Financial Stability Research Articles

Connectedness of global energy markets with global agricultural, natural resources, and socially responsible investments using extended GFI

PurposeThe study aims to investigate the risk transmission from COVID-19 to global agriculture, energy, natural resources/mining and environmentally/socially responsible investments. Additionally, it explores the connectedness of global energy indices with global agriculture, natural resources/mining and environmentally/socially responsible investments. The study develops a new COVID-19-based Global Fear Index (GFI) to achieve the objectives, thus contributing to the prevailing literature.Design/methodology/approachThe data of Global indices are selected from January 2020 to December 2021. The study uses multivariate BEKK-GARCH and TVP-VAR models to explore COVID-19 risk transmission and connectedness between global indices.FindingsSignificant shock and volatility transmissions from COVID-19 to all global indices are observed. Results show that global agriculture, natural resource/mining markets and environmentally and socially responsible investments are safe havens during COVID-19. Furthermore, these global investment choices are barely connected with global energy indices.Practical implicationsPortfolio managers and investors should invest in global indices to gauge the risk-adjusted return during the pandemic and upcoming health-related risks. Investors in energy sectors are advised to diversify the risk by adding safe-haven assets to their portfolios.Social implicationsThe findings shed light on the importance of environmentally and socially responsible investments as a separate asset class where ecologically friendly and socially sentimental investors could invest in diversifying the risk of their portfolios.Originality/valueThe paper offers valuable insights to policymakers and investors regarding asset pricing, risk management and financial market stability during pandemic-type emergencies.

Sacco Based Financial Characteristics and Financial Performance of Deposit Taking Savings and Credit Co-operative Societies in Kenya

In Kenya, Deposit-Taking Savings and Credit Cooperative Societies have faced significant challenges that have adversely impacted their financial performance. While existing literature has linked financial performance to financial characteristics, there remain conceptual and contextual gaps in empirical research. These gaps prompted the current study to examine SACCO-based financial characteristics as a tool for enhancing the financial performance of DT-SACCOs in Kenya. The study employed a descriptive research design, targeting a population of 190 DT-SACCOs. Using purposive sampling, 181 SACCOs that had been operational since 2018 were selected for analysis. Secondary data from the period 2018 to 2023 were utilized, and a quantitative approach was applied to generate both descriptive and inferential statistics. Panel regression was used to estimate the direct relationship between SACCO-based financial characteristics and financial performance, while also appraising how the Sacco Societies Regulatory Authority risk regulations moderated this relationship. The study concluded that capital adequacy had a statistically significant positive effect on financial performance, indicating that stronger capital buffers enhance profitability. In contrast, asset quality and financial investments showed statistically significant negative effects, suggesting that poor loan quality and mismanaged investments negatively impact financial outcomes. Liquidity, however, was positively associated with financial performance, underscoring the importance of maintaining adequate liquidity reserves. Moreover, the relationship between SACCO-based financial characteristics and financial performance was significantly moderated by SASRA risk regulations, highlighting the critical role of regulatory oversight in shaping financial outcomes. Based on these findings, the study recommends that DT-SACCOs in Kenya should: maintain optimal capital adequacy levels to safeguard financial stability; prioritize careful asset quality management and regular loan monitoring to develop sound lending policies; optimize financial investments to ensure sufficient funding for operational expenses; and maintain adequate liquidity levels to meet financial obligations and improve overall performance.

Exploring Trends in Financial Performance Metrics: An In-Depth Study of Nepalese Banks Over the Past Decade

This study investigates the trends in Return on Assets (ROA) and Return on Equity (ROE) within Nepalese banks over the past decade, while also assessing the growth of banking infrastructure, including branches, ATMs, and card usage. Utilizing a descriptive and correlational research design, secondary data spanning from fiscal years 2070/71 to 2079/80 was analyzed, drawing on monthly records from 20 commercial banks to yield 2,400 observations. Data was collected from annual reports, the Nepal Rastra Bank, the Central Bureau of Statistics, and economic surveys. Results revealed a significant initial rise in both ROA and ROE, indicating robust profitability, followed by notable declines that suggest underlying structural weaknesses in the banking sector. The expansion of banking infrastructure was substantial, with a marked increase in branches and ATMs between 2074 and 2075, positively correlating with financial performance indicators such as total deposits and loans. The study concludes that enhancing banking infrastructure is crucial for improving financial stability and performance in Nepal's banking sector. The findings highlight the interconnectedness of physical banking presence and financial health, emphasizing the need for strategic reforms. The novelty of this research lies in its comprehensive analysis of the relationships between banking metrics and financial outcomes in the Nepalese context, providing valuable insights for policymakers and financial institutions aiming to navigate current challenges and foster sustainable growth.

