In this paper, we investigate the role of short‐term debt in investment efficiency, and we examine the impact of the firm's life cycle stages on this relationship. Using data from non‐financial companies in the United States from 1971 to 2021, we argue that the short‐term debt may reduce the information asymmetries and discipline the management decisions, thus improving the investment efficiency. We argue, however, that the relationship varies throughout different life cycle stages. We find that short‐term debt positively influences investment efficiency and over‐investment. Furthermore, the firm's life cycle significantly impacts investment efficiency, with the introduction and growth stages negatively associated with it. The life cycle also affects the relationship between short‐term debt and investment efficiency, particularly during the growth stage. These results emphasis the role of short‐term debt and the firm's life cycle in mitigating information asymmetries and shaping management behaviour.
{"title":"Does the firm's life cycle matter in the relationship between short‐term debt and investment efficiency?","authors":"Ala'a Adden Awni Abuhommous","doi":"10.1002/ijfe.2977","DOIUrl":"https://doi.org/10.1002/ijfe.2977","url":null,"abstract":"In this paper, we investigate the role of short‐term debt in investment efficiency, and we examine the impact of the firm's life cycle stages on this relationship. Using data from non‐financial companies in the United States from 1971 to 2021, we argue that the short‐term debt may reduce the information asymmetries and discipline the management decisions, thus improving the investment efficiency. We argue, however, that the relationship varies throughout different life cycle stages. We find that short‐term debt positively influences investment efficiency and over‐investment. Furthermore, the firm's life cycle significantly impacts investment efficiency, with the introduction and growth stages negatively associated with it. The life cycle also affects the relationship between short‐term debt and investment efficiency, particularly during the growth stage. These results emphasis the role of short‐term debt and the firm's life cycle in mitigating information asymmetries and shaping management behaviour.","PeriodicalId":501193,"journal":{"name":"International Journal of Finance and Economics","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-04-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140566682","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 popularity of both green development and sustainable investment concepts, evaluation of environmental performance, social responsibility and corporate governance (ESG) is the way for enterprises to protect the environment and, at the same time, interact with stakeholders. This paper first analyses how ESG influences corporate total factor productivity (TFP), then, using A-share listed company data from 2009 to 2021, conducts an empirical test proving that ESG greatly boosts TFP. Examination of the intermediate mechanism reveals that ESG can improve TFP by raising R&D investment, enhancing the attention of stakeholders, and increasing internal control capabilities. The heterogeneity study shows that, for state-owned firms, non-polluting industries, and small-scale and low-market degree enterprises, ESG enhances TFP more. Further analysis indicates that ESG uncertainty and ESG catering behaviour will weaken the fostering impact, but environmental regulation has a beneficial regulatory role.
{"title":"Environmental and social governance performance and enterprise total factor productivity","authors":"Zhonghua Cheng, Lele Han","doi":"10.1002/ijfe.2974","DOIUrl":"https://doi.org/10.1002/ijfe.2974","url":null,"abstract":"With the popularity of both green development and sustainable investment concepts, evaluation of environmental performance, social responsibility and corporate governance (ESG) is the way for enterprises to protect the environment and, at the same time, interact with stakeholders. This paper first analyses how ESG influences corporate total factor productivity (TFP), then, using A-share listed company data from 2009 to 2021, conducts an empirical test proving that ESG greatly boosts TFP. Examination of the intermediate mechanism reveals that ESG can improve TFP by raising R&D investment, enhancing the attention of stakeholders, and increasing internal control capabilities. The heterogeneity study shows that, for state-owned firms, non-polluting industries, and small-scale and low-market degree enterprises, ESG enhances TFP more. Further analysis indicates that ESG uncertainty and ESG catering behaviour will weaken the fostering impact, but environmental regulation has a beneficial regulatory role.","PeriodicalId":501193,"journal":{"name":"International Journal of Finance and Economics","volume":"17 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140566528","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}
Aitzaz Ahsan Alias Sarang, Asad Ali Rind, Riadh Manita, Asif Saeed
This study examines the relationship between co‐opted directors (CODIR), measured as the fraction of directors appointed after the Chief Executive Officer (CEO) assumes office to board size, and firms' financial distress risk (FFDR). Understanding the relationship between CODIR and FFDR is imperative due to the significant impact of high risk‐taking on financial crises and the heightened expectations placed on board members for risk oversight. Despite growing research on corporate governance and FFDR, little attention has been paid to the role of CODIRs, presenting a significant gap in the literature. Using a US sample from 1996 to 2019, covering 13,486 firm‐year observations, we document that CODIR reduces FFDR, supporting the hypothesis that co‐opted directors have a lower financial distress risk‐taking propensity than their non‐co‐opted counterparts. We also find that a critical mass of at least three CODIRs and independent CODIRs reduces FFDR. Our results also document that CEO power in the form of CEO duality and CEO tenure, external monitoring in the form of the number of analysts following the firm, competition, and takeover susceptibility do not drive our main conclusions for co‐option and FFDR. Finally, the results show that CODIR reduces FFDR through liquidity channels. The findings remain robust to various definitions of co‐option and distress risk, and are consistent in both difference‐in‐differences analysis and propensity score matching.
