Financial Fragility Research Articles

Effect of Financial Independence on Reducing Risk of Financial Fragility

Purpose:This research aims to know and measure the impact of financial independence on financial fragility and to provide an applied knowledge framework that shows the relationship between these variables. Theoretical framework: and the research problem was represented in several questions, such as can financial independence reduce the financial fragility of the research sample companies?; and what is the level of financial independence and financial fragility of these companies?. Design/methodology/approach: Financial and statistical methods were relied on using the (SPSS) and (Excel) software. To answer these questions, test hypotheses and analyze the relationship between independent and dependent variables , several conclusions were reached, the most important of which is financial independence when companies reduce their dependence on debt and increase their dependence on internal resources as a main source of financing. Based on the conclusions, a set of recommendations was reached. The most important of which is the attention to restructuring the sources of financing for companies with high financial fragility, which contributes to increasing financial stability and reducing financial risks to a minimum. Findings: The research was based on a sample consisting of (6) industrial companies listed in the Iraqi Stock Exchange for the period from (2011-2020). Research, Practical & Social implications: The importance of the research lies in the fact that it has exploited the concepts of financial independence as it leads to reducing risks and assisting companies in reducing financial risks and reaching the required levels of performance, growth and continuity in a highly complex, unstable and limited environment, as well as contributing to urging companies to reconsider financial resources, and ways to benefit from it, which contributes to reducing costs and risks and increasing profitability. Originality/value: The importance of the current research is highlighted by delving into very important topics for industrial companies, as the concepts of financial fragility and financial independence are of increasing importance in the current era, especially in light of the competitive environment, high costs and difficulty in obtaining financial resources.

Moritz Schularick, ed.: Leveraged: the new economics of debt and financial fragility

Moritz Schularick, ed.: Leveraged: the new economics of debt and financial fragility

Differential responses to systemic therapy among patients who are financially fragile and receiving Medicaid: Results from ePRO and biometric monitoring study.

1527 Background: Cancer patients with Medicaid insurance have a 50% higher risk of unplanned ED admissions during systemic chemotherapy compared to commercially insured cancer patients. In a prospective study of an ePRO app and smartwatch to remotely monitor patients receiving anti-cancer therapy, we compared symptoms and biometric data among financially fragile (able vs. not to come up with $2000 in 30 days for an unexpected expense) Medicaid enrollees and commercially insured patients with solid tumor malignancies. Methods: The study was conducted at 3 community oncology practices in WA state. (ML41539, ISRCTN25569053) The ePRO had 15 common treatment-related symptoms from the PRO-CTCAE survey. 30 patients initiating systemic treatment wore a Samsung Galaxy 3 watch and completed the ePRO daily on study provided smartphones for 2 weeks. EPRO app adherence (ratio of completed to expected entries) was 91%. Smartwatch adherence (ratio of days with any biosensor data to number of days expected) was 86%. Composite symptom scores were calculated from ePRO responses using a published mapping algorithm (Range 0-3). Repeat symptoms, number of unique symptoms scores >1, and average heart rate (HR) were compared. Results: Participants’ average age was 60 (68% female; 75% no comorbidity, 45% metastatic, 10% Medicaid, 13% reported financial fragility). Treatments: chemotherapy only (56%); immunotherapy only (11%); combination therapy (33%). Financially fragile patients had significantly higher average HR, unique symptoms, and repeat symptoms (e.g., >1 day with symptoms). The average composite symptom score over 2 weeks was significantly higher for Medicaid enrollees, and trended higher for financially fragile patients. 16% of daily composite symptom scores recorded by Medicaid patients were 2 or greater, versus 7% for non-Medicaid patients (p<0.001). Conclusions: Medicaid-insured and financially fragile patients may have more adverse responses to systemic therapy compared to more advantaged patients. If supported in larger studies, the findings may have profound implications for research aimed at improving clinical management in financially disadvantaged cancer patients.[Table: see text]

