Financial Indicators Research Articles

Financial inclusion and stability in Ethiopia using bank-level data: A two-step system GMM estimation

Background This paper examines the impact of financial inclusion on bank stability within Ethiopian context, using panel data from 17 commercial banks over the period 2015-2023. Given the scarcity of research focused on the relationship between financial inclusion and bank stability in Ethiopia, this paper seeks to address a crucial gap by analyzing both conventional and digital aspects of financial inclusion in relation with bank stability. Methods A two-stage principal component analysis (PCA) was conducted to construct a composite financial inclusion index, integrating 10 conventional and 5 digital indicators. The study applied a two-step robust system generalized method of moments (GMM) to examine the effects of financial inclusion on bank stability, complemented by Granger causality testing to examine the directionality of this relationship. Results The result reveals a significant positive effect of financial inclusion on bank stability and Granger causality tests confirms a bi-directional relationship between financial inclusion and stability, indicating that improvements in financial inclusion foster greater stability and vice versa. Our results also highlight that while bank efficiency and GDP growth rate positively effect stability, total assets and income diversification exhibit detrimental effects. Conclusions It is essential to capitalize policy synergies to promote bank stability and to enhance financial inclusion through conventional and digital channels, while carefully managing the implications of risks associated with income diversification and asset distribution. Ensuring inclusive financial system is vital for maintaining bank stability, thus positioning it as a key priority for financial institutions.

Internal control of the commercial bank resource use efficiency

Subject. This article considers the methodological approaches to the analysis of banking resources from the point of view of their possible use in controlling the efficiency of resource provision and funding of commercial banks. Objectives. The article aims to test standard analytical methods used in the analysis of economic indicators characterizing the efficiency of banking activities in order to draw conclusions about the possibility of their application to control the risks of resource availability. Methods. For the study, we used induction and deduction, analysis and synthesis, modeling, comparison, extrapolation, abstraction, as well as financial analysis and analytical calculations of indicators developed by the banking regulator to identify risk areas and determine key economic and financial indicators of a commercial bank. Results. The article finds that banks are experiencing difficulties in achieving the appropriate efficiency of resource provision within the parameters set by the regulator, which indicates the need to control performance indicators, especially those characterizing resource provision, and their use as one of the main generators of profit from core activities. Conclusions and Relevance. In the context of crisis phenomena in the banking sector, it is necessary to pay attention to the control of ensuring the profitability of resources attracted by the bank, as well as the factors affecting it, the main of which are the return on assets and liabilities and the completeness of the allocation of financial resources. The results of studying the methods of economic analysis for assessing the efficiency of resource provision can be useful for studying the problems of using bank resources and assessing their efficiency, as well as monitoring of efficiency parameters for internal control purposes.

Paving towards the sustainable development goals: Analyzing the nexus of financial technology, business-centric-tourism, and green growth

The world is facing crucial challenges such as environmental degradation, social inequality, and slow economic growth due to the current transformative era. These challenges constitute a significant barrier to unlocking the world's full potential. In response, green growth has emerged as a focal point in global discourse due to the pivotal shift of legislators and researchers from conventional economic growth to sustainable and green growth. This research will examine the influence of financial technology and business-centric-tourism on green growth for a full panel of 148 worldwide economies and four different income-levels during the period spanning 2004–2021. The financial technology index comprises twenty-one enabling and integrated variables that capture the intersection between finance and technology. The two-step system GMM (Generalized Method of Moment) corroborated by the 2SLS (Two-Stage Least Square) method indicates that financial technology and business-centric-tourism endorse green growth for the world overall, while mixed results were observed at different income-levels. Moreover, energy transition, globalization, and business environment positively influence green growth, while it is negatively impacted by urban transition and socio-economic conditions. This study aligns its outcomes with the SDGs (Sustainable Development Goals) of 2030 and adds value to business literature on green growth by offering significant policy implications for achieving balanced and inclusive growth.

