Investment In Financial Assets Research Articles

Fixed investment or financial assets investment: Evidence from political uncertainty in China

AbstractUsing a comprehensive dataset of listed firms and detailed turnover data on top provincial leaders in China, we explore how political uncertainty affects a firm's portfolio choice. During political turnover, a firm decreases its fixed investment and increases its financial asset investment, but the promotional effect of political turnover on the financial asset investment of politically dependent enterprises (PDEs) is not obvious. We explain this finding through the mediating effect of stock price informativeness and degree of political dependence. Our results suggest that non‐PDEs rely on market information to make investment decisions, whereas PDEs are also affected by political resource information.

Individual Investors in the Nepalese Securities Market: What They Know and What They Like

Investments in financial assets is getting much more popular nowadays. The investment made by individual investors is always guided by their own comprehension and preference over the investment. Therefore, the study aimed to examine the understating and the preference of the individual investors of the Nepalese securities market. A convenient sampling strategy was employed to obtain the essential information via structured questionnaire survey from investors at different stock brokers' sites in Kathmandu valley and collected 203 responses. Nepalese investors favoured equities and the banking sector. Even though profit was their major investing goal, they did not do a risk-return analysis. They were unhappy with investment decisions, rules, and regulations. As a result, their investing decisions were significantly influenced by their presumption of market information and understanding. This study has aided to a better comprehension of what factors contribute to shaping the individual investors' investment decisions.

Do Nonfinancial Firms Use Financial Assets to Take Risk?

Abstract Using hand-collected data on financial asset portfolios and exploiting the 2014 oil price crisis as an exogenous cash flow shock, we investigate financial risk-taking at distressed firms. We find that distressed firms, with high debt rollover risk proxied for by short-term liabilities, substantially increase their investments in risky financial assets, including corporate debt, equity, and mortgage-backed securities. The effects are stronger for unhedged firms with low collateral assets. Overall, we provide new evidence that distressed firms take risk using financial assets camouflaged as cash reserves, which, compared to real assets, are less visible and carry lower transaction costs and accelerated payoffs. (JEL G32, G34)

ASEAN-5 Stock Price Index Valuation after COVID-19 Outbreak through GBM-MCS and VaR-SDPP Methods

In the economic globalization era, mainly since 2010, ASEAN countries’ financial and investment sectors have emerged to accelerate economic growth. The driving factor for the financial sector’s contribution is the public’s growing interest in financial asset investment products, of which the most chosen one in ASEAN is stocks. However, the COVID-19 pandemic at the end of 2019 affected the growth of stock investments, causing market conditions to be unstable. People held back their interest in investing in stocks because they thought this condition would bring significant losses. Therefore, in this study, the ASEAN-5 stock price index was evaluated to analyze the general stock price conditions for each stock market in the new standard era. The valuation included price predictions and risk of loss using the GBM-MCS and VaR-VC models. The results showed that the GBM-MCS model was more accurate than the GBM model because it had a more stable MAPE value. Referring to the VaR-VC value, the prediction of losses in the ASEAN topfive stock markets for 21–25 April 2022 ranged from 1% to 15%.

Research on Financial Asset Allocation Based on Mathematical Programming Model

With the increase of the total amount of family finance and the continuous enrichment of the types of family financial assets, the awareness of family financial management is increasingly strengthened, and people's understanding of family financial assets and their choice behavior begin to change. Financial asset investment has been deeply involved in people's social business activities, especially commercial banks, investment institutions, foundations, etc., which must participate in the investment and management of valuable financial assets at home and abroad. If investors want to reduce the risk of assets without losing profits, they need to diversify their investments and allocate assets effectively. For specific family financial products, some situations often occur in the process of combination, for example, the specific share of insurance assets is gradually increasing, while the share of cash and savings deposits is gradually decreasing. In this paper, the dominant principle of investment strategy is established, and the mathematical programming model of financial asset allocation is established. On this basis, the method of selecting the optimal financial asset portfolio is put forward.

How Does Population Aging Impact Household Financial Asset Investment?

The accelerated aging of China’s population will inevitably increase the burden of social retirement and significantly impact the development of financial markets, which is not conducive to sustainable social development. A proper allocation of financial assets will enable households to earn more property income and facilitate the appropriate allocation of social capital. The aging of the population is an essential factor affecting the allocation of financial assets to households. This paper examines the impact of an aging population on household financial asset allocation based on data from the 2015, 2017, and 2019 China Household Finance Surveys (CHFS). The study finds that aging significantly negatively affects household risky financial asset participation, depth of participation, and diversity. The findings remain robust after robustness tests using a two-way fixed effects model. In addition, this paper examines the mechanisms of influence from the perspectives of both risk aversion and financial literacy. In terms of mediating variables, aging increases the risk aversion of household heads, and an increase in risk aversion discourages households from investing in risky financial assets. In terms of moderating variables, the dampening effect of aging on investment in risky financial assets diminishes as financial literacy increases. In addition, empirical findings based on heterogeneity find that aging has a stronger negative impact on risky financial asset participation, depth of participation, and diversity in rural areas. Aging has a stronger negative impact on risky financial asset participation for households with children.

