Financial Regulation Research Articles

Strong financial regulation and enterprise digital innovation: promoting or inhibiting?

ABSTRACT Modern financial regulatory systems are vital in bridging the gap between digital and real economies. In this context, enterprises have the opportunity to achieve digital innovation transformation. This study examines the causal relationship between strong financial regulation and enterprise digital innovation using a quasi-natural experiment, focusing on the ‘Guiding Opinions on Regulating the Asset Management Business of Financial Institutions’ (NAMR). We observed a significant improvement in enterprises’ level of digital innovation after the NAMR implementation. Channel analysis confirms the micro-mechanisms of strong financial regulation, eased corporate financing constraints, increased R&D investment, and digital innovation. Furthermore, digital innovation driven by strong financial regulation can significantly improve corporate profitability. We also found that the positive effect of strong financial regulation on enterprise digital innovation is particularly significant in non-state-owned enterprises, highly competitive industries, and regions with high financial development levels. This study expands the understanding of how strong financial regulation affects enterprises’ digital innovation, with practical significance for understanding the relationship between financial regulation, corporate financial investment, and innovation decision-making.

Multi-Scale Evaluation and Simulation of Livelihood Efficiency in Post-Poverty Mountainous Areas

Promoting the coordination of livelihoods at the county and farmers’ scales is essential for achieving balanced regional development and rural revitalization in post-poverty mountainous areas. Existing studies predominantly focus on farmers’ or regional livelihood capital and livelihood efficiency at a single scale, lacking research on cross-scale coordination between farmers’ and county livelihoods. Consequently, these studies fail to reveal the interactions and synergistic enhancement pathways between the two scales. This study, using the Qinba mountains in southern Shaanxi as a case, employs system dynamics to construct a coupled system dynamics model of farmers’ livelihood efficiency and county livelihood efficiency. From the perspective of livelihood capital, five regulatory modes, comprising a total of 17 scenarios, were designed and simulated. The results indicate the following data: (1) The coupling coordination degree between farmers’ livelihood efficiency and county livelihood efficiency in the Qinba mountains is 0.623, indicating a moderate level of coordination overall. However, the coupling coordination relationship requires further optimization and adjustment. Specifically, Foping exhibits a severe imbalance, while the coupling coordination degree of Shiquan, Zhashui, Baihe, Pingli, and Lan’gao is in a state of basic coordination. Additionally, 19 other counties, including Lueyang, Ningqiang, Yang, and others, exhibit moderate coordination. (2) Enhancing social or financial capital through various means typically promotes the coordinated development of farmers’ and county livelihood efficiency. On average, social capital and financial capital regulation models can increase the coupling coordination degree by 0.08 and 0.17, respectively. Additionally, strategies such as increasing fixed asset investment and regulating other capital types, including reducing arable land, also effectively improve the coupling coordination degree of farmers’ and county livelihood efficiency. This study provides a decision-making basis for improving the coordination of farmers’ and county livelihoods in post-poverty mountainous areas, thereby promoting economic development and intensive resource utilization. It assists in formulating more precise policy measures and offers a reference for sustainable development and rural revitalization in similar regions.

Comparative institutional analysis of the banking systems of Russia and Belarus: a transactional approach

This study presents the results of a comparative institutional analysis of the banking systems of Russia and Belarus based on a transactional approach. These countries were chosen as the object of research for reasons of common factors of historical development, the degree of integration interaction between countries, as well as the availability of common approaches to financial regulation. It is shown that despite the similarity of the evolutionary development of the banking systems of Russia and Belarus, the modern credit markets of these countries differ in such parameters as the powers of the central bank, the degree of competition between banking and non-banking financial markets, the functional purpose and institutional structure of the second level of the national banking system.

