Pub Date : 2020-01-01DOI: 10.35944/jofrp.2020.9.1.001
Vu Thi Thanh Binh, Nhat-Minh Tran, Do Minh Thanh, Nguyễn Thị Hồng Nga
Improving the quality of accounting information systems through accountant resources is beneficial to the performance and sustainable development of SMEs. This study investigated the impact of accountant resources on the quality of accounting information systems in Vietnamese SMEs. Accounting information system quality was measured by a multidimensional scale including system quality, information quality, and usefulness. The study tested hypotheses using Path analysis of Structural Equation Model based on 434 respondents. The findings indicated a strong interaction between the components of the accounting information system quality under the effect of accountant resources. The results showed a positive direct effect of accountant resources on system quality and the path analysis results also revealed an influence of accountant resources on information quality and usefulness via mediating variables. The results highlighted the importance of accountant resources for the quality of accounting information systems. This study contributed theoretically to the non-financial indicator for measuring accounting information system quality.
{"title":"Impact of Accountant Resource on Quality of Accounting Information System: Evidence from Vietnamese Small and Medium Enterprises","authors":"Vu Thi Thanh Binh, Nhat-Minh Tran, Do Minh Thanh, Nguyễn Thị Hồng Nga","doi":"10.35944/jofrp.2020.9.1.001","DOIUrl":"https://doi.org/10.35944/jofrp.2020.9.1.001","url":null,"abstract":"Improving the quality of accounting information systems through accountant resources is beneficial to the performance and sustainable development of SMEs. This study investigated the impact of accountant resources on the quality of accounting information systems in Vietnamese SMEs. Accounting information system quality was measured by a multidimensional scale including system quality, information quality, and usefulness. The study tested hypotheses using Path analysis of Structural Equation Model based on 434 respondents. The findings indicated a strong interaction between the components of the accounting information system quality under the effect of accountant resources. The results showed a positive direct effect of accountant resources on system quality and the path analysis results also revealed an influence of accountant resources on information quality and usefulness via mediating variables. The results highlighted the importance of accountant resources for the quality of accounting information systems. This study contributed theoretically to the non-financial indicator for measuring accounting information system quality.","PeriodicalId":37351,"journal":{"name":"ACRN Journal of Finance and Risk Perspectives","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70083574","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-07-18DOI: 10.35944/JOFRP.2019.8.2.001
O. Lehner, Susanne Leitner-Hanetseder, Christoph Eisl
Digital Accounting has found its way into the everyday language used by accounting practitioners, with the Big 4 auditing companies pouring massive resources into the digitalisation of accounting processes in order to create an early-mover business advantage. With this special issue, we thus like to invite and motivate the community of scholars interested in digital accounting to collaborate, to take in the various field-specific perspectives and to finally holistically map and delineate the field of digital accounting. For this, we propose an early framework and a research agenda that may unite and guide researchers towards a holistic understanding of the field.
