Financial Regulation Research Articles

National Economic Stimulus Policy to Reduce Non-Performing Loan Risk on Msme Debtors Affected by Covid-19 Disturbing Banking Performance and National Financial System

Purpose: This study aims to analyze the effectiveness of stimulus policies implemented by The Financial Services Authority (OJK) in response to the current pandemic, specifically in aiding MSME debtors impacted by Covid-19 and mitigating the occurrence of bad credit.   Method: The research adopts a normative approach combined with both statutory and empirical juridical methodologies to examine the implementation of stimulus policies by OJK, particularly focusing on the provisions outlined in POJK Number: 11/POJK.03/2020.   Results and conclusion: The findings reveal that the economic stimulus policy introduced by the government has the potential to assist MSME debtors adversely affected by Covid-19 and alleviate the burden of bad loans. The extension of credit restructuring until March 2022 provided by this policy is identified as a key factor in facilitating increased lending activities and fostering accelerated national economic growth.   Research implications: This study contributes to the understanding of the efficacy of stimulus measures in addressing economic challenges posed by the pandemic, particularly in the context of MSMEs. It underscores the importance of timely and targeted interventions in supporting vulnerable sectors and safeguarding financial stability.   Originality/value: By combining normative and empirical juridical approaches, this research offers a comprehensive analysis of the implementation of stimulus policies by OJK and their impact on MSME debtors. The identification of specific provisions, such as credit restructuring extensions, provides valuable insights for policymakers, financial regulators, and stakeholders involved in formulating effective economic recovery strategies.

Financial regulations and sustainability: The role of energy price and climate policy uncertainty

Financial regulations and sustainability: The role of energy price and climate policy uncertainty

On the equivalence between Value-at-Risk- and Expected Shortfall-based risk measures in non-concave optimization

We study a non-concave optimization problem in which an insurance company maximizes the expected utility of the surplus under a risk-based regulatory constraint. The non-concavity does not stem from the utility function, but from non-linear functions related to the terminal wealth characterizing the surplus. For this problem, we consider four different prevalent risk constraints (Expected Shortfall, Expected Discounted Shortfall, Value-at-Risk, and Average Value-at-Risk), and investigate their effects on the optimal solution. Our main contributions are in obtaining an analytical solution under each of the four risk constraints in the form of the optimal terminal wealth. We show that the four risk constraints lead to the same optimal solution, which differs from previous conclusions obtained from the corresponding concave optimization problem under a risk constraint. Compared with the benchmark unconstrained utility maximization problem, all the four risk constraints effectively and equivalently reduce the set of zero terminal wealth, but do not fully eliminate this set, indicating the success and failure of the respective financial regulations.1

Analysis of the Principles of Good University Governance at the University of Indonesia as a State University with Legal Entity (PTN-BH) in 2014-2019

To achieve its vision and mission, the University of Indonesia (UI) has undertaken a series of improvements across various domains, encompassing governance. However, despite these endeavours, the enhancements in UI's governance do not seem to correlate with its performance achievements as documented in the annual reports. This study aims to analyse the application of the principles of good university governance at UI, a state university, from 2014 to 2019. The findings reveal that the execution of good university governance at UI, operating as a State University with a Legal Entity from 2014 to 2019, has not been optimised. The study delineated obstacles to good university governance at UI, encompassing the lack of involvement in decision-making processes beyond the rectorate, particularly in academic management; absence of transparent selection criteria for critical leadership roles such as UI Rectors and Deans; disparities in workload distribution across UI units; and outdated information on the ui.ac.id website. Recommendations stemming from the study advocate for enhancements in regulatory frameworks, refinement of staff performance assessment mechanisms, dissemination of financial regulations, and exploration of avenues to augment non-tuition revenue streams. These proposed measures aim to mitigate the identified challenges and to implement sound university governance principles more effectively at UI

Digital finance, financial regulation and transformation of R&D achievements

The transformation of scientific and technological achievements is the best form of the combination of technology and the economy, and only when new technologies are transformed into commodities can they be transformed into real productive forces and exert scale effects. With the rapid development of digital finance, it has changed the operating mode of financial markets and consumer behavior. Does digital finance promote the transformation of R&D achievements? We empirically examine this question using the panel data covering 30 provinces in China from 2011 to 2021. The empirical results indicate that the development of digital finance can improve the transformation rate of R&D achievements. Additionally, we find that the role of digital finance in promoting the transformation of R&D achievements needs to be guaranteed by the level of effective financial regulation. The research conclusions are a relevant reference for the government to improve the transformation rate of scientific and technological achievements.

