scholarly journals Irrational risk-taking of professionals? The relationship between risk exposures and previous profits

2021 ◽  
Author(s):  
Edina Berlinger ◽  
Barbara Dömötör ◽  
Balázs Árpád Szűcs
Keyword(s):  
Risk Taking ◽  
Risk Attitude ◽  
Insurance Companies ◽  
Individual Experience ◽  
Financial Firms ◽  
Panel Regressions ◽  
Key Factor ◽  
Experience Effects ◽  
And Control ◽  
The Impact

AbstractThe risk attitude of investors is a key factor determining financial asset prices and market trends. Changes in risk attitude may be due to the interference of macro-level (business cycle) and micro-level (individual experience) effects. We investigate the impact of individual experience on the subsequent risk-taking attitude of professionals via the analysis of the trading activity of 351 non-financial firms and (non-bank) financial institutions (insurance companies, financial intermediaries, etc.) covering 57,039 FX forward transactions in a highly volatile period between January 2008 and November 2012. Panel regressions for all firms and institutions do not show significant behavioral patterns. When investigating each client separately, however, we find that 39.7% of the clients having enough transactions to analyze statistically tend to increase their risk exposure irrationally after large gains or losses which can be the manifestation of the break-even and house-money effects well-documented in the literature for non-professionals. This irrational behavior may destroy value, so both market players and regulators should pay attention to monitor and control it.

scholarly journals Solvency Regulation—An Assessment of Basel III for Banks and of Planned Solvency III for Insurers

2021 ◽  
Vol 14 (6) ◽  
pp. 258
Author(s):  
Peter Zweifel
Keyword(s):  
Risk Taking ◽  
Capital Market ◽  
Regulatory Focus ◽  
Capital Requirements ◽  
Business Strategies ◽  
Insurance Companies ◽  
Basel Iii ◽  
Solvency Regulation ◽  
The Impact ◽  
The Capital Market

Basel III, regulating the solvency of banks, is to be fully implemented by 2027 while Solvency III directed at insurers is being prepared. In view of past experience, it will be closely modelled after Basel III. This raises two questions. (i) Will Basel III and Solvency III be more successful than their predecessors? (ii) Is it appropriate to continue regulating the solvency of banks and insurers in the same way? The first question is motivated by an earlier finding that Basel I and II risked inducing more rather than less risk-taking by banks, which also holds for Solvency I and II w.r.t. insurers. The methodology applied was to determine the slope of an endogenous perceived efficiency frontier (EPEF) in (μ^,σ^)-space derived from banks’ and insurers’ optimal adjustment to exogenous changes, in expected returns dμ¯ and volatility dσ¯ on the capital market. Both Basel I and II and Solvency I and II neglected the impact of these developments on banks’ and insurers’ EPEF. This neglect had the effect of steepening the EPEF, causing senior management to opt for an increased rather than reduced value of σ^, and hence a lower solvency level. This issue is resolved by Basel III (Principle 5), which requires banks to take developments in the capital market into account in the formulation of their business strategies designed to ensure solvency. In combination with increased capital requirements, this is shown to result in a reduced slope of their EPEF and hence a reduced risk exposure. However, planned Solvency III may cause the EPEF of highly capitalized insurance companies to become steeper, with a concomitant decrease in their risk-taking and an increase of their solvency level. The second question, concerning the appropriateness of the uniformity of solvency regulation directed at banks and insurers, arises because the parameters determining the slope of the respective EPEF are found to crucially differ. Therefore, the uniformity of Basel and Solvency norms creates the risk of a mistaken regulatory focus.

scholarly journals The Activation Relationship to Father and the Attachment Relationship to Mother in Children with Externalizing Behaviors and Receiving Psychiatric Care

2021 ◽  
Vol 2 (1) ◽  
pp. 59-70
Author(s):  
Daniel Paquette ◽  
Chantal Cyr ◽  
Sébastien Gaumon ◽  
Martin St-André ◽  
Mutsuko Émond-Nakamura ◽  
...  
Keyword(s):  
Risk Taking ◽  
Externalizing Behavior ◽  
Psychiatric Care ◽  
Externalizing Behaviors ◽  
Clinical Sample ◽  
Surrounding Environment ◽  
Child Externalizing Behaviors ◽  
And Control ◽  
The Impact ◽  
Attachment To Mother

