CROSS-COUNTRY STUDY ON THE DETERMINANTS OF BANK FINANCIAL DISTRESS

ABSTRACTBank failures affect owners, employees, and customers, possibly causing large-scale economic distress. Thus, banks must evaluate operational risks and develop early warning systems. This study investigates bank failures in the Organization for Economic Co-operation and Development, the North America Free Trade Area (NAFTA), the Association of Southeast Asian Nations, the European Union, newly industrialized countries, the G20, and the G8. We use financial ratios to analyze and explore the appropriateness of prediction models. Results show that capital ratios, interest income compared to interest expenses, non-interest income compared to non-interest expenses, return on equity, and provisions for loan losses have significantly negative correlations with bank failure. However, loan ratios, non-performing loans, and fixed assets all have significantly positive correlations with bank failure. In addition, the accuracy of the logistic model for banks from NAFTA countries provides the best prediction accuracy regarding bank failure.

A gestão do risco em instituições bancárias: uma análise com recurso a medidas de avaliação da performance ajustadas ao risco

Dissertação de Mestrado apresentado ao Instituto de Contabilidade e Administração do Porto para a obtenção do grau de Mestre em Auditoria sob orientação do Mestre Carlos Mota

Enterprise Risk Management e o seu impacto no desempenho das empresas: Estudo de caso de seis instituições financeiras nacionais

Dissertação de Mestrado apresentado ao Instituto de Contabilidade e Administração do Porto para a obtenção do grau de Mestre em Auditoria, sob orientação do Mestre Fernando Teixeira Pinto

Establishment of optimal physical assets inspection frequency based on risk principles

Risk Based Inspection (RBI) is a risk methodology used as the basis for prioritizing and managing the efforts for an inspection program allowing the allocation of resources to provide a higher level of coverage on physical assets with higher risk. The main goal of RBI is to increase equipment availability while improving or maintaining the accepted level of risk. This paper presents the concept of risk, risk analysis and RBI methodology and shows an approach to determine the optimal inspection frequency for physical assets based on the potential risk and mainly on the quantification of the probability of failure. It makes use of some assumptions in a structured decision making process. The proposed methodology allows an optimization of inspection intervals deciding when the first inspection must be performed as well as the subsequent intervals of inspection. A demonstrative example is also presented to illustrate the application of the proposed methodology.

Mercados bolsistas

O intenso intercâmbio entre os países, resultante do processo de globalização, veio acrescer importância ao mercado de capitais. Os países em desenvolvimento procuram abrir as suas economias para receber investimentos externos. Quanto maior for o grau de desenvolvimento de uma economia mais ativo será o seu mercado de capitais. No entanto, tem-se verificado uma tendência de substituição de enfoque económico, que antes era mais dirigido ao planeamento empresarial para metas mais ligadas ao meio ambiente. O mercado de capitais é um sistema de distribuição de valores mobiliários cujo objectivo é proporcionar liquidez a títulos emitidos pelas empresas, com a finalidade de viabilizar o processo de capitalização desses papéis. O mercado de capitais é composto pelas bolsas de valores, sociedades corretoras e outras instituições financeiras que têm autorização da Comissão de Valores dos Mercados Mobiliários (CMVM). O mercado bolsista insere-se no mercado de capitais. Nesses mercados, é importante conseguir conjuntamente a maximização dos recursos (retornos) e minimização dos custos (riscos). O principal objectivo das bolsas de valores é promover um ambiente de negociação dos títulos e dos valores mobiliários das empresas. Muitos investidores têm a sua própria maneira de investir, consoante o perfil que cada um tem. Além do perfil dos investidores, é também pertinente analisar a questão do risco. Vaughan (1997) observa que, nos dias atuais, a questão da administração do risco está presente na vida de todos. Este trabalho tem o propósito de demonstrar a necessidade da utilização de ferramentas para a seleção de ativos e para a mensuração do risco e do retorno de aplicações de recursos financeiros nesses activos de mercados de capitais, por qualquer tipo de investidor, mais especificamente na compra de ações e montagem de uma carteira de investimento. Para isso usou-se o método de Elton e Gruber, analisou-se as rentabilidades, os riscos e os índices de desempenho de Treynor e Sharpe. Testes estatísticos para os retornos das ações foram executados visando analisar a aleatoriedade dos dados. Este trabalho conclui que pode haver vantagens na utilização do método de Elton e Gruber para os investidores propensos a utilzar ações de empresas socialmente responsáveis.

