Financial Decisions Research Articles

Institutional differences, state ownership and financing decisions: Evidence from Chinese cross‐border mergers and acquisitions

AbstractUsing data on Chinese cross‐border mergers and acquisitions (M&As) from 2002 to 2022, this paper considers the effects of institutional differences and state ownership on the financing decisions of Chinese cross‐border M&As. We find that cultural differences and formal institutional differences have significantly positive effects on internal financing and equity financing. These findings indicate that under the influence of institutional differences, internal financing is the type of financing most favoured by Chinese enterprises engaged in cross‐border M&As, followed by equity financing and, finally, debt financing. We document that the financing decision most favoured by Chinese state‐owned enterprises is debt financing, whereas the least favoured decision is equity financing. In addition, we find a prominent mediating effect of information asymmetry, which implies that information asymmetry serves as a potential channel through which institutional differences impact the financing decisions of Chinese cross‐border M&As.

Incentive Contract, Equity Pooling, and Optimal Securitization Design

ABSTRACTThis paper examines the optimal security design and financing structure for investment funds, considering investors with heterogeneous risk preferences. The private equity (PE) fund serves as an information intermediary that plays a crucial role in aligning incentives and facilitating financing activities. To address the potential misalignment between incentive structures and financing requirements, we develop an integrated framework that incorporates both internal moral hazard and external financing decisions. Our analysis demonstrates that optimal equity incentives effectively align the interests of fund manager and PE fund, thereby enhancing fund performance. The results indicate that the optimal financing mechanism comprises a “waterfall” structure consisting of equity, senior bonds, and junior bonds. Furthermore, we find that pooling equity and issuing asset‐backed securities substantially reduce financing costs, although these costs increase with the size of the financing gap. The dual information asymmetry framework offers novel insights into structured financing and corporate growth strategies.

Evaluating the Economic Impact of Novel Oncology Drug Coverage Through Patient Assistance Programs.

Despite a universal public health care system, Canadian oncology patients often enroll in patient assistance programs (PAPs) to access oncology drugs that are awaiting funding decisions. Our multicenter study evaluated the pharmacoeconomic and clinical impact of PAPs for patients with cancer in British Columbia (BC). Eligible patients were diagnosed with cancer and enrolled in a PAP between January 2016 and December 2019 in three BC centers. Charts were reviewed for treatment details and survival data. For each drug indication, the hazard ratio from clinical trial data was multiplied by the median overall survival (mOS) or median progression-free survival (mPFS) of our cohort to estimate the mOS or mPFS if the drug was not received. Person life-years gained (PLYG) was the difference between the actual mOS or mPFS and the estimated mOS or mPFS if the drug was not received. Incremental cost-effectiveness ratios and drug costs were obtained from the Canadian Agency for Drugs and Technologies in Health. A total economic value of quality-adjusted life year (QALY) gained for each cohort was calculated and compared with the cost of drugs associated with the gain. Our cohort consisted of 1,025 patients who accessed 40 oncology drugs via PAP. The median time from Health Canada approval to provincial funding was 2.04 years. In the first PAP exposure group (N = 1,025), median PLYG was 0.38 years for OS and 0.80 years for PFS. The total estimated economic value of QALY gained was $83,068,819.32, with total drug costs of $97,026.661.44. PAPs were involved in covering up to $100 million in costs to bridge gaps between regulatory approval and public funding. Economic value and PLYG gained from PAPs are substantial.

Can Large Language Models beat wall street? Evaluating GPT-4’s impact on financial decision-making with MarketSenseAI

Can Large Language Models beat wall street? Evaluating GPT-4’s impact on financial decision-making with MarketSenseAI

