International Journal of Economics and Business Research (31 papers in press)
Attitude towards Foreign Product Purchase: Malaysian Consumers Perspective
by Khairul Anuar Mohammad Shah, Hazril Izwar Ibrahim, Nurliyana Maludin, Zurina Ismail
Abstract: This study examines the Malaysian consumers attitudes towards foreign purchase products. Specifically, this study investigates the consumers attitude whether they have the feeling of boycott, animosity, ethnocentrism, patriotism and worldmindedness towards foreign made products. It also has examined how these constructs can affect the foreign product judgment and their willingness to purchase such products. This study surveyed on 512 consumers from Penang, Kuala Lumpur, Melaka and Terengganu (East Cost). Methodology and practical implications were discussed at the end of this study. The findings show that consumer patriotism and consumer worldmindedness mediates the relationship between product judgment and purchase willingness of foreign made products. The results also indicated that consumers with the attitude of animosity and ethnocentrism was negatively judge foreign made products and consumer worldmindedness was positively judge of foreign made goods and products. Surprisingly, only consumer worldmindedness was positively related to purchase willingness of foreign made goods. In conclusion, this model of study s was performed well by testing the goodness of fit analysis. Discussion of findings and direction of future research are highlighted.
Keywords: boycott; animosity; ethnocentrism; purchase willingness; product judgment.
Online Financial Reporting Disclosure in Islamic Banking: Evidence from Bahrain
by Adel Sarea, Azam Khalid, Amanuddin Bin Shamsuddin, Iqbal Hawaldar, Zakir Hossen
Abstract: This study aims to investigate the level of disclosure of Islamic banking in Bahrain by the web-based disclosure. The web-based disclosure method was implemented to determine the quantity of the level of web-based disclosure of Islamic banks in Bahrain by using index consists of 90 items. The findings of the descriptive analysis indicated that the overall level of web-based disclosure was 73.3 %. The regression results showed a positive relationship between the independent variables (firm size, age, and profitability) and the level of web-based disclosure. The results of this paper help the Islamic banking in Bahrain to increase the level of web-based disclosure to reach full Online Financial Reporting Disclosure (OFRD) to satisfy the stakeholders. The outcomes of this study will be useful elsewhere.
Keywords: Online Financial Reporting Disclosure (OFRD); Islamic banking; Bahrain.
Emergence of Behavioural Finance: A Study on Behavioural Biases during Investment Decision-making
by Dhruv Sharma, Vandna Mishra, J.P. Pathak
Abstract: In 1950s & 1960s standard finance evolved & thereafter got wide acceptance among the academia However, standard finance paradigm faced difficulties and was questioned, when cracks began to appear due to the growing market inefficiencies and the fact that humans are not always rational Thus, the inherent flaws in traditional finance led to the emergence of behavioural finance, a new science which is a harmonious blend of research principles derived from subjects like finance, cognitive psychology, and behavioural economics It propounds psychological based theories to illustrate stock market anomalies, its core focus is to study the erroneous or less than perfect human behavior that influences individual investment decision and its subsequent effect on the market This paper aims to critically analyse the traditional financial theories, how behavioral finance supplemented these theories by introducing behavioural aspects and also uncovers the psychological impact of individuals on their decision making behaviour.
Keywords: behavioural; psychology; finance; anomalies; rational.
Non-Performing Assets: Drag for Stability of Indian Banking Sector
by Dolly Gaur, Dipti Ranjan Mohapatra, Pratap Ranjan Jena
Abstract: The positive and strong performance by banks is imperative for stable growth of Indian economy However, Non-Performing Assets (NPA) of banks are proving to be a substantial hurdle for India becoming a strong and stable economy Thus, the present work is an attempt to find and analyse the factors influencing NPA trends The proposed model for the mentioned subject matter comprises of a set of varied bank-specific, industry specific and macroeconomic variables The study includes some less used factors like, technical efficiency indicating bank performance, which has been measured using stochastic frontier model, and funding risk Considering the time frame of 14 years (2005-2018), 46 scheduled commercial banks in India have been studied For the purpose of analysis 2-step system generalised method of moments approach has been followed The findings indicate that NPA in India are time persistent and get discouraged by positive bank performance.
Keywords: Non-performing assets; India; Technical Efficiency; Dynamic panel; System generalized method of moments.
