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The public’s financial security is vital to economic stability, with policy and practice efforts focused on developing financial literacy to reduce financial vulnerability. However, this approach fails to fully consider the emotional factors that influence the financial decision-making process. This study examines how emotions shape these decisions, drawing on the concept of ‘muddling through’ to understand the complex process to be navigated. Data are drawn from 78 in-depth interviews with consumers who were financially ‘struggling and squeezed’. ‘Integral’ and ‘incidental’ emotions were influential both in assisting the decision-making process and in introducing biases that could lead to harm. Consumers were able to rationalize their decisions, even though they might not be economically optimal in the longer term. Muddling through theory is extended by explaining the role of emotions within it. New insights into the interaction between emotions that are ‘integral’ or ‘incidental’ to decision-making lead to policy and practice recommendations.

Budgeting is a valuable anticipatory tool, able to support technically efficient production, manage financial vulnerability, and increase financial resilience. However, inaccuracies in the budgetin...

Purpose This paper explores how global pandemic crises affect the financial vulnerability of municipalities. Design/methodology/approach This paper is developed from the relevant literature an analytical framework to examine municipal financial vulnerability before a global pandemic crisis and in its immediate aftermath by mapping and systematizing its dimensions and sources. To illustrate how it can be used and evaluate its robustness and flexibility, such a tool was applied to Portugal and Italy, two countries that particularly suffered from the Covid-19 crisis. Findings The application of the analytical framework has shown how financially vulnerable municipalities are to global pandemic crises. Financial vulnerability relates to issues ranging from institutional design to internal financial conditions and the perception of the capacity to cope with a crisis. Results further reveal that vulnerability has an inherent contingent nature in time and space and can lead to paradoxical outcomes. Research limitations/implications This paper provides a tool that can be useful for both academic and public policy purposes, to further appreciate municipal financial vulnerability, especially during crises. Practical implications Municipalities can use the framework to better manage their financial vulnerability, strengthening their anticipatory and copying capacities, while oversight authorities can use it to help municipalities become less financially vulnerable or, at least, more aware of their financial vulnerability. Originality/value Municipal financial vulnerability to global shocks has not been explored extensively. Also, the Covid-19 pandemic is different from previous global crises as it affected society overnight with the implementation of lockdown and social distancing measures., The authors also would like to acknowledge that this study was partially conducted at the Research Center in Political Science (UIDB/CPO/00758/2020), University of Minho and supported by the Portuguese Foundation for Science and Technology (FCT) and the Portuguese Ministry of Education and Science through national funds. It was also conducted at the Centre for Business and Economics Research, I&D unit funded by national funds through FCT – Fundaçãao para a Ciência e a Tecnologia, I.P., Project UIDB/05037/2020.

The financial well-being of the charity sector has important social implications. Numerous studies have analysed whether the concentration of income in a few sources increases financial vulnerability. However, few studies have systematically considered whether the type of income (grants, donation, fund-raising activities) affects the survival prospects of the charity. We extend the literature by (a) explicitly modelling the composition of sources of income, (b) allowing for short-term volatility as well as long-term survival and (c) testing alternative specifications in a nested form. We show that the usual association between income concentration per se and financial vulnerability is a specification error. Greater vulnerability is associated with dependence on grant funding, not overall concentration. Previous studies showing that concentration of income per se is problematic are picking up a proxy effect. We also show that the volatility of income streams may be an important factor in the survival of charities, but that this also varies between income sources.

Purpose The purpose of the paper is to examine how psychological characteristics predict membership of and transitions between states of higher vs lower financial vulnerability – and vice versa – over time. Design/methodology/approach This research uses a dynamic latent class model (latent transition analysis) to explore the dynamics of consumers’ financial vulnerability over time using longitudinal data obtained by repeatedly administering a measure of financial vulnerability. Findings This research finds that consumers in a state of lower vulnerability are “fragile” in having a relatively high likelihood of moving to a state of higher vulnerability, whereas those in a state of higher vulnerability are “entrenched” in having a relatively low likelihood of moving to a state of lower vulnerability. This pattern of results is called the “financial vulnerability trap.” While financial self-efficacy explains state membership, the consideration of future consequences drives state transitions. Research limitations/implications Future research could follow consumers over a longer period and consider the role of alternative psychological characteristics besides those examined. Practical implications This research provides practitioners with actionable insights regarding the drivers of changes in consumers’ financial vulnerability across time, showing the value of financial self-efficacy and the consideration of future consequences when developing strategies to prevent consumers from sliding from a state of lower to higher financial vulnerability over time. Originality/value There is scant research on financial vulnerability. Further, prior research has not examined whether and how consumers’ psychological characteristics help explain their membership of and transitions between states of different levels of financial vulnerability over time.