Burned by leverage? Flows and fragility in bond mutual funds

Does leverage drive investor flows in bond mutual funds? Leverage can increase fund returns in good times, but it can also magnify investors’ losses and their response to bad performance. We study bond fund flows to provide new evidence for the link between mutual fund leverage and financial fragility. We find that outflows are greater in leveraged funds during stressed periods and after bad performance, compared with unleveraged funds. We provide supporting evidence that leverage exacerbates the negative externality in investors' redemption decisions. In this regard, we find that fund managers in leveraged funds react more procyclically to net outflows compared with fund managers in unleveraged funds. Such procyclical security sales in leveraged funds may increase investors’ first-mover advantages and their response to bad performance. These findings suggest that leverage amplifies fragility in the bond mutual fund sector. JEL Classification: G01, G20, G23

Loan guarantees, bank underwriting policies and financial stability

Loan guarantees represent a form of government intervention to support bank lending. However, their use raises concerns as to their effect on bank risk-taking incentives. In a model of financial fragility that incorporates bank capital and a bank incentive problem, we show that loan guarantees reduce depositor runs and improve bank underwriting standards, except for the most poorly capitalized banks. We highlight a novel feedback effect between banks’ underwriting choices and depositors’ run decisions, and show that the effect of loan guarantees on banks’ incentives is different from that of other types of guarantees, such as deposit insurance.

Impact of banking sector competition on emerging market banks’ safety and soundness – A study on Indian Banks

The literature is unsettled on the simultaneous existence of Competition-Stability and Competition-Fragility phenomena in the banking system. Our study has extended the debate where we have incorporated accounting-based information along with 2-SLS system equation modeling to further explore linkages between competition, systemic risk, and stability prevailing in the Indian banking system. The study revealed that for Indian banks competition and systemic risk are inversely related. Systemic risk build-up occurs during the business growth cycle, and it spillovers onto the banking system during the economic down-cycle. The article finds that while a healthy competition would support the overall stability of banks, a fierce competition exerts competitive pressure on the banking system, and hence it negatively contributes to the bank’s stability. It has supported the financial fragility hypothesis and envisages that increased capital restricts competition, and aggressive loan creation increases fragility.

The War in Ukraine and the End of the American Financial Order?

The crises of 1997–98, 2008, and the pandemic accelerated contradictory changes in global financial governance. Taken together, the change and stasis propelled by these crises is coalescing around a fragmented “post-American financial order.” The war in Ukraine represents another inflection point. The war has facilitated the reassertion of American financial power and cooperation among rich nations. However, like previous crises, the war is creating fissures in financial governance. The landscape offers risks and opportunities against a backdrop of heightened financial fragilities, authoritarianism and fascism, inequalities, devastation associated with the pandemic and war, and climate crisis. In such moments, Hirschman’s “possibilism” is both elusive and necessary. In this context, we might aspire to “permissive multilateralism s” rather than nostalgia for a new Bretton Woods. JEL Classification: F02, F51

The Size Distribution of the Banking Sector and Financial Fragility

AbstractWe study the role of the size distribution of the banking sector for bailout policy and financial fragility in a model of financial intermediation with limited commitment and noisy sunspots. In particular, due to the different costs of mitigating depositors' losses, differences in financial fragility arise endogenously in the sense that the large banking market admits a higher degree of instability. Moreover, the desire to reduce differences in the amount of bailout funding across segments of the banking system leads the fiscal authority to collect less taxes ex‐ante but ends up rendering the scope for run equilibria larger.

Determinants of individuals’ objective and subjective financial fragility during the COVID-19 pandemic

We examine determinants of the objective and subjective financial fragility of 2100 individuals across Australia, France, Germany, and South Africa during the COVID-19 pandemic. Objective financial fragility reflects individuals’ (in)ability to deal with unexpected expenses, while subjective financial fragility reflects their emotional response to financial demands. Controlling for an extensive set of socio-demographics, we find that negative personal experiences during the pandemic (i.e., reduced or lost employment; COVID-19 infection) are associated with higher objective and subjective financial fragility. However, individuals’ cognitive (i.e., financial literacy) as well as non-cognitive abilities (i.e., internal locus of control; psychological resilience) help to counteract this higher financial fragility. Finally, we examine the role of government financial support (i.e., income support; debt relief) and find that it is negatively related to financial fragility only for the economically weakest households. Our results have implications for public policymakers, providing levers for reducing individuals’ objective and subjective financial fragility.

