bluuebunny/crossref_metadata_2025 huggingface dataset:
The survival potential of companies placed into administrative receivership
Authors: Hamilton Robert , Howcroft Barry , Liu Zhonghua , Pond Keith
Published: June 2007

Outlines the UK law on insovency and asks whether the financial ratios banks use to assess credit worthiness can discriminate between the companies placed in administrative receivership (AR) by their lending banks which can or cannot be rescued. Applies both linear discriminant analysis and logistic regression to samples of UK companies placed into AR in 1998, explains the methodology and shows broadly similar results from the two methods; and a predictive accuracy of 85‐90 per cent for the rescued companies and 55‐60 per cent for the failures. Analyses the key ratios for survival in more detail, looking at debtor turnover, the gearing ratio and the current ratio. Recogises the limitations of the study but sees it as a promising approach to predicting survivability.
Can we still find long‐term care financing without buying a policy, and do we want to?
Authors: Carney Robert J. , Morrison Dianne R. , Graham Lise , Morrison Ryan
Published: June 2007

Reports that under a third of the increasing numbers of US citizens needing long‐term care (LTC) in a nursing home pay their own fees; and that Medicaid (health programme for the poor) meets over half of LTC costs. Describes the rules applied to qualify for Medicaid LTC payments, the growth of “Medicaid estate planning” to shield the income/assets of the middle classes so that they can qualify and the actions taken by the government to restrict misuse of Medicaid and reduce its costs. Explains methods which are still being used to protect middle class income/assets without losing Medicaid eligibility; and the alternative of private LTC insurance, including its tax implications. Discusses efforts to develop a partnership between Medicaid and the insurance companies in some states; and the pros and cons of the plans available for both individuals and the government.
Financial planning, managers, and college students
Authors: James Joe , Hadley Leavell W. , Maniam Balasundram
Published: June 2007

Reports that few Americans plan financially for their retirement and outlines the possible strategies for doing so, referring to relevant research, e.g. company sponsored pension plans, individual retirement accounts and dependence on social security. Surveys students before and after financial planning instruction to identify any attitude changes. Finds that many had no idea of how to calculate the funds needed to meet their expectations initially, but that after their finance course they became more realistic about their requirements. Concludes that more training in retirement planning is needed for the general public, urges workers, employers and acacdemics to respond to calls for further research.
Evaluating the productive efficiency and performance of US commercial banks
Authors: Barr Richard S. , Killgo Kory A. , Siems Thomas F. , Zimmel Sheri
Published: June 2007

Reviews previous research on the efficiency and performance of financial institutions and uses Siems and Barr’s (1998) data envelopment analysis (DEA) model to evaluate the relative productive efficiency of US commercial banks 1984‐1998. Explains the methodology, discusses the input and output measures used and relates bank performance measures to efficiency. Describes the CAMELS rating system used by bank examiners and regulators; and finds that banks with high efficiency scores also have strong CAMELS ratings. Summarizes the other relationship identified and recommends the use of DEA to help analysts and policy makers understand organizations in greater depth, regulators and examiners to develop monitoring tools and banks to benchmark their processes.
Changing UK stock market sector and sub‐sector volatilities, 1968‐2000
Authors: Black Angela , Buckland Roger , Fraser Patricia
Published: June 2007

Points out that the decline in international economic differentials makes country effects less important and sector effects more important in managing equity funds; but that there is little research on sector and sub‐sector specific risks. Presents a study of sector and sub‐sector volatility in the UK 1967‐2000, explains the methodology, plots the lagged 12‐month moving average of the annualized standard deviation for market, sector and sub‐sector returns; and relates it to economic events and the US pattern. Analyses further and finds that most of the time series variation in total variance is due to changes in market and sub‐sector variance. Compares the volatility of individual sectors and discusses the implications for portfolio risk and diversification. Considers consistency with other research, the underlying reasons for the findings and opportunities for further research.
Interpretation of modelling results in data envelopment analysis
Authors: Krivonozhko Vladimir E. , Utkin Oleg B. , Volodin Andrei V. , Sablin Ilia A.
Published: June 2007

Refers to various types of data envelopment analysis (DEA) literature and puts forward a technique aimed at helping managers to visualize the results of DEA modelling without loss of mathematical rigour. Explains how DEA optimization models can determine different points on the frontier and applies the method to analyse the efficiency of 150 Russian banks in Sptember 1998. Illustrates the results and describes their multiple dimensions in words.
Linking corporate governance to firm behaviour and performance: the case of Korean chaebols viewed as a leveraged CMS firm
Authors: Lee Keun
Published: June 2007

