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ACRN Journal of Finance and Risk Perspectives
Vol. 2, Issue 2, Dec. 2013, ISSN 2305-7394
TABLE OF CONTENTS
EDITORIAL BOARD
THE INFLUENCE OF FINANCIAL ANALYSTS ON THE UNDERINVESTMENT PROBLEM
Ahmed Marhfor 1, Bouchra M’Zali 2, Jean-Claude Cosset 3
1 Department of administrative studies, University of Quebec in Abitibi-Témiscamingue
2 Department of Finance, ESG/UQÀM Montréal, 315 rue Sainte-Catherine Est, Montréal
3 HEC Montréal, 3000 chemin de la Côte-Sainte-Catherine,
Abstract. In this paper, we investigate whether more analyst coverage alleviates firm’s financing and investment distortions. Using a sample of 44 countries, we find that analyst coverage is positively related to firm’s financing constraints, in accord with the view that financial analysts’ do not reduce information asymmetries between market participants and contribute to efficient capital allocation. Furthermore, our results also indicate that analysts’ activities do not produce different effects depending on the country’s home environment.
Keywords: analyst coverage, firm’s financing constraints, information asymmetry, market efficiency, investment-cash flow sensitivity, financial hierarchy
THE EVOLUTION OF REGULATIONS IN BANKING: A CYCLE BASED APPROACH
Mehmet Hasan Eken 1, Suleyman Kale 2, Huseyin Selimler 3
1 Professor of Banking and Finance at Istanbul Commerce University, Faculty of Commercial Sciences, Department of Banking and Finance
2 Branch Manager at Ziraat Bankasi, Sirinevler Branch
3 Branch Manager at Ziraat Bankasi, Merter Branch
Abstract. The question about the specialness of banks has been the center of debates amongst academicians and regulators over a long period of time as leading to extensive regulations for controlling and supervision of banks. The base regulations, though not legally compulsory, have been those developed and published by Basel Committee since mid-1970s. The main intention of these regulations is to assure globally sound and stable financial systems in individual countries that will eventually lead to a stable economy across the globe. However, the recent financial crisis has proved that the banking regulations have not served as intended and yet they are under major revisions again. In this paper it is intended to investigate the evolution of bank regulations with a particular attention to the scope of banking, capital adequacy and deposit insurance. It will be another focal point of this paper to draw attention to the existence of cycles in the processes of regulations that makes regulations to move between two extremities; tight and loose regulations. In this manuscript these issues are investigated with an analysis of related literature and with specific observation on the evolution of regulations in the USA.
Keywords: bank regulations, capital adequacy, deposit insurance, basel committee.
REPORTING DESIGN – A SYSTEMATIC LITERATURE REVIEW
Christoph Eisl 1, Lisa Falschlunger 1, Peter Hofer 1, Michael Jungert 1
1 Upper Austria University of Applied Sciences, Wehrgrabengasse 1-3, 4400 Steyr, Austria
Abstract. Due to the fact that the quality of decisions is directly linked to the availability and the perception of information, its selection and representation are of major importance in business communication. The purpose of this paper is to identify the current status quo of existing research in the field of information design in business reports (reporting design) in order to cluster empirical contributions and to generate new findings. A systematic literature review consisting of 48 international studies published between 2003 and 2013 was conducted. The extended cognitive fit model from Shaft and Vessey (2006) serves as a research framework. The analysis of its four main perspectives: “External Problem Representation”, “Internal Problem Representation”, “Problem-Solving Task” and “Mental Representation” revealed the following eight literature streams: (1) Tables versus Graphs, (2) Analyses of annual reports, (3) Reporting Guidelines, (4) Knowledge and Skills, (5) Task Type, (6) Task Complexity, (7) Working Memory and Memory Affection, and (8) Information Overload. Based on this literature review a research agenda was developed.
