Risk Governance and Control: Financial Markets and Institutions

Journal Information
ISSN / EISSN : 2077429X / 20774303
Current Publisher: Virtus Interpress (10.22495)
Total articles ≅ 430
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Risk Governance and Control: Financial Markets and Institutions; doi:10.22495/rgc

Jose Maria Fernandez-Crehuet, Jorge Rosales-Salas, Rodrigo Avilés
Risk Governance and Control: Financial Markets and Institutions, Volume 10, pp 8-22; doi:10.22495/rgcv10i1p1

Abstract:In this paper, we propose an index to measure the quality of the most important European cities. Using collected data from 66 cities belonging to the 28 countries within the European Union and applying the principal components analysis method, we construct the European Cities Quality Index (ECQI) as a combination of eight dimensions: (1) Public health, (2) Education, (3) Employment and incomes, (4) Environment, (5) Gender equality, (6) Leisure and entertainment, (7) Housing and safety and (8) Transport and mobility, that are in turn made up of 40 distinct variables. We find that London, Aarhus, and Berlin are the cities with the highest scores in the index, with northern European cities performing the best. At the other end of the spectrum, Sofia, Plovdiv, and Bucharest, with severe deficiencies in every dimension, scored worst on the study. The comparisons with the Sustainable Cities Index (Arcadis), the Global Power City Index (Institute for Urban Strategies), Cities in Motion (IESE), the Cities Prosperity Index (UN), and Dynamic Cities (Savills) help us understand the potential use of this new index and its purpose as a tool for assessing public policy. The ECQI could be used to assist public policies designed to improve perception in regions where it is needed.
Stefania Sylos Labini
Risk Governance and Control: Financial Markets and Institutions, Volume 9, pp 4-6; doi:10.22495/rgcv9i4_editorial

George Tsalikis, Simeon Papadopoulos
Risk Governance and Control: Financial Markets and Institutions, Volume 9, pp 67-76; doi:10.22495/rgcv9i4p6

Abstract:Exchange-traded funds (ETFs) have grown considerably since their first introduction two and a half decades ago, becoming one of the most popular passive investment vehicles among retail and professional investors. However, their tracking ability is often questioned. In this paper we estimate tracking errors from a sample of 15 American and European ETFs utilizing three different methods. We find that American ETFs seem to exhibit lower tracking errors than European ETFs in all measurements of tracking error. We also analyse and discuss the factors that influence tracking error. Fund size and expense ratios are found to be affecting the tracking ability of ETFs. The results of this study concerning the performance and tracking error determinants of ETFs are consistent with the evidence presented in the literature. To our knowledge, this is the first study to compare American and European ETFs in terms of their tracking ability and their tracking error determinants.
Enrico Maria Cervellati, Francesco Corea, Paolo Zanghieri
Risk Governance and Control: Financial Markets and Institutions, Volume 9, pp 49-66; doi:10.22495/rgcv9i4p5

Abstract:We analyse the effect of behavioural biases on entrepreneurs’ decisions to insure their firms against different kinds of corporate risks. We use a large sample of 2,295 Italian small and medium enterprises (SMEs), finding that they under-insure themselves. Since SMEs should insure more – in proportion – compared to bigger companies, analysing the reasons for this underinsurance is relevant to improve entrepreneurs’ decisions and help their firms, but also from a policy-making point of view. We link corporate insurance choices with the entrepreneurs’ personal characteristics and behavioral traits as well as with their households’ financial choices. Our methodology uses stepwise regressions to discern which variables are statistically significant. In our results, we find that entrepreneurs not only underinsure their firms but also themselves, thus exposing themselves, their firms and their families to high idiosyncratic risk. We find that these suboptimal decisions are affected by behavioural biases such as overconfidence, over optimism, risk misperceptions, and stubbornness, even though in a not straightforward manner. We measure both the overall effect on the number of insurances underwritten and on the specific type of insurance contract. In general, we find that relatively bigger firms do buy more insurance, and that trust in insurance companies is a key driver to insurance purchasing, as well as the estimated probability of suffering damages in the future. In contrast, entrepreneurs do underwrite fewer insurance contracts if their firms caused or suffered damages in the past, but also if they possess personal insurances, thus treating them as substitutes for firm insurance. Since SMEs represent a very important part not only of the Italian economy but also of the economy of many other countries, analyzing their insurance-related decisions is relevant because understanding the determinants that may lead entrepreneurs to mitigate the risks they face is beneficial not only for them and their firms but also for the economy as a whole.
Jahidur Rahman, Yu Fang
Risk Governance and Control: Financial Markets and Institutions, Volume 9, pp 41-48; doi:10.22495/rgcv9i4p4