{"title":"Does a co‐opted director affect a firm's financial distress risk?","authors":"Aitzaz Ahsan Alias Sarang, Asad Ali Rind, Riadh Manita, Asif Saeed","doi":"10.1002/ijfe.2959","DOIUrl":"https://doi.org/10.1002/ijfe.2959","url":null,"abstract":"This study examines the relationship between co‐opted directors <jats:italic>(CODIR)</jats:italic>, measured as the fraction of directors appointed after the Chief Executive Officer <jats:italic>(CEO)</jats:italic> assumes office to board size, and firms' financial distress risk <jats:italic>(FFDR)</jats:italic>. Understanding the relationship between <jats:italic>CODIR</jats:italic> and <jats:italic>FFDR</jats:italic> is imperative due to the significant impact of high risk‐taking on financial crises and the heightened expectations placed on board members for risk oversight. Despite growing research on corporate governance and <jats:italic>FFDR</jats:italic>, little attention has been paid to the role of <jats:italic>CODIRs</jats:italic>, presenting a significant gap in the literature. Using a US sample from 1996 to 2019, covering 13,486 firm‐year observations, we document that <jats:italic>CODIR</jats:italic> reduces <jats:italic>FFDR</jats:italic>, supporting the hypothesis that co‐opted directors have a lower financial distress risk‐taking propensity than their non‐co‐opted counterparts. We also find that a critical mass of at least three <jats:italic>CODIRs</jats:italic> and independent <jats:italic>CODIRs</jats:italic> reduces <jats:italic>FFDR</jats:italic>. Our results also document that <jats:italic>CEO</jats:italic> power in the form of <jats:italic>CEO</jats:italic> duality and <jats:italic>CEO</jats:italic> tenure, external monitoring in the form of the number of analysts following the firm, competition, and takeover susceptibility do not drive our main conclusions for co‐option and <jats:italic>FFDR</jats:italic>. Finally, the results show that <jats:italic>CODIR</jats:italic> reduces <jats:italic>FFDR</jats:italic> through liquidity channels. The findings remain robust to various definitions of co‐option and distress risk, and are consistent in both difference‐in‐differences analysis and propensity score matching.","PeriodicalId":501193,"journal":{"name":"International Journal of Finance and Economics","volume":"23 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140202491","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 study examines the Japanese stock market connectedness across different sectors, focusing on both the time and frequency dimensions. The dataset used spans from January 1999 to April 2022 and employs various methodologies, including time‐varying parameter vector autoregressions, TVP‐VAR frequency dependency, and Quantile coherency. The empirical findings reveal that cyclical or aggressive stocks predominantly act as net transmitters of shocks across sectors. Moreover, short‐term spillovers are more significant compared to intermediate‐term spillovers, indicating that Japanese sectors are more pronounced to market shocks in the short run. The spillover effects are also asymmetric and vary over time. Additionally, the real estate sector exhibits diversification benefits across different time horizons, while the energy sector provides protection primarily in the short run. This research contributes to the development of financial policies aimed at reducing sectoral imbalances and promoting stable growth. Furthermore, it offers insights for investors seeking to devise optimal portfolio diversification strategies.
