A nonparametric model of financial system and economic growth

In this paper, we show that in the proposed models for economic growth, the financial system variables are generally nonparametric. We, thus, use a nonparametric panel data model to estimate the financial system-economic growth relationship. Our results suggest that as long as a country's domestic credit and private credit are above their cross-sectional mean they have a positive effect on GDP growth. We also discover that market capitalisation positively and significantly impacts GDP growth, while stocks traded (with the exception of OECD countries) has a statistically insignificant effect on GDP growth.

Financial systems and mechanisms of growth in different conditions of country risk

This article uses panel data from 1976 to 2003 to investigate the ways in which banking and stock markets influence economic growth in situations of high and low country risk. The mean and Standard Deviation (SD) of country risk are adopted to classify 28 countries into Low Risk Low Volatility (LRLV) and High Risk High Volatility (HRHV) subgroups. Through the technique of error correction-based panel co-integration developed by Westerlund (2007), several results are obtained. First, LRLV countries can expand the capitalization of stock market to enhance long-term economic growth. Second, HRHV countries, on the other hand, use two distinct strategies to promote long-term economic growth. Initially they develop their equity markets, which promote economic growth directly. Strengthened equity markets, in turn, aid in the development of credit markets, which subsequently brings an economic boom. Finally, regardless of selected subgroups, the contribution of stock market capitalization to economic growth appears to be substantially larger than that of bank credit, highlighting the importance of stock markets.

Productivity and efficiency analysis of Australia banking sector under deregulation

This paper conducts productivity and efficiency analysis of banks operating in Australia since the deregulation of the Australian financial system in early 1980s. Applying data envelopment analysis (DEA), with a moving window, the Malmquist indices are determined in order to investigate the levels of and the changes in the efficiency of Australian banks over the period from 1983 to 200 I. The DEA window analysis is adopted in order to relieve the small sample problem that in previous studies has proved problematic in the study of the Australian banking sector. The pal1icular window used in this case has been carefully designed to ensure the robustness of the efficiencies scores to changes in the window width. A second-stage regression is conducted by using the unconditional bootstrap approach suggested by Xue and Harker (1999) to overcome the dependency and heteroskedasticity of DE A efficiency scores. The empirical results demonstrate the effect of deregulation on the performance of individual banks, banks of different organizational types and the entire Australian banking sector.

An education and training framework for disaster risk management in banks

Banks are the most significant financial institutions operating within nation-state and the global financial system. These institutions are exposed to a wide range of operational risks. Disaster risk management is a critical component of the wider operational risk management. The Bank for International Settlements, in conjunction with nation-state prudential regulators, is introducing measures that will require banks to identify, measure and manage operational risks within the context of new capital adequacy requirements. An essential part of any risk management process is education and training. This paper presents a structured education and training framework that will support the achievement of banks’ disaster risk management objectives. The education and training framework comprises three specific programs: (1) an induction/awareness program targeted to all personnel, (2) a contingency planning program – a specialist program for disaster risk management personnel, and (3) an executive program designed for senior management, directors and strategic decision makers.

Firms as adaptive organizations : the case of Australian trading banks

The conventional accounting notion of ‘going concern’ — that a firm will continue its business operations in the same manner indefinitely — has underpinned accounting practice for over one hundred years. This idea has provided a rationale for spreading costs over accounting periods and for deferring costs as assets in balance sheets. An alternative idea that is widely regarded as reliable in the literatures of economics and deliberate action is that firms continually adapt to changes in market and economic conditions. That is economic behaviour. The implications of that view of a firm for accounting have been systematically explored by Chambers (1966). While not examining those particular implications, many other accounting theorists have been critical of the conventional accounting idea of 'going concern' and of its impact on accounting practice. The two notions of ‘going concern’ - as static or adaptive enterprises - are examined by referring to the business operations of the four major Australian trading banks over the period 1983-1991. Banks were selected because they are commonly thought to be particularly ‘conservative’ organizations. The period 1983—1991 was chosen because it covers the era of deregulation of the Australian financial system. The evidence adduced by this study indicates that the Australian trading banks have continually adapted their organizational structures and business operations in the light of changes in technology, markets for financial services, government policies and domestic and global economic conditions. Illustrations of adaptive behaviour by banks ate drawn from their normal operating procedures such as the provision of products and services, loan services, acquisitions, sale of property, non-core banking operations and international banking. It is argued on analytical grounds that the cost basis of accounting does not yield financial statements that provide factual and up-to-date information about the financial capacity of firms to pay their debts and to continue trading generally; that is, to be going concerns. At any time, those financial capacities are determined by the amount of money commanded by a firm, including the money's worth of its assets, and by its level of debt. It is concluded on empirical grounds that the Australian trading banks, at least, are adaptive entities.

The productivity and performance of Australia’s major banks since deregulation

The aim of this study is to present some measures of the performance of banks operating in Australia since the deregulation of the Australian financial system in early 1980s; including the periods of financial market instability (the early 1990s and mid to late 2000s). In undertaking this measurement two approaches will be used. The first simply applies standard financial indicators. The second approach applies data envelopment analysis (DEA), to determine Malmquist indices of the levels of and the changes in the efficiency and productivity of Australian banks. The empirical results demonstrate the effect of deregulation and periodic financial crisis’s on the performance of individual banks, and the major part of the Australian banking sector. Overall the productivity performance of the Australian banks tended to improve considerably in those periods of strongest economic growth (i.e. the mid 1980s and 2000s).

