Determinants of financial crises—An early warning system based on panel logit regression

Jemović, Mirjana; Marinković, Srđan

doi:10.1002/ijfe.1779

Cited by 14 publications

(13 citation statements)

References 55 publications

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“…Our findings illustrate how the United States, United Kingdom and Euro area provides a clear example of the impact of the speed regulatory adaptation problem (Jemovi c & Marinkovi c, 2021;Kane, 1977Kane, , 1983 on determining the direction of the VUC. However, it can potentially be distortive, as in the case of Euro area.…”

Section: Further Discussion Of the Resultsmentioning

confidence: 63%

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Unveiling the black swan of the finance‐growth Nexus: Assumptions and preliminary evidence of virtuous and unvirtuous cycles

2022

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Empirical evidence behind the nature of the finance‐growth nexus and mediating drivers behind this association is well documented in the literature. However, a framework that depicts the association between credit creation, financial innovation and endogenous creation of boom‐bust cycles is less evident and the gap between empirical research and theoretical development remains. Hence, this study represents a first attempt to provide a framework that could explain the switch of economic cycles from virtuous to unvirtuous and vice versa. We examine the role of financial innovation and identify its “hidden soul” defined as the rate of financial innovation (RoFIN). We study RoFIN together with other structural factors, such as monopolistic financial power concentration and financial deregulation in the creation of what we identify as the wealth trap, as a potential mediating factor behind the creation of virtuous and unvirtuous cycles. A cross‐country statistical exercise using the VUC indicator on the United States, United Kingdom, and Euro area economies shows the exponential effect of the rate of financial innovation over time and provides indicative evidence in support of our framework. Finally, we report that the indicator is better able to identify the unvirtuous cycle stages than the traditionally used Credit‐to‐GDP ratio.

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Section: Further Discussion Of the Resultsmentioning

confidence: 63%

“…How long a financial crisis lasts depends on the authorities' ability to react to specific crisis manifestations (Jemovi c & Marinkovi c, 2021). This highlights the importance for decision-makers to keep pace with increasing environmental and structural changes.…”

Section: Financial Market/political Power Concentrationmentioning

confidence: 99%

Unveiling the black swan of the finance‐growth Nexus: Assumptions and preliminary evidence of virtuous and unvirtuous cycles

2022

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“…Using multiple discriminant analyses, researchers have been able to anticipate and prevent some financial problems (Skomp et al, 1986). At present, integrating behavior aspects into the prediction of the financial crisis has attracted more and more attention; most of this research has been conducted with logit regression models (Jemović & Marinković, 2021;Demyanyka & Hasanb, 2010;Vermeulen et al, 2015). All the above-reviewed studies support the hypothesis that the real estate market behavior and the trust crisis in the financial sector are connected.…”

Section: Literature Reviewmentioning

confidence: 99%

Does the real estate market behavior predict the trust crisis in the financial sector? The case of the ECB and the Euro

Brychko

Vasilyeva

Rowland

et al. 2021

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Research background: Based on the history of financial crises, real estate market behavior could be thought of as a key benchmark of trust shifts in the financial sector of the economy. Plunging real estate asset prices accompanied by the financial "bubbles" explosion could be viewed as the harbinger ? even the cause ? of the public trust crash in the financial sector. Purpose of the article: This study intends to assess the extent to which the real estate market behavior determinants, along with financial sector consumers' feelings, are able to predict trust crises in the financial sector, namely to its primary institutions ? European Central Bank and the Euro. Methods: In order to estimate the probability of a trust crisis in the financial sector, two logistic regression logit models were developed based on two types of dependent variables as they reflect trust violations in the financial system primary institutions ? net trust in European Central Bank (Model I) and net support for the Euro (Model II). The research was conducted on quarterly panel data of the EU countries from the euro area covering the period from 2000 to 2019. Logit regressions employed for data processing and analysis were performed in the computational system STATISTICA. Findings & value added: The logit-modeling results show that determinants of irrational real estate buyers' behavior are powerless in predicting the escalation of the trust crisis in the Euro. However, binary models of real estate market behavior could be successfully used to predict the probability of the trust crisis in the European Central Bank. The results show that real house price indices, price to income ratio, price to rent ratio, and rent prices accompanied by the financial sector consumers' feelings are statistically significant, providing the best distribution between the normal times and periods of trust crisis in the European Central Bank. Irrational real estate market behavior may indicate serious problems in the trust violations in the European Central Bank, and it should be a signal for policymakers to take actions towards more efficient financial and real estate market regulation following the behavioral approach.

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“…A notable managerial practice shows that making accurate warnings and preventing corporate financial crisis is an important part of corporate management, and it is the prerequisite for the management to adjust managerial strategies, investment decisions, and financial policies, and to protect the interests of investors and creditors (Broz and Ridzak, 2017 ). The ultimate value of the financial warning system is in the timeliness and effectiveness of the warning information to let the decision-makers and managers take corresponding timely countermeasures (Jemović and Marinković, 2021 ). High-level financial warning capability cannot be bought and sold through market transactions like other production factors, that is, they are non-tradable (Samitas et al, 2020 ), and it is easy to build high-quality continuous barriers to competition.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Financial Crisis in Management Stress: From the Perspective of Crisis Anxiety of Others

Liu

Zhu

et al. 2022

Front. Psychol.

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The crisis anxiety of others is a phenomenon that goes hand in hand with the spread of the occupational health pandemic. It is becoming increasingly important to better understand its emergence process, especially in the era of greater uncertainty. This study aims to examine the impact of the external financial crisis on managerial stress among financial employees. The sample consists of 347 senior managers and financial employees from companies in China. The empirical analysis shows that external financial crises have significant effects on anxiety levels, especially external corporate crisis, debt crisis and growth crisis both have mediating effect on the relationship between anxiety level and pressure management and the relationship between external financial crisis and pressure management. This study explores the rules for the emergence of anxiety among corporate managers and expands the scope of environmental factors that need to be discussed in the study of corporate financial management. This study provides theoretical implications for the psychological study of Financial Management and practical implications for corporate financial management.

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Determinants of financial crises—An early warning system based on panel logit regression

Cited by 14 publications

References 55 publications

Unveiling the black swan of the finance‐growth Nexus: Assumptions and preliminary evidence of virtuous and unvirtuous cycles

Unveiling the black swan of the finance‐growth Nexus: Assumptions and preliminary evidence of virtuous and unvirtuous cycles

Does the real estate market behavior predict the trust crisis in the financial sector? The case of the ECB and the Euro

Financial Crisis in Management Stress: From the Perspective of Crisis Anxiety of Others

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