The moderating role of governance, banking regulation, and supervision on shadow economy, financial inclusion, and financial stability nexus: a case of G5 economies

The moderating role of governance, banking regulation, and supervision on shadow economy, financial inclusion, and financial stability nexus: a case of G5 economies

The Impact of Restrictive Macroprudential Policies through Borrower-Targeted Instruments on Income Inequality: Evidence from a Bayesian Approach

This study used the panel data from 15 emerging markets to examine the impact of restrictive macroprudential policies on income inequality from 2000–2019 using Bayesian panel vector autoregression and Bayesian panel dynamics generalised method of moments models. The chosen models are suitable for addressing multiple entity dynamics, accommodating a wide range of variables, handling dense parameterisation, and optimising formativeness and heterogeneous individual-specific factors. The empirical analysis utilised various macroprudential policy proxies and income inequality measures. The results show that when the central banks tighten systems using macroprudential policy instruments to sticker debt-to-income and financial instruments for lower-income borrowers (the bottom 40% of the income distribution), they promote income inequality in these countries while reducing income inequality for high-income borrowers (the high 1 percent of the income distribution). The impact of loan-to-value ratios was found to be insignificant in these countries. Fiscal policy through government expenditure and economic development reduces income inequality, while money supply and oil-price shocks exacerbate it. The study suggests implementing a progressive debt-to-income (DTI) ratio system in emerging markets to address income inequality among lower-income borrowers. This would adjust DTI thresholds based on income brackets, allowing lenient credit access for lower-income borrowers while maintaining stricter limits for higher-income borrowers. This would improve financial stability and reduce income disparities. Additionally, targeted financial literacy programs and a petroleum-linked basic income program could be implemented to distribute oil revenue to lower-income households. A monetary supply stabilisation fund could also be established to maintain financial stability and prevent excessive inflation.

Mergers and Acquisitions in the Banking Sector: A Systematic Literature Review

Mergers and acquisitions (M&A) have developed into a powerful strategic tool for consolidating banks to boost their capital bases, grow their businesses and bring about financial stability. Since the 1990s, the number of M&As has dramatically increased around the globe. This study attempts to provide a systematic review of recent M&A literature that has examined the different themes of M&As and their impact on the performance of the banking sector with an emphasis on 2013–2023. The objective of the study is to identify the important research gaps and provide direction for future research. Thus, it shows the past and recent status of M&A literature worldwide. The review has identified different themes of M&As, which include financial and operating performance, integration of technology, geographic strategies, corporate governance, cross-border M&As, size of banks, shareholders’ return, risk and loan quality, expertize and ownership. The findings indicate that research on M&As from the financial and operating performance perspective provides inconclusive results. Recently, research on cross-border M&As and integration of technology has been increasing as it provides a competitive edge to the acquirer. Results also suggest that the market considers the merger news positively for target banks, and geographic diversification and hiring financial experts in M&As improve the performance of the banks.

Is the Liraization Strategy of the Central Bank of Republic of Türkiye Successful?

This study aims to analyze the success of the “Liraization Strategy” introduced by the Central Bank of Republic of Türkiye. Liraization, the main component of unusual monetary policy, officially implemented from the beginning of 2022 to the second half of 2023. Using the policy texts of the Central Bank and literature review; regulations, tools and targets of the liraization strategy has been figured out. To evaluate the success of liraization, realization of the goals has been examined employing real data and graphical analysis. The outcomes indicate that the strategy has failed in price stability and financial stability. In addition, the current account balance has worsened. On the other hand, rising the share of TL in balance sheets of companies and bank via intensive regulations has caused to high cost on budget and the Central Bank. Also, market interventions to support TL have disrupted the market mechanism and relative prices; and have increased the inequality in income distribution.