Financial Statement Analysis of BYD Company Limited

This paper takes BYD as an example to analyze its financial indicators and conduct a comprehensive DuPont analysis for the period from 2019 to 2023. The analysis reveals that the company achieved significant financial growth during this period. Both operating revenue and net profit showed an upward trend, with particularly strong growth momentum in 2022 and 2023, as net profit increased substantially. The gross profit margin and net profit margin also improved, indicating enhanced operational efficiency and effective cost control. At the same time, BYD's continuous increase in R&D investment has driven technological innovation and product upgrades. The total assets have continued to grow, reflecting the company's business expansion and strengthened capabilities. The cash flow position remains healthy, with net operating cash flow steadily increasing, providing stable financial support for the company. However, BYD faces challenges such as intensified market competition and fluctuations in raw material prices, which necessitate ongoing optimization of business strategies and operational models to maintain its leading position and competitiveness. Overall, BYD has performed outstandingly in the new energy vehicle sector, with promising prospects for future development.

Banking Financial Performance as Influenced by Credit Risk, Liquidity and Bank Size In Conventional Banks Listed On The Indonesian Stock Exchange For The Period 2014 - 2023

This study aims to empirically examine the impact of credit risk, liquidity, and bank size on the financial performance of conventional banks listed on the Indonesia Stock Exchange (IDX) during the period 2014-2023, with a particular focus on the COVID-19 pandemic period. The research variables used include the Non-Performing Loan (NPL) ratio, Loan to Deposit Ratio (LDR), and bank size, while Return on Assets (ROA) is used as a financial performance indicator. This study uses the purposive sampling method to select a sample from 138 banks listed on the IDX, resulting in 9 banks that meet the established criteria. Data analysis was conducted using panel data regression with the Fixed Effect Generalized Least Square (GLS) model to address the issues of autocorrelation and heteroskedasticity found in classical assumptions. The research results show that credit risk (NPL) has a significant negative impact on ROA, while bank size and liquidity (LDR) have a significant positive impact on ROA during the pandemic. These findings highlight the importance of managing credit and liquidity risks as well as optimizing bank size to improve financial performance amid the challenging economic conditions caused by the pandemic. This study also suggests that the financial performance of banks can be more stable if supported by appropriate risk management strategies and good operational efficiency. The limitations of this study include a sample restricted to conventional banks in Indonesia and the specific conditions during the COVID-19 pandemic, which may affect the generalization of the results.

Approach to ESG Risk Assessment of Construction Companies Considering Financial Data

In modern conditions, environmental, social and corporate responsibility (ESG) factors are becoming increasingly important in assessing the sustainability and financial performance of companies, especially in resource-intensive industries such as construction. The purpose of this study is to develop and apply a comprehensive methodology for assessing ESG risks of construction companies taking into account financial indicators. Due to the limited availability of ESG data of Russian construction firms, the methodology was tested on hypothetical companies X, Y and Z, which allowed to demonstrate the assessment process and identify the potential of the methodology for practical application. The study collected and normalized data on environmental, social and governance factors, as well as financial indicators, using weighting factors to reflect the relative importance of each indicator. The results showed significant differences between companies, identifying areas for improvement and providing customized recommendations to improve their ESG performance and financial sustainability. The methodology proved to be effective even with limited data availability, offering a valuable tool for companies and investors to assess and improve ESG practices in the construction sector

Camel Financial Indicators and Performance of Tier Three Commercial Banks in Kenya

Camel Financial Indicators and Performance of Tier Three Commercial Banks in Kenya

Risk Management As A Determinant Of Indonesian Banking Financial Performance: A Systematic Literature Approach

