Introducing International Accounting Standards to an emerging capital market:Relative familiarity and language effect in Egypt

The purpose of this study is to assess the effect of relative familiarity and language accessibility on the International Accounting Standards (IASs) disclosures when IASs are first introduced in an emerging capital market. The study focuses on the annual reports of listed non-financial companies in Egypt when IASs were first introduced. The method used applies a disclosure index measurement to a sample of listed company annual reports and evaluates relative compliance with IASs in relation to corporate characteristics. The results show that for relatively less familiar requirements of IASs, the extent of compliance is related to the type of audit firm used and to the presence of a specific statement of compliance with IASs. A lower degree of compliance with less familiar IASs disclosure is observed consistently across a range of company characteristics. Consideration of agency theory and capital need theory would lead to prior expectation of a distinction in disclosure practices between different categories of companies. The results were, therefore, counterintuitive to expectations where the regulations were unfamiliar or not available in the native language, indicating that new variables have to be considered and additional theoretical explanations have to be found in future disclosure studies on emerging capital markets. © 2003 Elsevier Science Inc. All rights reserved.

Using the Agglomerative Method of Hierarchical Clustering as a Data Mining Tool in Capital Market

The purpose of this paper is to explain the notion of clustering and a concrete clustering method- agglomerative hierarchical clustering algorithm. It shows how a data mining method like clustering can be applied to the analysis of stocks, traded on the Bulgarian Stock Exchange in order to identify similar temporal behavior of the traded stocks. This problem is solved with the aid of a data mining tool that is called XLMiner™ for Microsoft Excel Office.

The impact of perceived corporate environmental performance on the behavior of capital market decision makers : analysis of food industry companies

Environmental protectionism and sustainable development has been gaining increased attention among governments, investors and consumers alike. As a result, firms are facing growing pressure from the various stakeholders to improve their environmental performance. This study is focusing on the food industry, which in recent years has been a subject of increased scrutiny due to their role in resource consumption, waste generation and unsustainable production practices. Our research is aiming to examine how the financial community evaluates the environmental stewardship of food industry companies as proxied by market reactions in response to environmental news. Are all company related environmental news items evaluated equally, and which financial and non-financial firm-specific attributes can influence market responses? Have there been changes in reactions on the stock exchange in the past two decades?

Formalization of the informal venture capital market - Business angel networks and syndicates

Business angels are natural persons who provide equity financing for young enterprises and gain ownership in them. They are usually anonym investors and they operate in the background of the companies. Their important feature is that over the funding of the enterprises based on their business experiences they can contribute to the success of the companies with their special expertise and with strategic support. As a result of the asymmetric information between the angels and the companies their matching is difficult (Becsky-Nagy – Fazekas 2015), and the fact, that angel investors prefer anonymity makes it harder for entrepreneurs to obtain informal venture capital. The primary aim of the different type of business angel organizations and networks is to alleviate this matching process with intermediation between the two parties. The role of these organizations is increasing in the informal venture capital market compared to the individually operating angels. The recognition of their economic importance led many governments to support them. There were also public initiations that aimed the establishment of these intermediary organizations that led to the institutionalization of business angels. This study via the characterization of business angels focuses on the progress of these informational intermediaries and their ways of development with regards to the international trends and the current situation of Hungarian business angels and angel networks.

Conglomerate structure and capital market timing

We examine the effects of keiretsu structure on capital market-timing. Keiretsu groups offer a hybrid structure between fully integrated conglomerates and stand-alone firms. We find that past market conditions affect the capital structure of keiretsu firms more than they affect the capital structure of unaffiliated firms. The decision to issue equity is more correlated with market conditions for keiretsu members than it is for unaffiliated firms. The stock returns of keiretsu firms following the issuance of equity decrease with the size of the issuance. These results suggest that keiretsu members time the issuance of equity more so than stand-alone firms.

Foreign Capital and Finland : Central government's first period of reliance on international financial markets, 1862-1938

