An examination of US dollar risk management by Canadian non‐financial firms

2008 ◽  
Vol 31 (8) ◽  
pp. 570-582 ◽  
Author(s):  
Alex Faseruk ◽  
Dev R. Mishra
Keyword(s):  
Risk Management ◽  
Financial Statements ◽  
Content Type ◽  
Financial Firms ◽  
Hedging Strategies ◽  
A Value ◽  
Operational Hedging ◽  
Financial Hedging ◽  
Us Dollar ◽  
The Impact

PurposeThe purpose of this paper is to examine the impact of US dollar exchange rate risk on the value of Canadian non‐financial firms.Design/methodology/approachThe sample, from the Compustat database, includes all non‐financial Canadian firms with sales over $100 million. The study segregates firms into hedging and non‐hedging groups and applies statistical techniques to test if hedging enhances value.FindingsThe results demonstrate that Canadian firms that have higher levels of US$ sales tend to use derivatives more frequently through higher levels of US$ exposure. Firms that have both US sales and assets appear less likely to use hedging. Firms with an American subsidiary and use financial instruments to hedge have higher values. When operational hedging is used with financial hedging, it is a value enhancing activity increasing their market‐to‐book by 14 per cent and market value‐to‐sales by 40 per cent. Incremental impact of these two hedging strategies is to enhance value by 7 per cent.Research limitations/implicationsThe sample from Compustat captures large capitalization Canadian firms but ignores about 75 per cent of Canadian firms. There is a bias towards larger firms. Some hedging items are not disclosed on financial statements. A survey would enhance and complement these results.Practical implicationsThe paper finds that it is important for Canadian firms that have exports denominated in US dollars to hedge their exposure. The full value of hedging is reaped by using both operational and financial hedges.Originality/valueThis study is the first that examines US dollar risk management by Canadian firms.

Determinants of corporate foreign exchange risk hedging

2014 ◽  
Vol 40 (2) ◽  
pp. 176-188 ◽  
Author(s):  
Lee-Lee Chong ◽  
Xiao-Jun Chang ◽  
Siow-Hooi Tan
Keyword(s):  
Exchange Rate ◽  
Descriptive Analysis ◽  
Financial Derivatives ◽  
Content Type ◽  
Risk Hedging ◽  
Financial Firms ◽  
Hedging Strategies ◽  
Factors Influencing ◽  
Financial Hedging ◽  
Exchange Risk

Purpose – The purpose of this study is to delineate the factors influencing the use of financial derivatives by non-financial firms in managing their exchange rate exposure. In total, 219 non-financial firms are surveyed in regard to their financial hedging decision. Design/methodology/approach – This study is conducted via a survey and the questionnaires were sent to the treasurers and financial controller of the firms. Descriptive analysis is employed to assess the profiles of the respondents. Then, factor analysis is carried out to determine the factors influencing the use of financial derivatives in Malaysia. Findings – The results indicate that the hedging decision of non-financial firms is influenced by their assertive level toward the market and regulators and also how flexible they are for derivative instruments. The intellectual capability that firms acquire to perform hedging strategies is also vital in influencing them to make hedging decision. Practical implications – The insights of this survey would assist and prepare firms to hedge their exchange rate risk by employing financial derivatives. Knowing the influences of firms' adoption of currency derivatives would allow policy makers to formulate their policies in boosting the liquidity of Malaysian derivative market. Originality/value – This study presents findings on the factors influencing the execution of financial hedging by non-financial firms in Malaysia. Survey data are used to seek for the feedback from the market players in order to provide empirical evidence on the corporate use of financial hedging.

