Financial Instruments Research Articles

An evaluation of financial statement quality in pre-versus post-IFRS-7 implementation: the case of Iraqi banking industry

This study compares Iraqi banking financial statements before and after IFRS-7 financial instruments disclosure. “Nijmegen Centre for Economics (NiCE)” qualitative content analysis was used to assess financial statement quality, which was measured using NiCE disclosure index. This study analysed data using a paired sample test to meet its goals. After IFRS-7, financial reporting quality is represented by 2016–2018. Before IFRS-7, it was represented by 2013–2015. In addition, the OLS regression analysis was implemented to assess hypotheses, incorporating data from 24 Iraqi institutions. The univariate analysis (t-test) and OLS regression showed that IFRS-7 improves financial statement “relevance, faithful representation, comparability, and timeliness”. No correlation was found for “understandability”. This study is the first to use Iraqi data and the most recent disclosure index to test the relationship between financial figure quality before and after applying the IFRS-7 financial instruments disclosure standard in developing countries. The results help regulators and policymakers regulate IFRS in Iraq and suggest policy changes to ensure compliance. The findings have major implications for business and policy that executives, lawmakers, and stockholders should consider. This study is applicable to ME countries that share comparable institutional, cultural, and accounting framework characteristics.

Legal Regulation, Financial Incentives and Professional Autonomy in the Prioritisation of Norwegian Specialist Health Services.

To study hospital physicians' awareness and perceptions of the legal and financial regulations, and their impact on professional discretion regarding equity in access to treatment and quality of care. A sample of 637 physicians in the Norwegian specialist healthcare services selected from a survey conducted by the Institute for Studies of the Medical Profession. The paper investigates how legal and financial policy instruments affect the application of professional discretion regarding the prioritisation of specialist health services. Descriptive statistics and regressions were conducted for the analyses. Compared with financial incentives, legal regulations (laws, priority rules and guidelines) were assessed to be less negative external interventions in the exercise of medical and professional judgement. The empirical analyses revealed a positive tendency in physicians' assessments of the impact of legal regulations on treatment equity and healthcare quality, but negative attitudes towards financial instruments. The variations revealed are attributable to various structural and epistemic features of the legal-bureaucratic and economic models of administration in this area of the welfare state. Legal and financial regulations are imposed to achieve certain social goals and values. The findings of this study can provide further insight for the health authorities in other countries concerning implementation of such regulations in the specialist healthcare services.

Legal regulation of risk hedging in financial markets using digital assets

This article is devoted to the consideration of issues related to the possibility of hedging risks using digital currencies and digital financial assets. The authors analyze the essence of hedging as one of the key factors of commercial activity, analyze its current legal regulation, identify financial risks that can be hedged, as well as the prospects for using digital assets as a risk management tool. The authors also determine some real cases of hedging transactions using digital assets.The authors believe that building a system of legal regulation in relation to hedging with digital assets should be aimed, first of all, at distinguishing hedging transactions and speculative high-risk transactions with financial instruments arising on the market.

What does it mean to the environment when a firm mortgages its emission rights? Evidence from corporate green investment

Based on a sample of Chinese heavily polluting firms from 2008 to 2019, we examine the impact of the adoption of the emissions rights mortgage (ERM) policy on firm-level green investment. We find that an ERM policy significantly enhances firms’ green investment. This effect is more salient when financial constraints are higher, local marketization levels are higher, and local governments’ environmental concerns are higher. Our study provides empirical evidence and policy implementations for the further development of financial instruments based on emissions rights and other environmental rights, which show that ERM is a sound policy to promote a sustainable environment.

