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ACRN Journal of Finance and Risk Perspectives
Vol. 3, Issue 2, June 2014, ISSN 2305-7394
Special Edition - Country Specific Intakes
TABLE OF CONTENTS
Impacts of lower exchange rates on exports, imports and national output of Tanzania
Godfrey Nyamrunda 1 and Cosmas Mbogela 2
1 Hull Business School, UK
2 School of Business, Mzumbe University, Tanzania
Abstract. This paper investigates empirically the long-run and short-run impacts of lower exchange rates on exports, imports and national output of Tanzania for annual recorded period dating from 1990 to 2011. The estimates of the cointegrating equations are obtained using the Vector Error Correction models which allow restrictions to be included to isolate the short run and long run behaviours of the selected variables. The major results shows that lower value of the currency (annual official exchange rate), has led to the increase in exports in the long run while imports have been declining overtime. Also this paper notice that in the long-run, other things being equal, the national output is increasing due to the devalued exchange rate in Tanzania which has lasted for more than twenty years. We follow all time series econometric procedures to measure the stability and robustness of our results and all discussion and conclusions are based on the results obtained from the specified VECM models.
Keywords: Exchange rate, Devaluation, Exports, Imports, VECM, Cointegration, Error Correction Model, Tanzania
JEL classification: O24, F3, F31
An Analysis of the Effects of the Financial Crisis on Enterprise Risk Management in the Canadian Financial Sector
Michael Maingot, Tony Quon and Daniel Zéghal 1
1 Telfer School of Management, University of Ottawa, Canada
Abstract. The effect of the financial crisis on enterprise risk management (ERM) disclosures was examined through a content analysis of the 2007 and 2008 annual reports of Canadian financial corporations listed on the S&P TSX Composite Index. Fourteen types of risk were tracked and categorized by level of risk exposure, risk consequence and risk management disclosures. We found very minor changes in the risk disclosures by Canadian financial corporations listed on the S&P TSX Composite Index from 2007 to 2008, despite plummeting net incomes (except for real estate trusts) and market valuations.
Keywords: Enterprise risk management, Financial crisis, Canadian financial sector, content analysis
Venture Capital Financing in the Republic of Macedonia: What is done and what should be done?
Veland Ramadani 1
1 South-East European University, Macedonia
Abstract. Venture capital represents a very interesting solution for the new and existing small and medium sized enterprises which have interesting and attractive ideas and projects, but are short of finances. The specific importance that lies on venture capital and its impact on small and medium sized enterprises is the fact that they provide much more than money for them. Beside the money they offer advices, experiences and contacts, which can increase the success possibilities of small and medium sized enterprises. This paper provides analyses of the current situation in the Republic of Macedonia related to the development of venture capital - what is done and what should be done? It also gives data on the features of investments made by venture capital funds, established by Small Enterprise Assistance Funds - SEAF from USA (SEAF Macedonia, Small Investment Fund and SEAF Fund for Southern Balkans) as the only funds which provide venture capital in Macedonia. The data are related to the number of investments made in Macedonia, preferred sectors for investments, amounts of invested capital, factors that affected these investments, received benefits of businesses from invested venture capital, level of success achieved from investments etc. In this paper also are given some measures, which should be taken into consideration for the development of venture capital in Macedonia.
Keywords: Business angel, venture capital, venture capital fund, carried interest, management fee, SEAF Funds, Macedonia.
Do Ownership Structures affect Banks’ Performance? An Empirical Inquiry onto Tanzanian Bank Industry
Janeth P. Swai and Cosmas S. Mbogela 1
1 School of Business, Mzumbe University, Tanzani
Abstract. Our inquiry is motivated by the ongoing extensive discussions on the relationship between banks performance and ownership structure which shows mixed results. We use a panel of nine Tanzanian banks from 2000 - 2009. Basing on a range of financial performance ratios and a sample of state and private owned banks in Tanzania, we compare the means and then test for the relationship between bank’s performance and ownership structure with a proper regression set up. On average private owned banks have higher Return on Average Assets and lower Operating Efficiency Ratio while state owned banks have higher Return on Equity and capital adequacy indicators, Equity to deposit Liability and Liquid assets to Deposit Liability. We find little evidence to suggest a linear positive or negative relationship between ownership structure and bank performance in Tanzania. For that reason, ownership alone has no much impact on the bank’s performance.
Keywords: Bank’s performance, Ownership Structure, Tanzania
JEL classification: C51, D58, E32.
