Financial Sector Research Articles

Mobile banking apps and the informal economy: evidence from survey data in Indonesia and Bangladesh

ABSTRACT Reducing preference for cash and supporting the adoption of digital financial services can help achieve financial inclusion while also diminishing economic informality. However, previous evidence suggests that increased access to formal banking services has not resulted in an immediate reduction in usage of informal services. This paper estimates the effects of mobile phone banking apps on the demand for cash using unique survey data from Bangladesh and Indonesia. Our models indicate that having access to a banking or payment app reduces a variable capturing preference for cash by between 4% and 10%. The results are robust to a range of specification checks (including the inclusion/omission of various controls) which suggests that confounding from unobservables is unlikely to be a substantive source of bias. Since cash is the preferred payment mechanism for the poor in developing countries, the results suggest that access to digital banking apps may reduce informality within the finance sector, leading to broader development implications.

OPTIMIZATION AND FORECASTING OF A SECURITIES PORTFOLIO BASED ON MACHINE LEARNING METHODS

The article is devoted to the demonstration and analysis of the possibilities of connecting the Markowitz model, which is a classical model for forming a portfolio of securities, and forecasting methods based on machine learning data. The relevance of the chosen topic is justified by the fact that the use of machine learning methods makes it possible to simplify the activities of financial sector workers and the work of professional stock market players, as well as reduce the complexity of interpreting mathematical models and methods of their construction for private investors. The purpose of this work is to use machine learning methods to solve the problem of building an optimal securities portfolio and predicting its behavior. Tasks: - build a Markowitz model based on the selected data; - to build an optimal portfolio based on the proposed optimality criterion; - offer a time series forecast; - to assess the adequacy of the constructed model; - combine the Markowitz model, which belongs to the class of widely known classical models, with the construction of a prediction based on machine learning. Methods and models: machine learning methods are used in the work, the Markowitz model is built based on the selected data, then the Markowitz model is combined with the construction of a forecast based on machine learning. Research results: the optimal portfolio for AXP has been built and its forecast has been fulfilled. The formation of the portfolio was based on the Markowitz model. The data obtained were tested for adequacy and showed fairly good results. A portfolio was built, the optimality criterion of which is the ratio of average profitability and volatility of profitability (maximizing average profitability while minimizing its volatility). The Markowitz model, which belongs to the class of widely known classical models, was combined with the construction of a prediction based on machine learning.

Unravelling the CSR-financial distress link: The mediating role of capital structure in Jordan’s financial sector

This study investigates the relationship between corporate social responsibility (CSR), capital structure, and financial distress in Jordan’s financial services sector. It tests the mediating effect of capital structure on the CSR-distress linkage. Utilizing a panel data regression approach, the analysis examines a sample of 35 Jordanian banks and insurance firms from 2015–2020. CSR is evaluated through content analysis of sustainability disclosures. Financial distress is measured using Altman’s Z-score model. The findings reveal an insignificant association between aggregated CSR engagement and bankruptcy risk. However, capital structure significantly mediates the impact of CSR on financial distress. Specifically, enhanced CSR enables higher leverage capacity, subsequently escalating distress risk. The results advance academic literature on the nuanced pathways linking CSR to financial vulnerability. For practitioners, optimally balancing CSR and financial sustainability is recommended to strengthen resilience. This study provides novel empirical evidence on the contingent nature of CSR financial impacts within Jordan’s understudied financial services sector. The conclusions offer timely insights to inform policies aimed at achieving sustainable and stable financial sector development.

Pengaruh Knowledge Gap dan Service Quality terhadap Digital Financial Service Experience dengan Internet Usage sebagai Moderator

Presently, the widespread adoption of digital transformation is profoundly shaping various industries, driving businesses to expand their digital footprint. In the financial sector, not only traditional banks but also a variety of companies, particularly those in the technology domain like Goto, Shopee, and Traveloka, are entering the market to provide digital financial services, emerging as strong contenders. With numerous companies offering digital financial services in Indonesia, there is a compelling push for businesses to vie in delivering top-notch services to customers, thereby enriching satisfaction and user experience. This research aims to explore the factors influencing the user experience of digital services, specifically within the realm of digital financial services. Employing a purposive sampling technique, the researchers determined the appropriate number of reliable and valid samples for the study. Questionnaires were distributed to Indonesian users of digital financial services to gather primary data, resulting in the analysis of 112 samples. The study indicates that knowledge gaps impact an individual's evaluation of the quality of digital financial services, and service quality significantly influences how users perceive their experience with digital financial services. Notably, no moderating effect of internet usage was detected in the relationship between knowledge gaps and service quality concerning the experience of digital financial services.

