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Financial Risk (financial + risk)
Terms modified by Financial Risk Selected AbstractsCapital Structure and Financial Risk: Evidence from Foreign Debt Use in East AsiaTHE JOURNAL OF FINANCE, Issue 6 2003George Allayannis Using a data set of East Asian nonfinancial companies, we examine a firm's choice between local, foreign, and synthetic local currency (hedged foreign currency) debt. We find evidence of unique as well as common factors that determine each debt type's use, indicating the importance of examining debt at a disaggregated level. We exploit the Asian financial crisis as a natural experiment to investigate the role of debt type in firm performance. Surprisingly, we find that the use of synthetic local currency debt is associated with the biggest drop in market value, possibly due to currency derivative market illiquidity during the crisis. [source] China's Current Real Estate Cycle and Potential Financial RisksCHINA AND WORLD ECONOMY, Issue 4 2006Xiaojing Zhang L1; E61; E51 Abstract The real estate cycle and financial stability are closely correlated. In light of global real estate bubbles, China's real estate cycle has attracted wide attention since 1998. The present paper analyzes three driving factors in the context of the current real estate cycle; namely, economic growth, macroeconomic environment and institutional establishment. Supported by econometric analysis using quarterly data from 1992,2004, the present paper indicates that real estate will develop steadily and that housing prices will consistently rise in the relative long run. Based on quantitative analysis, it is concluded that the implications of the current real estate cycle for financial stability include risks of real estate credit exposure, government guarantees and maturity mismatch. Some corresponding policy implications are discussed, such as advancing banking reform, encouraging the rational behavior of local governments and strengthening the regulation of foreign capital flows in and out of China's real estate industry. (Edited by Xinyu Fan) [source] Comparison of Additional Costs for Several Replacement Strategies of Randomly Ageing Reinforced Concrete PipesCOMPUTER-AIDED CIVIL AND INFRASTRUCTURE ENGINEERING, Issue 7 2009Franck Schoefs Some of them carry seawater and can deteriorate with time because of internal corrosion. Because of the low O2 content of aggressive water, slow corrosion is expected for such applications. If the RCPs are not periodically replaced, they will eventually fail. Replacement strategies for these pipes depend on (1) the risks associated with the failure of the water distribution network, and (2) the costs associated with replacing the pipes, including the removal of existing pipes, installation of new pipes, and associated production losses. Because of the lack of statistical data regarding RCP failure, the development of a risk-based replacement strategy is not an easy task. This article demonstrates how predictive models for the evolution of the failure of RCPs and the associated consequences of failure can be used to develop risk-based replacement strategies for RCPs. An application for the replacement strategies of a network modeled as a system consisting of 228 RCPs is presented as a case study. We focus on the assessment of the number of replaced components that governs the costs. The main objective of this article is to provide a theoretical approach for comparing replacement strategies, based on (1) the results of a reliability study, (2) the representation of the distributions of failed components (binomial distribution), and (3) the decision tree representation for replacement of RCPs. A focus on the scatter of the induced costs themselves is suggested to emphasize the financial risk. [source] Accelerating botulism therapeutic product development in the Department of Defense,DRUG DEVELOPMENT RESEARCH, Issue 4 2009Andrea M. Stahl Abstract Coordinated small-molecule drug discovery research efforts for the treatment of botulism by the public sector, especially the U.S. Department of Defense (DoD) and Department of Health and Human Services (DHHS), began in the 1990s and represent a significant resource investment. Organization of an effective botulism therapeutic drug program, however, presents formidable technical and logistical challenges. Seven distinct BoNT serotypes are known, each representing a different target. Moreover, BoNT exerts its action inside peripheral cholinergic neurons, and some serotypes may persist functionally within nerve cells for weeks or months. Clinical botulism occurs infrequently, and the effectiveness of prolonged mechanical ventilation to treat poisoning further limits experimental drug testing. The efficacy of experimental compounds must be extrapolated from disparate cell- or tissue-based or rodent models. Numerous compounds with moderate efficacy in experimental laboratory assays have been reported, but may not possess the necessary safety, efficacy, and pharmacokinetic profile to support therapeutic development. To mitigate these challenges, we propose product development tools to assist in management of the BoNT portfolio and to clearly define the desired therapeutic product. Establishing a target product profile (TPP) is proposed to guide public sector managers