The Instability of the Banking Sector and Macrodynamics: Theory and Empirics

Semmler, Willi; Mittnik, Stefan

doi:10.2139/ssrn.1871043

Cited by 5 publications

(1 citation statement)

References 53 publications

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“…According to Mittnik and Semmler (2011), the vulnerability of the banks and the downward instability essentially depend on the improper incentive system and lack of constraints imposed on financial intermediaries, which allow for unconstrained growth of capital assets through borrowing. On the other hand, generous payouts affect banks' risk-taking, equity formation, and leveraging.…”

Section: Literature Reviewmentioning

confidence: 99%

A Comprehensive Approach to Bankruptcy Risk Evaluation in the Financial Industry

Issa,

Bizel,

Jagannathan

et al. 2024

JRFM

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The study presents a comprehensive approach to examining the potential risk of bankruptcies in financial sector organizations. This investigation explores 20 financial sector entities and evaluates their fiscal history from 2000 to 2018. The developed model assesses the chance of these companies going bankrupt by analyzing indicators like liquidity, profitability, debt composition, and operational effectiveness. These metrics are contrasted to regulatory requirements and assessed as having low, moderate, or elevated risk repercussions, ultimately contributing to an overall threat rating. Additionally, the model has a unique algorithm that compensates for excessive debt levels, strengthening the reliability of the risk appraisal grade. This straightforward instrument illustrates the demand to incorporate a variety of financial health indicators. According to the findings, excessive amounts of debt have a detrimental influence on profitability, leading to decreased stock returns and a greater probability of bankruptcy. These findings have practical implications for investors and stakeholders, providing insightful information to help inform decision-making, especially during periods of economic unpredictability such as pandemics. Furthermore, they encourage the enhancement of financial market efficiency.

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Section: Literature Reviewmentioning

confidence: 99%