Accounting professionalization amidst alternating state ideology in Ethiopia

Purpose – This study aims to examine accounting professionalization in Ethiopia focusing on how the state, occupational group struggle and transnational accountancy bodies influence the realization of closure.

Design/methodology/approach – A qualitative research approach is employed. Data were collected using document review and oral history approaches.

Findings – Accounting professionalization in Ethiopia was initiated by the state to strengthen the country's financial system. Owing to a change of state ideology to communism in 1974, a strategy of developing accounting professionals as government-employed experts was pursued. The return to a market-oriented economy in 1991 has seen a trend towards a more autonomous accountancy profession. Inflow of UK capital in the early twentieth century and activities of the UK-based Association of Chartered Certified Accountants (ACCA) in recent decades have influenced Ethiopia's accountancy. Its professional and financial power has enabled ACCA to make arrangements with Ethiopian Professional Association of Accountants and Auditors (EPAAA) and consolidate its position in Ethiopia's accountancy by controlling EPAAA's member training and certification.

Originality/value – The literature on accounting professional projects in developing countries has focused on imperialistic influence in former British colonies. The present study extends this literature by illustrating how British influence has continued to extend beyond Britain's former colonial possessions. This enables an understanding of the dynamics of accounting professional projects in the developing world with analytical dimensions building on the hitherto dominant lens of “formal” colonial connection.

Risk management, optimal

Individuals continually confront a discrepancy between ever expanding and changing wants and the means that they have at their disposal, time, and income, to satisfy them. One of the consequences is the need to make constrained choices between alternatives that have uncertain outcomes. Risk is a different concept from uncertainty. Individual optimal risk management means reducing, eliminating, or fully bearing risk, after conducting a “cost-benefit” analysis. In practice, however, cognitive biases mean that many decisions are not economically rational, necessitating paternalistic government and judicial interventions. Systemic, or whole financial system collapse risk is, optimally managed using well-designed macroprudential regulatory tools. The source of this type of risk is the inherent dynamics of the financial system over the course of the business cycle, interacting with credit market negative externalities, often as in the case of the GFC, spawned by government regulatory failure

Anchoring countercyclical capital buffer in Basel III

This thesis proposes two top-down approch frameworks to assess the Basel III countercyclical capital buffer. The empirical results demonstrate that sovereign sector distance-to-default and market illiquidity are more suitable indicator for guiding the decision of the buffer during both build-up and release phase than the official indicator, credit-to-GDP ratio. The findings in this thesis are important to help safeguard the globe financial system.

Should credit default swap issuers be subject to prudential regulation?

Credit default swaps (CDSs) contributed significantly to and exacerbated the recent global financial crisis. As a result of the major role that CDSs played, this paper argues that CDS issuers should be subject to prudential regulation, in order to improve systemic stability in the financial system. Three reasons are put forward for this proposition. First, CDSs are functionally equivalent to insurance and so should be regulated in a consistent manner. Secondly, CDSs perform the economic function of assuming credit risk, and so should be prudentially regulated in the same way as other financial institutions which assume credit risk. Finally, CDSs have the potential to contribute to systemic instability in the financial system, and prudential regulation would reduce this risk.

Decision aggregation in an agent-based financial investment planning system

Agent technology provides a new way to model many complex problems like financial investment planning. With this observation in mind, a financial investment planning system was developed from agent perspectives with 12 different agents integrated. Some of the agents have similar problem solving and decision making capabilities. The results from these agents require to be combined. Ordered Weighted Averaging (OWA) operator was chosen to aggregate different results. Details on how OWA was applied as well as appropriate evaluation are presented.

An agent-based hybrid intelligent system for financial investment planning

Many complex problems including financial investment planning require hybrid intelligent systems that integrate many intelligent techniques including expert systems, fuzzy logic, neural networks, and genetic algorithms. However, hybrid intelligent systems are difficult to develop due to complicated interactions and technique incompatibilities. This paper describes a hybrid intelligent system for financial investment planning that was built from agent points of view. This system currently consists of 13 different agents. The experimental results show that all agents in the system can work cooperatively to provide reasonable investment advice. The system is very flexible and robust. The success of the system indicates that agent technologies can significantly facilitate the construction of hybrid intelligent systems.

Intelligent financial news digest system

We present an agent-based system Intelligent Financial News Digest System (IFNDS) for analyzing online financial news articles and associated material. The system can abstract, synthesize, digest, and classify the contents, and assesses whether the report is favorable to any company discussed in the reports. It integrates artificial intelligence technologies including traditional information retrieval and extraction techniques for the news analysis. It makes use of keyword statistics and backpropagation training data to identify companies named in reportage whether it is, evaluatively speaking, positive, negative or neutral. The system would be of use to media such as clipping services, media management, advertising, public relations, public interest, and e-commerce professionals and government non-governmental bodies interested in monitoring the media profiles of corporations, products, and issues.