Places Korean chaebols (i.e. family‐owned conglomerates) in the context of organizational theory, characterizes them as leveraged controlling minority structure firms and discusses the behavioural consequences of this. Examines their long term performance in terms of diversification/changinb business environment, aggressive investment drive and the effects of management by one man. Considers the necessary conditions for efficient corporate governance and relates them to various Korean reforms, e.g. to protect minority shareholders. Summarizes the findings of the study and briefly considers their implications.
Issues and remedies in Korean business restructuring
Authors: Woo Lee Sang , Kang Sung , Park Kang H.
Published: June 2007

Argues that increased insolvencies in Korean firms following the 1997 Asian financial crisis were due to low profitability and refers to relevant research on insolvency and failure prediction. Explains and discusses the private and legal types of restructuring open to Korean firms in trouble, pointing out that owners may use more than one type and thus cause losses and delays. Suggests that the courts should be able to determine whether firms require a composition or a corporate reorganization, develops a mathematical model to distinguish between them and tests it on 1997‐1998 data demonstrating a 70 per cent plus level of accuracy. Analyses the share price response to firm restructure and shows that differences depend on the financial condition of the firm: not the type of restructure. Calls for changes in the bankruptcy law to either unify the two types of legal restructure or to allow the courts to assign the type.
Exploring real exchange rate effects on trade balances in Thailand
Authors: Brahmasrene Tantatape , Jiranyakul Komain
Published: June 2007

This study investigates the impact of real exchange rates on the trade balances between Thailand and its major trading partners. Previous empirical evidence gave mixed results of the impact of real exchange rates on trade balances. In this study, Augmented Dicky‐Fuller and Phillips‐Perron tests for stationarity followed by the cointegration tests are implemented. All variables in the model are nonstationary but cointegrated. In cointegrating regressions, biases are introduced by simultaneity and serial correlation in the error. The specification that deals with these problems is the non‐linear specification of Stock and Watson (1989). By using this non‐linear model as modified by Reinhart (1995), the results show that the impact of real exchange rates (Thai baht/foreign currency) on trade balances is significant in most cases. Therefore, the generalized Marshall‐Lerner condition seems to hold. Furthermore, the results show that the real exchange rates play a more important role in the determination of the bilateral trade balances than other factors. Since the real exchange rate variable plays a major role in this study, the policy recommendation is to prevent exchange rate misalignment. A policy that can neutralize the changes in nominal exchange rates and relative prices should be introduced to prevent further deterioration of the trade balance.
Managing strategic exchange rate exposures: evidence from UK firms
Authors: Bradley Katrina , Moles Peter
Published: June 2007

The effect of exchange rate movements on firm value is important to firms engaged in international transactions. These accounting exposures can be managed using financial instruments. However, the competitive or strategic effects that create economic exposure require firms to adopt a strategic approach. This paper reports on the extent to which large, publicly‐listed UK firms adopt a strategic approach to the management of exchange rate risk. Unlike earlier studies, the results indicate the widespread use of a range of operational hedging techniques. A significant proportion of firms are also found to incorporate currency risk management as a factor in decisions made by their operating departments. However, the study also indicated considerable variation in the application of operational techniques between firms and industry sectors.
The organisation of foreign exchange risk management: a three‐country study
Authors: Belk P.A.
Published: June 2007

This paper reports on some of the results obtained from three contemporaneous in‐depth studies conducted with multinational corporations in the UK, the US and Germany. It focuses on the organisation of foreign exchange risk management, in particular the goals of exchange risk management, the centralisation of decision making, and the nature of the decision makers themselves. Whilst bearing in mind the limitations of the survey technique, which of necessity limited the size of each of the three samples, the results represent confirmation of the risk‐averse nature of multinationals, the effect of size on centralisation of decision making, and the pervasiveness of the treasurer as a decision maker.
Why firms in the UK use interest rate derivatives
Authors: Adedeji Abimbola , Baker Richard
Published: June 2007

Evidence reported by Geczy, Minton and Schrand (1997) showed that foreign exchange risk had a significant influence on the use of currency derivatives but that interest cover and financial leverage did not. In this study, we suggest that the reason why foreign exchange risk was significant but interest cover and financial leverage were not significant in the evidence was because currency derivatives were used to measure the dependent variable. We verify the validity of this suggestion by testing the influence of interest cover and financial leverage on the use of interest rate derivatives. Our sample comprises 140 firms in the UK, 48 of which use interest rate derivatives. Evidence observed shows that interest cover and financial leverage have a significant influence on the use of interest rate derivatives and that foreign exchange risk does not. We also compare the previous evidence referred to above with our results to determine whether there is a difference between the factors that motivate firms to use currency derivatives or interest rate derivatives. The result of the comparison indicates that dependence on overseas product and capital markets, tax, institutional shareholding and economies of scale are the factors that motivate firms to use currency derivatives. The result also indicates that high interest cover (i.e. interest/profit before interest and tax)or total debt ratio, economies of scale and directors’ shareholding are the factors that motivate firms to use interest rate derivatives.
Financial buyers in Takeovers: focus on cost efficiency
Authors: Frydman Halina , Frydman Roman , Trimbath Susanne
Published: June 2007