This study aims to understand how risk management affects financial performance in the Indonesian banking sector. In a business environment full of uncertainty, especially in the banking sector, risk management is key to ensuring financial stability. Systematic Literature This review (SLR) analyzes the findings of articles published between 2016 and 2022, focusing on the main risks faced by banks: credit risk, market risk, liquidity risk, and operational risk. The selected articles were obtained from leading journal sources in the fields of economics and business. The literature selection process includes the stages of identification, screening, and thematic analysis to identify trends and correlations between risk management and financial performance indicators such as Return on Assets (ROA) and Return on Equity (ROE). The results of the study indicate that credit risk and operational risk have the most significant impact on financial performance, while market and liquidity risks show varying effects depending on the market situation and internal conditions of the bank. These findings underline the importance of a proactive approach to risk management, including the implementation of integrated risk mitigation policies and the use of effective internal controls. Thus, risk management not only serves as a safeguard against potential losses but also as a support for business sustainability. This study recommends further research to explore new risks such as cyber threats and regulatory changes, which are increasingly relevant in the context of the modern banking industry. These results are expected to provide insights for financial practitioners and banking leaders in improving the resilience and financial performance of their companies.

The impact of digital finance on resource allocation efficiency: evidence from China

ABSTRACT Digital finance presents new opportunities for enterprise development. This study develops a digital finance index utilizing data from Chinese prefecture-level cities and listed companies between 2011 and 2021, employing the OP and LP methods to assess resource allocation efficiency. The impact of digital finance on efficiency was analysed using a two-way fixed-effects model alongside an instrumental variable approach, while a two-step methodology was adopted to explore the underlying mechanisms. The findings demonstrate that digital finance significantly enhances resource allocation efficiency by broadening financing channels, improving corporate fund utilization, and reducing information asymmetry. Furthermore, the improvement in resource allocation efficiency attributed to digital finance is particularly pronounced in regions with higher per-capita income, larger urban populations, and state-owned enterprises. This study contributes a novel perspective on resource allocation efficiency and provides policy implications for effectively harnessing the opportunities afforded by digital finance in the contemporary era, thereby maximizing the benefits of the digital age and improving resource allocation efficiency.

Integrating the SDGs into capital investments: an interventionist research study informed by a serendipitous approach

ABSTRACT This research explores how and to what extent companies can integrate sustainable development goals (SDGs) into their capital investment decisions. For a company that wants to become sustainable, evaluating where best to invest one's capital presents a practical problem because most tools for assessing returns on investment rely solely on financial indicators, not on broader measures of worth, such as environmental or social impacts. Additionally, existing frameworks that incorporate non-financial indicators tend to be targeted at shareholders looking to invest in entire companies, not at companies looking for ways to embed the SDGs into their capital outlays. To solve this problem, we undertook interventionist research devised around serendipity theory where we worked with a group of companies to develop a tool for helping companies to align their capital investments with specific SDG indicators. The result was a co-developed framework for supporting decisions about a company's capital investments informed by the SDGs. The research lasted for 17 months and evolved through five phases: identifying the problem; selecting a pilot investment and identifying the SDG targets; identifying key performance indicators (KPIs); critically assessing the KPIs and finalising the KPIs. This research contributes to accounting theory and practice in two ways. First, it outlines serendipity theory as an effective framework for guiding interventionist research towards finding helpful solutions to practical accounting problems. Second, it offers a 4-step method for integrating the SDGs into capital investment decisions. This answers the call for accounting research to engage with companies in the SDGs' pursuit.

Corporate Sustainability Reporting and Financial Performance: An Empirical Analysis of Indian Listed Companies

