scholarly journals Financial stability: does social activism matter?

2019 ◽  
Vol 28 (2) ◽  
pp. 183-214
Author(s):  
Peterson K. Ozili
Keyword(s):  
Gender Equality ◽  
Financial Institutions ◽  
Environmental Sustainability ◽  
Financial Stability ◽  
Social Protection ◽  
Social Activism ◽  
Financial System ◽  
System Stability ◽  
Content Type ◽  
The Impact

Purpose This study investigate the impact of social activism on financial system stability. Design/methodology/approach Financial stability was analysed from two complementary perspectives: bank-led financial stability and financial system stability driven by sector-wide credit supply. Social activism was analysed from three perspectives: gender equality advocacy, environmental sustainability advocacy and social protection advocacy. Findings The findings reveal that gender equality and environmental sustainability advocacy have significant positive effects for financial stability, whereas social protection advocacy has a significant negative effect for financial stability. In addition, social activism has negative effects for financial stability in the post-2008 financial crisis era. Finally, there are differential effects for country-groups, for instance, social activism strongly improves bank-led financial stability in African countries and for BLEND countries (countries that are eligible for International Development Association (IDA) borrowing based on per capita income levels and are also creditworthy for some borrowing from the International Bank of Restructuring and Development). The findings are relevant for the on-going debate about whether social inclusivity and activism has any economic value for the stability of businesses and the financial system. The findings have implications. Research limitations/implications The implication for policy-making is that the pressure on, or commitment of, financial institutions to be socially inclusive in all social matters such as gender equality, environmental sustainability and social protection does not guarantee stability in the financial system – whether bank-led financial stability or sector-wide financial stability. Therefore, regulators should ensure that financial institutions exercise careful discretion when adjusting their risk models to include all “social risk” factors amidst the recent pressure on corporations to be socially inclusive. Practical implications Another implication for business practice is that business leaders in financial institutions should identify the optimal level of social inclusivity that improves the stability of their corporations, because it would seem counterproductive if business leaders adopt full-scale social inclusion (or considerations) that subsequently make their corporations financially unstable which could lead to loss of shareholders wealth. Originality/value This study is the first attempt to investigate the impact of social activism on financial stability to determine whether greater social activism promotes stability or instability in the financial system.

scholarly journals Securities cross-holding in the Colombian financial system: a topological approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Carlos León ◽  
Javier Miguélez
Keyword(s):  
Financial Institutions ◽  
Financial Stability ◽  
Financial System ◽  
Financial Systems ◽  
Data Set ◽  
Content Type ◽  
Balance Sheets ◽  
System A ◽  
Circular Structure ◽  
The Impact

Purpose From a financial stability viewpoint, this paper aims to study cyclical interdependencies arising from the cross-holding of securities in the Colombian financial system. Design/methodology/approach Cross-holding of securities in financial systems occurs when two financial institutions hold securities issued by each other or when more than two financial institutions hold securities issued by each other in a circular structure. Securities cross-holding is key for financial stability because of potential contagion arising from cyclical interdependencies in the connective architecture of financial systems. The presence of cyclical interdependencies is studied based on network analysis. The data set is a multilayer network that comprises bonds, certificates of deposit and equity issued and held by Colombian financial institutions from 2016 to 2019. Findings Results show that the extent of securities’ cyclical interdependencies is particularly low and stable – even when cross-holding across different types of securities is considered. Research limitations/implications The monetary value of exposures and their size with respect to financial institutions’ balance sheets are not considered. Studying the impact on the financial system’s solvency is a compulsory research path. Practical implications The network topology suggests that increased potential contagion by cyclical interdependencies and feedback effects from securities cross-holding is rather limited. Originality/value To the best of the authors’ knowledge, this is the first time that cyclical interdependencies arising from the securities cross-holding are studied. From a financial stability perspective, the methodology is general and promising for monitoring and analytical purposes.

