Prediction of corporate financial distress: an application of the America banking industry

Financial distress prediction is an important and widely researched issue because of its potential significant influence on bank lending decisions and profitability. Since the 1970s, many mathematical and statistical researchers have proposed prediction models on such issues. Given the recent vigorous growth of artificial intelligence (AI) and data mining techniques, many researchers have begun to apply those techniques to the problem of bankruptcy prediction. Among these techniques, the support vector machine (SVM) has been applied successfully and obtained good performance with other AI and statistical method comparisons. Particle swarm optimization (PSO) has been increasingly employed in conjunction with AI techniques and has provided reliable optimization capability. However, researches addressing PSO and SVM integration are scarce, although there is great potential for useful applications in this field. This paper proposes an adaptive inertia weight (AIW) method for improving PSO performance and integrates SVM in two aspects: feature subset selection and parameter optimization. The experiments collected 54 listed companies as initial samples from American bank datasets. The proposed adaptive PSO-SVM approach could be a more suitable methodology for predicting potential financial distress. This approach also proves its capability to handle scalable and non-scalable function problems.     

IT-enabled transparent electronic markets: the case of the air travel industry

The electronic market hypothesis predicts that by reducing coordination costs, information technology (IT) will shift industrial organization from hierarchical to market-based forms of economic activity. While academic researchers and practitioners have witnessed these shifts with the advent of the Internet, there is little understanding about the process and the underlying forces that drive them. In this paper, we provide an in-depth analysis of the air travel industry, which has recently experienced significant IT-driven transformations. We conclude that, together with IT, pro-competitive laws and the information-intensive nature of air travel products have triggered competition for consumers with transparent market mechanisms, which is leading to the emergence of more transparent electronic markets in the air travel industry.     

Strategies for value creation in electronic markets: towards a framework for managing evolutionary change

This paper reviews the theoretical relevance of strategic analysis in eMarkets and advocates for a co-evolutionary approach to value creation and the management of change. A view of strategy is recognized which includes an evaluation of the stages and processes of evolution for these markets. A framework encompassing critical elements such as e-market ecosystems, e-alliances, e-knowledge and e-systems, is developed and advanced for further strategic analysis. The model is believed to be of value for conceptual assessment of virtual business communities where unique attention to continuous innovation and dynamic organizational adaptation are considered imperative for competitive success. This is increasingly characterized by paradoxical issues, such as competing in the present time and building long-term strategic competences for the future. The model is validated with relevant examples and a substantive case study.     

Mobile banking in the government-to-person payment sector for financial inclusion in Pakistan*

ABSTRACT

Whilst there have been growing interest and efforts by governments in developing countries to disburse digital government-to-person (G2P) payments to promote financial inclusion, the role of mobile banking in the receipt of social cash remains under-researched. Through an interpretive case study of the Benazir Income Support Programme (BISP) in Pakistan, this paper applies Orlikowski’s Duality of Technology that critically examines mobile banking usage by women beneficiaries and technology's effects on the institutional properties of their households. Qualitative data were collected through semi-structured interviews from participants located in Pakistan. The findings highlighted that mobile banking enabled women to receive the full amount of grants, securely and conveniently, from agents. However, mobile banking imposed human, socio-economic and technological constraints which restricted women's access to and usage of financial services that limited financial inclusion. Women were socially and politically empowered, thereby, social inclusion was transformative. This paper theoretically contributes to the Duality of Technology framework that was deterministic for women beneficiaries. The study accentuates the redesign of mobile banking to match women's capabilities, and imparting financial and digital training to them. Also, the provision of a range of financial resources to beneficiaries may steer micro-entrepreneurial activities to advance the inclusion agenda in Pakistan.     