toward critical aspects of the desired therapeutic product. Additional product development tools to assist in shaping research portfolios and to inform decisions regarding lead candidates to pursue are also discussed. Product development tools that facilitate the characterization of the ideal therapeutic product, and assist in the maintenance of a robust portfolio, will ameliorate the inherent financial risk in drug development for treating BoNT intoxication. Drug Dev Res 70:303,326, 2009. Published 2009 Wiley-Liss, Inc. [source] Corporate communication of financial riskACCOUNTING & FINANCE, Issue 2 2010Grantley Taylor M49 Abstract This study provides insights on the Financial Risk Management Disclosure (FRMD) patterns of Australian listed resource companies for the 2002,2006 period leading up to and immediately following adoption of the International Financial Reporting Standards (IFRS). Regression analysis demonstrates that corporate governance and capital raisings of firms are significant and positively associated with FRMD patterns. In contrast, overseas stock exchange listing of firms is significantly negatively associated with FRMD patterns. The findings show that the introduction of IFRS changes corporation's willingness to communicate risk information. [source] Generation unit selection via capital asset pricing model for generation planningINTERNATIONAL JOURNAL OF ENERGY RESEARCH, Issue 14 2003Romy Cahyadi Abstract The electric power industry in many parts of U.S.A. is undergoing substantial regulatory and organizational changes. Such changes introduce substantial financial risk in generation planning. In order to incorporate the financial risk into the capital investment decision process of generation planning, in this paper, we develop and analyse a generation unit selection process via the capital asset pricing model (CAPM). In particular, utilizing realistic data on gas-fired, coal-fired, and wind power generation units, we show which and how concrete steps can be taken for generation planning purposes. It is hoped that the generation unit selection process developed in this paper will help utilities in the area of effective and efficient generation planning when financial risks are considered. Copyright © 2003 John Wiley & Sons, Ltd. [source] Ranking factors of an investment in cogeneration: Sensitivity analysis ranking the technical and economical factorsINTERNATIONAL JOURNAL OF ENERGY RESEARCH, Issue 3 2001Gunnel Sundberg Abstract A deregulation of the electricity market in Europe will result in increased competition among the power-producing companies. They will therefore carefully estimate the financial risk in an investment in new power-producing capability. One part of the risk assessment is to perform a sensitivity analysis. This paper presents a sensitivity analysis using factorial design, resulting in an assessment of the most important technical and economical factors affecting an investment in a gas turbine combined cycle and a steam cycle fired by woodchips. The study is performed using a simulation model that optimizes the operation of existing power plants and potential new investments to fulfil the desired heat demand. The local utility system analysed is a Swedish district heating system with 655 GWh y,1 heat demand. The conclusion is that to understand which of the technical and economical factors affect the investment, it is not sufficient to investigate the parameters of the studied plant, but also the parameters related to the competing plants. Both the individual effects of the factors and the effect of their interaction should be investigated. For the energy system studied the price of natural gas, price of woodchips and investment cost have the major influence on the profitability of the investment. Copyright © 2001 John Wiley & Sons, Ltd. [source] Modelling Transparency in Disclosure: The Case of Foreign Exchange Risk ManagementJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 5-6 2007Andrew Marshall Abstract:, When managers choose not to disclose all the relevant information in their possession in their financial statements, there is an information gap between the managers and users and consequently a lack of transparency. We model the degree of transparency observed when disclosures of foreign exchange (FX) risk management in financial statements are compared to managerial information on FX risk management policy, as evidenced in questionnaire responses. In this comparative study of US and UK firms we find incomplete disclosure in both samples but with differing aspects. In the US case, the information gap is lower where the information has higher relevance or firms with higher financial risk (greater leverage) are signalling the extent of risk, but the gap is greater where firms are in competitive product markets. For the UK sample, the information gap is significantly lower where firms have higher financial risk or higher liquidity but the gap is greater where the shares are more closely held. We conclude that modelling and explaining this aspect of incomplete accounting disclosure in an international setting must be sufficiently flexible to accommodate national differences in managerial behaviour. [source] Recognition versus Disclosure: An Investigation of the Impact on Equity Risk Using UK Operating Lease DisclosuresJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 9-10 2000Vivien Beattie This study examines the equivalency of accounting recognition versus disclosure. OLS regression analysis is used to determine whether there is an association between equity risk and an adjustment to financial risk for off-balance sheet operating leases. Two methods of adjustment are considered: constructive capitalisation and a simple factor method. The observation of a reliably positive association suggests that UK investors/analysts view operating leases from a property rights perspective rather than an ownership perspective. This supports the argument for recognition of all lease rights and obligations ,on-balance sheet', as proposed in the recent G4+1 discussion paper ASB (1999). [source] Perceived trustworthiness of online shopsJOURNAL OF CONSUMER BEHAVIOUR, Issue 1 2008Oliver B. Büttner Trust has been found to be crucial for consumer behaviour towards online shops. However, existing studies on the role of trust in electronic commerce are mainly based on ad hoc scales to measure trustworthiness, merely rely on self-reported consequences of trust such as intention to buy, and focus on low-risk products. In a web-based study, 634 participants interacted with a provider of medical goods, that is a simulated online pharmacy. The study develops and employs a psychometrically sound scale for assessing perceived trustworthiness of online shops. Moreover, it examines the impact of trustworthiness on both consumers' intended and actual behaviour towards online shops. Results show that trustworthiness promotes both intention to buy and actual financial risk taking. Perceived risk was not found to moderate the relationship between trustworthiness and intention to buy. Instead, trustworthiness partially mediated the influence of perceived risk on intention to buy. The results from the scale development challenge multidimensional conceptualizations of trust; comparing this finding with other studies suggests that the duration of the relationship might moderate the dimensionality of trust. Copyright © 2008 John Wiley & Sons, Ltd. [source] Pricing Double-Trigger Reinsurance Contracts: Financial Versus Actuarial ApproachJOURNAL OF RISK AND INSURANCE, Issue 4 2002Helmut Gründl This article discusses various approaches to pricing double-trigger reinsurance contracts,a new type of contract that has emerged in the area of ,,alternative risk transfer.'' The potential coverage from this type of contract depends on both underwriting and financial risk. We determine the reinsurer's reservation price if it wants to retain the firm's same safety level after signing the contract, in which case the contract typically must be backed by large amounts of equity capital (if equity capital is the risk management measure to be taken). We contrast the financial insurance pricing models with an actuarial pricing model that has as its objective no lessening of the reinsurance company's expected profits and no worsening of its safety level. We show that actuarial pricing can lead the reinsurer into a trap that results in the failure to close reinsurance contracts that would have a positive net present value because typical actuarial pricing dictates the type of risk management measure that must be taken, namely, the insertion of additional capital. Additionally, this type of pricing structure forces the reinsurance buyer to provide this safety capital as a debtholder. Finally, we discuss conditions leading to a market for double-trigger reinsurance contracts. [source] Regulatory Disclosure of Offending Companies in the Dutch Financial Market: Consumer Protection or Enforcement Publicity?LAW & POLICY, Issue 4 2010JUDITH VAN ERP Regulatory disclosure of names of offending companies is increasingly popular as an alternative to traditional command and control regulation. The goals and intended effects of disclosure are not always clear, however. Do regulators wish to increase their transparency, or do they intend to name and shame? This article aims to contribute to a better understanding of the underlying working mechanism of regulatory disclosure of offenders' names through a case study of the Dutch Authority for Financial Markets' disclosure policy. It distinguishes two types of disclosure strategies: consumer oriented and firm oriented. The case study shows that although informing consumers was the primary purpose of disclosure as intended by the Dutch legislature, the purpose in practice has shifted to informing companies about the regulators' enforcement policy. The nature of the disclosed information makes it unlikely that disclosure adequately prevents financial risk taking by consumers. Instead of empowering consumers, disclosure has been incorporated in a traditional deterrence logic, turning out not to be an example of new governance but instead a modern version of command and control enforcement publicity. [source] Principal Component Value at RiskMATHEMATICAL FINANCE, Issue 1 2002R. BRUMMELHUIS Value at risk (VaR) is an industrial standard for monitoring financial risk in an investment portfolio. It measures potential losses within a given confidence interval. The implementation, calculation, and interpretation of VaR contains a wealth of mathematical issues that are not fully understood. In this paper we present