A proposed framework for implementing risk-based Shari’ah audit

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Suleiman Dalhatu Sani ◽  
Mustapha Abubakar
Keyword(s):  
Financial Institutions ◽  
Real Life ◽  
Financial System ◽  
Practical Work ◽  
System Stability ◽  
Illustrative Case ◽  
Content Type ◽  
Finance Industry ◽  
Islamic Financial Institutions

Purpose This paper aims to recommend a framework that serves as a practical work tool for conducting risk-based Shari’ah audit (RBSA) in Islamic financial institutions (IFIs). Design/methodology/approach Qualitative research method was used through critical in-depth content analysis of documented literature to generate deep insights, further supported with a hypothetical illustrative case study application of the framework on an Islamic bank, aimed at bringing the framework to a practical, near real-life scenario. Findings A robust RBSA framework has been developed which focuses on Shari’ah non-compliance risks to systematically and practically arrive at a rated opinion on the level of an IFI’s adherence with Shari’ah rules and principles as recommended by the Accounting and Auditing Organization for Islamic Financial Institutions, aimed to safeguard the IFI and promote financial system stability at large. Research limitations/implications Practical realities limited the study to the use of a hypothetical case study bank. Future researchers can apply the framework to a real case study of diverse IFIs for effective contextual recalibration in diverse jurisdictions. Practical implications This paper aids the development of both internal and external Shari’ah audit practice using the risk-based approach. Social implications The RBSA framework contributes to promoting public trust and confidence in the Islamic finance industry. Originality/value This paper has proposed this RBSA framework as a practical work tool for Shari’ah auditors in their engagements and regulators in promoting sound governance and financial system stability. It provides foundation for future researchers in the field.

Corporate social responsibility and financial stability: evidence from the Troubled Asset Relief Program

2019 ◽  
Vol 45 (8) ◽  
pp. 1111-1128 ◽  
Author(s):  
Elizabeth Cooper ◽  
Christopher Henderson ◽  
Andrew Kish
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Financial Institutions ◽  
Financial Stability ◽  
Banking Industry ◽  
Content Type ◽  
Troubled Asset Relief Program ◽  
Corporate Social ◽  
Relief Program ◽  
The Impact

Purpose The purpose of this paper is to test the impact of corporate social responsibility (CSR) in the banking industry using Troubled Asset Relief Program (TARP) as an experimental backdrop. Design/methodology/approach The authors match banks that received TARP with CSR data on publicly available firms. Using this data set, the authors are able to perform both univariate and multivariate analyses to determine the impact of CSR on bank management behavior. Findings The authors find evidence that supports stakeholder theory as applied to a sample of large financial institutions. The authors show that banks increased their CSR involvement and intensity following TARP, evidence that CSR is not merely transitory in nature but structural and an important aspect of firm value. The authors also find that capital ratios increase to a greater degree in banks whose CSR ratings were stronger prior to TARP. Finally, while all banks in the sample repaid Treasury, it took strong CSR banks a longer time to repay than banks with weaker CSR. The authors show how CEO compensation played a role in this relationship. Research limitations/implications The findings are limited to large banks. Practical implications Practically speaking, this study helps to discern the motivations and actions of large financial institutions. This is especially important from a regulator perspective, whose function is to maintain overall national financial stability. Originality/value This is the first study to link TARP and CSR literatures. Overall, there are a limited number of studies on CSR in the banking industry, and this paper adds to this burgeoning area. It is important and valuable to managers and policymakers to understand implications of CSR in the financial sector.

Testing the interrelatedness of banking stability measures

2014 ◽  
Vol 6 (1) ◽  
pp. 25-45 ◽  
Author(s):  
Vighneswara Swamy
Keyword(s):  
Emerging Economies ◽  
Financial Stability ◽  
Banking System ◽  
Financial System ◽  
Capital Adequacy ◽  
System Stability ◽  
Var Model ◽  
Content Type ◽  
Banking Stability ◽  
Asset Quality

Purpose – This study aims to investigate the inter-relatedness and the dynamics of banking stability measures and offers answers for some of the related issues such as does financial stability require the soundness of banking institutions, the stability of markets, the absence of turbulence and low volatility? and to what extent the soundness of banking sector in the case of emerging economies can help financial system stability. Design/methodology/approach – This study investigates banking stability by structuring a recursive micro panel vector auto regressive (VAR) model and corroborates the significance of the interrelatedness of the bank-specific variables such as liquidity, asset quality, capital adequacy and profitability by employing a robust panel data drawn from 56 leading banks for a period of 12 years. Findings – A significant contribution of this study is in establishing that liquidity in the banking-dominated financial system is reciprocally related with asset quality, capital adequacy, and profitability of the banking system and in effectively forecasting banking stability employing micro panel recursive VAR model. Research limitations/implications – The study could be further broadened by employing a macro and structural VAR modelling to forecast banking stability. Practical implications – This paper is one among the evolving body of literature that underscores the significant relationship between banking system resilience and financial stability in the context of emerging economies dominated with banking systems. Further, the forecast model is able to capture the dynamics of banking stability with greater and appreciable accuracy. Originality/value – The uniqueness of the study is in modelling banking stability measures in the context of banking-dominated emerging economy financial systems by employing micro panel recursive VAR model by deriving data from 58 leading banks for the period of 12 years from 1996 to 2009 and in offering insights in understanding financial stability with comprehensive literature review.