计算机风险对金融电子化推进的影响

随着计算机技术的急速发展,其在网络应用上存在着不少的隐患和风险。这对我国银行金融电子化的推进带来重大的影响。因此,本文在分析金融电子化发展的基础上,对计算机风险对我国金融电子化推进造成的问题进行探索,并进一步阐释我国金融电子化推进的对策。     

The non-market preconditions of electronic markets: implications for their evolution and applicability

This article asks which institutional structure is required for electronic markets to emerge. It proposes the adoption of a rather narrow concept of electronic markets, one which requires that electronic markets support the negotiation phase of a business process in order to identify those preconditions that are specific to electronic markets as compared to other inter-organizational systems. A theoretical framework is elaborated which distinguishes between the institutional regime shaping market participants' transaction behaviour, a set of meta-activities which establish and maintain the institutional regime, and a generative regime, which is the group of actors performing or promoting meta-activities. All three components constitute the notion of non-market preconditions of market systems, whether electronic or conventional. This theoretical concept is then used to identify the specific non-market preconditions of electronic markets in each of the three distinct categories. In the concluding section, the findings are related to the way in which electronic markets actually evolve and the areas of economic activity in which they provide a useful coordination instrument and in which they do not.     

The impact of electronic markets: the case of the Dutch Flower Auctions

The concept of electronic markets has been widely researched. There is, however, less experience with its operation and even less with the organisational impact that electronic markets can have on specific companies and sectors. This case study discusses a very specific market which is gradually moving into the electronic age: the Dutch Flower Auction. This auction is the world marketplace for flowers and pot plants. This case is unusual both in terms of industry (agriculture) and the specific nature of the goods dealt with (highly perishable and fragile, where quality is based on perception). This study, therefore, has been particularly revealing for the use of electronic markets as a strategic response in a changing marketplace.     

A soft-computing based rough sets classifier for classifying IPO returns in the financial markets

In the financial markets, due to limitations of the noise caused continuously by changing market conditions and environments, and a subjective sentiment or other factors unrelated to expected returns on investment decision-making of investors, there is a growing consensus designing and employing a variety of soft computing systems to remedy the aforementioned existing problems objectively and intelligently. Previously, many researchers have long used statistical methods for handling the related problems of investment markets. However, these conventional methods become more complex when relationships in the input/output dataset are nonlinear. Nevertheless, statistical techniques always rely on the assumptions on linear separability, multivariate normality, and independence of the predictive variables; unfortunately, many of the common models of treating the financial markets problems violate these assumptions. Therefore, to reconcile the existing shortcomings, this study offers three hybrid models based on a rough sets classifier to extract decision rules and aid making investment decision for the market investors.The proposed hybrid models include three differently integrated models for solving IPO (Initial Public Offerings) returns problems of the financial markets: (1) Experiential Knowledge (EK) + Feature Selection Method (FSM) + Minimize Entropy Principle Approach (MEPA) + Rough Set Theory (RST) + Rule Filter (RF), (2) EK + Decision Trees (DT)-C4.5 + RST + RF, and (3) EK + FSM + RST + RF. The proposed hybrid models are illustrated by examining an IPO dataset for publicly traded firms. The experimental results indicate that the proposed hybrid models outperform the listing methods in accuracy, number of attributes, standard deviation, and number of rules. Furthermore, the proposed hybrid models generate comprehensible rules readily applied in knowledge-based systems for investors. Meaningfully, the study findings and implications are of value to both academicians and practitioners.     

Services in electronic telecommunication markets: a framework for planning the virtualization of processes

The potential of electronic markets in enabling innovative product bundles through flexible and sustainable partnerships is not yet fully exploited in the telecommunication industry. One reason is that bundling requires seamless de-assembling and re-assembling of business processes, whilst processes in telecommunication companies are often product-dependent and hard to virtualize. We propose a framework for the planning of the virtualization of processes, intended to assist the decision maker in prioritizing the processes to be virtualized: (a) we transfer the virtualization pre-requisites stated by the Process Virtualization Theory in the context of customer-oriented processes in the telecommunication industry and assess their importance in this context, (b) we derive IT-oriented requirements for the removal of virtualization barriers and highlight their demand on changes at different levels of the organization. We present a first evaluation of our approach in a case study and report on lessons learned and further steps to be performed.     

