Risk Research Articles

Corporate culture's influence on the transparency of financial reporting in Iran: an in-depth analysis of readability and tone

PurposeThis study investigates the influence of corporate culture on financial reporting transparency within Iranian firms.Design/methodology/approachLeveraging a dataset of 1,480 firm-year observations from the Tehran Stock Exchange spanning from 2013 to 2022, the study employs text mining to quantify linguistic features of corporate culture and transparency, specifically readability and tone, within annual financial statements and Management Discussion and Analysis (MD&A) reports.FindingsOur results confirm a positive and significant relationship between corporate culture and financial reporting transparency. The distinct dimensions of corporate culture — Creativity, Competition, Control, and Collaboration — each uniquely enhance financial transparency. Robustness tests including firm fixed-effects, entropy balancing, Generalized Method of Moments (GMM), and Propensity Score Matching (PSM) validate the profound influence of corporate culture on transparency. Additionally, our analysis shows that corporate culture significantly affects the disclosure of business, operational, and financial risks, with varying impacts across risk categories. Cross-sectional analysis further reveals how the impact of corporate culture on transparency varies significantly across different industries and firm sizes.Research limitations/implicationsThe study’s scope, while focused on Iran, opens avenues for comparative research in different cultural and regulatory environments. Its reliance on text mining could be complemented by qualitative methods to capture more nuanced linguistic subtleties.Practical implicationsFindings underscore the strategic importance of cultivating a transparent corporate culture for enhancing financial reporting practices and stakeholder trust, particularly in emerging economies with similar dynamics to Iran.Originality/valueThis research is pioneering in its quantitative analysis of the textual features of corporate culture and its impact on transparency within Iranian corporate reports, integrating foundational theoretical perspectives with empirical evidence.

Reliability in mass alert system for dam emergencies: Case study of Vale S/A

AbstractIn its iron ore operations, Vale, the largest mining company in Brazil and the fourth largest mining company in the world by market value, has 77 dams considered with high potential damage in case of a failure in the stability controls. This classification follows the criteria of the sector regulatory agency in Brazil and determines that, for this class, a mass alert system is necessary for the resident population and workers immediately downstream of the dam within a region preset by legislation, considering a simulated flood area. For Vale, the mass alert system for dam emergencies is part of a critical mitigating control for a business risk analysis considering the hypothetical dam break as an unwanted material event. Therefore, both the probability of failure on demand, spurious failure, and availability of the assets of this protection barrier are important elements for this purpose, as well as the emergency response plan and the evacuation simulation of flood areas, which are part of a risk management system that require continuous verification and continuous improvement. Currently, Vale has 375 sirens, and it is planned to reach 420 sirens by the end of 2024. The purpose of this article is to present how the safety concepts applied to these systems were developed, the good practices applied from this study, and the lessons learned from the dam emergency management arising from the break of the Brumadinho dam in 2019. The reliability analyses of the systems involved and the main contributors to the Safety Critical Unavailability are presented, as well as the results of the reduction in the maintenance time and increase in system availability.

Pengaruh Profitabilitas, Likuiditas, Ukuran Perusahaan dan Risiko Bisnis terhadap Struktur Modal (Studi Empiris Pada Perusahaan Property dan Real Estate yang Terdaftar di Bursa Efek Indonesia Periode 2019-2023)

The purpose of this study is to analyze the profitability, liquidity, size of the company, and business risk to the capital structure. The study consists of four independent variables: profitability that is proxy with Return on Equity, liquidity that is Proxy with Current Ratio, Firm Size, and Business Risk proxy in BRSIK, and for the dependent variable: Capital Structure measured with Debt to Equity Ratio. In this study there were 41 companies meeting the criteria of 92 total observations with research objects on property and real estate companies registered in the BEI in the period 2019-2023. The methods used in this study consist of Classical Assumption Test, Correlation Coefficient Analysis Test, Dual Linear Regression Analysis Trial, Determination Analysis (R2), F Test and T Test. While the data analysis method used is double linear regression with a significance of 0.05 using Statical Product and Service Solution (SPSS) Version 22.0. The results of this study indicate that profitability does not have a significant effect on the Capital Structure. Liquidity has a positive and significant impact on Capital Structures. The size of the Company has a significant and positive impact on capital Structure and Business Risk has a negative and non-significant effect on capital structure.