Financial Issues of Third Party Litigation Funding in Anglo‑Saxon Law and in the Russian Federation

The paper is devoted to the issues of legal regulation of litigation funding by persons not directly involved in the case. The study is based on the case law of the British Commonwealth and the Russian Federation. The historical aspects of the formation of the institute and the champerty doctrine are considered, in which such financing is disclosed in two aspects: a)  support and encouragement of the process itself, when in its negative connotation control or support of the dispute or the parties leads to a violation of common law; b)  a percentage of the price of the claim without material interest in the dispute.The paper examines the issues of reimbursement of court costs in Russia, England and Ireland, and, considering the case of the United States, starts a discussion about the possibility and necessity of disclosing information about the sources of litigation funding. The question is raised about the need to extend the financial confidentiality regime to relations on litigation funding without any exceptions. Following the cases of court practice in England and Ireland, the author raises questions about the legal status and interest of the procedural sponsor. It is argued that the rhetoric about the role of the court may be lofty, but the reasoning does not reach such heights if access to justice is blocked due to lack of funds. Litigation funding and the assignment of rights allow low-income parties to achieve a certain degree of justice; it can be recognized that justice is imperfect, but better than none at all.

Linking physical climate risk with mandatory business risk disclosure requirements

Abstract Mandatory disclosure of physical climate risks to businesses is planned or being implemented in many countries. This raises the question, how viable is it to link increasing physical climate risk, expressed as extreme events, to an individual business. We demonstrate how the characteristics of increasing frequency, magnitude and duration of extreme events impact a hypothetical business supply chain using the analogy of a spider’s web, where an extreme event impacting a strand of the web (supply/market line) impacts the efficiency of the web (supply chain). We demonstrate that our hypothetical business, located in the centre of the web, can be unaffected by a very large number of extreme events, or be severely impacted by a small number of events, depending on exactly where the event occurs and the properties of the event. This implies that a business cannot assess physical climate risk based on a change in the frequency of events; the business needs to know the precise location of the events, as well as the magnitude and duration of each event. This information is not available and is unlikely to ever be available from climate model projections. Therefore, individual businesses required to disclose future physical climate risk are very unlikely to be able to provide useful quantitative assessments. We recommend that a business-specific storyline approach to future risk is used where multiple lines of evidence are woven into a risk assessment, including climate projections. Generic top-down prescriptions of future scenarios are very likely to lead to misrepresentation of risk and very poor outcomes for business, investors or financial regulators seeking to build resilience to future climate change.

Financial Technology, Regulation, and Inclusion Effects on Business Outcomes in Major World Economies

Financial Technology, Regulation, and Inclusion Effects on Business Outcomes in Major World Economies

The policy gap between finance and economy: Evidence from China's green finance policy

By exploiting the quasi-natural experiment of China's pilot zone for green finance reform and innovation (PZGFRI) policy, this paper investigates how the green finance policy affects corporate total factor productivity (TFP). The multi-period difference-in-differences method shows that the policy significantly reduces enterprise TFP. Moreover, this study finds that the policy promotes the control of credit by local governments but worsens credit supply to firms and then reduces TFP. This study further adopts moderation effect estimates to show that the intensity of financial regulation mitigates the negative impact of the policy on TFP. Ultimately, we warn that a green finance policy in a developing country cannot inherently guarantee economic performance. In addition, financial regulation is critical to lessening the problem of economic inefficiency due to the green finance policy.

Legal regulation of the budget process in the EU

The experience of the most influential interstate formation in Europe – the European Union, which occupies the second place in terms of GDP and the third in terms of population. is instructive in all its spheres of functioning, in particular in the field of budget law. Given the accelerated movement of Ukraine to the European community, the «budget experience» of the European Union is certainly the most indicative and instructive, since it was formed on the basis of a generalization of best practices of all member countries of the European continent. The article deals with a set of the main EU budget regulations: the Treaty on the Functioning of the European Union; Treaty on European Union; EU financial regulations; Regulation of the European Parliament and of the Council (EU, EURATOM) 2018/1046 of 18 July 2018 on financial rules applicable to the general budget of the Union on amendments to the regulations (EU) № 1296/2013, (EU) № 1301/2013, (EU) № 1303/2013, (EU) №  1304/2013, (EC) № 1309/2013, (EC) № 1316/2013, (EC) № 223/2014, (EC) № 283/2014 and Decision № 541/2014/ЄS and repealing Regulation (EU, Euratom) № 966/2012. On the basis of a detailed analysis of these documents, the fundamental positions of the EU budget process in general and the principles of the EU budget in particular are ordered, structured and described (they include the principles: unity, reliability of the budget, annuity, balance, unit of account, universality, detail, prudent financial management and productivity, transparency). Proposals for the implementation of the principles of the EU budget to the domestic budget law are carried out.