Keywords: Reporting Design, Information Design, Information Perception, Visualization, Tables and Graphs, Information Overload
RISK-ADJUSTED PRICING OF BANK’S ASSETS BASED ON CASH FLOW MATCHING MATRIX
Ihor Voloshyn 1, Mykyta Voloshyn 2
1 PhD, researcher, University of Banking of National Bank of Ukraine
2 Leading specialist, PJSC “Fidobank”, Ukraine
Abstract. To price bank’s assets correctly, it is important to know cost of funds. But funding cost calculation is complicated due to the fact that banks fund long-term assets through short-term liabilities. As a result, assets with a given time to maturity are usually financed by several liabilities with different maturities. To calculate funding cost it needs to know how cash flows are matched between assets and liabilities. For this it`s used cash flow matching matrix or funding matrix. In the paper, a new algorithm of filling of a two-dimensional funding matrix that is based on the golden rule of banking and modified RAROC-approach is proposed. It provides positive definiteness and uniqueness of the matrix. The matrix shows terms to maturity and amounts of liability cash flows which fund the asset cash flow with a given term to maturity. Examples of partially and fully filled matrices are presented. It is proposed an approach to risk-adjusted pricing that is based on this funding matrix and RAROC-approach adapted to cash flows. The developed approach to pricing integrates organically credit and liquidity risks. It takes into consideration expected credit losses and economic capital (unexpected credit losses) for all lifetime of asset cash flows and not one-year period traditionally used in RAROC.
Keywords: asset pricing, funding matrix, economic capital, cash flow at risk, risk-adjusted return on capital (RAROC), cash flow matching, interest rate, asset, liability
FINANCING AND COOPERATION BETWEEN THE PUBLIC ADMINISTRATION AND NON-PROFIT SECTOR IN THE SLOVAK REPUBLIC
Katarina Rentkova 1, Daniela Majercakova 2,
1,2 Comenius University in Bratislava, Faculty of Management
Department of Economics and Finances, Bratislava, Slovakia
Abstract. This paper presents a country specific intake on the cooperation between the public administration and the non-profit sector in the Slovak republic.
Keywords: cooperation, local development, management, municipality, non-governmental organization, non-profit management, civil society, citizens
ACRN Journal of Finance and Risk Perspectives
Vol. 2, Issue 2, Dec. 2013, ISSN 2305-7394
TABLE OF CONTENTS EDITORIAL BOARD THE INFLUENCE OF FINANCIAL ANALYSTS ON THE UNDERINVESTMENT PROBLEM Ahmed Marhfor 1, Bouchra M’Zali 2, Jean-Claude Cosset 3
1 Department of administrative studies, University of Quebec in Abitibi-Témiscamingue
2 Department of Finance, ESG/UQÀM Montréal, 315 rue Sainte-Catherine Est, Montréal
3 HEC Montréal, 3000 chemin de la Côte-Sainte-Catherine,
Abstract. In this paper, we investigate whether more analyst coverage alleviates firm’s financing and investment distortions. Using a sample of 44 countries, we find that analyst coverage is positively related to firm’s financing constraints, in accord with the view that financial analysts’ do not reduce information asymmetries between market participants and contribute to efficient capital allocation. Furthermore, our results also indicate that analysts’ activities do not produce different effects depending on the country’s home environment.
Keywords: analyst coverage, firm’s financing constraints, information asymmetry, market efficiency, investment-cash flow sensitivity, financial hierarchy
THE EVOLUTION OF REGULATIONS IN BANKING: A CYCLE BASED APPROACHMehmet Hasan Eken 1, Suleyman Kale 2, Huseyin Selimler 3
1 Professor of Banking and Finance at Istanbul Commerce University, Faculty of Commercial Sciences, Department of Banking and Finance
2 Branch Manager at Ziraat Bankasi, Sirinevler Branch
3 Branch Manager at Ziraat Bankasi, Merter Branch
Abstract. The question about the specialness of banks has been the center of debates amongst academicians and regulators over a long period of time as leading to extensive regulations for controlling and supervision of banks. The base regulations, though not legally compulsory, have been those developed and published by Basel Committee since mid-1970s. The main intention of these regulations is to assure globally sound and stable financial systems in individual countries that will eventually lead to a stable economy across the globe. However, the recent financial crisis has proved that the banking regulations have not served as intended and yet they are under major revisions again. In this paper it is intended to investigate the evolution of bank regulations with a particular attention to the scope of banking, capital adequacy and deposit insurance. It will be another focal point of this paper to draw attention to the existence of cycles in the processes of regulations that makes regulations to move between two extremities; tight and loose regulations. In this manuscript these issues are investigated with an analysis of related literature and with specific observation on the evolution of regulations in the USA.