a methodology for an approximation to value at risk that is based on the principal components of a sensitivity-adjusted covariance matrix. The result is an explicit expression in terms of portfolio deltas, gammas, and the variance/covariance matrix. It can be viewed as a nonlinear extension of the linear model given by the delta-normal VaR or RiskMetrics (J.P. Morgan, 1996). [source] Predicting the Financial Vulnerability of Charitable OrganizationsNONPROFIT MANAGEMENT & LEADERSHIP, Issue 2 2000Janet S. Greenlee This article describes a model that can be used to predict which nonprofit organizations are vulnerable to financial problems. The model is based on financial indicators developed by Tuckman and Chang (1991), adapts methodologies that have been developed in the for-profit sector to predict financial vulnerability, and was empirically tested using a multiyear Internal Revenue Service database provided by the National Center for Charitable Statistics. Both internal and external stakeholders can use the model when making allocation decisions during the strategic planning process and in evaluating financial risk. [source] Economic Evaluation of Scale Dependent Technology InvestmentsPRODUCTION AND OPERATIONS MANAGEMENT, Issue 1 2005Phillip J. Lederer We study the effect of financial risk on the economic evaluation of a project with capacity decisions. Capacity decisions have an important effect on the project,s value through the up-front investment, the associated operating cost, and constraints on output. However, increased scale also affects the financial risk of the project through its effect on the operating leverage of the investment. Although it has long been recognized in the finance literature that operating leverage affects project risk, this result has not been incorporated in the operations management literature when evaluating projects. We study the decision problem of a firm that must choose project scale. Future cash flow uncertainty is introduced by uncertain future market prices. The firm's capacity decision affects the firm's potential sales, its expected price for output, and its costs. We study the firm's profit maximizing scale decision using the CAPM model for risk adjustment. Our results include that project risk, as measured by the required rate of return, is related to the inverse of the expected profit per unit sold. We also show that project risk is related to the scale choice. In contrast, in traditional discounted cash flow analysis (DCF), a fixed prescribed rate is used to evaluate the project and choose its scale. When a fixed rate is used with DCF, a manager will ignore the effect of scale on risk and choose suboptimal capacity that reduces project value. S/he will also misestimate project value. Use of DCF for choosing scale is studied for two special cases. It is shown that if the manager is directed to use a prescribed discount rate that induces the optimal scale decision, then the manager will greatly undervalue the project. In contrast, if the discount rate is set to the risk of the optimally-scaled project, the manager will undersize the project by a small amount, and slightly undervalue the project with the economic impact of the error being small. These results underline the importance of understanding the source of financial risk in projects where risk is endogenous to the project design. [source] Foreign Currency Exposure in the Department of DefensePUBLIC BUDGETING AND FINANCE, Issue 4 2000Gerald M. Groshek The Department of Defense (DoD) incurs numerous costs denominated in foreign currencies in fulfilling U.S. alliance and security agreements overseas. Between fiscal years 1993 and 1997, the DoD expended over $10.4 billion in foreign currencies to operate and maintain its overseas facilities, and estimates for fiscal years 1998 and 1999 are $5.4 billion. In line with the government's general, risk-neutral approach to financial risk, the DoD makes no attempt to control its foreign exchange exposure against currency fluctuations. As such, there are inevitable differences in amounts budgeted to fund the DoD's overseas operations and amounts subsequently required to pay them. This paper examines the implications of DoD foreign exchange rate policy and applies an alternative approach to foreign exchange rate risk,one more in line with private-sector practices and overall efforts to reform government operations. The results indicate that forward contracts would inject greater certainty into the budgeting and administration of these programs and might release limited defense funds for use elsewhere. [source] Commercial Insurance vs Community-based Health Plans: Time for a Policy Option With Clinical Emphasis to Address the Cost SpiralTHE JOURNAL OF RURAL HEALTH, Issue 2 2005Bruce Amundson MD ABSTRACT: The nation continues its ceaseless struggle with the spiraling cost of health care. Previous efforts (regulation, competition, voluntary action) have included almost every strategy except clinical. Insurers have largely failed in their cost-containment efforts. There is a strong emerging body of literature that demonstrates the relationship between various clinical strategies and reductions in utilization and costs. This article describes the organization of health services, including integration of delivery and financing systems, at