Government emergency aid and perceived financial security in COVID-19: evidence from a sample of vulnerable women in Brazil

PurposeThe purpose of this study is to examine if public policy satisfaction is related with perceived financial security. The public policy examined is an emergency income policy in Brazil.Design/methodology/approachThe authors used a questionnaire to interview a random sample of 235 single-parent women who received Emergency Aid (EA) resources in Brazil during the pandemic. The questionnaire included measures of financial security, financial anxiety, financial resilience and profile aspects. The authors applied a multiple regression approach to identify the determinants of financial security during the pandemic.FindingsOur findings show that factors such as satisfaction with the emerging income policy and financial resilience are positively related to perceived financial security. Financial anxiety, financial fragility and job loss in the pandemic are negatively related with perceived financial security.Research limitations/implicationsWhile our results correspond to a random probabilistic sample of women residing in southern Brazil, they may not be generalizable to Brazil as a whole.Practical implicationsThis study provides evidence of the financial situation in the pandemic for the lives of economically vulnerable women. The research encourages government and financial institutions to understand the unique challenges faced by vulnerable populations during the pandemic and analyzes the direct results of EA. The study contributes to the establishment of policies to support vulnerable populations, encouraging security and financial resilience.Originality/valueThis research is innovative in its analysis of women’s financial situations during the pandemic, taking into consideration both behavioral aspects and profiles. Our focus on a specific case of emergency income policy adds to the understanding of the relation of such policies on vulnerable populations.

Bank competition, regulatory capital, and risk taking: international evidence

PurposeMotivated by recent financial liberalization policies in emerging markets, this study investigates whether bank competition and regulatory capital affect bank risk taking in an international banking context.Design/methodology/approachBank competition is regressed, using GLS regression, on various measures of bank risk, to reflect regulatory, accounting and market-based risk-taking. The authors use a sample of publicly traded banks operating in Africa during 2004–2019.FindingsResults show that higher level of bank competition increases bank risk taking and results in greater financial fragility in the absence of banking capital regulations. Furthermore, larger capital adequacy ratios control the risk-taking incentives of managers and guard banks against the risk of default. Further tests confirm the significance of market-based risk measures over accounting and regulatory measures.Practical implicationsFindings are relevant to bank managers and regulators in their sustained effort of finding an optimal balance between bank competition and financial stability. Increased competition should be balanced with capital regulations to curtail bank excessive risky behavior and derive the social benefits of greater competition in the market while sustaining overall economic growth.Originality/valueThis study provides novel evidence in an international context. First, it uses regulatory, accounting and market-based measures of bank risk taking to reflect regulators', management and market participants' emphasis. Another original contribution is the investigation of bank competition across African economies characterized by financial liberalization, stringent banking system and interesting socio-economic challenges.

Financial Literacy, Financial Fragility, and Financial Well-being Among Generation-Z University Students in Indonesia

This research aims to investigate the correlation between financial literacy and financial fragility as well as financial well-being, along with identifying what factors influence these three financial components. We create an online questionnaire and distribute it to 317 university students that are part of Generation-Z students in Indonesia. The data analysis method uses the logistic regression model and marginal effect analysis. The research’s findings shows that educational background of father and the behavior of recording transactions are the factors influencing financial literacy. In addition, the level of financial fragility and financial well-being has been found to be affected by the father’s education, parent’s income, and investment experience. It is also proven that financially literate people are capable of withstanding unexpected financial crisis. Finally, the result shows that financial literacy is a key to achieving financial well-being at an early age. Therefore, policy maker should be aware of this situation and increase financial education for young generations.DOI: 10.26905/jkdp.v27i2.9402

Systemic risk prevention policies targeting systemically important banks: Does clustering pattern matter?