The development of globalization creates a need for diagnosis of financial stability at the global level. This study aims to analyze the financial stability of the global banking system and identify threats to stability at the level of geographic regions and countries. The study uses the methods of a structured system, comparative and cluster analysis. The empirical study is based on World Bank data for 126 countries for the period 1998–2017. One of the key results of the study is the development of quantitative indicators of the financial stability of the world banking system. These indicators differ from the existing ones due to the predictive nature of the former. The study also proposes criteria of qualitative assessment of the level of financial stability of the world banking system and its individual elements in the form of regional and national banking systems. In addition, appropriate algorithms were developed to calculate the proposed indicators and criteria. The results helped to form clusters of countries in terms of the level of their banking system stability, compile maps of financial stability risks at the global level, and identify countries that are sources of potential threats to financial stability. The empirical part of the study confirms the practical applicability of the proposed analytical tools. The study shows that in 2017, the banking system of Asian countries moved to the high-risk zone. Potential threats to the financial stability of the global banking system come from the European and Asian banking systems, as well as from the Australian banking system. AcknowledgmentThe study was funded by the RFBR according to the research project No 18 010 00232 “A methodology of multilevel system of diagnostics and regulation of financial stability” year 2018–2020.

Do financial crises have an impact on trade flows via a shock to corporate risk or to bank risk? Focusing on Italy’s exports during a period characterized by both the global financial crisis and by the sovereign debt crisis, we exploit the prediction of standard trade models according to which financial shocks should be magnified by the time needed to ship a good to the importer’s country and by sector-level financial vulnerability. We also use bank-pair data on Italian banks’ assets and liabilities vis-a-vis their foreign bank counterparts in a specific country to construct proxies for the availability of trade finance in a given market. We find evidence of a negative impact of financial shocks on exports, especially to more distant countries and in more financially vulnerable sectors. The main channels seem to be related to an increase in corporate risk (reflecting shocks to bank finance and to buyer-supplier trade credit), while the ‘contagion effect’ of shocks stemming from bank risk seems to be much less significant.

Strong growth in consumer credit and widespread recourse to mortgage renegotiations observed since 2015 have affected householdsi?½ ability to repay their loans. In this paper we explore a novel way of accounting for these trends, by extending the Bank of Italy microsimulation model of householdsi?½ financial vulnerability. The extension provides a more accurate assessment of the financial stability risks stemming from the household sector. Consumer credit growth drives an increase in the share of vulnerable households, but has limited effects on the overall debt at risk. Mortgage renegotiations contribute to a decrease in householdsi?½ vulnerability.

We analyze older individuals’ debt and financial vulnerability using data from the Health and Retirement Study (HRS) and the National Financial Capability Study (NFCS). Specifically, in the HRS we examine three different cohorts (individuals age 56–61) in 1992, 2004, and 2010 to evaluate cross-cohort changes in debt over time. We also use two waves of the NFCS (2012 and 2015) to gain additional insights into debt management and older individuals’ capacity to shield themselves against shocks. We show that recent cohorts have taken on more debt and face more financial insecurity, mostly due to having purchased more expensive homes with smaller down payments.

The increasingly common online credit card repayment formats typically involve consumers’ active choice from among various payment amounts. Consumers rarely view minimum payment warning (MPW) disclosures while repaying online; therefore, the common shift toward online repayment means that the MPW is not salient for most credit cardholders. This article aims to shed light on credit cardholders’ payment decisions under this “active choice format” and explore effective online interfaces for payment decisions. Drawing on research in active choice, the authors demonstrate in three experiments that, compared with the “open format” used in traditional monthly statements, active choice format increases consumers’ full balance payment propensity and overall repayment amount, and this effect is even stronger when current account balance is included in the choice context. Furthermore, presence of the MPW disclosure significantly decreases payment of the minimum required amount and increases payment of the “three-year payoff amount.” Finally, presence of MPW increased consumer feelings about making the right decision, primarily for financially vulnerable people. These findings, based on hypothetical scenario choices, offer interesting theoretical and important policy implications.

The banking sector in Central and Eastern European countries is characterized by cross-border mergers and acquisitions. Financial integration improved firm access to international capital markets b...

We examine how charity financial information related to efficiency and financial vulnerability is used by private foundations in determining how much they grant to charities during capital campaigns. In general, private foundations are likely to be better able to evaluate charity financial information because they are sophisticated donors. They have the incentive to incur search costs, the ability to judge financial information, and are focused on grant-making. We find no evidence that efficiency measures are used by private foundations in determining capital campaign grant amounts, regardless of foundation sophistication. We interpret this result as being consistent with private foundations focusing on factors related to program accomplishments rather than on reported efficiency. We find evidence that private foundations pay larger grant amounts to less financially vulnerable charities. This effect is concentrated when grants are paid by more sophisticated private foundations (i.e., those that employ a professional staff). Data Availability: Data are available from the public sources cited in the text.