the community level as a model that effectively addresses the critical structural flaws that have frustrated control of costs. Community-based health plans (CHPs) have been developed and have demonstrated viability. The key elements of CHPs are a legal organizational structure, a full provider network, advanced care-management systems, and the ability to assume financial risk. Common misconceptions regarding obstacles to CHP development are the complexity of the undertaking, difficulty assuming the insurance function, and insured pools that are too small to be viable. The characteristics of successful CHPs and 2 case studies are described, including the types of advanced care-management systems that have resulted in strong financial performance. The demonstrated ability of CHPs to establish financial viability with small numbers of enrollees challenges the common assumption that there is a fixed relationship between health plan enrollment size and financial performance. Organizing the health system at the community/regional level provides an attractive alternative model in the health-reformdebate. There is an opportunity for clinical systems and state and federal leaders to support the development of community-based integrated delivery and financing system models that, among other advantages, have significant potential to modulate the pernicious cost spiral. [source] The responsible shareholder: a case studyBUSINESS ETHICS: A EUROPEAN REVIEW, Issue 1 2002Richard C. Warren Shareholders are sometimes considered to be, in moral terms, the owners of a company, they are after all the carriers of the residual liabilities and bear a higher proportion of the financial risk. However, in company law, the shareholders' responsibility is limited, and in financial terms shareholders are only liable up to the fully paid value of the share certificate. Moreover, when the shares are sold, the responsibility and risk are transferred completely to the new bearer of the shares. Whether this gap in moral and legal perceptions can be judged to be satisfactory in business ethics terms is a moot point and will be partly explored in this case study which seeks to analyse the shareholder's responsibility towards a firm in which they own shares. The case study company chosen as a vehicle to explore these issues is that of Turner & Newall; a company that subjected its employees, communities and customers to a major health hazard , asbestosis. This paper will use the Turner & Newall archive materials to illustrate the moral hazards that can arise for shareholders. In particular it will examine the ethical responsibilities of shareholders towards those stakeholders who were exposed to the dangers of asbestos. This case is a significant test of the veracity of the legal system of company control, and exposes the ineffectiveness of that system in accountability terms. The case study also deals with specific issues that arose in the asbestos crisis, as well as with more general issues in our present system of corporate governance and shareholder responsibilities. [source] Quantifying the financial risks and opportunities of climate change on the automotive industryENVIRONMENTAL QUALITY MANAGEMENT, Issue 3 2005Duncan Austin First page of article [source] A survey into the use of derivatives by large non-financial firms operating in BelgiumEUROPEAN FINANCIAL MANAGEMENT, Issue 3 2000Marc J. K. De Ceuster Empirical evidence on the use of derivatives for risk management on the European continent is virtually non-existent. To fill this gap, our survey documents the usage of derivatives by non-financial large firms operating in Belgium. This paper provides descriptive evidence with respect to several questions that are raised in the literature. Why do firms hedge? Which financial risks are being managed? How widespread is the use of derivatives? Which derivatives are used for which purposes? How is a risk management policy implemented? How are performance measurement and reporting structured? [source] Do microfinance programs help families insure consumption against illness?HEALTH ECONOMICS, Issue 3 2009Paul Gertler Abstract Families in developing countries face enormous financial risks from major illness both in terms of the cost of medical care and the loss in income associated with reduced labor supply and productivity. We test whether access to microfinancial savings and lending institutions helps Indonesian families smooth consumption after declines in adult health. In general, results support the importance of these institutions in helping families to self-insure consumption against health shocks. Copyright © 2008 John Wiley & Sons, Ltd. [source] Generation unit selection via capital asset pricing model for generation planningINTERNATIONAL JOURNAL OF ENERGY RESEARCH, Issue 14 2003Romy Cahyadi Abstract The electric power industry in many parts of U.S.A. is undergoing substantial regulatory and organizational changes. Such changes introduce substantial financial risk in generation planning. In order to incorporate the financial risk into the capital investment decision process of generation planning, in this paper, we develop and analyse a generation unit selection process via the capital asset pricing model (CAPM). In particular, utilizing realistic data on gas-fired, coal-fired, and wind power