This paper examines whether financial buyers are more likely to initiate takeovers of inefficient firms. We show that they indeed are and thus conclude that takeovers by financial buyers play a potentially beneficial role in the allocation of corporate assets in the US. economy. Our analysis of determinants of takeovers initiated by financial buyers uses an application of the methodology developed in Trimbath, Frydman and Frydman (2001). In order to illustrate efficiency enhancements introduced by financial buyers, we select Forstmann Little’s acquisition of General Instrument for a brief case study. We show that their aggressive programs of cost management substantially improved the efficiency of General Instrument. Moreover, it allowed General Instrument to expand research and development to become the global leader in high definition television.
Utility sector mutual funds: sources of performance and dividend policy implications
Authors: O’Neal Edward S. , Page Daniel E.
Published: June 2007

We examine the sources of performance for a sample of mutual funds that invest primarily in utility companies. Given recent deregulation developments in the utility industry and the sub‐market performance of utility stocks in the 1990s, we hypothesize that utility funds may be considering alternatives to traditional high‐yielding electric utility stocks. Although there is anecdotal evidence that utility funds may be tilting their focus away from electric utility stocks, we find that utility mutual funds as a group are no more or less heavily invested in utility stocks today than they have been over the past 10 years.
Harmonization of international taxation: the case of interlisted stocks
Authors: Graham Steven , Pirie Wendy L.
Published: June 2007

The fact that stocks going ex‐dividend decline in price by less than the dividend amount is theoretically attributed to the differential taxation of dividend and capital gains or the differential taxation of investor groups. NYSE, Amex and Toronto Stock Exchange listed stocks, and stocks interlisted on these three exchanges, are examined to infer the tax jurisdiction of the marginal investor. The stock price changes relative to the dividends are consistent with a tax clientele effect. Further, the stock price changes are plausible given the tax rates. Ex‐dividend day behavior is different for non‐interlisted stocks on all three exchanges, suggesting each exchange has a different tax clientele. Canadian firms interlisted on US exchanges exhibit ex‐dividend day behavior consistent with the appropriate US exchange’s non‐interlisted stocks, suggesting that the marginal investors in these stocks are American.
The effect of exchange rate expectations on market share
Authors: Huang Jui‐Chi , Brahmasrene Tantatape
Published: June 2007

This study examines the impact of expectations on the market share mechanism. The dynamic strategic pricing behaviors in the short‐run and the long‐run are also explored. The exchange rate expectations are incorporated into a switching cost model via the method of exchange rate pass‐through on product‐specific and country‐specific approach. By using the time series techniques, the results of the system estimations prove that the market share mechanisms are weakened by exchange rate expectations in open economies. Furthermore, not only is the degree of exchange rate pass‐through higher in the short‐run than in the long‐run but also many cases of pair‐wise rivalry are found. An improved understanding of the effects of exchange rate movements on foreign exporters pricing and pass‐through relations from this study may enhance competition in international markets.
Asian financial crisis: the pre‐ and post‐crisis analysis of Asian equity markets
Authors: Chatterjee Amitava , Felix Ayadi O. , Maniam Balasundram
Published: June 2007

This study adds to the ongoing analysis of the long‐term impact of Asian financial crisis on the stock markets of eight Asian‐Pacific countries. Using current data to capture postcrisis behavior of returns, multivariate cointegration analysis reveals that a cointegrating relationship exists among the markets that transcend the financial crisis. Both vector error correction (VEC) and Granger causality tests demonstrate the profound effect of financial crisis in Korea on the returns of other countries. Granger causality tests further reveal that the events surrounding the crisis in Thailand and Indonesia largely dictate their own short‐run returns behavior since the advent of the crisis. Compared to earlier period, the post‐crisis era also experiences a closer relationship among the index returns of Hong Kong, Korea, and Singapore and a heightened degree of convergence among the returns of Asian markets.
Nonlinear dynamics in multinational financial data
Authors: Tsoukalas Dimitrios , Darayseh Musa , Waples Elaine
Published: June 2007

