Journal of Risk and Financial Management (JRFM)

The fraud triangle has long served as a fundamental model for understanding corporate fraud, emphasizing opportunity, pressure, and rationalization. Over time, this framework evolved with the fraud diamond, which introduced capability; the fraud pentagon, which added arrogance; and the fraud hexagon, which incorporated collusion and reshaped arrogance. Building on these developments, this study proposes a seventh dimension: the pleasure and thrill of risk-taking. This psychological factor highlights the gratification that some individuals derive from engaging in fraud as a high-stakes game. Through a qualitative analysis of five major corporate fraud cases—Société Générale, Enron, Wirecard, Parmalat, and Theranos—this study highlights the presence of this additional motivational factor. By introducing the fraud polygon, this research provides a more comprehensive framework for understanding corporate fraud’s multifaceted nature. This model has significant implications for both academic research and practical fraud prevention, offering insights into the interplay between systemic vulnerabilities and intrinsic motivations.

This study examines the effect of firms’ greenness on IPO underpricing and subsequent short-term performance during the COVID-19 crisis period. Using 173 U.S. IPOs, we find that IPO underpricing is more pronounced for brown firms (i.e., firms have higher carbon footprints or operate in pollution-intensive industries) than for green firms (i.e., firms are engaged in environmentally sustainable practices). However, when we account for the exogenous change in environmental concerns, we find that an increase in environmental concerns causes lower initial day returns for brown firms. Later, we examine the post-IPO 3-month (6-month) holding period returns and find that brown firms earn higher returns than green firms when environmental concerns increase. Additionally, cross-sectional regressions indicate that firm-level characteristics, such as offer price and Hi-Tech, are positively associated, while R&D, leverage, and profitability are negatively associated with IPO.

This study examines the transformative potential of FinTech, particularly crowdfunding, in the context of traditional financial systems amidst the FinTech market downturn (‘Winter’) of 2022. We address a fundamental question: Does crowdfunding represent a viable alternative to conventional finance, or does it merely function as an extension of existing financial infrastructure? To investigate this relationship empirically, we developed a proprietary crowdfunding index and employed Interconnectedness Index methodology to compare the spillover effects of crowdfunding and traditional financial systems with common economic factors such as interest rates, USD index, economic uncertainty, cryptocurrency (Bitcoin), as well as commodities (gold and oil). Despite crowdfunding’s remarkable growth trajectory over the past decade, our empirical evidence indicates that it has not yet emerged as a viable substitute for conventional financial mechanisms. These findings carry substantial implications for regulatory frameworks, industry stakeholders, and academic discourse, contributing to the broader understanding of FinTech’s disruptive capacity within the financial ecosystem.

Using data from the Qingsike Private Equity Database, in this paper, we systematically examine how government policy-guiding funds impacted regional economic development in China from 2010 to 2021. An empirical analysis confirms that government-guided funds have a significant positive effect on regional economic growth, particularly in less affluent areas. Additionally, we found that the level of venture capital marketization and industrial structural upgrading mediate the relationship between policy-guiding funds and regional economic growth. These findings suggest that government policy-guiding funds foster regional economic advancement by enhancing market dynamism in the venture capital sector and optimizing industrial structures. A further analysis of moderating effects reveals that the effectiveness of policy-guiding funds is significantly influenced by government intervention and reginal marketization levels. In highly marketized regions, government-guided funds demonstrate a stronger economic stimulus effect. However, excessive government intervention can disrupt efficient market operations, thereby weakening the positive impact of the funds. These findings underscore the importance for policymakers to design and implement policy-guiding funds while carefully balancing the interplay between marketization and government intervention to achieve optimal outcomes.

