This paper aims to measure the impacts of environmental policy uncertainty on green innovation and explore the transmission channel that is less understood in past scientific works. In this paper, we use a newspaper-based sentiment mining approach to establish an index of environmental policy uncertainty in China and implement web crawlers and text analysis techniques to construct a network public opinion index of the Chinese financial market. Then, we explore the relationships between environmental policy uncertainty, network public opinion, and green innovation through the time-varying parameter structural vector autoregressive with stochastic volatility (TVP-VAR-SV) model. The transmission channels of environmental policy uncertainty to green innovation are depicted by selecting different timing of policy release. Our empirical study results show that the fluctuations of environmental policy uncertainty, network public opinion, and green innovation have time-varying characteristics. Furthermore, the findings reveal interactions among the three variables: 1) The environmental policy uncertainty can influence green innovation through network public opinion. 2) The environmental policy uncertainty has both inhibited and promoted effects on network public opinion and green innovation. 3) There are differences in the direction and the degree of impulse responses among the above three variables in the context of uncertainty shocks. Besides, managerial relevance and policy implications are also provided for decision-makers facing sustainable development challenges.
{"title":"Environmental policy uncertainty and green innovation: A TVP-VAR-SV model approach","authors":"Xi-te Yang, Jidi Cao, Zihan Liu, Yongzeng Lai","doi":"10.3934/qfe.2022026","DOIUrl":"https://doi.org/10.3934/qfe.2022026","url":null,"abstract":"This paper aims to measure the impacts of environmental policy uncertainty on green innovation and explore the transmission channel that is less understood in past scientific works. In this paper, we use a newspaper-based sentiment mining approach to establish an index of environmental policy uncertainty in China and implement web crawlers and text analysis techniques to construct a network public opinion index of the Chinese financial market. Then, we explore the relationships between environmental policy uncertainty, network public opinion, and green innovation through the time-varying parameter structural vector autoregressive with stochastic volatility (TVP-VAR-SV) model. The transmission channels of environmental policy uncertainty to green innovation are depicted by selecting different timing of policy release. Our empirical study results show that the fluctuations of environmental policy uncertainty, network public opinion, and green innovation have time-varying characteristics. Furthermore, the findings reveal interactions among the three variables: 1) The environmental policy uncertainty can influence green innovation through network public opinion. 2) The environmental policy uncertainty has both inhibited and promoted effects on network public opinion and green innovation. 3) There are differences in the direction and the degree of impulse responses among the above three variables in the context of uncertainty shocks. Besides, managerial relevance and policy implications are also provided for decision-makers facing sustainable development challenges.","PeriodicalId":45226,"journal":{"name":"Quantitative Finance and Economics","volume":null,"pages":null},"PeriodicalIF":5.3,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70230173","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}
The FeldsteinHorioka1980 study on investment flows through the correlation of domestic saving and investment concluded that liberalization of capital markets does not necessarily lead to a movement of capital looking for a better allocation of resources, as classical theory would suggest. Ever since, literature has been prolific regarding this "puzzle", with arguments for and against this conclusion. This paper aims to analyze the issue from a different perspective. In recent years, the stock markets of Chile, Colombia, Mexico and Peru joined the Latin American Integrated Market through an agreement that allows investors in any of the participating markets to invest in the others as if they were investing locally. Compositional methods are used to assess the hypothesis of a potential flow of capital between markets generated by the creation of the joint market. First, cross-sectional methods for compositional data were used to test the hypothesis. As a result, it was not possible to find a change in the composition of the investment in the four markets produced by the creation of the joint market. Secondly, vector autoregressive models were estimated and tested for structural breaks in the parameters. However, these models were not found to be informative. In conclusion, it was not possible to reject the Felstein-Horioka hypothesis, supporting the idea that liberalization is not enough to generate capital flows between markets.
