Potential Financial Risks Research Articles

Financial Distress and Value Premium using Altman Revised Z-score Model

In the stock market, investors and value managers desire to be safe. Estimating equity returns and evaluating potential financial distress risk are essential for investment and trading decisions. The link between distress risk and stock return is controversial, and current literature yields contradicting results. A variety of models may be used to evaluate distress risk-return trade-offs. This paper employs a revised Altman Z-score to examine financial distress and value premiums. Using univariate and multivariate techniques, we examine firm- and industry-level portfolio returns, encompassing all Indian companies listed on the Bombay Stock Exchange (BSE). Results confirm the existence of the distress factor effect found in industry and firm-level portfolios. It shows that the distress risk factor significantly determines stock returns as an independent systematic risk factor. This result is consistently found in most industries. The study demonstrates the existence of a value premium in both distressed and safe zones. The study also used a multivariate GRS test and the Fama-Macbeth procedure to validate the reliability of the distress factor and pricing models. Results confirm that Altman model-based distress factor augmented models improve the performance of existing pricing models with higher reliability and accuracy.

Enhancing financial fraud detection with hierarchical graph attention networks: A study on integrating local and extensive structural information

In the highly competitive business environment, financial fraud detection plays a crucial role in safeguarding companies and investors. However, traditional methods face challenges when assessing the complex and multidimensional nature of financial data. Cutting-edge machine learning techniques, particularly the hierarchical graph attention network (HGAT), emerge as a promising approach for financial fraud detection. The proposed approach includes encoding adjacency matrices for capturing local relationships and utilizing multi-head self-attention to propagate structural attributes across multiple layers. Node embeddings are generated by the HGAT model, which integrates both local and extensive structural information through multihead self-attention. Through learning intricate inter-entity relationships, the HGAT model can effectively identify potential financial risks. Experiments performed on a publicly available financial report dataset demonstrate the superior performance of our model compared to the existing methods in detecting financial risks.

BIOETHANOL (ENVIRONMENT SUPPORT FUEL) PRODUCTION AND OPTIMIZATION FROM PINEAPPLE PEEL AND BANANA PEEL

<p>The goal of this investigation was to focus on the viability of synchronous aging of natural product waste with Aspergillus Niger TISTR 3063 co-societies producing ethanol. Additionally noted was how the aging temperature affected the yield of ethanol. Peels from pineapple and banana were used as substrates, and they were prepared by being slashed into little rectangular pieces. A 250 ml Erlenmeyer jar containing glucose was used to mature several bundles of natural product waste as a control. Analysis of the factors involved in the production of organic waste included sugar, pH, TS, vs, debris, moisture, COD, and TKN. In my review, bio ethanol was produced from banana strips and pineapple strips using pretreatment techniques, more specifically, soluble and acidic pretreatment. The process of aging interaction is then used to produce bio-ethanol. However, the production of bioethanol from food crops needs to be regulated to ensure food security and requires line-by-line analysis to move potential financial and environmental risks. Utilizing Plan Master Programming version 13, determine whether the nature of the bioethanol has changed after synthesis.Using plan master programming, it is possible to see how the item ethanol is being streamlined. Plot the chart for the item's actual and predicted values, one component diagram, and 3D surface. The fuel qualities of the bioethanol that was given were thought to be comparable to those of diesel fuel, and they also complied with ASTM regulations.</p>

Social capital, financial intelligence, and entrepreneurial financial performance: evidence from the post-pandemic challenges

ABSTRACT The convergence of social capital and financial intelligence becomes a dynamic catalyst in the realm of post-pandemic challenges, promoting entrepreneurial financial performance to unforeseen levels as businesses use networks, knowledge, and financial expertise to overcome challenges and grasp new opportunities. Hence, the study explores the factors that influence entrepreneurial financial performance of employees in Pakistan’s corporate sector. Using two theoretical frameworks, Regulatory Focus Theory and Rubicon Four-Phase Action Model in Entrepreneurship, study identifies essential traits for entrepreneurship and their direct correlation with financial success. The study utilized a survey questionnaire to gather responses from 276 employees of the corporate sector involved in entrepreneurial activities. The findings suggest that financial literacy, financial risk tolerance, entrepreneurial competency, and social capital positively impact an entrepreneur’s locus of control and financial intelligence. Financial literacy equips entrepreneurs with necessary skills and knowledge to manage finances effectively, identify potential financial risks, and increase profitability. Financial risk tolerance enables entrepreneurs to understand financial markets better and make sound financial decisions. Entrepreneurial competency leads to sound financial decision-making and control of financial outcomes. Social capital provides valuable resources, information, and support to improve financial decision-making skills.