Global Study Revolutionizes Bankruptcy Prediction

This study evaluates bankruptcy potential in food and beverage companies listed on the Indonesia Stock Exchange during 2018-2022 using four methods: Grover, Springate, Zmijewski, and Altman. Analyzing data from 31 sampled companies, the research employs descriptive quantitative methods and SPSS 26 analysis. Findings reveal varied bankruptcy predictions: Grover predicts 3 potential bankruptcies, Springate identifies 18, Zmijewski finds none, and Altman predicts 14. Notably, Zmijewski's method demonstrates superior accuracy. These results aid investors in understanding company performance and inform future financial strategies, addressing a critical need in early bankruptcy prediction for the food and beverage industry. Future research may explore additional prediction models and extend the study period to enhance predictive accuracy further. Highlight: Diverse methods: Grover, Springate, Zmijewski, Altman offer varied bankruptcy predictions. Zmijewski's accuracy: Highest accuracy among methods for bankruptcy prediction. Investor insight: Guides future financial decisions based on company performance analysis. Keywoard: Bankruptcy, Food & beverage, Stock Exchange, Analysis, Prediction.

Demand Side Factors and Financial Inclusion: The Mediating Role of Financial Self-efficacy

Despite the recognized significance of achieving financial inclusion in Nigeria,there is limited studies in this area. This gap primarily arises from the prevailingfocus in existing literature on financial inclusion in Nigeria, which predominantlyemphasizes the supply side. Therefore, this study delved into the role of financial selfefficacyas a mediator in the relationship between demand-side factors and the financialinclusion of micro, small, and medium enterprises (MSMEs) in selected local governmentsin Oyo State. The study employed a cross-sectional survey design, the studygathered primary data through structured questionnaires and utilized a structuralequation model for analysis. The findings reported a significant positive link betweenfinancial attitude and financial inclusion (p-value: 0.000). Likewise, there was a noteworthypositive association between subjective norms and financial inclusion (p-value:0.001), as well as between personal experience and financial inclusion (p-value: 0.003). Intriguingly, financial self-efficacy emerged as a substantial obstacle to financial inclusion,acting as a mediating factor with a p-value of (0.002). By evaluating the mediationeffect, this study shows how financial self-efficacy enhance individuals MSMEs ownersto confidently undertake financial tasks and decisions and consequently, financial inclusion in relation to their attitude, experience and subjective norms respectively. Consequently,the study recommends the promotion of positive financial attitudes amongindividual MSMEs to facilitate continuous access to diverse financial services. Financialservice providers should prioritize the establishment of an effective and sustainablefinancial system that offers affordable services to MSMEs. Furthermore, communityleaders are encouraged to play a role in motivating their members to actively engage inthe formal financial sector.

ML Based Finance Advisor and Budget Optimizer

With the rapid change in the financial world, particularly today, the urgent demand for intelligent solutions to optimize the budget was therefore in great demand, individually as well as corporately. The paper proposes an advisory system for finance based on a cross-platform mobile application of Android and Flutter implementation of ml algorithm, which is designed to analyze users' financial data and come up with a personalized recommendation for budget optimization. The system can identify spending patterns, predict financial directions, and even propose cost-cutting initiatives by using ml algorithms that incorporate clustering and predictive analytics. It uses such core programming languages as Python in the design of the ml models and Dart through Flutter to give users a smooth, high-performance interface for Android and iOS. This makes it accessible and very easy to use to allow users to make real-time, data-driven financial decisions. The solution allows the users to maximize budgets in effective ways by reducing wastefulness and eventually leading towards financial stability. Demonstrated here is how ml-enhanced financial advisory applications have the potential to redesign personal and business finance management

The Role of Culture in Shaping Managerial Overconfidence and Its Impact on Financing Decisions

Traditional economic models that assume rational decision-making may not accurately capture the complexities of real-world financial decision-making. Behavioral Decision Theory can explain the gap between classical capital structure theories and inconsistent empirical evidence. Under the assumption of bounded rationality Behavioral Decision Theory linking cultural values, overconfidence and financial decision making. Culture is an important aspect in organization which need close attention. Culture play a vital role in shaping behavioral biases. Overconfidence is one of the well-known cognitive biases in financial decision making that often seen in managers. Cultural differences and managerial overconfidence have impact on financing decisions.