Current State and Emerging Trends in Financing Law Development

The current state of financial law is primarily defined by its subject matter. In contemporary conditions, the subject of financial law has evolved significantly, driven by the active development of its structure and, most notably, the emergence of new financial and legal institutions within decentralized finance. These institutions include state and municipal unitary enterprises, state and municipal institutions, state corporations, and public law companies. The growth of decentralized finance has been a prominent trend in the modern era, with considerable potential for further expansion. Financial and legal regulations, in general, serve to safeguard the public interests of the state and municipalities. However, it is important to acknowledge that, with the expansion of decentralized finance, the subject of financial law, considered the most fundamental indicator of the current state of this legal branch, should be understood not only in terms of the financial activities of the state and municipalities but also concerning the financial activities of entities, including non-state actors, that are tasked with executing public functions.

Mapping the influence: Institutional blockholder coordination and climate change risk disclosure

This study investigates the relationship between institutional blockholder coordination, proxied by geographic proximity, and climate change risk disclosure. Using a sample of 2,887 firm-year observations for S&P 500 companies from 2010 to 2022, we reveal that a firm's climate change risk disclosure decreases when its institutional blockholders are more coordinated. In addition, we find that the negative relationship between institutional blockholder coordination and climate change risk disclosure manifests more in firms with less diversified institutional blockholders, a smaller number of institutional blockholders, a prominent position to their blockholders, and more dedicated institutional blockholder ownership. Moreover, we find that the negative association between institutional blockholder coordination and climate change risk disclosure is more pronounced in firms with corporate general counsels, a non-concentrated customer base, higher asset tangibility, and those that are environmentally sensitive. Our main conclusion still holds after using an alternative measure for climate change risk disclosure as well as a battery of endogeneity tests. Finally, we propose that institutional blockholder coordination lessens climate change risk disclosure through the channel of increased performance-induced CEO dismissal. Collectively, this study provides insightful implications for academics, financial statement users, regulators, and policymakers.

Innovative but feeble: Civil society and political financing accountability in Uruguay

ABSTRACT This article examines the impact of civic action on enhancing accountability and combating corruption in political financing, focusing on two civil society initiatives in Uruguay. The initiatives aimed to digitize and map information on funding received by political parties and politicians in the 2009 and 2014 elections, presenting their findings through interactive online platforms. The paper engages theoretically with the literature on the dimensions of accountability and contributes to understanding the challenges faced by civil society organizations in promoting political financing accountability even in full democracies, a topic largely understudied. Findings highlight concerns beyond electoral authorities’ well-known resource constraints in detecting illicit political donations and spending in Uruguay. The paper shows that transparency is not enough to reduce corruption. We argue that for political finance accountability to be effective, it must encompass bottom-up, horizontal, and diagonal dimensions. The analysis suggests the need for complementary measures, such as digital solutions for reporting and disclosing political finance information, along with active horizontal and bottom-up oversight mechanisms. The article draws on qualitative analysis based on documentary research and 19 interviews with activists, academics, journalists, developers of the initiatives, and public officials involved in political finance regulation.

Cross-Border Enforcement of Consumer Banking Law

This literature review examines the ongoing challenges and advancements in consumer protection within international finance and arbitration. It highlights regulatory failures, particularly in the context of high-profile financial scandals, underscoring the necessity for more robust financial regulations. The review discusses the issues of cross-jurisdictional consumer protection, focusing on the implications of regulatory arbitrage and its detrimental effects on consumer rights in global contexts. Additionally, it addresses the role of online dispute resolution as a means to reduce barriers to justice in cross-border financial transactions. The importance of fairness and efficiency in consumer arbitration processes is emphasized, particularly in relation to emerging digital finance models. The review also explores the critical issues of transparency and potential bias in international financial dispute resolution. Furthermore, it underscores the urgent need for reforms in international commercial law to effectively protect consumers amid the complexities of globalization and evolving financial landscapes. This compilation of insights presents a comprehensive understanding of consumer protection in cross-border financial environments, illustrating the necessity for improved regulatory frameworks and dispute resolution mechanisms to safeguard consumer rights effectively.

How does the financial technology innovation regulatory pilot influence financial regulation?

Integration of technology and finance presents significant challenges for financial regulators, necessitating formulation of policies for mitigating financial security risks and related concerns. This study examines the impact of the Pilot Project of Regulation on Fintech Innovation (PPRFI) on financial regulation in China from 2013 to 2022. Findings demonstrate that PPRFI significantly strengthens financial regulation, with financial technology mediating the relationship between PPRFI and regulatory effectiveness. Heterogeneity analysis reveals that the policy's positive effects are more pronounced in provinces with lower levels of human capital and in the western regions of China.