The activation relationship refers to the emotional bond a child develops with a parent that helps ensure the regulation of risk-taking during child exploration of the surrounding environment. As a complement to Bowlby’s attachment theory, activation relationship theory provides a greater understanding of the impact of fathering on child development, focusing primarily on parental stimulation of risk-taking and control during child exploration. The overarching objective of this article is to better understand the association between children’s relationship quality with both parents, via the activation to father and the attachment to mother relationships, and child externalizing behaviors in a clinical sample. Fifty two-parent families (40 boys and 10 girls) were recruited at random from a population of children receiving treatment at the perinatal and early childhood psychiatry clinic. Results with 44 children (with complete cases) showed that overactivated preschoolers displayed more externalizing behaviors than did children with either an activated or an under-activated relationship with their father. Results also showed that children with a disorganized-controlling caregiving attachment to their mother marginally presented with higher levels of externalizing behavior.

scholarly journals The Impact of the Solvency II Directive on the Insurance Sector in Europe // Uticaj direktive solventnost II na sektor osiguranja u Evropi

2017 ◽  
Vol 7 (7) ◽  
pp. 301 ◽  
Author(s):  
Iva Tošić
Keyword(s):  
Member State ◽  
Solvency Ii ◽  
Insurance Market ◽  
Insurance Companies ◽  
Legal Rules ◽  
Insurance Sector ◽  
Healthy Functioning ◽  
And Control ◽  
The Impact ◽  
Paper Author

Solvency of insurance companies, its conservation, regulation and control is the basis for the healthy functioning of the insurance market. Solvency is an indicator of stability and security of the companies, as well as the guarantor of execution of obligations. The Solvency II Directive was adopted on 25th of November 2009. She announced big changes in the insurance and reinsurance law, both EU member countries and non-member countries, when it comes to the solvency of the company. The main reason for the adoption of the new directive is strengthening of the integrated market in insurance and reinsurance law through harmonized legal rules. Solvency II aims at a common market, working permit in one member State allows the company carrying out activities in all other member countries. Also, during the implementation of the new directive the countries should have the same rights of protection of the insured. For both requirements is necessary that the supervision rules are agreed and converged all across Europe. In this paper author analyzes influence of the Solvency II on EU member countries, and to non-EU countries, the state of security in Europe, as well as the extent to which some of the countries harmonized their legislation with the Directive.

scholarly journals The use of corporate derivatives: Effects on firm value in the Italian market

2021 ◽  
Vol 19 (1) ◽  
pp. 55-68
Author(s):  
Alberto Tron ◽  
Federico Colantoni
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Control Variable ◽  
Governance Mechanisms ◽  
Financial Firms ◽  
Corporate Governance Mechanisms ◽  
Italian Market ◽  
Effect Regression ◽  
And Control ◽  
The Impact

It is an empirical question whether the use of derivatives hedging among firms actually contributes to enhancing firm performances. Despite the increasing use of derivatives by non-financial firms, existing literature still debates about their effect, especially in countries with peculiar corporate governance mechanisms. By using a sample of non-financial Italian firms listed from 2007 to 2018, this paper investigates if the use of several types (currency, interest rate, and commodity) of financial derivatives can affect the value of a company. For measuring the impact of the derivatives and in order to address any possible endogeneity problem, besides using the conventional methodologies applied by previous literature (fixed-effect regression models and system GMM estimators), we run a random forest model, a machine learning technique not yet applied before in this field, and calculate the relative importance of each independent and control variable. Differently from other European countries, findings show that the use of derivatives does not affect the firm value in the Italian market. Therefore, our results confirm the role of corporate governance mechanisms on the relationship between firm value and the use of derivatives and that their impact is country-specific.

scholarly journals Evaluation of a collision-involved driver improvement scheme

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Julie Rachel Adams-Guppy ◽  
Andrew Guppy
Keyword(s):  
Risk Taking ◽  
Community Safety ◽  
Driving Safety ◽  
Training Methods ◽  
Content Type ◽  
Driving Experience ◽  
Positive Effects ◽  
Experience Effects ◽  
Improvement Scheme ◽  
The Impact

