scholarly journals The Relationship between Economic Uncertainty and Firms’ Balance Sheet Strength

2020 ◽  
Author(s):  
Mehmet Selman Çolak ◽  
İbrahim Ethem Güney ◽  
Yavuz Selim Hacıhasanoğlu
Keyword(s):  
Credit Risk ◽  
Balance Sheet ◽  
Composite Index ◽  
Policy Uncertainty ◽  
Economic Uncertainty ◽  
Assessment Score ◽  
Turkish Economy ◽  
Nonfinancial Firms ◽  
The Relationship ◽  
Trade Policy Uncertainty

This chapter aims to elaborate on the relationship between economic uncertainty and balance sheet strength of nonfinancial firms in Turkish economy. In order to effectively measure the balance sheet strength, we make use of a multivariate indicator, namely, the Multivariate Firm Assessment Score (MFA Score), which is a composite index to gauge the credit risk of nonfinancial firms quoted in Borsa İstanbul. MFA scores are compared with some uncertainty indicators for the period of 2005–2019. Our results suggest that when the uncertainties in global or Turkish economy are high, we observe a significant causal relationship from uncertainty indicators to firms’ balance sheet strength. More specifically, economic uncertainties negatively affect firms’ balance sheet performance in such an environment. Moreover, different types of uncertainties such as trade policy uncertainty and consumer perceptions about the economy are found to have differential impacts on exporter and non-exporter firms.

Economic policy uncertainty and hotel occupancy: the mediating effect of consumer sentiment

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ozgur Ozdemir ◽  
Wenjia Han ◽  
Michael Dalbor
Keyword(s):  
Economic Policy ◽  
Structural Equation ◽  
Mediating Effect ◽  
Equation Modeling ◽  
Policy Uncertainty ◽  
Economic Uncertainty ◽  
Consumer Sentiment ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
The Relationship

PurposeThe purpose of this paper is twofold. First, the study examines the prolonged effect of policy-related economic uncertainty on hotel operating performance, particularly the room demand (occupancy). Second, the study attempts to explain why occupancy drops when the perceived economic uncertainty is high by studying the mediating effect of consumer sentiment in the relationship between economic policy uncertainty and hotel demand.Design/methodology/approachThis quantitative study uses secondary data – US economic policy uncertainty (EPU) index, University of Michigan's index of consumer sentiment (ICS), and property-level hotel operating data from three states of the US – California, Florida and New York. Data were analyzed using random effect regression and structural equation modeling. Robustness tests were conducted to enhance the reliability of the research findings.FindingsRandom-effects regression analysis reveals that policy-related economic uncertainty has a negative and lead-lag effect on hotel occupancy, average daily rate and revenue per available room (RevPAR). Structural equation modeling results show that the relationship between economic policy uncertainty and hotel occupancy is significantly mediated by consumer sentiment. Robustness test results support the findings from the main analysis.Practical implicationsThis study offers valuable implications for the hotel professionals in regard to anticipating the economic impact of policy-related uncertainty on hotel industry and understanding how consumer sentiment affects demand at such crises times. Moreover, the study suggests potential course of actions to deal with declining room demand at times of uncertainty.Originality/valueThis empirical study explores how economic policy uncertainty affects hotel performance at the property level and explains the mediating effect of consumer sentiment on hotel room demand. The study provides a first-hand evidence of how consumer sentiment relates to the perception of economic uncertainty and leads to decline in consumer demand. In that regard, findings of the study have valuable implications for hospitality industry practitioners and relevant policymakers.

OFF-BALANCE SHEET ACTIVITIES AND BANK RISKS: AN INVESTIGATION OF THE LISTED COMMERCIAL BANKS IN CHINA (1999–2013)

2015 ◽  
Vol 10 (01) ◽  
pp. 1550004 ◽  
Author(s):  
KANGWEI YE
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Balance Sheet ◽  
Test Results ◽  
Bankruptcy Risk ◽  
Risk Characteristics ◽  
The Relationship ◽  
The Empirical Analysis ◽  
Bank Risks ◽  
Overall Risk

Based on a broad set of 16 listed commercial banks in China during the period 1999–2013, this paper makes the empirical analysis of the relationship between the development of off-balance sheet (OBS) activities and the banks' overall risk, bankruptcy risk and credit risk. Innovation of this article is mainly reflected in: (1) Considering different types of risk variables, it gives a more comprehensive disclosure of the bank's risk characteristics. (2) Dividing the research object into joint-stock commercial banks and state-owned commercial banks, and get some new test results: The development of OBS business of state-owned commercial banks increases the overall risk, bankruptcy risk and credit risk significantly. While in joint-stock commercial banks sample, the development of OBS business reduces the overall risk significantly.