Impact of Business Risk and Capital Structure on the Growth of the Sea Transportation Companies

The research aims to know and analyze the impact of business risk and capital structure on the growth of sea transportation companies listed on the Indonesia Stock Exchange in 2016-2020. Some of the problems encountered in this study, among others, namely, high business risk can reduce company growth, high capital structure can reduce company growth and also high debt to shipping companies can lead to difficulties in determining the composition of capital structure. Path analysis is used to test the hypothesis proposed in this study by using the Partial Least Square application. The total sample of 45 consisted of nine companies with a five-year observation period taken by purposive sampling technique. The results showed: business risk has no impact on firm growth, capital structure has no direct impact on company growth, business risk has a positive and significant direct impact on capital structure, and business risk does not directly impact company growth through capital structure mediation. The study concludes that business risk positively impacts capital structure, so the declining capital structure decreases business risk.

Analysis of the utilization of inspectorate audit report provincial and regency/city inspectorates by BPK representative of North Sulawesi Province

This study aims to determine the implementation of the use of the Provincial and Regency/City Inspectorate Audit Report (LHP) by the BPK Representative of North Sulawesi Province in the period of 2021 to 2023, obstacles and efforts to overcome obstacles. This research uses a qualitative method. Data collection with unstructured observations, in-depth interviews, and documentation. The results of the study show that the LHP of the Regional Inspectorate has not fully made an active contribution to the preparation of the program, implementation, and control of audit activities by the BPK Representative of North Sulawesi Province. The LHP of the Regional Inspectorate has contributed when the BPK Audit Team carried out the audit task. The BPK Audit Team is active in requesting the Regional Inspectorate's LHP and the Regional Inspectorate's Annual Supervision Work Program (PKPT) during the implementation of the audit task used in examining problems and recommendations along with not continuing the Regional Inspectorate LHP. The results of the BPK Audit Team's study are used in the preparation of the business risk matrix, fraud risk matrix, sample selection strategy and preparation of additional/alternative procedures if necessary. The obstacle to the use of the Regional Inspectorate LHP for BPK is the lack of understanding of the obligation of the Regional Inspectorate to actively submit its LHP to the BPK, the lack of timely receipt of the Regional Inspectorate LHP by the BPK Audit Team so that an in-depth evaluation cannot be carried out, the scope of the Regional Inspectorate LHP object is less relevant to the needs of the Audit Team. The efforts that have been made by BPK are that the BPK Audit Team has made a written request for the list of LHPs along with the LHP of the Regional Inspectorate and the Badiklat PKN BPK RI has opened opportunities to improve the competence of Regional Inspectorate inspectors with training for Regional Inspectorate inspectors.

Legal due diligence as a procedure necessary for creating a virtual enterprise

The article is devoted to the disclosure of legal due diligence as a system of business risk management when creating a virtual enterprise. Determining the full picture regarding the counterparty of the virtual enterprise is necessary in view of the importance of compliance with the requirements imposed by the regulatory and legal acts of Ukraine, adopted in connection with the large-scale military invasion, as well as the requirements of the EU regarding countering terrorism, illegal drug trafficking. The conducted research made it possible to come to the conclusion that due diligence is a systematic check of a business entity or certain assets, real estate objects based on professional analysis and assessment of information in order to identify and determine the degree of potential risks in order to make a decision on the feasibility of concluding the relevant contract and definition of its essential conditions. One of the types of such verification is legal due diligence, which consists in a legal verification of the legality of the company’s activities or the right to a certain asset of the opposite party. It is especially important to conduct it when creating a virtual enterprise, as it allows you to establish the identity of the future counterparty-participant of the virtual enterprise and, in turn, avoid the risk of establishing contractual relations with an improper counterparty. The stages of conducting legal due diligence are as follows: a) drawing up a plan for conducting an inspection with the definition of the necessary information and the procedure for obtaining it; b) obtaining information necessary for legal analysis; c) legal analysis and verification of the received information with the formulation of conclusions about the possibility of creating a virtual enterprise; d) formalization of the obtained results in the form of a written The legal basis for conducting this type of inspection can be a contract for the provision of consulting or legal services, as well as a contract between the company in respect of which legal due diligence is performed and the company that orders it.