Environmental, social and governance (ESG) ratings (scores) provide quantitative measures for socially responsible investment. We consider ESG scores to be a third independent variable—on par with financial risk and return—and incorporate such numeric scores into dynamic asset pricing. Based on this incorporation, we develop the entire investment process for the ESG market: portfolio optimization and efficient frontier, capital market line (the market portfolio), risk-assessment measures and hedging instruments (options). There is currently no riskless asset available in such an ESG market; to address this, we develop the so-called shadow riskless rate, applicable to markets having only risky assets. We believe this to be the first paper that fully develops, under a single dynamic pricing framework, the entire investment process for an ESG market. As there are significant differences in methodologies developed by providers of ESG scores, we do not take the position that data from any single agency are to be favored. Consequently, we utilize ESG scores from Refinitiv in the manuscript’s empirical studies and redo all computations using S&P Global RobeoSAM ESG scores.

This study analyzes the relationship between financial education, financial attitude, financial advice, financial knowledge, and behavior and its influence on financial capabilities, as well as their impact on financial well-being. The population consists of individuals over 18 years of age, who are primarily higher education students. A non-probabilistic self-selection sampling method was used, and data were collected through an electronic form on Google Forms. The design is quantitative, non-experimental, and cross-sectional. The instrument includes sections on sociodemographic profiles, financial education, financial attitudes, financial advice, financial knowledge and behavior, financial capabilities, and financial well-being using a 1 to 5 Likert scale. To ensure validity and reliability, statistical indices such as Cronbach’s alpha and McDonald’s omega were applied. Data normality was assessed, and exploratory and confirmatory factor analyses were conducted using structural equation modeling (SEM). The findings from the results of this study largely align with the existing literature regarding the relationship between financial knowledge and financial capabilities, as well as between financial capabilities and financial well-being. However, a discrepancy is observed in the hypotheses related to financial education, financial attitudes, and financial counseling, suggesting that although these factors are important, their influence may depend on other contextual elements or mediators not considered in this study. This opens the possibility for further investigation into how these factors interact in the development of financial capabilities.

The swift expansion of financial technology (FinTech) can substantially improve financial inclusion, especially in the rural regions of emerging nations such as India. FinTech has the potential to drive inclusive growth, reduce inequalities, and foster sustainable economic development. This research examines the determinants affecting the adoption of FinTech services in rural India by synthesizing three theoretical frameworks: The Technology Acceptance Model (TAM), the Theory of Planned Behavior (TPB), and the Technology Readiness Index (TRI). A mixed methods approach that combines partial least squares structured equation modeling (PLS-SEM) and fuzzy set comparative qualitative analysis (fsQCA) was used to evaluate the suggested framework. The integrated PLS-SEM and fsQCA offer a comprehensive, elegant, and resilient method for data analysis. While fsQCA addresses more intricate patterns within the data, PLS-SEM effectively identifies the relationships among significant factors. This makes the mixed method approach more judicious and advantageous than the single method approach. The findings showed that attitude (β = 0.35), perceived behavioral control (β = 0.28) from the Theory of Planned Behavior (TPB), perceived ease of use (β = 0.31) from the Technology Acceptance Model (TAM), and perceived insecurity (β = −0.19) from the Technology Readiness Index (TRI) all have a big impact on how people use FinTech. The findings also indicate that the desire to adopt FinTech positively influences financial inclusion among rural residents. These research findings enhance the debate on sustainable development by demonstrating how specific FinTech interventions can close the financial inclusion gap, empower rural populations, and achieve various Sustainable Development Goals (SDGs). The study’s findings could help governments, banks, and FinTech firms aiming to enhance the accessibility and use of digital financial services in rural India.

This study focused on exploring the influence of infrastructural development on foreign direct investment (FDI) in BRICS countries, including Brazil, Russia, India, China, and South Africa, using a fixed-effects approach. Secondary data ranged from 1991 to 2021. Existing theoretical and empirical literature on the subject (the infrastructural development-led FDI nexus) is quite mixed, which therefore makes it difficult for policy makers to make decisions. Internet penetration and fixed telephone subscriptions had a significant enhancing effect on FDI, whilst renewable energy infrastructure’s effect was found to be minimal and non-significant. In the fixed-effects model, the interaction term produced results showing that financial development enabled infrastructural development and significantly enhanced FDI inflows into BRICS countries. To improve FDI inflows, BRICS nations should implement policies with the aim of enhancing Internet penetration, fixed telephone subscriptions, and financial development. A threshold analysis of the infrastructural development levels that significantly improve FDI inflows is recommended to provide more clarity and specificity for policy making.

