Dynamic Financial Analysis: Classification, Conception, and Implementation

Dynamic financial analysis (DFA) models an insurance company's cash flow in order to forecast assets, liabilities, and ruin probabilities, as well as full balance sheets for different scenarios. In the past years DFA has become an important tool for the analysis of an insurance company's financial situation. In particular, it is a valuable instrument for solvency control, which is now becoming important as regulators encourage insurance companies to determine risk-based capital using internal risk management models. This article considers three aspects: First, we discuss the reasons why DFA is of special importance today. Second, we classify DFA in the context of asset liability management and analyze its fundamental concepts. As a result, we identify several implementation problems that have not yet been adequately considered in the literature, and therefore our third aspect is a discussion of these areas. In particular we consider the generation of random numbers and the modeling of nonlinear dependences in a DFA framework.     

Disentangling the impact of economic and health crises on financial markets

This paper explores the impact of different crises on the informational efficiency of financial assets. The study covers stock markets indices (ASX200, DAX30, EuroStoxx50, S&P500 and Nikkei), commodities (gold and oil) and volatility (VIX). The study analyzes, using a rolling window method, the long memory profile and the multifractality of the time series by means of the DFA and generalized Hurst exponents. This dynamic analysis is important as it uncovers the time-varying behavior of returns characteristics, affecting the investment decisions and trading strategies at different moments of time. The paper extends the current literature on informational efficiency, providing evidence of the distinct impact on the long memory and on the multifractality of the time series, depending on the nature of the crisis and the market. The results could be of interest for investors as well as for academics, regarding the hedging limits of the models during calm or turbulent times.     

Financial Management Strategy in a Community Welfare Organisation: A Boardroom Perspective

This paper presents the results of a four year participant observation study of boardroom deliberations and resulting financial management strategies in a large not–for–profit religious based community welfare organisation. Employing a complete membership research approach and informed by grounded theory analysis, the study develops a micro–theoretical framework portraying boardroom financial management and accountability strategising. The study finds that the strategic focus on mission financing was conditioned by the contested formulation of strategic objectives, core organisational service philosophies, and executive–board member interaction. A significant observed outcome of the strategic mission financing focus was the management of accountability and disclosure, to which two key strategies were contributory. These were the exercising of financial control and the exercising of relationships management. The findings offer hitherto unavailable insights into strategic financial management and accountability processes and their context at the boardroom level in the religious not–for–profit community welfare sector.     

The Determinants of Currency Risk Management in Latin American Nonfinancial Firms

This paper investigates the determinants of currency risk management in nonfinancial firms in Argentina, Brazil, Chile, and Mexico, based on a panel data sample of firms that list as American depositary receipts from 2001 to 2004. Our evidence indicates that derivatives held for hedging purposes can yield cash flows of the same order of magnitude of capital expenditures, operational earnings, and financial expense, unlike what was previously found by Guay and Kothari (2003) for U.S. firms. We study not only the decision to use derivatives, but also the magnitude of derivatives holdings and the importance of operational hedging in firms' risk management strategies. We find that economies of scale, financial distress costs, informational asymmetry, and growth opportunities are important for risk management decisions, and that firms do not hedge because of potential tax benefits.     

企业财务战略管理：一个企业能力理论视角

企业能力理论已成为研究企业理论与战略管理理论一个热门领域。企业的本质是知识与能力的集合体。财务战略管理作为企业战略管理的职能管理战略应该立足于企业能力现状,即从企业能力现状出发,进行具体的财务战略谋划;另一方面,财务战略管理应服务于企业能力尤其是竞争优势的培养这一企业能力目标。     

Financial literacy and over-indebtedness in low-income households

Financial literacy can explain a significant proportion of wealth inequality. Among the key components of financial literacy are numeracy and money management skills. Our study examines the relative importance of these components in the determination of consumer debt and household net worth among credit union members in socially disadvantaged areas. The main finding from our analysis is that money management skills are important determinants of financial outcomes but that numeracy has almost no role to play. This result adds to a recent US-based behavioural finance literature on the role of attention and planning in consumer finance. Findings are found to be robust when the sample is reduced to only those who have a clear role in household financial decision-making and also when controlling for potential endogeneity. Our findings have policy implications in the UK and elsewhere as credit unions across the world are important players in national financial literacy strategies.     