{"title":"Capital flows in integrated capital markets: MILA case","authors":"Juan David Vega Baquero, Miguel Santolino","doi":"10.3934/qfe.2022027","DOIUrl":"https://doi.org/10.3934/qfe.2022027","url":null,"abstract":"The FeldsteinHorioka1980 study on investment flows through the correlation of domestic saving and investment concluded that liberalization of capital markets does not necessarily lead to a movement of capital looking for a better allocation of resources, as classical theory would suggest. Ever since, literature has been prolific regarding this \"puzzle\", with arguments for and against this conclusion. This paper aims to analyze the issue from a different perspective. In recent years, the stock markets of Chile, Colombia, Mexico and Peru joined the Latin American Integrated Market through an agreement that allows investors in any of the participating markets to invest in the others as if they were investing locally. Compositional methods are used to assess the hypothesis of a potential flow of capital between markets generated by the creation of the joint market. First, cross-sectional methods for compositional data were used to test the hypothesis. As a result, it was not possible to find a change in the composition of the investment in the four markets produced by the creation of the joint market. Secondly, vector autoregressive models were estimated and tested for structural breaks in the parameters. However, these models were not found to be informative. In conclusion, it was not possible to reject the Felstein-Horioka hypothesis, supporting the idea that liberalization is not enough to generate capital flows between markets.","PeriodicalId":45226,"journal":{"name":"Quantitative Finance and Economics","volume":null,"pages":null},"PeriodicalIF":5.3,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70230235","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}
With the full integration of digital information technology and financial services, digital finance has developed rapidly. As there are significant differences in the development level of FinTech and traditional financial sectors in different cities, it is important to evaluate the development level of urban digital finance. This study aimed to compile an index of urban digital finance to present an accurate and in-depth depiction of how urban digital finance has developed in China. Our sample covers 278 cities in China, over the period 2010–2020. This paper firstly constructs the urban digital financial index system from the three dimensions of digital financial services, digital financial technology, and digital financial operating environment, and then adopts a combination of subjective and objective methods to measure the urban digital financial index. This paper study revealed that China's urban digital finance has been on an upward trend from 2010 to 2020, and the digital finance operating environment is an important driving force for the growth of the urban digital finance index. The convergence of China's urban digital finance is decreasing, indicating that the gap in digital financial development between cities is increasing. Urban digital finance has positive spatial agglomeration, but this spatial agglomeration is decreasing.
{"title":"Measuring China's urban digital finance","authors":"Gaoke Liao, Zhenghui Li, Mengxin Wang, Khaldoon Albitar","doi":"10.3934/qfe.2022017","DOIUrl":"https://doi.org/10.3934/qfe.2022017","url":null,"abstract":"With the full integration of digital information technology and financial services, digital finance has developed rapidly. As there are significant differences in the development level of FinTech and traditional financial sectors in different cities, it is important to evaluate the development level of urban digital finance. This study aimed to compile an index of urban digital finance to present an accurate and in-depth depiction of how urban digital finance has developed in China. Our sample covers 278 cities in China, over the period 2010–2020. This paper firstly constructs the urban digital financial index system from the three dimensions of digital financial services, digital financial technology, and digital financial operating environment, and then adopts a combination of subjective and objective methods to measure the urban digital financial index. This paper study revealed that China's urban digital finance has been on an upward trend from 2010 to 2020, and the digital finance operating environment is an important driving force for the growth of the urban digital finance index. The convergence of China's urban digital finance is decreasing, indicating that the gap in digital financial development between cities is increasing. Urban digital finance has positive spatial agglomeration, but this spatial agglomeration is decreasing.","PeriodicalId":45226,"journal":{"name":"Quantitative Finance and Economics","volume":null,"pages":null},"PeriodicalIF":5.3,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70230518","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}
In this study, the authors aim to analyze the impact of pension asset investments on the economic growth of selected non-OECD countries, taking into account the controlling effect of gross fixed capital formation, domestic credit to the private sector, inflation, public debt and population. To conduct the econometric analysis in this study, the authors relied on secondary data published in the annual reports of the OECD, the World Bank and the IMF. Based on the econometric results of this study, the authors conclude that the investment of pension fund assets has positively impacted the economic growth of selected non-OECD countries (2002–2018). This study is of scientific importance because it provides detailed empirical evidence regarding the investment of pension funds in international financial markets and the effects of these investments on the economic growth of non-OECD countries. Moreover, the authors of this study through this scientific paper provide new scientific evidence to governments and policymakers in these countries on how to design appropriate strategic investment policies so that pension funds invest their pension assets at a safe rate of return from investments to ensure economic growth and efficiency in the capital markets. Given that most non-OECD countries are emerging and transition economies, the importance of this study lies in the fact that the authors, through empirical findings, highlight the importance of pension fund investments in global financial markets and the effects of these investments on the economic growth of these countries.