MENGELOLA RESIKO DENGAN PRODUK DERIVATIF

2008 ◽  
Author(s):  
Dandes Rifa
Keyword(s):  
Risk Management ◽  
Value At Risk ◽  
Foreign Currency ◽  
Balance Sheet ◽  
Cash Flows ◽  
Market Risks ◽  
Hedging Strategies ◽  
Operational Hedging ◽  
Potential Risks ◽  
Derivative Products

The main objective of risk management is to minimize the potential for losses (risk) arising from unexpected changes in currency rates, credit, commodities and equities. One of the risks faced by companies is market risk (value at risk). This article aims to explain that risk management can be one of them by using derivative products. Derivative transactions is very useful for business people who want to hedge (hedging) against a commodity, which always experience price changes from time to time. There are three strategies that can be used to hedge the balance sheet hedging strategy, operational hedging strategies and contractual hedging strategies. Staregi contractual hedging is a form of protection that is done by forming a contractual hedging instruments in order to provide greater flexibility to managers in managing the potential risks faced by foreign currency. Most of these contractual hedging instrument in the form of derivative products. The management can enhance shareholder value by controlling risk. -Party investors and other interested parties hope that the financial manager is able to identify and manage market risks to be faced. If the value of the firm equals the present value of future cash flows, then risk management can be justified. 

Do disclosure and transparency affect bank’s financial performance?

2019 ◽  
Vol 19 (6) ◽  
pp. 1344-1361
Author(s):  
Isaiah Oino
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Financial Performance ◽  
Financial Institutions ◽  
Content Type ◽  
Loan Portfolios ◽  
Cent Level ◽  
Transparency And Disclosure ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of transparency and disclosure on the financial performance of financial institutions. The emphasis is on assessing transparency and disclosure; auditing and compliance; risk management as indicators of corporate governance; and understanding how these parameters affect bank profitability, liquidity and the quality of loan portfolios. Design/methodology/approach A sample of 20 financial institutions was selected, with ten respondents from each, yielding a total sample size of 200. Principal component analysis (PCA), with inbuilt ability to check for composite reliability, was used to obtain composite indices for the corporate governance indicators as well as the indicators of financial performance, based on a set of questions framed for each institution. Findings The analysis demonstrates that greater disclosure and transparency, improved auditing and compliance and better risk management positively affect the financial performance of financial institutions. In terms of significance, the results show that as the level of disclosure and transparency in managerial affairs increases, the performance of financial institutions – as measured in terms of the quality of loan portfolios, liquidity and profitability – increases by 0.3046, with the effect being statistically significant at the 1 per cent level. Furthermore, as the level of auditing and the degree of compliance with banking regulations increases, the financial performance of banks improves by 0.3309. Research limitations/implications This paper did not consider time series because corporate governance does not change periodically. Practical implications This paper demonstrates the importance of disclosure and transparency in managerial affairs because the performance of financial institutions, as measured in terms of loan portfolios, liquidity and profitability, increases by 0.4 when transparency and disclosure improve, with this effect being statistically significant at the 1 per cent level. Originality/value The use of primary data in assessing the impact of corporate governance on financial performance, instead of secondary data, is the primary novelty of this study. Moreover, PCA is used to assess the weight of the various parameters.

The impact of counterfeit risk management on healthcare supply chain performance: an empirical analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mauro Falasca ◽  
Scott Dellana ◽  
William J. Rowe ◽  
John F. Kros
Keyword(s):  
Risk Management ◽  
Supply Chain ◽  
The United States ◽  
Equation Modeling ◽  
Significant Positive Effect ◽  
Healthcare Organizations ◽  
Content Type ◽  
Overall Performance ◽  
The Impact ◽  
Positive Effect

PurposeThis study develops and tests a model exploring the relationship between supply chain (SC) counterfeit risk management and performance in the healthcare supply chain (HCSC).Design/methodology/approachIn the proposed theoretical model, HCSC counterfeit risk management is characterized by HCSC counterfeit risk orientation (HCRO), HCSC counterfeit risk mitigation (HCRM) and HCSC risk management integration (HRMI), while performance is represented by healthcare logistics performance (HLP) and healthcare organization overall performance (HOP). Partial least squares structural equation modeling (PLS-SEM) and survey data from 55 HCSC managers are used to test the research hypotheses.FindingsHCRO has a significant positive effect on HCRM, while HCRM has a positive impact on HRMI. With respect to HLP, HCRM has a nonsignificant effect, while HRMI has a significant impact, thus confirming the important mediating role of HRMI. Finally, HLP has a significant positive effect on the overall performance of healthcare organizations.Research limitations/implicationsAll study participants were from the United States, limiting the generalizability of the study findings to different countries or regions. The sample size employed in the study did not allow the authors to distinguish among the different types of healthcare organizations.Originality/valueThis study delineates between a healthcare organization's philosophy toward counterfeiting risks vs actions taken to eliminate or reduce the impact of counterfeiting on the HCSC. By offering firm-level guidance for managers, this study informs healthcare organizations about addressing the challenge of counterfeiting in the HCSC.