Hedging instruments to ensure the economic security of economic entities: Methodological background. Part 1

Subject. This article discusses the use of hedging instruments in the process of minimizing the risks of changes in market conditions and their impact on the economic security of economic entities. Objectives. The article aims to define hedging as a process of minimizing market risks and their distribution among participants in market transactions and describe the impact of hedging on the valuation of financial accounting items. Methods. For the study, we used the provisions of general economic theories of positive and normative economics, theories of accounting and analysis, theories of finance, the concept of sustainable development of the organization and the concept of constructive obligation. Results. The article defines the method of special accounting for hedging instruments, the use of which makes it possible to reliably reflect in the Statement of Financial Position of the organization the impact of the risk of changes in market conditions and their minimization when allocating these risks among the participants of an exchange transaction in the financial market. Conclusions. Derivative financial instruments are subject to financial accounting and reporting, and the special hedge accounting method is a business model for the use of hedging instruments that includes elements of hedging.

CROWDFUNDING AND FUNDRAISING AS INNOVATIVE FINANCIAL TOOLS IN PROVIDING ALTERNATIVE ENERGY SOURCES

Objectives. Search and substantiation of directions for investing investment resources in alternative energy sources using crowdfunding and fundraising mechanisms. Method. Research methods in this scientific article are statistical, logical, historical, graphic, as well as general methods of scientific thinking: analysis, synthesis, induction, deduction. The results. The existence of the problem of insufficient financial instruments for building a system of alternative regenerative energy sources is substantiated. The necessity of an in-depth study and analysis of the financial tools of crowdfunding and fundraising for more effective provision of financial resources for the production of alternative renewable energy sources has been proven. Scientific novelty. The need for innovative financial instruments for "green" projects of renewable sources of energy resources has been identified. It is proposed and justified to use fundraising and crowdfunding start-up projects for the most optimal financing of social, so-called "green" investments in renewable energy sources at the current stage of the military crisis. Practical significance. The practical implementation of the proposed measures for the development of innovative projects based on fundraising and crowdfunding in the system of alternative renewable energy sources in the conditions of a crisis state of the economy will save financial resources and increase the profitability of domestic enterprises in the energy sector, which will have a positive effect on the general macroeconomic situation in the state.

Enhancing valuation of variable annuities in Lévy models with stochastic interest rate

This paper extends the valuation and optimal surrender framework for variable annuities with guaranteed minimum benefits in a Lévy equity market environment by incorporating a stochastic interest rate described by the Hull-White model. This approach frames a more dynamic and realistic financial setting compared to previous literature. We exploit a robust valuation mechanism employing a hybrid numerical method that merges tree methods for interest rate modeling with finite difference techniques for the underlying asset price. This method is particularly effective for addressing the complexities of variable annuities, where periodic fees and mortality risks are significant factors. Our findings reveal the influence of stochastic interest rates on the strategic decision-making process concerning the surrender of these financial instruments. Through comprehensive numerical experiments, and by comparing our results with those obtained through the Longstaff-Schwartz Monte Carlo method, we illustrate how our refined model can guide insurers in designing contracts that equitably balance the interests of both parties. This is particularly relevant in discouraging premature surrenders while adapting to the realistic fluctuations of financial markets. Lastly, a comparative statics analysis with varying interest rate parameters underscores the impact of interest rates on the cost of the optimal surrender strategy, emphasizing the importance of accurately modeling stochastic interest rates.

Assessing farmers’ intention to adopt drought insurance. A combined perspective from the extended theory of planned behavior and behavioral reasoning theory

Agriculture in Mediterranean climates, such as that of southern Spain, is highly vulnerable to climate change, and particularly to hydrological drought. Financial instruments such as weather index-based insurance have been developed in response to increasing climate risks. In previous studies of intention to adopt this type of insurance, little attention has been paid to farmers’ underlying psychological motivations related to their perceptions of climate change, reasons for or against insurance adoption, attitudes toward insurance, subjective norms, or perceived control over the instrument. To comprehensively address this gap, a combined exploratory model based on the theory of planned behavior and behavioral reasoning theory is proposed. Specifically, the aim of this research is to analyze the psychological factors that determine farmers' intention to adopt drought insurance. The conceptual model is tested on a sample of 146 farmers from an irrigated area in the lower Guadalquivir region of Andalusia. The data are analyzed using partial least squares structural equation modeling (PLS-SEM). Contrary to expectations, the results of the study suggest that belief in climate change does not significantly influence the reasons for or against insurance adoption, nor the attitudes toward or perceived control over it. The recommendations drawn from this study can contribute to the design of more effective policies and communication strategies that address farmers' psychological perceptions and motivations, thereby helping to boost the adoption of drought insurance.