{"title":"The impact of pension fund assets on economic growth in countries, emerging countries, and developed countries","authors":"Fisnik Morina, S. Grima","doi":"10.3934/qfe.2022020","DOIUrl":"https://doi.org/10.3934/qfe.2022020","url":null,"abstract":"In this study, the authors aim to analyze the impact of pension asset investments on the economic growth of selected non-OECD countries, taking into account the controlling effect of gross fixed capital formation, domestic credit to the private sector, inflation, public debt and population. To conduct the econometric analysis in this study, the authors relied on secondary data published in the annual reports of the OECD, the World Bank and the IMF. Based on the econometric results of this study, the authors conclude that the investment of pension fund assets has positively impacted the economic growth of selected non-OECD countries (2002–2018). This study is of scientific importance because it provides detailed empirical evidence regarding the investment of pension funds in international financial markets and the effects of these investments on the economic growth of non-OECD countries. Moreover, the authors of this study through this scientific paper provide new scientific evidence to governments and policymakers in these countries on how to design appropriate strategic investment policies so that pension funds invest their pension assets at a safe rate of return from investments to ensure economic growth and efficiency in the capital markets. Given that most non-OECD countries are emerging and transition economies, the importance of this study lies in the fact that the authors, through empirical findings, highlight the importance of pension fund investments in global financial markets and the effects of these investments on the economic growth of these countries.","PeriodicalId":45226,"journal":{"name":"Quantitative Finance and Economics","volume":null,"pages":null},"PeriodicalIF":5.3,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70230580","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}
This paper analyses the impact of various oil shocks on the stock volatility prediction by using a Fourier transform-based Long Short-Term Memory (LSTM) model. Oil shocks are decomposed into five components following individual oil price change indicators. By employing a daily dataset involving S & P 500 stock index and WTI oil futures contract, our results show that different oil shocks exert varied impacts on the dynamics of stock price volatility by using gradient descent. Having exploited the role of oil shocks, we further find that the Fourier transform-based LSTM technique improves forecasting accuracy of the stock volatility dynamics from both statistical and economic perspectives. Additional analyses reassure the robustness of our findings. Clear comprehension of the future stock market dynamics possesses important implications for sensible financial risk management.
{"title":"Fourier transform based LSTM stock prediction model under oil shocks","authors":"Xiaohang Ren, Weixin Xu, Kun Duan","doi":"10.3934/qfe.2022015","DOIUrl":"https://doi.org/10.3934/qfe.2022015","url":null,"abstract":"This paper analyses the impact of various oil shocks on the stock volatility prediction by using a Fourier transform-based Long Short-Term Memory (LSTM) model. Oil shocks are decomposed into five components following individual oil price change indicators. By employing a daily dataset involving S & P 500 stock index and WTI oil futures contract, our results show that different oil shocks exert varied impacts on the dynamics of stock price volatility by using gradient descent. Having exploited the role of oil shocks, we further find that the Fourier transform-based LSTM technique improves forecasting accuracy of the stock volatility dynamics from both statistical and economic perspectives. Additional analyses reassure the robustness of our findings. Clear comprehension of the future stock market dynamics possesses important implications for sensible financial risk management.","PeriodicalId":45226,"journal":{"name":"Quantitative Finance and Economics","volume":null,"pages":null},"PeriodicalIF":5.3,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70230606","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}
Stock trades pass through several phases before completion, from placing an order via a brokerage firm, to the delivery of securities versus payment. This paper sheds light on the later phases of the trading process for equity securities in USA capital markets. In a continuous effort to improve the settlement process, the National Securities Clearing Corporation makes several substantial changes every year to the rules and regulations that govern the settlement process. This paper investigates the impact of rule changes on the efficiency of settlement, based on the volume of shares that failed to deliver from 2004 to 2017. The rule changes are modeled with a dummy variable in a vector autoregressive (VAR) model, where the quantity of fails and market returns are both included in the VAR model as endogenous variables. The results show a considerable impact of rule and regulation changes on the quantity of shares failed to be delivered in time for settlement; especially, the regulations implemented to improve short selling had a statistically significant impact on reducing settlement failures and improving market returns. The finding of this study provides important information for regulators and investors with regard to the settlement process and investment strategies.