Systemic liquidity risk index for Moroccan banking sector
Firano Zakaria 1
1 University of Mohammed V-Agdal, Rabat, Morocco
Abstract. In this paper a new measure of the banking liquidity based on the liquid assets. On the basis of balance-sheet of the banks of the sample, we could detect the cycles of liquidity which characterize the Moroccan banking system and this between 2001 and 2010. The various results obtained made it possible to detect two cycles of liquidity, the first indicating one period of over liquidity, characterized by an abundance of the cushions of liquidities, the other testifying to a contraction in the mattress of liquidity of the banking system. While falling under a prudential macro approach, we were interested in the relation being able to link, the development of the liquidity and the various fluctuations of the macroeconomic framework. For this purpose, we identified several macroeconomic variables likely to influence the development of the banking liquidity, in particular, the economic growth, credit growth, exchange reserve, interbank interest rates, and return of stock market of Casablanca.
Keywords: systemic risk, macro prudential approach and liquidity risk.
JEL classification: C51, D58, E32.
WHAT DOES THE VIX ACTUALLY MEASURE? AN ANALYSIS OF THE CAUSATION OF SPX AND VIX
Merav Ozair 1
1 Department of Finance and Risk Engineering, Polytechnic Institute at NYU, USA
Abstract. We examine the causality relationship between the S&P500 (SPX) and the VIX. Our contention that a circular mechanism which “feeds” itself that can be explained by “cause and effect”, is supported by the empirical findings on the intraday, minute bar, time series of the SPX and the VIX. The findings are supported across different samples and estimation models and show that: (1) the SPX shock to the VIX time series is not only significant but also persistent; (2) the VIX follows a serial pattern of significant reversal (in the first lag) followed by momentum in the subsequent lags (and beyond the first 10 minutes); (3) the VIX endures a “permanent” market impact, while the SPX sustains a “transitory” one; and (4) the SPX shock on the VIX system remains in the system long enough to account for 70% of the variance of the VIX, suggesting a predictive power of the SPX to the current movement of the VIX.
Keywords: causality, Vector Autoregressive (VAR), Volatility Index (VIX), S&P500 Index (SPX), shocks, market impact, reversal, momentum, autocorrelation, cointegration
JEL Classifications: C58; C55; G02; G19
ACRN Journal of Finance and Risk Perspectives
Vol. 3, Issue 2, June 2014, ISSN 2305-7394
Special Edition - Country Specific Intakes
TABLE OF CONTENTS Impacts of lower exchange rates on exports, imports and national output of TanzaniaGodfrey Nyamrunda 1 and Cosmas Mbogela 2
1 Hull Business School, UK
2 School of Business, Mzumbe University, Tanzania
Abstract. This paper investigates empirically the long-run and short-run impacts of lower exchange rates on exports, imports and national output of Tanzania for annual recorded period dating from 1990 to 2011. The estimates of the cointegrating equations are obtained using the Vector Error Correction models which allow restrictions to be included to isolate the short run and long run behaviours of the selected variables. The major results shows that lower value of the currency (annual official exchange rate), has led to the increase in exports in the long run while imports have been declining overtime. Also this paper notice that in the long-run, other things being equal, the national output is increasing due to the devalued exchange rate in Tanzania which has lasted for more than twenty years. We follow all time series econometric procedures to measure the stability and robustness of our results and all discussion and conclusions are based on the results obtained from the specified VECM models.
Keywords: Exchange rate, Devaluation, Exports, Imports, VECM, Cointegration, Error Correction Model, Tanzania
JEL classification: O24, F3, F31
An Analysis of the Effects of the Financial Crisis on Enterprise Risk Management in the Canadian Financial SectorMichael Maingot, Tony Quon and Daniel Zéghal 1
1 Telfer School of Management, University of Ottawa, Canada
Abstract. The effect of the financial crisis on enterprise risk management (ERM) disclosures was examined through a content analysis of the 2007 and 2008 annual reports of Canadian financial corporations listed on the S&P TSX Composite Index. Fourteen types of risk were tracked and categorized by level of risk exposure, risk consequence and risk management disclosures. We found very minor changes in the risk disclosures by Canadian financial corporations listed on the S&P TSX Composite Index from 2007 to 2008, despite plummeting net incomes (except for real estate trusts) and market valuations.