We test for the presence of non‐linear dynamics in real stock return, in the American, British, and Japanese equity markets. Evidence on non‐linearities will have important implications for financial analysts. The results provide evidence of nonlinear structure in stock returns, in the three markets, suggesting that linear models, such as Ordinary Least Squares or Vector Autoregressive (VAR), may not always be appropriate for analyzing data.
Bank holding company expansion into nonbank functions: is the rise in systematic risk rewarded?
Authors: Pat Obi C. , Emenogu Augustine
Published: June 2007

This study provides evidence regarding the performance of bank holding companies (BHC) following a series of deregulatory measures by the United States Congress. To compare performance of commercial banks before and after expanding their operations to nonbank functions, a set of hypotheses addressing BHC risk and return characteristics are proposed. Empirical results are mixed. Total risk dropped after expansion. Market risk, on the other hand, rose substantially in post‐expansion time. When returns are adjusted for risk, a marginal improvement in performance is achieved.
Corporate failure for manufacturing industries using firms specifics and economic environment with logit analysis
Authors: Darayseh Musa , Waples Elaine , Tsoukalas Dimitrios
Published: June 2007

The purpose of this paper was to determine whether a model utilizing a number of economic variables in combination with financial ratios results in a model superior to the traditional models including the financial ratios alone. A sample of 110 manufacturing companies which had become bankrupt between 1990 and 1997 were identified from the F & S Index and matched to 110 non‐failed companies on the basis total assets, financial statement date and four digit industry code. The proposed model predicted correctly 87.82 and 87.50 percent of the estimation and holdout samples, respectively. The significance of the coefficients in each year’s model was evaluated by using the t‐statistic corresponding to each coefficient’s value. The overall models are significant at ∝‐level of 0.05.
Green accounting in developing countries: the case of U.A.E. and Jordan
Authors: Jahamani Yousef F.
Published: June 2007

Research presented in this paper focuses on three environmental aspects, environmental awareness, environmental involvement, and environmental reporting. Developed countries have achieved a lot of progress in these fields. Developing countries such as Jordan and U.A.E. are still in their early stages. Two samples of corporate decision‐makers in these countries were utilized to examine the above aspects. The results show that they are aware of environment protection issues, but their commitment to environment protection is still low. Few of them report their environment performance. The results of Mann‐Whitney test show that there is no difference between Jordan and U.A.E. in terms of circumstances leading to environmental awareness, environmental awareness and involvement.
Measuring risk in the Greek bond market an alternative approach
Authors: Artikis Panayiotis G.
Published: June 2007

The capital asset pricing model, using as an approximation of the market portfolio the General Index of the Athens Stock Exchange, has been applied extensively to measure the risk of the bond mutual funds operating in the Greek financial market. This article argues that the General Index of the Athens Stock Exchange cannot approximate the market portfolio and proposes an alternative index. In turn, the proposed Bond Index is tested using the daily returns of the bond mutual funds operating in the Greek financial market. The proposed index proved to be a very good approximation of the Greek bond market. Besides, this index approximates the market portfolio much better than General Index of the Athens Stock Exchange.
An empirical investigation of the traditional and the clean surplus valuation models
Authors: Karathanassis G.A. , Spilioti S.N.
Published: June 2007

Early theoretical work on equity valuation suggests that equity prices are determined by variables such as dividends and growth in dividends. However, these “traditional” views have been challenged by recent studies that seem to indicate that equity prices are determined by book value and discounted future abnormal earnings. This paper employs panel data methodology and equity prices from Athens Stock Exchange empirically to compare the performance of the traditional and the more recent models of equity valuation. The results show that the performance of the Ohlosn (1995) model is quite similar to that of the traditional models even though in some cases Ohlson’s model performance appears to be superior.
Mean reversion of size‐sorted portfolios and parametric contrarian strategies
Authors: Gropp Jeffrey
Published: June 2007

Evidence of mean reversion in U.S. stock prices during the post‐World War II era is mixed. I find that using the standard portfolio formation method to construct size‐sorted portfolios is inadequate for detecting mean reversion. Using alternative portfolio formation methods and additional cross‐sectional power gained from size‐sorted portfolios during the period 1963 to 1998, I find strong evidence of mean reversion in portfolio prices. My findings imply a significantly positive speed of reversion with a half‐life of approximately three and a half years. Parametric contrarian investment strategies that exploit mean reversion outperform buy‐and‐hold and standard contrarian strategies.
Intangible assets and stock trading strategies
Authors: Zhang Duo
Published: June 2007