{"title":"Regulatory reform and trade settlement failures in USA equity markets: Does regulatory reform matter?","authors":"Muath Asmar, Susanne Trimbath","doi":"10.3934/qfe.2022023","DOIUrl":"https://doi.org/10.3934/qfe.2022023","url":null,"abstract":"Stock trades pass through several phases before completion, from placing an order via a brokerage firm, to the delivery of securities versus payment. This paper sheds light on the later phases of the trading process for equity securities in USA capital markets. In a continuous effort to improve the settlement process, the National Securities Clearing Corporation makes several substantial changes every year to the rules and regulations that govern the settlement process. This paper investigates the impact of rule changes on the efficiency of settlement, based on the volume of shares that failed to deliver from 2004 to 2017. The rule changes are modeled with a dummy variable in a vector autoregressive (VAR) model, where the quantity of fails and market returns are both included in the VAR model as endogenous variables. The results show a considerable impact of rule and regulation changes on the quantity of shares failed to be delivered in time for settlement; especially, the regulations implemented to improve short selling had a statistically significant impact on reducing settlement failures and improving market returns. The finding of this study provides important information for regulators and investors with regard to the settlement process and investment strategies.","PeriodicalId":45226,"journal":{"name":"Quantitative Finance and Economics","volume":null,"pages":null},"PeriodicalIF":5.3,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70230631","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}
Models of crisis prediction continue to gain traction with the increased frequency of global crisis such as the ongoing COVID-19 pandemic. Moreover, the connectedness of financial markets appears to be of central importance in determining how shocks spill through asset market linkages. The study thus applies the time-frequency connectedness measures of Diebold & Yilmaz (2012) and Baruník & Křehlík (2018) to examine return and volatility connectedness dynamics in East African Community (EAC) member states. The study found a strong interdependence among the considered EAC markets as indicated by the high values of total return and volatility spillover indices. This high degree of interdependence is reflected in both static time and frequency domain return and volatility connectedness, especially at the longer term frequency bands, an indication that return and volatility shocks are persistent. This result lends further support to existing evidence on the suitability of the EAC regional economic integration, including the possible eventual establishment of a monetary union. In addition, the dynamic spillover analysis indicates that connectedness among these EAC markets is highly time-varying and appears to be amplified during global crisis events such as the European debt crisis, Kenyan elections, commodity price shocks and the COVID-19 pandemic. However, the results suggest that relative to periods of domestic turbulence, financial market connectedness in the EAC is more likely to get amplified during periods of external global shocks. The study also contributes to emergent literature on connectedness among financial markets during the COVID-19 pandemic. Importantly, the study finds that the COVID-19 pandemic had a significant effect on all the considered EAC markets although the magnitude and direction of impact varies across markets and countries. In addition, the study finds that Brent Crude oil prices are a significant source of return and volatility spillovers to EAC markets especially during crisis periods.