This study examines the association between self-employment, otherwise known as entrepreneurship, and student loan debt. Based on data from the 2021 National Financial Capability Study, which were analyzed using a multinomial probit model, our results suggest that households that used student loans to finance the education of one household member are more likely to report that the other member of the household pursued self-employment, with everything else remaining equal. This association between student loans and household self-employment is both economically and statistically significant. Our results highlight the importance of alternative forms of financing for entrepreneurship and expand upon existing knowledge about the unintended effects of student loans. Policymakers should consider these results when analyzing the various intended and unintended benefits of policies affecting the availability of student loans.

This paper investigates whether the external audit quality has an impact on the link between ESG performance and firm valuation using a sample of publicly listed Nordic firms. The results from a fixed-effect panel regression show that higher ESG scores lead to higher valuation when a Big Four audit firm is engaged as the external auditor, highlighting the impact of audit quality on the the reliability of the ESG evaluation. The finding highlights the importance of intense external audits in reinforcing investors’ confidence in ESG–firm valuation assessment.

This study investigates the impact of digital transformation on modern accounting practices among Jordanian SMEs, focusing on the moderating role of organizational culture. Digital transformation using AI, blockchain, and cloud computing improves operational efficiency, real-time financial reporting, and decision making. However, the integration of these technologies poses challenges such as skill gaps, cost constraints, and cultural resistance. A quantitative survey of 480 employees in managerial roles from Jordanian SMEs shows that organizational culture plays a dual role as a driver and moderator of digital transformation. The findings confirm the role of digital transformation in reshaping modern accounting practices. Also, this study shows that to get the most out of digital transformation in accounting, a culture of innovation and continuous learning is required.

This study examines the effects of implementing sustainable strategies in operations on the abnormal stock returns of companies listed on the Vietnamese stock market under uncertain conditions, using an event study and difference-in-differences analysis. Daily trading data were obtained from 107 companies listed on the Vietnamese stock market from 2 January 2020 to 31 March 2020 (~6313 observations included in the sampling). Of these, 41/107 (38.3%) and 66/107 (61.7%) did and did not implement sustainability strategies in their operations, respectively. The feasible generalized least-squares regression model indicated a positive impact of the implementation of sustainable strategies in operations on abnormal stock returns of the companies during the COVID-19 pandemic (p < 0.01 in the context of the COVID-19 pandemic). The results underline the implementation of sustainability strategies in the operations of companies as a critical tool to mitigate damage under uncertain conditions, enhance resilience, and achieve long-term competitive advantages.

Despite the fact that a decade has elapsed since the establishment of the Eurasian Economic Union (EAEU), the impact of the EAEU on the economic development of its member states remains a subject of ongoing debate. This article examines the mutual trade in services between the Eurasian Economic Union (EAEU) countries, with the aim of assessing the impact of membership on it. The difference-in-difference model has been applied for impact assessment. The model utilizes data from five EAEU member countries—Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia—capturing periods both before and after their EAEU membership, spanning 17 years in total. The results show that membership in the EAEU has significantly affected the exports of services from Russia and Belarus and has a less significant impact on the exports of services from Kazakhstan to the EAEU. At the same time, it has no significant effect on the exports of services from Kyrgyzstan and Armenia to other EAEU countries. In order to ascertain the challenges that exist, expert surveys among service exporters from Armenia have been conducted. Representatives of companies exporting various services to the EAEU have been selected as experts. The survey results indicate the presence of various barriers, including legal, logistical (for cargo transportation companies), and cultural challenges. These barriers encompass licensing difficulties, technical obstacles related to VAT refunds, a ban on cash payments, and difficulties with financial transfers due to sanctions against Russia. The findings of this research are of practical importance and can serve as a guideline for policymakers in the EAEU.

