Journal articles: 'Insolvency risk'

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Vasiu, Diana Elena. "Could The Insolvency Risk for Companies Traded on Bucharest Stock Exchange have been Identified? A Case Study Using the Altman Model." Land Forces Academy Review 23, no. 4 (December 1, 2018): 306–12. http://dx.doi.org/10.2478/raft-2018-0038.

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Abstract Insolvency represents the state of the debtor’s patrimony characterized by insufficient funds available for the payment of certain, liquid and due debts. It may occur even in case of strong companies, for example, in case of listed companies, generating loses for investors. In economic theory, a series of insolvency risk prediction models were developed, based on the method of scores, the most known and used being the Altman model. At the present moment, five companies, traded at Bucharest Stock Exchange are insolvent. The aim of this paper is to establish if the Altman model can successfully be used for Romanian traded companies, to determine the risk of insolvency.

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Budko, Elena V. "Bankruptcy as a Way of Self-Defense of the Risk Subject." Siberian Journal of Philosophy 18, no. 1 (2020): 87–98. http://dx.doi.org/10.25205/2541-7517-2020-18-1-87-98.

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The phenomenon of insolvency (bankruptcy) is considered as a mode of existence of the subject of risk in the projection of his socio-economic behavior (fear, anxiety, loneliness) and features of personal constitution (evasion of responsibility, restriction of freedom, being in debt, deception). The article substantiates the fact that the institution of insolvency (bankruptcy) of citizens appears as a means of resolving the conflict of interests between the debtor and its creditors, as a mechanism for protecting the socio-economic rights of an insolvent risk subject and as a way to “exit” from an unstable financial crisis situation.

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Madaus, Stephan, and F. Javier Arias. "Emergency COVID-19 Legislation in the Area of Insolvency and Restructuring Law." European Company and Financial Law Review 17, no. 3-4 (September 14, 2020): 318–52. http://dx.doi.org/10.1515/ecfr-2020-0018.

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The appearance of the COVID-19 in Europe has prompted lawmakers to introduce public health measures that inevitably hurt the economy by reducing economic activity and business revenues. The foreseeable risk that the pandemic could be followed immediately by a bankruptcy epidemic led to the adoption of rules related to insolvency and restructuring laws in emergency legislation in most European countries. These rules aim at avoiding businesses to become insolvent either by suspending insolvency tests (see II.) or by providing cash support and debt moratoria (see III.). They may also contain measures that indirectly affect insolvency and restructuring proceedings (see IV.). This paper explains the logic behind emergency legislation and the specific rules adopted in European countries.

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Draguiev, Deyan. "The Effect of Insolvency on Pending International Arbitration: What Is and What Should Not Be." Journal of International Arbitration 32, Issue 5 (October 1, 2015): 511–42. http://dx.doi.org/10.54648/joia2015024.

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Situations in which the respondent in international arbitral proceedings is declared insolvent in its jurisdiction of incorporation while the arbitration is still pending are not uncommon. They raise a number of choice of law issues both in terms of substantive and procedural law. While the roots of arbitration lie in party autonomy, insolvency laws are often comprised of mandatory rules protecting the interests of different classes of stakeholders. This article attempts to devise an abstract model of the various choice of law and characterzation problems regarding the cross-border effect of the insolvency and provide reasoned options and solutions for the arbitral tribunal faced with the interaction between insolvency and pending arbitration proceedings. It is suggested that it is part of the arbitrators’ duty to render an enforceable award to consider cautiously the effects of insolvency, especially if there is a risk of a clash with the mandatory framework of insolvency either at the seat of the arbitration or the likely place of enforcement of the award. The arguments are tested against recent case law of various national courts having reviewed the conflicts between arbitration and insolvency.

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Stroie, Cristina, and Adriana Duţescu. "The Enterprise Risk Profile Model and Its Implementation in Reorganised Companies." Proceedings of the International Conference on Business Excellence 13, no. 1 (May 1, 2019): 241–53. http://dx.doi.org/10.2478/picbe-2019-0022.

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Abstract Globalization, as a response to the accelerated developments in recent decades, has shifted the world economy to a direction in which the adaptation to uncertainty conditions has been one of the most important manifestations of rational behavior. Human activity has always been subject to risks and uncertainty, and environmental pressure naturally generates selection and adaptation. The risk profile analysis in insolvency proceedings, as an indicator of managerial and financial health, represents a challenge to complement the gaps in the literature, given the limited studies in the field, compared to the bibliography in the field of risk management, for the companies in the economic circuit. This topic is of major importance for all business environments, having in view the disasters generated by economic crises on companies. In terms of judicial reorganization and insolvency proceedings, the situation in Romania proves to be different from the practices in the countries with tradition in this field and we are referring here to the USA, Germany and France. Comparative studies have indicated dysfunctions in the reorganization procedures in Romania, related to the lack of a coercive system to remove the insolvency debtors from the economic circuit, and the lack of models for analyzing the reorganization capacity of companies in insolvency proceedings. Regarding a possible reorganization of a company, creditors do not have approved analysis models in order to vote on reorganization plans and most of the time, at least as far as public creditors are concerned, their vote is negative and unfounded. The purpose of this research is to generate a model of internal risk analysis specific to the companies undergoing insolvency proceedings and of external risks related to the activity sector, a model able to predict the possibility of reorganizing a company undergoing insolvency proceedings. The main tool used is the interview, conducted on a sample of insolvency experts in Romania, with an average experience of approx. 10-20 years in insolvency and reorganization activities. Based on the analysis of the obtained results, we will refine and restructure a model, and then we will test it on a sample of companies undergoing insolvency proceedings.