Hall (2001a) argues that the value of intangible assets can be inferred from firms’ stock market value and the value of tangible assets, which suggests rational valuation in the market. This paper investigates the relationship between firms’ future stock returns and their inferred intangibles and indirectly tests Hall’s hypothesis by using various trading strategies. It is found that the inferred intangibles have predictive power for stock returns, which might be because of mean‐reverting misvaluation by the stock market; and the way the inferred intangibles predict stock returns is consistent with the three‐factor model of Fama and French (1992). However, I find that the predictive power of inferred intangibles is consistent with market inefficiency, rather than a rational premium for distress risk related to the book‐to‐market equity ratio. Thus the intangible assets hypothesis of Hall does not hold and the discrepancy between market equity and book equity suggests market inefficiency.
Hedging strategies using LIFFE listed equity options
Authors: Nikolaos Dritsakis , Christos Grose
Published: June 2007

Ex ante tests of the efficiency of the London options market explain alternative hedging
strategies to fund managers who seek to comprehend the opportunities in the options markets
and profit by potential market inefficiencies. Over and under valued options were
used to form hedge portfolios, which were mostly positive indicating potential inefficiencies
in LIFFE. Therefore options appear to incorporate the role of an investment strategy
on their own and not only as a hedge against positions in the underlying stocks while the
Black‐Scholes formula proved to be an easily computed and implemented way to make
above normal, zero risk profits. This paper also confirms the ability of a weighted implied
standard deviation to explain future volatility more accurately than historical volatility by
use of regression analysis.
Dividend smoothing and optimal re‐investment
Authors: Fairchild Richard John
Published: June 2007

Lintner’s (1956) survey revealed that managers are concerned about dividend signalling over time, and adopt a smoothing policy. In addition to signalling, dividend policy may affect a firm’s re‐investment opportunities, particularly if it is capital constrained. In this paper, we examine the interaction between dividend smoothing/signalling and optimal re‐investment. We develop a dividend policy model that considers both an optimal level of dividends (and re‐investment) at each point in time, and optimal smoothing over time. Our model provides both theoretical insights, and provides a practical management tool for dividend policy.
Investigating bank structure of an open petroleum economy: the case of Saudi Arabia
Authors: Essayyad Musa , Madani Haider
Published: June 2007

This article investigates concentration, efficiency, and profitability of commercial banks operating in Saudi Arabia, which is considering acceding to the World Trade Organisation whose rules on financial services liberalisation could pose a competitive challenge to local banks. We use regression analysis to investigate the underlying determinants of Saudi bank concentration, efficiency, and profitability. The significance of the study stems from the conventional premise that highly concentrated banking or credit market introduces inefficiencies that would harm firms’ access to credit thus hindering economic growth. If banks were found to be highly concentrated and hence inefficient, then the relevant policy question that should be addressed by Saudi Arabian policy makers is what should be done to alleviate the situation. Empirical results show that Saudi banking market is highly concentrated, and healthy competition through the Saudi adoption of corrective measures would ease the problem. The Saudi government may like to consider concurrently joining the WTO, and allow non‐banking institutions to enter into brokerage business, offer financial products and services (investment banking, brokerage, and portfolio management), and compete with commercial banks through fair participation in auctioning of government securities.
Development and performance of domestic and foreign banks in GCC countries
Authors: Islam Mazhar M.
Published: June 2007

An analysis of domestic and foreign banks’ internal performance by investigating their financial ratios shows that banks in Bahrain, Oman, the United Arab Emirates (GCC countries) have improved their performance over the past several years. Commercial banks in these GCC economies are well capitalised and have adopted modern banking services. Most banks are found to be financially sound by international standards, measured by all key financial ratios. Their operations can be characterised by satisfactory asset quality, more than minimum BIS capital/asset ratio, and high level of profitability. External performance is measured by evaluating banks’ market shares, regulatory compliance and public confidence; and most of the banks show better progress. Harmonization of the banks’ supervisory and accounting systems towards IAS has contributed to the safety and competitiveness of the banking sector.
China’s ageing, risk of the elderly and accounting for aged care
Authors: Zhang Jane
Published: June 2007

This paper analyses the risks of the elderly and needs for aged care in China as a major social problem faced by the Chinese government in the 21st century, suggests the development of aged care accounting as a tool of providing information for policy‐makers, and outlines a general framework for such a development. The role of accounting in addressing aged care issues is recognised with a view to expanding social and demographic dimensions of accounting. Social and economic developments in China have increased people’s life expectancy which is leading to rapid population ageing. Meanwhile, the economic reform has largely dismantled the infrastructure of the traditional socialist care system. Consequently, there is growing concern about the risk and financing of aged care. The “one couple with one child” policy in China has also brought up the issue whether China will be able to afford the enormous amount of cost that aged care needs in the 21st century. The emergence of accounting for aged care is likely to provide information which can be used to address these demographic issues.
When should an investor buy a newly issued stock?
Authors: Boyer Carol Marie
Published: June 2007