Climate Risk and Its Impact on the Cost of Capital—A Systematic Literature Review

As climate change intensifies the frequency and severity of its adverse events, there is growing concern about its impact on the economy, particularly in financial markets and corporate financial management. This study addresses this gap through a systematic literature review in Scopus according to the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) method, aiming to analyse how climate risk affects the Weighted Average Cost of Capital (WACC) and, consequently, corporate investment and financing decisions. The findings reveal that companies with negative environmental profiles face higher capital costs and loan interest rates. The cost of capital is crucial in the fight against climate change, highlighting the need for sustainable financial policies and investments. Therefore, it is essential to implement policy interventions that reduce these costs, which requires a radical transformation of existing financial frameworks, the promotion of innovative instruments, and the strengthening of financial markets through an integrated approach that links climate finance with economic and social development.

Is It Worth Imitating Other Investors’ Determinants of Effective Investment Strategies Among Students

Purpose: This study examines the investment strategies of Generation Z, focusing on how they define and implement these strategies. It explores the factors influencing their decisionmaking, such as risk aversion and time horizon, and investigates the impact of social interactions on their investment choices. Design/ methodology/approach: The research involved a total of 626 participants across two academic years (218 in 2022 and 408 in 2023), who developed and executed virtual investment strategies over a seven-week period using GPWtrader, an educational platform by the Warsaw Stock Exchange Foundation. Weekly meetings were held where participants presented their strategies, market observations, and results. After the investment period, a quantitative study was conducted with 314 students from the total sample (106 in 2021/22 and 208 in 2022/23), collecting data on their investment goals, instrument selection, and strategy adaptation methods. Findings: The main finding is that any strategy turned out to bring a better return rate than a strategy that was constantly shifting. Also, different strategies were adopted and many students were imitating the strategies of their peers, suggesting that the social aspect of the investment decision-making process should not be underestimated. Research limitations/implications: The study’s main limitations are its focus on a single, homogeneous group and its sample size, which limited the use of advanced statistical analyses. The authors plan to extend the research to compare the students’ returns with market portfolio returns, analyze correlations between strategies and outcomes, and include other sub-populations of Generation Z. Originality/value: This paper extends the perspective on the investment behaviors of Generation Z, emphasizing the importance of consistency in strategy execution and the influence of social interactions. It makes a significant contribution to understanding generational differences in financial decision-making, offering practical implications for financial education and investment training.

Financial Sustainability Through Literacy and Retirement Preparedness

This study discusses financial sustainability in retirement via a comprehensive bibliometric and content analysis on financial literacy and retirement preparedness for 1970–October 2024. Data for this study are extracted from the Scopus database. In line with the PRISMA guideline, the inclusion and exclusion criteria were applied, and the final corpus of articles used in the analysis is 518 articles. These articles are analyzed using the bibliometric methods: Bibliometrix R-package (Biblioshiny) version 4.0 and VOSviewer 1.6.20. The descriptive analysis identified the publication trends, prominent authors, articles, sources, country collaboration, and quadrant analysis. Based on the bibliographic coupling, the following themes were identified: (1) financial literacy and retirement planning, (2) behavioral finance and psychological determinants of retirement planning and preparedness, (3) financial risk, decision making, and retirement preparedness, and (4) gender, socioeconomic factors, and financial literacy disparities. This study has consolidated and enriched the understanding of how financial literacy, education, psychology and behaviors, and financial risk play a pivotal and central role in shaping long-term financial sustainability, as well as retirement planning and preparedness. From a practical perspective, an all-inclusive understanding of the above is essential for guiding regulators and policymakers in designing policies, targeted interventions, and programs that empower individuals towards retirement preparedness, considering regional, socioeconomic, and gender-related factors.

Factors Influencing Equity Financing within Government Entities in South Africa

Equity financing theorsuggests that firms favour equity financing over debt to mitigate potential external risks and reduce exposure to external scrutiny. The aim of this study is to determine the extent to which various factors influence equity financing decisions within South African government entities. This study investigates the critical factors influencing equity financing decisions within government entities in South Africa. Employing Stata for data analysis, the research utilizes a cross-sectional, quantitative methodology supplemented by questionnaire-based data collection from 51 respondents. The application of Panels corrected standard errors (PCSEs) regression reveals a positive and significant relationship between risk appetite of the company (RAF) and company size (SIZE) with equity financing evidenced by P = 0.000 and 0.037, respectively. The links between reliance on internal funds (RIF) and equity financing is positive and slightly significant at 0.051 level. Based on these results, it is recommended that government entities assess their risk appetite and internal financial resources carefully when considering equity financing, ensuring alignment with strategic objectives and market conditions.