Effect of natural hazards on the household financial asset allocation: Empirical analysis based on CHFS2019 data

Natural hazards are a common challenge to human survival and development. China is a country, that is, prone to natural hazards because of its vast territory and vast area. In fact, China is one of the countries most affected by natural hazards. The impact of natural hazards is often multidimensional, and the occurrence of natural hazards can have a dramatic impact on government finances and household property structures. However, existing research in China has mainly focused on individual factors and the household level, and there are gaps in the impact of natural hazards on the economic status of households. Based on the China Household Finance Survey-2019 (CHFS) data, this paper investigates the impact of natural hazards on household financial asset allocation using the Probit and Tobit models and the propensity score matching method. It is found that: the occurrence of natural hazards significantly reduces the likelihood of households’ investment in stocks and risky assets; older, more economically advanced, and better educated household heads are more willing to make risky investments; and households with lower financial literacy are more affected by natural hazards in terms of investment in risky financial assets than those with high financial literacy. Therefore, it is necessary for the government to do pre-disaster prevention and post-disaster reconstruction, and further improve the social security mechanism and optimize the risk management system, so that more households can participate in the financial market and thus obtain higher investment returns.

Capitalisation of research and development investment and enterprise value: a study on the threshold effect based on level of financialisation

This study uses a mathematical model to explore how enterprises’ financialisation levels affect the role of research and development (R&D) investment capitalisation in enterprise value. We construct a mathematical model involving the financialisation level, capitalised R&D investment, and enterprise value. The sample comprises A-share listed companies that disclosed the capitalisation of R&D investment in the Shanghai and Shenzhen stock markets from 2014 to 2020. The results suggest that R&D investment capitalisation positively impacts enterprise value, especially in the current phase. With financialisation level as the threshold variable, R&D investment capitalisation has a double threshold effect on enterprise value in the current and next phases. Additionally, corporate financial investment behaviour has a timely impact on capitalised R&D investment but does not significantly impact enterprise value in a future phase. Enterprises evidently choose financial investment to enhance enterprise value by increasing capitalised R&D investment. These results can help enterprises formulate financial asset investment strategies and promote their development from virtual to real. The government should standardise enterprises’ financial investment behaviour, prevent excessive financialisation, and promote high-quality development of the real economy.

The long reach of class origin on financial investments and net worth

In this study, we argue that parents’ class position may influence the type and timing of their offspring's investments in financial assets. These investments may facilitate net worth accumulation beyond direct transfers, contributing to the intergenerational reproduction of social positions. We test these expectations using retrospective life history and prospective panel data for 14 countries from the Survey of Health, Ageing and Retirement in Europe. We apply discrete-time event history analyses to examine the first financial investments’ timing over the life course and conduct a mediation analysis of net worth. We find that individuals from advantaged parental classes are more likely to invest in stocks and mutual funds. When considering horizontal differentiation, managerial classes with relatively more economic capital than cultural capital are more likely to invest in financial assets. However, we do not find robust evidence for distinct timings of financial investments by parental class. Advantaged parental class is positively associated with net worth in later life. However, this association cannot be explained by the specific investments of individuals from advantaged parental classes.

Housing and portfolio choice: Evidence from urban China

Standard theory predicts that homeownership has both substitution and diversification effects on a household's investments in risky financial assets. Findings from previous empirical studies are inconclusive regarding the net effect. Using data from three surveys in urban China, this study investigates whether homeownership crowds out investments in risky financial assets. The study finds that owing a home decreases a household's probability of participating in the financial market and reduces its total amount of risky financial assets and the share in total household wealth. The crowd-out effect of homeownership on household risky financial asset investment is heterogeneous. Different from existing studies, the mechanism of the crowd-out effect is liquidity constraints rather than mortgage commitment risk, and households with multiple houses also show diversified asset allocation characteristics in China.