The relationship between Bitcoin returns and trade policy uncertainty

2019 ◽  
Vol 29 ◽  
pp. 75-82 ◽  
Author(s):  
Giray Gozgor ◽  
Aviral Kumar Tiwari ◽  
Ender Demir ◽  
Sagi Akron
Keyword(s):  
Trade Policy ◽  
Policy Uncertainty ◽  
The Relationship ◽  
Trade Policy Uncertainty

Merton-type default risk and financial performance: the dynamic panel moderation of firm size

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Mushafiq ◽  
Syed Ahmad Sami ◽  
Muhammad Khalid Sohail ◽  
Muzammal Ilyas Sindhu
Keyword(s):  
Financial Performance ◽  
Firm Size ◽  
Default Risk ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Dynamic Panel Data ◽  
Dynamic Panel ◽  
Content Type ◽  
Nonfinancial Firms ◽  
The Relationship

PurposeThe main purpose of this study is to evaluate the probability of default and examine the relationship between default risk and financial performance, with dynamic panel moderation of firm size.Design/methodology/approachThis study utilizes a total of 1,500 firm-year observations from 2013 to 2018 using dynamic panel data approach of generalized method of moments to test the relationship between default risk and financial performance with the moderation effect of the firm size.FindingsThis study establishes the findings that default risk significantly impacts the financial performance. The relationship between distance-to-default (DD) and financial performance is positive, which means the relationship of the independent and dependent variable is inverse. Moreover, this study finds that the firm size is a significant positive moderator between DD and financial performance.Practical implicationsThis study provides new and useful insight into the literature on the relationship between default risk and financial performance. The results of this study provide investors and businesses related to nonfinancial firms in the Pakistan Stock Exchange (PSX) with significant default risk's impact on performance. This study finds, on average, the default probability in KSE ALL indexed companies is 6.12%.Originality/valueThe evidence of the default risk and financial performance on samples of nonfinancial firms has been minimal; mainly, it has been limited to the banking sector. Moreover, the existing studies have only catered the direct effect of only. This study fills that gap and evaluates this relationship in nonfinancial firms. This study also helps in the evaluation of Merton model's performance in the nonfinancial firms.

Planning Institutions and Urban Spatial Patterns: Evidence from a Cross-National Analysis

2021 ◽  
pp. 0739456X2110442
Author(s):  
Stephan Schmidt ◽  
Wenzheng Li ◽  
John Carruthers ◽  
Stefan Siedentop
Keyword(s):  
Composite Index ◽  
Metropolitan Regions ◽  
Institutional Planning ◽  
National Planning ◽  
Institutional Frameworks ◽  
Planning Framework ◽  
Compact Development ◽  
National Analysis ◽  
The Relationship ◽  
Cross National

This paper examines how national planning frameworks differ from each other and how those differences relate to patterns of urban development using an international cross section of metropolitan regions. We construct a composite index to measure institutional planning frameworks through objective criteria—restrictive versus permissive; binding versus nonbinding; nationally versus locally oriented—that enables comparison between (not within) countries. We also estimate a series of models to evaluate the relationship between institutional frameworks and patterns. The evidence suggests that a more centralized and coordinated planning framework produces more compact development, whereas a more decentralized and uncoordinated planning framework results in less compact development.

Financial and social efficiency analysis of Islamic microfinance institutions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Marwa Fersi ◽  
Mouna Bougelbène
Keyword(s):  
Capital Structure ◽  
Credit Risk ◽  
Risk Taking ◽  
Negative Impact ◽  
Microfinance Institutions ◽  
Social Efficiency ◽  
Content Type ◽  
Islamic Microfinance ◽  
The Impact ◽  
The Relationship

PurposeThe purpose of this paper was to investigate the impact of credit risk-taking on financial and social efficiency and examine the relationship between credit risk, capital structure and efficiency in the context of Islamic microfinance institutions (MFIs) compared to their conventional counterparts.Design/methodology/approachThe stochastic frontier approach was used to estimate the financial and social efficiency scores, in a first step. In a second step, the impact of risk-taking on efficiency was evaluated. The authors also took into account the moderating role of capital structure in this effect using the fixed and random effects generalized least squares (GLS) with a first-order autoregressive disturbance. The used dataset covers 326 conventional MFIs and 57 Islamic MFIs in six different regions of the world over the period of 2005–2015.FindingsThe overall average efficiency scores are less than 50%, where CMFIs could have produced their outputs using 48% of their actual inputs. IMFIs record the lowest financial (cost) efficiency that is equal to 28% on average. The estimation results also reveal a negative impact of nonperforming loan on financial and social efficiency. Finally, the moderating effect of leverage funding on the relationship between credit risk-taking and financial efficiency was confirmed in CMFIs. However, leverage seems to moderate the effect of risk-taking behavior on social efficiency for IMFIs.Originality/valueThis paper makes an initial attempt to evaluate the effect of risk-taking decision and its implication on efficiency and MFIs' sustainability. Besides, it takes into consideration the role played by the mode of governance through the ownership structure. In addition, this research study sheds light on the importance of the financial support for the development and sustainability of these institutions, which in return, contributes to a sustainable economic development.

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