Mechanisms of state regulation of the sphere of financial services to ensure sustainable development of Ukraine in the context of national security: Public administration aspects

The article makes an attempt of conceptual comprehension of state of the art in the field of public administration mechanisms for the regulation of financial services sphere in the context of sustainable development as an important element of national security. The case of Ukraine is taken as a reference point, considered in comparative plane on the background of cases of the U.S., EU, and ASEAN. The core drawbacks, lags, and challenges in Ukrainian financial regulation sphere are outlined, and the areas of potential improvement are suggested.

Unveiling the role of city commercial banks in influencing land financialization: Evidence from China

Local financial development is crucial for advancing regional financial supply side structural reform, enabling local governments to leverage financial instruments to effectively mobilize land resources and foster competitive growth. The introduction of numerous financial products linked to land-related rights and interests has resulted in a pronounced transmission and interconnection of fiscal and financial risks across regions. This study examines the impact of local financial development on land financialization in China using panel data from prefecture-level cities and detailed information on land mortgages. The findings indicate that the establishment of city commercial banks (CCBs) contributes to the progress of land financialization by incentivizing local government financing vehicles to participate in land mortgage financing, increasing the transfer of debt risks to the financial sector. Notably, the impact of CCBs on land financialization is more pronounced in regions with urban agglomeration, high GDP manipulation, inadequate local financial regulation, and robust implicit government guarantees. Further analysis reveals that CCB establishment has negative spillover effects on land financialization in neighboring areas, while expansion strategies such as establishing intercity branches, engaging in cross-regional mergers, and relaxing regulations have mitigated the rise of land financialization at the regional level. This study provides policy recommendations that focus on reducing local governments’ reliance on land financing and enhancing the prevention and management of financial risks.

Role of environmental, social, and governance (ESG) investment and natural capital stocks in achieving net-zero carbon emission

This study investigates the role of environmental, social, and governance (ESG) investment and natural capital stocks in achieving net-zero carbon emissions, focusing on the Chinese economy. This study uses the data from 2013 to 2022 and applies correlation analysis, quantile process estimation, quantile-factor augmented vector autoregressive, quantile dimension regression, and robustness analysis techniques. The results confirmed that ESG investment has a significant role in net-zero carbon emission and fosters natural capital stocks in the Chinese ecosystem. The results further established that natural capital stocks significantly benefit the Chinese ecosystem and reduce greenhouse gas emissions, CO2 emission – gaseous fuel, CO2 emission – solid fuel, and carbon intensity. Moreover, natural capital stocks have a significant role in achieving net-zero carbon emissions and it accelerates gross tree cover and green agricultural yield. The study is of great interest to corporations, Chinese banks, and the government in planning and achieving net-zero carbon emissions as per Prudential Financial regulation and accounting reporting systems. Achieving net-zero carbon emission is a process-based approach; therefore, the study recommends that policymakers customize investment mechanisms and natural capital accounting standards as per the territorial requirements and execute an ecological control system to make it sustainable.

Data Access and Automated Decision-Making in European Financial Law

Abstract This article examines the regulatory landscape of financial data access within the European Union, emphasising the implications and effectiveness of recent legislative initiatives. It provides an in-depth analysis of the Financial Data Access Regulation (FIDA) proposal and its relationship with existing laws, focusing on the possibilities for data access and utilisation in the context of Open Finance. The discussion evaluates the regulatory framework for automated decision-making (ADM) in European financial law, highlighting its strengths and identifying areas for improvement. By exploring the intersections of tech resilience, financial regulation, and data protection, the article aims to clarify the practical implications of current and proposed rules, emphasising effective practices and areas needing further legislative attention.