Purpose The purpose of this study is to compare driver knowledge, attitudes and perceptions (in terms of hazard, risk, accident, offence detection and driving skill perceptions) and self-reported driving style in a sample of 461 drivers before and after attending a UK driver improvement scheme for culpable collision-involved drivers, to inform future directions in the design of driver retraining programmes. Design/methodology/approach Participants were a sample of 461 drivers attending a UK 1.5 day driver improvement scheme course for culpable collision-involved drivers. The course contained classroom-based training and a practical driving component. Participants completed a driver improvement scheme questionnaire before and immediately after attending the 1.5-day course and again 3 months later. Findings Results indicated significant pre- and post-course effects in terms of increased driving safety with respect to driving knowledge, perceptions of control, perceived likelihood of accident-involvement, hazard perception and reported risk-taking. Key positive effects of reduced risk-taking and near-misses persisted three months after course completion. Research limitations/implications One limitation of this study is that at the 3-month follow-up there was a reduction in the response rate (44.69%) which included significantly fewer young drivers. Practical implications Results indicate positive behavioural, perceptual and behavioural changes, along with specific age, gender and driving experience effects which have implications for the design of future driving courses. Social implications This study has implications for community safety through enhanced road safety training measures. Originality/value The analysis of age, gender and driving experience effects of the impact of this driver improvement scheme will allow targeted training methods for specific groups of drivers.

scholarly journals The impact of company-specific and external factors on corporate risk taking: The case of Egyptian insurance companies

2013 ◽  
Vol 10 (3) ◽  
pp. 210-225
Author(s):  
Mohamed Sherif ◽  
Mahmoud Elsayed
Keyword(s):  
Risk Taking ◽  
Stock Prices ◽  
Risk Measures ◽  
External Factors ◽  
Insurance Companies ◽  
Method Of Moment ◽  
Life Insurers ◽  
Systematic Risks ◽  
Corporate Risk ◽  
The Impact

Using a two-way panel regression analysis with fixed and random effects and the generalized method of moment(GMM), we investigate the impact of both firm-specific and external factors on the risk taking of Egyptian insurance companies. We use hand-collected data of Egyptian insurance companies over the period from 2006 to 2011 to estimate the relationship between total and systematic risks as risk measures and the independent variables. Following Eling and Mark (2011) the extent of risk taking is quantified through variations in stock prices and these are explained by firm-specific and external factors. We find that differences in company size, interest rate level and economic development affect variations in stock prices. The analysis also highlights differences between the life and non-life insurers, with the non-life insurers exhibiting a higher level of risk (market and premium) and board independence. The pattern of results are qualitatively the same for non-life insurers but different for life insurers when we use GMM method.

scholarly journals The Relevance of Subjective Benefits in Risky Choice Across ten Domains of Life

2020 ◽  
Author(s):  
Jana Bianca Jarecki ◽  
Andreas Wilke
Keyword(s):  
Risk Taking ◽  
Rank Order ◽  
Risk Attitude ◽  
Risky Choice ◽  
Risk Return ◽  
Related Information ◽  
Domains Of Life ◽  
The Stability ◽  
Choice Tasks ◽  
The Impact

In risk-research, there are two traditions of measurement: the attribute-based and the vignette-based tradition. The attribute-based approach focuses on the impact that the attributes (prob-abilities and outcomes) of risky options have on the processing of risk-related information. The vignette-based approach fo-cuses on responses to questions about contextualized situations involving risk. We bring these two approaches together here to investigate the stability of risk preferences and information processing in risky choice tasks across different contextualized situations. To this end, we employ an evidence-based multi-attribute gamified risky choice task in a retest design. The re-sults (N = 226) show that risk propensities are very stable within domains across time. Participants’ explicit beliefs about risks and returns did not accurately reflect the actual rank order of the costs and benefits of actions in the real world, which we obtained from statistical databases. Also, we find that that pro-spect theory’s risk-attitude parameters are mostly unrelated to the risk-taking in the contextualized task, and that benefit per-ceptions influence risk-taking, in line with a risk-return trade-off view on risk-taking.