A - 83 Concordance between Informant Measures, Executive Functioning, and Functional Ability in an Older Adult Population

Abstract Objective Informant-report measures often do not correlate with neuropsychological tests measuring the same cognitive construct, yet they may offer insight into everyday difficulties not captured by objective tests. Performance-based measures of functional ability, developed to capture real-world skills, may better align with informant-report measures. Clarifying the relationship between subjective and objective assessment tools in older adults could enhance precision in selecting the most appropriate measures. Method As part of a comprehensive neuropsychological battery, community-dwelling older adults who were cognitively unimpaired or who presented with subjective cognitive decline or mild cognitive impairment completed tests of executive functioning (EF), (D-KEFS Trail Making Test 4, Letter Fluency, WCST, WAIS-Comprehension) and financial capacity, Financial Capacity Instrument (FCI-SF). Informants responded to measures of functional ability, Amsterdam Instrumental Activities of Daily Living Questionnaire Short Version (A-IADL-Q-SV) and Assessment of Functional Capacity Interview (AFCI) and items capturing EF on the Brief Informant Form of Neurobehavioral Symptomatology (BINS). Results Participants’ (N = 97, Mage = 74.64 ± 7.42 years; Meducation = 15.76 ± 2.42 years; 74.2% female) FCI-SF performance significantly correlated with higher A-IADL-Q-SV (r = 0.403, p < 0.01) and AFCI (r = −0.294, p < 0.01) scores, whereas there was no significant correlation between a composite Z-score for traditional neuropsychological tests and select EF items from the BINS, (r = −0.119, p = 0.252). Conclusion We found greater alignment between objective and subjective measures of functional ability than EF, possibly due to the observable nature of functional tasks. Objective and informant measures of EF do not align, potentially targeting different aspects of cognition in non-demented older adults. This should be considered when selecting instruments measuring specific constructs of interest.

A - 84 Associations between Social Vulnerability, Adaptive Functioning, and Personal Distress in Non-Demented Older Adults

Abstract Objective Though social vulnerability is associated with cognitive decline in older adults, its correlation with socioemotional and functional changes, both common in neurogenerative diseases, is often overlooked. We sought to elucidate the interplay between these critical domains in older adults with varying degrees of cognitive compromise, including participants who presented with mild cognitive impairment (MCI), subjective cognitive decline (SCD), or were cognitively unimpaired (CU), with implications for enhancing risk detection in vulnerable populations. Method Participants (N = 97; Mage = 74.64 ± 7.42 years; Meducation = 15.76 ± 2.42 years; 74.2% female) were community-dwelling older adults, along with their informants, who underwent comprehensive neuropsychological testing and responded to the Social Vulnerability Scale (SVS15), an informant-reported assessment designed to identify potential victims of exploitation. A Kruskal-Wallis test determined group differences on SVS15 (CU, SCD, MCI). Spearman correlations tested relationships among SVS15 and adaptive functioning (Assessment of Functional Capacity Interview, Financial Capacity Instrument) and personal distress, a measure of the tendency to experience anxiety/distress in response to others’ suffering (Interpersonal Reactivity Index–Personal Distress). Results SVS15 scores significantly differed across diagnostic groups, H(2) = 7.060, p < 0.05, with the MCI group performing significantly worse than the CU group, H(2) = 17.703, p < 0.05. SVS15 was significantly associated with worse functional (r = 0.571, p < 0.001) and financial (r = −0.224, p = 0.027) capacity and heightened personal distress (r = 0.390, p < 0.001). Conclusions Increased social vulnerability is associated with functional impairment and personal distress in older adults with and without cognitive impairment. Older adults with elevated emotional reactivity in distressing situations and lower levels of functional and financial capacity may be more susceptible to exploitation.