Using a large dataset of listed firms in Korea, we test whether volatility of capital structure affects stock returns in a systematic way. Stock returns of high capital-structure-volatility firms belonging to different size groups move together over time, suggesting the existence of a capital-structure-volatility factor. This factor earns a sizable, negative risk-premium of −1.08% on a monthly basis over the sample period spanning 2004–2017, and the factor return is adversely affected by deteriorating financial market conditions. Moreover, the cross-sectional relation between capital structure volatility and stock returns is also negative. Overall results indicate that the capital structure volatility may represent another pricing puzzle in stock markets.

Though the majority of Americans report they are financially stable, they do not have sufficient savings to handle an unplanned emergency. There appears to be a disconnect between an individual's perception of their financial situation and their actual financial state. Nevertheless, only scant research focuses on financial vulnerability from both a subjective and objective perspective, and a clear and consistent definition of this construct is missing in the literature. To fill this gap, this review draws across disciplines to consolidate extant knowledge on financial vulnerability. First, we propose a novel definition of financial vulnerability that includes both its subjective and objective dimensions. Next, we create a framework to assess a consumer's financial vulnerability. We then identify interventions for varying degrees of financial vulnerability that are tailored to the individual's fiscal situation. Finally, we present a research agenda to guide future research on financial vulnerability.

This article, building on governmental financial resilience literature, and using data from a survey of over 600 local governments in Germany, Italy and the UK, looks at the role that external shocks, anticipatory capacities and associated perceived vulnerabilities play in determining different organizational response strategies (i.e. ‘bouncing back’ versus ‘bouncing forward’ strategies) at times of crisis. In the face of shocks, higher perceived vulnerabilities will especially be associated with bouncing back strategies, whereas the presence of anticipatory capacity will be associated with bouncing forward strategies. Points for practitioners The present study reveals the crucial role of perceived vulnerabilities and anticipatory capacities for local governments that face shocks and crises. While organizational responses in the sense of bouncing back (e.g. retrenchment, buffering, downsizing, cutbacks) are strongly linked to the associated vulnerabilities, the implementation of bouncing forward strategies (e.g. transformation, repositioning, reorientation) turns out to mainly be dependent on anticipatory capacities, which enable organizations to better recognize potential shocks before they arise. This emphasizes the importance of developing wider anticipatory capacities within local governments as a key element to cope effectively under difficult conditions, as well as to build and nurture a financial resilience culture.

We demonstrate theoretically and empirically that financial development of the destination country is as important as that of the origin country in shaping bilateral trade patterns, on both the extensive margin and the intensive margin of international trade.

In this paper, we investigate the association between bank integration, measured with the share of foreign banks in the banking industry, and macroeconomic volatility in emerging economies. We find a negative and significant relationship between bank integration and short-run fluctuations in output, consumption and investment, controlling for financial development, bank concentration and the real effective exchange rate. However, this relationship is found to be positive at high levels of financial development. We also explore the association at the regional level and show that the presence of foreign banks in Latin America is negatively and significantly correlated with macroeconomic volatility both in normal times and times of crisis. Despite widespread concerns in emerging Europe, which experienced greater financial vulnerability during the global financial crisis, we find no significant association between growth volatilities and bank integration.

This article investigates the distribution of widely used consumer loans in Denmark in light of the ‘risk position’ that this places Danish households in. Denmark has the highest debt to income ratio among all OECD countries (OECD 2019). The high level of consumer debt has received limited political attention in Denmark and the social and legal protection of citizens with debt problems is weak (Jørgensen 2012, 2015). This article presents findings from an empirical study investigating the distribution of common consumer loans in Denmark. Drawing on the notion of ‘risk position’ the article challenges the idea that only socially marginal groups are in risk of getting into debt problems. In the empirical study we analyze the sociodemographic distribution of two common loan types in Denmark, bank loans and credit card debt among loan takers by using administrative register data of a full population of individuals. Register-based data provides the most reliable measures of debt compared to self-reported surveys, because of non-response problems in surveys (cv. Oksanen et al. 2015). The results show high debt levels among hitherto known vulnerable social groups but also highlights groups of middle- and higher-income wage earners as having very high levels of debt. We conclude by framing the results in light of existing policy measures in Denmark and suggest a better balance between deregulation of credit markets and individualization of debt problems on the one hand and the need for political protection of individual loan takers on the other. This article investigates the distribution of widely used consumer loans in Denmark in light of the ‘risk position’ that this places Danish households in. Denmark has the highest debt to income ratio among all OECD countries (OECD 2019). The high level of consumer debt has received limited political attention in Denmark and the social and legal protection of citizens with debt problems is weak (Jørgensen 2012, 2015). This article presents findings from an empirical study investigating the distribution of common consumer loans in Denmark. Drawing on the notion of ‘risk position’ the article challenges the idea that only socially marginal groups are in risk of getting into debt problems. In the empirical study we analyze the sociodemographic distribution of two common loan types in Denmark, bank loans and credit card debt among loan takers by using administrative register data of a full population of individuals. Register-based data provides the most reliable measures of debt compared to self-reported surveys, because of non-response problems in surveys (cv. Oksanen et al. 2015). The results show high debt levels among hitherto known vulnerable social groups but also highlights groups of middle- and higher-income wage earners as having very high levels of debt. We conclude by framing the results in light of existing policy measures in Denmark and suggest a better balance between deregulation of credit markets and individualization of debt problems on the one hand and the need for political protection of individual loan takers on the other.

