New Issue of Risk Governance and Control: Financial Markets & Institutions Journal

The recent (Volume 9, issue 3) issue of Risk Governance and Control: Financial Markets & Institutions journal deals with the topics of firm performance, audit and audit standards, risk reporting, risk disclosure, firm returns, etc. The full issue of the journal is available following the link.

Lin Lingnan investigates correlation between gender and credit risk, using the data of the largest peer-to-peer lending platform RenRenDai spanning from March 2016 to September 2016. In order to avoid the endogeneity problem, this paper first uses the instrumental variable method to conduct a baseline Probit model estimate connecting gender difference to the default rate with several borrowers’ individual characteristics under control. Then the original Probit model and a propensity score matching method aiming to eliminate the effects of divergent observable characteristics are applied to test the robustness of the outcome. Both the baseline estimation and the robustness test show that there is no significant gender effect on the probability of default, ceteris paribus. Therefore, borrowers’ gender is not a good screening device for the P2P lending platform to control the credit risk; other factors should be taken into account to reduce the non-performing loan rate.

Khan Kamran, Houda Chakir Lamrani and Shah Khalid study dividends, distributed among the shareholders. When there is more profit, it increases the dividends which, in turn, increase the stock price of the firm and vice versa, when there is less profit it decreases the dividend payment and the stock price. In Pakistan the companies have no standard policy, therefore, they are open to decide about the dividend payment. The main objectives of the research are aimed at analyzing and investigating factors which affect firm performance such as dividend policy, capital structure short and long term, firm size and firm growth. In this research, the effect of dividend payment policy on the firm’s future performance of the Karachi stock exchange (KSE) listed companies (specifically cement sector) is analyzed.

Khalil Feghali and Joe Hallak analyze the international standards for internal audit (IIA) created by the Internal Audit Institute in the United States are presently one of the most important bases for the practice of the internal audit profession. In this research, we assess the use of these principles in international groups through empirical studies, adopting an objective evaluation of the application of the standards. This multivariate statistical study was conducted in 2017 on more than 22 countries covering Africa, Middle East and Europe. Data was collected through a validated questionnaire covering two topics: general company information, and international internal audit standards applicability and relevance. Statistical analysis was performed using SPSS-22 software (IBM, New York, USA).

Dmitriy Riabichenko, Martin Oehmichen, Yaroslav Mozghovyi and Andreas Horsch analyzes the relationship between ownership structure and risk profile based on the data from the emerging banking market. Using Kohonen self-organizing maps,they divide banks into clusters according to the type of risk profile. This mapping technique is based on panel data dimensionality reduction, as risk profile is changeable over time.

Ahmed S. Alanazi, Saad A. Alhoqail examine the relationship between corporate governance and firms’ performance (stock returns) in the emerging market. The paper fills the need for empirical evidence on governance issues in the scarce emerging markets compared to the developed world. Exploiting a unique dataset on the corporate governance index for the largest 90 companies listed on the Saudi stock market, we construct two portfolios. The research compares the performance of good governed companies and poorly governed firms. We find that good governed portfolio outperforms the poor one. Nevertheless, regression results do not show any association between corporate governance score and performance. We interpret this as weak evidence for the link between corporate governance and firms’ performance.

Zornitsa Todorova identifies, visualizes and analyzes a correlation network of residual stock returns for more than 5,000 US-based publicly traded firms (using methods from graph theory and network analysis). Building on prior work by Billio et al. (2012), the paper computes a systemic measure of network centrality using principal components analysis. Two main questions are addressed: 1) What is the empirical relationship between expected stock returns and network centrality? and 2) Does network centrality have predictive power to identify firms, which are most at risk during systemic events? First, the paper finds that network centrality has substantial predictive power in out-of-sample tests related to the recent financial crisis. Second, firms that are more central in the network earn higher returns than firms that are located in the periphery.

The Journal of Risk Governance and Control: Financial Markets & Institutions is published quarterly. Currently, we announce a call for papers for the last issue of the journal in 2019. In order to submit a manuscript, please contact the managing editor of the journal Polina Bahmetenko directly at