This study documents the amount of time it takes for Initial Public Offerings (POs) to make the transition from underperformance to meeting or exceeding the return for firms of similar size. The study looks at yearly holding period lengths of 1 to 10 years. The results of this study show that if purchased on issuance date, IPOs need to be held for over five years in order to make a return equal to the market.
Market reaction to the expiration of IPO lockup provisions
Authors: Brau James C. , Carter David A. , Christophe Stephen E. , Key Kimberly G.
Published: June 2007

Initial public offering (IPO) lockup agreements prevent insider sale of shares for specified periods of time (often 180 days). This study investigates share price reactions at and around the time the lockup agreements expire. Results indicate statistically significant negative abnormal returns in the event window surrounding the expiration date. The results are consistent with informational asymmetries and decreasing incentive alignment between insiders and general shareholders. In addition, multivariate analysis identifies several variables that help explain these abnormal returns.
An examination of underperformance and liquidity of initial public offerings by high growth stocks on the German Neuer Markt
Authors: Burrowes Ashley , Feldmann Horst , Feldmann Mareile , MacDonald John
Published: June 2007

Eckbo, Masulis, & Norli (2000) question previous examination of initial public offering (IPO) underperformance with the keen argument that the increase in the number of traded shares and the infusion of equity reduce two significant premia in the stock’s return, namely, liquidity risk and financial risk. The new market for high (expected) growth stock in Germany is examined for evidence of underpricing, underperformance, and liquidity improvements during the first two complete years of operation – 1998 and 1999. The initial trading period examines the offering day and also the first ten days of trading (for the investor who can not get allocation but enters the secondary market). The postissue performance study period is taken as the 5‐day period one‐year after the IPO. Using regression of four underpricing measures upon issuing firm characteristics deemed important from the extant literature, we seek to explain the degree of underpricing discovered. We find that substantial underpricing occurs and performance is high one year later, even adjusted for the German market return for the period or the firm‐specific sector performance for the same period. Trading dwindles for most stocks after the offering day. One year later, the trading of the stock is even lower. We do find that the more active the trading in the initial period, the greater the returns and trading one year after.
Venture capital for China: opportunities and challenges
Authors: Dauterive Jerry , Fok Wing
Published: June 2007

Although many recognize China’s vast market potential, the challenges of doing business in an economy that was largely closed to market forces for a half century must be recognized. This paper examines the role of venture capital in China’s economic development. The potential impact of a healthy venture capital market is immense, but this healthy market is far from the reality in China. The major obstacles that must be addressed include the state control of vital institutions and regulation of economic activity, including restrictions on the flow of capital and currency.
Brokers, bureaucrats and the emergence of financial markets
Authors: Stringham Edward , Boettke Peter
Published: June 2007

When managers wish to raise external capital, investors must be able to trust that brokers and managers will not cheat them out of their money. To what extent is government regulation necessary for the existence of advanced financial transactions and, for that matter, the well functioning of markets in general? A growing literature argues that strong state enforcement is needed to foster financial markets (La Porta et al, 1997, Glaeser et al, 2001). The problem of contractual performance and, more generally, the problem of social order are some of the most enduring questions in the social sciences. German sociologist Georg Simmel may have put it most eloquently in his 1910 essay when he asked, “How is Society Possible?” but the question is rooted in a discourse dating back at least to Thomas Hobbes’s (1651) Leviathan. Hobbes contended that social order was impossible without external enforcement, and in a similar manner many modern commentators in law and finance maintain that the state must play an active role for markets to function. In his study of emerging financial markets in post‐Soviet Russia, Timothy Frye (2000:2) argues that, “politics underpins social order”.
Oil and currency factors in Middle East equity returns
Authors: Amoateng Kofi A. , Kargar Javad
Published: June 2007

The desire to increase investor interest in emerging markets has motivated many studies of return and risk characteristics of equity prices in these markets. Using data from January 1999 to December 2002, we examine the dynamic relationships between oil, currency, and stock prices in the four major markets in the Middle East. Three of the four are highly correlated with the major stock markets. The potential for diversifying in Middle East markets is limited. The Egyptian and Jordanian markets, on one hand, and the Israeli and Saudi markets, on the other, are marginally integrated. While Israeli shekels significantly explain their equity prices, crude oil futures prices fairly explain oil‐rich Saudi and Egyptian equity prices. We conclude that it takes a long time for crude oil futures prices to reach equilibrium with stock prices in Israel when there is a shock to the system. However, it takes relatively a short time for crude spot oil prices and currency price to reach equilibrium with stock prices when there is a shock in the system of Saudi Arabia or Egypt. Our results suggest that, in the short and long term, investor decisions in these markets are influenced by oil and currency prices.
China stock price reactions to financial announcements: evidence from segmented markets
Authors: Huang Xiaowu
Published: June 2007