Resumen: El objetivo de este estudio es cuantificar la vulnerabilidad externa de la economía colombiana para el lapso 1990-2015. Para alcanzar este propósito, se calcularon dos indicadores, tomando como referencia la propuesta de Abeles y Valdecantos (2016). A partir de los resultados encontrados, se evidenció que, durante el transcurso del periodo estudiado, la economía colombiana, durante el transcurso del periodo estudiado, incrementó tanto su vulnerabilidad real como la financiera. Frente a este hallazgo, se argumentó que la mayor vulnerabilidad externa de este país se explica por dos razones: a) la incapacidad de esta economía para modificar su modelo de inserción comercial basado en la explotación de los recursos naturales y b) el incremento de la dependencia del financiamiento externo. Clasificación JEL: F40, O10, O54, O13. Abstract: The objective of this study is to quantify the external vulnerability of the Colombian economy from 1990 to 2015. To achieve this purpose, two indicators were calculated, taking the proposal of Abeles and Valdecantos (2016) as reference. The results proved that the Colombian economy, during the period studied, increased its real and financial vulnerability. Facing this finding, the argument is made that the country’s greatest external vulnerability is explained for two reasons: (a) the inability of this economy to modify her model of commercial insertion based on the exploitation of natural resources and (b) the increase in dependence of the external financing. Clasificación JEL: F40, O10, O54, O13. Résumé: Cette étude a pour but de quantifier la vulnérabilité externe de l’économie colombienne pour la période 1990-2015. Pour atteindre cet objectif, deux indicateurs ont été calculés, en prenant comme référence la proposition d’Abeles et Valdecantos (2016). Les résultats obtenus ont montré que, au cours de la période étudiée, l’économie colombienne a augmenté sa vulnérabilité réelle et financière. Au vu de ce constat, il a été avancé que la plus grande vulnérabilité extérieure de ce pays s’explique par deux raisons: a) l’incapacité de cette économie à modifier son modèle d’insertion commerciale basé sur l’exploitation des ressources naturelles et b) l’augmentation de la dépendance à l’égard des financements extérieurs. Clasificación JEL: F40, O10, O54, O13.

This paper attempts to develop a financial vulnerability indicator for China as a barometer for the state of financial vulnerability in the Chinese financial market, possibly for real-time application. Twelve variables from different sectors are utilised to extract a common vulnerability component using a dynamic approximate factor model. Through the implementation of a Markovswitching Bayesian vector autoregression (MSBVAR) model, the empirical results indicate that a high-vulnerability episode is associated with substantially lower economic activity, but a low-vulnerability episode does not incur substantial changes in economic activity. Notably, the constructed indicator can serve as a real-time early warning system to signify vulnerabilities in the Chinese financial market. First published online 20 November 2020

This article explores how and to what extent revenue diversification and concentration strategies affect financial performance, particularly financial capacity and vulnerability, in nonprofit organizations. Using a sample collected from a systematic literature search of all major databases, we first conducted a bibliometric analysis of 86 existing studies to visualize the clusters of major topics in this area and to explore the connections between existing studies. We then employed a meta-analysis to quantitatively synthesize 258 effect sizes from 23 existing empirical studies. We found that diversification had little effect on financial vulnerability, but it had a slightly negative effect on financial capacity. The article finally uses a meta-regression to discuss some of the theoretical and practical reasons why there is inconsistency in the results across existing studies and calls for more discussion of the assumptions and effectiveness of revenue diversification among nonprofit scholars and practitioners.