{"title":"Japanese stock market sectoral dynamics: A time and frequency analysis","authors":"Rim El Khoury, Muneer M. Alshater, Onur Polat","doi":"10.1002/ijfe.2965","DOIUrl":"https://doi.org/10.1002/ijfe.2965","url":null,"abstract":"This study examines the Japanese stock market connectedness across different sectors, focusing on both the time and frequency dimensions. The dataset used spans from January 1999 to April 2022 and employs various methodologies, including time‐varying parameter vector autoregressions, TVP‐VAR frequency dependency, and Quantile coherency. The empirical findings reveal that cyclical or aggressive stocks predominantly act as net transmitters of shocks across sectors. Moreover, short‐term spillovers are more significant compared to intermediate‐term spillovers, indicating that Japanese sectors are more pronounced to market shocks in the short run. The spillover effects are also asymmetric and vary over time. Additionally, the real estate sector exhibits diversification benefits across different time horizons, while the energy sector provides protection primarily in the short run. This research contributes to the development of financial policies aimed at reducing sectoral imbalances and promoting stable growth. Furthermore, it offers insights for investors seeking to devise optimal portfolio diversification strategies.","PeriodicalId":501193,"journal":{"name":"International Journal of Finance and Economics","volume":"165 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140172159","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}
Estimation constitutes a major challenge in the implementation of mean–variance portfolios. To overcome this, we propose a partial index‐tracking strategy that aims to mitigate estimation error ex‐ante. Theoretically, we minimize the mean‐squared error of the proposed strategy by shrinking the portfolio variance to its tracking error. Using an empirical design with over 50 years of data, our paper makes two important observations. First, we show that our proposed approach is consistent with both linear and non‐linear shrinkage strategies in terms of robustness. Second, the proposed decision rule leads to a lower out‐of‐sample tracking error. Our findings, overall, stress the appeal of partial index tracking not only in terms of shrinkage (robustness) but also in terms of relative performance.
{"title":"Partial index tracking enhanced mean–variance portfolio","authors":"Zhaokun Cai, Zhenyu Cui, Majeed Simaan","doi":"10.1002/ijfe.2967","DOIUrl":"https://doi.org/10.1002/ijfe.2967","url":null,"abstract":"Estimation constitutes a major challenge in the implementation of mean–variance portfolios. To overcome this, we propose a partial index‐tracking strategy that aims to mitigate estimation error ex‐ante. Theoretically, we minimize the mean‐squared error of the proposed strategy by shrinking the portfolio variance to its tracking error. Using an empirical design with over 50 years of data, our paper makes two important observations. First, we show that our proposed approach is consistent with both linear and non‐linear shrinkage strategies in terms of robustness. Second, the proposed decision rule leads to a lower out‐of‐sample tracking error. Our findings, overall, stress the appeal of partial index tracking not only in terms of shrinkage (robustness) but also in terms of relative performance.","PeriodicalId":501193,"journal":{"name":"International Journal of Finance and Economics","volume":"12 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140148024","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}
We assess the link between fiscal sustainability coefficients, namely the responses of the primary government balance and the global government balance to the debt‐to‐GDP ratio, and the response of government revenues to government expenditures. For 22 OECD developed countries we use annual data between 1950 and 2019. Other determinants of fiscal responses are also studied in the context of quantile regressions. We find that the output gap contributes to increasing fiscal sustainability by positively influencing the responsiveness of the primary and global government balances; and the responses of the primary and global government balances to the debt ratio and the response of government revenues to government expenditures depend on the level of the debt ratio. In addition, from the quantile analysis, the influence of the response of government revenues to government expenditures is negative and increasing over the deciles, confirming the existence of a negative cross‐relationship between the fiscal sustainability coefficients.
{"title":"Determinants of the degree of fiscal sustainability","authors":"António Afonso, José Alves, José Carlos Coelho","doi":"10.1002/ijfe.2960","DOIUrl":"https://doi.org/10.1002/ijfe.2960","url":null,"abstract":"We assess the link between fiscal sustainability coefficients, namely the responses of the primary government balance and the global government balance to the debt‐to‐GDP ratio, and the response of government revenues to government expenditures. For 22 OECD developed countries we use annual data between 1950 and 2019. Other determinants of fiscal responses are also studied in the context of quantile regressions. We find that the output gap contributes to increasing fiscal sustainability by positively influencing the responsiveness of the primary and global government balances; and the responses of the primary and global government balances to the debt ratio and the response of government revenues to government expenditures depend on the level of the debt ratio. In addition, from the quantile analysis, the influence of the response of government revenues to government expenditures is negative and increasing over the deciles, confirming the existence of a negative cross‐relationship between the fiscal sustainability coefficients.","PeriodicalId":501193,"journal":{"name":"International Journal of Finance and Economics","volume":"22 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140147943","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}
We show that through the safe asset channel the excess liquidity created by large scale asset purchases (QE) can lead to higher sovereign bond spreads in the euro area. This unintended effect is most likely in volatile market conditions when excess liquidity spurs demand for tradeable safe assets, pushing down the interest rate of these assets, which widens risk spreads. Outcomes of a panel regression model estimated for individual euro area countries confirm that the excess liquidity created by QE had an upward effect on sovereign bond spreads. It indicates that the safe asset channel dominates the usual portfolio rebalancing channel. For monetary policy the results imply that large scale asset purchases by QE are not an appropriate instrument to address country specific shocks.