Quantitative Strategies Based on FinGPTs Analysis of the Federal Reserves Attitude

This paper explores the impact of the Federal Reserve (Fed) on financial markets, specifically through the sentiment scoring of Fed meeting minutes by the AI analysis model FinGPT and its correlation with market performance. The article first introduces the method of sentiment analysis using FinGPT and conducts an in-depth analysis of the meeting minutes from 1990 to 2020 using this method. Furthermore, key market data, such as the S&P 500 Index, real estate, and financial sector indices, are used to assess the actual impact of the Feds attitude on market dynamics. Through quantitative trading and backtesting analysis, this study verifies the performance and effectiveness of a single-factor strategy in different markets. The results show that while the Feds sentiment scores have high predictive validity and market adaptability in the financial sector, their performance in the real estate market and the broader stock market index is relatively weaker. The findings indicate that the market applicability of the strategy is significantly influenced by market type and economic environment. Future strategy optimization needs to consider these factors to enhance adaptability and efficiency across different markets.

Adoption of new banking models from a consumer perspective: the case of Iran

PurposeTraditionally, the banking and financial sectors have pioneered adoption of new technologies and business models. One important digital banking model that has proven its efficacy in recent times, is Digital-Only Banking (DOB) where consumers interact with their banks through digital channels only. Having detailed knowledge of what actually happens at the consumer level during the adoption of new digital models and technologies is paramount to the success of these technological initiatives. The present study aims to investigate DOB adoption behavior and possible barriers using a quantitative approach at the consumer level. A conceptual model is developed by extending the Unified Theory of Acceptance and Use of Technology (UTAUT) model, incorporating Trust (TR), Perceived Risk (PR) constructs and cultural moderators of Individualism (IDV) and Uncertainty Avoidance (UA).Design/methodology/approachFor this study, an online survey instrument was created and administered in Iran. The research sample was selected through the application of purposive sampling. Data from 788 respondents were analyzed. The proposed model was tested using Partial Least Square.?.s Structural Equation Modeling (PLS-SEM).FindingsThe results show that DOB adoption is positively influenced by Effort Expectancy (EE), Social Influence (SI), and Facilitating Conditions (FC), while PR negatively influences DOB adoption intention. Unexpectedly, the results indicate that TR has no significant impact on DOB usage intention. Additionally, this study demonstrates that with individuals having a low level of IDV, the relationship between PE and BI is stronger, and with individuals having a low level of UA, the impact of SI on BI is stronger. It also reveals that the impact of TR on BI is stronger in low individualistic cultures.Practical implicationsDOB providers should enhance support features of their services or provide facilities that make it simpler for users to accomplish online transactions. Here, in order to improve the UI/UX design of their apps, DOB product managers should carefully observe the technical guidelines of the operating systems of digital devices, such as the Human Interface Guidelines (HIG) for iOS and Material You for Android. Additionally, DOB providers should build partnerships with mega online retailers to provide hassle-free and easy to use payment solutions for consumers.Originality/valueDOB, as a novel and business model, has been investigated in very few studies, especially regarding any which focus on its adoption. To fill this gap, this research investigates DOB adoption through a modified version of the UTAUT model. The findings of this study suggest that future research regarding DOB should consider sources of TR, types of non-adopters, and context. This study, as the first of its kind in DOB literature, also highlights the significant role played by cultural values in customer behavior regarding DOB adoption.

Review of literature on capital structure: Independent and Dependent Variables

Choosing a capital structure presents many difficulties for businesses. Choosing the right balance between debt and equity is one of the most important decisions. A poor capital structure decision has the power to completely ruin any company's success. Researchers have shown interest in analyzing the capital structure of the companies. The main objective of this paper to review these empirical studies of capital structure and to identify frequently used parameter by the researchers for last 14 years. The empirical capital structure literature is reviewed in this paper, with a focus on works released since 2010. The research paper also intends to address particular issues for further investigation while highlighting the significant gaps in the literature on the factors influencing capital structure and it compares the outcomes of practical research with theoretical expectations. This study investigates the independent factors and their dependent effects that lead companies to stray from ideal capital structures. This study primarily focuses on review of studies in the context of: (i) Capital structure in the banking and financial institutions sector; (ii) Capital structure in the metals industry; (iii) Retail industry; (iv) Software industry; and (v) Pharmaceutical industry. Only secondary data were used in this present study.