Beyond the Financial Horizon: A Critical Review of Social Responsibility in Latin American Credit Unions

Credit unions in Latin America play an important role in the financial system, making a significant contribution to the achievement of the Sustainable Development Goals (SDGs) through their focus on financial inclusion, sustainability, and economic resilience. Assessing the social responsibility of these cooperatives ensures ethical, sustainable operations that benefit the population. Unlike traditional financial institutions, cooperatives are based on principles focused on mutual benefit, democratic participation, and responsibility toward their members and the community. This critical literature review, conducted through scientific databases, synthesizes findings on social responsibility in credit unions. The financial system is relevant for global economic stability and growth, comprising institutions like credit unions that facilitate capital flow. It operates through financial instruments, intermediaries, and markets, ensuring efficient resource allocation and risk management. Effective financial management involves planning, organizing, directing, and controlling resources to achieve stability and growth, integrating social responsibility. Credit unions in Latin America highlight cooperative principles, emphasizing member service, community development, and sustainable practices over profit maximization, thereby fostering economic inclusion and ethical business practices. In conclusion, credit unions provide affordable financial services while promoting values of solidarity and equity. However, as entities directly linked to communities, it is essential for them to monitor their actions in terms of social responsibility. This is important to measure and ensure their impact on society and its context. Finally, future research should focus on balancing economic viability with social responsibility, exploring innovative models, governance frameworks, and technological impacts.

Analyzing the Selective Stock Price Index Using Fractionally Integrated and Heteroskedastic Models

Stock market indices are important tools to measure and compare stock market performance. The Selective Stock Price (SSP) index reflects fluctuations in a set value of financial instruments of Santiago de Chile’s stock exchange. Stock indices also reflect volatility linked to high uncertainty or potential investment risk. However, economic shocks are altering volatility. Evidence of long memory in SSP time series also exists, which implies long-term persistence. In this paper, we studied the volatility of SSP time series from January 2010 to September 2023 using fractionally heteroskedastic models. We considered the Autoregressive Fractionally Integrated Moving Average (ARFIMA) process with Generalized Autoregressive Conditional Heteroskedasticity (GARCH) innovations—the ARFIMA-GARCH model—for SSP log returns, and the fractionally integrated GARCH, or FIGARCH model, was compared with a classical GARCH one. The results show that the ARFIMA-GARCH model performs best in terms of volatility fit and predictive quality. This model allows us to obtain a better understanding of the observed volatility and its behavior, which contributes to more effective investment risk management in the stock market. Moreover, the proposed model detects the influence volatility increments of the SSP index linked to external factors that impact the economic outlook, such as China’s economic slowdown in 2012 and the subprime crisis in 2008.

LEGAL ASPECTS OF A BANK GUARANTEE AS A FINANCIAL SECURITY INSTRUMENT

A bank guarantee is an important instrument for securing financial obligations in legal transactions, creating security and trust between the contracting parties. This paper analyzes the legal aspects of a bank guarantee as a security interest, including its legal nature, types of guarantees, as well as the rights and obligations of the contracting parties. Special focus is placed on the analysis of domestic legislation in the Republic of Serbia and comparative legal practice, highlighting the similarities and differences of approaches across different jurisdictions. The paper also examines the role of bank guarantees in international transactions with reference to relevant international conventions and regulations, especially in the context of globalization of markets. The aim of the paper is to provide a comprehensive overview of the legal framework that governs the issuance and enforcement of bank guarantees and to identify challenges and opportunities for improving this financial instrument in practice. Based on the analysis, recommendations are made for legal entities to optimize the use of bank guarantees in business transactions.