Analysing the mediating effect of leader-member exchange on the relationship between servant leadership and organisational commitment
by Arun Aggarwal, Kamrunnisha Nobi, Dinesh Jaisinghani, Geeti Sharma
Abstract: The objective of the current research is to analyse the mediating role of leader-member exchange on the relationship between servant leadership and organizational commitment. In order to achieve this objective, the data was collected from 524 full time employees working in five companies of information technology sector operating in northern India. Results of the structural equation modelling analysis revealed that servant leadership has significant and positive impact on leader-member exchange. Further, servant leadership has positive impact on organizational commitment. Leader-member exchange has positive impact on employees commitment level except continuance commitment. Finally, results of the mediational analysis shows that servant leadership mediates the relationship between leader-member exchange and affective, continuance and normative commitment.
Keywords: Servant Leadership; Leader-Member Exchange; Affective Commitment; Continuance Commitment; Normative Commitment; Structural Equation Modeling.
ECONOMIC IMPACT OF CYCLING ACROSS VARIOUS NATIONS
by Alpana Agarwal, Virad Gupta
Abstract: The purpose of this paper was to find the impact of cycling in five nations, namely Canada, Europe, New Zealand, UK and USA. Bicycle tourism and trail tourism contribute significantly to local, state, national and international economies (Handy et al., 2014). Research papers for the mentioned five Nations were analysed about the volume of their economic impact, and which were most benefitted. Analysis is based on behaviours (satisfaction) of cyclists, development of local communities and small scale businesses, management and governance of cycling, tourism, environment, recreation, health benefits, tourists and commuters, which saved the state and national governments funds as well as increased fuel and moneysaving. Six broad factors, i.e., areas topography, its climate, the cycling infrastructure, presence of accessible bicycle resources, business support and community support were analysed to examine their effect on cycling. Characteristics of the Indian market were also examined, based on which a few suggestions are given.
Keywords: economic impact of cycling; tourism; cycle trails; economic development; health impact; topography; infrastructure; Indian cycling market.
EFFECTS OF ECONOMIC CONDITIONS ON BUSINESS GROWTH: AN ANALYTICAL STUDY
by Harshita Bhargave, Ashish Srivastava
Abstract: Economic conditions provide important insights to organizations so that business firms adjust their views to attain growth. Hence, authors tried to investigate the effects of economic conditions on business growth where 200 sample sizes are taken for the structured survey. Six progressive modern cities of India have opted for the survey. To obtain the authentic data; Interview and Questionnaire survey techniques have been performed. Finally, it is found that higher interest rates lead to failure in achieving business goals. Overall, 64 % of the organizations validate the fact. SWOT analysis leads to an accurate evaluation of business performance. It is interesting to notice that only 8 % of the business concerns are disagreeing with the fact. Subsequently, it is suggested that it is better for an organization to be well equipped with strategic tools and competencies in order to beat the economic challenges.
Keywords: Economic conditions; Business growth; Gross domestic product; GDP; SWOT analysis; Economic challenges.
Internationalisation of Indian SMEs: Problems and Prospects
by Nidhi Arora, Parneet Kaur
Abstract: The purpose of this research is to find out the factors that initiate and hinder the process of internationalisation of Small & Medium enterprises with reference to state of Punjab in India. The factors which initiate internationalisation of Punjab SMEs were divided into internal and external factors. The data was collected through questionnaire from 100 SME exporters from Punjab. The firms were selected from the top five industries which contributed maximum to the exports. With the help factor analysis and multiple regression technique, the findings indicate that the factors initiating internationalisation are international direction, resource capability, managerial competencies, technology updation, competitive industry, international networks and government support whereas, the barriers faced were operational and governmental problems. The results of the study provide us with various factors which should be kept in mind while entering into foreign markets and will help the policy makers to make strategies regarding internationalisation of SMEs.
Keywords: Internationalisation; SMEs; Exporters; Barriers; Driving Forces.
Exploring trust and responsiveness as antecedents for intention to use FinTech services
by Shubhangi Singh, Marshal M. Sahni, R.A.J. KUMAR KOVID
Abstract: FinTech is an emerging paradigm in financial services industry which is becoming the additional source of revenue generation not only for banking companies but also for telecommunication and retail companies It is a form of service delivery enabled by innovative technologies Despite the numerous benefits of FinTech, its acceptance with users is not as per the industry expectations This can be attributed to various factors such as lack of trust or responsiveness in available FinTech services The objective of our research is to explore the antecedents of intention to use namely, perceived usefulness, perceived ease of use, perceived trust and responsiveness These factors were empirically assessed by survey of 439 FinTech users Exploratory factor analysis was done to extract relevant factors Structural equation modelling was done to examine model fit and hypotheses testing The analysis shows that usefulness and ease of use have direct effect on intention to use. Trust and responsiveness have an indirect effect on intention to use and is mediated by usefulness and ease of use.