Research on Financial Risk Prevention in Corporate Mergers and Acquisitions

Since the beginning of the reform and opening-up, enterprises have been continuously growing and expanding under the impetus of various reform measures. However, internal accumulation alone cannot meet the demands of rapid growth and domestic and international market competition. Corporate mergers and acquisitions, as one of the crucial strategic approaches, have become an effective means for achieving low-cost expansion and sustainable development, providing companies with growth opportunities and market advantages. Nevertheless, along with these benefits come a series of potential financial risks that, if not effectively managed, can lead to severe losses for the enterprise. This research aims to explore the financial risks during the process of corporate mergers and acquisitions and propose corresponding risk prevention strategies.

Tax Incentives and Maturity Mismatch between Investment and Financing: Evidence from China

AbstractThis paper examines the effects of China's accelerated depreciation policy (ADP) on the maturity mismatch between investment and financing. Using panel data for China's A‐share nonfinancial listed companies from 2010 to 2019 and a staggered difference‐in‐differences approach, we found the following. First, ADP significantly aggravated the degree of corporate maturity mismatch, and this result was robust across multiple checks. Second, due to an insufficient long‐term loan supply, firms had to finance the fixed investments induced by ADP with short‐term debts, leading to maturity mismatches. Third, the positive policy effects were mainly significant for firms with high policy exposure, high‐risk preferences, a high degree of information asymmetry, and firms with weak long‐term financing capacity. Finally, maturity mismatch exacerbated corporate financial risks. Our research findings indicate that passive maturity mismatch is prevalent among Chinese companies and emphasize the need to address financial repression in order to mitigate the potential financial risks that may arise from tax incentives.

The potential impact of novel tuberculosis vaccines on health equity and financial protection in low-income and middle-income countries

IntroductionOne in two patients developing tuberculosis (TB) in low-income and middle-income countries (LMICs) faces catastrophic household costs. We assessed the potential financial risk protection from introducing novel TB vaccines, and...

Study on the Financial Risks of Listed Airlines-Based on Air China Case Study

With the development of the scientific economy, air transport has become an important mode of transport in people's daily travel, and after the financial crisis in 2008, China's aviation industry has shown rapid development and good development opportunities - the average annual growth rate of passenger turnover exceeds 8%. However, there are still many problems in the development of China's aviation industry. All this is reflected behind the fact that China's aviation industry is facing great financial risks, and financial risks, as a common problem for listed companies, can have an impact on the operation and sustainable development of the company. In particular, the airline industry has been severely impacted by the global outbreak of the COVID-19 and the business environment has further deteriorated. It has therefore become particularly important for airlines to effectively identify and prevent financial risks in the complex macro environment and market context. This paper looks at the financial risks that listed airlines will face. Based on the annual reports of airlines, it explores the potential financial risks in the daily operations of airlines from real data, and makes suggestions on how to identify financial risks and make effective early warning and solution measures. Finally, using Air China as a case study, this paper explores the company's financial risks through financial statement analysis and DuPont analysis, and conclude and outlook on the above analysis.

FTX fiasco and global equity markets: evidence from event study approach

PurposeThis study aims to investigate the impact of FTX bankruptcy on the global stock markets, including both the developed and emerging markets, as per the Morgan Stanley Capital Investment (MSCI) country classification.Design/methodology/approachUsing the daily closing prices for leading stock market indices of all 47 countries in the MSCI market classification, comprising 23 developed markets and 24 emerging markets, the event study methodology is used to examine the impact of the event on developed markets, emerging markets and overall global equity markets.FindingsThe study finds heterogeneous effects of the event on different countries. Results indicate that overall global equity markets experienced a statistically significant positive cumulative average abnormal returns of 15.8533% in the complete event window of 28 days from t − 7 to t + 20. The authors conclude that traditional global equity markets can be used as a hedge against potential financial risk posed by unfavorable events in the cryptocurrency markets and have safe haven properties.Practical implicationsThe study emphasizes the global financial system’s interconnectedness and the potential of traditional equity markets to hedge risks in the cryptocurrency market. The findings are relevant for investors seeking portfolio diversification and mitigating their exposure to potential risks in the cryptocurrency market.Originality/valueTo the best of the authors’ knowledge, the present study is the earliest attempt to comprehensively examine the impact of the bankruptcy of the world’s fourth largest cryptocurrency exchange, FTX, on the global equity markets.

