Essays on the impact of stakeholders' sentiment on the financial decision making process

The most important factor that affects the decision making process in finance is the risk which is usually measured by variance (total risk) or systematic risk (beta). Since investors’ sentiment (whether she is an optimist or pessimist) plays a very important role in the choice of beta measure, any decision made for the same asset within the same time horizon will be different for different individuals. In other words, there will neither be homogeneity of beliefs nor the rational expectation prevalent in the market due to behavioral traits. This dissertation consists of three essays. In the first essay, “ Investor Sentiment and Intrinsic Stock Prices”, a new technical trading strategy was developed using a firm specific individual sentiment measure. This behavioral based trading strategy forecasts a range within which a stock price moves in a particular period and can be used for stock trading. Results indicate that sample firms trade within a range and give signals as to when to buy or sell. In the second essay, “Managerial Sentiment and the Value of the Firm”, examined the effect of managerial sentiment on the project selection process using net present value criterion and also effect of managerial sentiment on the value of firm. Final analysis reported that high sentiment and low sentiment managers obtain different values for the same firm before and after the acceptance of a project. Changes in the cost of capital, weighted cost of average capital were found due to managerial sentiment. In the last essay, “Investor Sentiment and Optimal Portfolio Selection”, analyzed how the investor sentiment affects the nature and composition of the optimal portfolio as well as the portfolio performance. Results suggested that the choice of the investor sentiment completely changes the portfolio composition, i.e., the high sentiment investor will have a completely different choice of assets in the portfolio in comparison with the low sentiment investor. The results indicated the practical application of behavioral model based technical indicator for stock trading. Additional insights developed include the valuation of firms with a behavioral component and the importance of distinguishing portfolio performance based on sentiment factors.

Disaster Risk Management Disparity in the Caribbean: Evidence from Barbados, Dominican Republic, Jamaica and Trinidad and Tobago

This study on risk and disaster management capacities of four Caribbean countries: Barbados, the Dominican Republic, Jamaica, and Trinidad and Tobago, examines three main dimensions: 1) the impact of natural disasters from 1900 to 2010 (number of events, number of people killed, total number affected, and damage in US$); 2) institutional assessments of disaster risk management disparity; and 3) the 2010 Inter-American Bank for Development (IADB) Disaster Risk and Risk Management indicators for the countries under study. The results show high consistency among the different sources examined, pointing out the need to extend the IADB measurements to the rest of the Caribbean countries. Indexes and indicators constitute a comparison measure vis-à-vis existing benchmarks in order to anticipate a capacity to deal with adverse events and their consequences; however, the indexes and indicators could only be tested against the occurrence of a real event. Therefore, the need exists to establish a sustainable and comprehensive evaluation system after important disasters to assess a country‘s performance, verify the indicators, and gain feedback on measurement systems and methodologies. There is diversity in emergency and preparedness for disasters in the four countries under study. The nature of the event (hurricanes, earthquakes, floods, and seismic activity), especially its frequency and the intensity of the damage experienced, is related to how each has designed its risk and disaster management policies and programs to face natural disasters. Vulnerabilities to disaster risks have been increasing, among other factors, because of uncontrolled urbanization, demographic density and poverty increase, social and economic marginalization, and lack of building code enforcement. The four countries under study have shown improvements in risk management capabilities, yet they are far from being completed prepared. Barbados‘ risk management performance is superior, in comparison, to the majority of the countries of the region. However, is still far in achieving high performance levels and sustainability in risk management, primarily when it has the highest gap between potential macroeconomic and financial losses and the ability to face them. The Dominican Republic has shown steady risk performance up to 2008, but two remaining areas for improvement are hazard monitoring and early warning systems. Jamaica has made uneven advances between 1990 and 2008, requiring significant improvements to achieve high performance levels and sustainability in risk management, as well as macroeconomic mitigation infrastructure. Trinidad and Tobago has the lowest risk management score of the 15 countries in the Latin American and Caribbean region as assessed by the IADB study in 2010, yet it has experienced an important vulnerability reduction. In sum, the results confirmed the high disaster risk management disparity in the Caribbean region.