Keywords: FinTech; TAM; intention to use; trust; responsiveness.
An Exploratory Study Identifying Motives and Barriers to Ethical Consumption for Young Indian Consumers
by Swetarupa Chatterjee, Naman Sreen, Pradip Sadarangani
Abstract: In recent times, there has been a huge uproar in the media about ethical consumerism. Ethical products can help corporations to build positive brand image and improve bottom line and can help consumers feel proud by contributing to the well-being of people, planet and animals. The purpose of this study is to check the drivers and the barriers of ethical consumption. The study incorporates focus group discussions for learning about the factors propelling the growth of the consumption of ethical products, as well as those that are hindering the growth. We identified personal values, habit, social guilt, separate categorization of ethical products in retail stores, need for a certification, source credibility and government policies as the motivators of ethical consumption. We identified dearth of knowledge, willful ignorance, high price, and green scepticism (or cynicism), tragedy of commons, quality of the product and the product category as barriers to ethical consumption.
Keywords: Ethical Consumption; Barriers; Motives; Focus Group Discussion; Millennial.
The impact of word of mouth on brand equity: A case study from the sportswear market in Vietnam
by Vinh Tran, Ba Thanh Truong, Hoang Ngan Nguyen, Thi Kim Phuong Tran
Abstract: The main purpose of this study is to explore the influence of word of mouth (WOM) on brand equity in the causal relationships between its dimensions: brand awareness, brand associations, perceived quality, and brand loyalty. Sample data was collected from 335 customers in the sportswear market of Vietnam. Empirical results revealed that the model was a suitable fit with the sample. Results from structural equation modeling (SEM) show that: (1) word of mouth has positive effects on brand awareness, brand association, perceived quality and brand loyalty; and (2) these dimensions of brand equity are interrelated. Some suggestions for future research are provided.
Keywords: word of mouth; brand equity; sportswear market; SEM.
Factors Determining Z-score and Corporate Failure in Malaysian Companies
by Md. Mahmudul Alam, Nurul Izzaty Hasanah Azhar, Norziana Lokman, Jamaliah Said
Abstract: Predicting the sustainability of a business is crucial to prevent financial losses among shareholders and investors. This study attempts to evaluate the Altman model for predicting corporate failure in distressed and non-distressed Malaysian companies based on the data of financially troubled companies which are classified as Practice Note 17 (PN17) and matching similar non-PN17 companies during the period 2013 to 2017. This study utilizes panel ordinal and panel random effects regressions. Findings show that the liquidity, profitability, leverage, solvency, and efficiency ratios are negatively significantly associated with corporate failure and bankruptcy. The leverage ratio is determined to be the strongest indicator of bankruptcy, followed by profitability, liquidity, solvency, and efficiency ratios. The findings will help companies management bodies implement suitable strategies to prevent further financial leakage, thereby ensuring continuous and sustainable return on investment and profits for investors and shareholders.
Keywords: Corporate Failure; Financial Distress; PN17 companies; Ratio analysia; Z-Score.
Impact of E-Commerce on Indias Exports and Investment
by Ittika Takkar, Shalini Sharma
Abstract: E-Commerce has become an important mode of trade, both domestically and internationally. E-commerce provides a platform for exchange of goods and services and thus directly alters the cost of trade and profits of firms, while simultaneously, generates a demand for a different set of skilled managers and creates opportunities for increasing investment and thereby affects the volume of domestic and international trade and in-turn affects the overall level of output and employment in an economy. There are empirical evidences on how certain developed countries like United Kingdom, United States of America, earlier, and lately developing countries like China, have leveraged e-commerce to enhance international trade. This paper attempts to contribute to the literature by studying the impact of e-commerce on Indias international trade, especially exports, and investment which in-turn impact the level of output/GDP and employment in the country.
Keywords: E-Commerce; Internet; Trade; Exports; Investment; Growth; GDP; India.