It is well known that strengthening the soundness of individual banks that are too large or too interconnected is essential for maintaining financial stability. The clustering among homogeneous banks may also cause financial fragility but has received less attention. This paper discusses the policy improvement for preventing systemic risk from the perspective of the clustering pattern of systemically important banks (SIBs) based on a network optimization model. The results show that the clustering pattern of SIBs is closely related to systemic risk contagion. Remarkably, networks with fewer connections among SIBs exhibit lower systemic risk than those featuring apparent clustering of SIBs. The potential mechanism is that the systemic vulnerability of small and medium-sized banks is greatly reduced in the disassortative networks. The proposed tools based on this-inter-SIBs exposure limits and pairwise capital requirements-can guide network optimization and significantly reduce systemic risk. Furthermore, combining existing capital surcharges for SIBs (focusing on the stability of individual SIBs) and proposed network-based tools (focusing on the cluster structure of the network) will be an effective way to enhance financial stability over existing policies.

Does good financial behavior reduce the negative impact of financial fragility on individuals’ financial optimism? The never-ending Lebanese crisis case

This study aims to investigate the level of logistical coordination and the state of coordination mechanisms in procurement activities among enterprises involved in supply chains. The research was conducted through a comparative analysis of statistical data obtained from a survey of businesses between July and October 2021. The study proposes a method for identifying general and individual performance indexes for partner companies' interactions by examining joint planning, synchronized documentation, coordinated operational procedures, and resource integration. This method is relevant to both logistics theory and the practical activities of supply chain participants. The research highlights the evolution of metrics used to evaluate the extent of coordination mechanisms employed by businesses in their procurement activities. Based on the selection criteria, an assessment scale is proposed to determine the level of logistical coordination in supply chain companies' procurement activities. The findings offer insights into the development of coordination mechanisms for organizations across various sectors (industrial, trading, freight forwarding), focusing on their scientific significance and impact on the competitiveness of consolidated supply chains. This study contributes to the literature by providing a comprehensive understanding of logistical coordination and coordination mechanisms in procurement activities among supply chain enterprises, as well as offering a practical assessment scale for evaluating logistical coordination levels.

Investigating the Determinants of Financial Well-Being: A SEM Approach

Studies reveal that the financial well-being of employees has a direct bearing on their productivity and overall well-being. The wellness initiatives organized by the information technology (IT) companies operating in India have also started focusing on the contributing aspects of financial well-being. In this context, the article explores the determinants of financial well-being of IT professionals in India. The article utilizes confirmatory factor analysis (CFA) for the analysis. The study employs a survey questionnaire covering financial literacy, financial behavior, and financial fragility. It also attempts to recognize the influence of gender and job roles (technical or managerial) in ascertaining financial well-being. The sample data used in the study include 237 professionals employed in the IT sector. The study uses partial least squared structured equation modelling (PLS-SEM) to understand the connection between the determining factors. The results indicate that financial well-being is positively influenced by financial literacy and financial behavior while financial fragility has a substantial negative impact. The financial literacy and financial fragility are significantly different between technical and managerial roles. Gender appears to have a sizeable impact on the financial behavior and financial fragility levels—women employees performed better in both the factors. Interestingly, financial literacy levels of the two genders are not significantly different. The results show that there is a need to focus on literacy, behavior, and fragility in financial wellness programs organized by the IT industry. Further, the study recommends offering tailored financial wellness training modules created based on the job levels and gender instead of following “one program, fits all” standardized approach.