Determinants of Income Smoothing Practices in Light of the Recent Pandemic: Evidence from Banks in MEA Region

This study examined the effects of the recent COVID-19 pandemic on income smoothing practices in the banking sector of Middle Eastern and African (MEA) countries. It examined how global geopolitical risk (GPR) and the bank's internal indicators influenced these practices. Focusing on 175 banks across the MEA region with data spanning from 2018 to 2021. This study employed several econometric approaches, i.e., GMM, 2SLS, MMQR and QRPD, to provide robust estimations. The study's scientific novelty is in its thorough analysis of how COVID-19 stringency and global geopolitical uncertainties uniquely impact income smoothing practices, utilising advanced econometric techniques to capture nuances across different regions. The findings revealed that income smoothness has increased in response to stringent COVID-19 measures such as lockdowns and movement controls, with consistent results across various methods. Additionally, the higher global GPR is associated with increased income smoothness. The study also identified varying impacts of bank-specific factors: bank size, and capital adequacy ratio (CAR), generally show positive effects, while return on assets (ROA), cost-to-income ratio (CI), leverage (LEV), and liquidity (LIQ) often have negative impacts, with some variables displaying minimal significance in different quantiles. Practically, the study offers valuable insights for policymakers and banking sector professionals by highlighting how heightened COVID-19 stringency and geopolitical risks influence income smoothness. This can aid in the development of strategies to manage financial stability and adapt to future economic shocks.

Effect of Financial Metrics on Risk Indicators in Nigeria Listed Deposit Money Banks

This study investigates the effect of financial metrics on risk indicators in Nigerian deposit money banks. The analysis employs yearly time series data spanning from 2007 to 2022, acquired from the Exchange Group PLC. Descriptive statistics, panel unit root tests, Hausman tests, and Panel Ordinary Least Squares (OLS) procedures were used at a 95% confidence interval. The study utilized secondary data sourced from the Exchange Group PLC database. The R-squared (0.564390) and Adjusted R-squared (0.540629) values indicate that the models have strong explanatory power. The results show that all variables are stationary at their levels (I(0)). The primary financial metrics influencing risk indicators among deposit money banks in Nigeria are revenue growth, net interest margin, and earnings per share. It was recommended that banks should implement effective risk management systems that can handle increased complexity and scale of operations, and regularly update them, leveraging blockchain technology for decentralized risk management as it relates to revenue growth rate of banks. Maintain a healthy net interest margin through effective risk management practices and internal controls, and utilize this strength to invest in risk mitigation measures, introducing incentive programs to encourage employee involvement in risk management. Conduct regular financial reviews and audits to ensure accurate earnings reporting and risk identification, utilizing AI-powered tools for earnings analysis to identify anomalies and potential risks. Prioritize prudent lending practices and effective risk management to maintain financial stability, implementing dynamic adjustments to the debt-to-equity ratio in response to changes in risk detection needs.

PENGARUH KOMPETISI BANK TERHADAP STABILITAS SISTEM KEUANGAN PERBANKAN (STUDI KASUS PADA KBMI IV TAHUN 2019-2022)

The emergence of banking as an intermediary institution plays a very important role in the economy because it is the heart that must pump "money" and distribute it to all organs that need the money. Therefore, it is very important to maintain the stability of the banking financial system. The development of the banking system can trigger competition in the banking industry which can affect banking stability. This research was conducted to determine the effect of bank competition on the stability of the banking financial system. This research focuses on KBMI 4 data which is a large bank HHI index, market share and Loan to Deposit Ratio (LDR) used as a proxy for competition and Non-Performing Loans (NPL) as a proxy for banking financial stability. The analysis technique used is Panel Data Regression with KBMI 4th ​​quarter data for 2019-2022. Of these three variables, the HHI index and Loan to Deposit Ratio (LDR) variables have a significant effect on Non-Performing Loans (NPL). Meanwhile, the market share variable has no significant effect on Non-Performing Loans (NPL).

Financial Literacy among Unorganised Workers - A Bird’s View

Financial literacy refers to the skill, knowledge, capabilities, awareness, behaviour and attitude to achieve the financial well-being of an individual by making sound and viable financial decisions. It refers to the capability to manage financial substances competently and make suitable decisions about investing, planning, budgeting, managing, and controlling. It is the ability of understanding and apply financial management aids to accomplish financial stability concerning investing, management of debt, and allocation of income towards several goals instead of unjust expenses and making an individual self-sufficient. The purpose of this paper is to examine the perception of workers towards financial literacy components and to analyze the impact of financial literacy on financial decision-making.