Role of financial stability, environmental regulations and uncertain economic policies in CO2 emission and investment in renewable energy: Evidence from China

Role of financial stability, environmental regulations and uncertain economic policies in <scp>CO₂</scp> emission and investment in renewable energy: Evidence from China

A Study on the Spill Over Effects on Nifty 50 Returns: Evidence from Stock Market Performances of Major Asian Counterparts of India

This study investigates the spillover effects of major Asian stock market performances on the returns of the Nifty 50, India's benchmark index. Employing advanced econometric techniques, we analyze the dynamic relationships between the Nifty 50 and key Asian counterparts, considering both short-term and long-term horizons. Our research delves into return spillovers aiming to comprehensively assess the interconnectedness and transmission of market movements across the region. This study utilizes an extensive dataset covering Nifty 50 returns from April 1, 2013, to March 31, 2023, along with meticulously documented returns from stock market indexes linked to major strategic alliances in India. By applying advanced multivariate time series analysis techniques, encompassing Vector Autoregression (VAR), Granger causality tests, and impulse response functions, we model the intricate dynamics interweaving these indexes with the Nifty 50. The research endeavors to answer fundamental questions, including assessing short- term and long-term effects resulting from major Asian counterparts of India on Nifty returns, as well as exploring noticeable patterns that indicate the direction of causality between these counterparts and Nifty returns. The outcomes of this study carry substantial implications for decision-makers. Investors can make more informed decisions, businesses planning strategic partnerships can refine their strategies, and policymakers can formulate economic and financial regulations that accurately reflect the complexities of these dynamics. By unveiling the ripple effects of these counterparts on the Nifty 50, this research offers valuable insights into the evolving dynamics of India's financial markets and their integration into the global economy.

Correlation between income inequality and economic growth in Russian regions: new results based on the Granger causality test

The issue of income inequality is highly relevant in scientific literature. It is caused both by the population’s pursuit of achieving an acceptable level of social justice specific to a particular society and by the property, which is often attributed to income inequality, to negatively influence economic development and growth. This article conducts an analysis of cause-and-effect relations between income inequality in the Russian regions (measured by the Gini index) and the level of gross regional product (hereinafter referred to as GRP) per capita. The primary research method employed is the Granger causality test. The research is based on data from the Federal State Statistics Service on the socio-economic development of Russian regions. Direct and reversal causality tests were performed, revealing that GRP per capita influences income inequality, but not vice versa. Moreover, the logarithm of GRP per capita exhibits a bidirectional relationship with the Gini index for Russian regions. On the basis of the obtained results, it is concluded that for effective management of the issue of regional income inequality, it is advisable to use indirect methods of financial regulation instead of the direct ones and influence income inequality through indicators of GRP per capita in Russian regions, thereby creating conditions for an increase in the standard of living and average income.

New development: Whole state accounting—Experiences of the state of Hesse

IMPACT The state of Hesse began voluntarily converting its cash and budget system to an accrual-based accounting system in 1998. A particular challenge in the conversion of the accounting system is involving all departments and employees in this reform process, as the transition from cash accounting to accrual accounting requires a fundamental change to existing administrative processes. The continuous political support of the state government over several legislative periods was of particular importance. The path that Hesse has taken in converting its accounting system from 1998 to the current adoption of the new financial regulations in 2022 has been highly successful. The state now has a sensible combination of the strengths of accrual-based and cash-based accounting with performance-oriented management. The accrual accounting system increases the transparency of the budget and provides significant additional information for politicians, managers and citizens. The cash-based budget remains an important management tool for budget preparation and the debt brake.

Fiscal multipliers and income inequality (The case of OECD countries, Russia and China)

This study assesses the impact of fiscal multipliers on the level of socioeconomic inequality in 38 countries based on data from the period 2007—2022 with the aim to explore causal relationships between the potential methods of public financial regulation and income indicators in the context of achieving sustainable economic growth. First the fiscal multipliers are estimated relative to GDP, then the obtained data is used to explain the level of income inequality across a broad range of countries. It is shown that the average level of wealth inequality directly influences the level of post-tax income inequality, therefore, addressing income inequality should not neglect other forms of inequality, parti cularly wealth distribution inequality; the effectiveness of fiscal policy has a reverse impact on the level of post-tax income inequality, indicating that a high share of the shadow economy, inefficient tax administration, and redistributive function of public finances contribute to high levels of income inequality . Budgetary instruments for poverty control, targeting, and the efficiency of budgetary expenditures can alter the level of income inequality.

Navigating sustainable horizons: exploring the dynamics of financial stability, green growth, renewable energy, technological innovation, financial inclusion, and soft infrastructure in shaping sustainable development.