{"title":"The Whatness of Digital Accounting: Status Quo and Ways to move forward","authors":"O. Lehner, Susanne Leitner-Hanetseder, Christoph Eisl","doi":"10.35944/JOFRP.2019.8.2.001","DOIUrl":"https://doi.org/10.35944/JOFRP.2019.8.2.001","url":null,"abstract":"Digital Accounting has found its way into the everyday language used by accounting practitioners, with the Big 4 auditing companies pouring massive resources into the digitalisation of accounting processes in order to create an early-mover business advantage. With this special issue, we thus like to invite and motivate the community of scholars interested in digital accounting to collaborate, to take in the various field-specific perspectives and to finally holistically map and delineate the field of digital accounting. For this, we propose an early framework and a research agenda that may unite and guide researchers towards a holistic understanding of the field.","PeriodicalId":37351,"journal":{"name":"ACRN Journal of Finance and Risk Perspectives","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-07-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43570948","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Special Issue Digital Accounting","authors":"","doi":"10.35944/jofrp.2019.8.2","DOIUrl":"https://doi.org/10.35944/jofrp.2019.8.2","url":null,"abstract":"","PeriodicalId":37351,"journal":{"name":"ACRN Journal of Finance and Risk Perspectives","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70083523","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-01-01DOI: 10.35944/jofrp.2019.8.1.009
Navitha Singh Sewpersadh
Presently, the oversight role performed by the governing board has been interrogated due to the demise of several corporate giants. The governing board is responsible for advancing the strategic direction of the company by ensuring superior performance whilst managing risks. Accordingly, this study investigated whether the governing board has any influence on a firm’s profitability by using OLS and GMM estimation on an unbalanced panel of 130 firms over a six-year period. ROA served as a proxy for firm performance and several board-level governance variables were selected namely board size, board independence, CEO duality, director qualifications, and board interlocks. From an econometric contribution, this study found that the addition of instrument variables in the GMM estimation model has proven to be robust in examining corporate governance variables. GMM is also robust in controlling endogeneity and a possible bi-directional causality between board and profitability. From a theoretical contribution, agency, resource dependence and management hegemony theories are highly prevalent in the governing boards of the JSE. The results of this study are as envisaged in the SCP paradigm. All hypotheses were supported, showing overall that profitability is significantly influenced by the board attributes. This study provides a useful analysis of the theoretical framework used by academic writers as a foundation for model specification as well as contributes to the econometric methodology of corporate governance. These findings will also advise future researchers, stakeholders and regulators in better understanding the role of board composition from a profit maximisation and sustainability outlook.
{"title":"Governing Board Attributes as Profitability Influencers under Endogeneity: An Econometric Analysis in South Africa","authors":"Navitha Singh Sewpersadh","doi":"10.35944/jofrp.2019.8.1.009","DOIUrl":"https://doi.org/10.35944/jofrp.2019.8.1.009","url":null,"abstract":"Presently, the oversight role performed by the governing board has been interrogated due to the demise of several corporate giants. The governing board is responsible for advancing the strategic direction of the company by ensuring superior performance whilst managing risks. Accordingly, this study investigated whether the governing board has any influence on a firm’s profitability by using OLS and GMM estimation on an unbalanced panel of 130 firms over a six-year period. ROA served as a proxy for firm performance and several board-level governance variables were selected namely board size, board independence, CEO duality, director qualifications, and board interlocks. From an econometric contribution, this study found that the addition of instrument variables in the GMM estimation model has proven to be robust in examining corporate governance variables. GMM is also robust in controlling endogeneity and a possible bi-directional causality between board and profitability. From a theoretical contribution, agency, resource dependence and management hegemony theories are highly prevalent in the governing boards of the JSE. The results of this study are as envisaged in the SCP paradigm. All hypotheses were supported, showing overall that profitability is significantly influenced by the board attributes. This study provides a useful analysis of the theoretical framework used by academic writers as a foundation for model specification as well as contributes to the econometric methodology of corporate governance. These findings will also advise future researchers, stakeholders and regulators in better understanding the role of board composition from a profit maximisation and sustainability outlook.","PeriodicalId":37351,"journal":{"name":"ACRN Journal of Finance and Risk Perspectives","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70083677","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-01-01DOI: 10.35944/jofrp.2019.8.1.010
Rezki Ananda Mulia, J. Joni
In this paper, we investigate the effect of Corporate Social Responsibility (CSR) on risk taking in Indonesia. We hand collect CSR and other corporate governance data from 2016-2017 for publicly listed firms on the Indonesian Stock Exchange (IDX). The results, based on 820 firm-year observations, suggest that CSR activity is negatively related to corporate’s risk. This means the presence of CSR activity is positively perceived by stakeholders. Therefore, it reduces operating and market risks of the company. Also, we test for endogeneity and the main findings remain similar.