The main objective of the study is to evaluate the Finnish central government s foreign borrowing between the years 1862 and 1938. Most of this period was characterised by deep capital market integration that bears resemblance to the liberal world financial order at the turn of the millennium. The main aim is to analyse the credit risk associated with the state and its determination by evaluating the world financial market centres perception of Finland. By doing this, the study is also expected to provide an additional dimension to Finland s political and economic history by incorporating into the research the assessments of international capital markets regarding Finland during a period that witnessed profound political and economic changes in Finnish society. The evaluation of the credit risk mainly relies on exchange-rate risk free time series of the state s foreign bonds. They have been collected from quotations in the stock exchanges in Helsinki, Hamburg, Paris and London. In addition, it investigates Finland s exposure to short-term debt and Moody s credit ratings assigned to Finland. The study emphasises the importance of the political risk. It suggests that the hey-day of the state s reliance on foreign capital markets took place during last few decades of the 19th century when Finland enjoyed a wide autonomy in the Russian Empire and prudently managed its economy, highlighted in Finland s adherence to the international gold standard. Political confrontations in Finland and, in particular, in Russia and the turbulence of the world financial system prevented the return of this beneficial position again. Through its issuance of foreign bonds the state was able to import substantial amounts of foreign capital, which was sorely needed to foster economic development in Finland. Moreover, the study argues that the state s presence in the western capital markets not only had economic benefits, but it also increased the international awareness of Finland s distinct and separate status in the Russian Empire and later underlined its position as an independent republic.

Um estudo sobre a relação entre ações preferenciais e valor de mercado das empresas brasileiras de capital aberto

O mercado de capitais brasileiro se caracteriza pela alta concentração de poder nas mãos de poucos acionistas controladores. No Brasil, a existência de ações preferenciais sem direito a voto enseja o surgimento de conflito de agência entre acionistas controladores e acionistas minoritários, agravado pelo fato de que o controle pode ser exercido com uma participação relativamente pequena sobre o total de ações emitidas pelas companhias. A concentração de propriedade permitiria a possibilidade de expropriação dos direitos dos minoritários. Diversos estudos empíricos vêm sendo realizados ao longo dos últimos anos com o objetivo de avaliar a influência da estrutura de propriedade das ações sobre o valor de mercado das companhias. Nesse contexto, o presente trabalho pretende trazer novas contribuições, com ênfase na participação de ações preferenciais na estrutura de propriedade. Neste trabalho, usando uma amostra de empresas de capital aberto negociadas na BM&FBOVESPA, a partir de teste de diferença de médias, rejeita-se a hipótese de igualdade de valor entre empresas que só possuem ações ON em sua estrutura de propriedade, em relação às que possuem ambos os tipos, ON e PN. Em continuidade, usando modelos de regressão linear, encontra-se relação negativa estatisticamente significativa entre valor de mercado das empresas e variável utilizada para caracterizar a estrutura de propriedade, especificamente, a diferença entre o percentual de participação dos acionistas não controladores no total de ações PN e o percentual de participação dos acionistas controladores no total de ações PN.

Mergers and Acquisitions in Vietnam’s Emerging Market Economy, 1990-2009

This paper is the first major and thorough study on the M&A activities in Vietnam’s emerging market economy, covering almost entirely the M&A history after the launch of Doi Moi. The surge in these activities since mid-2000s by no means incidentally coincides with the jump in FDI and FPI inflows into the nation. M&A industry in Vietnam has its socio-cultural traits that could help explain economic happenings, with anomalies and transitional characteristics, far better than even the most complete set of empirical data. Proceeds from sales of existing assets and firms have mainly flowed into the highly speculative industries of securities, banking, non-bank financials, portfolio investments and real estates. The impacts of M&A on Vietnam’s long-term prosperity are, thus, highly questionable. An observable high degree of volatility in the M&A processes would likely blow outthe high ex ante expectations by many speculators, when ex post realizations finally arrive. The effect of the past M&A evolution in Vietnam has been indecisively positive or negative, with significant presence of rent-seeking and likelihood of causing destructive entrepreneurship. From a socio-economic and cultural view, the degree of positive impacts it may result in for domestic entrepreneurship will perhaps be the single most important indicator.

The cross-section of stock returns in an early stock market

Using a new dataset which contains monthly data on 1015 stocks traded on the London Stock Exchange between 1825 and 1870, we investigate the cross section of stock returns in this early capital market. Unique features of this market allow us to evaluate the veracity of several popular explanations of asset pricing behavior. Using portfolio analysis and Fama–MacBeth regressions, we find that stock characteristics such as beta, illiquidity, dividend yield, and past-year return performance are all positively correlated with stock returns. However, market capitalization and past-three-year return performance have no significant correlation with stock returns.