The Impact of Family Involvement on the R&D Intensity of Publicly Traded Firms

2011 ◽  
Vol 24 (1) ◽  
pp. 62-70 ◽  
Author(s):  
Fernando Muñoz-Bullón ◽  
Maria J. Sanchez-Bueno
Keyword(s):  
Family Involvement ◽  
Risk Taking ◽  
Time Horizon ◽  
Family Firms ◽  
Publicly Traded ◽  
Time Period ◽  
Resource Endowment ◽  
Negative Effect ◽  
And Control ◽  
The Impact

This study examines the impact of family involvement in ownership and control on firms’ R&D intensity, relying on panel data on publicly held firms in Canada over the 2004 to 2009 time period. The literature on the link between family firms and R&D is unclear: although some characteristics may promote R&D intensity in family firms, others factors may have a negative effect. Thus, the authors propose a theoretical framework whereby differences in R&D intensity between family and nonfamily firms are explained based on key conditions, including time horizon, agency costs, resource endowment, or risk-taking behavior. The findings of this study show that publicly traded family firms in Canada record lower R&D intensity compared with nonfamily firms and, therefore, support one side of the previous literature over the other.

scholarly journals Entropy-Based Risk Control of Geological Disasters in Mountain Tunnels Under Uncertain Environments

2018 ◽  
Author(s):  
Yuanpu Xia ◽  
Ziming Xiong ◽  
Hao Lu ◽  
Xin Dong
Keyword(s):  
Decision Making ◽  
Risk Control ◽  
Engineering Application ◽  
Control Process ◽  
Uncertain Environments ◽  
Underground Engineering ◽  
Entropy Model ◽  
Key Factor ◽  
And Control ◽  
The Impact

Uncertainty is the main source of risk of geological hazards in tunnel engineering. Uncertainty information not only affects the accuracy of evaluation results, but also affects the reliability of decision-making schemes. Therefore, it is necessary to evaluate and control the impact of uncertainty on risk. In this study, the problems in existing entropy-hazard model such as inefficient decision-making and failure of decision-making are analysed, and an improved uncertainty evaluation and control process are proposed. Then the tolerance cost, the key factor in the decision-making model, is also discussed. It is considered that the amount of change in risk value (R1) can better reflect the psychological behaviour of decision-makers. Thirdly, common attribute decision models, such as the expected utility-entropy model, are analysed, and then the viewpoint of different types of decision-making issues that require different decision methods is proposed. The well-known Allais paradox is explained by the proposed methods. Finally, the engineering application results show that the uncertainty control idea proposed here is accurate and effective. This research indicates a direction for further research into uncertainty, and risk control, issues affecting underground engineering works.

scholarly journals Soil mycobiota under managed and unmanaged forests of Nothofagus pumilio in Tierra del Fuego, Argentina

2019 ◽  
Vol 49 ◽  
Author(s):  
Lorena A. Elíades ◽  
Marta N. Cabello ◽  
Verónica Pancotto ◽  
Alicia Moretto ◽  
Natalia A. Ferreri ◽  
...  
Keyword(s):  
Management Practices ◽  
Diversity Index ◽  
Biological Indicators ◽  
Tierra Del Fuego ◽  
Nothofagus Pumilio ◽  
Management Interventions ◽  
Key Factor ◽  
And Control ◽  
The Impact ◽  
Shannon’S Diversity Index

Background: Management practices can modify the productivity of forests and the associated microbial diversity of soil. The soil mycobiota is considered a key factor in the ecological functions of forests. Forests of Nothofagus pumilio (Poepp. & Endl.) Krasser (Nothofagaceae) are the main source of timber and one of the most important economic resources in the province of Tierra del Fuego (Argentina). However, there is no information on the impact of forest management interventions for the soil mycobiota, which can be reliable biological indicators of disturbance.Methods: Fungi were isolated from samples of soil collected under several Nothofagus pumilio forests subjected to different types of management and periods of time since the intervention. Types of management were represented by harvested forest with a shelter wood cutting, stockpile area and control forest without intervention and the periods of time since intervention were 1, 5–10 and 50 years. Species richness, evenness and Shannon’s diversity index of the mycobiota in each condition of management were calculated. Additionally, the effect of seasonality was analysed.Results: The soil mycobiota was represented by 70 taxa. Richness and/or Shannon’s diversity index of the mycobiota between undisturbed forest and stockpile area were higher in May (autumn) than in September or November. There were no differences in mycobiota diversity between dates in the harvested forest.Conclusions: Our results indicate that the forest intervention per se did not negatively affect the soil culturable mycobiota composition of N. pumilio forests in Tierra del Fuego (Argentina).

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