{"title":"Time-Frequency connectedness between developing countries in the COVID-19 pandemic: The case of East Africa","authors":"Lorna Katusiime","doi":"10.3934/qfe.2022032","DOIUrl":"https://doi.org/10.3934/qfe.2022032","url":null,"abstract":"Models of crisis prediction continue to gain traction with the increased frequency of global crisis such as the ongoing COVID-19 pandemic. Moreover, the connectedness of financial markets appears to be of central importance in determining how shocks spill through asset market linkages. The study thus applies the time-frequency connectedness measures of Diebold & Yilmaz (2012) and Baruník & Křehlík (2018) to examine return and volatility connectedness dynamics in East African Community (EAC) member states. The study found a strong interdependence among the considered EAC markets as indicated by the high values of total return and volatility spillover indices. This high degree of interdependence is reflected in both static time and frequency domain return and volatility connectedness, especially at the longer term frequency bands, an indication that return and volatility shocks are persistent. This result lends further support to existing evidence on the suitability of the EAC regional economic integration, including the possible eventual establishment of a monetary union. In addition, the dynamic spillover analysis indicates that connectedness among these EAC markets is highly time-varying and appears to be amplified during global crisis events such as the European debt crisis, Kenyan elections, commodity price shocks and the COVID-19 pandemic. However, the results suggest that relative to periods of domestic turbulence, financial market connectedness in the EAC is more likely to get amplified during periods of external global shocks. The study also contributes to emergent literature on connectedness among financial markets during the COVID-19 pandemic. Importantly, the study finds that the COVID-19 pandemic had a significant effect on all the considered EAC markets although the magnitude and direction of impact varies across markets and countries. In addition, the study finds that Brent Crude oil prices are a significant source of return and volatility spillovers to EAC markets especially during crisis periods.","PeriodicalId":45226,"journal":{"name":"Quantitative Finance and Economics","volume":null,"pages":null},"PeriodicalIF":5.3,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70231020","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}
Traditionally, financial risk management is examined with cartesian and interpretivist frameworks. However, the emergence of complexity science provides a different perspective. Using a structured questionnaire completed by 120 Risk Managers, this paper pioneers a comparative analysis of cartesian and complexity science theoretical frameworks adoption in sixteen Zimbabwean banks, in unique settings of a developing country. Data are analysed with descriptive statistics. The paper finds that overally banks in Zimbabwe are adopting cartesian and complexity science theories regardless of bank size, in the same direction and trajectory. However, adoption of cartesian modeling is more comprehensive and deeper than complexity science. Furthermore, due to information asymmetries, there is diverging modeling priorities between the regulator and supervisor. The regulator places strategic thrust on Knightian risks modeling whereas banks prioritise ontological, ambiguous and Knightian uncertainty measurement. Finally, it is found that complexity science and cartesianism intersect on market discipline. From these findings, it is concluded that complexity science provides an additional dimension to quantitative risk management, hence an integration of these two perspectives is beneficial. This paper makes three contributions to knowledge. First, it adds valuable insights to theoretical perspectives on Quantitative Risk Management. Second, it provides empirical evidence on adoption of two theories from developing country perspective. Third, it offers recommendations to improve Quantitative Risk Management policy formulation and practice.
{"title":"A survey comparative analysis of cartesian and complexity science frameworks adoption in financial risk management of Zimbabwean banks","authors":"Gilbert Tepetepe, Easton Siment-Phiri, D. Morton","doi":"10.3934/qfe.2022016","DOIUrl":"https://doi.org/10.3934/qfe.2022016","url":null,"abstract":"Traditionally, financial risk management is examined with cartesian and interpretivist frameworks. However, the emergence of complexity science provides a different perspective. Using a structured questionnaire completed by 120 Risk Managers, this paper pioneers a comparative analysis of cartesian and complexity science theoretical frameworks adoption in sixteen Zimbabwean banks, in unique settings of a developing country. Data are analysed with descriptive statistics. The paper finds that overally banks in Zimbabwe are adopting cartesian and complexity science theories regardless of bank size, in the same direction and trajectory. However, adoption of cartesian modeling is more comprehensive and deeper than complexity science. Furthermore, due to information asymmetries, there is diverging modeling priorities between the regulator and supervisor. The regulator places strategic thrust on Knightian risks modeling whereas banks prioritise ontological, ambiguous and Knightian uncertainty measurement. Finally, it is found that complexity science and cartesianism intersect on market discipline. From these findings, it is concluded that complexity science provides an additional dimension to quantitative risk management, hence an integration of these two perspectives is beneficial. This paper makes three contributions to knowledge. First, it adds valuable insights to theoretical perspectives on Quantitative Risk Management. Second, it provides empirical evidence on adoption of two theories from developing country perspective. Third, it offers recommendations to improve Quantitative Risk Management policy formulation and practice.","PeriodicalId":45226,"journal":{"name":"Quantitative Finance and Economics","volume":null,"pages":null},"PeriodicalIF":5.3,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70230371","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}
The importance of macroeconomic indicators on the performance of bankruptcy prediction models has been a contentious issue, due in part to a lack of empirical evidence. Most indicators are primarily centered around a company's internal environment, overlooking the impact of the economic cycle on the status of the company. This research brings awareness about the combination of microeconomic and macroeconomic factors. To do this, a new model based on logistic regression was combined with principal component analysis to determine the indicators that best explained the variations in the dataset studied. The sample used comprised data from 1,832 Portuguese construction companies from 2009 to 2019. The empirical results demonstrated an average accuracy rate of 90% up until three years before the bankruptcy. The microeconomic indicators with statistical significance fell within the category of liquidity ratios, solvency and financial autonomy ratios. Regarding the macroeconomic indicators, the gross domestic product and birth rate of enterprises proved to increase the accuracy of bankruptcy prediction more than using only microeconomic factors. A practical implication of the results obtained is that construction companies, as well as investors, government agencies and banks, can use the suggested model as a decision-support system. Furthermore, consistent use can lead to an effective method of preventing bankruptcy by spotting early warning indicators.