ЦИФРОВА ФІНАНСОВА ГРАМОТНІСТЬ: КОМПОНЕНТИ ТА МЕТОДИ ПІДВИЩЕННЯ

This article is dedicated to the topic of financial literacy and its development in the context of the digitization of financial services. Traditional financial literacy is insufficient for effectively utilizing financial resources in today's digital world. The concept of digital financial literacy is introduced. It combines the skills of using financial services and the use of digital technologies. In the article is proposed authors’ definition of digital financial literacy by components, which include awareness of digital financial products and services, awareness of potential digital financial risks, control over them, and knowledge of the rights of consumers of financial services. These components are crucial for the development of digital financial literacy. The article highlights potential security risks, such as digital fraud, technical failures, and excessive reliance on digital services. The importance of understanding digital footprint and online reputation is emphasized. The article provides simple principles to help users protect their personal information and avoid fraud. It explains the need for understanding consumer rights and compensation procedures to enable individuals to protect their rights. Understanding these aspects of digital financial literacy is essential for effectively managing financial resources in today's digital world. Research conducted in 2021 showed that technology users have a higher level of financial literacy compared to those who do not use technology. However, the overall level of financial literacy in Ukraine is still insufficient for making informed financial decisions. The National Bank of Ukraine, the Ministry of Digital Transformation and other international, governmental, and non-governmental organizations are focusing on the development of financial literacy among the population. It is recommended to focus on the development of digital financial literacy, using communication campaigns, sharing information about providers of digital financial services, financial education initiatives, and awareness-raising about digital crimes and consumer rights in financial services.

Hot topic detection in central bankers’ speeches

Analysis of central bankers’ statements is essential to understand current economic conditions and predict future market trends. The most popular method used for this purpose – qualitative monitoring and evaluation (QME) – is based on the input of domain experts, which is expensive and subjective by nature. Several researchers have attempted to use text mining techniques as alternatives. However, they have primarily focused on aligning textual information with macroeconomic indicators, rather than directly extracting keywords. The primary aim of this study is to identify the possibility of automatically detecting potential financial risk factors by applying text mining techniques to central bankers’ speeches. We propose a text mining framework to extract risk factors ex ante by detecting hot topics in speeches made by chairs of the Federal Reserve System. In the framework, we use a simple and effective unsupervised keyword-scoring method,11The source code used for this study is available at https://github.com/sophia-jihye/hot_topic_detection_in_central_bankers_speeches. which treats bigrams as keywords and incorporates the temporal importance of keywords by estimating the “emergence” of a term at a certain time period relative to previous time periods. In-depth analysis through extensive experiments was conducted to compare risk factor detection performance using eight existing methods Including statistical approaches and recent pretrained language model-based approaches. Experimental results demonstrate that our proposed method adopting a statistical approach effectively captures potential risk factors in central bankers’ speeches. Application of the proposed framework to manuscripts of speeches made between 1997 and 201922The dataset collected for this study is available at https://github.com/sophia-jihye/bis_speeches_text_dataset. revealed that the recurrence of the terms Such as “east asia” “information technology” and “subprime mortgage” which describe the Asian financial crisis Dot-com bubble And global financial crisis Respectively Could have been detected prior to the onset of the respective crises. Furthermore The quantitative evaluation revealed that the frequency of appearance of the phrase “subprime mortgage” increased by more than 400% in speeches made during the second quarter of 2007 as compared to the previous quarter Whereas the number of the New York times news articles containing the word “subprime mortgage” only increased by approximately 0%. our results show that central bankers’ speeches can be used as an appropriate data source for the ex ante identification of market risk factors. We anticipate that this study will contribute to broadening the understanding of trends in hot topics in the financial market Monitoring potential risk factors And developing preemptive response plans to deal with impending financial crises.