Abstract:The purpose of this study is to investigate the relationship between corporate social responsibility and firm performance in China. We have used the sample of A-share listed firms from Shenzhen and Shanghai Stock Exchange for the period 2011 to 2017. We used pooled ordinary least squares (OLS) regression as a baseline methodology. We find that corporate social responsibility has a significantly positive effect on firm performance in China. Our results suggest that Chinese companies having better financial performance undertake more CSR reporting. This paper contributes to the existing literature by investigating the effect of firm performance on CSR reporting of Chinese listed companies.
Guan-Chih Chen, Shuling Tsao, Ren-Her Hsieh, Pan Hu
Risk Governance and Control: Financial Markets and Institutions, Volume 9, pp 20-29; doi:10.22495/rgcv9i4p2

Abstract:An increasing number of commercial banks in China began to pay attention to comprehensive risk management after the global financial crisis. With the accelerated pace at which China’s commercial banks are expanding abroad, establishing a comprehensive risk management system appropriate for the international financial market has become a critical hurdle for these banks’ further development. This paper explores the impact of risk management on the financial performance of listed banks in China, comparing state-owned banks and non-state-owned banks, by establishing multiple linear regression analysis models. The results reveal a significant impact on the financial performance of state-owned commercial banks, such as on insolvency risk index, loan-to-deposit ratio, nonperforming loan ratio, and bank size. Insolvency risk index and bank size are found to positively impact state-owned commercial banks’ financial performance. For non-state-owned banks, capital adequacy ratio, nonperforming loan ratio, and bank size have significantly impact financial performance, with bank size positively influencing financial performance.
Vittorio Boscia, Valeria Stefanelli, Benedetta Coluccia, Federica De Leo
Risk Governance and Control: Financial Markets and Institutions, Volume 9, pp 30-40; doi:10.22495/rgcv9i4p3

Abstract:In international contexts, a key role has been assigned to sustainable finance for the achievement of climate change mitigation objectives. In the context of environmental finance, this contribution focuses on the tool of green bonds, framing the regulators’ perspective and the principles of (self) regulation that describe the process of issuing, evaluating and reporting for the transparency and efficiency of the financial market. The previous studies, in fact, neglected the theme of the rules despite the numerous interventions of the institutions in this field and despite the fact that the theory of market efficiency underlines the crucial role of the rules for the protection of investors and the transparency of the market. In particular, knowing the regulatory framework makes possible to highlight the system of incentives and protections for issuers and investors in the segment of listing and trading of securities. From our analysis, it emerged that the current voluntary regulatory system is still far from ensuring an adequate level of transparency to investors. However, the report published by the EU Commission, containing the proposal to introduce common criteria for the issuance of green bonds in Europe, seems to promote greater protection for the underwriters, leaving more room for the development of green investments. The present study concerns a preliminary analysis, necessary for subsequent investigations aimed at evaluating the convenience of green bonds compared to other segments of bonds listed on the European market.
Christos Kallandranis
Risk Governance and Control: Financial Markets and Institutions, Volume 9, pp 8-19; doi:10.22495/rgcv9i4p1

Abstract:Trust is considered a cornerstone in binding the society, the economy and the politics altogether. The rationale of trust takes into account the importance of both individual factors and social and institutional structures. However, since the onset of the crisis, net trust in institutions has generally declined. The literature has shown that economic and other macro-variables matter for trust in institutions along with individual characteristics. However, there is no systematic evidence on the impact of credit ratings and bailouts. Hence by employing a probit model and using the Eurobarometer survey from 2000 to 2014, this study focuses on rating episodes and bailouts while controlling for individual-level influences. Along with socio-demographic factors and economic conditions, rating episodes and bail-out plans are seen to reduce the tendency of people to trust.
Mireille Chidiac El Hajj, Giorgia Mattei
Risk Governance and Control: Financial Markets and Institutions, Volume 9, pp 4-6; doi:10.22495/rgcv9i3editorial