This paper investigates the valuation of international acquisitions of multinational corporations (MNCs) using real options theory, focusing on L'Oréal's acquisition of Aesop. It explores how MNCs create growth and deferral options simultaneously in M&A deals, enhancing market value and promoting sustainable practices. The study addresses two key questions: the role of MNCs in advancing sustainability and the measurement of market value added through parallel compound options. Using L'Oréal's acquisition of Aesop as a case study, the paper demonstrates the strategic benefits of combining growth and deferral options. Examples include L'Oréal's expansion into new markets like China, leveraging Aesop's sustainable practices, and achieving competence-based collaborative synergies. The findings provide a framework for assessing collaborative synergies in international transactions, contributing to the literature on strategic management, international business, and financial management. In conclusion, the paper highlights the importance of strategic flexibility and sustainability in MNC acquisitions, offering valuable insights for future research and practical applications in international business.

Disparities in financial literacy between males and females pose significant challenges in the developing world, particularly in terms of banking sector participation and economic engagement. Women, in particular, face greater difficulties in managing personal and household income due to lower financial literacy levels compared to men. This research aims to analyze the causes, effects, and potential measures to address these disparities, situating the discussion within socio-cultural, educational, and economic contexts. A systematic review and bibliometric analysis were conducted to examine relevant studies, with Open Alex serving as the primary database. The search was conducted from 2010 to 2024. Initially, 1620 papers were identified and through stringent inclusion criteria following PRISMA guidelines, 193 studies were selected for the final review. The study employed bibliometric techniques such as co-authorship, keywords analysis, and citation analysis to identify key topics, contributors, and research gaps in the literature. The findings reveal that socio-cultural practices, a lack of resources, and low income levels significantly contribute to women’s financial illiteracy. Furthermore, the research underscores the increasing recognition of the importance of adopting a gender-sensitive approach to financial literacy. These disparities limit women’s decision-making power and exacerbate socio-economic imbalances in developing countries. This study offers valuable implications for policy and practice, advocating for targeted interventions to enhance women’s financial literacy and economic participation. The results emphasize the need for differentiated strategies and provide a foundation for future research focused on closing the gender gap in financial competence and economic empowerment.

Because of the theoretical challenges posed by the Efficient Market Hypothesis with respect to technical analysis, the effectiveness of technical indicators in high-frequency trading remains inadequately explored, particularly at the minute-level frequency, where the effects of the microstructure of the market dominate. This study evaluates the integration of traditional technical indicators with Random Forest regression models using minute-level SPY data, analyzing 13 distinct model configurations. Our empirical results reveal a stark contrast between in-sample and out-of-sample performance, with R2 values deteriorating from 0.749–0.812 during training to negative values in testing. A feature importance analysis demonstrates that primary price-based features dominate the predictions made by the model, accounting for over 60% of the importance, while established technical indicators, such as RSI and Bollinger Bands, account for only 14–15%. Although the indicator-enhanced models achieved superior risk-adjusted metrics, with Rachev ratios between 0.919 and 0.961, they consistently underperformed a simple buy-and-hold strategy, generating returns ranging from −2.4% to −3.9%. These findings challenge conventional assumptions about the usefulness of technical indicators in algorithmic trading, suggesting that in high-frequency contexts, they may be more relevant to risk management rather than to predicting returns. For practitioners and researchers, our findings indicate that successful high-frequency trading strategies should focus on adaptive feature selection and regime-specific modeling rather than relying on traditional technical indicators, as well as indicating the critical importance of robust out-of-sample testing in the development of a model.

The issue of key determinants affecting the financial performance of advertising and marketing companies in Central and Eastern Europe remains understudied, despite the industry's rapid growth and regional specifics. This study investigates financial performance determinants of advertising and marketing companies in four CEE countries (the Czech Republic, Poland, the Slovak Republic, and Ukraine) during 2021-2023, employing the least absolute deviations method. The study examines three financial performance measures (Return on Assets, Return on Equity, and Operating Profit Margin) using three independent variables (Current Ratio, Debt to Equity, and Total Asset Turnover) and control variables such as Company Size, Leverage, and Company Type. The results show that Total Asset Turnover consistently has a significant positive impact on ROA and ROE across all studied countries. The study also identified significant regional variations in liquidity and capital structure impacts, particularly in the Polish market, and uncovered distinct patterns in how financial leverage affects various performance metrics across the studied countries. Specifically, while leverage shows a predominantly negative relationship with ROE in most countries, it positively influences OPM for Polish, Slovak, and Ukrainian companies, suggesting that the role of financial leverage in company performance is highly context-dependent. The novelty of the study lies in a comprehensive investigation of specific determinants of financial performance in the CEE advertising and marketing sector, revealing the crucial role of efficient asset and equity management in the region.

