Risk Governance and Control: Financial Markets and Institutions

Journal Information
ISSN / EISSN : 2077-429X / 2077-4303
Current Publisher: Virtus Interpress (10.22495)
Total articles ≅ 470
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Latest articles in this journal

Risk Governance and Control: Financial Markets and Institutions, Volume 11, pp 18-31; doi:10.22495/rgcv11i2p2

The purpose of this paper is to determine the cross-market liquidity and price spillover effects across euro area sovereign bond markets. The analysis is carried out with the constructed minute frequency order-book dataset from 2011 until 2018. This derived dataset covers the six largest euro area markets for benchmark 10-year sovereign bonds. To estimate the cross-market spillover effect between sovereign bonds, it was decided to use the empirical approach proposed by Diebold and Yilmaz (2012) and combine it with the vector error correction model (VECM). We also employed the panel regression model to identify why some bond markets had a higher spillover effect while others were smaller. The dependent variable was the daily average spillover effect of a particular bond. As the spillover effects vary highly across different bonds, country-specific fixed effects were used, and the clustered standard errors were calculated for robustness reasons. Lastly, the cross-market spillovers were analyzed daily to compare them with the results of the model with intraday data. The analysis was performed with rolling 100-day window variance decompositions and a 10-day forecast horizon for six sovereign bonds and the overnight indexed swap (OIS) market. The results of the created time-series model revealed that intraday cross-market spillovers exist but are relatively weak, especially in the case of liquidity spillovers. As the cross-market linkages became much more robust with the model using daily data, the liquidity or price disbalances between different markets are usually corrected on longer intervals than minutes. Distance between countries is the most important explanatory variable and is negatively linked to the magnitude of both liquidity and price spillovers. These findings should be of particular interest to bond market investors, risk managers, and analysts who try to scrutinize the liquidity and price transmission mechanism of sovereign bonds in their portfolios.
Noomen Chaabane
Risk Governance and Control: Financial Markets and Institutions, Volume 11, pp 8-17; doi:10.22495/rgcv11i2p1

The objective of this research is to review, analyse, and provide empirical evidence about the impact of the intellectual capital (IC) characteristics on the firm performance on listed 26 companies in Tunisian Stock Exchange for the years 2010–2019. 260 companies were taken as a sample of this research using the purposive sampling method. The efficiency of intellectual capital was measured using the value added intellectual coefficient (VAIC) method developed by Pulic (2000). The research method used was multiple linear regression analysis. Our empirical analysis substantiates the fundamental role of IC components in improving the financial and stock market performance of listed Tunisian companies. The results obtained on the human capital efficiency variable contribute to improving the market of Tunisian listed companies and confirm the role attributed to human capital in the knowledge economy and even the basic hypothesis of the VAIC method. Investors do not place any importance on the following variables: structural capital, human capital and the efficiency of structural capital during market valuation. Future research is suggested to use cross-country companies as the sample.
Risk Governance and Control: Financial Markets and Institutions, Volume 11, pp 4-6; doi:10.22495/rgcv11i1editorial

In the first issue of the journal Risk Governance and Control: Financial Markets & Institutions in 2021 contributions are published that studied industries that provide finance from a different point of view and papers related to human capital with various declensions.
Alessandra Von Borowski Dodl
Risk Governance and Control: Financial Markets and Institutions, Volume 11, pp 80-93; doi:10.22495/rgcv11i1p6