The Use of Dynamic Financial Analysis to Determine Whether an Optimal Growth Rate Exists for a Property-Liability Insurer

Prior research on the aging phenomenon has demonstrated that new business for property‐liability (P‐L) insurers generates high loss ratios that gradually decline as a book of business goes through successive renewal cycles. Although the experience on new business is initially unprofitable, the renewal book of business eventually becomes profitable over time. Within this context, insurers need to manage their exposure growth in order to maximize long run profitability. Dynamic financial analysis (DFA), a relatively new tool for P‐L insurers, utilizes Monte Carlo simulation to generate the overall financial results for an insurer under a large number of scenarios. This article uses a publicly available DFA model—along with the estimated market value of an insurer, based on 1990–2001 data for stock P‐L insurers and underlying financial variables—to determine optimal growth rates of a P‐L insurer based on mean–variance analysis, stochastic dominance, and constraints on leverage.     

The impact of off-balance-sheet regulations on bank risk-taking: Evidence from China

The release of new asset management rules has played a positive role in regulating the asset management business of financial institutions, preventing and controlling financial risk. It has also had an important impact on the management of banks’ off-balance-sheet (OBS) innovation. This paper uses unbalanced panel data on 75 commercial banks in China from 2007 to 2017 and combines a theoretical and an empirical model to study the development of bank OBS innovation and bank risk taking from the perspective of new asset management regulations. The analysis finds (1) the rapid development of OBS innovation will increase bank risk taking and (2) the solution to the problem of rigid payment is conducive to reducing the risk taken by Chinese commercial banks when providing OBS innovation.     

Zur Modellierung von Rückversicherungsverträgen in der dynamischen Finanzanalyse

In this paper we study the influence of Gaussian dependencies on the payoff of reinsurance contracts and the resulting effects on a non-life insurer's risk and return profile. To achieve this, we integrate different Gaussian dependencies and reinsurance contracts in a dynamic financial analysis (DFA) framework and conduct numerical tests within a simulation study. Depending on the reinsurance contract and the dependency employed, we find substantial differences in risk assessment for the ruin probability and for the expected policyholder deficit. The results have important implications for regulators and rating agencies that use these risk measures as a foundation for capital standards and ratings. Our results extend the findings of a recent working paper by Eling and Toplek (2008) with a detailed analysis of Gaussian dependencies under different reinsurance contracts.     

Elderly consumers and financial choices: A systematic review

The purpose of this paper is to investigate elderly choices and behaviors in financial services markets. A systematic review of a five-decade period (1970–2019) of academic research in the marketing field was carried out in order to identify elderly consumers’ decisions regarding financial asset management and legacy, highlighting the main findings of extant research and practical implications for marketers. Results shed light on financial asset management in terms of welfare, retirement planning, and investments for old age, as well as legacy practices in terms of special possessions, charities, and rites of passage. The study underlines the need to consider the heterogeneous nature of elderly consumers’ values and lifestyles in designing strategies for financial services and products, emphasizing that demographic differences alone are not adequate to effectively define market segments. Furthermore, the role of mixed marketing approaches considering elderly choices are discussed, together with implications for companies that want to target such consumer target.