Highlights • We aim to reconcile debate about the usefulness of consumer confidence (CC) indices. • Contrary to prior research, we show that CC is not a singular construct. • National CC affects price consciousness via personal CC and financial vulnerability. • Locus of control moderates the effect of national CC on financial vulnerability. • Implications relate to forecasting, marketing, and financial education/counselling., Despite their ubiquity in academic and commercial research, evidence of the usefulness of consumer confidence indices is mixed. To contribute to this debate, we examine the psychological mechanisms through which consumer confidence does (and does not) affect consumer behavior. We develop a conceptual model, which we test via structural equation modelling and moderated mediation analysis, using data from a sample of US consumers (n = 1,090). Rather than conceptualize consumer confidence as a single construct, our study is the first to distinguish between national consumer confidence and personal consumer confidence. Consistent with cognitive appraisal theory, personal consumer confidence mediates the relationship between national consumer confidence and perceived financial vulnerability, which in turn leads to increased price conscious behavior. Drawing on attribution theory, we find that external locus of control enhances the effects of national consumer confidence. We provide practical advice to economic forecasters, business analysts, marketers, and financial educators.

In disrupted families due to migration individual members support each other through transnational care. The care is often reciprocal as the members who are left behind support the members who emigrated and in return receive care from the emigrated family members. Aged parents who get left behind, however, often become vulnerable. The hermeneutic literature review shows that social, psychological or emotional and economic vulnerability are experienced. They have to deal with cultural challenges as their children form part of a new culture in their receiving country. Strong feelings of loss, helplessness and loneliness are experienced. The emigration of their children may also contribute to the financial vulnerability of the elderly.

Research on financial vulnerability has largely focused on the relationships between the economic environment, consumer financial activities and indebtedness, limiting our understanding of the role assumed by interpersonal relationships that underlie this socially embedded phenomenon. Using the common Brazilian practices of borrowing–lending amongst family and friends as the research context, we show that these practices can be viewed as a gift guided by the logic of a moral economy. Our findings show that individuals resort to the market economy to maintain a moral economy of credit which can be a blessing (when the extension of financial help to important others alleviates financial vulnerability by negotiating the marketplace) or a curse (when extension of financial help to others leads to one’s own financial constraints). This study illustrates an inverted gift giving process whereby the recipients’ own indulgence is presented as a monadic gift in accessing the dyadic gift giving relationship.

The level of Malaysian household debt remains high, currently among the highest in Asia, raising concerns about its sustainability. This article analyzes the prevalence of financial vulnerability, ...

In a large sector-level bilateral trade dataset, we find robust evidence supporting a broad international credit channel of U.S. monetary policy transmission to developing countries. We show that U.S. monetary policy has a significant effect on the sectoral composition of developing countries' exports. Financially more vulnerable sectors have a significantly more negative exposure of their trade to a tight U.S. monetary policy, especially in financially less developed exporting countries or during significant U.S. tightening periods. Moreover, we identify both a monetary policy dependence mechanism and a financial dollarization mechanism through which U.S. monetary policy can influence the sectoral composition of developing countries' exports.

Capital control policies have consequences on economic growth and international trade. Using data on 99 countries from 1995–2014, we find evidence that the effect of capital controls on trade vary across industries that have differing levels of external financing and asset tangibility. For exporter countries that tighten capital controls, industries that rely more heavily on external financing experience a larger decline in exports, while industries that possess more tangible assets experience a smaller decline in exports. For importer countries, tighter capital controls imply a decrease in trade, and this effect is uniform across all industries. The pattern with respect to external financing persists after accounting for availability of domestic credit and the differences in industry shares, and are predominantly found in countries with low levels of financial development. On the other hand, the varying effect related to asset tangibility is mostly absorbed by domestic credit market.

In this paper, we examine the Federal Reserve’s newest policy tool, known as the overnight reverse repo (ONRRP) facility, to understand its effects on the repo market. Using exogenous variation in the parameters of the ONRRP, we show that private repo activity is crowded out when money funds invest in the ONRRP. Additionally, we find that the ONRRP increases lenders’ bargaining power, thereby raising borrower funding costs. Lastly, we show that repo borrowers reallocate to repo backed by riskier collateral and borrow more from ONRRP-ineligible asset managers, both of which could increase financial vulnerability due to instability in dealer funding. Received April 27, 2017; editorial decision October 19, 2017 by Editor Stijn Van Nieuwerburgh.