Perceived business risks and observed impacts of the Russian-Ukraine war among small- and medium-sized agri-food value chain enterprises in Egypt

We examine the perceived business risks and impacts on performance associated with the Russian aggression in Ukraine in February 2022 among 450 Egyptian small and medium-sized agrifood enterprises. Our analysis identifies six distinct clusters of enterprises based on their perceived risks and three clusters based on the observed impacts of the war. We find a strong association between perceived business risks and observed impacts, suggesting that the risks identified by agrifood SMEs significantly influence their actual business performance. This underscores the importance of understanding and effectively managing perceived risks to mitigate the negative impacts of external shocks, enhance operational resilience, and improve overall performance. Moreover, the results indicate that the consequences of the war extend beyond direct effects on agrifood enterprises, affecting various stages of the agrifood chain. This implies that, in times of crisis, the absence of a well-functioning agrifood SME sector may threaten the sustainability of the entire agrifood value chain. These insights contribute to a more comprehensive understanding of the experiences of agrifood SMEs during the early stages of the war, helping policymakers and enterprises prioritize risk management strategies and allocate resources effectively to enhance performance and competitiveness in times of crisis.

Capital Structure and Risk Profile Comparison of Pharma Leaders

The pharmaceutical industry is in the spotlight nowadays. The financial situation of the pharmaceutical industry has experienced a lot of ups and downs due to the COVID-19. Therefore, analyzing the financial data of the pharmaceutical industry becomes significant. This report looks at three headline companies in the pharmaceuticals industry, Pfizer, Johnson & Johnson and Amgen. By analyzing and comparing their D/E ratio, weighted average cost of capital (WACC) and business risk, this report explores the reasons for the differences in the data of these three companies, forecasts the growth prospects of them and gives relevant advice to investors. The pharmaceutical industry is in the spotlight nowadays. The financial situation of the pharmaceutical industry has experienced a lot of ups and downs due to the COVID-19. Therefore, analyzing the financial data of the pharmaceutical industry becomes significant. This report looks at three headline companies in the pharmaceuticals industry, Pfizer, Johnson & Johnson and Amgen. By analyzing and comparing their D/E ratio, weighted average cost of capital (WACC) and business risk, this report explores the reasons for the differences in the data of these three companies, forecasts the growth prospects of them and gives relevant advice to investors. A basic result turn out to be that Investors should weigh the financial strategies of these companies against their individual risk tolerance and the dynamic landscape of the pharmaceutical industry before making investment decisions.

The Impact of Digital Finance on Corporate Operational Risk From the Perspectives of R&D Investment and Financing Constraints

The swift expansion of digital finance has profoundly influenced the operations of micro-enterprises and subsequently impacted macroeconomic stability and financial health. This study utilizes financial data from A-share listed companies from 2011 to 2020, alongside indicators of the macro digital economy, to assess how digital finance development influences business risks. It demonstrates that digital finance notably reduces these risks, with these findings holding steady even after addressing endogeneity concerns and performing various robustness tests. Analysis of the mechanisms shows that increased investments in R&D and alleviation of financing constraints are key ways digital finance reduces business risks. A heterogeneity analysis reveals that the impact of digital finance varies depending on the corporate structure and size, with state-owned and large-scale enterprises benefiting more, likely due to the digital divide. Furthermore, this study explores the effects of digital finance on reducing corporate fraud and litigation risks, discovering that it significantly lowers fraud risks, although it does not significantly affect litigation risks. This research provides important theoretical and practical insights, suggesting that digital finance can enhance risk management and contribute to superior economic and financial development.

Business activity and risks of trading enterprises: the dialectic of the relationship

The paper defines the content of the definition of «business activity» in a broad and narrow sense, the components of its assessment are indicators of logistical, commercial, financial, and investment activities. It is shown that regular assessment and analysis of the business activity of a trading enterprise allows timely detection of problems, optimization of the use of resources, increasing the efficiency of its activity and making informed management decisions. It is shown that risk is an integral part of the economic activity of trading enterprises, which requires special attention and management efforts to ensure the stability and development of enterprises. Approaches to the creation of a complex risk management system with the selection of individual components, the integration of which will ensure the stability and sustainability of trading enterprises in conditions of uncertainty and rapid changes in the market environment, are proposed. A set of measures that will contribute to improving the competitiveness of trade enterprises and increasing their ability to adapt to changes in the economic environment are substantiated. Implementation of the proposed tools will allow trade enterprises to better understand and analyze the needs of their customers, thereby ensuring more efficient work in a risk-oriented environment. The principles of the use of digital technologies in the economy of a commercial enterprise are proposed, including such elements as big data analytics, marketing automation, personalized communications and the integration of various sales channels. This provides the ability to quickly adapt to changes in the market situation, reducing risks and increasing the efficiency of business processes of a trading company. It has been proven that the intensification of business activity and the reduction of risks of trade enterprises require a systematic approach, which includes strategic planning, innovation, effective management of resources and risk minimization. Implementation of the proposed strategies will help trading enterprises to increase their competitiveness, reduce risks and ensure stable development in conditions of market uncertainty.