Impact of Economic Crises on Banking Sector Performance- A Comparative Analysis of Conventional and Islamic Banks Across OIC Countries

This study investigates the impact of three significant economic crises—the Eurozone Debt Crisis (2010-2012), the COVID-19 Pandemic (2020-2021), and the Post-Pandemic Economic Recovery (2021-2022)—on the performance of conventional and Islamic banks in Organization of Islamic Cooperation (OIC) countries. Using a dataset of 4,381 observations from 34 OIC countries, panel regression techniques are employed to evaluate the influence of these crises on key financial performance metrics: Return on Shareholders' Funds (ROSF), Profit Margin (PM), Return on Total Assets (ROA), Current Ratio (CR), and Solvency Ratio (SR). The analysis reveals that while the Eurozone Debt Crisis did not significantly affect bank performance, the COVID-19 pandemic led to a notable decline in profitability but an improvement in liquidity. The results highlight that during the COVID-19 pandemic, banks faced substantial challenges in maintaining profitability, as evidenced by the significant decrease in PM. However, the improvement in CR suggests that banks enhanced their liquidity management strategies to cope with the crisis. The Post-Pandemic Economic Recovery phase brought positive changes in both profitability and liquidity, demonstrating the ability of banks to adapt and thrive as economic conditions stabilized. Macroeconomic variables, such as GDP growth and inflation, played crucial roles, with GDP growth positively affecting ROSF and inflation negatively impacting PM. These findings underscore the importance of a diversified banking system, including both conventional and Islamic banks, to enhance financial stability. Policymakers and financial regulators should consider the unique strengths of Islamic banking principles in regulatory frameworks and prioritize sound macroeconomic policies to promote stability and resilience in the banking sector. Future research should further explore the long-term impacts of economic crises on bank performance across different regions and banking models, as well as the interaction between regulatory environments and bank resilience. Keywords: Economic crises, bank performance, conventional banks, Islamic banks, OIC countries, COVID-19 pandemic, Eurozone Debt Crisis, post-pandemic recovery, financial stability, macroeconomic factors.

Juridical Analysis of State-Owned Enterprises (BUMN) with Bankruptcy Status

Bankrupt BUMN is not as simple as bankruptcy of a person or other legal entity, because this BUMN has state assets whose management must involve state intervention. Government intervention is proven by the presence of the Minister of Finance as CFO and majority owner of BUMN and the Minister of BUMN as director and supervisor of BUMN activities, apart from that there are supporting regulations, namely the KN Law, PN Law and Constitutional Court Decision No. 62/PUU-XI/2013 which notes that wealth separated from BUMN remains state wealth. If a state company is bankrupted by its own debtor, the finance minister has the largest say in the state-owned bankruptcy application than the GMS, in Peru the finance minister has the highest power and is the only party. who can file bankruptcy. The legal consequence of BUMN bankruptcy is that a public confiscation is carried out, but first the BUMN must go through a process of paying state assets in accordance with Minister of Finance Regulation No. 50/PMK.06/2014 because BUMN goods are still considered state-owned goods.

Taming the Cycles of Finance? Central Banks and the Macro-Prudential Shift in Financial Regulation. By Matthias Thiemann. Cambridge: Cambridge University Press, 2024. 300p. £95.00 cloth.

Taming the Cycles of Finance? Central Banks and the Macro-Prudential Shift in Financial Regulation. By Matthias Thiemann. Cambridge: Cambridge University Press, 2024. 300p. £95.00 cloth.

SFDR Regulation (Level 2): What Impact on the Performance of Sustainable ETFs?

The paper analyses the effect of Sustainable Financial Disclosure Regulation (level 2) on sustainable ETFs. First, we compare the financial performance of two samples of ETFs classified according to article 8 and those that have been downgraded from art. 9 to art. 8 of the SFDR regulation. Second, we analyze the performance of downgraded ETFs following the entry into force of SFDR level 2. Our results highlight that the funds classified as art.9 showed significant differences in performance compared to those under art. 8 and the downgrade process significantly affected the performance of the ETFs analyzed.

Design, simulation and feasibility of the innovative agricultural warehouse receipt system through dynamic programming and agent-based models.

