years, from 2008 to 2017. The panel model revealed that short-term debt, long-term debt, retained earnings, and share capital explain 61.36% of variations in financial growth as measured by growth in earnings per share and 65.57% of variations in financial growth as measured by growth in market capitalization. Short-term debt has a positive and significant effect on financial growth as measured by growth in earnings per share (β=0.024095, p=0.013) and growth in market capitalization (β=0.028529, p=0.006). Long-term debt has a positive and significant effect on financial growth as measured by growth in earnings per share (β=0.864088, p=0.000) and growth in market capitalization (β=0.958656, p=0.000). Retained earnings have a positive and significant effect on financial growth as measured by growth in earnings per share (β=0.951749, p=0.015) and growth in market capitalization (β=0.043784, p=0.004). Further, share capital has a positive and significant effect on financial growth as measured by growth in earnings per share (β=0.007016, p=0.000) and growth in market capitalization (β=0.09635, p=0.001). Firm size significantly intervenes in the effect of financial structure on the financial growth of non-financial firms listed at the NSE measured using growth in earnings per share. However, Firm size does not intervene in the effect of financial structure on the financial growth of non-financial firms listed at the NSE measured using growth in market capitalization. The study concludes that short-term debt, long-term debt, retained earnings, and share capital positively influence financial growth as measured by both growth in earnings per share and growth in market capitalization. The study recommends that the management of non-financial firms listed at the NSE to balance financing a firm using debt and equity. The study also recommends that the management of non-financial firms listed at NSE to encourage its shareholders to re-invest back their earnings rather than consuming them as dividends. Financial structure varies significantly depending on the sector in which a firm operates. There is a need to conduct a comparison study to establish the effect of financial structure on the financial growth of non-financial firms versus financial firms listed at the NSE. The comparison study will tell which form of financing is appropriate for non-financial firms and which one is appropriate for financial firms.

Stock market performance differences between fintech and traditional financial firms

Nowadays, Fintech firms are making the most of new technologies to expand and improve financial services, displacing traditional financial companies in some cases. These Fintech firms are playing an increasingly relevant role, not only in the economic and financial sphere, but also in the stock markets, as they have become an attractive investment alternative. However, our knowledge of these companies’ stock performance is still limited. In this context, the aim of this study is to analyse the return and risk associated to investing in the FinTech companies comprising the Nasdaq Financial Technology index as well as the return and risk associated to investing in traditional financial companies comprising the Standard & Poor’s 500 Financials index. The study is completed by analysing the results of a zero-cost investment strategy based on buying shares in FinTech companies and selling shares in traditional financial companies. This allows us to analyse whether there are significant differences between the two types of investment. Our overall results show that the risk-adjusted return, as well as the systematic risk, are conditioned by the state of the economy in both types of investment and that the significant differences in investment style boil down to the fact that traditional companies are value firms. Meanwhile, fintech firms have greater capacity for growth in the stock market. These findings provide relevant information for current research on Fintech firms in comparison to traditional financial firms. Moreover, these findings can be used by investors for their trading strategies

Islamic finance: Meeting Global Aspirations and Growth Potential — UK Model

This study’s objective is to provide a description of the Islamic financial industry and its products, with an emphasis on the development of Islamic finance in the UK market. Islamic finance is a relatively popular issue in the world of economics due to its patterns of worldwide expansion. In the western world, the UK is at the forefront of Islamic finance. This research used a positivist outlook, and a descriptive research design. The optimum way will thus be to acquire secondary data. Both content analysis and descriptive analysis were used to examine the data that had been gathered. The findings showed that the UK’s political environment and organizational structure support the expansion of Islamic banking there. The study also highlights the difficulties that UK-based Islamic financing faces. The results showed that financing real estate, as well as the provision of insurance services and the financing of transport firms without interest charges on loans, improve investment by Islamic banking and conventional banking institutions with an Islamic sector.