Do bank regulations matter for financial stability? Evidence from a developing economy

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Antony Rahim Atellu ◽  
Peter Muriu ◽  
Odhiambo Sule
Keyword(s):  
Low Income ◽  
Financial Stability ◽  
Measurement Errors ◽  
Banking Sector ◽  
Financial System ◽  
System Stability ◽  
Series Data ◽  
Estimation Technique ◽  
Content Type ◽  
Bank Regulations

Purpose This paper aims to establish the effect of bank regulations on financial stability in Kenya. Specifically, the study seeks to uncover the effect of micro and macro prudential regulations on financial stability and their trade-offs or complementarities. Design/methodology/approach Using annual time series data over the period 1990–2017, the study uses structural equation model (SEM) estimation technique. This solves the problem of approximating measurement errors, using both latent constructs and indicator constructs. Findings Study findings reveal that macro and micro prudential regulations are significant drivers of financial stability. Further, prudential regulations are more effective when they complement each other. Research limitations/implications This study centers on how bank regulations affect financial stability. Future research could be carried out on the effect of Non-Bank Financial Institutions regulations on financial system stability. Practical implications Complementing macro and micro prudential regulation is more effective and efficient in ensuring stability of the financial system other than letting the two policy objectives operate independently. Social implications Regulatory authorities should introduce prudential regulations that would encourage innovations in the banking sector. This ensures easy deposit mobilization that enhances financial inclusion. Prudential regulations that ensure financial stability will be effective when low income earners are included in the financial system. Originality/value To the best of the authors’ knowledge, this study is the first to investigate the role of banking regulations on financial stability. This study is also pioneering in the use of SEM estimation technique, in examining how prudential regulations affect financial stability. Previous cross-country studies have focused on macro prudential regulations ignoring the importance of micro prudential regulations.

Shadow banking's effects in the Chilean financial system

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Diana López Avilés ◽  
Paula Piñeira ◽  
Víctor Andrés Roco Cáceres ◽  
Felipe Vergara ◽  
Nicolas Araya
Keyword(s):  
Systemic Risk ◽  
Value At Risk ◽  
Financial Stability ◽  
Financial System ◽  
Conditional Value At Risk ◽  
Shadow Banking ◽  
Content Type ◽  
Relevant Effect ◽  
New Research ◽  
The Impact

PurposeThe Financial Stability Board (FSB) determined that entities classified as shadow banking are of a credit nature because they are capable of affecting the financial system through the entry and exit of capital. This study aims at measuring the impact of shadow banking in the systemic risk in Chile. A sample of 91 institutions (Run) belonging to the mutual funds was used, with a series showing a continuous behaviour between 2004 and 2018.Design/methodology/approachThe measurement is carried out using the conditional value at risk (CoVaR) methodology, which analyses the behaviour of an institution in a regular state against the same institution in a state of stress.FindingsThe results obtained reflect that liquidity mismatches do not have a relevant effect on the systemic risk, while the 2008 crisis does contribute to its decline.Originality/valueThere are less number of literature studies that apply statistical models regarding shadow banking, at least at a quantitative level, so this research is a beginning for other studies, supporting future authors in their new research as a basis.

Financial Stability, Systemic Risk, and Taxpayers’ Money—The Rationale for a Special Resolution Regime

2016 ◽  
Author(s):  
Michael Schillig
Keyword(s):  
Moral Hazard ◽  
Market Efficiency ◽  
Financial Institutions ◽  
Systemic Risk ◽  
Financial Stability ◽  
Financial System ◽  
System Stability ◽  
Cross Border ◽  
Ex Post ◽  
Ex Ante

Special resolution regimes are generally introduced with the objective of helping to ‘maintain financial stability, minimize systemic risk, protect consumers, limit moral hazard and promote market efficiency’. The recurring themes are financial stability, systemic risk, and taxpayers’ exposure to losses. This chapter explores whether and to what extent a special resolution regime for banks and financial institutions can contribute to the enhancement of financial (system) stability and can limit systemic risk. It seeks to clarify these concepts and discusses possible ex ante incentives that a (recovery and) resolution regime may provide for controlling systemic risk. Further, it focuses on ex post remedies for the curtailment of systemic risk, and considers the international and cross-border implications.