The Effects of Foreign Direct Investment, External Debts and Trade Openness on Economic Growth: Evidences from Ottoman Empire 1881
by Abdul Rahim Ridzuan, Lotfi Demikha, Amir Shaharuddin
Abstract: This paper empirically examines the impact of foreign direct investment, external debts and trade openness on economic growth in Ottoman Empire. The existent literature lacks a comprehensive quantitative analysis of this pattern. The study is empirical and utilizes time series technique Autoregressive Distributed Lag Model (ARDL) on macroeconomic data for a period 1881-1914. The study reveals a significant positive effect of external debt, trade openness and government expenditure on economic growth. The obtained results also highlight the fact that foreign direct investment and inflation show a significant negative impact on economic growth. Our findings recommend focusing on adopting economic policies that promote generating funds using local sources instead of relying on external funders to boost economic development.
Keywords: ARDL; Economic growth; Ottoman Empire; FDI.
METHODOLOGY OF CREATING SUCCESS CRITERIA WITHIN THE BUSINESS MODEL FOR ITS SUSTAINABILITY REASONS
by Helena Skadina, Rosita Zvirgzdina
Abstract: Complex business environment, growing intensity of competition and shortening of innovation cycles bring difficulties for management and decision making. If previously companies aimed to ensure the quality of their products, now the creation of value for customers and other stakeholders is becoming the most essential element for the future of a company. Sustainability in the sense of a sustainable business model represent the value creation in the stakeholders' perception. It means that each activity while modelling business should be checked for sustainability reasons by companys management. In this way it would be possible to improve controlling mechanisms within the company as well. The aim of this article is to offer a methodology contributing to creation of success criteria. As a result, there are methods presented which make the development of success criteria for Management possible and sustainability controlling for business activities related to time, costs, flexibility and quality.
Keywords: sustainability; business model; business model dimensions; success criteria; time; costs; value; flexibility indicators.
Brand Liking and Consumer Gratitude effects on Consumer-Brand Love Relationships and Repurchase Intention
by Prapatsorn Suetrong, Guilherme D. Pires
Abstract: This paper extends understanding of consumer-brand love relationships by examining the effects of brand likeability and consumer gratitude, as antecedents of brand love, on brand love creation and consumer repurchase intention. This is examined for service-products characterised relative to the dominance of their intangible elements, hence accounting for their search, experience and credence qualities. Using PLS-SEM and empirical data from an online survey, results indicate that brand likeability and consumer gratitude are directly related, and both constructs are positively associated with brand love for the three types of service-products, such that consumer gratitude is a significant mediator in the relationship between brand likeability and brand love. Examining brand likeability and gratitude effects on brand love narrows the knowledge gap in the brand love literature leading to important managerial implications, allowing for the development of effective brand strategies for strengthening consumer repurchase intention.
Keywords: consumer-brand love relationship; gratitude; likeability; repurchase intention; service-product category.
Eco-Friendly Products Purchase Intention: Comparison of Theory of Planned Behavior and Social Cognitive Theory
by Swetarupa Chatterjee, Naman Sreen, Pradip Sadarangani
Abstract: The present study uses Theory of Planned Behavior (TPB) and Social Cognitive Theory (SCT) to examine the eco-friendly purchase intentions of individuals. This study also examines the role of knowledge as a predictor and as a moderator in the theories inspected for determining individuals eco-friendly purchase intention. Data is collected in India using a survey method from 456 respondents. AMOS 25.0 and SPSS 16.0 is used to analyze the data to ensure reliability, validity, and model fit, and to compare the theories The results of the study indicate that TPB is a better predictor of eco-friendly purchasing intentions than SCT. Additionally, knowledge significantly influenced eco-friendly purchase intentions directly (i.e. as an extension variable in both theories) but failed as a moderator to significantly influence the relationships in the theories. These results provide empirical guidelines to policymakers and practitioners for promoting eco-friendly products.
Keywords: Theory of Planned Behavior (TPB); Social Cognitive Theory (SCT); Knowledge; Eco-friendly Purchase Intention.