Abnormal CSR Performance and Auditor Litigation Risk

Recent studies provide evidence that corporate social responsibility (CSR) conscious firms are less likely to engage in high-profile corporate misconduct and be subject to SEC investigations, suggesting that auditor litigation risk may be lower for better CSR performers. However, we argue that the association between CSR performance and auditor litigation risk may not be linear for two reasons. First, for a given level of audit risk, the lower the perceived risk of material misstatement, the higher the actual detection risk. Second, ceteris paribus, an incorrectly assessed low audit risk acceptable for abnormally high CSR performance would also increase auditor’s actual detection risk. Using a matched sample analysis for the period of 2004 to 2013, this study finds that the propensity for auditors to be sued first decreases as CSR performance improves, but then increases with excessively high abnormal CSR performance. Further analyses indicate that the convexity of CSR performance on auditor detection risk arises from the inherent risk channel (client business risk, financial misreporting, and earnings management), but not from the control risk channel (internal control material weaknesses). This study provides new insights on the signaling value of CSR performance on an auditor’s litigation risk.

Projection transformation-based link prediction for possible collaboration connections in bimodal supply chain networks

Aiming at the problems of information disconnection and business interruption in supply chain networks caused by uncertainties such as trade wars and COVID-19, a projection-transformation-based model for predicting possible collaborative relationship links in bimodal supply chain networks is designed from the perspective of network science. The model first transforms the bimodal network structure of supply chain into a corresponding unimodal projection network by projection transformation; then screens the candidate collaborative links in the network; finally assigns weights to the similarity links according to different influencing factors, and calculates the possibility of potential collaborative links in the bimodal supply chain network by this. The experimental results show that the model can achieve higher quality prediction in real bimodal supply chain networks compared with other baseline link prediction models, which provides theoretical and methodological support for better formulation of business contingency plans and risk defense measures.

Pengaruh Risiko Bisnis, Growth Opportunity dan Kepemilikan Manajerial terhadap Struktur Modal

This study aims to determine the influence of Business Risk, Growth Opportunity, and Managerial Ownership on Capital Structure. Business Risk is measured using EBIT divided by total assets. Growth Opportunity is measured by using total assets in the current period minus total assets in the previous period, and divided by total assets in the previous period. Managerial ownership is measured by the number of shares owned by the managerial party (manager and directors) divided by the total outstanding shares. Meanwhile, the Capital Structure is measured using the Debt Equity Ratio (DER). The population in this study is property & real estate sector companies listed on the Indonesia Stock Exchange for the 2018-2022 period. The number of samples in this study was 16 with a 5-year observation method in the 2018-2022 period and the number of financial statements used as samples in this study amounted to 80, which was obtained through the purposive sampling method. The type of data in this study is secondary data with quantitative research methods. The analysis technique used was panel data regression analysis with a significance level of 5%. This study was processed using eviews 12 software and showed the results that (1) Business risk had a significant negative effect on capital structure, (2) Growth opportunity did not have a significant effect on capital structure, (3) Managerial ownership did not have a significant effect on capital structure.

Business Risk Management Strategy in Adaptation of Beef Caft Businesses to the Impact of Climate Change in Sumenep District

Business Risk Management Strategy in Adaptation of Beef Caft Businesses to the Impact of Climate Change in Sumenep District

Burial objects” or “Birds of a feather”: The contagion effect of financial violations in business groups——The evidence from China

This study explores the conagion effect of financial violations within Chinese business groups from 2012 to 2021. Findings reveal that violations lead to stock price declines in member companies, with contagion primarily driven by irrational investor sentiment (“burial objects”) over the short term. The financial and governance characteristics of infected companies deteriorate (“birds of a feather”), but do not impact their long-term stock returns. Mitigating investor irrationality in infected companies helps curb contagion. This research contributes to business group governance and risk contagion theories, revealing a unique irrational contagion channel of financial violations within business groups in emerging markets.

The lower the integrity, the higher the risk: how does the lack of corporate integrity exacerbate risk?

Corporate integrity is not only a core element of its success but also plays a crucial role in the development of the corporation itself, consumers, investors, and society as a whole. This paper focuses on companies listed on the A-share market from 2017 to 2022, delving into the impact of corporate integrity on business risk. The findings indicate a significant negative correlation between corporate integrity and business risk, primarily mediated through the profitability of the corporation. Further heterogeneous analysis reveals that for large and state-owned enterprises, the impact of corporate integrity on their risk levels is particularly pronounced.

