Journal of Financial Risk Management

Journal Information
ISSN / EISSN : 2167-9533 / 2167-9541
Current Publisher: Scientific Research Publishing, Inc. (10.4236)
Total articles ≅ 199
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Latest articles in this journal

Rugangira Paul Kato
Journal of Financial Risk Management, Volume 10, pp 54-79; doi:10.4236/jfrm.2021.101004

This paper investigates the relation between market discipline and bank risk-taking for Tanzanian commercial banks during the period 2009-2017. In the fixed effect (within) estimator, it uncovers mixed results. It found some support that market discipline exists and via interbank deposit reduced bank risk (i.e. credit risk). Contrary to expectation, the finding exhibits that the link between the interaction of market discipline and bank capital on bank risk is negative and statistically significant. It is also evident that bank capital, off-balance items, and size better explain the variation in bank risk. The results serve as a policy hint to banks’ regulators and policymakers in strengthening market discipline framework for the reduction of bank risk-taking.
Rocheny Sifrain
Journal of Financial Risk Management, Volume 10, pp 80-99; doi:10.4236/jfrm.2021.101005

This paper investigates the factors of the banking stability in Haiti, over the period of 1996 to 2017, using macroeconomic, government and institutions, banking system, and economic freedom factors measured respectively by GDP growth and exchange rate, political stability index and regulatory quality index, bank lending-deposit interest rate spread, property rights index and investment freedom index. To carry out the analysis, the yearly data have been transformed into quarterly data, giving a sample of 88 observations. By means of OLS regressions, six statistical models have been specified. Banking stability which is the response variable is measured by the z-score. The results suggest that macroeconomic and economic freedom factors have positive effects on the banking stability, while the banking system factor impacts negatively the banking stability in Haiti. Conversely, government and institutions factor has no significant impact on the Haitian banking stability. When it comes to assess the impact of each explanatory variable (GDP growth, exchange rate, political stability index, regulatory quality index, bank lending- deposit interest rate spread, property rights index and investment freedom index) on banking stability, the results show that they all have significant effects on the Haitian banking stability. However, when all of the independent variables are analyzed in one multiple regression together, the political stability index is not statistically significant. The findings of this study have important implications for decision makers. Governments and the Central Bank should intensity their efforts in creating a promising macroeconomic environment, adopting effective monetary policy, reducing restrictions in investment and reinforcing laws to protect property rights, in order to maintain or improve banking stability in Haiti.
Dewundara Liyanage Prasath Manjula Rathnasingha, Nayomi Weerasinghe
Journal of Financial Risk Management, Volume 10, pp 25-39; doi:10.4236/jfrm.2021.101002

The investment banks, brokerage houses, and pension funds spend large amounts of capital to hire security analysts to predict earnings, stock recommendations, and target prices for their customers and public investors. These observations raise a compelling empirical motivation for the researcher to investigate Do Sell-Side Security Analysts (SSSA) can forecast earnings, stock recommendations, target prices, and particularly consensus prices (average target prices) accurately. The population of the study includes public listed companies in Colombo Stock Exchange which are of interest to the SSSA in their equity research studies but all the listed companies cannot be considered as the population since there are companies that haven't used in the stock market research or equity research studies of the brokering firms. The number of companies qualifying for the study is based on the sample selection criteria to limit the analysis to a realistic level. There are 22 listed companies, qualified for the study from 2012 to 2018. In calculating monthly stock returns, the researcher assumes that any form of declaration of remittances such as dividends, bonus issues, stock splits, and right issues encourage investors to purchase the stock and it causes the price of a stock to increase. In general, the increase is about equal to the amount of the benefit, however, the actual price change is based on market activity. Finally, the results of hypothesis testing through multiple regression models discuss to achieve the research objectives. The findings of the study have important implications for diverse users to formulate their future policy decisions for the development of the stock market and the economy. The investigation reveals that there is a statistically significant positive relationship between Rit and RCP.
Asiedu Michael, Nana Adwoa Anokye Effah, Tchuiendem Nelly Joel, Agyeiwaa Owusu Nkwantabisa
Journal of Financial Risk Management, Volume 10, pp 1-24; doi:10.4236/jfrm.2021.101001

In this study, we employed the dynamic autoregressive distributed lag bounds test, co-integration test and granger causality test to examine the long-run and short run interrelationship among financial deepening, stock market development and economic growth for eight (8) countries in Africa using annual data for the period 1996-2019 to establish the interrelationship between Africa’s developing capital markets and the real side of their economies. While we found the series in five countries (Nigeria, Algeria, Namibia, Kenya and Mauritius) to be co-integrated; three other countries were not. The result from the granger causality test established bi-directional causality between economic growth (lnGDP) and stock market development (STMCAP/GDP) in Algeria, Namibia and Mauritius as the remaining five countries recorded only unidirectional causality from economic growth (lnGDP) to stock market development (STMCAP/GDP). Our panel analysis revealed a positive relationship between stock market development (STMCAP/GDP) and financial deepening (M2/GDP). There is a positive relationship between economic growth (lnGDP) and financial deepening (M2/GDP) for all the countries except for Eswatini and Mauritius. Further analysis of the interrelationship with economic growth (lnGDP) as dependent variable found significant and varying results for the time series across countries. However, the results from the panel regression found no significant effect from both financial deepening (M2/GDP) and stock market development (STMCAP/GDP) in Africa. To this end, we recommend swift and systematic reforms tailored towards improving the efficiency for their capital markets.
Solongo Chuluunbat
Journal of Financial Risk Management, Volume 10, pp 40-53; doi:10.4236/jfrm.2021.101003