Approximate Solutions for Nash Differential Games

In this paper, we are concerned with an open-loop Nash differential game. The necessary conditions for an open-loop Nash equilibrium solution are obtained, also the existence for the solution of the dynamical system of the differential game is studied. Picard method is used to find an approximate solution, and the uniform convergence is proved. Finally, we constructed figures for the analysis of the differential game. These results can be applied between economic and financial firms as well as industrial firms.

Does the Relationship between Entrepreneurial Orientation and Subjective Financial Firm Performance Have an Inverted U-Shape? Evidence from Southeast European SMEs

Many academic studies have focused on exploring various interactions between entrepreneurial orientation (EO) and firm performance, where, in general, the findings confirmed their existence to be of positive character. However, many authors indicated a need to further test the possibilities concerning the nonlinearity between EO and firm performance. Moreover, since many research studies on this topic have been conducted in developed countries, there is still a need for such studies in developing countries, especially in the region of southeast Europe. Therefore, the purpose of this paper is to investigate the existence of nonlinearity between EO and subjective financial performance among SMEs in southeastern European countries. Data was collected from decisionmakers of the 963 SMEs operating in Slovenia, Croatia, Bosnia and Herzegovina, Serbia, Montenegro, and North Macedonia. Proposed hypotheses were tested using hierarchical linear regression analysis. Research results confirmed existence of the positive direct relationship EO has on financial performance, including the positive effects on sales growth and profit-to-sales ratio. On the other hand, results have not confirmed existence of nonlinearity effects that EO has on financial performance, sales growth, nor on the profit-to-sales ratio. In other words, the observed relationship does not exhibit inversed U-shape characteristics among southeast European SMEs.

How do females in top executive positions influence firm profitability: new insight from non financial firms on Ghana Stock Exchange

Purpose This study aims to investigate the impact of female chairperson, female chief executive officer and presence of females on boards on listed firms’ profitability using data from Ghana. Design/methodology/approach This study used ordinary least square estimation and generalized least square (i.e. fixed and random effect estimation techniques) estimation on the data of 15 nonfinancial listed firms on Ghana Stock Exchange between 2010 and 2020. Findings The results show that while males dominate corporate executive positions in listed nonfinancial firms in Ghana, females serving in top corporate executive positions like chief executive officer, board chairperson and female board membership positively impact listed firms’ performance in the form of return on assets, net profit margin and gross profit margin. These findings are consistent even when year and industry effects are controlled for. This suggests that enacting policies at the national and firm levels to encourage female participation in corporate executive roles/positions are critical for promoting firm performance. Originality/value This study extends extant empirical literature on the economic role of female executives in firm performance from the developing context of Ghana. With calls in literature for more studies on the subject matter in varied contexts and conditions, this study takes the discussion a step further by investigating whether the gender of those in positions such as board chairperson and chief executive officer matters in firm profitability in Ghana.

Bank Market Structure and SMMEs’ Access to Finance: A South African Perspective

While the importance of the banking sector on various fundamental economic variables is well-documented in the literature, little is known about the relationship between the bank market structure and access to finance for opaque firms, particularly in developing economies such as South Africa. Using ordered probit and logit models, we investigate the impact of bank market structure on small, micro and medium enterprises (SMMEs)access to finance. Our results show that high bank concentration increases the obstacle to accessing finance for SMMEs in South Africa, and the relationship is non-linear. Thus, to a greater extent, our study validates the market power hypothesis, which argues that low competition diminishes firms’ access to finance.