Examining the Moderated-Mediation Role of the Financial Sector and Institutional Quality in the Relationship Between Remittances and Economic Growth in Developing Countries

Examining the Moderated-Mediation Role of the Financial Sector and Institutional Quality in the Relationship Between Remittances and Economic Growth in Developing Countries

Current Situation, Problems and Suggestions of Agricultural Futures Market in China

The agricultural futures market occupies a central position in China's financial landscape, wielding substantial influence over the sustainable development of the national economy. Apart from its core roles in price discovery and risk management for agricultural products, this market acts as a catalyst for efficient allocation of resources and continuous financial innovation. Furthermore, it enhances market liquidity and amplifies China's global economic impact. As China's financial sector matures, the agricultural futures market will continue its dual role of bolstering agricultural prosperity and financial dynamism, despite encountering various challenges. This study explores the present state of China's agricultural futures market, evaluating metrics such as total market turnover and penetration. Analysis identifies several critical issues, including inadequate liquidity, susceptibility to market manipulation, speculative activities, and uncertain economic policies. To address these challenges, the paper proposes targeted strategies. The research outcomes carry significant implications for nurturing the sustainable and resilient growth of China's agricultural futures market.

An Overview of the Roles and Functions of Selected Financial Role Players to Protect Financial Stability and Promote Market Integrity in South Africa

The South African Reserve Bank (SARB) and other financial role players such as the Prudential Authority (PA), the Financial Sector Conduct Authority (FSCA), the National Credit Regulator (NCR), the Financial Intelligence Centre (FIC), the Financial Stability Oversight Committee (FSOC), the Financial Sector Contingency Forum (FSCF), the Financial Sector Council of Regulators (FSCR) and the Financial Sector Inter-Ministerial Council (FSIC) play a significant role in the protection and promotion of financial stability and market integrity in South Africa. The SARB has the primary financial stability mandate, whilst the FSCA was established to primarily promote market integrity and enhance market efficiency through protecting and promoting the fair treatment of financial customers and promoting financial literacy programs. As technology advances and new players enter the market, traditional financial institutions are faced with increased competition and the need to adapt and innovate to stay relevant. In this regard, regulatory frameworks and the functions of regulatory bodies should be constantly reviewed to conform to financial technology (fintech) developments and safeguard consumer interests. This article examines the roles and functions of the aforementioned financial role players as regulated by the Financial Sector Regulation Act (FSR Act) and other relevant financial sector laws. This is done to evaluate the effectiveness of their roles and functions to protect and promote financial stability and market integrity in line with fintech and Artificial Intelligence (AI) developments. The paper also evaluates the importance of cooperation and collaboration between the financial role players to fulfil their roles and functions.

Information and economic security of a credit institution as factors of ensuring its sustainable development

The article defines the essence of information security as an essential component of the economic security of a credit institution on the basis of many definitions of the concepts of "information security" and "economic security" formulated by different researchers taking into account different points of view. Special attention is paid to new regulatory documents regulating the security of the critical information infrastructure of the Russian Federation, ensuring the information security of the credit and financial sector, improving the operational risk management system and comprehensive modernization of corporate risk management systems in credit institutions, taking into account the new conditions for ensuring information security and the functioning of the economic security system, on the effective functioning of which the ability to a credit institution's commitment to sustainable development.

ESG ratings and corporate success: analyzing the environmental governance impact on Chinese companies’ performance

This study explores the impact of ESG ratings on corporate performance, focusing on achieving sustainable development and corporate sustainability through innovation within the context of high-quality global economic growth. In recent years, ESG ratings have garnered significant attention in the financial sector, influencing corporate strategy and performance management. While some argue that ESG activities might detract from profitability, others highlight that firms with strong ESG performance can access low-cost capital, thereby enhancing overall performance. Using a sample of China’s A-share listed companies from 2009 to 2021, this research examines the influence and mechanisms of ESG ratings on corporate performance. The findings indicate a significant positive relationship between ESG ratings and corporate performance, which remains robust after rigorous testing. Mediation analysis reveals that ESG ratings improve corporate performance by alleviating financing constraints and enhancing corporate reputation. Furthermore, the performance-enhancing effects of ESG ratings are more pronounced in firms with robust internal controls and private enterprises. This research provides empirical evidence to support stronger ESG investment and the refinement of the ESG rating system.