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Coumas, Michael. "Taking Directors Seriously: A Silver Bullet for Triggering the Creditors’ Interest Duty—Part I." Business Law Review 42, Issue 3 (June 1, 2021): 121–27. http://dx.doi.org/10.54648/bula2021017.

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Directors of solvent companies owe a fiduciary duty to shareholders qua the company. If a company becomes technically insolvent, the duty switches to the company’s creditors. This is uncontroversial. However, the duty is also said to switch some point before, i.e., in the ‘vicinity of insolvency’. Therefore, directors must be able to make decisions which do not prejudice shareholders, in a way that is free from exposure to claims by creditors. This uncertainty stems from the case law, where the rules of company law have been confused with the policies underlying insolvency law. The two bodies should be considered separately despite their interrelationship in practice. Doing so reveals the proper and fair function of the duty. Its application should be limited to cases of actual insolvency only. While exceptions may be made for cases of irresponsible or negligent risk-taking, this should be the exception – not the rule. This essay is the first of two parts, and examines the emergence of the duty and possible justifications. company law, insolvency law, directors’ duties, fiduciary duties, agency costs

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Orellana-Osorio, Iván, Marco Reyes-Clavijo, Estefanía Cevallos-Rodríguez, Luis Tonon-Ordoñez, and Luis Pinos-Luzuriaga. "Insolvency analysis of the food manufacturing industry in Cuenca." UDA AKADEM, no. 5 (April 15, 2020): 8–36. http://dx.doi.org/10.33324/udaakadem.vi5.271.

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The risk of insolvency is related to failure or business closure, for this reason the analysis and management of this type of risk is important. The insolvency risk was applied to the food manufacturing industry in Cuenca in the period 2013-2017, which allowed to determine the bankruptcy risk existing in the companies analyzed, as well as trends of the indicator in relation to the business size. Two models were applied: the business insolvency prediction model of Altman and the logistic model using the maximum likelihood method proposed by Ohlson. Altman’s model showed that companies in the 5 years analyzed are in “Safe Zone” (3,187 points in 2013 and 3,448 in 2017). Similarly, the Ohlson model, showed that in 2013 there was a 20,7% risk of insolvency in the sector, compared to 17,7% in 2017. The results of the analysis indicate that insolvency risk shows a decreasing trend in the analyzed period, which take us to the conclusion that the sector is financially healthy. However, due to the current changing environment and the internal operative management, it is very likely that the values suffer changes. Analyzing the risk of insolvency is fundamental for companies, considering that it will allow them to know the level of bankruptcy risk they have, and based on this, take measures to reduce the risk. Key words: Altman model; food sector in Cuenca; insolvency risk; Ohlson model.

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Gennaro, Alessandro. "Insolvency Risk and Value Maximization: A Convergence between Financial Management and Risk Management." Risks 9, no. 6 (June 1, 2021): 105. http://dx.doi.org/10.3390/risks9060105.

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This conceptual paper focuses on the relationship between insolvency, capital structure, and value creation. The aim is twofold: to define risk-based capital measures able to absorb the effects of financial distress and avoid corporate default; and to verify conditions and limits of use of these measures in corporate financial policies. The capital measures based on insolvency risk will be defined by recalling the concepts of Cash Flow-at-Risk and Capital-at-Risk. A first check on the usefulness of these risk-based measures and their consistency with the principle of value maximization is carried out through a simulation model. The scenario analysis allows us to examine how financial and risk policies oriented by insolvency avoidance affect the firm value. According to evidence from the simulation model, these measures appear to be useful in lowering the default risk, but they require a continuous assessment of their impact on the firm value.

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Huang, Rachel J., Jeffrey T. Tsai, and Larry Y. Tzeng. "Government-provided annuities under insolvency risk." Insurance: Mathematics and Economics 43, no. 3 (December 2008): 377–85. http://dx.doi.org/10.1016/j.insmatheco.2007.10.002.

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10

Zabkowski, Tomasz S. "RFM approach for telecom insolvency modeling." Kybernetes 45, no. 5 (May 3, 2016): 815–27. http://dx.doi.org/10.1108/k-04-2015-0113.

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Purpose – The purpose of this paper is to present application of recency, frequency and monetary value (RFM) approach to predict customer insolvency using telecommunication data corresponding to RFM of late payments. The study tackles a serious problem that telecommunication companies often face and shows the ways to deal with it. Design/methodology/approach – Based on a real telecom customer data, RFM approach was tested against decision trees and logistic regression models. Proposed models were evaluated with lift measure, area under the receiver operating characteristic and the ability to detect significant amount of money owed by insolvent customers. Findings – The main findings from the research are twofold: RFM approach offers a viable alternative for customer insolvency classification. The proposed models perform well and all of them can capture significant amount of money owed by insolvent customers what is of high importance for the revenue assurance. Originality/value – In comparison to previous studies proposed research presents novelty in the following areas. First, it deals with RFM applied to insolvency data (previous studies dealt with direct marketing data). Second, with these three variables it is possible to act as an early warning system for predicting the risk level and probable anomalies as quickly as it is possible (data retrieval and computational time is reduced). Third, RFM approach was tested against decision trees and logistic regression and the quality of the models was also assessed three months after the estimation.

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11

Rachdi, Houssem, Mohamed Ali Trabelsi, and Naama Trad. "Banking Governance and Risk: The Case of Tunisian Conventional Banks." Review of Economic Perspectives 13, no. 4 (December 1, 2013): 195–206. http://dx.doi.org/10.2478/revecp-2013-0009.

