THE DEVELOPMENT OF DIAGNOSTIC TOOLS FOR ASSESSING THE LEVEL OF FINANCIAL CORPORATIONS’ STABILITY BY CASCADE APPROACH

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DOI:

https://doi.org/10.18371/fcaptp.v4i39.241299

Abstract

Abstract. The scientific article is devoted to the development of a methodology for assessing the financial stability of financial corporations using the technology of cascading approach to identify weak areas in their activities and prevent the development of threats to their stable operation. The root causes of their financial instability are selected as the object of financial corporations’ financial stability assessment, and a chain of causal relationships is considered that turn the preconditions into real threats to financial stability or even signs of the corporation’s financial fragility. At the same time, the source of prerequisites for the financial stability of financial corporations in the state and depth of imbalances, which are formed both in the internal and external environment of their operation.

It is proved that the tools for assessing internal imbalances in the activities of financial corporations should not be limited to financial imbalances, as their root causes can be concentrated in the organizational, managerial, institutional, conceptual component, in the field of personnel, information, technical support. Therefore, the structuring of imbalances in the activities of financial corporations is proposed to be carried out according to the theory of economic potentials and to identify the following content areas: opportunities, resources, tools, and abilities, the interaction of which forms the potential of financial corporations to operate.

A three-stage method for assessing the financial stability of financial corporations has been developed, using a cascading approach, which involves the consistent diagnosis of internal imbalances in the activities of financial corporations: 1) those that arise within each component (resources, means, and capabilities) and are the area of origin of internal threats to their financial stability; 2) imbalances that arise through inter-component interaction (resources-means; abilities-means; resources-abilities) and are the sphere of manifestations of imbalances; 3) those that arise through interaction with the external environment and maximally show the impact of their condition and depth on the level of financial stability.

For each of these areas, a set of indicators has been developed and an algorithm for calculating the integrated index of financial stability of a financial corporation has been constructed. The scientific and methodological approach was tested on the example of systemically important banks of Ukraine during 2017—2020, each of which is currently in a continuum of financial stability, and for most banks, there is a growing trend of quantitative measurement of its level.

In general, the paper reveals a comprehensive approach to assessing the financial stability of financial corporations, which allows you to systematize those key positions in which the imbalance increases the likelihood of their financial fragility and financial instability.

Keywords: financial corporations, financial stability, internal imbalances, economic potential, valuation, indicators, nonlinear rationing.

JEL Classіfіcatіon C13, C81, D53, G21, G23         

Formulas: 7; fig.: 0; tabl.: 3; bibl.: 22.

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Published

2021-09-10

How to Cite

Hutorna, M. ., Rudenko, M. ., Nemish, Y. ., Kulinich, T. ., & Hasii, O. . (2021). THE DEVELOPMENT OF DIAGNOSTIC TOOLS FOR ASSESSING THE LEVEL OF FINANCIAL CORPORATIONS’ STABILITY BY CASCADE APPROACH. Financial and Credit Activity: Problems of Theory and Practice, 4(39), 109–120. https://doi.org/10.18371/fcaptp.v4i39.241299

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Section

The topical questions about the development of finance, account and audit