{"title":"Effects of QE on sovereign bond spreads through the safe asset channel","authors":"Jan Willem van den End","doi":"10.1002/ijfe.2958","DOIUrl":"https://doi.org/10.1002/ijfe.2958","url":null,"abstract":"We show that through the safe asset channel the excess liquidity created by large scale asset purchases (QE) can lead to higher sovereign bond spreads in the euro area. This unintended effect is most likely in volatile market conditions when excess liquidity spurs demand for tradeable safe assets, pushing down the interest rate of these assets, which widens risk spreads. Outcomes of a panel regression model estimated for individual euro area countries confirm that the excess liquidity created by QE had an upward effect on sovereign bond spreads. It indicates that the safe asset channel dominates the usual portfolio rebalancing channel. For monetary policy the results imply that large scale asset purchases by QE are not an appropriate instrument to address country specific shocks.","PeriodicalId":501193,"journal":{"name":"International Journal of Finance and Economics","volume":"19 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140148025","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 research aims to understand how certain events, like the global financial crisis, the post-global financial crisis period, the COVID-19 pandemic, and the Russia-Ukraine war, along with changes in the value of the US dollar and uncertainty in gold, currency, and stock markets, affect the uncertainty in oil prices. We are particularly interested in looking at positive and negative changes in these factors when oil price uncertainty is either high or low. To achieve this, we use a quantile regression method, which allows us to analyse different levels of oil price uncertainty effectively. Throughout the whole timeframe we looked at, the initial findings suggest that when there is much uncertainty in the oil market, the US dollar and uncertainty in major markets have a bigger influence on making the oil market more uncertain, compared to times when there is not much uncertainty about oil prices. We also noticed that the impacts of negative and positive changes in the reserve currency, and uncertainties are quite different when crises happen. To cite an example, when there is much uncertainty about oil prices, positive expectations about economic activity (because the reserve currency is weaker) and confidence in the stock market (less worry about a shock in the stock market) have a stronger impact, reducing uncertainty in oil prices during the global financial crisis. On the other hand, more negative effects from pessimistic expectations (due to a stronger US dollar and increased fear of a shock in the stock market) lead to higher oil price uncertainty during the COVID-19 pandemic. According to what we have discovered in our analysis, policymakers and investors should evaluate how both negative and positive shifts in the reserve currency (US dollar) and uncertainties in gold, currency, and stock markets separately affect the uncertainty in oil prices. It is important to understand that these effects vary depending on the level of uncertainty in oil prices and the direction (positive or negative) and timing of the changes.
{"title":"How do the reserve currency and uncertainties in major markets affect the uncertainty of oil prices over time?","authors":"Baris Kocaarslan, Ugur Soytas","doi":"10.1002/ijfe.2962","DOIUrl":"https://doi.org/10.1002/ijfe.2962","url":null,"abstract":"This research aims to understand how certain events, like the global financial crisis, the post-global financial crisis period, the COVID-19 pandemic, and the Russia-Ukraine war, along with changes in the value of the US dollar and uncertainty in gold, currency, and stock markets, affect the uncertainty in oil prices. We are particularly interested in looking at positive and negative changes in these factors when oil price uncertainty is either high or low. To achieve this, we use a quantile regression method, which allows us to analyse different levels of oil price uncertainty effectively. Throughout the whole timeframe we looked at, the initial findings suggest that when there is much uncertainty in the oil market, the US dollar and uncertainty in major markets have a bigger influence on making the oil market more uncertain, compared to times when there is not much uncertainty about oil prices. We also noticed that the impacts of negative and positive changes in the reserve currency, and uncertainties are quite different when crises happen. To cite an example, when there is much uncertainty about oil prices, positive expectations about economic activity (because the reserve currency is weaker) and confidence in the stock market (less worry about a shock in the stock market) have a stronger impact, reducing uncertainty in oil prices during the global financial crisis. On the other hand, more negative effects from pessimistic expectations (due to a stronger US dollar and increased fear of a shock in the stock market) lead to higher oil price uncertainty during the COVID-19 pandemic. According to what we have discovered in our analysis, policymakers and investors should evaluate how both negative and positive shifts in the reserve currency (US dollar) and uncertainties in gold, currency, and stock markets separately affect the uncertainty in oil prices. It is important to understand that these effects vary depending on the level of uncertainty in oil prices and the direction (positive or negative) and timing of the changes.","PeriodicalId":501193,"journal":{"name":"International Journal of Finance and Economics","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140107986","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}
Xin Jin, Bisharat Hussain Chang, Chaosheng Han, Mohammed Ahmar Uddin
Financial markets are highly unpredictable and often associated with tail risks. This study examines the tail connectivity among three distinct markets—conventional, religious, and sustainable—and uses a new neural network quantile regression technique to quantify their risk exposure. The findings suggest that traditional and religious investments have the greatest tail risk exposure during crises, emphasising the importance of diversification using sustainable investments. The Systematic Network Risk Index identifies intense events, such as the COVID-19 pandemic, the European debt crisis, and the global financial crisis, as having the greatest tail risk. The Systematic Fragility Index finds the Islamic stocks during the COVID-19 crisis and the conventional stock market before the pandemic to the highly vulnerable markets. On the other hand, the Systemic Hazard Index identifies Islamic stocks as the primary source of systemic risk. The study concludes by providing implications for decision-makers, regulatory authorities, investors, players in the financial system, and investment managers to diversify their risk by utilising green/sustainable investments.