     

Strategic HRM as a Budgetary Control Mechanism in the Large Corporation: A Case Study from Engineering Contracting

This paper presents case study evidence of a rare attempt to make the corporate human resource function strategic. More significantly, the paper’s theoretical approach and the research questions it addresses examine the material beyond the confines of HRM discourse that emphasizes “strategic choice", integration or fit as received management strategies. Alternatively, the empirical, yet theoretically informed research questions suggest that strategic HRM necessarily de-skills the autonomy and discretion of many workers. Further, to be effective HRM must be diluted to reflect what is often (un)spoken budget and financial performance criteria that constitute an internal audit system. The theoretical arguments and empirical material presented in this paper appears relevant to a critically informed accountancy audience for two reasons. First, the case demonstrates how the language of financial management is diffused within other management fields such as HRM. Second, although the centralized system of performance management for project management appeared as a human resource innovation it intensified the significance of financial constraints on human resource staff whose labour process was previously relatively autonomous.     

Non-technical skills for managing risk and performance in financial trading

Recent large-scale failures in financial institutions have been found to be caused, in-part, by human factors-related issues in financial trading. In other environments where risk management and performance are intertwined, a human factors approach is often adopted to understand how the ‘non-technical skills (NTS)’ (leadership (LD), decision-making (DM), situation awareness (SA), teamwork) of organisational actors influence outcomes. Yet, to date, there has been minimal application of human factors research in financial trading. This study (i) identifies ‘real-world’ (i.e. non-laboratory) research studies investigating the NTS important for performance in financial trading, (ii) examines and synthesises data on the NTS found to underpin good or poor performance and (iii) considers the quality and coverage of research investigating NTS in financial trading, and identifies potential areas for future research. Nineteen studies were identified through a systematic literature search and then content-analysed for associations between NTS and performance in financial trading. The review found a range of decision-making (e.g. heuristics and biases, intuitive DM, emotional regulation) and LD skills (e.g. setting standards, monitoring behaviour, encouraging speaking-up) to have been identified as important for managing risk and performance in financial trading environments. Furthermore, SA (e.g. information search and assessment strategies, vigilance, identifying ‘noise’ data) and teamwork (e.g. avoiding ‘role’ conflict, communication between traders) were found to be important, yet remain less explored within the literature, and should be the focus of future research. NTS appear essential for effective risk management within the financial sector, yet further field research is required to examine the context-relevant behaviours that underpin safe activity. This will facilitate the development of evidence-based systems for assessing and training NTS competencies.     

The dynamics of textile firm responses to the restriction of endocrine disrupting surfactants: a Vietnam case study

Abstract

Since textile industry has been claimed to endanger the environment and human health, the insight of textile firm behavior regarding chemical use and discharge is vital for designing environmental risk management strategies. This study aimed to explore the dynamics of responses to the restriction of nonylphenol (NP) and its ethoxylates (NPEOs) among the Vietnamese textile manufacturers from the perspectives of attitude and the perceptions of adaptabilities, risks, benefits, and barriers. The chemicals are used as surfactants and are known to be responsible for endocrine disrupting effects. In-depth interviews were conducted with technical specialists from four textile firms and one chemical supplier. Regulatory and market situations with regards to the chemicals were also assessed. The findings revealed varied responses to chemical elimination where perceived technical risk, financial risk, benefits, and barriers played different roles in driving a certain action. The attitude towards chemical restriction was shaped by the trade-off between perceptions of financial risk and benefits and was moderated by market strategy. Efforts, such as enhanced washing or reductions in the dose of NP/NPEOs, imply the potency of continuous discharge of these chemicals into the environment, suggesting critical investigations on NP/NPEOs removal to prioritize actions for balancing between economic growth and environmental protection. Poor access to new policies and technological and chemical innovations was the most important barrier among private firms, highlighting the roles of non-governmental textile and garment industrial/trade associations in enhancing their members’ informative capacity. The study reflects the significance of incorporation of firm behavior research into environmental risk management practice.     