This empirical analysis examines the relationship between corporate sustainability reporting and financial performance among Indian listed companies. In recent years, sustainability has gained prominence in corporate strategy due to increasing regulatory requirements, investor interest, and stakeholder expectations. The study explores how sustainability reporting, as disclosed through corporate sustainability reports (CSR), affects the financial performance of companies. Using a sample of Indian companies listed on major stock exchanges, the study analyzes data on sustainability disclosures, financial performance indicators (such as return on assets, return on equity, and market valuation), and various control variables. The analysis employs statistical methods, including regression models, to identify the correlation and potential causal linkages between sustainability reporting and financial performance. The findings suggest a positive relationship between comprehensive sustainability reporting and financial performance, indicating that companies with better sustainability practices tend to experience higher financial returns and market valuation. The results also highlight the role of regulatory frameworks, industry-specific factors, and company size in shaping the strength of this relationship. This study contributes to the growing body of literature on corporate sustainability by providing insights specific to the Indian context, where sustainability reporting practices are evolving. It suggests that companies engaging in transparent and detailed sustainability reporting may achieve not only environmental and social benefits but also financial gains, making sustainability a strategic priority for long-term value creation.

COMPREHENSIVE EVALUATION OF THE PERFORMANCE OF ENTERPRISE LOGISTICS ACTIVITIES IN THE MODERN MARKET CONDITIONS

The article addresses the issues of evaluating the performance of enterprise logistics activities in the context of modern globalization and increasing competition. Effective management of logistics processes is a key condition for ensuring sustainable development and competitiveness of an enterprise. The study emphasizes the need for a comprehensive approach to evaluating logistics operations, considering not only financial indicators but also resources, costs, outcomes, and customer service levels. The analysis of modern evaluation methodologies highlights their advantages and disadvantages when applied to logistics management. Although these methodologies have significant potential for improving logistics processes, they do not always provide an integrated analysis of all aspects of activity, which limits their effectiveness in strategic decision-making. The methodology for comprehensive evaluation of the performance of enterprise logistics activities proposed in the article is based on a multi-level approach, which includes the calculation of local, block, and integrated indicators. This methodology allows for a thorough analysis of logistics processes, considering the relationships between costs, resources, and final results, and provides the flexibility to respond to changes in market conditions. An important component of the proposed approach is the ranking of indicators, which enables the assessment of their impact on the overall efficiency of logistics processes and identifies key areas for optimization. By forming a performance matrix, the enterprise can build a structured evaluation system that ensures an integrated analysis of both financial and non-financial indicators. Special attention in the study is paid to the calculation of the integrated performance indicator of logistics activities, which serves as a general characteristic of the efficiency of the enterprise’s logistics processes. It is calculated as the geometric mean of block indicators, providing a weighted assessment of the influence of different aspects of logistics activities on the overall outcome. The interpretation of this indicator allows enterprise management to make informed decisions aimed at optimizing costs, improving customer service quality, and efficiently utilizing resources. The proposed approach is flexible and can be adapted to the specifics of various enterprises and industries, making it a universal tool for evaluating logistics processes in modern market conditions. The study results demonstrate that the application of the comprehensive methodology for evaluating the performance of logistics activities contributes to improved logistics management, resource optimization, and strengthening the enterprise’s competitive position in the market.

Financial management of an environmental enterprise

The article examines financial management of environmental enterprises from the standpoint of evaluating the results of financial analysis and specifics of its implementation. Increasing the competitiveness of environmental organisations in the Russian Federation and ensuring their prospects in the face of sanctions and restrictions at this stage of development is becoming increasingly relevant. The authors propose a methodology for financial analysis of industrial and environmental activities of an enterprise based on the calculation of key financial and private environmental indicators of environmental enterprises. The novelty of this study lies in an integrated approach to financial management based on the results of the analysis of financial and private environmental indicators of environmental organisations, covering the financial and environmental aspects of their activities. The integrated approach to financial management is innovative because it is founded on the close relationship between financial and environmental activities of enterprises. The presented article develops analytical support and methodological tools of the analysis for use by environmental enterprises, with consideration to their specifics, in order to improve the efficiency of financial management. The practical significance of this article lies in the analytical provision of effective financial management for the sustainable development of environmental enterprises.