This paper examines sustainable development, which employs an integrated approach to tackle environmental, social, and economic challenges. It provides a theoretical underpinning by examining sustainable development's inception, fundamental tenets, and conceptual structures. This study highlights the interdependence of social equity, economic prosperity, and environmental conservation, emphasizing the need for a comprehensive approach. Quantitative methodology is utilized in this study, and the dependent variable is sustainable development. Financial risk, green growth, technological innovation, renewable energy, financial inclusion, and soft infrastructure are all independent variables. The analysis is predicated on secondary data from the Organization for Economic Cooperation and Development and World Development Indicators databases spanning 2004 to 2019. An entropy-weighted method used for the green growth index is a metric that enhances the precision of variable indicators. Cointegration, correlation, VIF, cross-sectional dependency, and stationarity tests are among the diagnostic tests that inform the selection of methods for the panel data set. It is determined that fully modified ordinary least squares is the suitable technique. The findings suggest statistically significant positive correlations among greenhouse gases, financial inclusion, and soft infrastructure. Conversely, significant negative correlations exist between financial risk, green growth, renewable energy, and technological innovation. An estimated 55% long-run variance is present. The study's key finding is that financial risk has an adverse effect on sustainable development, while an impactful relationship where increased green growth is linked to decreased GHG emissions. This association is notably significant. Results show that renewable energy has a negative coefficient and significant negative impact on greenhouse gases, showing an active relation to enhancing sustainable development. In contrast, financial inclusion has a significant positive effect on sustainable development. The implications imply that providing incentives to institutions engaged in alternative energy, precisely renewable sources, could positively impact the environment. Government policies and funding regulations oriented toward sustainable development are indispensable for environmental sustainability. Government policies and incentives are pivotal in advancing an environmentally conscious and sustainable future. This study's contribution lies in elucidating the positive correlation between government interventions and promoting renewable energy adoption, thereby paving the way for a greener tomorrow.

Improvement of financial reporting of organisations in the conditions of digital economy development

The purpose of the study is to investigate the current trends in the development of financial reporting of entities in the context of digitalisation of the economy both at the domestic and global level. The prospects of using XBRL (eXtensible Business Reporting Language) as the main digital format for presenting business reporting were analysed.Methodology. In the work on this article were applied such scientific methods as analysis, collection and processing of primary data, statistical observation and comparison, comparative methods.Originality / value of the study - The study is of value and originality in the context of formation and presentation of financial statements in the Republic of Kazakhstan. The author's approach to this process is unique and has the potential to improve the efficiency and transparency of financial reporting in the country.Results of the study - The results of the study provide valuable information that can be used by various financial market stakeholders, namely national financial regulators in making decisions to develop and improve policies and regulations; to help investors make informed investment decisions; international financial market participants, forecasting currency fluctuations and making strategic decisions; professional associations.

The Impact of International Financial Regulation on Financial Management of Chinese Enterprises

 With the globalization of financial markets, international financial regulation has become increasingly crucial in shaping the financial landscape of countries worldwide. This paper explores the influence of international financial regulation on the financial management of Chinese enterprises. By examining the regulatory frameworks, compliance requirements, and their effects on financial practices, this study aims to provide insights into how Chinese financial enterprises navigate through the complex regulatory environment. Through a comprehensive analysis of case studies and empirical data, this paper sheds light on the challenges and opportunities presented by international financial regulation for Chinese financial entities, and suggests strategies for effective financial management in this context.

No need to worry? Estimating the exposure of the German banking sector to climate-related transition risks

ABSTRACT Climate change poses several risks to the value of financial assets and financial stability. The study conducted in this paper focuses on the German banking sector and estimates its exposure to climate risks arising from a transition to a carbon-neutral economy. Our analysis identifies the energy, transportation, and manufacturing sectors as the most sensitive to transition risks. It shows that the German banking sector's direct exposure to climate transition risks is non-negligible. Moreover, it indicates that an amplified exposure to transition risks characterizes large private banks. These findings are comparable to other countries exposures and relevant to financial supervision and regulation, calling for increased engagement to assess, measure, and manage climate-related financial risks.

Impact of Financial Regulations on Market Liquidity in Germany

Purpose: The aim of the study was to investigate the impact of financial regulations on market liquidity in Germany.&#x0D; Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries.&#x0D; Findings:  Financial regulations in Germany impact market liquidity through a complex interplay of factors. While they enhance stability and investor protection, compliance costs and altered trading dynamics may initially hinder liquidity. However, regulatory initiatives driving innovation and global harmonization can ultimately foster a more efficient market environment, benefiting both domestic and international&#x0D; Unique Contribution to Theory, Practice and Policy: Market microstructure theory, information-based theory of liquidity &amp; agency theory may be used to anchor future studies on the impact of financial regulations on market liquidity in Germany. Financial institutions should proactively adapt their trading strategies and liquidity management practices in response to changing regulatory environments. Regulators should adopt a balanced approach to financial regulation, considering both the benefits of market liquidity and the need for stability and investor protection.