Financial innovations for economic growth

The article examines the impact of financial innovations to ensure economic growth. The authors attempt to reveal the essence of financial innovations. The directions in which the work on innovation for development is currently focused are considered. For the development of the Russian economy under sanctions, it is proposed to create a convenient and independent international settlement tool that will help reduce the damage from restrictions. One of the ways to solve this problem is the development and implementation of projects related to digital financial assets, such as the use of gold-backed stablecoins for international settlements. Other innovations in the financial sector are also being considered. The further introduction and development of financial innovations in Russia contributes to the renewal of the financial system, increasing the level of financial security and creating favorable conditions for economic growth. These steps can help mitigate the negative effects of sanctions and contribute to the sustainable development of the country's economy in the face of external pressure.

Dinamika Kinerja Keuangan Perusahaan di Sektor Kesehatan, Keuangan, dan Teknologi

This study explores the financial performance comparison of three major service sectors: healthcare, finance, and technology, with a focus on liquidity, solvency, activity, and profitability. Using data from 2021 and 2022, the study aims to provide in-depth insights into the financial strengths and weaknesses of each sector during the Covid-19 pandemic period. The analysis involves comparing the financial ratios of selected companies within each sector to industry averages to identify trends, differences, and potential issues. The results show that the healthcare sector has the highest liquidity, solvency, and profitability among the three sectors. The finance sector demonstrates the highest operational efficiency compared to the other two sectors but has the lowest liquidity, solvency, and profitability. The technology sector shows adequate liquidity, solvency, and profitability but lacks efficiency in its operations. Future strategies for the healthcare sector should include diversifying investments, optimizing operations, and enhancing customer service. For the finance sector, strategies should focus on improving liquidity and solvency, innovating in products and services to boost profitability. The technology sector should invest in automation, human resource development, and maintain a strong focus on innovation.

Analyzing banking sector development and renewable energy consumption impact on load capacity factor in Sudan

This study delves into the impact of banking sector development (BSD), renewable energy consumption (REC) and economic growth (EG) on environmental quality (EQ), using the load capacity factor (LCF) in Sudan. Utilizing time series data from 1990 to 2018 and the Autoregressive Distributed Lag (ARDL) method, this research aims to explore both short-term and long-term dynamics, and cointegration, to provide a detailed understanding of these relationships. The study's primary objective is to elucidate the effects of BSD, REC, and EG on Sudan's EQ through the LCF metric and to test the Load Capacity Curve (LCC) hypothesis. The results indicate that the squared values of per capita GDP (long-term) and REC (short- and long-term) contribute to an increase in Sudan's LCF, thereby enhancing EQ,while BSD and per capita GDP negatively affect EQ, thus confirming the LCC hypothesis. Sudan authorities are urged to prioritize environmentally friendly economic policies, sustainable urban development, and the transition to renewable energy sources. However, the revelation that BSD diminishes environmental sustainability suggests a reevaluation of the financial sector's role. Encouraging green technologies could amplify the LCF and mitigate environmental degradation, enabling Sudan to create a sustainable environment by promoting renewable energy investments and long-term GDP per capita growth while curbing financial expansion. This research provides a critical framework for policymakers to create strategies that balance economic development with ecological preservation, ensuring Sudan's long-term sustainability.Graphical

Regarding the finance-investment nexus in sub-Saharan Africa: an issue of too little or too much finance?

PurposeThis study investigates the finance-investment nexus in sub-Saharan Africa using data from 41 countries spanning the period from 2000 to 2022. The central question addressed is whether there is a “too little” or “too much” finance problem in the region.Design/methodology/approachThis study employs a system-generalised method of moments (GMM) approach to analyse the association between finance and private investment. Additionally, a dynamic threshold regression model is used to uncover potential nonlinearities in this relationship.FindingsInitially, the study identifies a negative correlation between increased finance and private investment. However, further analysis using the dynamic threshold regression model reveals a critical threshold level of finance. Specifically, the threshold is found to be 6.52% of domestic credit to the private sector and 23.18% using the financial development index. Below this threshold, finance negatively impacts private investment, while surpassing this threshold leads to positive growth in private investment. These findings indicate an issue of “too little” finance in the finance and private investment nexus in sub-Saharan Africa. The results are robust across different model specifications.Research limitations/implicationsThe implications of this study highlight the importance of identifying critical thresholds for financing to enhance investment expenditures in the region.Originality/valueThis study contributes to the literature by uncovering nonlinearities in the finance-investment nexus in sub-Saharan Africa. The identification of critical thresholds provides valuable insights for policymakers, emphasising the need to strengthen the financial sector in countries operating below these thresholds to promote private investment and economic growth.