{"title":"Corporate Social Responsibility (CSR) and Risk Taking: Evidence from Indonesia","authors":"Rezki Ananda Mulia, J. Joni","doi":"10.35944/jofrp.2019.8.1.010","DOIUrl":"https://doi.org/10.35944/jofrp.2019.8.1.010","url":null,"abstract":"In this paper, we investigate the effect of Corporate Social Responsibility (CSR) on risk taking in Indonesia. We hand collect CSR and other corporate governance data from 2016-2017 for publicly listed firms on the Indonesian Stock Exchange (IDX). The results, based on 820 firm-year observations, suggest that CSR activity is negatively related to corporate’s risk. This means the presence of CSR activity is positively perceived by stakeholders. Therefore, it reduces operating and market risks of the company. Also, we test for endogeneity and the main findings remain similar.","PeriodicalId":37351,"journal":{"name":"ACRN Journal of Finance and Risk Perspectives","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70083717","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-01-01DOI: 10.35944/jofrp.2019.8.1.007
M. S. Gassouma
Problem/Relevance: This paper deals with such market disciplinary factors as shareholder ownership, audit committee composition and Basel III prudential regulation affecting accounting manipulation measured by abnormal accruals in Tunisian banks in the event of managerial deviation from regulatory requirements Research Objective/Questions : The aim of this study is to estimate the abnormal accruals that measure the accounting manipulation, and to test the effect of disciplinary and regulatory factors accordingly to The spring Arab revolution, on accounting Manipulation. Methodology: We propose to construct abnormal accruals as an endogenous variable, using the classic Kothari model (2005), in order to explain them by means of the “difference-in-difference” estimation approach (DID), understand the significance of the evolution of the manipulation, and explain these accruals using internal and external disciplinary factors. On the other hand, we use the credit risk portfolio manipulation theory advocated by Nessim (2003) and Repullo (2007), to understand the concept of actual venture capital of Tunisian banks after the Arab Revolution. Major Findings : The results show that the situation of Tunisian banks has dramatically worsened since the Tunisian Revolution. The DID approach showed an exacerbation of abnormal accruals and a manipulation transfer from net income smoothing to credit portfolio value smoothing in order to reach a healthy financial situation. This aggravation is linked to the market discipline deterioration, the shareholders, the external auditors and the supervisory board. Implications : Before the Revolution, accounting manipulation was mainly caused by banking undercapitalization that led managers to offer more risky credit in a diluted ownership market and in an informational asymmetry situation characterized by the absence of the audit committee. After the Revolution, accounting manipulation resulted from an overcapitalization situation, which led managers to grant more risky credit. To circumvent the shareholders’ supervisory power, managers manipulated credit portfolio values, offering a low level of credit risk, and circulating false beliefs for shareholders and depositors. This was done when prudential supervision was weak, leading to an information asymmetry and long-term conflict of interest between external auditors and managers through abnormal remuneration and a long relationship.
{"title":"Abnormal accounting accrual Management by internal and external Market Discipline: The case of Tunisian banks in the context of the ‘Arab Spring’","authors":"M. S. Gassouma","doi":"10.35944/jofrp.2019.8.1.007","DOIUrl":"https://doi.org/10.35944/jofrp.2019.8.1.007","url":null,"abstract":"Problem/Relevance: This paper deals with such market disciplinary factors as shareholder ownership, audit committee composition and Basel III prudential regulation affecting accounting manipulation measured by abnormal accruals in Tunisian banks in the event of managerial deviation from regulatory requirements Research Objective/Questions : The aim of this study is to estimate the abnormal accruals that measure the accounting manipulation, and to test the effect of disciplinary and regulatory factors accordingly to The spring Arab revolution, on accounting Manipulation. Methodology: We propose to construct abnormal accruals as an endogenous variable, using the classic Kothari model (2005), in order to explain them by means of the “difference-in-difference” estimation approach (DID), understand the significance of the evolution of the manipulation, and explain these accruals using internal and external disciplinary factors. On the other hand, we use the credit risk portfolio manipulation theory advocated by Nessim (2003) and Repullo (2007), to understand the concept of actual venture capital of Tunisian banks after the Arab Revolution. Major Findings : The results show that the situation of Tunisian banks has dramatically worsened since the Tunisian Revolution. The DID approach showed an exacerbation of abnormal accruals and a manipulation transfer from net income smoothing to credit portfolio value smoothing in order to reach a healthy financial situation. This aggravation is linked to the market discipline deterioration, the shareholders, the external auditors and the supervisory board. Implications : Before the Revolution, accounting manipulation was mainly caused by banking undercapitalization that led managers to offer more risky credit in a diluted ownership market and in an informational asymmetry situation characterized by the absence of the audit committee. After the Revolution, accounting manipulation resulted from an overcapitalization situation, which led managers to grant more risky credit. To circumvent the shareholders’ supervisory power, managers manipulated credit portfolio values, offering a low level of credit risk, and circulating false beliefs for shareholders and depositors. This was done when prudential supervision was weak, leading to an information asymmetry and long-term conflict of interest between external auditors and managers through abnormal remuneration and a long relationship.","PeriodicalId":37351,"journal":{"name":"ACRN Journal of Finance and Risk Perspectives","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70083585","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-01-01DOI: 10.35944/jofrp.2019.8.1.012