Effectiveness of banking financial stability in light of the indicators of Central Bank of Iraq (MACHINE LEARNING) - an analytical study of a sample of banks listed on the Iraq Stock Exchange

Effectiveness of banking financial stability in light of the indicators of Central Bank of Iraq (MACHINE LEARNING) - an analytical study of a sample of banks listed on the Iraq Stock Exchange

Impact of Regulatory Changes on Financial Market Stability in Germany

Purpose: The aim of the study was to examine the impact of regulatory changes on financial market stability in Germany. 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. Findings: The impact of regulatory changes on financial market stability in Germany has been significant, contributing to a more resilient financial system. Stricter regulations, particularly after the 2008 financial crisis, have enhanced risk management practices, increased capital requirements for banks, and improved transparency in financial transactions. These measures have reduced systemic risks and bolstered investor confidence, helping to maintain market stability even during periods of economic uncertainty. However, the increased regulatory burden has also posed challenges for financial institutions, leading to higher compliance costs and adjustments in business strategies to meet new standards. Unique Contribution to Theory, Practice and Policy: Theory of financial regulation, adaptive market hypothesis (AMH) & the institutional theory may be used to anchor future studies of the impact of regulatory changes on financial market stability in Germany. Practically, financial institutions and market participants need to adapt to evolving regulatory environments with robust risk management and compliance strategies. Policymakers should ensure that regulatory frameworks are designed to promote financial stability while accommodating the needs of financial institutions.

Abstract A006: Disparities, social determinants of health, and ovarian cancer: predicting ovarian cancer using sociodemographic information and comorbidities as risk factors

Abstract Introduction In this study, we aimed to identify associations between ovarian cancer (OC) and patient information, including demographics and comorbidities in order to increase awareness of OC risk factors and the ways in which disparities affect individual risk. Methods Administrative data analysis was performed using Florida state inpatient data collected by the Healthcare Cost and Utilization Project in 2012. Demographic variables included age, race, insurance type, and income level. Comorbidities included hypothyroidism, diabetes, hysterectomy, obesity, alcohol abuse, and drug abuse. For each variable, descriptive and logistic regression analyses were performed using SAS software and confirmed with SPSS software to determine frequencies within binary OC outcomes and calculate associations. Results Descriptive analysis revealed that OC was most frequent in white women (73.47%) over 65 (50.17%), who were Medicare beneficiaries (57.00%) within the second quartile of annual income ($38,000-$48,000) (30.71%). Most OC patients did not have any comorbidities. Logistic regression analysis revealed higher risk of OC in women over 65 compared to younger women (OR= 4.277; 95% CI= 3.585-5.103). Black women had reduced odds of OC compared to White women (OR=0.790; 95% CI= 0.693-0.900). Privately insured women had higher odds of OC compared to women with Medicare (OR= 1.426; 95% CI= 1.245-1.634). The risk of OC was reduced in patients in the first, second, and third quartiles of annual income when compared to the highest quartile of annual income (OR= 0.606; 95% CI= 0.527-0.698, OR= 0.618; 95% CI= 0.537-0.710, OR= 0.644; 95% CI= 0.557-0.743, respectively). The risk of OC was increased in women with hypothyroidism (OR= 1.083; 95% CI= 1.021-1.148), diabetes (OR= 1.134; 95% CI= 0.973-1.331), and women who had a hysterectomy (OR= 18.543; 95% CI= 15.262-22.530), compared to those without. Odds of OC were significantly reduced in women with obesity (OR= 0.574; 95% CI= 0.503-0.654) compared to those without. Women who abused alcohol or drugs had lower odds of OC than those who did not (OR= 0.296; 95% CI= 0.205-0.426, OR= 0.280; 95% CI= 0.205-0.382, respectively). Conclusions This study identifies OC risk factors and highlights differences in the prevalence and risk of OC between women of different sociodemographic groups and between women with and without various comorbidities. Groups with socioeconomic privilege were at higher risk of OC. Financial stability and access to healthcare increase the likelihood of receiving a diagnosis, suggesting potential detection bias. Decreased risk of OC was observed in patients with stigmatized comorbidities such as obesity and substance abuse disorders. Under-investigation of symptoms is common in patients with these conditions, leading to underdiagnosis. Health and socioeconomics are inextricable, so it is necessary to understand the relationship between these aspects of patient health and OC to more accurately assess individual risk. Citation Format: Anna E. Langston, Zahra Bahrani-Mostafavi. Disparities, social determinants of health, and ovarian cancer: predicting ovarian cancer using sociodemographic information and comorbidities as risk factors [abstract]. In: Proceedings of the 17th AACR Conference on the Science of Cancer Health Disparities in Racial/Ethnic Minorities and the Medically Underserved; 2024 Sep 21-24; Los Angeles, CA. Philadelphia (PA): AACR; Cancer Epidemiol Biomarkers Prev 2024;33(9 Suppl):Abstract nr A006.