This study aims to investigate how innovation development drives green finance in the Visegrad countries by analyzing the role of R&D investments, high-tech trade, and patent activity in attracting greenfield investments. Using a vector autoregression (VAR) model with data from 2007 to 2022, this study employs forecasting techniques, impulse response functions, and variance decomposition analyses to assess the dynamic relationship between innovation and green financial flows. The findings reveal that R&D expenditures are the strongest driver of green investments, explaining over 93% of the variance in Poland and Hungary. High-tech trade significantly influences investment trends, contributing up to 84% of the variance in the Czech Republic, while patent applications initially boost greenfield investments but show diminishing returns over time. Although innovation-driven investments remain stable overall, the impact of trade and patents varies across countries, reflecting regional differences. This study identifies key challenges, such as commercialization gaps and policy disparities, highlighting the need for targeted financial and innovation policies. To sustain green finance growth, policymakers should expand R&D funding, strengthen trade infrastructure, and enhance intellectual property commercialization. Additionally, financial institutions and investors should play a more active role in developing green investment markets to support long-term economic resilience and sustainability.

An efficient legal system facilitates the enforcement of guarantees, enables the recovery of non-performing loans and increases trust between creditors and borrowers. This study examines the effect of the legal environment and the profitability of the Angolan banking sector. Specifically, it analyses the influence of property rights and the rule of law on bank profitability in Angola. The study employs various econometric methods for analyzing panel data, such as Feasible Generalized Least Squares (FGLS), and instrumental variables models such as Two-Stage Least Squares (IV-2SLS), Generalized Method of Moments (IV-GMM) and Quantile Regression (MQREG). The study concludes that improving the legal environment by strengthening property rights and promoting the rule of law favours the profitability of Angolan banks. In terms of practical implications, this study shows that the legal environment in Angola is an important barrier to the promotion of credit in Angola, and, above all, to improving the profitability of banks. This study contributes to the scarce literature highlighting the relationship between the legal system and the Angolan banking sector, a topic that has been little explored in the context of African countries. Furthermore, the study awakens the dormant debate on the legal system and finance.

The reversal of the trend towards the decline in income inequality in the last four decades in most countries has created favorable grounds for the rise of nationalist and anti-globalization sentiments. Economic failures of countries, groups of people and individuals are among important factors that cause nationalism. The rise of nationalism in many countries in recent decades, as measured by the decline in the “pride in your own country” indicator from the World Values Survey, is statistically significantly related to the change in income inequality (Gini coefficient) within the country. When globalization is properly managed, it is good for growth and income distribution and does not lead to nationalism. But if it is accompanied by the decline in real incomes for large masses of people, nationalist political forces have additional arguments for instigating anti-globalization and isolationist sentiments. The rise in income inequality within major countries since the 1980s poses a threat not only to social stability, but also to globalization.

This study explores the impact of audit quality and the proportion of women on an audit committee on earnings management. Moreover, we examined how age diversity and the presence of non-foreign women on audit committees influence earnings management. Our study utilizes data from 165 UK-based listed companies between 2011 and 2021. A combination of static and dynamic analysis was used to empirically reveal our results. The results show a negative and significant relationship between audit quality and earnings management, as per the Kothari model. The presence of a female audit committee does not affect earnings management. However, when we control for demographic variables like age and nationality, we found that non-foreign female members of the audit committee reduced earnings management, while age diversity among female members had no effect. Additional analysis using the Dechow model revealed that both the presence of a female audit committee and their nationality affected earnings management. Our findings contribute to ongoing discussions on corporate governance by providing evidence that female audit committees and audit quality influence earnings management in UK-listed companies. This study is one of the few that examines demographic attributes (e.g., nationality or age).