Keywords: Enterprise risk management, Financial crisis, Canadian financial sector, content analysis
Venture Capital Financing in the Republic of Macedonia: What is done and what should be done? Veland Ramadani 1
1 South-East European University, Macedonia
Abstract. Venture capital represents a very interesting solution for the new and existing small and medium sized enterprises which have interesting and attractive ideas and projects, but are short of finances. The specific importance that lies on venture capital and its impact on small and medium sized enterprises is the fact that they provide much more than money for them. Beside the money they offer advices, experiences and contacts, which can increase the success possibilities of small and medium sized enterprises. This paper provides analyses of the current situation in the Republic of Macedonia related to the development of venture capital - what is done and what should be done? It also gives data on the features of investments made by venture capital funds, established by Small Enterprise Assistance Funds - SEAF from USA (SEAF Macedonia, Small Investment Fund and SEAF Fund for Southern Balkans) as the only funds which provide venture capital in Macedonia. The data are related to the number of investments made in Macedonia, preferred sectors for investments, amounts of invested capital, factors that affected these investments, received benefits of businesses from invested venture capital, level of success achieved from investments etc. In this paper also are given some measures, which should be taken into consideration for the development of venture capital in Macedonia.
Keywords: Business angel, venture capital, venture capital fund, carried interest, management fee, SEAF Funds, Macedonia.
Do Ownership Structures affect Banks’ Performance? An Empirical Inquiry onto Tanzanian Bank IndustryJaneth P. Swai and Cosmas S. Mbogela 1
1 School of Business, Mzumbe University, Tanzani
Abstract. Our inquiry is motivated by the ongoing extensive discussions on the relationship between banks performance and ownership structure which shows mixed results. We use a panel of nine Tanzanian banks from 2000 - 2009. Basing on a range of financial performance ratios and a sample of state and private owned banks in Tanzania, we compare the means and then test for the relationship between bank’s performance and ownership structure with a proper regression set up. On average private owned banks have higher Return on Average Assets and lower Operating Efficiency Ratio while state owned banks have higher Return on Equity and capital adequacy indicators, Equity to deposit Liability and Liquid assets to Deposit Liability. We find little evidence to suggest a linear positive or negative relationship between ownership structure and bank performance in Tanzania. For that reason, ownership alone has no much impact on the bank’s performance.
Keywords: Bank’s performance, Ownership Structure, Tanzania
JEL classification: C51, D58, E32.
Systemic liquidity risk index for Moroccan banking sectorFirano Zakaria 1
1 University of Mohammed V-Agdal, Rabat, Morocco
Abstract. In this paper a new measure of the banking liquidity based on the liquid assets. On the basis of balance-sheet of the banks of the sample, we could detect the cycles of liquidity which characterize the Moroccan banking system and this between 2001 and 2010. The various results obtained made it possible to detect two cycles of liquidity, the first indicating one period of over liquidity, characterized by an abundance of the cushions of liquidities, the other testifying to a contraction in the mattress of liquidity of the banking system. While falling under a prudential macro approach, we were interested in the relation being able to link, the development of the liquidity and the various fluctuations of the macroeconomic framework. For this purpose, we identified several macroeconomic variables likely to influence the development of the banking liquidity, in particular, the economic growth, credit growth, exchange reserve, interbank interest rates, and return of stock market of Casablanca.
Keywords: systemic risk, macro prudential approach and liquidity risk.
JEL classification: C51, D58, E32.
WHAT DOES THE VIX ACTUALLY MEASURE? AN ANALYSIS OF THE CAUSATION OF SPX AND VIXMerav Ozair 1
1 Department of Finance and Risk Engineering, Polytechnic Institute at NYU, USA
Abstract. We examine the causality relationship between the S&P500 (SPX) and the VIX. Our contention that a circular mechanism which “feeds” itself that can be explained by “cause and effect”, is supported by the empirical findings on the intraday, minute bar, time series of the SPX and the VIX. The findings are supported across different samples and estimation models and show that: (1) the SPX shock to the VIX time series is not only significant but also persistent; (2) the VIX follows a serial pattern of significant reversal (in the first lag) followed by momentum in the subsequent lags (and beyond the first 10 minutes); (3) the VIX endures a “permanent” market impact, while the SPX sustains a “transitory” one; and (4) the SPX shock on the VIX system remains in the system long enough to account for 70% of the variance of the VIX, suggesting a predictive power of the SPX to the current movement of the VIX.
Keywords: causality, Vector Autoregressive (VAR), Volatility Index (VIX), S&P500 Index (SPX), shocks, market impact, reversal, momentum, autocorrelation, cointegration
JEL Classifications: C58; C55; G02; G19