Risk Governance and Control: Financial Markets and Institutions

Journal Information
ISSN / EISSN : 2077-429X / 2077-4303
Published by: Virtus Interpress (10.22495)
Total articles ≅ 498
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Latest articles in this journal

Risk Governance and Control: Financial Markets and Institutions, Volume 12, pp 8-26; https://doi.org/10.22495/rgcv12i2p1

In their studies, Loughran, Ritter, and Rydqvist (1994), Fan, Wong, and Zhang (2007), Chi and Padgett (2005) as well as Ritter (1991) show differences in the regional characteristics of underpricing and overpricing in initial public offerings (IPOs). Our study analysis the regional differences in the influencing factors of underpricing or overpricing based on a systematic literature review that is focused on the Chinese and the U.S. capital markets. Therefore, following the systematic literature review protocol, it was possible to select 38 papers published between 1988 and 2019. Our results show that stock market-specific factors are crucial for regional differentiation. Results on the correlation between stakeholder- and issuance-specific factors are at least partially contradictory. The uniformly identified correlations of stakeholder and issuance factors diverge only slightly in both markets. The investigation of the influencing factors mentioned in the studies also reveals the causal relationship that the IPO return phenomenon of underpricing is influenced by site-exclusive and site-independent factors, whereas overpricing is primarily influenced by site-independent factors. We thus close an existing research gap and satisfy an important information need of issuers and investors.
Risk Governance and Control: Financial Markets and Institutions, Volume 12, pp 4-6; https://doi.org/10.22495/rgcv12i1editorial

The editorial team is delighted to present the first issue of the journal Risk Governance and Control: Financial Markets and Institutions in 2022. This issue contains six interesting papers dealing with up-to-date subjects in accounting, macroeconomics, economic policy, and innovation, which are analyzed from an original perspective. In particular, these six papers focus on environmental accounting, hidden champion companies, transitional economy, economic growth and taxation, Fintech companies, foreign direct investments, and export diversification.
Gladys Gamariel, Mapeto Bomani, Lucky Musikavanhu, James Juana
Risk Governance and Control: Financial Markets and Institutions, Volume 12, pp 74-89; https://doi.org/10.22495/rgcv12i1p6

This study examines the individual and interactive impact of foreign direct investment (FDI), domestic production structure, infrastructure, natural resource endowment, and fiscal incentives on export diversification. The econometric estimation is based on a dynamic systems general method of moments (sGMM) analysis using panel data from 44 Sub-Sahara African (SSA) countries. The study finds a positive export-diversifying effect of FDI in SSA suggesting that FDI has an influence on the composition of export baskets in host economies. Furthermore, diversifying production sectors, credible institutions, and macroeconomic stability are essential for promoting export diversification, while landlockedness and natural resource endowments contribute to export concentration. The study finds that the FDI’s impact on export diversification is reinforced by better access to infrastructure and fiscal incentives to foreign investors in special economic zones (SEZs). The latter results compare with findings by Farole and Moberg (2017), while the importance of infrastructure in export diversification is emphasised by Fosu (2021). The findings from this study are particularly important to SSA economies that other than having highly concentrated export baskets have in recent years faced declines in FDI albeit limited domestic capital and government resources needed to propel export diversification. SSA economies must focus on efforts to attract more FDI possibly through regulatory reforms that grant foreign investors fiscal incentives for investing in targeted sectors and operating in SEZs.
Zakia Siddiqui, Claudio Andres Rivera
Risk Governance and Control: Financial Markets and Institutions, Volume 12, pp 63-73; https://doi.org/10.22495/rgcv12i1p5

This research aims to suggest a definition of FinTech, stating its main attributes based on the theoretical development of the field in academia. A systematic literature review (SLR) with the qualitative content analysis (QCA) method analyses about 22 research papers. These papers were selected based on the number of citations and their metrics, such as impact factors. After analyzing the literature, a definition of FinTech ecosystem is suggested with the roles played by stakeholders, for instance, lawmakers, information technology (IT) companies, traditional financial institutions, financial customers and investors affecting FinTech. This definition considers the framework offered by Au and Kauffman (2008). Further, the authors identify FinTech as a disruptive innovation and outline the main business models where FinTech operate blockchain, crowdfunding, payments, insurance, wealth and asset management, big data analysis, and application programming interface (API) are discussed with the roles they play. Lastly, competitive advantages and challenges encountered by FinTech are discussed which is an extension of work by Gomber, Koch, and Siering (2017). Further research can be done to understand the nature of each FinTech category and see the impact of regulations and collaborations on the economy and society.
Arata Yaguchi
Risk Governance and Control: Financial Markets and Institutions, Volume 12, pp 46-62; https://doi.org/10.22495/rgcv12i1p4