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Abstract Banks are in the business of taking risks. The 3 pillars of Basel II capital accord highlight the crucial role of informative risk disclosures in enhancing market discipline. The specific role and responsibilities of the board of directors or supervisory boards in banking institutions continue, however, to fuel debate. Findings of the literature are often inconclusive. The main contribution of this study is examining how board characteristics affect risk in banking industry. We explore this relationship by using many econometric approaches. The empirical analysis based on a sample of 11 Tunisian conventional banks over the period 2001-2011 reports the following results when using GLS RE: small and dual functions boards are associated with more insolvency risk but have no significant effect on credit and global risks. The presence of independent directors within the board generates an increase in global risk but has no significant effect on insolvency and credit risks. A lower CEO ownership has no significant effect with all measures of risks. Finally, banking capitalization is associated with more insolvency risk, and small size banks assume lower credit risk. These findings are performed by using a GMM in system approach

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Tan, Yong, and John Anchor. "Does competition only impact on insolvency risk? New evidence from the Chinese banking industry." International Journal of Managerial Finance 13, no. 3 (June 5, 2017): 332–54. http://dx.doi.org/10.1108/ijmf-06-2016-0115.

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Purpose The purpose of this paper is to investigate the impact of competition on credit risk, liquidity risk, capital risk and insolvency risk in the Chinese banking industry during the period 2003-2013. Design/methodology/approach This study uses a generalized method of moments system estimator to examine the impact of competition on risk. In particular, translog specifications are used to measure the competition and insolvency risk. Findings The results show that greater competition within each bank ownership type (state-owned commercial banks, joint-stock commercial banks and city commercial banks) leads to higher credit risk, higher liquidity risk, higher capital risk, but lower insolvency risk. Originality/value This paper is the first piece of research testing the impact of competition on different types of risk in banking industry and it further contributes to the empirical literature by using a more accurate competition indicator (efficiency-adjusted Lerner index) and a more precise insolvency risk indicator (stability inefficiency).

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13

Huhtilainen, Matias. "The determinants of bank insolvency risk: evidence from Finland." Journal of Financial Regulation and Compliance 28, no. 2 (January 2, 2020): 315–35. http://dx.doi.org/10.1108/jfrc-02-2019-0021.

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Purpose This paper aims to contribute to the literature on the determinants of bank-specific insolvency risk. Design/methodology/approach By applying a dynamic two-step System GMM estimator on a novel, representative panel of 339 Finnish unlisted cooperative and savings banks over the period 2002-2018. Findings This study contributes to the literature on the determinants of bank-specific insolvency risk by applying a dynamic two-step System GMM estimator on a novel, representative panel of 339 Finnish unlisted cooperative and savings banks over the period 2002-2018. The key findings suggest that Finnish banks have become less fragile under the renewed EU banking regulation. In particular, the CRD IV has affected banks’ equity levels. This study also captures the detrimental effect of cost inefficiency as well as a positive relationship between the income diversification and insolvency risk. A negative relationship between the GDP growth rate and the insolvency risk is also reported although results suggest that the effect is not immediate. Originality/value This result is discussed together with other macroeconomic factors. The consequent conclusion underlines the fundamental significance of overall macroeconomic dynamics. From the perspective of regulatory harmonization, more research is needed to address the level of homogeneity of macroeconomic dynamics between different geographical and cultural regions.

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Mevorach, Irit, and Adrian Walters. "The Characterization of Pre-insolvency Proceedings in Private International Law." European Business Organization Law Review 21, no. 4 (February 26, 2020): 855–94. http://dx.doi.org/10.1007/s40804-020-00176-x.

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AbstractThe decade since the financial crisis has witnessed a proliferation of various ‘light touch’ financial restructuring techniques in the form of so-called pre-insolvency proceedings. These proceedings inhabit a space on the spectrum of insolvency and restructuring law, somewhere between a pure contractual workout, the domain of contract law, and a formal insolvency or rehabilitation proceeding, the domain of insolvency law. While, to date, international insolvency instruments have tended to define insolvency proceedings quite expansively, discussion of the cross-border implications of pre-insolvency proceedings has barely begun. The question is whether pre-insolvency proceedings should qualify as proceedings related to insolvency for the purpose of private international law characterization. The risk is over-inclusivity of cross-border insolvency law, which, where it is based on universality and unity, might defeat contractual expectations. This article argues, however, that we should be slow to exclude pre-insolvency proceedings from cross-border insolvency law: these proceedings are initiated in the zone of insolvency, their effectiveness depends on a statutory mandate and not purely on private ordering, they interact and intersect with formal proceedings, and can benefit from the unique system developed by cross-border insolvency law. We suggest, though, that modified universalism (the leading norm of cross-border insolvency) and international insolvency instruments, should, and are able to, adjust to the peculiarities of pre-insolvency proceedings to address concerns about inclusivity and accommodate pre-insolvency proceedings adequately.

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Persson, Annina H., Ann-Sofie Henrikson, and Karin Lundström. "Household Credit, Indebtedness, and Insolvency." European Review of Private Law 21, Issue 3 (May 1, 2013): 795–814. http://dx.doi.org/10.54648/erpl2013042.

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Abstract: The problem of excessive debt among households in Sweden is increasing. As a result of the development within the financial sector, households in Sweden have increased their debt incurrence markedly. It has been relatively easy to borrow money, due to the deregulation of the credit market in Sweden in the 1990s and the low interest rates in recent years. As mortgage loan is the bulk of the total household debt, the risk that individuals will be affected by excessive debt incurrence and insolvency has therefore increased. Therefore, a number of new legislative changes have been implemented to overcome this problem. In order to prevent these risks, the Financial Authority has adopted a rule that stipulates that new loans should not exceed 85% of the property market value. Reports from both the Swedish Enforcement Authority and the Swedish Financial Supervisory Authority show that 20% of Swedish households have a difficult time making ends meet. Those who are affected by excessive debt often experience a lower standard of living since frequently they are impacted by distraint. The aim of this paper is to describe and analyze the excessive debt situation in terms of insolvency and effects on households and society. Firstly, we intend to investigate foreclosures in Sweden, both regionally and over time. Why are certain regions less frequently affected by these risks while other regions show higher levels of risk even during generally good years? Secondly, we will investigate whether (a) whether properties that have undergone executive auction are sold at a lesser value, (b) if these properties have an impact on the property prices in the vicinity and (c) if those who buy these properties themselves run a greater risk of insolvency. Thirdly, a closely related area of legal interest is investigating to what extent legislation provides a protective net for the debtor who, through the executive auction, thereby loses his/her residence.