The Economic and Psychological Effects of Cash Transfers in Development Cooperation
by Augustin Suessmair
Abstract: Against the backdrop of increasing popularity as an instrument of international development cooperation, our paper examines the economic and psychological effects of cash transfers. At this moment, this paper specifically focuses on the reaction of local markets and the structural conditions for a successful implementation as well as the effects of cash-transfers on their recipients self- esteem and on the self-actualisation of women in developing countries. While the data was collected via semi-standardised guideline interviews with experts, the interpretation was carried out in accordance with Philipp Mayrings Qualitative Content Analysis. Our study finds that cash transfers seldomly cause inflationary effects while they particularly require functioning markets, existing value chains and fulfilment of governmental support functions for a successful implementation. While the impact of cash transfers on the psychological constructs in question is generally assessed positively by the interviewed experts, several implications and potential psychological downsides are addressed.
Keywords: Development cooperation; cash transfer; unconditional cash transfer programs; cash benchmark; impact evaluation; income; poverty alleviation; direct investment; human capital.
Towards the innovation of High-Tech Small-Medium Enterprises (SMEs)- the interview approach
by Victor Chang, Qianwen Xu, Wei Xue, Yijie Chen
Abstract: With the fierce competition in the global market, the Chinese government pays more and more attention to the innovation of SMEs, especially to the innovation activities of high-tech SMEs. The research concludes the model-factors influencing the innovation of SMEs, which is based on the past literature research and collect the primary information through the face to face interview. In this research, 50 employees from 10 SMEs around Suzhou, including ten officers from the government, were interviewed. The research result indicated that the key factors influencing the innovation of SMEs are government incentive policies, entrepreneurship, competition, and demand from the market. And based on the research result, the paper constructs the SMEs Innovation Model (SIM), which would be used for further research.
Keywords: Innovation; High-Tech; Small-Medium Enterprises (SMEs); High-tech SMEs.
Institutional distance and foreign direct investment: An asymmetric approach
by Marcelo P. Duarte, Fernando Carvalho
Abstract: This paper analyses the effects of distance asymmetries on Portuguese inward foreign direct investment (FDI) from relatively more, and less, developed countries through the lenses of institutional distance. We developed a panel dataset composed of 35 origins of Portuguese FDI during the period 20032015 and analysed it through a series of multiple regression techniques. Results suggest that, when investing in Portugal, countries with lower levels of development are not affected by distance variations. Conversely, it seems that FDI from more developed countries is influenced by several dimensions of distance. This paper contributes to the understanding of asymmetries in institutional distance, emphasising the need for purely asymmetric distance constructs in IB research. Also, it provides the framework for assessing asymmetries with traditional, absolute measured, distance constructs.
Keywords: Asymmetries; country development; cross national distance; distance; distance asymmetries; FDI; foreign direct investment; multiple regressions; panel data; Portugal.
SENSORY MARKETING ON CUSTOMERS SATISFACTION: A TALE FROM THE SECOND LARGEST COFFEE EXPORTER
by Linh Bui, Hoang Nguyen
Abstract: Using sensory marketing, which engages a customers five senses (sight, sound, smell, touch and taste), businesses aim to approach customers on an emotional rather than on a rational level, thus bringing them satisfaction and influencing their behaviour. This paper aims to examine the impact of sensory marketing on customer satisfaction with coffee shops in Hanoi, Vietnam. Previous research in this field has been conducted and has proven that marketing appeals to the five senses can influence customers emotions and behaviour. However, Vietnams potential coffee shop market has not yet been investigated. This study employs a quantitative approach using an online survey of 255 Hanoi coffee shop visitors to examine the influence of sensory marketing. The findings indicate that the sensory marketing factors of sound, touch and taste, in descending order of impact level, have a positive impact on satisfaction, while sight and smell have no effect.
Keywords: sensory marketing; five senses; customers satisfaction; coffee shops.
Analysing Factors that Affect Profitability and Growth in French Publicly Listed Firms
by ILIAS MAKRIS, Panagiotis Charalabakis, Stavros Stavroyiannis
Abstract: The Eurozone was at the centre of the 2008 recession, and many country-members were affected by the financial crisis. France, the country with the 2nd largest GDP in the EMU (and crucial for the sustainability of the common currency area), according to some researchers it endured the economic crisis relatively well. However, recent surveys, indicate that the French economy has experienced worrying times during the economic crisis In this research work, economic data from a large number of French publicly listed firms is analysed for the last decade, to identify common characteristics that are associated with firm performance and growth, during a recessionary period and its aftermath For that reason, a panel data analysis is performed, along with the necessary unit root tests The findings indicate the crucial role of financial health, internationalisation and size of the firm, in financial performance, growth and dynamism.