The global economy grew by 2.8 times from 1997 to 2019. Meanwhile, Japan’s economy grew by only 15%. Even heavily sanctioned countries such as North Korea, Venezuela, and Iran, grew by 60%, 75%, and 5.6 times respectively during the same period of time. Even war-torn countries such as Somalia, Libya, and Afghanistan, grew by 26%, 80%, and 6.5 times respectively (United Nations Statistics Division1). Japan was the second largest economy in the world in 1997. However, Japan’s growth rate has been the worst in the world since then. What has happened to the country? Japan’s economy began to slow down in the fiscal year (FY) 1990 and reached negative growth from FY 1997. After that, thanks to unprecedented monetary easing and enormous-scale fiscal spending, Japan’s nominal gross domestic product (GDP) reached a record high in FY 2016 for the first time in 19 years; however, more easing and more fiscal spending can no longer be expected. Because Japan’s tax revenue effectively peaked in FY 1990 and that caused a huge budget deficit and accumulated public debt. And this made the social security system in jeopardy. Japan’s strength until the 1980s was neither a coincidence nor a miracle; it was the tax system that supported the economy and public finances well. At that time, there was no consumption tax that levies on sales no matter how the economic condition is, while the income tax which is the fruit of production was highly progressive. The corporate tax rate was also high. This allowed people to compete in a more equal environment, which resulted in higher productivity and consequently higher tax revenue. The tax reform of FY 1989 destroyed Japan’s economy. In the face of higher inflation coupled with a weaker yen, another tax reform that goes back to the pre 1989 system is urgently needed. The tax system is the foundation of a country. This paper may give a clue to how to solve your own country’s problems as well.
Sabrina Spallini, Antonia Rosa Gurrieri, Karola Sheu
Risk Governance and Control: Financial Markets and Institutions, Volume 12, pp 33-45; https://doi.org/10.22495/rgcv12i1p3

The aim of this paper is to investigate Albanian registered trademarks to understand the characteristics of a successful trademark in a transition economy. In order to verify the research hypothesis on the characteristics of the trademarks (Crass, Czarnitzki, & Toole, 2019) as key indicator of success, we use linear regression on a dataset set based on taxonomy of the legal status of applications and the registration of the trademarks in Albania. Our empirical analyses are based on data from the DPPI (Drejtoria e Përgjithshme e Pronësisë Industriale), Albanian Central Intellectual Property Office, for the period 1994–2019. The findings show evidence of the choice of the trademark name as a critical success factor as well as the characteristics of the activities, as the trademarks used in different product contests or corporate trademark strategies (Antwi, Carvalho, & Carmo, 2021). These results could be relevant both to firms implementing branding strategies and to analysts or policymakers analysing markets in transition economies.
Nail Sariyev, Janka Táborecká-Petrovičová
Risk Governance and Control: Financial Markets and Institutions, Volume 12, pp 21-32; https://doi.org/10.22495/rgcv12i1p2

The purpose of the paper is to review and evaluate the performance of a specific type of globally successful innovative company introduced to scientific literature as “hidden champion” by Simon (1990), using a combination of traditional financial key performance indicators (KPIs) with the modern evaluation method of the European Foundation for Quality Management (EFQM) model. The results showed that there are many areas in the selected company where EFQM allows building an effective management system, applied as a benchmarking tool for using the experience of leading companies. The joint utilisation of the KPIs and the EFQM model helps to create an objective picture and evaluate the organization in a relatively complex way. This paper provides in-depth insights into the application of new models in practice that are still scarce and may serve as a base for further research realized on larger samples. This work shows for the first time the application of EFQM commonly used in large organizations, for the special category of small and medium-size enterprises (SMEs) companies called “hidden champions” (HCs). In general, there is a lack of studies in domestic literature devoted to the concept of “hidden champions”. This paper contributes to this field from the perspective of quality management, and it provides also valuable insight for practice.
Sami Salem Elhossade, Akram Ali Zoubi, Ali Awad Zagoub
Risk Governance and Control: Financial Markets and Institutions, Volume 12, pp 8-20; https://doi.org/10.22495/rgcv12i1p1

