Reassessing information security perceptions following a data breach announcement: The role of post-breach management in firm-specific risk

AI Innovation and firm-specific risks: the double-edged sword of media and customer focus

Nonlinear Effects of ESG on Firm-Specific Risk: Evidence from Thailand

This study investigates the effect of environmental, social, and governance (ESG) performance on Australian energy firm-specific risk, a critical sector with exposure to both market risk and sustainability. Based on balanced panel data of 20 ASX-listed energy firms between 2020 and 2024, firm-specific risk is proxied by idiosyncratic volatility measures (VOL-360 and VOL-200). The study uses fixed effects panel regressions, based on Hausman, Wald, and robust tests. The results confirm that ESG performance significantly affects firm-specific risk, though the effect varies with subdimensions. Social score reduces volatility, evidencing higher investor confidence in socially responsible firms. Environmental and governance scores are shown to have conflicting or destabilizing effects across different model specifications. These results suggest that, in the Australian market, investors place larger importance on social performance than on environmental and governance aspects. The findings emphasize the need for regulators to ensure stricter ESG disclosure levels and managers to reinvigorate social norms as means of reducing firm risk and enhancing market stability.

This study investigates how promoter and institutional ownership influence firm-specific risk — both market-based (stock return volatility) and fundamental (Altman Z-score) — using a decade-long panel of Indian listed firms (2014–2024). Unlike prior studies that analyze ownership types in isolation, this research offers a unified empirical model incorporating both risk measures. The key contribution of the paper is the simultaneous estimation of the effect of ownership structures on two complementary dimensions of firm risk. The findings reveal that institutional ownership significantly reduces volatility, while promoter holding shows no significant impact on risk. Larger firms are more financially stable. These insights are especially relevant for governance reforms and investor strategy in emerging markets.

Abstract Research aim: The nexus between financial strategies and firm value is evident as firms pursue value maximisation through their strategic policies and decisions. However, achieving value maximisation is fraught with challenges relating to tax planning matters, dividend policy, and investment decisions, among others. Hence, this study examines how financial strategies impact firm value of listed non-financial firms in Nigeria. Design/ Methodology/ Approach: This study adopts a longitudinal research design with stratified sampling. A total of 84 firms were sampled out of 104 listed non-financial firms. Data was extracted from these companies’ annual reports and market data websites, and panel generalised least squares (GLS) was employed to analyse the data obtained after the preliminary analysis. Research finding: The results of the analysis reveal that tax planning, investment decisions, dividend policy, and profitability positively impact the value of the Nigerian listed nonfinancial firms. Hence, the study concludes that financial strategies are critical levers for the value maximisation of these firms. Theoretical contribution/Originality: This paper contributes to the literature by using shareholder value maximisation theory to show how a well-designed financial strategy can enhance shareholder value through market confidence, optimised resource allocation, risk management, dividend payment, and effective tax planning. Practitioner/Policy implication: The practical implications of this study are that tax efficiency, effective operational cost management, and strategic investment decisions need to align with the firm-specific risk profile to maximise firm value. To policymakers, easy access to long-term financing and provision of tax breaks and other tax incentives should be encouraged to enable firms to optimise their financial strategies and ultimately firm value. Research limitation: This paper encompasses non-financial firms in Nigeria spanning ten sectors. Future studies can conduct sectoral analysis and take industry-specific factors into consideration.

This study investigates how women’s inclusion in leadership positions affects financial risk in China’s hotel industry, integrating gender role theory with agency theory. Test results of dynamic panel regressions with the two-step SYS-GMM estimation reveal three key insights, providing empirical evidence that strategic gender diversity in leadership can serve as a financial risk management tool. First, both women’s inclusion in executive (EWI) and board (BWI) positions significantly reduce firm-specific risk but have no impact on market-wide risk. Second, the study identifies a U-shaped relationship, with firm-specific risk minimized at optimal inclusion levels of 29.21% (EWI) and 24.20% (BWI). Third, the risk-mitigating effect of EWI and BWI is asymmetric, specifically stronger during economic expansions than recessions, reflecting the hospitality sector’s cyclical nature. The study contributes theoretical value by bridging theories with financial risk analysis in hospitality contexts and offers practical guidance for hotel firms in optimizing leadership structures.