We explore the possible existence and behavior of hot money in six categories of disaggregated bilateral capital flows (equity inflows, equity outflows, bond inflows, bond outflows, banking credit inflows, and banking credit outflows) for 12 emerging markets vis-a-vis the US from 1995 to 2012 and provides several new findings. First, we identify the existence of hot money in all six categories above and conclude that both gross inflows and gross outflows can be the sources of hot money. Second, hot money in equity inflows (outflows) engages in positive (negative) feedback trading regarding local stock market returns. Third, some categories of hot money have a temporary influence on local stock market returns while the others have a permanent influence, supporting the explanations of both price pressures and information advantage. Finally, local stock market returns in half of our sample countries, which have tightened capital controls during the late 2000s global financial crisis (GFC), are more affected by hot money than in the other half. Our findings confirm several popular conjectures of hot money, and endorse the use of capital controls to limit financial vulnerability in the run-up to and during the GFC.

The paper investigates whether patent fees are an effective mechanism to deter the filing of low-quality patent applications. The study analyzes the effect of the Patent Law Amendment Act of 1982, which resulted in a fivefold increase in patenting costs at the U.S. Patent and Trademark Office (USPTO), on various indicators of patent quality. Using a series of difference-in-differences regressions, I find evidence that the increase in fees was associated with an increase in patent quality. The effect is strongest for companies with a small patent portfolio. The study has strong policy implications in the current context of concerns about declines in patent quality and the financial vulnerability of the USPTO.

This study develops a micro-founded model to analyse the economic-financial conditions of Italian households. Initially, an indicator is constructed for the base year 2014, which identifies vulnerable households based on the budget constraint and the composition of their financial portfolio. Subsequently, the impact of the predicted trends of macro-economic variables on the indicator is calculated in order to monitor its evolution in the short term (2015-2017). The empirical analysis is based on the Survey of Household Income and Wealth of the Bank of Italy and on the macroeconomic forecasts of Prometeia. The macroeconomic scenario for the period 2015-2017 implies a progressive reduction in the percentage of vulnerable households for the full extent of the projection.

Not-for-profit (NFP) organisations experience a tension between societal perceptions about maximising mission expenditure on one hand, and their need to accumulate reserves to ensure longer term financial sustainability on the other. While studies have examined the level of reserves in UK and US contexts, there is little Australian research or guidance about what constitutes an appropriate level of NFP reserves. This paper examines the levels and implications of the reserves of 52 Australian NFP non-governmental organisations (NGOs) over eight years, identifying two groups. Spenders, with less than three months of expenditure in reserve, were more financially vulnerable, had higher levels of debt, yet spent a relatively greater proportion of their revenue on mission-related activities than savers. Savers, with more than three months’ reserves, demonstrated a greater proportion of revenue from fundraising, proportionately greater equity levels, and higher returns on assets. Providing unique insights into the financial reserves of Australian NGOs, this empirical study contributes to existing NFP literature on reserves, which to date has focused primarily on US and UK contexts. Further, we propose that by developing, monitoring and communicating their reserves’ strategies, NFP boards and managers will be able to improve their organisations’ financial sustainability and manage societal perceptions about reserves.

We evaluate the effect of the 2008 pension reform in Chile, applying a difference-in-difference estimation method to longitudinal survey data representative of the Chilean population. Our evidence suggests that those who started to receive a basic pension increased their debt more than their assets. We interpret this as an indicator of debt sustainability. The debt ratio increased significantly more for women, who may be particularly exposed to financial crises. The results raise concerns about the potential financial vulnerability of the population targeted by the reform, due to over-indebtedness.

Financial inclusion has become a policy priority. For many countries, this has meant focusing on the delivery and practical aspects of financial products and services. This paper argues that this approach is not sufficient to improve financial wellbeing more broadly. It suggests a more comprehensive approach moving away from asking whether people are excluded or not to asking whether they have access to accessible, acceptable and appropriate resources and supports in adverse financial circumstances. A better understanding of individuals’ financial resilience: how they bounce back from adverse financial events and the resources and supports they draw on; could help determine where resources can and should be invested to assist people to cope with financial adversity, assist the development of effective policy and, ultimately, improve financial wellbeing. This paper puts forward a definition of financial resilience and a methodology for measuring it. Australia is used as a case country from which to draw conclusions using a survey of 1496 representative adults (18+). The findings indicate that over 2 million Australian adults experienced severe or high levels of financial vulnerability raising very real concerns about financial wellbeing. Implications for academics and policy makers are presented.