The use of environmental management accounting (EMA) benefits organisations by providing them with different information for decision-making (Burritt, Hahn, & Schaltegger, 2002; Adams & Zutshi, 2004; International Federation of Accountants IFAC, 2005). EMA has received increasing attention since 2000 and is now considered an effective tool for dealing with environmental issues and the economic performance of companies and countries (Elhossade, Abdo, & Mas’ud, 2021). This paper purposes to present an empirical case for research in EMA. The paper provides an analysis of the current status of EMA practices in manufacturing companies operating in Libya and identified the barriers preventing such practices. Data were collected from a sample of companies in Libyan manufacturing industry contexts utilizing a questionnaire survey. To analyse these data, two statistical techniques were employed: factor analysis and descriptive tools analysis. The current level of EMA adoption among manufacturing companies in Libya was found to be low. The findings of the study reveal that institutional barriers constituted the greatest obstacle to the adoption of EMA in manufacturing companies in Libya. This was followed by management barriers, informational barriers, financial barriers, and, lastly, attitudinal barriers. This paper concluded that Libyan universities should include EMA in the management accounting syllabus, provide books, and conduct research into practices related to EMA. Furthermore, the Libyan government and other stakeholders should play an active role in enacting and enforcing further strict environmental regulations and laws. This would be useful, as it would increase the concern of local communities about environmental issues; this would, in turn, make companies more concerned about improving their environmental performance.
Andrey Afanasiev, Olga Kandinskaia
Risk Governance and Control: Financial Markets and Institutions, Volume 11, pp 26-37; https://doi.org/10.22495/rgcv11i4p2

The digital transformation of finance has been significantly facilitated by the COVID-19 pandemic, and it has become the dominant trend and the driving force of development in the upcoming years. The digital transformation brings not only benefits to financial markets, people, companies, and institutions, but it also results in dramatic changes of the underlying risks. The nature, mechanisms, and scale of financial crises are bound to change substantially. The paper develops a new, forward-looking approach to financial crises research. We build further upon the multidisciplinary research agenda on digital transformation by Verhoef et al. (2021). Achieving a bright digital future requires knowing and managing the adverse effects of digitalisation (Clim, 2019; Dickson, 2019; Gimpel & Schmied, 2019). Our literature search has not found any studies on digital transformation risks as a key policy to prevent future financial crises. The purpose of this paper is to examine the existing system of risks monitoring, to analyse changes in risks due to the digital transformation in finance, and to provide policymakers with insights regarding the related evolution of risks. This paper is a policy analysis type of research containing a systematic overview of risk assessment reports at the global and the EU levels.
Mfon Akpan, Guneet Dhillon, Kim Trottier
Risk Governance and Control: Financial Markets and Institutions, Volume 11, pp 8-25; https://doi.org/10.22495/rgcv11i4p1

The purpose of this paper is to improve our understanding of the relationship between share price and accounting information. Much of the literature utilizes the earnings number to reflect firm value. However, the revenue number seems more relevant for high tech firms (Xu, Cai, & Leung, 2007), and cash flow figures are more informative for internet companies (Romanova, Helms, & Takeda, 2012). We build on this notion that share price may map out to different accounting numbers for different firms. We collect 629 accounting metrics for 3,365 firms in the U.S. and estimate their correlation with the firms’ share price. We analyze these correlations and find that many firms exhibit a low correlation between share price and earnings. Other accounting numbers are important for these firms, including book value of net assets, retained earnings, stock options, gain or loss items, special or non recurring items, and dividend rates. We are curious to learn what causes firms to anchor onto different metrics, therefore perform a cluster analysis to group similar firms together along three key accounting metrics. We examine the composition of each cluster and find that capital structure, dividend patterns, the persistence of operations, age, and industry can influence which accounting number is correlated with firm value. We encourage other researchers to continue this exploration as there are many interesting questions to answer.
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