Customer Concentration and Its Impact on Earnings Management Research

This study is primarily focused on the comprehensive data of Chinese A-share listed companies throughout the period from 2010 to 2021. It conducts a meticulous and empirical analysis to thoroughly explore the substantial influence of customer concentration on corporate earnings management. The research findings clearly demonstrate that customer concentration has a notably significant and detrimental effect, significantly exacerbating the level of corporate earnings management. The in-depth mechanism analysis further reveals that an increase in customer concentration inevitably leads to a heightened operational risk for the company and a substantial augmentation of agency costs. These combined factors consequently provide an impetus and conducive environment for the company to engage in earnings management activities. The conclusions drawn from this exhaustive study not only hold immense guiding significance for the management of companies when formulating strategic market plans and crucial financial decisions but also offer highly valuable reference points for investors when assessing the quality and authenticity of corporate earnings. Such insights are crucial in facilitating more informed and rational decision-making processes within the business and investment domains.

Analysis of Financing Channels of Real Estate Companies in China

With the continuous development of China's economy, the real estate industry plays an important role in it, which witnesses booming growth. However, with its rapid development, it has also brought great problems and challenges, such as blocked funding sources and high financing costs. Therefore, this article will study the financing channels of several listed real estate companies, China Fortune Land Development CO, Poly Development Co., Ltd. since 2014 to 2018, comparing and analyzing the financing channels of private and state-owned enterprises. By extracting information about funding costs and risks from financial and public debt information, the differences in WACC values, cash flow status, and debt structures under different companies' financing plans will be compared. Accordingly, this study investigated possible reasons of choices made by these two enterprises. Enterprise decision-makers still need to make sufficient understanding and weigh the pros and cons before making financing decisions and should not finance blindly. These results of this article have reference significance for the financing of future real estate companies.

Promoting Sustainable Investment Through Designing and Pricing Green Financial Derivatives

As climate change and environmental degradation escalate, the financial sector faces growing pressure to adopt sustainable practices. This paper examines designing and pricing of green financial derivatives and their role in promoting sustainable investment. Through references review and case studies, the study assesses the influence of regulatory frameworks like the EU's EIA Directive on the environmental integrity of green derivatives. The findings emphasize the crucial role of EIAs in ensuring that green financial products meet sustainability goals and highlight the increasing importance of ESG derivatives. However, the effectiveness of these derivatives is hindered by challenges such as their synthetic nature, lack of direct ownership of underlying assets, and complexities in ESG reporting. The study also identifies the need for traditional pricing models to evolve by incorporating sustainability factors, with advanced data analytics and technologies. In conclusion, robust regulatory frameworks, effective market incentives, and improved investor education are essential for promoting sustainable investment. Additionally, it is significant for public-private collaboration to scale sustainable finance initiatives and the integration of ESG criteria into financial decision-making to achieve both financial and sustainability objectives.

The Impact of Social Influences on Investment Decision-Making: A Multi-Method Analysis of Vietnamese Investors

This study explores the impact of social influences on investment decision-making, focusing on Vietnamese investors and employing a multi-method approach. Drawing on Social Contagion Theory, Behavioural Finance Theory, and Information Cascade Theory, the research examines how social media, peer pressure, and expert opinions shape investment behaviour. A representative sample of 368 individual investors was analysed using Partial Least Squares Structural Equation Modelling (PLS-SEM) and fuzzy-set Qualitative Comparative Analysis (fsQCA), revealing significant direct effects of social influences, moderated by investment self-efficacy and risk perception. Notably, novice investors were more susceptible to peer pressure and social media, while experienced investors relied heavily on expert advice. The findings extend theoretical frameworks by elucidating the mediating and moderating mechanisms of social influences and providing boundary conditions based on investor experience. Methodological contributions include the integration of quantitative and qualitative approaches and advanced analytical techniques. Practical implications highlight the need for investment platforms to provide tailored decision-support tools, financial advisors to enhance investor self-efficacy, and regulators to address misinformation risks in digital platforms. Despite limitations such as reliance on self-reported data and a cross-sectional design, the study offers a robust foundation for future research into the dynamic interaction of social and cognitive factors in financial decision-making.