Keywords: Financial Performance; France; Publicly Listed Firms; Debt accumulation; Profitability; Growth.
An Experimental Investigation of Trust And Reciprocity In Double-Shot Investment Games
by Rupali Misra, Puneeta Goel
Abstract: When there are multiple interactions between two individuals, trust and reciprocal behaviour are guided by the plausible cost of risking future collaborations. However, in case of single transaction, there is no risk of retaliation. We examine this through two investment experiments the original Berg et al. (1995) investment game and a modified version which emulates a protocol to capture trust and reciprocal behaviour of paired subjects through double interactions. Double interaction subjects display higher level of trust and reciprocity than single interaction subjects. Women are more strategic than men and are more trusting and trustworthy. Reciprocity is also identified as a determinant of trust. Another important contribution of the study is importance of recent behaviour in guiding final reciprocal action. This is the first paper where double-shot interaction has been introduced to study trust and reciprocal behaviour in an experimental setting.
Keywords: Investment game; Trust; Reciprocity; Double-Interaction Game; Gender.
Examination of the relationship between different commodity indices
by Subhakara Valluri
Abstract: Our research aims to examine the relationship between different sectors of commodity indices The Standard & Poor's Goldman Sachs Commodity Index (SP-GSCI) is used to find the relationship between inter-sector commodity sub-indices of agriculture, energy, and precious metals. There is no significant research done by analysing the links between commodity sectors like agriculture, energy, and precious metals. S&P GSCI Agriculture Index (SGK), S&P GSCI Energy Index (SGJ), and S&P GSCI Precious Metals Index (SGP) with daily values from October 2001 till December 2016 are taken to represent the data in the regression analysis. Toda and Yamamoto (1995) procedure is used to find the causal links between commodity sectors like agriculture, energy, and precious metals. In our analysis, the price movement in the energy is affecting both the agricultural index and precious metals index Price movement in the agricultural index is also affecting the precious metals index.
Keywords: Commodity Markets; Commodity Indices; Causal Analysis; Toda and Yamamoto (1995) Procedure; S&P GSCI Index.
Risk assessment of business models driven by Industry 4.0
by Kristina Kovaitė, Jelena Stankevičienė
Abstract: Industry 4.0 changes business models and in so doing presents new risks that need to be addressed. Research presented in this paper developed a risk assessment for business model digitisation (RADi) matrix which consists of technical, competences, employee and customer consent, data security, and financial risk. The expert evaluation uses the FARE method as a multi-criteria decision support approach. The results determine which parts of a business model driven by the Industry 4.0 are most affected by different risks. The results indicate the greatest impact is on customer channels, key resources, revenue stream, and customer segments, whilst key partners are the least impacted. Our research demonstrates that the RADi model can be used by firms to identify and plan for critical risks as well as to implement the digitisation of business models. Policymakers will find the RADi approach useful to anticipate risks and prioritise public support and regional development.
Keywords: Industry 4.0; digitalisation; risk assessment; business model; multi-criteria methods.
Scenario planning combined with probabilities as a risk management tool - analysis of pros and cons
by Helena Gaspars-Wieloch
Abstract: Scenario planning and probabilities are often very helpful in uncertain decision problems. In the paper, we examine the correctness of combining probabilities with scenario planning in risk management. We make a literature review and analyse diverse decision problems differing from each other with regard to their nature, the decision maker's objectives and preferences. We explore competition, quality, innovation, resource allocation, inventory and banking issues. The illustrative examples concern both one-criterion and multi-criteria decision problems. We get to the point that scenario planning is an unquestionable support for risk management. Nevertheless, the use of probabilities as an accompanying tool may be necessary and justified merely in some specific cases.
Keywords: scenario planning; probabilities; risk management; risk assessment; uncertainty; payoff matrix; scenarios; decisions; banking; saving rates; spare parts quantity problem; product quality; innovations; coefficient of pessimism.