generation units, we show which and how concrete steps can be taken for generation planning purposes. It is hoped that the generation unit selection process developed in this paper will help utilities in the area of effective and efficient generation planning when financial risks are considered. Copyright © 2003 John Wiley & Sons, Ltd. [source] Social health insurance in developing countries: A continuing challengeINTERNATIONAL SOCIAL SECURITY REVIEW, Issue 2 2002Guy Carrin This paper addresses the issue of the feasibility of "social" health insurance (SHI) in developing countries. SHI aims at protecting all population groups against financial risks due to illness. There are substantial difficulties in implementation, however, due to lack of debate and consensus about the extent of financial solidarity, problems with health service delivery, and insufficient managerial capacity. The transition to universal coverage is likely to take many years, but it can be speeded up. Adopting a "family" approach to financial protection, sustained financial support from governments and donors, and deconcentrating the development of SHI may slash several years from the time needed to achieve full universal protection against healthcare costs. [source] Judgmental Discounting and Environmental Risk Perception: Dimensional Similarities, Domain Differences, and Implications for SustainabilityJOURNAL OF SOCIAL ISSUES, Issue 1 2007Alexander Gattig Environmental risks constitute a special category of risks because they often involve consequences that are highly uncertain, strongly delayed, occurring at distant places, and,therefore,mostly borne by others. Economic, decision,theoretic, and psychological research about the way people deal with such consequences is reviewed. Two major findings are presented: first, there is evidence that discounting mechanisms are stable across different preference dimensions (uncertainty, temporal, spatial, and social distance). Second, discount rates tend to vary across different problem domains (e.g., environmental vs. health vs. financial risks). In particular, it appears that temporal discounting is less pronounced for environmental risks than in other domains. Several factors are identified that affect the nature of the risk evaluation process, and it is argued that environmental risks differ from other risks on such factors. These environmental-risk characteristics may have important implications for policy strategies to promote environmental sustainability. Contrary to other domains, appealing to the public's long-term preferences may be successful. Also in policy making, insights from standard economic decision theory to environmental decision making should be applied with caution. [source] The future of IPM: whither or wither?AUSTRALIAN JOURNAL OF ENTOMOLOGY, Issue 2 2009Myron P Zalucki Abstract The acronym IPM (integrated pest management) has been around for over 50 years and now not only supposedly guides research and extension in pest management but also markets pesticides, is claimed to be undertaken by many growers, and even resonates with public perceptions and politicians. Whether or not IPM programs are sustainable in the longer term under the conflicting stresses and strains of the modern agricultural environment is debatable. We analyse three case studies of IPM development in Australia: citrus IPM in central Queensland, Brassica IPM in southeast Queensland and Helicoverpa management in cotton in eastern Australia. Many management practices for these pests have changed over time. In the more stable citrus system classical biological control along with changed practices (reduced pesticide use) have effectively controlled imported scale insect pests. In Brassicas and cotton, IPM is predominantly of the sample and spray variety where, increasingly, less broad-spectrum insecticides are used and, in cotton, Helicoverpa management includes the deployment of transgenic plants. We question whether or not IPM principles are always consistent with market forces and whether or not the approach is universally applicable for all pest insects when implemented at the small (field or farm) scale. Farmers will adopt cost-effective approaches that minimise their financial risks. For Australia as a whole over the last 30 years insecticide input costs per hectare have increased faster than the price index, reflecting more costly insecticides, changes to the combinations of crops grown and an increase in the overall area of crops cultivated together with possible concomitant changes in pest abundance. Any pest crisis will ensure rapid changes in practice and adoption of technologies, in order to mitigate the short-term financial stresses caused. However, regression to former practices tends to follow (e.g. in Brassica crops). In most cases, we cannot objectively test if changed management practices are responsible for changes in pest abundance, as is often claimed, or if the latter is simply a consequence of the weather and/or related large-scale landscape features (e.g. area of host plants). We argue that for many systems the future of pest management practice will require a change to landscape or area-wide approaches. We suspect, given how entrenched the acronym has become, whatever the nature of the approach it will be called IPM. [source] | |||||||||||||||||||