Risk dimensions, risk clusters, and foreign direct investments in developing countries

Okafor, Luke Emeka; Hassan, M. Kabir; Rashid, Mamunur; Prabu, Darniya; Sabit, Ahmed

doi:10.1016/j.iref.2022.07.013

Cited by 12 publications

(1 citation statement)

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“…These safety nets can take different forms in an institutional setting. For example, alongside positive asset and profit growth [ 11 ], a firm may take more risk if the economic condition—say, in terms of the growth of gross domestic products—is good [ 12 ]. Banks might be less reluctant to proactively identify and manage risk in the presence of a strong derivative market [ 13 ].…”

Section: Introductionmentioning

confidence: 99%

Cushion hypothesis and credit risk: Islamic versus conventional banks from the MENA region

Abdeljawad,

Rashid,

Abu Alia

et al. 2024

PLoS ONE

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Conventional banks are ‘indirectly’ allowed to take more risk under the shadow of sovereign guarantees. Banks commit moral hazards as any major banking crisis will be ‘cushioned’ by deposit insurance and bailed out using the taxpayer’s money. This study offers an alternative explanation for the determinants of banks’ credit risk, particularly those from the Islamic regions. Although conventional banks and Islamic banks may share state and social cushioning systems, Islamic banks are strictly prohibited by moral and religious principles from gambling with depositors’ funds, even if there is a cushion available to bail them out. However, banks belonging to collective societies, such as those in the MENA area, may be inclined to take more risks due to the perception of having a larger safety net to protect them in the event of failure. We analyse these theoretical intersections by utilising a dataset consisting of 320 banks from 20 countries, covering the time span from 2006 to 2021. Our analysis employs a combination of Ordinary Least Squares (OLS), Fixed Effects (FE), and 2-step System-GMM methodologies. Our analysis reveals that Islamic banks are less exposed to credit risk compared to conventional banks. We contend that the stricter ethical and moral ground and multi-layer monitoring system amid protracted geopolitical and post-pandemic crises impacting Islamic countries contribute to the lower credit risk. We examine the consequences for credit and liquidity management in Islamic banks and the risk management strategies employed by Islamic banks, which can serve as a valuable reference for other banks.

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Section: Introductionmentioning

confidence: 99%

Cushion hypothesis and credit risk: Islamic versus conventional banks from the MENA region

Abdeljawad,

Rashid,

Abu Alia

et al. 2024

PLoS ONE

Self Cite

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Does firm‐level exposure to climate change influence inward foreign direct investment? Revealing the moderating role of ESG performance

Qing,

Dagestani,

Nam

et al. 2024

Corp Soc Responsibility Env

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The impact of climate change on foreign direct investment (FDI) at the corporate level is insufficiently explored, despite extensive discussions on environmental protection. This research utilizes novel panel data (2009–2022) on Chinese A‐share listed firms, using a two‐way fixed‐effect estimator to probe whether and how a firm's exposure to climate change influences the inflow of FDI, while considering the moderating role of environmental, social, and governance (ESG). The results show: (i) firm‐level exposure to climate change harms inward FDI inflow; (ii) host country firms can mitigate the negative effect of exposure to climate change on inward FDI inflow by strengthening their ESG performance; (iii) exposure to climate change primarily impacts FDI inflow through environmental taxes and green investments; (iv) the detrimental effect of climate change risk on incoming FDI is more pronounced in the central and eastern region of China, and among non‐state‐owned firms. These findings provide insightful theoretical and practical implications for addressing SDG 13 (Climate Action) challenges and for attracting multinational investments in developing countries like China.

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Is Interest Rate an Effective Instrument for Controlling Inflation and Its Effect on Investment Activities in Developing Countries?

Hasran,

Saputra,

Haque

2023

Corporate Management Ecosystem in Emerging Economies

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Risk dimensions, risk clusters, and foreign direct investments in developing countries

Cited by 12 publications

References 50 publications

Cushion hypothesis and credit risk: Islamic versus conventional banks from the MENA region

Cushion hypothesis and credit risk: Islamic versus conventional banks from the MENA region

Does firm‐level exposure to climate change influence inward foreign direct investment? Revealing the moderating role of ESG performance

Is Interest Rate an Effective Instrument for Controlling Inflation and Its Effect on Investment Activities in Developing Countries?

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