Neural network analysis and the characteristics of market sentiment in the financial markets

The properties of a modular neural network system designed to forecast movements of the long gilt futures contract are examnined. The examination illustrates that diagnostic measures can effectively inform end-users of the system when appropriately to switch modules given the likelihood of the degradation of forecasts. The modelling is based upon periods of market sentiment, and the inductive data models encapsulated, within the modules of the neural network system, are investigated. The models track, and also provide knowledge of , underlying market characteristics in different periods of market sentiment. The research provides deductions concerning the (dis-)similarity of underlying characteristics in differing periods of market sentiment.     

Banking on ICT: The relevance of online dispute resolution in the Islamic banking industry in Malaysia

In order to keep the cost of settling disputes low and standards for grievance remedial methods high, access to justice is paramount in today's fast pace commercial transactions in the digital world. In Malaysia, the successes recorded in the Islamic banking industry do not just flourish without some consequential challenges such as the increasing rate of disputes involving Islamic financial products and services. Though the number of widely reported cases heard and determined by the courts between 1985 and 2010 are about 20, the Financial Mediation Bureau seems to be more active in dispute resolution in the industry. This study seeks to explore the relevance of such mechanism that would use five distinct but connected modules for dispute settlement. This pioneering research introduces a new dimension in the sustainability of the economy by leveraging the state-of-the-art information and communication technology (ICT) in resolving banking disputes in the Islamic finance industry in Malaysia. Exploring the relevance of such online dispute resolution platform for Islamic finance disputes will serve as a launch pad for further studies that will involve the design and application of such technology in the Islamic finance industry.     

The economics and psychology of consumer trust in intermediaries in electronic markets: the EM-Trust Framework

The rise of electronic markets (EM) and e-commerce came with the promise of disintermediation. Yet, from aggregators to authenticators, the online landscape today is scattered with intermediaries such as EBay and Verisign, aiming to streamline e-commerce transactions and building consumer trust in EM. The central theme of this paper is to understand the contextual factors that lead to consumers’ need to trust intermediaries. In developing our arguments, the paper synthesizes perspectives from information economics, transaction cost economics, and literature on institution-based trust to develop the EM-Trust Framework. Drawing from information economics, the paper contends that EM embody certain inefficiencies, which in turn contribute towards heightening consumer uncertainty, especially under conditions of high information specificity. Heightened consumer uncertainty subsequently reduces consumer trust in EM. It is only in the face of uncertainty and a loss of trust in EM that consumers transfer their need to trust in intermediaries. However, the transference of trust is complete only if agency costs from intermediation lie within consumer thresholds. A mini-case of online mortgage marketplaces is used to illustrate the EM-Trust Framework, thus creating threads for more insightful investigations in the future.     

Triggers and barriers to financial inclusion: The use of ICT-based branchless banking in an Amazon county

Financial inclusion can be defined as the access to formal financial services at an affordable cost for all members of an economy, favoring mainly low-income groups. It has been recognized as a critical element in policies for poverty reduction and economic growth. Some successful experiences with financial inclusion reported in developing countries are associated with the use of information and communication technology (ICT)-based branchless banking. One of these experiences is the Brazilian correspondent model, an ICT-based network responsible for delivering financial services to tens of millions of poor Brazilians, most of them having no other way to access banking services. This article presents a case study of financial inclusion in Autazes, a county in the Amazon region not served by banks until 2002, when a correspondent started its operations there. Since then, Autazes has experienced economic and social changes, due in part to government social benefits and other banking services delivered at the local level. The results of our field study in Autazes suggest that financial inclusion through the correspondents’ process positively contributes to local socio-economic development but, at the same time, presents clear negative signs such as low-income population over-indebtedness, reproduction of social exclusion practices and reinforcement of power asymmetries. We conclude that although access to financial resources is a fundamental way to promote local development to low-income population, such access should be accompanied by other inclusive mechanisms like financial education in order to be effective.     