Positive Energy Districts: Fundamentals, Assessment Methodologies, Modeling and Research Gaps

The definition, characterization and implementation of Positive Energy Districts is crucial in the path towards urban decarbonization and energy transition. However, several issues still must be addressed: the need for a clear and comprehensive definition, and the settlement of a consistent design approach for Positive Energy Districts. As emerged throughout the workshop held during the fourth edition of Smart and Sustainable Planning for Cities and Regions Conference (SSPCR 2022) in Bolzano (Italy), further critical points are also linked to the planning, modeling and assessment steps, besides sustainability aspects and stakeholders’ involvement. The “World Café” methodology adopted during the workshop allowed for simple—but also effective and flexible—group discussions focused on the detection of key PED characteristics, such as morphologic, socio-economic, demographic, technological, quality-of-life and feasibility factors. Four main work groups were defined in order to allow them to share, compare and discuss around five main PED-related topics: energy efficiency, energy flexibility, e-mobility, soft mobility, and low-carbon generation. Indeed, to properly deal with PED challenges and crucial aspects, it is necessary to combine and balance these technologies with enabler factors like financing instruments, social innovation and involvement, innovative governance and far-sighted policies. This paper proposes, in a structured form, the main outcomes of the co-creation approach developed during the workshop. The importance of implementing a holistic approach was highlighted: it requires a systematic and consistent integration of economic, environmental and social aspects directly connected to an interdisciplinary cross-sectorial collaboration between researchers, policymakers, industries, municipalities, and citizens. Furthermore, it was reaffirmed that, to make informed and reasoned decisions throughout an effective PED design and planning process, social, ecological, and cultural factors (besides merely technical aspects) play a crucial role. Thanks to the valuable insights and recommendations gathered from the workshop participants, a conscious awareness of key issues in PED design and implementation emerged, and the fundamental role of stakeholders in the PED development path was confirmed.

Tools for development of the Russian electric power industry in the current realities

Electric power industry is one of the most important sectors of Russian economy that satisfies the needs of the country’s population, companies of various areas of economy in electric and thermal energy and supplies it for the CIS and Non-CIS countries. Due to this, it is significant to study the tools for development of Russian electric energy industry in the current realities, and this is the basis of the article. The purpose of the article is to study the modern tools for development of electric energy industry and work out the recommendations on their improvement. The following aspects are considered as the main tools for development of electric energy industry: interconnection of electric grid resources, carbon neutrality, legislative acts, digital technologies, financial instruments aimed at attracting investment, accumulation systems (portable sources of electricity), electric transport, and green energy. The methodological basis of the research is the analysis of scientific publications and Internet resources, synthesis and generalization of the data acquired. The authors of the study have analyzed the most significant tools that can be used to develop the electric energy industry in the current situation, and worked out the recommendations on improving the effectiveness of their implementation. To provide a full-fledged solution of the tasks set in the article the authors have analyzed the dynamics of the electric energy industry, identified the basic principles of its development, the peculiar features of their implementation, worked out the opportunities and recommendations for their improvement. According to the results of the study it has been suggested to establish a new institute – a specialized international innovation centre of electric energy industry which will ensure attraction of investment, formation of effective cooperation with friendly countries and development of green energy industry. The authors have identified the tools providing for the development of electric energy industry in Russia, worked out recommendations on their improvement, suggested a new institute of financing and development of electric energy industry. The results of the study in hand can be used in the activity of the companies involved in electric energy industry and further research on the topic.

A proposed model for Zakah on financial instruments: accounting approach

PurposeThis paper aims to propose a model of Zakah treatment for financial instruments. The model depends on the link between the financial assets and liabilities that emerge from a financial instrument contract.Design/methodology/approachThe determination of Zakah on contemporary financial instruments is controversial, with various conflicting Fatwas being presented. This paper introduces a theoretical model that integrates Fiqh rules, accounting, finance and economic principles to propose a method for calculating Zakah on financial instruments. This theoretical model can be the foundation for future empirical and statistical testing.FindingsThe proposed model advocates omitting the financial assets/liabilities when determining the Zakah base for companies, as the Zakah burden relies on the owner of the real asset. The paper elaborates on the implementation of the model on debts, investments and cash accounts.Research limitations/implicationsThe paper does not investigate whether or not the accounting approach in dealing with financial contracts is deemed acceptable by Fiqh scholars, nor does it discuss whether or not this may affect the Zakah fatwas regarding these types of accounts.Practical implicationsThe paper establishes a conceptual framework for the Zakah on financial assets. This will pave the way for future empirical research and testing to validate the framework in different contexts. In addition, if regulators adopt this model and apply it to all companies, it would promote fairness and justice at the national level.Social implicationsThe proposed model advocates omitting the financial assets/liabilities when determining the Zakah base for companies, as the Zakah burden relies on the owner of the real asset. The paper elaborates on the implementation of the model on debts, investments and cash accounts.Originality/valueTo the best of the authors’ knowledge, this is the first attempt to utilize the accounting approach in order to determine the amount of Zakah.