{"title":"Impact of macroeconomic indicators on bankruptcy prediction models: Case of the Portuguese construction sector","authors":"Ana Sousa, A. Braga, Jorge Cunha","doi":"10.3934/qfe.2022018","DOIUrl":"https://doi.org/10.3934/qfe.2022018","url":null,"abstract":"The importance of macroeconomic indicators on the performance of bankruptcy prediction models has been a contentious issue, due in part to a lack of empirical evidence. Most indicators are primarily centered around a company's internal environment, overlooking the impact of the economic cycle on the status of the company. This research brings awareness about the combination of microeconomic and macroeconomic factors. To do this, a new model based on logistic regression was combined with principal component analysis to determine the indicators that best explained the variations in the dataset studied. The sample used comprised data from 1,832 Portuguese construction companies from 2009 to 2019. The empirical results demonstrated an average accuracy rate of 90% up until three years before the bankruptcy. The microeconomic indicators with statistical significance fell within the category of liquidity ratios, solvency and financial autonomy ratios. Regarding the macroeconomic indicators, the gross domestic product and birth rate of enterprises proved to increase the accuracy of bankruptcy prediction more than using only microeconomic factors. A practical implication of the results obtained is that construction companies, as well as investors, government agencies and banks, can use the suggested model as a decision-support system. Furthermore, consistent use can lead to an effective method of preventing bankruptcy by spotting early warning indicators.","PeriodicalId":45226,"journal":{"name":"Quantitative Finance and Economics","volume":null,"pages":null},"PeriodicalIF":5.3,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70230571","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}
Total insolvencies filed by Canadian Households reached a record number in 2009 when close to 152,000 individuals sought the protection of the Bankruptcy and Insolvency Act. This paper aims to investigate the factors that dictate the choice of insolvent debtors during an economic crisis, by comparing their choice before, during and after the crisis. Using data provided by the Office of the Superintendent of Bankruptcy, and in addition to explain insolvency choice by the debtor's wealth, income and level of debt, the results show that insolvent debtors are more likely to file for bankruptcy during an economic crisis than before and after. This is in fact, a significant contribution to the literature, for never before had debtors' insolvency choice been looked at in light of the effects of an economic crisis.
{"title":"The insolvency choice during an economic crisis: the case of Canada","authors":"Wilner Predelus, Samir Amine","doi":"10.3934/qfe.2022029","DOIUrl":"https://doi.org/10.3934/qfe.2022029","url":null,"abstract":"Total insolvencies filed by Canadian Households reached a record number in 2009 when close to 152,000 individuals sought the protection of the Bankruptcy and Insolvency Act. This paper aims to investigate the factors that dictate the choice of insolvent debtors during an economic crisis, by comparing their choice before, during and after the crisis. Using data provided by the Office of the Superintendent of Bankruptcy, and in addition to explain insolvency choice by the debtor's wealth, income and level of debt, the results show that insolvent debtors are more likely to file for bankruptcy during an economic crisis than before and after. This is in fact, a significant contribution to the literature, for never before had debtors' insolvency choice been looked at in light of the effects of an economic crisis.","PeriodicalId":45226,"journal":{"name":"Quantitative Finance and Economics","volume":null,"pages":null},"PeriodicalIF":5.3,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70230745","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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