Operational risk management, financial sector stability and sustainable development in West Africa

Achieving sustainable development in West Africa is vital for integrating environmental, social and economic well-being in the region. This study examines the impact of operational risk management and financial sector’s stability on sustainable development in West Africa, focusing on countries that are members of the Economic Community of West African States (ECOWAS) from 2015 to 2022. Data from the World Development Indicators (WDI) and country Policy and Institutional Assessment (CPIA) were analyzed using the systems GMM to control for endogeneity. The study found conflicting results for financial sector stability’s impact on adjusted net savings and the sustainable development index. While financial sector stability had a negative effect on adjusted net savings, it had a positive impact on the sustainable development index. Additionally, environmental taxes were found to contribute to sustainable development by promoting efficiency and reducing carbon emissions. In conclusion, addressing operational risks, ensuring financial sector stability and promoting sustainable development can help achieve SDGs 8, 9, and 11, creating a stable, inclusive, and resilient economic environment conducive to long-term growth and sustainability in West Africa.

Legal Governance of Fintech Risks in Malaysia

This study examined the correlation between legal governance and fintech risks in Malaysia. The study examined the existing literature on the legal governance of fintech risks, as published in various journals between 2017 and 2022. Due to strict access control, fintech businesses face challenges implementing their solutions within the financial sector. They are required to obtain the necessary financial business authorisation to proceed. Nevertheless, the present status of fintech businesses within the financial legal system is unclear, resulting in uncertainty regarding their corporate standing, rights, and obligations. As a result, their participation in financial operations may face difficulties regarding legal scrutiny. If a fintech company experiences a technical malfunction during the application process could negatively affect consumers' financial interests. Defining the legal responsibilities between the technical body and the commercial entity can sometimes be challenging. Thus, it is possible to easily incite disruptions in assuming legal responsibilities. This study proposes the implementation of legal governance or a new regulatory framework to mitigate fintech risks for users. Fintech adoption in Malaysia is still in its early stages. Fintech poses a significant challenge to the financial sector. It is crucial to acknowledge the risks associated with Fintech.

Understanding AI's Role in the Banking Industry: A Conceptual Review

This study delves into the shifting role of Artificial Intelligence (AI) within the banking industry, with a focus on its transformative effects on service quality, operational effectiveness, and customer interaction. The research underscores significant developments in AI and its integration, highlighting its pivotal role in updating traditional banking practices and tackling modern-day challenges. It offers a comprehensive analysis of the potential of AI to enhance banking services, while also addressing obstacles such as technical difficulties and regulatory concerns. The outlook section predicts ongoing AI expansion in the banking sector, particularly its capacity to further tailor banking services and improve risk management. The goal of this research is to provide a comprehensive understanding of AI's integration into Indian banking, shedding light on the evolving relationship between technological innovation and the financial sector

Innovative approaches to financial analytics education: Kolb's theory in SEC IPO analysis

AbstractThis study presents an innovative educational approach, integrating David A. Kolb's Experiential Learning Theory (ELT) into financial analytics education, with a focus on the analysis of Initial Public Offerings (IPOs) via the SEC's EDGAR database. Through the application of ELT, this article explores the effective melding of experiential learning methodologies with advanced analytical tools such as Python, SQL, and various data analytics platforms. The teaching exercise outlined emphasizes the importance of hands‐on activities—ranging from data scraping and analysis of SEC filings to conducting sentiment analysis—aimed at fostering not only technical proficiency among students but also enhancing their critical thinking and ethical decision‐making skills. By detailing the execution and outcomes of utilizing ELT in the context of financial analytics, this work contributes to the discourse on modern finance education, advocating for a model that prepares students for the challenges of an increasingly complex and ethical finance industry. This approach underscores the need for educational practices that are both theoretically robust and practically relevant, ensuring students are well‐equipped for dynamic roles within the finance sector.