The relationship between narcissism, managerial overconfidence and comparability of financial statements of listed companies

2021 ◽  
Vol 19 (5) ◽  
pp. 681-700
Author(s):  
Mohammad Almaleki ◽  
Mahdi Salehi ◽  
Mahdi Moradi
Keyword(s):  
Stock Exchange ◽  
Chief Executive ◽  
Financial Statements ◽  
Business Environment ◽  
Multiple Regression Model ◽  
Content Type ◽  
Institutional Settings ◽  
Managerial Overconfidence ◽  
The Impact ◽  
The Relationship

Purpose This study aims to investigate the impact of managerial narcissism and overconfidence on financial statements’ comparability. In other words, this paper seeks to answer the question of whether the personality characteristics of managers may affect the level of financial statements’ quality of commercial entities or not. Design/methodology/approach The research hypotheses are tested using a sample of 896 observations taken from the Tehran Stock Exchange and 245 observations from the Iraqi Stock Exchange during 2012 and 2018 using the multiple regression model based on the combined data technique. Findings The findings show that managerial narcissism is positively and significantly associated with Iran’s financial statement comparability. In contrast, Iraqi data articulate a negative association between these two variables. This paper finds that Chief Executive Officer overconfidence and financial statements’ comparability are negatively related in both countries. Following the market variation, the different findings suggest that institutional settings such as the general managerial style, adopting international accounting standards (now IFRS) leading to the extent of auditing market globally in Iraq and suffering from international sanctions in Iran, the governing business environment may play an allocative role in preparing financial statements. Originality/value The present research is the first research conducted in two emerging markets (Iran and Iraq) examining the relationship between managers’ narcissism and overconfidence and financial statements’ comparability. Therefore, the present research in this area can significantly contribute to the development of science and knowledge.

Enterprise risk management and sustainability of banks performance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Babajide Oyewo
Keyword(s):  
Risk Management ◽  
Banking Sector ◽  
Management Practice ◽  
Enterprise Risk Management ◽  
Annual Reports ◽  
Banking Reform ◽  
Content Type ◽  
Enterprise Risk ◽  
The Impact

PurposeThis study investigates firm attributes (namely level of capitalisation, scope of operation, organisational structure, organisational lifecycle, systemic importance and size) affecting the robustness of enterprise risk management (ERM) practice, the extent to which ERM affects the performance of banks and the impact of ERM on the long-term sustainability of banks in Nigeria. This was against the backdrop that the 2012 banking reform was a major regulatory intervention that mainstreamed ERM in the Nigerian banking sector.Design/methodology/approachThe study employed a mixed methodology of content, trend and quantitative analyses. Ex post facto research design was deployed to analyse performance differential of banks, with respect to the implementation of ERM, over a 10-year period (2008–2017). A disclosure checklist developed from the COSO ERM integrated framework was used to assess the robustness of ERM by content-analysing divulgence on risk management in published annual reports. The banking reform periods were dichotomised into pre- (2008–2012) and post- (2013–2017) reform periods. Jonckheere–Terpstra test, independent sample t-test and Mann–Whitney test were applied to analyse a total of 1,036 firm-year observations over the period 2008–2017.FindingsResult shows that bank attributes significantly affecting the robustness of risk management practice are level of capitalisation, scope of operation, systemic importance and size. Performance of banks improved slightly during the post-2012 banking reform period. This suggests that as banks consolidate on the gains of ERM, benefits of the regulatory policy on risk management may be realised in the long run. Result also shows that ERM enhances long-term performance, connoting that effective risk management could serve as a competitive strategy for surviving turbulence that typically characterises the banking sector.Practical implicationsThe emergence of level of capitalisation, scope of operation, systemic importance and size as determinants of ERM provides empirical evidence to support the practice of reviewing the capital requirements for banking business from time to time by regulatory authorities (i.e. recapitalisation policy) as a strategy for managing systemic risk. Top management of banks may consider instituting mechanisms that will ensure risk management is given prominence. A proactive approach must be taken to convert risks to opportunities by banks and other financial institutions, going forward, to cope with the vicissitudes of financial intermediation.Originality/valueThe originality of the study stems from the consideration that it provides some new insights into the impact of ERM on banks long-term sustainability in a developing country. The study also contributes to knowledge by exposing the factors determining the robustness of risk management practice. The study developed a checklist for assessing ERM practice from annual reports and other risk management disclosure documents. The paper also adds to the scarce literature on risk governance and risk management.