{"title":"The tail connectedness among conventional, religious, and sustainable investments: An empirical evidence from neural network quantile regression approach","authors":"Xin Jin, Bisharat Hussain Chang, Chaosheng Han, Mohammed Ahmar Uddin","doi":"10.1002/ijfe.2949","DOIUrl":"https://doi.org/10.1002/ijfe.2949","url":null,"abstract":"Financial markets are highly unpredictable and often associated with tail risks. This study examines the tail connectivity among three distinct markets—conventional, religious, and sustainable—and uses a new neural network quantile regression technique to quantify their risk exposure. The findings suggest that traditional and religious investments have the greatest tail risk exposure during crises, emphasising the importance of diversification using sustainable investments. The Systematic Network Risk Index identifies intense events, such as the COVID-19 pandemic, the European debt crisis, and the global financial crisis, as having the greatest tail risk. The Systematic Fragility Index finds the Islamic stocks during the COVID-19 crisis and the conventional stock market before the pandemic to the highly vulnerable markets. On the other hand, the Systemic Hazard Index identifies Islamic stocks as the primary source of systemic risk. The study concludes by providing implications for decision-makers, regulatory authorities, investors, players in the financial system, and investment managers to diversify their risk by utilising green/sustainable investments.","PeriodicalId":501193,"journal":{"name":"International Journal of Finance and Economics","volume":"28 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140107818","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}
Georgios Chortareas, Apostolos G. Katsafados, Theodore Pelagidis, Chara Prassa
This paper develops a logistic regression model in an in‐house credit assessment system (ICAS) framework for predicting corporate defaults in the Greek economy. We consider the impact of the COVID‐19 pandemic and the associated government financial support schemes, aiming to protect against financial vulnerabilities, on the probability of default of non‐financial firms, as well as the relevant sectoral and firm‐size effects. In developing the ICAS framework, we address methodological issues such as the predictive performance of statistical versus machine learning approaches and the imbalanced dataset problem, indicating ways to evaluate such models with strong predictive power. Our findings suggest that the effect of the financial support measures dominates the pandemic shocks, thus substantially reducing the probability of firms' default, while the size‐ and industry‐based models show that firms in the micro and services sectors benefited the most. Furthermore, using a random forest model, our findings highlight the trade‐off between the transparency of traditional statistical models and the predictive value of machine learning models.
{"title":"Credit risk modelling within the euro area in the COVID‐19 period: Evidence from an ICAS framework","authors":"Georgios Chortareas, Apostolos G. Katsafados, Theodore Pelagidis, Chara Prassa","doi":"10.1002/ijfe.2957","DOIUrl":"https://doi.org/10.1002/ijfe.2957","url":null,"abstract":"This paper develops a logistic regression model in an in‐house credit assessment system (ICAS) framework for predicting corporate defaults in the Greek economy. We consider the impact of the COVID‐19 pandemic and the associated government financial support schemes, aiming to protect against financial vulnerabilities, on the probability of default of non‐financial firms, as well as the relevant sectoral and firm‐size effects. In developing the ICAS framework, we address methodological issues such as the predictive performance of statistical versus machine learning approaches and the imbalanced dataset problem, indicating ways to evaluate such models with strong predictive power. Our findings suggest that the effect of the financial support measures dominates the pandemic shocks, thus substantially reducing the probability of firms' default, while the size‐ and industry‐based models show that firms in the micro and services sectors benefited the most. Furthermore, using a random forest model, our findings highlight the trade‐off between the transparency of traditional statistical models and the predictive value of machine learning models.","PeriodicalId":501193,"journal":{"name":"International Journal of Finance and Economics","volume":"3 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140073253","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}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：