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Sanfins, Marco Aurélio Dos Santos, and Danilo Soares Monte-Mor. "RiD: Uma Nova Abordagem para o Cálculo do Risco de Insolvência." Brazilian Review of Finance 12, no. 2 (October 6, 2014): 229. http://dx.doi.org/10.12660/rbfin.v12n2.2014.18543.

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Given the recent international crises and the increasing number of defaults, several researchers have attempted to develop metrics that calculate the probability of insolvency with higher accuracy. The approaches commonly used, however, do not consider the credit risk nor the severity of the distance between receivables and obligations among different periods. In this paper we mathematically present an approach that allow us to estimate the insolvency risk by considering not only future receivables and obligations, but the severity of the distance between them and the quality of the respective receivables. Using Monte Carlo simulations and hypothetical examples, we show that our metric is able to estimate the insolvency risk with high accuracy. Moreover, our results suggest that in the absence of a smooth distribution between receivables and obligations, there is a non-null insolvency risk even when the present value of receivables is larger than the present value of the obligations.

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Hoyt, Robert E., J. David Cummins, and Richard A. Derrig. "Managing the Insolvency Risk of Insurance Companies." Journal of Risk and Insurance 59, no. 4 (December 1992): 713. http://dx.doi.org/10.2307/253356.

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Lamy, Robert E., and G. Rodney Thompson. "PENN SQUARE, PROBLEM LOANS, AND INSOLVENCY RISK." Journal of Financial Research 9, no. 2 (June 1986): 103–11. http://dx.doi.org/10.1111/j.1475-6803.1986.tb00440.x.

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Wilson, Nick, and Mike Wright. "Private Equity, Buy-outs and Insolvency Risk." Journal of Business Finance & Accounting 40, no. 7-8 (September 2013): 949–90. http://dx.doi.org/10.1111/jbfa.12042.

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Marassi, Daria, and Valetino Pediroda. "Risk insolvency predictive model maximum expected utility." International Journal of Business Performance Management 10, no. 2/3 (2008): 174. http://dx.doi.org/10.1504/ijbpm.2008.016637.

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Hugonnier, Julien, and Erwan Morellec. "Bank capital, liquid reserves, and insolvency risk." Journal of Financial Economics 125, no. 2 (August 2017): 266–85. http://dx.doi.org/10.1016/j.jfineco.2017.05.006.

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Balteș, Nicolae, and Ruxandra Maria Pavel. "Assessment of the Insolvency Risk in Companies Listed on the Bucharest Stock Exchange." Studia Universitatis „Vasile Goldis” Arad – Economics Series 29, no. 4 (December 1, 2019): 58–71. http://dx.doi.org/10.2478/sues-2019-0018.

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Abstract The present study presents, from the theoretical and pragmatic point of view, 6 of the established score models regarding the assessment of the insolvency risk, belonging to the Anglo-Saxon, Continental and Romanian schools. The research sample is made up of 26 companies belonging to the hotel industry and restaurants, listed on the Bucharest Stock Exchange. The research was carried out over a period of 11 years (2007-2017). Following the application of the score models, it was found that during the period covered by the research, a number of 14 companies had a relatively high insolvency risk and 12 of them had a relatively low insolvency risk.

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Kim, Minhyuk. "Financial Conglomerate Affiliation, Insurance Companies’ Performance, and Risk." Korean Journal of Financial Studies 49, no. 3 (June 30, 2020): 447–88. http://dx.doi.org/10.26845/kjfs.2020.06.49.3.447.

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This study analyzes the relationship between financial conglomerate affiliation, insurance companies’ performance, and risk. For verification, a univariate analysis was conducted using a propensity score matching technique and an ordinary least squares regression model was estimated. As a robustness check, the Heckman two-stage regression model, which is known for correcting self-selection bias, was also estimated. The main results are as follows. First, as a result of belonging to a financial conglomerate, insurers’ profitability and simple equity ratio are significantly lower than that of stand-alone insurers, while revenue volatility and insolvency risk are significantly higher. Second, statistically significant negative relationships among insurance companies’ profitability, earnings volatility, and insolvency risks are greater if they belong to a mixed conglomerate rather than a financial holding company. Finally, the results reveal that this negative effect is caused by the adverse impacts of equity investments of affiliates owned by insurance companies belonging to mixed conglomerates. These findings indicate that the expansion of affiliates’ shareholding by an insurer can increase fluctuations in the insurer’s earnings by transferring the change in management performance, consequently increasing the risk of insolvency as measured by the Z-score.

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Djebali, Nesrine, and Khemais Zaghdoudi. "Bank Governance, Risk and Bank Insolvency: Evidence from Tunisian Banks." International Journal of Accounting and Financial Reporting 7, no. 2 (December 25, 2017): 451. http://dx.doi.org/10.5296/ijafr.v7i2.12218.