An industry approach to shared, cross-organisational engineering change handling - The road towards standards for product data processing

Standards for cross-enterprise communication between systems that actively manage product data and which control the associated workflows–including release and approval processes–have been in industrial use for some time. Experiences gained during the last decade showed that purely data centric approaches, such as supported by IGES, ISO 10303 (STEP) and IFC are not sufficient. Cross-enterprise communication requires not only agreements about data format and semantics, but also about orderly procedures for efficient communication between the stakeholders in a workflow.This paper presents the background and approach taken for the development of a standard for cross-company engineering change management (ECM), which is currently undertaken as a joint activity between VDA (German Association of the Automotive Industry) and ProSTEP iViP (international association for information integration in industry). Based on the results of this joint activity, which was recently published as SASIG ECM Recommendation V2.0 and as VDA 4965 V3.0, ECM Pilot implementations within member companies were conducted. They proved that a lead-time reduction of the engineering change process of 20%–40% is possible while the quality of the process increases. The approach itself should work not only in engineering change or product data environments, but also in document oriented environments as well as in sectors other than automotive.The ECM standard provides specifications of reference business processes, including the definition of the participants’ roles and the interaction and synchronization (“touch”) points where data are communicated. It leverages and builds on other established product data standards wherever possible. Thus, the data model defined by STEP AP214, (Core Data for automotive mechanical design processes) is used to describe the “payload”–i.e. the product data content to be exchanged–at defined synchronization points. OMG’s PLM Services provide the framework for sending messages between the stakeholders of an Engineering Change, and business process modelling languages such as e.g. BPEL (Business Process Execution Language), standardized by OASIS, provide the capability to execute the ECM protocol’s specification. They ensure the ability to use the latest state-of-the-art internet technologies such as XML and web-services.     

From decision optimization to satisficing: Regulation of automated trading in the US financial markets

Market fragmentation, technical complexity and information asymmetry drive the regulation of financial markets. We examine how government bodies develop and implement policy mandates for regulatory oversight of automated trading. Simon's theory of bounded rationality guides the research enquiry on regulatory decision choices and outcomes. Primary and secondary data reveal four phases of evolutionary technological change in financial markets. Each phase presents financial regulators with unprecedented policy challenges in preventing systemic and firm-specific risk in financial markets. Findings show regulatory mandates eschew ex-ante for ex-post decision criteria, as constrained optimization results in regulators’ seeking satisfactory solutions to mitigate financial market risk.     

The moderating effect of user experience on satisfaction with electronic banking: empirical evidence from the Spanish case

The aim of this paper is to contribute to the field of satisfaction research from the perspective of electronic banking users—a topic of great interest to financial institutions as they formulate business strategies. In this context, we analyze the possible moderating effect of user experience with the products of a specific institution. A comprehensive review of the scientific literature justified the development of a behavioral model that explains satisfaction using a set of constructs or endogenous variables and the moderating effect of experience. Data was collected from a self-administered Web survey in the authenticated section of the electronic banking service of a prestigious Spanish National financial institution. The analysis tests the relationship between the proposed variables (ease of access, trust, ease of use and usefulness) and demonstrates the moderating effect of electronic banking experience on them. The study was limited to the data of a single financial institution. Caution should therefore be exercised in generalizing the results. The research results provide a number of valuable conclusions for financial institutions. This paper is a pioneer study of satisfaction with electronic banking, especially with regard to the causal relationships between satisfaction and its main determinants.     

OWA rough set model for forecasting the revenues growth rate of the electronic industry

Business operation performance is related to corporation profitability and directly affects the choices of investment in the stock market. This paper proposes a hybrid method, which combines the ordered weighted averaging (OWA) operator and rough set theory after an attribute selection procedure to deal with multi-attribute forecasting problems with respect to revenue growth rate of the electronic industry. In the attribute selection step, four most-important attributes within 12 attributes collected from related literature are determined via five attribute selection methods as the input of the following procedure of the proposed method. The OWA operator can adjust the weight of an attribute based on the situation of a decision-maker and aggregate different attribute values into a single aggregated value of each instance, and then the single aggregated values are utilized to generate classification rules by rough set for forecasting operation performance.To verify the proposed method, this research collects the financial data of 629 electronic firms for public companies listed in the TSE (Taiwan Stock Exchange) and OTC (Over-the-Counter) market in 2004 and 2005 to forecast the revenue growth rate. The results show that the proposed method outperforms the listing methods.