This paper examines empirically Chinese stock price reactions to financial announcements for 2002. We find that B share prices react more strongly to negative financial announcements than A shares. The announcements can lead to excess returns. One explanation is that the markets are segmented by the inconvertibility of China’s currency, as well as by the structural change of investors. Meanwhile China listed companies need to improve their transparency and disclosure.
Bank merger and bank stock volatility: a post‐announcement analysis
Authors: Boon Tan Hui , Wooi Hooy Chee
Published: June 2007

The collapse of the Malaysian exchange rate and the stock market during the Asian financial crisis had elevated uncertainties in the financial market and increased the instability of the bank stock returns. Whilst it is commonly known that the crisis rooted from a complex interplay of various factors, there seemed to exist some fundamental and systemic problems in the banking sector. Besides, the challenges from the wave of financial globalization also urged the authorities to conduct structural enhancement in the sector. This paper briefly outlined the main aspects of the Malaysian bank merger program, and tracked as well as evaluated the effects of the program on the volatility of the Malaysian bank stock returns. It was found that the proposed merger did bring about stability for the banks’ stock prices and returns, especially after the initial consolidation announcement of 29 July 1999 based on the estimations of conditional variances. The analysis also documented a persistency positive risk returns tradeoff and asymmetrical news effects in the bank stocks before the announcement. After the announcement, bank stocks clearly enjoyed a huge reduction in the volatilities and the asymmetrical news effects.
Measuring liquidity risk in a banking management framework
Authors: Gabbi Giampaolo
Published: June 2007

Stresses that recent changes in financial markets have involved the payment system and the banking processes directly devoted to short term forecasting. Proposes that financial flows control systems must be adopted that can measure performance and liquidity risks consistent with the models often used for credit and market risks.
The effects of IT expenditures on banks’ business performance: using a balanced scorecard approach
Authors: Kim Chang‐Soo , Davidson Lewis F.
Published: June 2007

This study uses the balanced scorecard(BSC) framework to assess the business performance
of information technology (IT) expenditures in the Korean banking industry. The relationship between IT expenditures and bank’s financial performance or market share was significantly different depending upon the level of IT. For banks that maintain high IT level, IT expenditures appear to have (1) increased labor productivity, (2) decreased payroll expenses and increased operating and total administrative expenses, (3) increased market share, and (4) increased revenue and profit. The evidence suggests two important practical implications. First, if banks effectively use IT strategy to improve competitive advantage, they are likely to reduce payroll expenses and increase market share as well as profitability. Second, this study posits that bank managers should consider using a balanced scorecard approach to measure business performance of both IT and management strategies. Thus, evidence of this study provides guidance for achieving competitive advantage in the banking industry.
Performance evaluations based on financial information: how do managers use situational information?
Authors: Rose Jacob M.
Published: June 2007

Organizations regularly use budgets as benchmarks for performance, and budgets represent a key control feature for almost every organization (Brown and Solomon (1993)). Research has demonstrated that outcome effects are pervasive in performance evaluation processes, and that performance evaluators do not interpret situational information consistently. An experiment is conducted to examine the effects of situational information on managers’ performance and ability attributions under conditions of favorable and unfavorable financial outcomes. The findings indicate that when financial outcomes are unfavorable, outcome effects dominate the performance evaluation process, and situational information has little effect on performance evaluations. The results of cognitive load manipulations indicate that situational information is not ignored, but rather discounted when financial outcomes are favorable.
Choice of relative performance evaluation for strategic reasons
Authors: Janakiraman Surya N.
Published: June 2007

This paper presents a new perspective for the use of relative performance evaluation. It argues that firms may want to evaluate their CEOs relative to their competitors for strategic reasons. It considers a competitive industry and with the help of a multiple agency model arrives at a set of hypotheses regarding the weights on firm performance and industry performance. These hypotheses do not have an analogue in a traditional single agency model framework. The empirical hypotheses relating the compensation contract parameters to the cost and market structures of the industry are tested with cash compensation data from 272 firms over a period of 18 years. Some of the empirical hypotheses find support from the data. Finally the paper also investigates whether the data supports alternate hypotheses arrived at by considering competing explanation for the use of RPE based on Holmstrom’s informativeness criterion.
Performance measurement and organizational effectiveness: bridging the gap
Authors: Henri Jean‐François
Published: June 2007