中国养老服务财政支出效率评价及影响因素分析

首先,构建养老服务财政投入和产出的评价指标体系,利用我国30个省省际面板数据,采用Super-SBM DEA模型,对各省的财政支出效率进行测量及对比分析;其次,利用Tobit面板数据回归模型剖析影响养老服务财政支出效率的主要因素。结果表明：我国东、中、西部养老服务财政支出综合技术效率排序为西部地区>东部地区>中部地区,综合技术效率无效很大程度上是由纯技术效率和规模效率决定的,提高总效率的策略在于提高预算管理水平和优化财政资源配置。城镇化水平对养老服务财政支出效率具有显著的正向影响,财政自给能力、社会养老资源(养老保险基金累计结余)具有显著的负向影响。基于此,可以通过增加财政支出、选好财政投入方向、不断优化财政投入方式等策略提升我国养老服务财政支出效率。     

当前金融知识宣传教育面临的主要矛盾和对策

金融知识宣传教育是金融消费者保护工作的重要内容,对维护金融稳定和可持续发展具有重要意义。本文基于银行业开展金融知识宣传教育的实践,指出当前金融知识宣传教育面临的五大主要矛盾,并提出进一步深入开展金融知识宣传教育的五项对策。     

Modeling and Management of Nonlinear Dependencies–Copulas in Dynamic Financial Analysis

We study the influence of nonlinear dependencies on a non-life insurer's risk and return profile. To achieve this, we integrate several copula models in a dynamic financial analysis framework and conduct numerical tests. We also test risk management strategies in response to adverse outcomes. Nonlinear dependencies have a crucial influence on the insurer's risk profile that can hardly be affected by the analyzed management strategies. We find large differences in risk assessment for the ruin probability and for the expected policyholder deficit. This has important implications for insurers, regulators, and rating agencies that use these measures as a foundation for internal risk models, capital standards, and ratings.     

On Being a Financial Manager in a Church Organisation: Understanding the Experience

Accountants and financial managers, as individuals and as occupational groups, are largely invisible in the growing body of financial management literature. In particular, limited privilege has been given to the experiences of financial managers in organisations dominated by social or value‐based goals, rather than financial motives. To begin to address this lacunae, this paper presents a micro study of financial managers 'in motion'( Hopwood, 1987 ) in the state division of a large Australian church. By explicating the financial managers' own perspectives of their experiences, the study provides a unique perspective of understanding of what it is to 'be' a financial manager in a non‐profit entity.     

矩阵式管理在人民银行财务管理中的效应分析

新经济形势下,人民银行在我国经济和社会发展中的作用更加明显,同时央行治理结构不断完善,对会计财务工作提出了新的要求,财务预算管理越来越成为央行维护金融稳定、实施货币政策、实现地位职能的重要保障。合理规划预算资金,提高资金的使用效益成为预算管理工作的重中之重。本文从人民银行预算管理的现状入手,分析当前预算管理模式存在的问题,提出在财务预算管理中采用矩阵式管理模式的思路,旨在加快推进财务预算管理工作转型,更好地满足央行履职需要。     

Risk perception and risk management in the Middle East market: theory and practice of multinational enterprises in Saudi Arabia

This exploratory study investigates the risk perception and risk management strategies of Western multinational enterprises in the Middle East. A sample of 49 German companies operating in Saudi Arabia provides the empirical setting for this research. The study reveals that cultural risk is assessed as more important in the business environment than political, financial, and economic risk. The most critical risk factors are not sufficiently included in the methodology of country risk measures, which are often used as a source for country‐specific risk information. In terms of risk management strategies, participating firms use mostly informal approaches rather than structured hedging or insurance products. Furthermore, we find that firm size has implications on the perception of some risk factors and for the level of risk management sophistication.     

基于DFA方法的中国洪水保险定价研究

对洪水保险进行精确有效的定价十分困难.动态财务分析模型(DFA)能够有效的将多种因素综合在一起进行分析,弥补了以往洪水保险定价方法以单一时点统计数据作为定价基础的缺陷;再保险安排是洪水保险计划中的一个重要组成部分,购买60%比例再保险是最适当的;购买再保险能够极大的降低洪水保险计划的破产概率.