Keywords: bank regulations, capital adequacy, deposit insurance, basel committee.
REPORTING DESIGN – A SYSTEMATIC LITERATURE REVIEW Christoph Eisl 1, Lisa Falschlunger 1, Peter Hofer 1, Michael Jungert 1
1 Upper Austria University of Applied Sciences, Wehrgrabengasse 1-3, 4400 Steyr, Austria
Abstract. Due to the fact that the quality of decisions is directly linked to the availability and the perception of information, its selection and representation are of major importance in business communication. The purpose of this paper is to identify the current status quo of existing research in the field of information design in business reports (reporting design) in order to cluster empirical contributions and to generate new findings. A systematic literature review consisting of 48 international studies published between 2003 and 2013 was conducted. The extended cognitive fit model from Shaft and Vessey (2006) serves as a research framework. The analysis of its four main perspectives: “External Problem Representation”, “Internal Problem Representation”, “Problem-Solving Task” and “Mental Representation” revealed the following eight literature streams: (1) Tables versus Graphs, (2) Analyses of annual reports, (3) Reporting Guidelines, (4) Knowledge and Skills, (5) Task Type, (6) Task Complexity, (7) Working Memory and Memory Affection, and (8) Information Overload. Based on this literature review a research agenda was developed.
Keywords: Reporting Design, Information Design, Information Perception, Visualization, Tables and Graphs, Information Overload
RISK-ADJUSTED PRICING OF BANK’S ASSETS BASED ON CASH FLOW MATCHING MATRIX Ihor Voloshyn 1, Mykyta Voloshyn 2
1 PhD, researcher, University of Banking of National Bank of Ukraine
2 Leading specialist, PJSC “Fidobank”, Ukraine
Abstract. To price bank’s assets correctly, it is important to know cost of funds. But funding cost calculation is complicated due to the fact that banks fund long-term assets through short-term liabilities. As a result, assets with a given time to maturity are usually financed by several liabilities with different maturities. To calculate funding cost it needs to know how cash flows are matched between assets and liabilities. For this it`s used cash flow matching matrix or funding matrix. In the paper, a new algorithm of filling of a two-dimensional funding matrix that is based on the golden rule of banking and modified RAROC-approach is proposed. It provides positive definiteness and uniqueness of the matrix. The matrix shows terms to maturity and amounts of liability cash flows which fund the asset cash flow with a given term to maturity. Examples of partially and fully filled matrices are presented. It is proposed an approach to risk-adjusted pricing that is based on this funding matrix and RAROC-approach adapted to cash flows. The developed approach to pricing integrates organically credit and liquidity risks. It takes into consideration expected credit losses and economic capital (unexpected credit losses) for all lifetime of asset cash flows and not one-year period traditionally used in RAROC.
Keywords: asset pricing, funding matrix, economic capital, cash flow at risk, risk-adjusted return on capital (RAROC), cash flow matching, interest rate, asset, liability
FINANCING AND COOPERATION BETWEEN THE PUBLIC ADMINISTRATION AND NON-PROFIT SECTOR IN THE SLOVAK REPUBLIC Katarina Rentkova 1, Daniela Majercakova 2,
1,2 Comenius University in Bratislava, Faculty of Management
Department of Economics and Finances, Bratislava, Slovakia
Abstract. This paper presents a country specific intake on the cooperation between the public administration and the non-profit sector in the Slovak republic.
Keywords: cooperation, local development, management, municipality, non-governmental organization, non-profit management, civil society, citizens