To address marketing challenges in the agricultural sector, provide financial support for small-scale farmers over marketing seasons, manage price risks of agricultural products, and enhance the functioning of agricultural mercantile exchanges, it is attainable to implement an efficient and compliant warehouse receipt system (WRS) that aligns with the legal, institutional, social, and economic-financial conditions of a country. The aim of this study is to design, simulate, and assess the feasibility of an innovative WRS in the agricultural sector. To achieve this, a WRS was designed and evaluated for maize crop in Iran. The research methodology of this study is divided into three main parts: design, simulation, and feasibility assessment of the WRS. The design process incorporated the FAO-provided (2009) warehouse receipt system development, considering the experiences of various countries and the institutional and financial regulations specific to Iran. Additionally, a dynamic programming model was used to simulate the system, and an agent-based model was utilized for system feasibility assessment. The study results demonstrated that it is possible to design an innovative and efficient WRS by involving five key actors, including farmers, buyers (maize traders), banks, mercantile exchange market, and the warehouse (governmental institution), and establishing clear communications among them. Based on simulation results using dynamic programming model, it was evident that four parameters, namely the annualized loan interest rate, the valuation coefficient for loan collateral, price volatility of the product over the marketing season, and the warehouse cost-to-product value ratio, significantly impact the adoption of the WRS by farmers. In conclusion, the findings from the agent-based model revealed that setting the annualized loan interest rate at 8%, a collateral valuation coefficient of 85%, price fluctuations over the non-harvest time at 60%, and a warehouse cost-to-product value ratio of 2% can result in the participation of nearly 100% of farmers in the proposed WRS.

Некоторые вопросы финансово-правового регулирования ипотечного жилищного кредитования в современной России

The article examines the problems associated with the financial and legal regulation of mortgage lending in modern Russia. It is indicated that the Russian Federation is developing and implementing new financial and legal mechanisms designed to provide citizens with housing for a long period of time. The author comes to the conclusion: despite the fact that in the field of residential mortgage lending there are a number of laws and regulations that have shown their effectiveness, due to economic and political circumstances, as well as due to the expiration of a number of preferential programs, this the sphere becomes very uncertain and requires legal regulation.

Reputation, commitment, and financial market regulation

This paper explores the interplay between reputation mechanisms, pre-commitment strategies, and financial market regulation. Through a theoretical model, we analyze how repeated interactions between market participants, combined with regulatory oversight, can lead to improved compliance and market efficiency. The study demonstrates that reputation mechanisms serve as powerful self-regulatory tools, as negative reputational feedback exerts a stronger influence on market behavior than positive feedback, particularly when the cost of non-compliance is high. Additionally, we investigate the role of pre-commitment in promoting market cooperation and separating equilibria, where high-quality suppliers distinguish themselves from lower-quality competitors. However, in the absence of stringent regulatory enforcement, pre-commitments may be exploited by low-quality suppliers, leading to market inefficiencies. Our findings suggest that a reputation-based, tiered regulatory framework can optimize resource allocation and enhance the effectiveness of financial market regulation. The paper concludes with policy recommendations for integrating these mechanisms into current regulatory practices and outlines areas for future research.

Financial reporting quality and disclosure on stock price of listed deposit money banks in Nigeria

Due to the lack of a regulatory framework, financial scandals, fraud and poor disclosure in financial reports, investors and other stakeholders lose confidence in the firm's performance, which could lead to lower share prices. Investors and financial analysts who have noticed the impact of accounting quality and disclosures on stock prices have necessitated this study. This study looked at the impact of financial reporting quality and disclosure on the stock price of listed deposit money banks in Nigeria. The study made use of secondary data gathered from the annual report of listed DMB in Nigeria. The data generated were analysed using descriptive statistics, correlation analysis and Panel ordinary least square regression to understand the degree of relationship among the variables. A correlation matrix was carried out to test for multi-collinearity within the selected variables. Findings revealed that the combined effect of financial reporting quality and disclosure has a positive and significant impact on the stock price of listed deposit money banks in Nigeria. The study thereby recommends that for financial institutions to achieve sustainable performance levels, they should ensure that they meet stakeholders’ demands, which mainly rest on accounting information comprehensiveness and quality. Furthermore, the quality of accounting should be improved by ensuring companies adhere to accounting standards and financial regulations regarding disclosures.