China's Financial System and Economy: A Review

China's financial system has been integral to its spectacular economic growth over the past 40 years. We review the recent literature on China's financial system and its connections to the Chinese economy based on the categories of Aggregate Financing to the Real Economy (AFRE), a broad measure of the nation's yearly flow of liquidity accounting for unique features of China's financial system. While early work on China's financial system emphasizes the state-owned enterprise reform, the recent literature explores other more market-based financing channels—including shadow banking—that grew rapidly after 2010 and have become important components of AFRE. These new financing channels not only are intertwined with each other, but also, and more importantly, are often ultimately tied back to the dominant banking sector in China. Understanding the mechanisms behind these channels and their intrinsic connections is crucial to alleviate capital allocation distortion and mitigate potential systemic financial risk in China.

Climate risk and financial systems: A nonlinear network connectedness analysis

To deeply analyze and understand the macro-financial impact of climate change, this paper investigates the effect of climate risk on systemic financial risks by employing a network approach. The results demonstrate that climate risk not only affects a single financial market but also induces risk co-movement, which aggravates potential systemic financial risks. Specifically, the system-wide connectedness across the financial system respectively increased by 2.52% and 1.76% after the withdrawal of the US from the Kyoto Protocol and the Copenhagen UN Climate Change Conference. The bond and stock markets are the primary transmitters of climate shocks, while the forex and commodity markets appear to be more sensitive to climate-related information. In addition, the vulnerability of financial asset price fluctuations to climate risk changes substantially over time. Quantile regressions reveal the positive impact of climate risk on total connectedness across the financial system. This study provides novel insight into how the financial system responds to climate-related information and how systemic risk dynamics materialize.

Financial risk prediction in supply chain finance based on buyer transaction behavior

Financial risk in supply chain finance (SCF) is defined as the possibility that suppliers fall into liquidity crisis due to delayed payment. Predicting financial risk is important for supply chain stability. In this paper, a financial risk prediction model is developed using XGBoost and then evaluated by applying buyer transaction behavior data. We further construct single and hybrid models, respectively, and compare their performance using receiver operating characteristic curve (ROC), area under the ROC curve (AUC), and F1-Score. Last, feature importance and partial dependence plots (PDPs) are employed for model interpretation. The results show that XGBoost model can effectively predict potential financial risks, and shed lights on managers' payment practice. This paper is one of the few studies that develop new models to examine financial risks in SCF empirically.

Evaluating Consumer Behavior, Decision Making, Risks, and Challenges for Buying an IoT Product

Home appliance manufacturers have been adding Wi-Fi modules and sensors to devices to make them ‘smart’ since the early 2010s. However, consumers are still largely unaware of what kind of sensors are used in these devices. In fact, they usually do not even realize that smart devices require an interaction of hardware and software since the smart device software is not immediately apparent. In this paper, we explore how providing additional information on these misunderstood smart device features (such as lists of sensors, software updates, and warranties) can influence consumers’ purchase decisions. We analyze how additional information on software update warranty (SUW) and the type of sensors in smart devices (which draw attention to potential financial and privacy risks) mediates consumer purchase behavior. We also examine how other moderators, such as brand trust and product price, affect consumers’ purchase decisions when considering which smart product option to buy. In the first qualitative user study, we conducted interviews with 20 study participants, and the results show that providing additional information about software updates and lists of sensors had a significant impact on consumer purchase preference. In our second quantitative study, we surveyed 323 participants to determine consumers’ willingness to pay for a SUW. From this, we saw that users were more willing to pay for Lifetime SUW on a smart TV than to pay for a 5-year SUW. These results provide important information to smart device manufacturers and designers on elements that improve trust in their brand, thus increasing the likelihood that consumers will purchase their smart devices. Furthermore, addressing the general consumer smart device knowledge gap by providing this relevant information could lead to a significant increase in consumer adoption of smart products overall, which would benefit the industry as a whole.