Applications of machine learning in quantitative trading

Abstract. This paper also addresses quantitative trading where machine learning techniques are applied. Quantitative trading uses historical data and makes future predictions that inform and optimise trading strategies. There are two machine learning techniques used in quantitative trading: supervised and reinforcement learning. In a supervised learning setting, machine learning techniques such as regression analysis, classification models and time series prediction are used to forecast future possible outcomes in the market. Data such as historical prices, volume and financial indicators are used to determine trends that inform and optimise trading decisions. Reinforcement learning is another machine learning technique in quantitative trading where adaptive strategies using a reward system are designed. These strategies then analyse market dynamics and optimise trades through interaction and feedback. The third technique, deep learning, takes neural networks and uses them to process large-scale, complex data. It's particularly useful in quantitative trading as it generates more accurate predictions; for instance, neural networks are capable of learning trading signals from price and volume data and even from news headlines. By enabling computers to analyse large quantities of training data, deep learning improves the predictive accuracy of future price trends. It also helps to generate trading signals that are more robust to market conditions.

Ethical transparency in business failure prediction: uncovering the black box of xgboost algorithm

ABSTRACT This paper introduces an innovative machine learning model, built upon the robust and interpretable Extreme Gradient Boosting (XGBoost technique), to predict business failure. The study uses the VADIS financial strength indicator, from ORBIS, in a sample of 3,806 Spanish firms. The empirical analysis demonstrates that higher solvency, profitability, and reduced indebtedness correlate with a lower propensity for business failure. The model offers a powerful tool for early detection and intervention in financial distress, helping prevent insolvency. This study extends its focus to the ethical dimensions inherent in the application of machine learning algorithms. It attempts to demystify the proverbial ‘black box’ nature of such techniques, shedding light on their ethical foundations. By demonstrating the transparency and interpretability of the XGBoost model, we address the ethical concerns often associated with the ‘black box’ nature of machine learning algorithms.

Information Communication Technology and Financial Sector in West Africa

Globally, information and communication technology play a pivotal role in driving the financial sector. This study examines the relationship between information communication technology and the financial sector in West Africa from 2012 to 2022. The study is essential because studies focusing on ICT and financial depth are scarce in West African nations. The data for the study comes from the World Bank database and uses the GMM system. The financial depth indicator is the ratio of bank assets to GDP while the indicators of ICT are internet subscription, mobile subscription and fixed broadband subscription. Mobile phone subscription significantly and statistically enhances financial depth of banks in West Africa by 423.82 % during the period under review. Internet subscription increases financial sector size by 11 % and the result is statistically significant. The fixed broadband positively influences the financial depth in West Africa by 341 %, and the result is statistically significant. Policymakers must invest heavily on ICT and adopt financial technology to promote financial depth.

Impact of Financial Intermediation and Regulatory Frameworks on Financial Deepening and Economic Growth: Insights from Lesotho

Purpose: The purpose of this study is to analyse the impact of financial intermediation and regulatory frameworks on financial deepening and economic growth in Lesotho, utilizing data from 2003 to 2022. The objective is to explore the relationships between selected financial and economic indicators and assessing their influence on financial deepening. Methodology: This study utilized secondary time series data, which poses challenges regarding authenticity and reliability since it was collected by external parties. However, these concerns were addressed by using data from reputable global agencies like the IMF, World Bank, and the Central Bank of Lesotho’s annual report from 2003 to 2022. The analysis was conducted using the Ordinary Least Squares (OLS) regression method. Findings: The findings highlight the complex role of financial intermediation and regulatory frameworks in shaping financial deepening and economic growth. Higher cash reserve ratios and treasury bill rates negatively affect financial deepening by reducing liquidity and increasing credit costs. However, increased commercial bank deposits with the central bank positively contribute to financial stability and deepening. Moderate inflation also fosters financial deepening by raising the nominal value of financial assets. While ATMs per capita enhance financial access and growth, an increase in bank branches per capita shows inefficiencies, underscoring the need for effective infrastructure and service delivery. Unique Contribution to Theory, Policy and Practice: The study suggests that policymakers should adjust cash reserve requirements, monitor credit expansion to avoid over-lending, and improve banking infrastructure. It highlights the need for careful interest rate management and promoting financial innovation to enhance market depth.