The minimum wage and the financialization of firms: Evidence from China

This paper utilizes China's A-listed firm data to investigate whether increasing the minimum wage promotes the financialization of firms. We apply instrumental variable estimation and various robustness tests to address measurement errors and potential endogeneity. We find robust and consistent evidence that exposure to higher minimum wages increases a firm's investment in financial assets. Furthermore, we explore the effects of moderators, such as increased employment stickiness, intensification of financial constraints, and reduced innovation activities as potential explanations for the positive effect of increasing minimum wages. Moreover, firms located in non-coastal cities with relatively higher equity concentration and lower market competition are substantially more incentivized to increase investment in financial assets. Overall, this paper provides new insights into understanding the effects of increasing labor costs on firms' asset allocation in emerging market economies.

EXPECTED SHORTFALL DENGAN EKSPANSI CORNISH-FISHER UNTUK ANALISIS RISIKO INVESTASI SEBELUM DAN SESUDAH PANDEMI COVID-19 DILENGKAPI GUI R

In financial analysis, risk measurement is critical. Stocks are a sort of financial asset investment that is in high demand by investors. Expected Shortfall is one of the strategies used to assess stock investing risk (ES). ES is a risk metric that considers losses in excess of the Value at Risk (VaR). Cornish-Fisher Expansion (ECF) is used to calculate ES with data that deviates from normality and takes into account skewness and kurtosis values. This study used data from the closing price of Sri Rejeki Isman Tbk (SRIL) shares before and during the Covid-19 Pandemic (14 January 2019 to 18 May 2021), with non-normally distributed returns. According to the calculations, the risk that investors will bear using the ES ECF value for the next day before the Covid-19 Pandemic is 1.1752 and after the Covid-19 Pandemic is 3.3177% at a 95% confidence level. The risk that investors will bear for the next day before the Covid-19 Pandemic is 5.8928%, and after the Covid-19 Pandemic is 10.3703%, based on a 99% confidence level. The findings of the study reveal that the higher the amount of trust, the higher the risk.

Effect of Environmental, Social, and Governance Performance on Corporate Financialization: Evidence from China

Many nonfinancial firms in China invest increasingly in financial assets. To understand the driving factors behind this phenomenon, this paper examines the effect of environmental, social, and governance (ESG) performance on corporate financialization. The empirical results show that ESG performance has a positive effect on corporate financialization, suggesting that ESG activities are a tool for firms to seek financial arbitrage. Further examination confirms that corporate financialization of Chinese nonfinancial listed firms is motivated mainly by maximizing short-term financial returns, rather than reserving funds for long-term development. Heterogeneity analysis shows that the positive effect is more significant in non-state-owned firms and in firms located in regions with a low degree of marketization. This study enriches the existing literature on the economic consequences of ESG performance and the influential factors of corporate financialization and provides practical guidance for government regulators to strengthen stricter regulation on ESG activities and financial asset investment to ensure sustainable and healthy economic development.

Portfolio Allocation and Financial Performance of Insurance Industry in Nigeria

This paper investigated the connection between portfolio allocation and financial performance of insurance industry in Nigeria. The data was obtained from secondary sources and estimated with autoregressive distributed lag (ARDL). The study discovered a long-run relationship between portfolio allocation to cash and equivalents, financial assets, reinsurance assets, investment properties, other receivables and prepayments, property and equipment and financial performance proxied by growth in gross premium income (GPI). Further research reveals that allocation to in cash and equivalents, other receivables and prepayments and properties and equipment had an insignificant negative effect on GPI. Furthermore, the study discovered that investment in financial assets, reinsurance assets and investment properties had positive statistically significant relationship with GPI. This result implies that insurance companies’ investment in financial assets, reinsurance assets, investment properties is relativ ely high and do have strong correlation with financial performance. Hence, portfolio management in insurance industry plays a crucial role in finance. Policy should be geared towards purchase of valueadding property and equipment, purchase of intangibles, efficient utilization of proceeds from sale of property and equipment and retention of cash and cash equivalents for prompt payment of claims.

Environmental regulation and corporate financial asset allocation: A natural experiment from the new environmental protection law in China

Taking the implementation of the new environmental protection law in 2015 as a quasi-natural experiment, we use the difference-in-differences (DID) approach to investigate the impact of stringent environmental regulation on financial asset investment of high polluting firms. We find robust evidence that the new environmental protection law has a negative effect on corporate investment in financial assets. The effect works by increasing corporate environmental protection investment. Furthermore, we find that the negative effect of the new environmental protection law on financial investments of high polluting firms is more pronounced for small-scale firms, firms in industries with greater competition, and firms in regions with good legal environment. Overall, this study complements the existing literature by illustrating how strict environmental regulation affects corporate financial policies.