This study examines the impact of patent activity on the idiosyncratic volatility (IVOL) of U.S. pharmaceutical companies, addressing a critical gap in the literature on the relationship between innovation and firm-specific risk. Using panel data from Thomson Reuters/Refinitiv covering 2,910 firms over 2005−2024, we employ the Fama-French 5-factor model to isolate firm-specific volatility and analyze how patent events and pharmaceutical development activities affect stock price risk. Our findings reveal a complex relationship between innovation and volatility that varies by development stage. While patent activity overall reduces idiosyncratic volatility, early and mid-stage development projects (Phase I and II) initially increase firm-specific risk, reflecting inherent uncertainties in drug development. Conversely, newly launched products significantly reduce volatility, indicating that risk mitigation occurs primarily at commercialization. These relationships remain robust during crisis periods, including the 2008−09 financial crisis and COVID-19 pandemic. The results provide valuable insights for investors seeking to assess pharmaceutical investment risks, managers optimizing innovation portfolios, and policymakers designing intellectual property frameworks. The study’s focus on the U.S. market and reliance on patent counts rather than quality measures suggest important avenues for future research across different regulatory environments and innovation metrics.

NLP-Based Quantification of ESG in Sustainability Reports and Firm-Specific Risk: Evidence from Borsa İstanbul

ABSTRACT This study investigates the impact of social and relationship capital (SRC) on the volatility of stock returns for financial companies in the European Union. While prior research has examined the link between SRC and market returns, this study uniquely explores its influence on both systematic and idiosyncratic components of volatility. Using a sample of 140 EU banking, insurance, and asset management firms from 2002 to 2021, we apply Marshall’s (2015) model to decompose total volatility. The findings reveal that firms with high SRC typically exhibit greater total volatility, largely driven by systematic risk, whereas low-SRC firms are more influenced by idiosyncratic factors. These results are robust across various specifications, including lagged data and sector-specific analyses. This study underscores the importance of SRC for financial intermediaries. Its implications are multifaceted. For investors, high-SRC firms align more closely with market movements, facilitating market-oriented strategies but offering fewer diversification benefits, whereas low-SRC firms expose portfolios to greater firm-specific risks. For regulators, the evidence underscores the role of SRC in shaping risk profiles, informing supervisory practices that increasingly incorporate ESG considerations. Finally, for financial institutions, SRC emerges as a driver of stakeholder trust and reputation and a determinant of exposure to systematic shocks.

Factor-based investing has become an increasingly popular strategy among investors. While many proposed factors are based on firm characteristics and economic theory, a rise in environmental, social, and governance focus has spurred the proposal of sustainability factors, such as ESG factors. This growing emphasis on ESG has led to greenwashing emerging as a significant challenge. However, its role as a potential asset pricing factor remains unexplored. This study aims to fill this gap by investigating the explanatory power of greenwashing in the cross-section of asset returns. Using a double-selection LASSO approach and a two-pass regression, we evaluate the contribution of greenwashing as a new asset pricing factor by estimating its stochastic discount factor loading using an extensive global dataset. We further explore its associated risk premium. Our key finding is that in Europe, prior to the Paris Agreement – between 2011 and 2015 – the pair of the stochastic discount factor loading and risk premium for the greenwashing factor is statistically different from zero. This result is robust across alternative factor-portfolio constructions, with greenwashing firms consistently underperforming their genuinely sustainable peers. This suggests that, in an environment lacking uniform ESG disclosure standards, investors treated greenwashing as a systematic information risk factor rather than an idiosyncratic concern. After the Paris Agreement, greenwashing has no significant pricing power, effectively reclassifying greenwashing as a firm-specific risk. These findings suggest that policymakers should strive for clear, consensus-driven ESG regulations to mitigate uncertainty, and that investors can continue to rely on traditional diversification strategies to hedge against the greenwashing risk.

