Towards Predicting Financial Failure in Non-Profit Organisations

Non-profit organisation financial failure has been a prevalent problem in developed and developing economies. Such incidences bring adverse effects to the reputation of the non-profit organisation in question and the third sector as a whole, especially if the organisation in question is significantly large in size, leading to possible knock-on effects such as disruption to society, litigation, loss of investor confidence in the economic environment, and a worsening of a country's ranking under the Corruption Perceptions Index. This chapter examines past financial failures amongst non-profits and reviews past literature on attempts to predict non-profit failures before they occur. Finally, it proposes an additional governance-related factor to be taken into consideration when considering potential financial distress amongst non-profit organisations. Suggestions for further research are made accordingly.

Measuring the Impact of Financial Crisis

Crisis in 2001 and global financial crisis in 2008 effect Turk economy in a lot of ways. Financial crisis creates destructive effect especially on increasing market economies. It is not so easy to watch occurring of this financial crisis and determining of its expanding. First of all determining of crisis terms are needed to predict of financial crisis. In this part, a financial stress index is composed by using TL interest rate and monthly data of global gross reserves belongs to $/TL exchange rate between 1997:01-2014:12 terms for Turkey. Months when financial stress index raised to top level for Turkey and financial crisis are observed on, are found as February(2001) and November (2008).

Dating Banking and Currency Crises in Turkey, 1990-2014

The last two decades characterized by financial crisis episodes have seen a proliferation of empirical studies. These early warning system models allowed researchers to distinguish certain key determinants of financial crises, and helped predicting and preventing the occurrence of some crises. However, crises continue to arise as recently illustrated by the onset of the global financial crisis. This clarifies that there are still a lot to learn about financial crises. In this sense, this paper aimed to compare the performance of several currency and banking crisis indicators within the Turkish economy which underwent severe financial crises in the last twenty years. Different currency crisis indicators performed well by detecting the 1994, 2001 and 2008 currency crises, while banking crisis indicators had significant inconsistencies. However, two banking crisis indicators we developed stand for valuable efforts in dating banking crises by constructing aggregate indexes, and contribute significantly to the empirical crisis literature.

KLR Approach as an Early Warning Indicator of Turkish Currency and Banking Crisis in 2000 and 2001

International organizations as private sector institutions started to develop Early Warning System [EWS] models aiming to anticipate whether and when individual countries can collide with a financial crisis. EWS models can be made most useful to help sustain global growth and maintain financial stability, especially in light of the lessons learned from the current and past crises. This paper proposes Early Warning Systems (EWS) for Turkish Currency and Banking Crisis in 2000 and 2001. To that end “KLR model” or “signaling window” approach developed by Kaminski, Lorezondo and Reinhart (1998) is testified in the empirical part of this research and applied to a sample of Turkey macroeconomic data for the 1998-2003 monthly periods.

Building a Surveillance Framework for Currency Crises in Indonesia

There seems to be no single country that can escape from currency crises. This paper aims to answer: (i) How to determine exchange market pressure (EMP)? and (ii) To what extent the contribution of selected indicators to the prediction of currency crises?. The study adopts indicators developed by Kaminski, et.al (1999) by using signal extraction method as the early warning system (EWS) mechanism. By employing four selected variables, International reserve, real exchange rates, credit growth, and domestic inflation, the findings suggest the periods of crises fluctuated over the observations under various thresholds. The EMP touched the Kaminsky's line only during the Asian and global financial crises. Meanwhile, the Garcia's, Park's and Lestano's line was passed through frequently over the observations, and it implies that the financial system was cyclically under shocks. In conclusion, the currency crises frequently appear attacking Indonesia's financial system so that need to be mitigated by net open position (NOP) as macroprudential instrument.

Assessing the Financial Vulnerability of Emerging Markets

The consequences of the recent financial crises during the last two decades showed how important it is to monitor financial performance and try to predict a coming crisis. In an effort to predict a coming crisis, the authors calculate a vulnerability index based on a number of financial and economic indicators. This chapter analyzes the financial vulnerability of sixteen emerging countries as these countries are more vulnerable to financial fluctuations. The findings show that Peru, Russia, Indonesia, and Thailand are less vulnerable to a crisis, whereas, South Africa, Turkey, India, Egypt, and Hungary are more vulnerable to a crisis.

Currency Crisis in Developing Countries

Currency crises have been the subject of an extensive economic literature, both theoretically and empirically. The purpose of this chapter is to examine and investigate the causes of currency and associated crises, evaluates the accuracy of empirical models in predicting crises, and review works on measuring the consequences of crises on the real economy. It is a cross sectional survey study and used of secondary data on the causes of currency and associated crises, and challenges in avoiding these crises. The study reveals that reduce output, financial liberalization, capital and current accounts, the real economy and macroeconomic conditions are some of the indicators of currency crisis. A key cost of currency crisis is forgone output. EWS models estimate probabilities of crises to occur. The implications are that currency crisis negatively affects the economy needs to be predicted and managed appropriately.

Using Self Organizing Maps for Banking Oversight

This chapter combines two methods based on neural networks (trait recognition and self-organizing maps) to develop a model of bankruptcy prediction. The authors apply the method to the Spanish savings banks, most of them rescued by the Government between 2008 and 2013 in a costly massive process. First, the authors detect the combinations of variables (performance, asset structure, and capitalization) that best describe the profile of the rescued savings banks. Then, the authors use these combinations on a yearly basis to generate bi-dimensional maps in which banks are placed according to their risk and similarities. This method provides a visual tool that can improve the oversight of policy makers on the whole financial system and enable time pertinent answers to some threatens to the country financial stability. The maps are useful means to detect and understand how the financial threats emerge over time too.

Financial Contagion in a Glance

The purposes of this chapter are: to provide an overview over usage of financial contagion in detecting crisis; to provide a conceptual framework for investigating financial abnormalities and their potential spread; to provide a taxonomy for financial abnormalities; to provide a taxonomy of transmission channels for economic and financial abnormalities. The approach of this research is largely based on adaptation of medical sciences research to economic research, mainly the adaptation of Epidemiology to economic sciences. The chapter provides means for investigating in a systematic way cases of abnormalities like cascade business failures, cascade regional or national level economy recession based.

The Twin Deficit as an Early Warning Sign in Avoiding Crises

By analyzing the causes and consequences of Greek debt crisis, we identify early warning fiscal and financial signals. The existence of twin deficits for a number of years can be characterized as the key fiscal indicator concerning the debt problems faces Greece. Moreover, indicators from the banking sector also reveal significant information for the Greek crisis. The interdependence of banking and government sectors and opportunistic political behavior can affect dramatically a small economy. Common currency reveals structural weaknesses of the Greek economy.