Corporate cash flow and dividends smoothing: a panel data analysis at Bursa Malaysia

2015 ◽  
Vol 13 (1) ◽  
pp. 2-19 ◽  
Author(s):  
Apedzan Emmanuel Kighir ◽  
Normah Haji Omar ◽  
Norhayati Mohamed
Keyword(s):  
Panel Data ◽  
Cash Flow ◽  
Panel Data Analysis ◽  
Generalized Method Of Moments ◽  
Cash Flows ◽  
Payout Policy ◽  
Free Cash Flow ◽  
Content Type ◽  
Financial Firms ◽  
The Impact

Purpose – The purpose of this paper is to contribute to the debate and find out the impact of cash flow on changes in dividend payout decisions among non-financial firms quoted at Bursa Malaysia as compared to earnings. There has been renewed debate in recent finance and accounting literature concerning the key determinants of changes in dividends payout policy decisions in some jurisdictions. The conclusion in some is that firms base their dividend decisions on cash flows rather than published earnings. Design/methodology/approach – The research made use of panel data from 1999 to 2012 at Bursa Malaysia, using generalized method of moments as the main method of analysis. Findings – The research finds that Malaysia non-financial firms consider current earnings more important than current cash flow while making dividends payout decisions, and prior year cash flows are considered more important in dividends decisions than prior year earnings. We also found support for Jensen (1986) in Malaysia on agency theory, that managers of firms pay dividends from free cash flow to reduce agency conflicts. Practical implications – The research concludes that Malaysian non-financial firms use current earnings and less of current cash flow in making changes in dividends policy. The policy implication is that current earnings are dividends smoothing agents, and the more they are considered in dividends payout decisions, the less of dividends smoothing. Social implications – If dividends smoothing is encouraged, it could lead to dividends-based earnings management. Originality/value – The research is our novel contribution of assisting investors and government in making informed decisions regarding dividends policy in Malaysia.

Comparing co-production approaches to dynamic risk assessments in a forensic intellectual disability population: outcomes of a clinical pilot

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Deborah J. Morris ◽  
Elanor L. Webb ◽  
Inga Stewart ◽  
Jordan Galsworthy ◽  
Paul Wallang
Keyword(s):  
Risk Management ◽  
Intellectual Disability ◽  
Management Plan ◽  
Risk Assessments ◽  
Risk Management Plan ◽  
Convenience Sample ◽  
Content Type ◽  
Dynamic Risk ◽  
Management Plans ◽  
The Impact

Purpose A co-produced clinical practice that aims to improve outcomes through a partnership with service users is becoming increasingly important in intellectual disability (ICD) services, yet these approaches are under-evaluated in forensic settings. This study aims to explore and compare the feasibility of two approaches to co-production in the completion of dynamic risk assessments and management plans in a secure setting. Design/methodology/approach A convenience sample of adults admitted to a secure specialist forensic ICD service (N = 54) completed the short dynamic risk scale (SDRS) and drafted risk management plans under one of two conditions. In the first condition, participants rated the SDRS and risk management plan first, separately from the multidisciplinary team (MDT). In the second condition, participants and MDTs rated the SDRS and risk management plan together. Findings In total, 35 (65%) participants rated their risk assessments and 25 (47%) completed their risk management plans. Participants who rated their risk assessments separately from the MDT were significantly more likely to complete the SDRS (p = 0.025) and draft their risk management plans (p = 0.003). When rated separately, MDT scorers recorded significantly higher total SDRS scores compared to participants (p = 0.009). A series of Mann-Whitney U tests revealed significant differences between MDT and participant ratings on questions that required greater skills in abstraction and social reasoning, as well as sexual behaviour and self-harm. Originality/value Detained participants with an intellectual disabilities will engage in their dynamic risk assessment and management plan processes. The study demonstrates the impact of different co-production methodologies on engagement and highlights areas for future research pertaining to co-production.