Non-governmental organizations (NGOs) in sub-Saharan Africa (SSA) experience financial challenges that hinder efforts to promote social change and development. Revenue diversification is one adaptive response to these challenges, yet there is a lack of evidence concerning the relationship between revenue diversification and financial vulnerability among NGOs in SSA. Using data from an online survey of NGOs (N = 170), we hypothesized that a greater number of revenue sources is associated with lower probability of financial vulnerability, while a greater level of dependence on international funding is associated with higher probability of financial vulnerability. Results from probit regression models controlling for organizational characteristics indicated partial support for hypotheses. Having four or more types of revenue was associated with 87% lower probability of financial vulnerability compared to having one type of revenue (p

We develop a model to assess the financial vulnerability of the Italian corporate sector over a two-year horizon under baseline and stressed scenarios. To take into account the heterogeneity of firms and their demography we use micro data, which are then integrated with macroeconomic forecasts. We find that an accommodative monetary policy combined with economic recovery and pro-growth reforms widely reduce the vulnerability of the corporate sector. However, micro firms and those operating in the construction sector remain the most vulnerable, suggesting that targeted policies would be beneficial.

This paper intends to assess financial vulnerability in Thailand through the construction of a financial vulnerability indicator (FVI). This early warning system has been developed using the signals approach proposed by Kaminsky and Reinhart (1999), followed by composite indicator construction. The period under study spans from January 2000 through to December 2016. Our empirical findings indicate that exports has the lowest noise-to-signal ratio (0.13), followed by real GDP (0.15) and house price index (0.20). These suggest that financial crises are usually preceded by a weakening in exports, a slowdown in the economy and a decline in house price. For Thailand, four major financial episodes are successfully outlined during the study period, demonstrating the effectiveness of an early warning system in financial vulnerability forecasting.

Financial soundness in the household sector matters for financial stability and for the real economy. The level of household debt in Korea raises concern about the financial soundness of the household sector due to its size, growth rate and quality. Against this backdrop, we assess the financial vulnerability of borrowers based on an analysis of credit bureau (CB) data, in which the actual credit activities of most individuals are recorded at a high frequency in Korea. We construct over-indebtedness indicators from the CB data and then assess the predictability of forthcoming defaults. Based on the over-indebtedness indicators, we show how borrowers are distributed in terms of over-indebtedness and how the over-indebted differ from average borrowers in terms of their characteristics. Furthermore, we show how the aggregate credit risk in the household sector would change under macroeconomic distress by analyzing how each borrower’s credit quality would be affected by adverse shocks. The findings of this paper may contribute to assessing household debt vulnerability and to enhancing regulatory and supervisory practices for financial stability.

This research analyzes the concept of financial vulnerability of nonprofits in depth. We review the definitions given by the prior literature, concluding that none of them is complete. We propose a definition in which financial vulnerability consists of three dimensions: operational (variation of net assets over time), leverage (relationship between total assets and debt), and liquidity (ratio of current assets to short-term debt). We use a sample of 212 Non-Governmental Development Organizations (NGDOs) from the United Kingdom to analyze these measures, observing a limited number of nonprofits simultaneously classified as vulnerable according to the different traditional concepts. Applying our proposed multidimensional model, we find that 6 % of the sample is highly financially vulnerable according to the three dimensions, and a high proportion (18 %) of nonprofits is simultaneously vulnerable in leverage and liquidity dimensions. Finally, we compare the obtained results using traditional variables and those derived from our model.

Financial vulnerability of nonprofit organizations arising from governmental funding instability is examined using hazard analysis. Funding instability is characterized by time-at-risk, and vulnerability is expressed by hazard rate measuring the speed of nonprofit organizations closure. The analysis provides estimation of instantaneous probability of a nonprofit organization failure at a given point in time. Drawing on 2,660 Israeli nonprofit organizations, we found that the relationship between hazard rate and time-at-risk has an inverted U–shape curve; hazard rate increases with time-at-risk, reaches a maximum then descends.

The purpose of this study is to shed light over the management of foreign reserves that have contradictory policy intentions and impacts; (1) to defend the domestic currency (2) to depreciate the domestic currency. With this Mobius’s strip-like nature in mind, we extend the Dornbusch (1976) exchange rate overshooting model with the foreign reserves. Alongside with financial vulnerability, the presence of foreign reserves amplifies or alleviates monetary policy shocks on the exchange rate.

This study investigates the effect of a capital facilities project on nonprofit financial vulnerability metrics. The author employs a difference-in-differences technique to model the relationship between facilities investments and financial vulnerability indicators using data for a matched-pair sample of nonprofit organizations that invested and did not invest in a facilities project. Overall the findings suggest that investments in facilities are associated with temporary increases in an organization's net assets ratio and decreases in its surplus ratio after a project is completed, and that the costs associated with facilities projects (for example, debt) place strain on nonprofit finances. The study's findings have implications for the financial management of nonprofit organizations, particularly in regard to the associated costs of capital expansion.

This paper is concerned with measuring the financial vulnerability (FV) of households arising from consumer debt. Our case of application is Chile. Our main finding is that by applying a methodology that allows for households' heterogeneities and that accounts for contextual factors (like motives for asking for debt, exposure to shocks, family structure, holdings of assets and perspectives of future income), we better quantify the risks that financially vulnerable households may entail to the financial system.