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The aim of this paper is twofold. Firstly, it investigates the effect of bank governance on bank risk measured by the standard deviation of the return on assets (SDROA). Secondly, it tests the relationship between bank governance mechanisms and bank insolvency proxied by the Zscore (ROA). To achieve this goal, we used a sample of 11 Tunisian banks observed during the period 2006-2015. These 11 banks are considered as the most dynamic banks in the Tunisian banking system. The econometric approach used in this study is based on panel data analysis especially fixed and random effect models. Empirical results indicate that the presence of Supervisory Committee and monitoring of risks (COR), the executive compensation (REMB) and the board size (BDSIZE) increases significantly Tunisian bank risk and insolvency. However, the presence of independent directors (INDD) and the proportion of institutional investors decrease bank risk and bank insolvency. With regard to the effect on macroeconomic condition, only inflation rate exerts a significant effect. However, this effect is negative when the dependent variable is SDROA and positive for Z-score. The effect of GDPG is not significant for both bank risk and bank stability.

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Hussain, Rana Yassir, Xuezhou Wen, Rehan Sohail Butt, Haroon Hussain, Sikandar Ali Qalati, and Irfan Abbas. "Are Growth Led Financing Decisions Causing Insolvency in Listed Firms of Pakistan?" Zagreb International Review of Economics and Business 23, no. 2 (November 1, 2020): 89–115. http://dx.doi.org/10.2478/zireb-2020-0015.

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AbstractWe examine the relationship between growth opportunities and insolvency risk in a mediating framework through financing decisions for 330 listed firms on the Pakistan Stock Exchange (PSX) This study covers a data period of five years ranging from 2013 to 2017. Financing decisions used in this study involve capital structure decision and debt maturity decision. We applied robust clustered panel OLS regression to the data and found a negative relationship between growth opportunities and insolvency risk in all samples consisting of overall, large and small firms. Growth opportunities have a negative impact on the capital structure, but debt maturity was influenced positively. Financing decisions influenced the insolvency risk positively. We used Baron and Kenny’s (1986) approach to detect the intervening effects of financing decisions. Further, Sobel’s test used to check the significance of mediation. Partial mediation was found for the debt maturity ratio in the large and overall sample of firms. However, the capital structure did not mediate the relationship between growth opportunities and insolvency risk in this study.

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Gant, Jennifer L. L., and Jenny Buchan. "Moral Hazard, Path Dependency and Failing Franchisors: Mitigating Franchisee Risk Through Participation." Federal Law Review 47, no. 2 (April 1, 2019): 261–87. http://dx.doi.org/10.1177/0067205x19831841.

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Employment relations are well understood. Business format franchising is a newer and rapidly evolving business expansion formula, also providing employment. This article compares the fates of employees and franchisees in their employer/franchisor insolvency. Whereas employees enjoy protection, franchisees continue to operate in conditions that have been described as Feudal. We identify the inherence of moral hazard, path dependency and optimism bias as reasons for the failure of policies and corporations laws, globally, to adapt to the franchise relationship. This failure comes into sharp focus during a franchisor’s insolvency. We demonstrate that the models of participation available to employees in the United States, Australia and the United Kingdom could be used to inform a re-balancing of the franchisees’ relationship with administrators and liquidators during the insolvency of their franchisor, providing franchisees with rights and restoring their dignity.

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Kokorin, Ilya. "Insolvency of Significant Non-Financial Enterprises: Lessons from Bank Failures and Bank Resolution." European Business Law Review 32, Issue 3 (June 1, 2021): 521–56. http://dx.doi.org/10.54648/eulr2021019.

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In the aftermath of the global financial crisis the EU bank resolution regime went through fundamental changes that seek to preserve financial stability and ensure continuity of critical functions. The same cannot be said of insolvency rules applicable to non-financial enterprises. Unlike bank resolution with its macroprudential and proactive focus, insolvency law has largely remained microprudential and reactive. Admittedly, unlike bank failures, corporate insolvencies usually do not pose systemic risk. However, in practice this may not hold true for significant non-financial enterprises (SNFEs). Such enterprises oftentimes play a major role in national economies and serve important public functions. Their failure may trigger contagion and cause disruptive consequences. Insofar as insolvency of SNFEs raises concerns common to bank failures, the question arises whether certain strategies and tools embraced within the EU bank recovery and resolution framework should be extended to regulate SNFE insolvency. This article explores the feasibility of such an extension. Bank resolution, insolvency, significant non-financial enterprises, enterprise groups, Carillion, early intervention, recovery and resolution planning, living wills, public interest, systemic risk, critical functions.

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Grassa, Rihab. "Ownership structure, deposits structure, income structure and insolvency risk in GCC Islamic banks." Journal of Islamic Accounting and Business Research 7, no. 2 (April 11, 2016): 93–111. http://dx.doi.org/10.1108/jiabr-11-2013-0041.

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Purpose This paper aims to examine the effect of the concentration of ownership concentration and the deposits structure on the link between income structure and insolvency risk in Islamic banks operating in Gulf Cooperation Council (GCC) countries. Design/methodology/approach Using data for 43 GCC Islamic banks over the period from 2005 to 2012, this paper specifies a three-stage least-squares model in which the impact of the concentration of ownership concentration and the deposits structure on income diversification and insolvency risk is jointly analyzed to address the problem of endogeneity. Findings The findings show that the income structure influences the insolvency risk in Islamic banks with a concentrated ownership structure. This is because the deposits structure and large shareholders influence strategic decisions. Research limitations/implications This paper is, also, subject to a number of limitations. First, this study focuses exclusively on the GCC context and excludes the other Middle East and Far East countries. Second, the paper does not take into consideration banking regulation. Practical implications The paper findings shed light on the ongoing debate about the benefits of revenue diversification and also provide valuable insights for market participants, regulators and supervisors about what drives performance in Islamic banks. Originality/value The paper fills the gap in the existing literature on insolvency risk in Islamic banks. It is expected to provide useful information for policy makers and Islamic bankers to develop a sound Islamic banking industry in the GCC region. In addition, the link identified between ownership concentration, deposits structure and revenue diversification is a novel way of analyzing the impact of the latter on insolvency risk in Islamic banks.