This paper looks into the financial advancements made by Mongolia over the 20th century towards the 21st century. It also looks into the global financial trends with an insight into the various factors contributing to the changes and developments in the global financial sector. It has analyzed the financial situation of Mongolia in the 20th century and how it has changed through various reforms and revolutionary measures in the 21st century. Various financial indicators have been compared between the last century and this century to identify the advancements made in the financial industry. It has identified various challenges in the financial sector of Mongolia and offered recommendations on how to solve these challenges.
Meiyi Zhou, Lianqian Yin
Journal of Financial Risk Management, Volume 9, pp 23-43; doi:10.4236/jfrm.2020.91002

Michael Asiedu, Emmanuel Owusu Opong, Orazgylyjova Gulnabat
Journal of Financial Risk Management, Volume 9, pp 252-267; doi:10.4236/jfrm.2020.93014

For a better insight and understanding of how monetary policy and the financial market in less developed countries such as those in Africa are interrelated; there is a need to also understand and appreciate the fundamentals of these economies and the associating imperfections within their financial systems due to the fact that they are less liberalized, relatively young, highly illiquid, logistically constrained among others. This study is a comprehensive analysis of the dynamics in stock market performance following changes in monetary aggregates in ten (10) selected African countries from 1993 to 2019. We adopted three stock market performance indicators; namely S & P global equity index, stock turnover and stock market capitalization as dependent variables and inflation, broad money growth, exchange rate, real interest rate and commercial bank and lender serving as independent variables. We then employed the random effect model based on our results from the Hausman test and VECM after co-integration was established among the variables. The study established the presence of a monetary transmission mechanism following changes in money supply. We found that growth in broad money positively affects the stock market performance through the interest rate channel. Interest rate and inflation recorded negative effects on stock market performance indices. We also found that changes in monetary policy are highly significant in stock market performance in the West African market due to the relatively high level financial openness in the countries under consideration.
Kafeel, Javed Ali, Maaz Ud Din, Abdul Waris, Muhammad Tahir, Sher Khan
Journal of Financial Risk Management, Volume 9, pp 494-517; doi:10.4236/jfrm.2020.94027

This paper examines the impact of working capital management on firm’s profitability performance of manufacturing firms by using not only static models such as ordinary least square (OLS), fixed and random effects but also dynamic models difference generalized method of moments (GMM) and system generalized method of moments (SGMM) over the period from 2007 to 2018. The performance was measured in terms of profitability by return on the asset as a dependent variable and the working capital management was determined by inventory conversion cycle (ICP), receivable collection period (RCP), payable deferral period (PDP) and cash conversion cycle (CCC) as an explanatory variables. This study only presents the results of System GMM model, due to efficient system estimator and producing statistically significant outcome. The results show that inventory conversion period (ICP) and payable deferral period (PDP) have a positive relationship with return on asset while the cash conversion cycle (CCC) has a negative effect on return on assets, whereas receivable collection period (RCP) is positive but statistically insignificant. This paper results suggest that pay suppliers prolong and collecting payments from customers earlier, moreover cement firms could add value by improving their cash conversion cycles. Furthermore, managers can create value for shareholders by reducing inventory and receivable accounts. This paper adds new knowledge to current literatures by examining the effect of working capital management on profitability in the context of an emerging capital market of Pakistan.
Ernest Yeboah Boateng, Paul K. Yeboah, Isaac Christopher Otoo, Joseph Otoo
Journal of Financial Risk Management, Volume 9, pp 377-389; doi:10.4236/jfrm.2020.94020

The Vector Error Correction (VEC) model was used to assess the impact of monetary policy rate on commodity prices in Ghana. Monthly data on monetary policy rate, commodity prices of cocoa, gold and crude oil from January 2005 to December 2017 obtained from the Bank of Ghana was used for the study. The estimated VEC model aided in establishing long and short run relationships between monetary policy rates and the major commodity prices in Ghana. The study revealed that in the long run, monetary policy rates are negatively correlated to crude oil prices, positively correlated to both cocoa prices and gold prices but to a little extent. It was also evident from the study that in the short run, the first lag of monetary policy rate is negatively related to itself and the second lag of monetary policy rate is positively related to itself. Additionally, the first and second lagged periods of cocoa price have positive influence on monetary policy rate in the short run, but the first and second lagged periods of gold price have negative influence on monetary policy rates in the short run. The Granger causality test also reveals that the movement of cocoa prices in Ghana can be explained to cause the movement of monetary policy rates and gold prices in short run. A positive shock in monetary policy rate will have a positive and persistent effect on itself. Likewise, positive shock in monetary policy rate will have a positive and persistent effect on cocoa prices. The response generated from a positive shock on monetary policy rate has a persistent and decreasing effect on both crude oil and gold prices.
Riad Makdissi, Anita Nehme, Rachelle Chahine
Journal of Financial Risk Management, Volume 9, pp 1-22; doi:10.4236/jfrm.2020.91001

Entrepreneurs are faced with complex financial decisions to turn their businesses around. They make financial decisions in the form of savings, investment and retirement planning, which makes financial culture crucial in business financing decisions and subsequent performance. Decisions made by SME owners need to be madse with a certain level of expertise, which requires financial knowledge, behaviors and attitudes that will enhance the financial performance of the business. The purpose of this research is to know the influence of financial culture on the SMEs’ financial performance in Lebanon. The survey made it possible to deduce the relationship between the financial culture and the financial performance.
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