Illicit and Corruption Mitigation Strategy in the Financial Sector: A Study with a Hybrid Methodological Approach

In recent decades, experts from all around the world have been increasingly interested in illegal conduct and corruption in financial organizations. Utilizing the illegal and corruption hypothesis, we investigate the core traits and trends of this phenomenon in European financial institutions. We also examined how specific aspects are incorporated into financial firms’ anti-corruption strategies. The current study makes an effort to comprehend the afore-mentioned challenges using the tools of scientometrics and data analysis. More precisely, our empirical analysis was based on 336 European financial institutions for the years of 2018–2020, and our study also employed bibliographic data from 687 scientific documents indexed in the Scopus database in 2010–2021. The R language’s Bibliometrix tool was applied to analyze the body of the existing literature. A binary logistic regression approach was used to analyze the data. While the goal of our empirical study is to unveil the factors causing or mitigating illegal activity and corruption in the financial sector, the bibliographic analysis revealed the determinants validated in previous work. Our results highlight the need of policy makers to implement measures to limit illegal activity and reduce corruption in financial institutions to improve reputations and customers’ fidelity, which are necessary for the achievement of the sustainable development goals concerning financial institutions. Another conclusion is the emergence of a new source of corruption, which South Africa’s experience has confirmed. Our findings also support two components of the contemporary approach for reducing corruption and illicit activity, namely, the usage of new technology specialists and the incorporation of ESG factors.

Firm growth and profitability: The role of age and size in shifts between growth–profitability configurations

To investigate the routes toward profitable growth, this study partially replicates and extends the work of Davidsson et al. (2009) on firm growth–profitability dynamics with multi-industry data on over 66,000 Finnish firms. The results support prior findings on initial profitability being more important than initial growth for achieving high performance in both performance dimensions. Additional investigations on the role of firm age and size reveal further interesting dynamics: Very small young firms face fewer risks from growing at a low profitability level than other firms, and the benefits of firm size for future performance depend on the firm's current profitability. The results advance the understanding of the reasons and consequences of the different modes (i.e., profitable vs. non-profitable) of firm growth.

Social influence pressures and the risk preferences of aspiring financial market professionals

To better understand the behavior of financial market professionals, in this study, we analyze the risk preferences of aspiring financial market professionals before they enter the financial markets and examine whether these risk preferences are influenced by obedience and conformity pressures. We conducted an experiment involving 131 students and asked them to choose between risky and safe grading options. Observing their change of choices under social influence pressures, we found that obedience pressure significantly influenced their risk choices, but conformity pressure was effective only when the peer information was delivered by an authority figure. Overall, our findings imply that risk preferences are not invariable and can be maneuvered by an authority figure. For practitioners, our findings imply that managers in financial firms can use their power responsibly to discourage excessive risk-taking behavior. For academia, our findings show the importance of training accounting graduates with competencies beyond technical proficiency and with better understanding of the social context in which (ethical) decisions are made.

Political Uncertainty and Financial Firm Performance: Evidence from the Thai Economy as an Emerging Market in Asia

This study analyzes the effects that certain political-uncertainty factors have on financial firm performance in the Stock Exchange of Thailand (SET). The results of a panel regression performed on a database of 7976 firm-years over 18-year unbalanced panel data from 2001 to 2018 show a mixed relationship between political uncertainty and firm performance. The constitutional reform harms the return on assets (ROA), and the government election and political protest significantly decreased the market value of equity (MVE). In contrast, constitutional reform increased MVE, and the government election positively impacted ROA. Therefore, this study emphasizes how political unpredictability is assumed to influence firm performance in Thailand’s economy, an Asian developing country.

Board diversity: Moderating effects of CEO overconfidence on firm financing decisions