C. Binder, O. Lehner
The article uses a bank’s credit data to study the impact of the Basel IV regulations on risk weight density (RWD). The analysis of the simulated data shows mixed results, as the improvement of risk weight heterogeneity is restricted to optimistically valued portfolios. Conservatively valued portfolios are likely to be confronted with an RWD decrease. However, within these portfolios, risk weight heterogeneity usually does not play an important role. Out of all the analysed Basel IV rules, the output floor clearly has the biggest influence on risk weight density, while the effect of the input floors is very limited within optimistically valued portfolios and is even eliminated by the removal of the scaling factor within conservatively valued portfolios. The change in RWD will also lead to a concurrent change in risk-weighted assets and therefore also in the level of eligible capital. The findings within the retail portfolio confirm those of the EBA study, which already suggested that Basel IV and especially the output floor will lead to a significant increase of risk capital (European Banking Authority, 2018).
{"title":"The Problem of Heterogeneity withinRisk Weights: Does Basel IV containthe Solution?","authors":"C. Binder, O. Lehner","doi":"10.35944/jofrp.2019.8.1.012","DOIUrl":"https://doi.org/10.35944/jofrp.2019.8.1.012","url":null,"abstract":"The article uses a bank’s credit data to study the impact of the Basel IV regulations on risk weight density (RWD). The analysis of the simulated data shows mixed results, as the improvement of risk weight heterogeneity is restricted to optimistically valued portfolios. Conservatively valued portfolios are likely to be confronted with an RWD decrease. However, within these portfolios, risk weight heterogeneity usually does not play an important role. Out of all the analysed Basel IV rules, the output floor clearly has the biggest influence on risk weight density, while the effect of the input floors is very limited within optimistically valued portfolios and is even eliminated by the removal of the scaling factor within conservatively valued portfolios. The change in RWD will also lead to a concurrent change in risk-weighted assets and therefore also in the level of eligible capital. The findings within the retail portfolio confirm those of the EBA study, which already suggested that Basel IV and especially the output floor will lead to a significant increase of risk capital (European Banking Authority, 2018).","PeriodicalId":37351,"journal":{"name":"ACRN Journal of Finance and Risk Perspectives","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70083780","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-01-01DOI: 10.35944/jofrp.2019.8.1.006
Eungmin Kang, Ryumi Kim, Sekyung Oh
Problem/Relevance - The relationship between dividend yields and stock returns is an unresolved issue in finance. Previous papers show mixed results on the relationship. To clarify the relationship,we consider dividend reputation. We investigate whether dividend reputation plays a role in explaining the relationship between dividend yields and stockreturns.Research Objective/ Questions –We hypothesize that firms with dividend reputation tend to have less risk compared to firms without dividend reputation, and the expected return of firms with dividend reputation will be lower given the dividend yield, whichis called the “reputation effect.” A mix of firms with and without dividend reputation in a sample could distort the relationship between stock returns and dividend yields. We group stocks according to reputation and analyze the relationship between dividend yields and stock returns. Methodology - We construct our sample from all firms listed on the NYSE, AMEX, and NASDAQ stockexchanges. In our analysis, reputation effects are included to analyze the relationship between dividend yields and stockreturns. We divide our sample firms into three groups according to the track record of dividend payments to control for reputation effects: (1) reputation-established firms, (2) reputation-building initiation, and (3) no reputation firms. To test the hypotheses, we run the panel regression with reputation variables and the controlvariables.Major Findings –We find that the reputation effect is strongest for reputation-established firms and a weaker reputation effect for reputation-building younger firms.After controlling the reputation effect and other relevant variables, we find that there does exist a significantly positive relationship between dividend yields and stockreturns. Implications –The empirical results show that the reputation effect is higher for established firms with a good track record of dividend payments than for firms with a short history of dividend payments or for firms with an unreliable history of dividend payments. After controlling the reputation effect and other relevant variables, we find there exists a significantly positive relationship between dividend yields and stock returns. We also find that one year is not enough time for firms to build a dividend reputation.