Alternative capital requirement for insurers: possibilities and issues
by Ilze Zariņa, Irina Voronova, Gaida Pettere
Abstract: Solvency II framework regulates how much capital the insurance companies of the European Union must hold. Although the framework lasts four years, there is still place for improvements considering experience. The goals of the research are to propose an alternative capital model methodology using copulas for reserve risk and to show the case study of potential capital shift impact. To conduct the research, the authors have used the extensive literature review, analytical methods and modelling. Research scope is non-life insurance companies under the Solvency II framework with a focus on reserve risk. The research will help avoid that alternative models are only a modern risk management tool and add risk management reality. Higher capital surplus can be achieved if a copula approach is used for risk aggregation in the Baltic non-life market. The Baltic market does not use alternative capital requirement and internal models. Using an alternative model is the right insurer's approach in modern risk management.
Keywords: solvency II; value-at-risk; risk management; insurance; internal model; reserve risk; best estimate; copula; solvency capital requirement; alternative capital requirement; t copula; normal copula; economic modelling.
Assessment of reputational risk impact on commercial banks financial performance
by Daiva Jurevičienė, Viktorija Skvarciany, Ksenija Kravec
Abstract: The current study aims to determine criteria linked to a bank's reputation and evaluate the effect of reputation on the commercial bank's performance. In order to estimate the impact of reputation on a commercial bank's performance, the expert evaluation method was chosen. The research was conducted in two steps: first, the unstructured (informal) interview was applied to extract the factors; second, the multicriteria decision methods such as simple additive weighting (SAW), complex proportional assessment (COPRAS) and geometric mean were employed for evaluating the determined factors. The research results showed that the weakest position of the commercial bank in terms of reputational risk implied the performance efficiency decrease. The conducted research contribute to the scientific literature by providing a methodology for assessing the impact of reputational risk on commercial bank's performance. However, the methodology could be applied to those banks that do not provide services for individual customers but work with business clients only.
Keywords: reputation; reputational risk; multicriteria decision-making methods (MCDM); SAW; simple additive weighting; COPRAS; complex proportional assessment; banking.
Risk management considerations for artificial intelligence business applications
by Gergő Barta, Gergely Görcsi
Abstract: The number of projects and the amount of investment into artificial intelligence (AI) based business process automation is increasing that is also due to research advancements in corresponding fields. To utilise its true power, business organisations shall identify and treat risks arising from AI, that must be reduced to an acceptable level to maintain fraud-free business operation in alignment with external legislative requirements. If risks are not assessed, then AI might cause greater headache resulting in expensive implementation without business benefit. The objective of the paper is to analyse the nature of risk elements that AI can bring to the life of corporations and the countermeasures that shall be implemented by analysing general IT risk assessment processes and the stages of intelligent system development. The article also examines frameworks for AI risk management approaching risks associated with intelligent decision making by providing guidelines of required business processes to be implemented.
Keywords: artificial intelligence; machine learning; IT risk assessment; risk management framework; business process automation.
Nexus between assets structure and profitability of Croatian banking system
by Iris Lončar, Tonći Svilokos
Abstract: Traditionally, in Croatia, as well as in other developing countries, most entities (households and enterprises) with cash surpluses entrust their investment portfolios to banks, instead of investing in securities. Therefore, the question of the profitability of banks' business becomes a key issue, as they do not only meet the interests of their shareholders and management, but also have positive effects on the whole economy. The aim of this paper is to analyse the influence of the structure and dynamic of total assets on financial performances on the example of the Republic of Croatia. In order to achieve the main purpose, the cross-section and fixed-effects panel models will be estimated. They will include standard profitability and various assets indices. The results of the analysis show that the level of total assets and especially the level of fixed assets, as well as the share of the other deposits, significantly influence the level of profit after taxation, as well as on return on assets (ROA) and return on equity (ROE).
Keywords: Croatian banking industry; assets' structure; profitability; ROA; return on assets; ROE; return on equity; cross-section model; fixed-effects panel model.
On the resilience and the risk spillovers in innovation clusters
by Laura Gudelytė
Abstract: In this paper, we provide the determination of systemic risk in a networked structure that appears together with synergistic effect as a result of collaboration in innovation clusters. The interpretation of proposed conceptual model of evaluation of systemic risk can be at least twofold: core-periphery, business entities-R&D institutions, etc. The systemic risk is treated as a generalised risk impacting directly or non-directly the performance of an innovation cluster. The conceptual model of evaluation of systemic risk should be useful for understanding and further treatment of measuring risk in a case of innovation management. Also, the structure and further properties of systemic risk and contagion within innovation cluster are discussed in this paper.
Keywords: contagion; structure of innovation cluster; systemic risk; uncertainty; asymmetry; business; model of evaluation; commercialisation.