Aplicação do modelo de Elton-Gruber para a construção de carteira no índice PSI-20

Os mercados financeiros têm um papel fundamental na dinamização das economias modernas. Às empresas cotadas oferece o capital necessário para impulsionar o seu crescimento e aos investidores individuais proporciona a diversificação das suas carteiras, usufruindo desta forma do crescimento e da vitalidade da economia mundial. A gestão de carteiras de ativos financeiros constitui uma área que procura apresentar mecanismos para a obtenção de uma relação ótima entre retorno e risco. Neste sentido, inúmeros estudos têm contribuído de forma significativa para a eficiência e para a prática desta técnica. Esta dissertação pretende analisar a metodologia desenvolvida por Elton-Gruber para a construção de carteiras otimizadas e aplicar as técnicas subjacentes ao mercado acionista português. Para o efeito, serão realizadas pesquisas em fontes bibliográficas da especialidade e serão consultadas bases de dados de cotações históricas das ações e do índice de mercado nacional. A aplicação incidiu sobre ações cotadas no índice PSI-20 durante o período compreendido entre 2010 e 2014. No intuito de melhorar a compreensão das séries de retornos das amostras, o estudo de caráter quantitativo também recorreu à análise estatística. As evidências mostram que a carteira otimizada, no período em análise, contém apenas as ações da empresa Portucel. Este resultado estará condicionado pelos efeitos da crise financeira que iniciou em 2008.

Market risk charge of the trading book: a comparison of the Basel II and Basel III

This paper aims to investigate if the market capital charge of the trading book increased in Basel III compared to Basel II. I showed that the capital charge rises by 232% and 182% under the standardized and internal model, respectively. The varying liquidity horizons, the calibration to a stress period, the introduction of credit spread risk, the restrictions on correlations across risk categories and the incremental default charge boost Basel III requirements. Nevertheless, the impact of Expected shortfall at 97.5% is low and long term shocks decrease the charge. The standardized approach presents advantages and disadvantages relative to internal models.

Introducing risk parity on momentum and carry portfolios

The momentum and carry anomalies have been extensively documented in the literature. However, there are still many issues relating to the risks associated to them that are left unexplained. One is the fact that an investor holds for too long the most volatile assets, both under momentum and carry strategies. Therefore, they present a level of risk and a probability of extreme events to happen inconsistent. This work project hypothesizes and proves the introduction of risk parity rules on the weights of the portfolios do increase risk rewarding of carry strategies. However, it fails under momentum strategies.

MarketOpolis: A market simulation based on investors decisions

This study aims to replicate Apple’s stock market movement by modeling major investment profiles and investors. The present model recreates a live exchange to forecast any predictability in stock price variation, knowing how investors act when it concerns investment decisions. This methodology is particularly relevant if, just by observing historical prices and knowing the tendencies in other players’ behavior, risk-adjusted profits can be made. Empirical research made in the academia shows that abnormal returns are hardly consistent without a clear idea of who is in the market in a given moment and the correspondent market shares. Therefore, even when knowing investors’ individual investment profiles, it is not clear how they affect aggregate markets.

Limitations and improvements to the risk assessment process in Olive Oil Mills: the views of OSH practitioners

Although most of the accidents occurred in Olive Oil Mill (OOM) resulted from “basic” risks, there is a need to apply adequate tools to support risk decisions that can meet the specificities of this sector. This study aims to analyse the views of Occupational, Safety & Health (OSH) practitioners about the risk assessment process in OOM, identifying the key difficulties inherent to the risk assessment process in these sector, as well as identifying some improvements to the current practice. This analysis was based on a questionnaire that was developed and applied to 13 OSH practitioners working at OOM. The results showed that the time available to perform the risk assessment is the more frequent limitation. They believe that the methodologies available are not an important limitation to this process. However, a specific risk assessment methodology, that includes acceptance criteria adjusted to the OOM reality, using risk metrics supported on the frequency of accidents and workdays lost, were indicated as being also an important contributions improve the process. A semi-quantitative approach, complemented with the use of the sector accident statistics, can be a good solution for this sector. However, further strategies should also be adopted, mainly those that can lead to an easy application of the risk assessment process.