Model For Small Enterprises Innovation Strategies Adaptation On Climate Change: Learn From Traditional Textile Sumba

All business organizations face various risks that might arise from changes in the external macro and micro environment. One of the significant changes in the external macro-environment is climate change. Climate change and its derivative impacts on business activities need to be managed properly by adapting innovations in the production process. Various studies on the impact of climate change on business activities are more focused on conventional measures to gauge business risks which are more responsive and focused on large companies. There are still few studies conducted on small and traditional businesses related to strategic actions in dealing with climate change, especially non-agricultural businesses. Therefore, this research aims to provide an overview of the adaptation strategy of production process innovation in the small-scale weaving industry in Sumba Island, Indonesia. The research conducted in-depth qualitative interviews with traditional textile producers in East Sumba. The main criterion in determining the respondents is the length of the business run by the traditional weaver. The study found that while most traditional weavers of Sumba textile rely on status quo technology, some strategies emerged to adapt to climate uncertainty in weaving production. The authors also identify three benchmarks of climate adaptation measures by the traditional weavers.

ESG Rating Divergence and Trade Credit Financing : Promotion or Inhibition ?

ESG plays a key role in promoting sustainable development strategies. Data integrators integrate ESG-related information of enterprises and provide measurable reference for investors. However, different ESG rating agencies have different rating results for the same enterprise, which brings trouble to users in evaluating company information and formulating relevant investment strategies. This paper takes 2009-2022 Shanghai and Shenzhen A-share listed companies as the research object, and examines the relationship between ESG rating divergence and trade credit financing from the perspective of supply chain financing. The study finds that ESG rating divergence significantly inhibits the trade credit financing of enterprises, which is mainly achieved by aggravating the divergence of analysts ' forecasts and increasing the business risks of enterprises. Heterogeneity analysis shows that ESG rating divergence have a more significant inhibitory effect on trade credit financing in enterprises with high supply chain discourse power, strong supply chain stability and weak development ability. The conclusions of this paper are helpful to understand the economic consequences of ESG rating divergence and enrich the research on the influencing factors of trade credit financing.

Pengaruh profitabilitas, likuiditas, leverage, kepemilikan manajerial dan risiko bisnis terhadap kebijakan dividen dengan firm size sebagai variabel moderasi pada perusahaan sektor consumer cyclicals

This study aims to examine the effect of probability, liquidity, leverage, managerial ownership, and business risk on dividend policy and to determine whether firm size can moderate the influence of profitability, liquidity, leverage, managerial ownership, and business risk on dividend policy. The sample of this study consisted of 52 companies confirmed by the Indonesian Stock Exchange in the consumer cyclical industry from 2020-2022. The sampling technique used purposive sampling. The analysis technique uses Multiple Regression Analysis (MRA) with STATA 17. The findings obtained show that managerial ownership has a significant positive effect on dividend policy. Profitability, liquidity, leverage, and business risk do not affect dividend policy. Firm size cannot moderate the effect of profitability, liquidity, Leverage, managerial ownership, and business risk on dividend policy. Under the agency model theory, consumer cyclical companies are expected to monitor the performance and the proportion of managerial ownership shares on deciding dividend policy because the more significant the percentage of managerial share ownership will minimise agency conflicts.

Capital structure, profitability and risk: a study of small companies in the industrial sector of the Republic of Kazakhstan

The purpose of the study: Determining the impact of the capital structure on small companies’ performance operating in the field of industry in Kazakhstan. The problem statement. The question to be analyzed in this study is: does the capital structure aff ect the performance of small Kazakhstani companies operating in the industrial sector? Methodology: In this study, we use data from 30 small industry companies in Kazakhstan based on annual reports for 2012-2022. The total debt ratio is the dependent variable used in this study. Profi tability, business risk, tax efficiency and age of the company were taken as independent variables. Statistics, correlation and multivariate regression were used to analyze the data. Originality/value of the study: The results showed that borrowed capital is subject to factors of profi tability, tax burden, and business risk. There was no signifi cant impact of the age of the company on the borrowed capital. Relevance: This study complements the literature on capital structure factors in developing countries and the financial condition of small industrial enterprises. This research will be aimed at exploring the potential use of borrowed capital to increase the profi tability of the company to reduce business risks.