Comparison of the Turkey and Pakistan Bankıng Sector during the Covıd 19 Pandemic Process and Analysis of the Relationship wıth the Internal Factors Determined Regardıng Financial Vulnerabilities

The banking sector, the importance of which cannot be denied in the development of national economies, may be subject to many internal or macroeconomic factors that can cause vulnerability. On December 1, 2019, the adverse effects of the covid 19 pandemic, which started in Wuhan, China and spread all over the world in a brief period, revitalized the importance of the financial fragility problem in the Turkish banking sector as well as in the banking sectors of other countries around the world. This study it is aimed to analyze the relationship levels of the endogenous factors associated with financial vulnerability in the Turkish-Pakistani banking sector with the data for the period of 2016-2020 based on two countries. For this purpose, the micro variables of 24 deposit banks operating in the Turkish banking sector and 23 deposit banks operating in the Pakistani banking sector were determined as return on assets, interest margin, return on equity, liquidity, and financial leverage. Financial vulnerability is defined as the capital adequacy ratio and correlation and regression analyses were conducted to identify the relationship with micro variables. In the literature review, it has been observed that studies and research have been undertaken on financial vulnerability and stability in the Turkish banking sector and in different countries. However, these studies are mainly regional assessments rather than comparisons between two different countriesın this context, the evaluation of the vulnerability of the banking sectors of the two countries in the covid 19 process indicates that this study is distinct from the others. In addition, this comparison of the financial vulnerability levels of banks in the event of a possible crisis in the banking sector of the two countries is intended to assist similar academic studies and to enrich and diversify the literature.

Current Account Imbalances, Income Inequality, and Financial Instability: Asian Experiences

ABSTRACT From Asian experiences in financial crises of 1997–08 and 2007–09, this study finds that higher income inequality can worsen current account imbalances and exacerbate external vulnerability. Capital flows, volatile though they are, are the effect, not the cause, of variations in economic fundamentals. We show that credit-based growth with the aid of foreign financing is prone to financial fragility while export-oriented growth on the basis of domestic saving is good for financial stability. Given the rising international political tensions, our result suggests that Asian emerging markets should reduce inequality and boost demand to achieve sustainable credit and balanced growth. By doing so, Asia can effectively help alleviate global imbalances and lower financial risk.

Africa between Financialization and its Commodities: Post-pandemic Economic Development Path

The objective of this article is to delve into the development of the region’s financial fragility and economic instability process in an environment where, in the absence of the United States, other agents such as Turkey, the United Arab Emirates, Saudi Arabia, Russia, and the growing presence of China, have emerged. An inflationary environment, high indebtedness, and rising interest rates in the short term are placing countries of the region to the limit due to the lack of a full employment policy given the burden of servicing external debt and the need to import food, fertilizers, and fuel. This situation prioritizes institutional investors who play a determining role in the economic development of the African region.

Financial education: From better personal finance to improved citizenship

AbstractFinancial education is a crucial determinant of informed decisions, in both the private and social spheres. From a life cycle perspective, it improves personal finance. From youth to retirement, basic economic and financial competences, including specific pension literacy, help to plan for the future and to make better choices, thus reducing the probability of financial fragility, particularly in old age, and increasing economic independence, particularly for women. In the social sphere, a growing literature is demonstrating that basic financial education also affects public choices, influencing voting behavior, economic reforms, policy outcomes, and, more generally, the workings of our democracies.

Regional Comparative Analysis on the Determinants of the Spaniards’ Financial Knowledge

Are there regional differences in the determinants of financial knowledge in the Spanish adult population? To answer this question, we use data from the Spanish Survey of Financial Competences to estimate qualitative response models in which each of the "big three" of financial knowledge (inflation, compound interest, and risk diversification) acts as a dependent variable on a set of explanatory variables concerning the particularities of individuals. We find that, while some factors determine financial knowledge in a generalized way in most regions and in the same direction (e.g., gender, education, self-confidence), others do so in different ways depending on the region analyzed. Among the latter are health status and financial fragility (where, in both, the different degree of social protection between regions may play an important role), as well as birthplace and age, among others. Rurality also stands out as having different implications in Navarra than in the rest of the regions. We conclude by proposing to use both longitudinal and aggregate indicators of financial knowledge in Spanish regions in order to analyze in the future related issues that are beyond the possibilities offered by microdata bases.