The importance of CEO overconfidence in capital structure decision-making has drawn attention of many scholars in the past. Despite this, literature on the subject to-date does not offer consensus on how CEO overconfidence biases interact with corporate governance in determining company strategies for financing its capital investments. Our paper aims to address a specific gap in the literature concerning the potentially moderating role of board diversification on the CEO overconfidence and its impact on corporate capital structure decision-making. In a major innovation to the literature, we look at board diversity from five perspectives: gender and age diversity, board independence, board size, and the duality of the roles of CEO and chairperson. To make our findings methodologically robust, we consider two measures of the CEOs’ overconfidence: media-based measure (implied measure of overconfidence) and CEO stock purchases (revealed measure of overconfidence). We extend our analysis to the top 100 US listed companies over 2011–2019 — the period between two systemic crises, the Great Recession and the Covid19 pandemic. We show that general effect of board diversity on CEO overconfidence is highly sensitive to different measures of overconfidence. CEOs’ implied overconfidence has a negative correlation with debt financing of the company, which is consistent with the findings of Heaton (2002). These results do not hold for the revealed measure of CEO overconfidence. Board diversity plays an important role in moderating the impact of CEO overconfidence on capital structure decisions. This holds for gender diversity, and for the board size and the number of independent directors, confirming prior literature on the subject. However, age diversity of the board and the duality of the CEO and chairperson are insignificant in moderating CEO overconfidence, which adds new insights to the literature to-date.

Female gender diversity on corporate board and bid ask spread

Female participation on corporate board is one of the most studied topics in corporate governance research. This paper analyzes the effect of female directors and gender diversity on bid ask spread. We calculate the score of female governance and we test three proxies of a bid-ask spread. Our results provide comprehensive and robust evidence for the association between female board participation and stock liquidity in Tunisian market. This study is based on a sample covering all financial firms in Tunisia (banks, insurances, and leasing) from 2008 to 2019 based on panel data approach. We conclude that female directors generate a positive effect on stock liquidity when they have a more active role on the board and when they are represented in relatively large numbers. Female CEO and institutional female directors enhance monitoring quality, develop control and improve supervising. Female directors are more effective at changing board processes, improving governance, and then affect significantly and negatively bid ask spread. Our research is the first to use the female governance index, it proves that female directors improve corporate governance, enhance stock liquidity. This result encourages firms to select competitive women to occupy strategic posts.

Communities of co-occurrence network of financial firms in news

The correlations between financial firms have a significant impact on the emergence and spread of systemic financial risks. In addition to traditional numerical data, text data also contains a lot of relational information and could serve as a data source for unveiling cross-firm relationships. This paper uses news data to construct a co-occurrence network of Chinese financial firms and subsequently employs the Louvain algorithm to detect communities, showing clusters of firms with dense interconnections. Relationships among firms are further examined from a community perspective. The results demonstrate that firms within the same industry have a greater degree of interconnections in the co-occurrence network. Besides, the level of correlation between communities fluctuates in response to shocks and policies.

Internal controls and corporate governance in financial firms and non-financial firms: what about the new EU rules?

Internal controls and corporate governance in financial firms and non-financial firms: what about the new EU rules?

REDE DE PROPRIEDADE CORPORATIVA: CAPITALISMO HIERÁRQUICO NO CONTEXTO BRASILEIRO

ABSTRACT Several studies have indicated a type of hierarchical capitalism in Latin America, characterized by the presence of multinational and state corporations, diversified multi-enterprise groups, low-skilled labor, and segmented labor markets. From the perspective of ownership networks, we explore who the owners of large Brazilian corporations are. These networks reveal actors and groups with prominent positions in the structure and ownership of companies. Thus, this article proposes to 1) describe the ownership network of the largest Brazilian corporations; 2) analyze the density, average degree, modularity, and the number of components connected in this network; 3) analyze measures of weighted degree centrality, intermediation, and eigenvector; 4) identify and analyze subgroups in the network, and 5) relate the configuration of the ownership network with hierarchical capitalism in the Brazilian context. The results point to prominent positions of financial shareholders, the Brazilian state (state-owned firms), and groups composed mostly of large multinationals, financial firms, families, and state-owned firms, confirming that the ownership structure is strongly linked to these players.

The COVID-19 Shock and Firm Financing: Government or Market? Or Both?

The COVID-19 Shock and Firm Financing: Government or Market? Or Both?

Firm Financing through Insider Stock Pledges

Firm Financing through Insider Stock Pledges