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Scarlino, Danilo. "Zone of Insolvency, Directors Duties and Creditors Protection in U.S." European Business Law Review 29, Issue 1 (February 1, 2018): 1–31. http://dx.doi.org/10.54648/eulr2018001.

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When a company is navigating in the “zone of insolvency” – usually defined as the extent of the risk that creditors will not be paid – its directors face the dilemma related to their managerial decisions in the light of the foreseeable effects and risks for shareholders and for creditors. It is a generally accepted principle in U.S. that when a company is approaching such “zone of insolvency” or is in the “vicinity of insolvency” no fiduciary duties are owned to the creditors as expression of the shareholder primacy rule. The aim of this article is to demonstrate the existence of provisions of law together with important policy reasons that impose the duties shifting to creditors in the zone of insolvency and that allow to create a presumption of directors’ knowledge of when their duties shift, which means when the company is getting closer to insolvency. Accordingly, this article seeks to demonstrate that directors’ duties toward creditors should shift on the ground of two reasons: Firstly, the directors’ and shareholders’ opportunistic behavior – together with the opportunistic behavior of well-informed creditors–. Secondly, the need to preserve value for creditors. By comparing U.S. principles with UK insolvency system the conclusion is in the sense that in the zone of insolvency directors should have a clear duty to take every reasonable step in order to minimize the risk of potential losses for creditors. Moreover, this article shows that in U.S. from the interconnection of the MD&A provisions with the law of avoidable preferences, a general principle accordingly can be inferred. It brings that directors have the duty to know when the company is in trouble and therefore that insolvency is looming at the horizon, with a presumption that covers the period of time starting from the last financial statements release until the day of the bankruptcy filing. Specifically, the law of preferences as section 547 of the Bankruptcy Code – by striking down last-minute grabs – conceptually admits the principle that directors together with control shareholders and strong creditors know longer time in advance that the company will face a liquidation proceeding than other creditors and outsiders. As a consequence, the Delaware approach of allowing full discretion to the board of directors even at the “end game” stage with its actual risk of opportunistic behavior (asset dilution, asset substitution, debt dilution, conflicts among creditors) is incongruent with the retrospective approach of both state creditors’ remedies and federal bankruptcy law that after insolvency challenges distributions to shareholders and favors creditors and seeks recoupment. Therefore, this article argues for a pre-insolvency, “end stage” rule of constraint by demonstrating that the UK wrongful trading liability of directors is more coherent and congruent with majority legal systems’ post-bankruptcy recapture approaches than the U.S. one found in the Delaware jurisprudence.

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Ros, Anna, Alba Ruiz, Carles Rusiñol, and Alexandre Valeriano. "The risk of insolvency and the audit report." European Accounting and Management Review 6, no. 1 (2019): 40–52. http://dx.doi.org/10.26595/eamr.2014.6.1.2.

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Genriha, Irina, Gaida Pettere, and Irina Voronova. "Entrepreneurship insolvency risk management: a case of Latvia." International Journal of Banking, Accounting and Finance 3, no. 1 (2011): 31. http://dx.doi.org/10.1504/ijbaaf.2011.039370.

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Finch, Vanessa. "Security, Insolvency and Risk: Who Pays the Price?" Modern Law Review 62, no. 5 (September 1999): 633–70. http://dx.doi.org/10.1111/1468-2230.00230.

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Frank, Richard G., and Tricia Neuman. "Addressing the Risk of Medicare Trust Fund Insolvency." JAMA 325, no. 4 (January 26, 2021): 341. http://dx.doi.org/10.1001/jama.2020.26026.

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Chunhachinda, Pornchai, and Li Li. "Income Structure, Competitiveness, Profitability, and Risk: Evidence from Asian Banks." Review of Pacific Basin Financial Markets and Policies 17, no. 03 (August 14, 2014): 1450015. http://dx.doi.org/10.1142/s0219091514500155.

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This paper investigates the impact of Asian banks' income structure on competitiveness, profitability, and risk over the period 2005–2011. Exchange-listed commercial banks of eight Asian countries are included in the study sample. The cross-sectional regression results reveal that higher exposure of net non-interest income in Asian banks increases market risk and asset risk but lowers insolvency risk, ROA and ROE. On the other hand, higher exposure of net fees and commissions reduces return volatility, market risk, and asset risk but increases insolvency risk, ROA, and ROE. Further, exposure to trading and derivatives, along with other securities, tends to decrease banks' competitiveness.

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Meshack, Kerongo Maatwa, and Rose Wairimu Mwaura. "THE EFFECT OF OPERATIONAL RISK MANAGEMENT PRACTICES ON THE FINANCIAL PERFORMANCE IN COMMERCIAL BANKS IN TANZANIA." American Journal of Finance 1, no. 1 (December 15, 2016): 29. http://dx.doi.org/10.47672/ajf.83.