This article examines the patch-working strategies of migrant entrepreneurs as a form of social agency. ‘Patch-working’ – the reliance on supplementary forms of income to support business activity – is often seen as a means of cushioning the financial vulnerability of small firms. However, the mechanisms and forms that patch-working takes tend to be overlooked. Evidence from 42 West Midlands’ firms shows that, despite the highly constrained operating environment, the exercise of social agency can help to cushion against disadvantage and to rework their current conditions through patch-working. This allows for business growth, and even transformational growth in some cases, rather than sheer survival. Even so, our findings show that the agency of migrant entrepreneurs brings about only minor improvements in revenue and is certainly not capable of fundamentally changing either the nature of the sector or the structure of the labour market in which they are embedded.

This study develops a systematic framework for assessing a country’s financial vulnerability using a predictive classification model of random forests. We introduce a new indicator that quantifies the potential loss in bank assets and measures a country’s overall vulnerability by aggregating these indicators across the banking sector. We also visualize the degree of vulnerability by creating a Financial Hazard Map that highlights countries and regions with underlying risks in their banking sectors.

This paper uses rich firm-level data for the UK to investigate the link between firms’ financial health and export exit, paying attention to the ERM currency crisis and the global financial crisis. Our results show that deterioration in the financial position of firms has increased the hazard of export exit during the 2007–09 crisis but has no significant effect on the early 1990s crisis. We also explore the extent to which firms in financially vulnerable industries face greater sensitivity of export exit to financial conditions. We conclude that firms in sectors with great reliance on external finance experience higher hazards of exiting the export market during the 2007–09 crisis.

Although they are instrumental for economic development, productivity-enhancing corporate investments may increase the financial vulnerability of companies, especially in an economic and financial crisis. We employ an instrumental probit model with the aim of finding evidence for the investment and credit patterns that led companies into financial distress during the global financial crisis 2009–2010. The company-level micro-data for our study on three Central and East European countries—Hungary, Bulgaria, Romania and two Baltic countries, Latvia and Lithuania—originates from two independent surveys, the Business Environment and Enterprise Performance Survey conducted in 2008 and the Financial Crisis Survey conducted in 2009/2010. Both were carried out jointly by the EBRD and the World Bank. Our results emphasize a substantial adverse impact from investment intensity and debt financing on company financial soundness during a crisis. On top of that, we discover a strong non-linear pattern in the sensitivity of company distress to its investment-financing nexus.

This paper aims to investigate Malaysia’s vulnerability to a financial crisis. The methodology employed is an extension of the signals approach based on the original work of Kaminsky and Reinhart (1999). By studying the period from 2000M1 to 2016M9, we construct a financial vulnerability indicator (FVI) to measure the development of vulnerabilities in the Malaysian financial system. Our empirical findings unveil that the causes of crises are multidimensional. Notably, economic slowdown, decline in stock price and weak exports contain good predictive power in assessing financial vulnerability to a crisis. This study highlights the significance of internal and external macroeconomic conditions in determining a country’s vulnerability.

This paper investigates the effect of the 2008–9 financial crisis on firms’ employment composition decision when it is possible to choose between permanent and fixed-term workers. We use linked employer-employee data for the universe of private sector firms in Portugal, and exploit precrisis variation in financial vulnerability across industries for identification. We find that firms in more financially constrained industries hire a larger proportion of fixed-term workers with respect to permanent workers after the 2008-9 crisis, relative to less financially vulnerable firms. At the worker-level, workers hired by firms in industries that require significant external financing are more likely to be hired with a fixed-term contract after the crisis than comparable workers hired by other firms. Our results suggest that the crisis induced financially constrained firms to use the more flexible fixed-term contracts more intensively., This research was partially funded by the European Union European Regional Development Fund (FEDER, Portugal), project FCOMP-01-0124-FEDER041505, and by Fundação para a Ciência e a Tecnologia, project EXPL/IIM-ECO/1207/2013.

We study how financial imperfections affect product quality across countries and industries, and analyze the implications for trade flows and prices. To this purpose we assemble a unique data set, which contains estimates of export quality, financial development, and financial vulnerability, for all countries and manufacturing industries over the last three decades. We find the interplay between cross-country differences in financial frictions and cross-industry differences in financial vulnerability to be an important determinant of the geographical and sectoral variation in average product quality. We show that this effect mostly occurs along an intensive margin, whereby financial imperfections distort the quality of existing exports to a given destination market. Finally, we provide evidence that quality adjustments are an important mechanism through which financial development shapes the variation in trade flows and export prices across countries and industries.