This study focuses on the value structure that correlates improvements in the financial services consumer’s decision-making quality with the development of their autonomy. The discussion is based on the concepts of ceremonial and instrumental values, according to Bush (1987). We anchor our analysis on the premise that there is still room for enhancing the results within the National Financial System – NFS – by broadening the scope of initiatives on financial services consumers’ education and protection (von Borowski Dodl, 2020). Strengthening this perspective, we emphasize the consumer’s role as an agent and the relevance of taking decisions according to their life plans. The analysis is undertaken through the institutional literature lens, considering both schools of thought: Original Institutional Economics (OIE) (drawing on Tauheed, 2013a, 2013b) and New Institutional Economics (NIE) (focusing on North, 1990). From the conjunction of the theoretical apparatus and the applied analysis, we propose a governance policy within the NFS aimed at increasing its efficiency. Effective communication between stakeholders and consumers’ participation in the structuring of institutions – by publicly evincing their political power – hold the potential for promoting governance effectiveness. Additionally, although the approach taken focuses on the NFS, the diagnosis process carried out in this study can be easily reproduced in other contexts.
Thomas Holtfort, Andreas Horsch, Joachim Schwarz
Risk Governance and Control: Financial Markets and Institutions, Volume 11, pp 61-79; doi:10.22495/rgcv11i1p5

Fintech entrepreneurship has already influenced financial markets and their players worldwide in a disruptive, but also a risky way (Thakor, 2020; Zeranski & Sancak, 2020). In this context, it seems worthwhile to analyze which factors drive the design and development of global fintech entrepreneurship. Thus, the paper takes fintech-related research a step further by exploring the drivers of fintech evolution in different countries and continents that display different levels of fintech activity. For this purpose, first economic, technological, legal, and cultural factors influencing the development of fintech entrepreneurship are examined from an evolutionary point of view, and second, a generalized linear mixed model is used in order to evaluate the statistical relevance of these factors on fintech entrepreneurship more comprehensively. The analyzed data period from 2000 to 2017 also makes it possible to assess the influence of the dot.com bubble and the financial crisis on fintech entrepreneurship. The results of the empirical analysis suggest that the gross domestic product (GDP), regulatory burden, government tech procurement and the degree of individualism are important drivers of fintech startup activity. These findings help gauge the present and future market position of fintechs, leading to implications for entrepreneurs, competitors, and regulators alike.
Riccardo Savio
Risk Governance and Control: Financial Markets and Institutions, Volume 11, pp 49-60; doi:10.22495/rgcv11i1p4

There is a growing consensus among scholars that the liberalization of shop opening hours increases revenues and creates jobs. While this is probably true, prior literature does not provide evidence on the risks of this kind of liberalization on the reduction of firm performance, and how firms in the retail industry manage the risk of underperformance. In fact, although theory establishes a direct link between increasing of shop opening hours with revenues and employment, it is challenging to rule out how firms react to this and if there are effects on firm performance. While several studies on firms’ strategic choices on opening hours have recently been released, no empirical studies provide evidence on firm performance following a change in the regulation of shop opening hours. The study contributes to the literature adding evidence on consequences on firm performance, an aspect generally not analysed by prior scholars in this field. We explore the effects of extended shopping hours on performance faced by firms operating in retail industries. To this purpose, we collected data about a large sample of limited liability companies in Italy, where a reform was issued in 2012 to boost the economy even through liberalization of shop opening hours. Using data of Italian firms operating in the retail industries, we find that reducing restrictions on shopping hours increases revenues and personnel costs. Interestingly, our model predicts that the deregulation of shopping hours involves firm lower performance.
Pasqualina Porretta, Andrea Benassi
Risk Governance and Control: Financial Markets and Institutions, Volume 11, pp 33-48; doi:10.22495/rgcv11i1p3

Sustainable finance has become a common lexicon of both supervisors and financial institutions in the last years also due to the COVID-19 crisis. Undoubtedly, the application of ESG (environmental, social, and governance) factors is currently designing a new strategic perspective, a new approach to business usually named “sustainable”. The paper’s research problem is related to the reengineering of the bank’s business model on sustainability. Integrate ESG factors within the decision-making process will not be enough for the European financial sector; it will be strategic that European authorities and regulators also ensure incentives in this direction. In this perspective, the paper has the purpose to answer the following questions: “How sustainable the business model of cooperative credit banks is and how they are ESG oriented?”, “What are the possible ways, in the prudential framework, to foster a higher attention to the ESG paradigm, in the bank’s business model?”. The research methodology used analyses of a) the main features of cooperative bank systems and the sustainability of their business model and the conceptual benchmark framework used by EBA in the 2020 survey; b) the case of Iccrea Sustainability Framework. The contribution of our paper is manifold and likely to raise the interest of policymakers. Our argumentations and conclusions are likely to contribute in terms of recognition of the sustainable business model also in the prudential framework in the current COVID-19 economy.
Lorena Çakërri, Oltiana Muharremi, Filloreta Madani
Risk Governance and Control: Financial Markets and Institutions, Volume 11, pp 20-32; doi:10.22495/rgcv11i1p2

