Exploring the Impact of Market and Price Risk Management on Financial Risk Management: The Mediating Role of Institutional Risk Management in Ghana's Agricultural Sector
1Dexter Senanu Kofi Hewlett A, 2Kojo Essel-Mensah, 3Janet Owusu Asabre
1Department of Banking and Finance, University of Professional Studies, Accra, Ghana
2Department of Mathematical Statistics and Actuarial science, University of the Free State, South Africa,
3The International Institute of Tropical Agriculture (IITA)
https://doi.org/10.47191/jefms/v8-i3-10
ABSTRACT:
This study investigates the influence of Market and Price Risk Management (MPRM) on Financial Risk Management (FRM) by considering Institutional Risk Management (IRM) as a mediating variable within Ghana's agricultural sector. This study evaluates the effectiveness of risk-management strategies in reducing financial instability among stakeholders. A quantitative research design was utilised, employing structural equation modelling (SEM) to analyse survey data from agricultural firms and financial institutions. These findings indicate that MPRM significantly improves FRM, suggesting that effective market risk management bolsters financial stability. Furthermore, IRM exhibited a partial mediating effect, indicating that strong institutional frameworks enhance financial resilience. The findings indicate that the role of institutions in mitigating financial risk is essential, supporting Institutional Risk Theory and Risk Management Theory while contesting Agency Theory, which emphasises shareholder-centric risk strategies. This study presents originality through the integration of institutional risk as a mediating mechanism, providing new insights into the risk dynamics within emerging economies. Practical implications include the enhancement of regulatory policies, the improvement of financial literacy programs, and the adoption of structured hedging strategies to stabilise agricultural financial markets. These findings enhance the discussion of risk management policies, regulatory interventions, and financial sustainability in developing economies.
KEYWORDS:
Market and Price Risk Management, Financial Risk Management, Institutional Risk, Structural Equation Modeling, Agricultural Finance
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