European politicians and financial literacy activism: Does financial (in)stability matter?

Financial education can influence the level of financial literacy. In each country, political incentives can shape financial education policies. Political activism in financial education can be motivated by concerns over financial instability. This theoretical relationship is empirically validated applying text analysis. By using financial education narratives as a proxy for political activism among European Parliament politicians from 1997 to 2024, we test whether financial instability cases matter in explaining political activism in financial education.

US domestic sentiment reactions to climate and economic policy uncertainties: a quantile ARDL approach

ABSTRACT Over the years, climate and economic policy uncertainties have become critical considerations that shape public attitudes. They have the potential to impact people’s perceptions of financial stability, ecosystem integrity, and environmental sustainability. This paper aims to provide evidence on the sensitivity of US business and consumer sentiments to uncertainties arising from climate and economic policies in both short-term and long-term perspectives, and across different sentiment states. Our empirical investigation draws on a quantile ARDL approach, after orthogonalizing original sentiment series with respect to a diverse range of influential factors. The results reveal that climate and economic policy-related uncertainties have a negative impact on business (consumer) sentiment in the short and long run (only in the short run). These effects are particularly more pronounced when pessimistic sentiment begins to take hold. Moreover, we find evidence of locational asymmetry, especially in the long run.

Retraction Note: Financial stability influence on climate risk, GHG emission, and green economic recovery of China.

Retraction Note: Financial stability influence on climate risk, GHG emission, and green economic recovery of China.

The natural law and positivist approaches to legal understanding in the context of revealing the category of legal personality of professional participants in capital markets

This article aims to analyze the main philosophical concepts used in understanding the legal category of legal personality and to conduct a descriptive study of the concepts related to this category that prevail in domestic science. The author of the article substantiates the position that the approaches to the theoretical and legal developments of the category of universal legal personality of legal entities should be based on the natural law type of legal understanding. At the same time, the article analyzes domestic authors’ approaches to understanding the legal category of legal personality and compares these approaches with those prevailing in Western countries. Furthermore, the author attempts to justify the expediency of distinguishing exclusive legal personality, given the positivist approach that underlies the construction of the model of the exclusive type of legal personality of professional participants in capital markets. In our opinion, establishing the exclusive legal personality of legal entities is a state-imposed limitation on their universal legal capacity, such as the ability to participate in certain civil-law relations, considering the social importance of the type of activity carried out by these entities. After all, the proper functioning of capital markets is crucial to the financial stability of the country. Capital markets, along with commodity markets, directly influence the formation of exchange rates by attracting foreign investment into the country’s economy. They can also act as a catalyst for economic growth by accumulating financial resources from the population to create capital-intensive productions with high value-added end products. However, achieving such results depends on the balanced state policy in the field of regulating the activities of professional participants in capital markets. To limit the speculative nature of such entities and ensure sustainable economic development, the scope of their legal capacity is narrowed by directly specifying in the law the types of activities they are permitted to engage in.

Retraction Note: Financial stability nexus with oil prices shocks and business cycle uncertainty during COVID-19: empirical trends of ASEAN economies.

Retraction Note: Financial stability nexus with oil prices shocks and business cycle uncertainty during COVID-19: empirical trends of ASEAN economies.

Banks incentive pay, diversification and systemic risk

This paper analyzes the impact of incentive pay for bank managers on financial stability. The study focuses on two banks owned by risk-neutral principals but operated by risk-averse managers who decide on leverage and the extent of diversification into the other bank’s assets, both of which determine the systemic risk. To begin, we establish the optimal incentive pay contract assuming a planner seeks to maximize the total value of the banks. In equilibrium, we find that the contract excessively relies on relative performance evaluation, leading to an inefficiently high degree of diversification, leverage, and systemic risk. This outcome obtains even when the principal represents the interests of all stakeholders in an individual bank. We demonstrate that only regulation specifically targeting relative performance evaluation can restore efficiency, while existing regulations on managerial pay can inadvertently amplify systemic risk.