{"title":"Dividend Yields, Stock Returns and Reputation","authors":"Eungmin Kang, Ryumi Kim, Sekyung Oh","doi":"10.35944/jofrp.2019.8.1.006","DOIUrl":"https://doi.org/10.35944/jofrp.2019.8.1.006","url":null,"abstract":"Problem/Relevance - The relationship between dividend yields and stock returns is an unresolved issue in finance. Previous papers show mixed results on the relationship. To clarify the relationship,we consider dividend reputation. We investigate whether dividend reputation plays a role in explaining the relationship between dividend yields and stockreturns.Research Objective/ Questions –We hypothesize that firms with dividend reputation tend to have less risk compared to firms without dividend reputation, and the expected return of firms with dividend reputation will be lower given the dividend yield, whichis called the “reputation effect.” A mix of firms with and without dividend reputation in a sample could distort the relationship between stock returns and dividend yields. We group stocks according to reputation and analyze the relationship between dividend yields and stock returns. Methodology - We construct our sample from all firms listed on the NYSE, AMEX, and NASDAQ stockexchanges. In our analysis, reputation effects are included to analyze the relationship between dividend yields and stockreturns. We divide our sample firms into three groups according to the track record of dividend payments to control for reputation effects: (1) reputation-established firms, (2) reputation-building initiation, and (3) no reputation firms. To test the hypotheses, we run the panel regression with reputation variables and the controlvariables.Major Findings –We find that the reputation effect is strongest for reputation-established firms and a weaker reputation effect for reputation-building younger firms.After controlling the reputation effect and other relevant variables, we find that there does exist a significantly positive relationship between dividend yields and stockreturns. Implications –The empirical results show that the reputation effect is higher for established firms with a good track record of dividend payments than for firms with a short history of dividend payments or for firms with an unreliable history of dividend payments. After controlling the reputation effect and other relevant variables, we find there exists a significantly positive relationship between dividend yields and stock returns. We also find that one year is not enough time for firms to build a dividend reputation.","PeriodicalId":37351,"journal":{"name":"ACRN Journal of Finance and Risk Perspectives","volume":"693 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70083429","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-01-01DOI: 10.35944/jofrp.2019.8.1.013
M. Hayne, Soline Ralite, Jakob Thomä, D. Koopman
A debate has recently emerged as to whether climate risks may be material for financial stability, driven by a solid body of evidence that climate risks may create value destruction for key industrial sectors that are prominently represented in financial markets. As a result, financial supervisory authorities are starting to explore how these risks can be integrated into existing stress-testing frameworks. This paper proposes a methodology that financial supervisors could follow to build ‘late & sudden’ transition scenarios that could be used as input into either traditional or climate-specific stress-tests of regulated entities. It also proses that supervisors run multiple simulations of these scenarios across regulated entities to inform on systemic and idiosyncratic ‘impact tolerance’ and creation of ‘reverse stress-tests’ enable the setting of minimum capital thresholds. An illustrative application of the process is shown, focusing on listed equity and corporate bonds tied to climate sensitive sectors (fossil fuels, power, steel, cement, automotive and aviation).