The aim of this paper is to bridge the gap between the organizational effectiveness (OE) models developed in the field of organizational theory and the performance measurement models presented within the management accounting literature. The specific evolution of these two complementary streams of research stemming from two different fields of research are reconciled and integrated by analyzing their convergences and divergences. As a response to theoretical and practical pressures, the evolution of OE models reflects a construct perspective, while the evolution of performance measurement models mirrors a process perspective. Performance measurement models have moved from a cybernetic view whereby performance measurement was based mainly on financial measures and considered as a component of the planning and control cycle to a holistic view based on multiple nonfinancial measures where performance measurement acts as an independent process included in a broader set of activities. This paper contributes to the performance measurement literature by establishing the origins of the performance measurement models and by shedding light on unexplored fertile areas of future research.
Some lessons from price bubbles and market crashes in Southeast Asia
Authors: Ang James S. , Tourani‐Rad Alireza , Yu Jean C.
Published: June 2007

In this paper we provide an in‐depth comparative analysis of the shares of listed firms in three Southeast Asian stock markets, namely, Indonesia, Malaysia and Thailand, that had experienced the most violent fluctuations in the 1997 market crash. Our purpose is to present broad lessons from the experiences of these countries that could be helpful to understand the behavior of stock markets under severe financial crisis. Several new results are found: (1) There were local price bubbles prior to the market crash in each country. (2) Price momentum may have contributed to the share price increase prior to the crash but not during the period of crisis or the market reversal. (3) The price bubbles in these countries were mainly among the most liquid and most volatile shares. (4) Asset liquidity was found to cause returns to behave differently in quiet versus extraordinary period.
Analyst earnings forecast trends in Pacific Rim countries
Authors: Ciccone Stephen J. , Etebari Ahmad
Published: June 2007

This study analyzes trends in analyst forecast properties from 1987 through 1998 in the United States and seven Pacific Rim countries: Australia, New Zealand, Taiwan, Hong Kong, Japan, South Korea, and Thailand. Analyst forecast properties in the United States have become less dispersed, more accurate, and less optimistic during the sample period. Similar trends exist in Australia and New Zealand, but not in the other sample countries. In contrast, the forecast property trends of most Asian countries are the exact opposite. For example, in Japan and Korea, forecast dispersion, forecast error, and optimism all significantly increase over the sample period. The results suggest that Asian firms do not play the U.S.‐style earnings game in which managers guide analysts toward a certain target number and then report earnings that beat the target.
Efficiency versus risk in large domestic US banks
Authors: Fan Linbo , Shaffer Sherrill
Published: June 2007

This paper studies the profit efficiency of a sample of large U.S. commercial banks and explores how this performance varies with selected measures of bank risk reflecting aspects of credit risk, liquidity risk, and insolvency risk. We use a standard profit function and the stochastic frontier approach, and compare two standard functional forms – Cobb‐Douglas and translog – to assess the tradeoff between precision and parsimony. We find that profit efficiency is sensitive to credit risk and insolvency risk but not to liquidity risk or to the mix of loan products.
Bank profit warnings and signaling
Authors: Jackson Dave , Madura Jeff
Published: June 2007

Bank profit warnings represent a milder form of negative news than a bank failure. Yet, they may contain signals about a bank or its rivals because the information is transmitted when the bank believes that the market is overly optimistic about its future earnings. Thus, the profit warning serves as a means by which insiders of the bank can reduce the asymmetric information between the bank’s insiders and its investors. We find that banks experience negative valuation effects in response to their profit warnings. The banks’ profit warnings result in significant negative valuation effects for its corresponding rival banks, which implies that the warning carries valuable information about banking industry conditions. However, the effects on rivals are attenuated since the passage of Regulation Fair Disclosure (RFD). This implies that investors may be relying on more transparent sources of information about individual banks rather than relying on one bank’s warning as a signal about other banks. Furthermore, bank regulations may allow for more transparent communication by banks than that of nonbank firms.
S&L performance persistence, moral hazard and market discipline
Authors: Sinan Cebenoyan A. , Cooperman Elizabeth S. , Register Charles A.
Published: June 2007

While prior research finds evidence of significant performance persistence in banking, the issue of the determinants of such persistence has rarely been examined. In light of a liberalized thrift takeover market, this study tests for persistence and then attempts to identify its determinants for U.S. thrifts operating during 1989 to 1994. A moral hazard hypothesis for losing persistence is examined, as well as the effectiveness of the takeover market in disciplining persistent losers. Results indicate significant performance persistence, with firms in the sample 16 times more likely to remain in an initial position as a winner, or loser, than to switch. Consistent with moral hazard, persistent losers exhibit low charter values and greater risk‐taking behavior, with the opposite relations for persistent winners. Finally, and perhaps most importantly, persistent losers generally had a significantly higher probability of subsequent takeover, indicating the effectiveness of the takeover market in disciplining poor performers.