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Purpose: The purpose of the study was to determine the effect of operational risk management practices on the financial performance in commercial banks in TanzaniaMethodology: The research problem was studied by use of a descriptive research design. The population of the study consisted of all commercial banks in Tanzania. The study used the sample size of 34 commercial banks in Tanzania. Therefore all the commercial banks participated in equally. Questionnaires were the primary data collection tool in this study. The data gathered from the respondents shall be analyzed and presented using descriptive statistics.Results: The study found that the three independent variables in the study credit risk, Insolvency risk and Operational efficiency influenced the financial performance for the period under study. Credit risk Insolvency risk and Operational efficiency influenced commercial banks financial performance for the period of study.Unique contribution to theory, practice and policy: This study therefore recommends that the commercial banks should handle their operations appropriately as the changes in the factors like Insolvency and Credit risk bring about an effect on the profitability of commercial banks hence affecting their financial performance

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Poiedynok, V. V., and I. V. Kovalenko. "RESPONSIBILITY OF DIRECTORS IN BANKRUPTCY PROCEDURES UNDER EU LAW AND INDIVIDUAL MEMBER STATES OF EU." Economics and Law, no. 1 (April 15, 2021): 48–60. http://dx.doi.org/10.15407/econlaw.2021.01.048.

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The Bankruptcy Proceedings Code of Ukraine provides for the possibility of imposing liability under the obligations of the debtor – a legal person on the founders (stakeholders, shareholders) or other persons who have the right to give mandatory instructions to the debtor or have the opportunity to otherwise determine his actions. As a result, "comfortable" organizational forms of companies, such as LLCs and JSCs, have become risky for investors; managers, who may be employees, bear risk too. The article analyzes the legislation of the EU and some EU member states (Germany, France, Spain, the Netherlands, Latvia, Romania), concerning the liability of individuals in insolvency proceedings. We find that the rules on such liability are not harmonized at the EU level; as for individual countries, their laws do provide for the possibility of holding both de jure and de facto directors, whereas the latter may include the founders (stakeholders, shareholders) of the company, for the debts of the company. At the same time, the legislation of European countries describes in great detail the conditions and procedure for imposing such liability, which makes the risks for the individuals concerned predictable. Moreover, special rules on liability in insolvency proceedings are systematically linked to the provisions of company law, which establish the obligation of directors to act with due diligence in the interests of the company and liability for knowingly making business transactions with the knowledge that the company is insolvent (wrongful trading). In Ukraine, there are absolutely no specific legal provisions on the conditions and procedure for holding even de jure directors to liable in insolvency proceedings, not to mention the founders (stakeholders, shareholders) of companies, which creates a situation of legal uncertainty. To eliminate it, the legislation of Ukraine should define: the range of individuals on whom such liability may be imposed; a specific list of actions, the commission of which may give rise to liability; the need to prove the guilt of such individuals; forms of guilt sufficient to be held liable (only intent or also negligence); procedural rules for establishing guilt, including the issue of the burden of proof; who may lay claim to a director (insolvency administrator, creditor, court); statutes of limitations on the liability of directors, etc.

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Serly, Serly. "Analyzing The Effect Of Bank Characteristic On Profitability In Banking Companies Listed In Indonesia Stock Exchange." EKONIKA Jurnal Ekonomi Universitas Kadiri 6, no. 1 (April 30, 2021): 100. http://dx.doi.org/10.30737/ekonika.v6i1.939.

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This research is conducted to analyze the effect of bank characteristics on go public banks’ profitability in Indonesia. Return on asset, return on equity, and net interest margin are dependent variables in this research and involves five types of banking risks (credit, liquidity, security, capital, and insolvency), bank size and diversification, and cost efficiency. Research objects of this research are banking companies listed on Indonesian Stock Exchange (IDX). The research data is financial data issued by IDX from 2014 to 2018. Observation data collected in this research is processed using the regression panel method. The result from this research is that credit risk and insolvency risk has effect on return on asset and return on equity significantly. Liquidity risk, capital risk and bank size don’t have significant effect. Security risk and bank diversification effecting net interst margin significantly. Cost efficiency has effect on profitability significantly.

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ADAMUS, RAFAŁ. "EARLY WARNING OF INSOLVENCY IN THE EUROPEAN UNION LAW." Sociopolitical sciences 10, no. 5 (October 30, 2020): 89–94. http://dx.doi.org/10.33693/2223-0092-2020-10-5-89-94.

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Rapid diagnosis of the risk of an entrepreneur’s insolvency is of great importance for the socio-economic environment. This issue is of particular importance in the context of the financial crisis caused by the COVID-19 pandemic. The insolvency resulting in the announced bankruptcy brings a lot of harm to the debtors themselves (their shareholders), creditors and the entire economy. A much better solution is the restructuring of the debtor. For the purposes of predicting insolvency can be used Artificial Intelligence although traditional methods are also in use. For these reasons, in European Union law, the Restructuring Directive focuses on the anticipation of debtor’s insolvency. The text refers to possible directions for the implementation of the directive in national laws. The aim of the study is to analyze the available methods of early warning against insolvency. As a result of the research, the ways of implementing the Directive were proposed.

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Voda, Alina Daniela, Gabriela Dobrotă, Diana Mihaela Țîrcă, Dănuț Dumitru Dumitrașcu, and Dan Dobrotă. "CORPORATE BANKRUPTCY AND INSOLVENCY PREDICTION MODEL." Technological and Economic Development of Economy 27, no. 5 (August 19, 2021): 1039–56. http://dx.doi.org/10.3846/tede.2021.15106.

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In any competitive economy, the risk of bankruptcy is pervasive. The research aims to contribute in improving the predictive power of bankruptcy and insolvency risk among companies by introducing new methods of processing and validation. This paper investigates the extensive application of the Z score model for predicting the economic-financial stability of Romanian companies in the manufacturing and extractive industries. A list of 37 financial indicators determined on the basis of the balance sheet data of 80 companies for the period 2015–2018 was used. Stepwise Least Squares Estimation through the Forward method allowed the identification of the most relevant ones. Canonical discriminant analysis and sensitivity analyzes were introduced to test the predictive power of the model. The new model identified allows both the prediction of bankruptcy and insolvency risk. This study contributes to the literature by testing variables in relation to financial difficulties and by including other classification information. The robustness of the determined canonical discriminant function was verified by testing the model on two other samples.