{"title":"Factoring transition risks into regulatory stress-tests: The case for a standardized framework for climate stress testing and measuring impact tolerance to abrupt late and sudden economic decarbonization","authors":"M. Hayne, Soline Ralite, Jakob Thomä, D. Koopman","doi":"10.35944/jofrp.2019.8.1.013","DOIUrl":"https://doi.org/10.35944/jofrp.2019.8.1.013","url":null,"abstract":"A debate has recently emerged as to whether climate risks may be material for financial stability, driven by a solid body of evidence that climate risks may create value destruction for key industrial sectors that are prominently represented in financial markets. As a result, financial supervisory authorities are starting to explore how these risks can be integrated into existing stress-testing frameworks. This paper proposes a methodology that financial supervisors could follow to build ‘late & sudden’ transition scenarios that could be used as input into either traditional or climate-specific stress-tests of regulated entities. It also proses that supervisors run multiple simulations of these scenarios across regulated entities to inform on systemic and idiosyncratic ‘impact tolerance’ and creation of ‘reverse stress-tests’ enable the setting of minimum capital thresholds. An illustrative application of the process is shown, focusing on listed equity and corporate bonds tied to climate sensitive sectors (fossil fuels, power, steel, cement, automotive and aviation).","PeriodicalId":37351,"journal":{"name":"ACRN Journal of Finance and Risk Perspectives","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70083799","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-01-01DOI: 10.35944/jofrp.2019.8.1.014
Julia M. Puaschunder
The following article innovatively paints a novel picture of the mass psychological underpinnings of business cycles based on information flows in order to recommend how certain communication strategies could counterweight and alleviate information failing market performance expectations that could potentially build disastrous financial market mass movements of booms and busts. An introduction to the history of economic cycles will lead to George Soros’ Theory of Reflexivity in order to draw inferences for the analysis of the role of information in creating economic booms and busts in the age of globalization. Empirically, based on a central European central bank’s GNP projections and backtesting corrections, a pattern of central bank corrections communication and economic market performance will be unraveled for the first time to outline that central bank market prediction corrections are positively correlated with near future market performances and negatively correlated with distant future market performances. The collective reality of prices and the irrationality of the crowds perturbating markets will be discussed. Business cycles are argued to obey some kind of natural complexity, as for being influenced by econo-historic communication trends. Recommendations how to create more stable economic systems by avoiding emergent risks in communicating market prospects more cautiously will be given in the discussion followed by a prospective future research outlook and conclusion.
{"title":"Value at looking back:Towards an empirical validation of the role of reflexivity in econo-historic backtesting:Economic market prediction corrections correlate with future market performance","authors":"Julia M. Puaschunder","doi":"10.35944/jofrp.2019.8.1.014","DOIUrl":"https://doi.org/10.35944/jofrp.2019.8.1.014","url":null,"abstract":"The following article innovatively paints a novel picture of the mass psychological underpinnings of business cycles based on information flows in order to recommend how certain communication strategies could counterweight and alleviate information failing market performance expectations that could potentially build disastrous financial market mass movements of booms and busts. An introduction to the history of economic cycles will lead to George Soros’ Theory of Reflexivity in order to draw inferences for the analysis of the role of information in creating economic booms and busts in the age of globalization. Empirically, based on a central European central bank’s GNP projections and backtesting corrections, a pattern of central bank corrections communication and economic market performance will be unraveled for the first time to outline that central bank market prediction corrections are positively correlated with near future market performances and negatively correlated with distant future market performances. The collective reality of prices and the irrationality of the crowds perturbating markets will be discussed. Business cycles are argued to obey some kind of natural complexity, as for being influenced by econo-historic communication trends. Recommendations how to create more stable economic systems by avoiding emergent risks in communicating market prospects more cautiously will be given in the discussion followed by a prospective future research outlook and conclusion.","PeriodicalId":37351,"journal":{"name":"ACRN Journal of Finance and Risk Perspectives","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70083842","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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