Investigating the Impacts of Carbon Pricing Mechanism on CCS development in ASEAN countries

Abstract Carbon Capture and Storage (CCS) is a technology that contributes toward a reduction in carbon dioxide (CO2) emissions from large point sources. It has been proven to be a crucial technology to decarbonise ASEAN’s hard-to-abate industry sector. ASEAN countries are a concentrated cluster, contributing to significant emissions, and provides the potential for suitable geological storage for CCS according to current studies. This paper discusses the impact of carbon pricing on the CCS development in ASEAN countries, through studying factors that enable or disable successful CCS projects. Causal Loop Diagram (CLD), as a part of system dynamics, was employed as an analytical tool to identify and visualize the key variables, system’s structure, the network of existing carbon pricing mechanisms and other financing instruments needed in CCS deployment. The results of this study indicate that strong public and private finance, the development of carbon markets, and carbon pricing policies are the key enablers for CCS projects in ASEAN. Carbon pricing should be viewed as an effective catalyst that helps the growth of CCS with the right policies in place, government and regulatory support, and market forces.

GOVERNMENT DEBT AND CRYPTOCURRENCIES: HOW BITCOIN IS CHANGING THE RULES OF THE GAME

In recent years, there has been a significant increase in public debt in many countries, which calls into question the sustainability of traditional financial systems. In this context, cryptocurrencies, especially bitcoin, are beginning to play an increasingly important role in the economy. This article explores the relationship between government debt and cryptocurrencies, focusing on how bitcoin can change the rules of the game in the financial world. We consider the mechanisms by which bitcoin and other cryptocurrencies can serve as an alternative to traditional financial instruments, as well as their potential as a means of protection against inflation and devaluation. In addition, the risks and benefits of investing in cryptocurrencies are analyzed against the background of growing government debt. The article also discusses the impact of regulation and government control on the development of the crypto market and its interaction with public finances. In conclusion, we hypothesize about the future role of bitcoin in the global economy and its ability to change the approach to public debt management.

Accounting for financial instruments: regulations and banks’ behavior in light of IFRS 9

Accounting for financial instruments: regulations and banks’ behavior in light of IFRS 9

The Effect of Financial Performance to Share Returns on Companies IDX 30 Indexed During The Covid Pandemic at The Indonesian Stock Exchange

This research is a replication of several previous on going studies due to previous research results that tried to test the influence of financial performance on stock returns on IDX 30 during the covid 19 pandemic. The study is intended to obtain an explanation of empirical facts on the influence of factors described through financial stability, external pressure, and financial targets together and partial influences financial statement fraud on banking companies during the period of COVID 19 on the Indonesian Stock Exchange. The population in this study is all IDX 30 indexed companies on the Indonesian Stock Exchange, namely as many as 30 companies. With sample count of 22 companies. The type of data used in this study was secondary data with the amount of observation from 2019-2020 during the COVID 19 pandemic period so that it became a sample of observation of 22 X 2 = 44 samples, and the scale used in this study was the scale of ratio and analysis of data used was with the multiple linear regression approach at a significant rate of 5%. Research will be very useful input for investors as an important guideline for looking at the condition of the company and the fundamental aspects to assess the expectations of the return (return shares) that it will acquire and as a decision maker to buynot buy shares of the company. The results of this research are also expected to be used by IDX 30 companies to find out their condition and finances so as to improve the financial performance of the next period that will eventually affect the company’s stock price. In addition, this research can also be used as the basis for advanced research to review financial performance viewed from different perspectives of financial instruments.