Homebuilder ETFs provide investors with a diversified portfolio of residential construction and sales companies which reduces risks associated with individual stock selection in the sector. This study examines the net monthly returns of homebuilder exchange-traded funds (ETFs) through various performance evaluation models and market situations. The results reveal that these ETFs outperformed benchmark indices in absolute returns. Despite homebuilding being part of the real estate sector, the correlation between monthly returns of homebuilder ETFs and the Dow Jones US Real Estate Index, though positive, is not very high. The performance of ETFs varied across market conditions, demonstrating both outperformance and underperformance compared to U.S. stocks. During the COVID-19 pandemic, homebuilder ETFs displayed a decline, trailing behind U.S. equities in both absolute returns and risk-adjusted performance. This result emphasizes their vulnerability during economic crises. Utilizing a modified version of the Carhart factor model, significant exposure of real estate ETFs to the stock market was observed. Moreover, an assessment of ETF portfolio managers’ skills indicated proficiency in security selection but limited capabilities in market timing. Homebuilder ETFs pose higher downside risks than other indices, evident in their elevated Value at Risk (VaR) and Conditional Value at Risk (CVaR) values.

The COVID-19 pandemic had a significant impact on the economy and the stability of financial markets, creating challenges and financial risks for companies. This study analyzes the financial reports of companies listed on Euronext Lisbon with the aim of examining financial risk disclosures and calculating their determinants. For this purpose, data was collected from the Euronext Lisbon website as well as the companies’ own websites. Once the data were gathered, 16 companies were analyzed over a five-year period, from 2018 to 2022. Using panel data regression techniques (e.g., fixed effects regression models), it was observed that profitability, capital structure, and size have a positive but not statistically significant relationship with interest risk. Conversely, size and capital structure they have a positive and significant relationship with liquidity risk. Profitability has a positive and significant relationship with insolvency risk. Macroeconomic variables do not exhibit consistent signs across all models. This research provides insights into how the determinants of financial risks influence risks during a pandemic period.

This study aimed to identify the impact of audit committee characteristics on voluntary risk disclosure and to discover the moderating effect of family ownership on the relationship between audit committee characteristics and voluntary risk disclosure. Its population is represented by Jordanian commercial banks registered and operating in Jordan from 2017 to 2023. Significantly, it concluded by revealing that the characteristics of the audit committee, namely, independence, experience, and committee size, obviously impact the disclosure of voluntary risk in the selected banks. However, the results made it obvious that the number of audit committee meetings did not affect the degree of voluntary risk disclosure. In addition, the results reveal that family ownership moderately affects the relationship between some audit committee characteristics and voluntary risk disclosure.

This study investigates weekend price gaps in three major stock market indices—the Dow Jones Industrial Average (DJIA), NASDAQ, and Germany’s DAX—from 2013 to 2023, using high-frequency (5 min) data to explore whether gap movements arise from random volatility or reflect systematic market tendencies. We examine 205 weekend gaps in the DJIA, 270 in NASDAQ, and 406 in the DAX. Two principal hypotheses guide our inquiry as follows: (i) whether price movements into the gap are primarily driven by increased volatility and (ii) whether larger gaps are associated with heightened volatility. Employing Chi-square tests for the independence and linear regression analyses, our results show no strong, universal bias towards closing gaps at shorter distances across all three indices. However, at medium-to-large distances, significant directional patterns emerge, particularly in the DAX. This outcome challenges the assumption that weekend gaps necessarily “fill” soon after they open. Moreover, larger gap sizes correlate with elevated volatility in both the DJIA and NASDAQ, underscoring that gaps can serve as leading indicators of near-term price fluctuations. These findings suggest that gap-based anomalies vary by market structure and geography, raising critical questions about the universality of efficient market principles and offering practical insights for risk management and gap-oriented trading strategies.