Human capital in a global and knowledge-based economy. Part 2. Asssessment at the EU country level.

This report is an extension and partial update of de la Fuente and Ciccone (2002). It constructs estimates of the private and social rates of return on schooling for fourteen EU countries using microeconometric estimates of Mincerian wage equations, the results of cross-country growth regressions and OECD data on educational expenditures, tax rates and social benefits. The results are used to draw some tentative conclusions regarding the optimality of observed investment patterns and educational subsidy levels.

The Causal effect of education on aggregate income

Empirical studies assume that the macro Mincer return on schooling is con- stant across countries. Using a large sample of countries this paper shows that countries with a better quality of education have on average relatively higher macro Mincer coeficients. As rich countries have on average better educational quality, differences in human capital between countries are larger than has been typically assumed in the development accounting literature. Consequently, factor accumulation explains a considerably larger share of income differences across countries than what is usually found.

Differences in self-reported prevalence and management of cardiovascular risk factors in Switzerland, 2007

Purpose: To assess the prevalence of four self-reported cardiovascular risk factors (CV RFs: smoking, hypertension, dyslipidaemia and diabetes) and their reported management in seven Swiss regions (Léman, MiUelland, Zurich, North-West Switzerland, Oriental Switzerland, Central Switzerland and Tessin). Methods: National health interview survey conducted in 2007 in a representative sample of the Swiss population (17,879 subjects). Age-adjusted data on prevalence of self-reported CV RFs, treatment among participants reporting a RF, control of RFs among treated participants and CV RF screening in the last 12 months levels were computed after weighting. Results: The prevalence of hypertension was highest in North-West Switzerland (27.3%) and lowest in Central Switzerland (21.0%, p<0.001). Antihypertensive treatment was highest in Léman region (62.7%) and lowest in Oriental Switzerland (55.2%, p<0.001). Screening was higher in Tessin (89.3%) and lowest in Léman region (81.8%, p<0.001). Prevalence of dyslipidaemia was highest in Tessin and Léman region (20.7% and 20.1 %, respectively) and lowest in Oriental Switzerland (14.5%, p<0.001). Lipid-Iowering treatment was highest in Tessin and Léman region (44.3% each) and lowest in Central Switzerland (30.7%, p<0.001). Dyslipidaemia screening was highest in Tessin (76.6%) and lowest in Central Switzerland (58.6%, p<0.001). Prevalence of diabetes was highest in North-West Switzerland (5.4%) and lowest in Central Switzerland (3.3%, p<0.05). Diabetes screening was highest in Tessin (78.1%) and lowest in Oriental Switzerland (64.0%, p<0.001). Conversely, no between-region differences were found for hypertension or dyslipidaemia control (see table). Conclusion: there are significant differences between the Swiss regions in self-reported prevalence and management of CV RFs. Screening is beUer in Tessin than in the other regions.

Peut-on évaluer te risque hémorragique tors d'anticoagutation orale [Oral anticoagulation and the risk of major bleeding]

Oral anticoagulants are frequently used in clinical practice. The most important complication of oral anticoagulation is major bleeding. The incidence of major bleeding is about 2-3%/year in randomized controlled trials but may be considerably higher under real life conditions. Major bleeding risk in patients receiving oral anticoagulants depends on factors related to anticoagulation itself (intensity and quality), patient-related factors (demographic characteristics and comorbid diseases), and concomitant treatments with antiplatelet or non-steroidal anti-inflammatory drugs. The role of clinical prediction rules for major bleeding is discussed.

Inequality over the business cycle: Estimating income risk using micro-data on consumption

We use CEX repeated cross-section data on consumption and income, to evaluate the nature of increased income inequality in the 1980s and 90s. We decompose unexpected changes in family income into transitory and permanent, and idiosyncratic and aggregate components, and estimate the contribution of each component to total inequality. The model we use is a linearized incomplete markets model, enriched to incorporate risk-sharing while maintaining tractability. Our estimates suggest that taking risk sharing into account is important for the model fit; that the increase in inequality in the 1980s was mainly permanent; and that inequality is driven almost entirely by idiosyncratic income risk. In addition we find no evidence for cyclical behavior of consumption risk, casting doubt on Constantinides and Duffie s (1995) explanation for the equity premium puzzle.