Gender Gaps In Financial Literacy: A Study Of English Literature Students

Financial literacy encompasses the knowledge, skills, and confidence to make informed financial decisions and is critical to individual and societal well-being. The gender gap in financial literacy is widespread and persistent. Using Chen and Volpe’s (1998) framework, this study aims to examine the level of financial literacy of English Literature study program students from a gender perspective. This study used a quantitative descriptive method, with data collected from 77 seventh-semester students through a validated questionnaire. The results showed an overall moderate level of financial literacy, with an average correct answer rate of 73.2%. Personal financial planning emerged as the most vital domain, while debt management was the weakest domain. Analysis from a gender perspective showed that female students had a higher average score (73.94%) than male students (69.8%), although there was more significant variability in scores among female students. These results suggest that female students generally have better financial literacy. Women are more engaged in financial literacy learning when the material is relevant to their personal or social needs, such as household budget planning and future financial security.

Improving realised volatility forecast for emerging markets

AbstractAccurate forecasting of realised volatility is essential for financial risk management and investment decision-making in emerging markets, taking the South African financial market as a benchmark. This study examines the predictive performance of four prominent models: HAR (Heterogeneous AutoRegressive), realised GARCH (Generalized AutoRegressive Conditional Heteroscedasticity), Recurrent Conditional Heteroskedasticity (RECH), and the Rough Fractional Stochastic Volatility (RFSV) models. These models are specifically tailored to capture the complex dynamics and long-range dependence observed in financial time series. We illustrate the challenges and limitations of these models outside the context of established markets. Our empirical findings reveal unique strengths for each model. The HAR model excels in capturing long-term volatility patterns, while realised GARCH models effectively capture volatility clustering and persistence. RECH model showcases their ability to forecast Value-at-Risk, while the RFSV model successfully captures irregular and long-memory characteristics. We provide empirical evidence that the South African financial market is rough. Moreover, this study provides valuable insights into forecasting realised volatility in the South African market, and the findings can assist practitioners and investors in making informed decisions and developing robust risk management strategies.

Improving Financial Literacy among Millennials: A Financial Management Perspective

Financial literacy is a crucial skill for navigating today’s complex economic environment, yet it remains a significant challenge among millennials. As a generation facing increasing financial pressures, understanding key financial principles is essential for making informed decisions and achieving financial well-being. This paper explores the importance of enhancing financial literacy among millennials from a financial management perspective, highlighting the challenges they face and the potential strategies for improvement. By examining existing literature and trends, this study aims to provide insights into the role of financial education and practical steps that can help millennials improve their financial capabilities and make sound financial decisions in an ever-changing world.

Incentivizing water conservation in agriculture: A case study of the great salt lake watersheds

Abstract Conserving agricultural water resources is crucial for sustainable development, yet, developing effective policies is challenging due to limited site-specific information. We present a framework combining economic models and remote-sensing data to spatially explicitly assess willingness-to-accept payments to irrigators and unit water-saving costs. Applied to three major tributary watersheds of the Great Salt Lake, this frame- work identifies areas with the highest conservation potential and cost-effectiveness. We find that an annual water conservation goal of 581 million m3, necessary to restore the lake within 30 years, can be met by fallowing irrigated alfalfa fields. With 95% certainty, this goal would be fully achieved with annual payments of US$325 million under site-specific payments or US$376 million under county-level payments, or at least 84% achieved with US$341 million under watershed-level payments. This framework can be applied to explore policy priorities and the economic viability of land-based natural resource protection, informing funding decisions and achieving conservation goals in various contexts.