Improving the potential of fifth-generation district heating and cooling networks through robust design and operational optimization under future energy market and demand uncertainties

Network investments and projected energy prices greatly impact the financial viability and environmental impact of fifth-generation district heating and cooling (5GDHC) networks. Compared to the previous generation, the upfront investment costs in 5GDHC networks are relatively high due to the decentralized energy demand and supply of the participating prosumers. The transition to 5GDHC is also hindered by uncertain energy markets and the fluctuating energy demands of the prosumers. It makes investors hesitant to commit, even for promising business cases. In this work, a framework is presented to assess the economic and environmental performance of a 5GDHC business case, based on a multi-objective robust optimization algorithm (MO-RDO), to identify the optimal trade-offs between environmental and economic designs. The proposed methodology consists of four steps. In the first two steps, a specific business case is modeled, and techno-economic and environmental performances are analyzed against uncertain energy markets. In the third step, the techno-economic and environmental indicator responses are used to develop a data-driven machine-learning model. This model offers better computational efficiency than a high-fidelity nonlinear model and assesses the most influential parameters driving economic and environmental performance via a global sensitivity analysis. This aids in refining the multi-objective robust design optimization (MO-RDO) framework by pinpointing key design variables and objectives amid data uncertainties. Additionally, the formulated MO-RDO provides a mix of environmentally and economically optimal network designs and operational parameters and highlights the trade-offs between them. The designs and trade-offs are evaluated using financial metrics like net present value (NPV), return on investment, and discounted payback period. These metrics are calculated over the project life, considering the initial investment and net savings. For the considered case, the environmental design has a 10% higher investment cost compared to the economically optimal solution but reduces total emissions (TE) by 13% and improves operational cost savings, which is crucial for better financial indicators. The proposed framework aligns with the EU transition plan to incorporate waste energy sources and decarbonization paths, estimating only a 3% increase in NPV as a risk for the environmentally optimal solution on a financial scale.

The Effect of Loan Portfolio Diversification on the Performance of Microfinance Institutions in Cameroon

This study investigates the effect of loan portfolio diversification on the performance of microfinance institutions. 32 MFIs are selected from various regions employing the quantitative techniques approach. Quantitative data were gathered through questionnaires and performance was also through questionnaires from the MFIs. The research design integrates a cross-sectional analysis to capture a snapshot of current diversification practices on financial performance indicators such as return on assets (ROA) and return on equity (ROE). The findings indicate that MFIs with diversified loan portfolios tend to exhibit better financial performance and lower risk levels, suggesting that diversification is a viable strategy for enhancing the stability and profitability of microfinance institutions.

Navigating the financial sector's role in energy transition: A comprehensive assessment through the lens of the energy trilemma

Global energy concerns and climate change underscore the need to address energy trilemma (ET), which is the delicate balance of energy security, equity, and environmental sustainability. Navigating this trilemma requires financial and economic development to promote investments in clean energy solutions. In this context, the present study examines the influence of financial development and macroeconomic factors on ET in 18 emerging nations from 2000 to 2021. It also analyzes the implications of the Paris Agreement and the Kyoto Protocol on this relationship. The findings reveal that financial development indicators help reduce greenhouse gas emissions and improve access to clean fuels and technologies. Conversely, it negatively impacts the primary energy supply from renewable sources and the share of electricity from wind energy. Nonetheless, these outcomes persist even after ratifying the Kyoto and Paris Agreement. These unfavorable results are caused by prevailing financial barriers, which are further impeded by technological, environmental, and socioeconomic challenges. Thus, this research highlights the importance of targeted policy reforms in facilitating an effective energy transition and offers actionable recommendations for policymakers aimed at achieving sustainability goals.