The effect of the financial crisis on audit quality: European evidence

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Maria I. Kyriakou
Keyword(s):  
Financial Crisis ◽  
Audit Quality ◽  
Ordinary Least Squares ◽  
Least Squares Regression ◽  
Cross Sectional ◽  
Accounting Firms ◽  
Content Type ◽  
Financial Firms ◽  
The Impact ◽  
Big Four

Purpose This paper aims to examine the impact of the recent financial crisis on audit quality by analysing discretionary accruals. Design/methodology/approach This study considers a sample of German, French, Italian and Spanish non-financial firms from 2005 to 2013 to investigate the auditor’s independence. It uses a cross-sectional and time-series ordinary least squares regression model to control for other predictors of the auditor’s independence when the financial crisis produces a decrease in audit quality. Findings The proportion of the non-financial firms having lower audit quality was higher during the financial crisis. In addition, during the crisis auditors were less likely to provide a higher audit quality for these non-financial firms. The level of audit quality returned to normal levels during the post-crisis years when the crisis had ceased. Originality/value These findings contribute to the literature on the impact of economic and financial changes on audit quality. In addition, this research finds that the Big Four accounting firms provide a higher audit quality in different circumstances from non-Big Four accounting firms, and that audit quality decreased during the crisis and returned to normal in the post-crisis period.

The impact of corporate social responsibility on financial distress: evidence from developing economy

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Farooq ◽  
Amna Noor
Keyword(s):  
Corporate Social Responsibility ◽  
Financial Distress ◽  
Z Score ◽  
Socially Responsible ◽  
Content Type ◽  
Financial Firms ◽  
Responsible Behavior ◽  
Corporate Social ◽  
The Impact ◽  
Practical Implications

Purpose This study aims to explore the role of corporate social responsibility (CSR) on the likelihood of financial distress for a sample of 139 Pakistan Stock Exchange (PSX) listed firms throughout 2008–2019. Design/methodology/approach The dynamic generalized method of moments (GMM) estimator is used to examine the impact of CSR on financial distress. The investment in CSR is measured through a multidimensional financial approach which comprises the sum of the contribution made by the company in the form of charitable donation, employees’ welfare and research and development, while the Altman Z-score is used as an indicator of financial distress. The higher the Z-score, the lower will be the probability of financial distress. Findings The authors find a significant positive impact of CSR on financial distress in GMM model. This finding is consistent with the shareholder view and over-investment hypothesis of CSR as management makes an investment in CSR to get personal benefits, which resultantly leads the firm toward financial distress state. Further, this positive relationship remains present for firms having strong involvement in foreign business through exports. Research limitations/implications Like other studies, the present study is not free from limitations. First, financial firms are skipped from the sample, although literature witnesses a lot of studies highlight the financial firms’ commitment to achieving CSR goals. Second, financial distress occurs in different stages, and this study fails to establish a linkage between CSR engagement at different stages of financial distress. In the future, researchers can make valuable addition by covering these missing links in present studies. Practical implications Findings suggest several practical implications. For policymakers, they should encourage firms to adopt more socially responsible behavior as it not only prevents them from distress but also comes with better investment behavior, minimize bankruptcies and make economies more strong and stable. Second, results suggest corporate managers emphasize socially responsible behavior as its benefits are beyond the “societal benefits” as it lessens financial distress through lower cost of debt, lesser financial constraints and reduced cost of information asymmetry, and it minimizes the cost of capital. Lastly, investors make risk premium assessments related to future earnings by determining the likelihood of financial distress in the future. Originality/value The study extends the body of existing literature on CSR and the likelihood of financial distress in Pakistan, which is according to the best knowledge of the authors, not yet studied before. The results suggest that policymakers may pay special attention to the quality of CSR while predicting corporate financial distress.

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