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Yeo, Eunjung, and Jooyong Jun. "Peer-to-Peer Lending and Bank Risks: A Closer Look." Sustainability 12, no. 15 (July 29, 2020): 6107. http://dx.doi.org/10.3390/su12156107.

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This study examined how the expansion of peer-to-peer (P2P) lending affects bank risks, particularly insolvency and illiquidity risks. We compared a benchmark case wherein banks are the only players in the loan market with a segmented market case wherein the loan market is segmented by borrowers’ creditworthiness, P2P lending platforms operate only in the low-credit market segment, and banks operate in both low- and high-credit segments. For the segmented market case compared with the benchmark one, we find that, while banks’ insolvency risk increases, their illiquidity risk decreases such that their overall risk also decreases. Our results imply that sustainable P2P lending requires an appropriate differentiation of roles between banks and P2P lending platforms—P2P lending platforms operate in the low-credit segment and banks’ involvement in P2P lending is restricted—so that the growth of P2P lending is not adverse for bank stability.

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Torre Olmo, Begoña, María Cantero Saiz, and Sergio Sanfilippo Azofra. "Sustainable Banking, Market Power, and Efficiency: Effects on Banks’ Profitability and Risk." Sustainability 13, no. 3 (January 26, 2021): 1298. http://dx.doi.org/10.3390/su13031298.

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The financial crisis seriously damaged the reputation of the banking sector, as well as its profitability and risk of insolvency, which led many banks to adopt a sustainable approach aimed at balancing long-term goals with short-term performance pressures. This article analyses how sustainable banking practices affect the profitability and the insolvency risk of banks. Moreover, we examine how sustainable strategies determine the effects of market power and efficiency on bank profitability. We used a two-step System-GMM to analyze an unbalanced panel of 1236 banks from 48 countries over the period 2015–2019. We found that sustainable banking practices increased profitability, and market power was an important determinant of profitability among conventional banks, but not among sustainable banks. Higher levels of cost scale efficiency led to greater profitability for both sustainable and conventional banks. However, there was no significant relationship between sustainable banking and insolvency risk. These results indicate that the traditional determinants of bank profitability are not relevant in explaining the superior profits of sustainable banks, which suggests the emergence of a new paradigm related to sustainability among the drivers of bank profitability.

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NOVAK, I. M. "Formation of Insurance Risk Compensation Mechanism of Employer Insolvency." Demography and social economy, no. 2 (December 20, 2012): 95–102. http://dx.doi.org/10.15407/dse2012.02.095.

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Varetto, Franco. "Genetic algorithms applications in the analysis of insolvency risk." Journal of Banking & Finance 22, no. 10-11 (October 1998): 1421–39. http://dx.doi.org/10.1016/s0378-4266(98)00059-4.

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Rahman, Aisyah Abdul. "Financing structure and insolvency risk exposure of Islamic banks." Financial Markets and Portfolio Management 24, no. 4 (October 20, 2010): 419–40. http://dx.doi.org/10.1007/s11408-010-0142-x.

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Franc-Dąbrowska, Justyna, and Małgorzata Porada-Rochoń. "Minimization of Insolvency Risk – Proposal for a Model Solution." Annales Universitatis Mariae Curie-Skłodowska, sectio H, Oeconomia 51, no. 6 (April 13, 2018): 85. http://dx.doi.org/10.17951/h.2017.51.6.85.

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Strobel, Frank. "Bank insolvency risk andZ-score measures with unimodal returns." Applied Economics Letters 18, no. 17 (November 2011): 1683–85. http://dx.doi.org/10.1080/13504851.2011.558474.

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Lepetit, Laetitia, and Frank Strobel. "Bank insolvency risk and Z-score measures: A refinement." Finance Research Letters 13 (May 2015): 214–24. http://dx.doi.org/10.1016/j.frl.2015.01.001.

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Lepetit, Laetitia, and Frank Strobel. "Bank insolvency risk and time-varying Z-score measures." Journal of International Financial Markets, Institutions and Money 25 (July 2013): 73–87. http://dx.doi.org/10.1016/j.intfin.2013.01.004.

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Cagle, Julie A. B., and Scott E. Harrington. "Insurance supply with capacity constraints and endogenous insolvency risk." Journal of Risk and Uncertainty 11, no. 3 (December 1995): 219–32. http://dx.doi.org/10.1007/bf01207787.

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Lindgren, Jussi. "Examination of Interest-Growth Differentials and the Risk of Sovereign Insolvency." Risks 9, no. 4 (April 14, 2021): 75. http://dx.doi.org/10.3390/risks9040075.

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The objective of this research was to demonstrate the (nonlinear) risks of sovereign insolvency and explore the applicability of stochastic modeling in public debt management, given a structural economic model of stochastic government debt dynamics. A stochastic optimal control model was developed to model public debt dynamics based on the debt accounting identity, where the interest-growth differential obeys a continuous random process. This stochasticity represents both the interest rate risk of public debt and the variability of the growth rate of the nominal Gross Domestic Product combined. The optimal fiscal policy was analyzed in terms of the model parameters. The model was simulated, and results were visualized. The insolvency risk was demonstrated by examining the variance of the optimal process. The model was amended with hidden credit risk premia and fiscal multipliers, which forces the debt dynamics to be nonlinear in the debt ratio. The results, on the other hand, confirm that the volatility of the interest-growth differential is crucial in terms of sovereign solvency and in addition, it demonstrates the large risks stemming from the multiplier effect, which underlines the need for prudent debt management and fiscal policy.

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Journal articles on the topic 'Insolvency risk'

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