Circular economy and firm-specific risks: A risk management perspective

ABSTRACT We propose a new method to measure a firm’s exposure to global value chains (GVC) using financial disclosures and examine the effect of supply chain risks on firm performance. Our method leverages a language model that integrates industry-wide GVC concentration metrics with firm-specific risk factors from annual financial disclosures, enabling firm- and year-specific GVC exposure assessments without relying on proprietary data. This granular measure reveals the varying impacts of GVC exposure on revenue and profit, showing that (1) cost pressures from supply chain risks outweigh revenue gains, (2) manufacturing firms face a greater profit decline from GVC risks, and (3) firms with direct foreign market access can mitigate these negative effects on profitability.

ABSTRACT This paper investigates the impact of environmental disclosure by companies in the Chinese energy sector on idiosyncratic volatility in their expected stock returns. Using a panel dataset of A-share listed firms in the Chinese energy sector and environmental disclosure scores from 2011 to 2020, the study finds that environmental disclosure is positively and robustly correlated with idiosyncratic volatility, reflecting firm-specific return variations unexplained by conventional asset pricing models. This relationship arises from environmental disclosure increasing investor concerns and perceptions of associated risks. However, the positive relationship between environmental disclosure and idiosyncratic volatility weakens significantly when renewable energy companies disclose environmental information, while it intensifies for fossil fuel energy companies. Furthermore, the study rules out the possibility that environmental disclosure serves as a noisy measure, even within China’s mixed system of mandatory and voluntary disclosure. The findings validate the differential impacts of environmental risks and pollution levels associated with various energy types on idiosyncratic volatility but challenge the managerial opportunism theory, which suggests that environmental disclosure induces information asymmetry in the energy sector. These results offer important implications for policymakers, investors, and researchers.

The management of industries often seeks to reduce risk by providing information through various channels such as regulatory institutions and voluntary disclosures. Risk-taking plays a significant role in maintaining the competitive advantage of companies and guides them toward greater economic growth. In competitive environments, companies pursue different strategies to increase their market share and create barriers to entry for others. The selection of each strategy entails acceptance of varying levels of risk and has different impacts on firm-specific risk. The study sample consists of 18 experts, including specialists, managers, and knowledgeable stakeholders, who are considered the statistical population. The criteria for expert selection include comprehensive knowledge of processes within knowledge-based industries in the country and familiarity with financial risk reduction concepts. Participants were selected through purposive sampling and in accordance with the saturation principle. Using grounded theory methodology, the study identified indicators related to financial risk reduction and proposed a conceptual model. The necessity of each extracted component for reducing financial risk in knowledge-based industries and the presentation of a proposed model were examined. The research was analyzed using three stages of coding: open, axial, and selective. The results show that, based on conceptual and secondary codes, the following components were extracted: Causal Factors (e.g., establishing appropriate structures, team-building to promote knowledge-based companies); Contextual Factors (e.g., empowering financial funds, investment diversification, risk reduction strategies); Intervening Factors (e.g., enhancing management and leadership, empowering knowledge-based companies, research and development); Outcomes (e.g., improving quality of life, increasing owners’ trust, profitability). The identified components enable the creation of a real-time, risk-reducing work environment.

This study explores the mediating role of idiosyncratic risk in the relationship between company size, financial performance, and stock prices in the technology sector listed on the Indonesia Stock Exchange (IDX). Secondary data were gained from the annual financial statements of technology companies conducted IPOs before 2019, excluding firms with negative equity or those under suspension, formed the basis for analysis. Path analysis using SPSS version 27 was employed to examine these relationships. The study found that company size positively and significantly have impacts on stock prices. Financial performance also shows a positive and significant influence on stock prices. Idiosyncratic risk partially mediates the relationship between company size and stock prices. Similarly, idiosyncratic risk mediates the link between financial performance and stock prices, highlighting the unique risks specific to each firm as critical factors influencing stock valuation. The study underscores the dual importance of company size and financial performance in driving stock prices while emphasizing the significant role of idiosyncratic risk in moderating these effects. These findings provide valuable insights for companies, investors, and policymakers to understand stock price fluctuations, particularly in the dynamic and high-risk technology sector. Practical implications include optimizing financial performance and managing firm-specific risks to enhance stock market performance.