Financial access and the finance–growth nexus: evidence from developing economies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hazwan Haini
Keyword(s):  
Economic Growth ◽  
Financial Institutions ◽  
Developing Economies ◽  
Financial System ◽  
Financial Inclusion ◽  
Financial Access ◽  
Content Type ◽  
Marginal Impact ◽  
Financial Depth ◽  
The Impact

PurposeThis study examines the impact of financial institutions access and financial institutions depth on economic growth in 51 low- and lower–middle-income countries from 1996 to 2017.Design/methodology/approachThe study employs an index of financial institutions depth and financial institutions access that considers the multidimensional nature of finance. The study employs a generalised least squares model as the baseline fixed effects model suffers from serial correlation. In addition, the study examines the marginal impact of financial development on growth at varying levels of financial access.FindingsThe results show that both financial access and financial depth are positive to growth. However, the marginal impact of financial depth is negative at low levels of financial access, while the finance–growth relationship becomes positive at higher levels of financial access. Results suggest the importance of developing inclusive financial systems that emphasise quality rather than quantity to promote economic growth.Research limitations/implicationsThe major limitation lies in the measurement of financial access as it focusses more on financial system penetration and overlooks the other aspects of financial inclusion such as financial literacy and cultural differences.Practical implicationsDeveloping countries should continue to develop an inclusive financial system that supports the Universal Financial Access 2020 initiative.Originality/valueThis study provides further empirical evidence on the finance–growth literature focussing on the impact of financial inclusion which is scarce. Furthermore, the study employs an index of finance that captures the multidimensional nature of finance.

Investigating the impact of board characteristics on money laundering

2020 ◽  
Vol 23 (4) ◽  
pp. 751-767
Author(s):  
Shaban Mohammadi ◽  
Hadi Saeidi ◽  
Nader Naghshbandi
Keyword(s):  
Money Laundering ◽  
Financial Stability ◽  
Stock Exchange ◽  
Screening Method ◽  
Financial System ◽  
Chief Executive ◽  
Statistical Population ◽  
Content Type ◽  
Board Characteristics ◽  
The Impact

Purpose The purpose of this study is to examine the effect of board characteristics on money laundering in Iranian listed companies. Design/methodology/approach This was a descriptive-correlational study, and in terms of purpose, it was an applied research. The statistical population of this study was all companies listed in Tehran Stock Exchange during the years 2012-2018. A sample of 150 companies was selected by screening method. Data analysis and hypothesis testing were performed using logistic regression and Eviews 10. Findings The results indicated that the board bonus and CEO duality (chief executive officer duality) had a significant effect on money laundering. CEO gender also had a significant effect on money laundering. Originality/value Sound management of risks related to money laundering by the board of directors is associated with stability, soundness and overall health of a country's financial system, which enables the integrity of the international financial system by meeting the Basel Committee goals, including strengthening the regulations, monitoring and improving current procedures, promoting financial stability and maintaining and enhancing a good corporate reputation; however, banks and other financial institutions are exposed to more serious risks, especially the reputation risk, operational risk, etc., if management does not play an effective role in the fight against money laundering. If management considers efficient and risk-driven policies and procedures in the fight against money laundering, then many problems and losses as well as many costs, including failure to collect receivables and to bring legal proceedings, can be prevented.

Influence of internal and external risks on sustainability of financial system of Аltai krai

2018 ◽  
Vol 35 (4) ◽  
pp. 133-136
Author(s):  
R. N. Ibragimov
Keyword(s):  
Sustainable Development ◽  
Financial Stability ◽  
Management Strategy ◽  
Financial System ◽  
Risk Management Strategy ◽  
The Sustainable Development ◽  
The Stability ◽  
The Impact

The article examines the impact of internal and external risks on the stability of the financial system of the Altai Territory. Classification of internal and external risks of decline, affecting the sustainable development of the financial system, is presented. A risk management strategy is proposed that will allow monitoring of risks, thereby these measures will help reduce the loss of financial stability and ensure the long-term development of the economy of the region.

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