Russian Enterprise Restructuring - the Effect of Privatisation and Market Liberalisation on the Performance of Large Enterprises

The fundamental question in the transitional economies of the former Eastern Europe and Soviet Union has been whether privatisation and market liberalisation have had an effect on the performance of former state-owned enterprises. This study examines the effect of privatisation, capital market discipline, price liberalisation and international price exposure on the restructuring of large Russian enterprises. The performance indicators are sales, profitability, labour productivity and stock market valuations. The results do not show performance differences between state-owned and privatised enterprises. On the other hand, the expansion of the de novo private sector has been strong. New enterprises have significantly higher sales growth, profitability and labour productivity. However, the results indicate a diminishing effect of ownership. The international stock market listing has a significant positive effect on profitability, while the effect of domestic stock market listing is insignificant. The international price exposure has a significant positive increasing effect on profitability and labour productivity. International enterprises have higher profitability only when operating on price liberalised markets, however. The main results of the study are strong evidence on the positive effects of international linkages on the enterprise restructuring and the higher than expected role of new enterprises in the Russian economy.

Asymmetric information, credit market condition, and entrepreneurial finance

The issue of imperfect information plays a much more important role in financing “informationally opaque” small businesses than in financing large companies.1 This chapter examines the asymmetric information issue in entrepreneurial finance from two perspectives: the effects of relationship lending and the impacts of credit market concentration on entrepreneurial financial behavior. These two perspectives are strongly linked to each other via the asymmetric information issue in entrepreneurial finance. Existing literature has recognized the important role played by relationship lending in alleviating the problem of asymmetric information. However, mixed empirical results have been reported. For example, it has been found that the development of relationship lending can improve the availability of finance for small businesses borrowers (Petersen and Rajan, 1994) and reduce the costs of finance (Berger and Udell, 1995). Meanwhile, with monopoly power, banks may extract rents, in terms of charging higher-than-market interest rates, from small businesscustomers who have very concentrated banking relationships (Ongena and Smith, 2001). In addition, both favorable and unfavorable effects of credit market concentration on financing small businesses have been acknowledged. Small business borrowers may have to pay a higher-than-market price on loans (Degryse and Ongena, 2005) and are more likely to be financially constrained (Cetorelli, 2004) than in competitive markets. On the other hand, empirical studies have shown that market concentration create a strong motive for lenders to invest in private information from small business customers, and therefore a concentrated market is more efficient in terms of private information acquisition (Han et al., 2009b). The objective of this chapter is to investigate, by reviewing existing literature, the role played by relationship lending and the effects of market concentration on financing entrepreneurial businesses that are supposed to be informationally opaque. In the first section we review literature on the important role played by asymmetric information in entrepreneurial finance from two perspectives: asymmetric information and relationship lending, and the theoretical modeling of asymmetric information. Then we examine the relationship between capital market conditions and entrepreneurial finance and attempt to answer two questions: Why is the capital market condition important for entrepreneurial finance? and What are the effects of capital market conditions on entrepreneurial financial behavior in terms of discouraged borrowers, cash holding, and the availability and costs of finance?

Market capitalization of Australian stock exchange (ASX) listed biotechnology companies

Comments on the market capitalization of Australian Stock Exchange listed biotechnology companies. Background on the Australian biotechnology stock market; Factors which determine the levels of risks; Points to consider when valuing Australian biotechnology companies.

National and international financial reporting standard convergence and the relevance for non-participants in capital markets : a preparer perspective

This study presents some implications of recent policy moves to enhance the harmonization of financial reporting and disclosure by adopting international financial reporting standards. In particular the impact on small organizations that do not participate in capital markets is considered. The results of a survey of practitioners indicate a perception that the non-capital market sector is likely to be significantly affected by additional reporting burden that convergence with international financial reporting standards imposes. On the whole the results show there was concern that the traditional users of the financial reports of organizations who do not participate in capital markets, would have limited if any, use for financial reports that conformed to international financial reporting standards, The results of this study have implications for nations such as Malaysia and New Zealand, which are currently engaging in the differential reporting debate.

Low-frequency volatility of yen interest rate swap market in relation to macroeconomic risk

Using ‘low-frequency’ volatility extracted from aggregate volatility shocks in interest rate swap (hereafter, IRS) market, this paper investigates whether Japanese yen IRS volatility can be explained by macroeconomic risks. The analysis suggests that this low-frequency yen IRS volatility has strong and positive association with most of the macroeconomic risk proxies (e.g., volatility of consumer price index, industrial production volatility, foreign exchange volatility, slope of the term structure and money supply) with the exception of the unemployment rate, which is negatively related to IRS volatility. This finding is fairly consistent with the argument that the greater the macroeconomic risk the greater is the use of derivative instruments to hedge or speculate. The relationship between the macroeconomic risks and IRS volatility varies slightly across the different swap maturities but is robust to alternative volatility specifications. This linkage between swap market and macroeconomy has practical implications since market makers and hedgers use the swap rate as benchmark for pricing long-term interest rates, corporate bonds and various other securities.