Interactive voice response systems: The double-edged sword of AI and the culture of hospitality in healthcare

The main objective of this research note is to turn healthcare organizations’ and scholars’ attention to the challenges experienced by patients as they interact with various artificial intelligence (AI)-based applications, particularly interactive voice response (IVR) systems, in the healthcare industry. While the existing literature reveals a substantial scholarly interest in the adoption and utility of these technologies in various contexts, the paucity of comprehensive research investigating how some of these technologies lie in contrast to the culture of hospitality in healthcare and the potential health and financial risks involved are striking. More importantly, a multi-dimensional assessment tool to measure the quality of AI-based healthcare services has not been established yet.

Climate change and macro-financial risks: financial policy responses for an orderly low-carbon transition

Climate-related financial policies (CRFPs) are needed to tame potential climate-related financial risks deriving from climate change and to finance the low-carbon transition. International engagement levels and CRFP adoption are currently too low to encourage an adequate low-carbon transition and protect the financial system from materializing climate risks. Therefore, greater global commitment is especially important as the COP27 will likely uphold the 1.5 ∘C targets while following the Intergovernmental Panel on Climate Change’s advice to keep global warming below 2 ∘C. Despite the recent rapid proliferation of the literature on climate-related financial policymaking, some important knowledge gaps remain. Additional investigation, particularly in financial disclosure and stress tests, climate-aligned macro-prudential policies aimed at financial capital, climate data availability, and new research approaches, is required to help decision-makers achieve orderly and swift decarbonization.

Animal agriculture’s potential financial risks

Animal agriculture’s potential financial risks

Performance Evaluation and Improvement Countermeasures of the Real Estate Regulation Policy in Dongguan

With the development of modern society, the real estate industry is closely related to people’s production and life, and it is an important industry related to the national economy and people’s livelihood. Local development not only needs the real estate to promote economic prosperity, but may also harm the development of the real economy, bringing potential financial risks. In order to alleviate the real estate problems and contradictions in the process of development, the Dongguan government has frequently introduced various relevant control policies, but the housing price rises too fast, the supply and demand imbalance in the real estate market, the supply structure imbalance and other problems are still serious. Practice shows that the real estate industry can develop more smoothly by combining the market’s selfregulation with the government’s macro-control. This paper introduces the real estate market and policy of Dongguan City. On this basis, combined with the relevant data of the real estate industry in Dongguan, the effect of the real estate policy was evaluated, and the advantages and shortcomings of the implementation of the real estate control policy in Dongguan were analyzed. Through quantitative and qualitative analysis methods, this paper further screens the primary indicators for the different impacts brought by the performance of the real estate regulation policies, and adopts the principal component analysis method to quantitatively evaluate the performance of the real estate regulation policies in Dongguan City during 2019-2021. Finally, this paper puts forward suggestions to improve the real estate regulation policies in Dongguan City.

INVESTIGATING HOW FINANCIAL MANAGEMENT MIGHT SUPPORT SUSTAINABLE DEVELOPMENT AND CORPORATE PRACTICES; THEMATIC ANALYSIS

Background: Recently, industries have become more prone to incorporate societal expectations into their business strategy. Moreover, sustainable business practices and development frequently involve adopting successful financial management. Financial management serves as a direction that affects organizational development overall. High-quality financial management is essential to ensuring the overall organization's growth and financial stability, especially when benefiting from substantial expenditures. Aim: This article investigates how financial management may support the growth and adoption of sustainable corporate practices. Methodology: The research is based on a thematic analysis of resources from different researchers in order to confirm that suitable financial management practices are essential to improve productive capacity while managing potential financial risks. Results: According to the study's outcomes,businesses that are implementing sustainable practices under the influence of sustainable investment pressure, employee pressure, organizational management pressure, and regulatory pressure are more likely to see an improvement in their financial productivity. Hence, in order to achieve sustainability within a business, the process must be ingrained throughout every level of organizational support, from senior executives to entry-level employees. Conclusion: This research has shown that an organization must address financial management responsibly and ensure that its abilities are appropriate. The research has also shown how important sustainability problems are in determining financial outcomes and what drives value. In conclusion, financial management is essential for encouraging sustainable business practices and growth. Keywords: Business Development, Financial Management, Financial Risks, Sustainable Business Practices, Thematic Analysis