Over the past three decades, Albania has had positive and increasing foreign direct investment (FDI) inflows that have brought significant changes in many economic sectors. The paper’s purpose is to analyze the dynamic relationship between FDI and economic growth, particularly emphasizing absorption capital variables. The research question is if the human capital development level, technological development, trade openness, public expenses, and financial system development in Albania help or hinder the materialization of the expected positive effect of FDI on economic growth? We used empirical analyses to evaluate these relationships based on the model created by Borensztein, De Gregorio, and Lee (1998). We changed a few variables in the model, and we used the multivariate vector autoregressive (VAR) model and the vector error correction model (VECM) to analyze the variables’ causal relationships. Some of the results achieved are consistent with other authors’ findings, so human capital is considered an essential element of host countries’ absorptive capacity. In the long run, in Albania, the FDI’s impact on economic growth positively affects human capital development, especially on knowledge and expertise and financial system development. However, the technological difference index gives a negative long-term impact on economic growth, and trade opening is statistically insignificant.
Shab Hundal, Taisiia Zinakova
Risk Governance and Control: Financial Markets and Institutions, Volume 11, pp 8-19; doi:10.22495/rgcv11i1p1

Financial Technology (FinTech, hereafter) has integrated with the banking sector. Despite its fast growth, FinTech is a relatively new and under-explored phenomenon in the academic and corporate spheres. The current study aims to explore, first, the role and relevance of FinTech in the commercial banking sector in Finland; and second, the changing dynamics of stakeholders of the banking industry in the light of FinTech. The above objectives have been studied in the wake of the COVID-19 pandemic. The primary data has been collected through semi-structured interviews. A significant impact of FinTech has been observed in the following aspects of the banking sector: customers, strategy, risk management, investors, operations, competitiveness, and future growth. FinTech adoption has been contributed by the growth in the IT sector and innovations in the field of firm financing including crowdsourcing and peer-to-peer financing. Changing customers’ demands and behaviour have also facilitated FinTech adoption (Lee & Teo, 2015). Banks have been integrating FinTech into insurance services and this feature has become more profound ever since banks increased their cooperation with international insurance companies (Paschen, Wilson, & Ferreira, 2020). Similarly, there has been a significant increase in collaboration between banks and FinTech start-ups. Nonetheless, the unpredictable factors, such as the ongoing COVID-19, can influence the future innovation and adoption of FinTech.
Mauro Paoloni, , , Valentina Santolamazza
Risk Governance and Control: Financial Markets and Institutions, Volume 10, pp 8-21; doi:10.22495/rgcv10i4p1

The Italian banking system has changed profoundly and nowadays banks have to adapt their strategies to attain an adequate level of profitability (Mattei, 2019). Digitalization and mergers and acquisitions (M&A) are useful to obtain this result. However, at the same time, they can have a negative impact on the relationship between the bank and the territory, compromising the local economic growth (Caporale, Di Colli, Di Salvo, & Lopez, 2016). The objective of this work is to understand if any strategies could be undertaken to maintain the territorial relationship even when M&A and digitalization have become necessary. The methodology used is an ethnographic exploratory single case study (Yin, 1984). The information collected using semi-structured interviews is interpreted through qualitative inductive content analysis (Elo & Kyngäs, 2008). The interviews suggest that even when M&A and digitalization have a negative impact on the relationship between bank and territory, these two processes, if well-managed, could both improve the bank’s profitability and the contact with the local reality. Therefore, if a strategic management process is defined in advance, it is possible to maintain, or, even gain profitability
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