ABSTRACT In order to validate the varied conclusions regarding the integration of corporate ESG practices by investors during external shocks, this study utilises the COVID-19 crisis as a specific external shock. The findings from our difference-in-differences methodology suggest that companies demonstrating strong ESG performance have succeeded in reducing idiosyncratic risk throughout the pandemic period. Additionally, we uncover that revenue growth acts as a critical pathway through which ESG performance reduces firm-specific risk, highlighting that firms with strong ESG practices achieved higher revenue growth, which in turn contributed to risk reduction. Further analysis shows that the political environment and dividend policy influence this relationship, as examined through heterogeneity analysis. By employing the quantile difference-in-difference technique in conjunction with the adaptive Markov Chain Monte Carlo method, we depict the dynamic evolution track of the marginal effect of ESG performance across various levels of idiosyncratic risk. Our results remain robust even after a series of rigorous robustness checks.

Purpose The purpose of this article is to investigate the influence that firm-specific characteristics, such as organisational capabilities, risk management methods and stakeholder relationships, have on political risks (PRs) that are associated with multinational construction projects in Pakistan. Design/methodology/approach The methodology employed in this investigation involved the acquisition of data through the use of questionnaires administered to experts in the construction industry. The research applied a quantitative method, and the sources of the data are from the Pakistani stakeholders. One hundred questionnaires were used for the data collection during field visits. Based on the data, it has been ensured that the valid questionnaires were utilised, and the data were tested for validity and reliability. The analysis tool utilised was SPSS software. For the questionnaire, a total of 15 firm-specific factors were considered in order to design the survey, which specifically targeted the identified features. The factors identified as risks were investigated using quantitative method to determine firm-specific risks. Findings It was found that when stakeholders have a better grasp of these dynamics, they are better able to strengthen their resilience and efficacy in managing PRs, which ultimately increases the likelihood that the project will be successful. Research limitations/implications International construction projects (ICPs) in emerging countries are substantially impacted by PRs, which can have a considerable impact on their success and sustainability. The study is localised and not generic as it is limited to Pakistan, and the risk factors considered are firm-specific but related to PRs. Practical implications By identifying key risk factors, these firms can develop targeted risk management strategies, leading to enhanced decision-making and more efficient resource allocation. Effective strategies include diversification, local partnerships and comprehensive risk assessments tailored to the unique challenges faced by international contracting firms in Pakistan. Social implications ICPs in emerging countries like Pakistan face critical problems, which include the presence of PRs. Although the larger political environment plays a significant part, the manner in which businesses navigate and mitigate PRs is also influenced by firm-specific elements. Originality/value The study is novel in terms of the factors looked at, the data, the conceptual framework and the findings of the study. The dynamic political scene, which is characterised by instability, policy changes, corruption and geopolitical conflicts, poses significant dangers to the timeliness of projects, the expenses of such projects and the investments that are made in those projects.

The inherent rarity and inimitability of intellectual property (IP) has long been recognized as the foundation of its strategic value. These characteristics are compromised in markets with weak IP protection, where IP cannot be leveraged to create sustainable competitive advantage. This presents significant challenges for internationalization, and extant literature provides little guidance on how firms can mitigate this risk. From first principles of resource-based theory, we posit that service transition alleviates this loss of a strategic resource, representing a basis for reliable revenue generation that retains its rarity and inimitability across markets with varying levels of regulatory protection. Combining novel datasets on firms’ foreign market activity and countries’ IP rights, we find that IP risk increases the volatility of revenues and consequently firm idiosyncratic risk, but that this can be offset by (a) deriving a larger share of revenues from service-based business segments and (b) increasing the knowledge intensity of service offerings. Results from a 12-year panel of 2,716 firms across 223 industries offer new insights into how the regulatory environment can erode the strategic value of resources and practical recommendations to mitigate the detrimental effects on firm-specific risk and market performance.

Impact of using derivatives on stock market liquidity