Corporate financialization and fixed investment rate: Evidence from China

This paper examines whether the relationship between corporate financialization and fixed investment rate is heterogeneous among China's listed non-financial enterprises. Using data from 2007 to 2016, we find that there is a negative relationship between corporate financialization and fixed investment rate. This result is consistent with the crowding out view that corporate investment in financial assets crowd out fixed investment. The relationship is moderated negatively (i.e., weakened) by monetary policy. We also find that this negative (moderating) relationship is more (less) pronounced in state-owned enterprises than in non-state-owned enterprises.

Does supplemental private health insurance incentivize household risky financial asset investment? Evidence from the China Household Financial Survey.

Private health insurance (PHI) is considered a supplement to public medical insurance schemes in China. To the extent that PHI coverage may offset background risk by decreasing medical expenditure risk, it may also incentivize risky financial behaviors. However, empirical evidence confirming this theory is absent in China. We fill this void by examining the impact of supplemental PHI on household risky financial investment using data from the China Household Financial Survey (CHFS). In the first set of analyses, we used bivariate probit (BVP) models with instrumental variables (IVs) to examine the effects of PHI on the extensive margin of household risky financial investment. In the second set of analyses, we used Tobit models with a two-stage residual inclusion (2SRI) framework to examine the effects of PHI on the corresponding intensive margin. The results indicated that supplemental PHI increased the probability of holding risky financial assets. On top of that, PHI increased the percentage of total financial assets allocated to risky financial investment. Such effects were more pronounced on stocks than on other risky products. Our findings provided evidence that purchasing supplemental PHI in China may increase the risk tolerance of financial investment, and risk attitude is a mediating factor between PHI ownership and risky financial investment behavior.

Lecturer's Behavior Finance in Making Investment Decisions on Financial Assets from The Perspective of Psychological Factors

This research is a continuation of research year 1 with the title “Lecturer Financial Asset Investment Interest in Surabaya”. In the first year of research, the research was limited to investment interest as an endogenous latent variable. 3 exogenous latent variables were consisting of financial literacy, attitude, and motivation. There is also 1 moderating variable, namely family. The purpose of this study was to determine the behavior of lecturers in Surabaya in making investment decisions. 3 factors as exogenous variables are investment interest, risk perception, and risk tolerance. These factors affect investment decisions as endogenous variables. The analysis tool used is SEM PLS and with 56 participant’s data. The results show that investment interest greatly influences investment decisions. while the other two variables, risk perception, and risk tolerance do not affect investment decisions. The dependent variable or as an endogenous variable in this study is investment decisions and 3 exogenous latent variables, namely investment interest, risk perception, and risk tolerance.

The Impact of Financial Drivers on Credit Default Swap (CDS) in Turkey: The Cointegration with Structural Breaks and FMOLS Approach

The CDS premium is considered to be an important criterion in the risk premiums of countries with emerging markets and it also provides important information about the credibility of these countries for investors. Decreasing the level of CDS for developing countries helps investors to work with the country and smoothes the way for investments in financial assets. Hence, determining the factors which can affect changes in the CDS of these countries has beco me crucial for their economies. Thus, the relationship between Turkey’s CDS for 5 years and financial factors have been analyzed through the monthly data for the period between 2012 and 2020. For this purpose, the existence of the long-run relationship between the series was investigated by Gregory-Hansen (1996) and Hatemi-J (2008) and it was seen that the series are cointegrated. Afterwards, the long-run coefficients between the series were estimated by FMOLS. The results indicate that the BIST100 index and liquid liabilities have a positive effect on CDS and that the domestic credit volume of the banking sector has a negative effect on CDS. Furthermore, the estimated break dates suggest that significant events are occurring in the Turkish economy.

The Impact of Financial Drivers on Credit Default Swap (CDS) in Turkey: The Cointegration with Structural Breaks and FMOLS Approach

The CDS premium is considered to be an important criterion in the risk premiums of countries with emerging markets and it also provides important information about the credibility of these countries for investors. Decreasing the level of CDS for developing countries helps investors to work with the country and smoothes the way for investments in financial assets. Hence, determining the factors which can affect changes in the CDS of these countries has beco me crucial for their economies. Thus, the relationship between Turkey’s CDS for 5 years and financial factors have been analyzed through the monthly data for the period between 2012 and 2020. For this purpose, the existence of the long-run relationship between the series was investigated by Gregory-Hansen (1996) and Hatemi-J (2008) and it was seen that the series are cointegrated. Afterwards, the long-run coefficients between the series were estimated by FMOLS. The results indicate that the BIST100 index and liquid liabilities have a positive effect on CDS and that the domestic credit volume of the banking sector has a negative effect on CDS. Furthermore, the estimated break dates suggest that significant events are occurring in the Turkish economy.