Disater Risk Management Disparity in the Caribbean: Evidence from Barbados, Dominican Republic, Jamaica and Trinidad and Tobago

This study on risk and disaster management capacities of four Caribbean countries: Barbados, the Dominican Republic, Jamaica, and Trinidad and Tobago, examines three main dimensions: 1) the impact of natural disasters from 1900 to 2010 (number of events, number of people killed, total number affected, and damage in US$); 2) institutional assessments of disaster risk management disparity; and 3) the 2010 Inter-American Bank for Development (IADB) Disaster Risk and Risk Management indicators for the countries under study. The results show high consistency among the different sources examined, pointing out the need to extend the IADB measurements to the rest of the Caribbean countries. Indexes and indicators constitute a comparison measure vis-à-vis existing benchmarks in order to anticipate a capacity to deal with adverse events and their consequences; however, the indexes and indicators could only be tested against the occurrence of a real event. Therefore, the need exists to establish a sustainable and comprehensive evaluation system after important disasters to assess a country’s performance, verify the indicators, and gain feedback on measurement systems and methodologies. There is diversity in emergency and preparedness for disasters in the four countries under study. The nature of the event (hurricanes, earthquakes, floods, and seismic activity), especially its frequency and the intensity of the damage experienced, is related to how each has designed its risk and disaster management policies and programs to face natural disasters. Vulnerabilities to disaster risks have been increasing, among other factors, because of uncontrolled urbanization, demographic density and poverty increase, social and economic marginalization, and lack of building code enforcement. The four countries under study have shown improvements in risk management capabilities, yet they are far from being completed prepared. Barbados’ risk management performance is superior, in comparison, to the majority of the countries of the region. However, is still far in achieving high performance levels and sustainability in risk management, primarily when it has the highest gap between potential macroeconomic and financial losses and the ability to face them. The Dominican Republic has shown steady risk performance up to 2008, but two remaining areas for improvement are hazard monitoring and early warning systems. Jamaica has made uneven advances between 1990 and 2008, requiring significant improvements to achieve high performance levels and sustainability in risk management, as well as macroeconomic mitigation infrastructure. Trinidad and Tobago has the lowest risk management score of the 15 countries in the Latin American and Caribbean region as assessed by the IADB study in 2010, yet it has experienced an important vulnerability reduction. In sum, the results confirmed the high disaster risk management disparity in the Caribbean region.

Self -management factors, influences, and conditions for type 2 diabetes among Black ethnic groups in Miami, Florida and Abidjan, Cote d'Ivoire

The Dahlgren and Whitehead ecological theory provides the framework for a cross-sectional design to compare socio-demographic characteristics, living and working conditions, and lifestyle daily habits as well as cultural and ecological factors among six diabetic multiethnic Black groups in Miami and Abidjan. Approximately 180 Black Americans (African-, Caribbean-, and Haitian-) and 180 Black Africans (Akan, Malinke, and Krou) aged 20 years and older were surveyed. During the preliminary of this study participants' attitudes and behaviors were qualitatively assessed (N=60) and a tool was developed to describe, in the main study (N=360), differences in participants' strength of commitment to diabetes lifestyle self-management. Despite similarities found in terms of age and gender, statistically significant differences were also found within and among groups in terms of living and working conditions, education level, and religion. African American groups were more likely to participate in more diabetes classes than Haitian Americans and Caribbean Americans. However, African Americans were less likely to adhere to daily dietary and weight control regimens. Although, Black African groups reported limited access to equipment, facilities, and financial support they were more likely to follow dietary and weight control recommendations than Black American groups. Overall, African American participants showed the poorest attitudes towards recommended foods, Caribbean American respondents reported the best attitudes and behaviors towards weight control regimens, and the Malinke group had significantly more strength of commitment to successful weight control. Furthermore, Black African groups had significantly more strength of commitment to successful dietary adherence and significantly less support for weight control than Black American groups. ^ Significant differences found within Black groups suggest that understanding each patient's conditions may help healthcare professionals in initiating individualized appropriate counseling before goal setting, and in developing culturally relevant type 2 diabetes management programs. Moreover, significant differences exist in strength of commitment to lifestyle adherence among Black groups in Miami and Abidjan. Cultural, socio-demographic factors and self-management habits may explain differences in participants' outcomes. At the policy level, Black groups should not be approached as a homogenous group and assessment of the vulnerability of each ethnic group may be necessary in the decision-making process.^

Finance past, finance future: a brief exploration of the evolution of financial practices

As we work our way through the latest financial crisis, politicians seem both powerless to act convincingly and unable to craft from the welter of diverse and antagonistic narratives a coherent and convincing vision of the future. In this article, we argue that a temporal lens brings clarity to such confusion, and that thinking in terms of time and reflecting on privileged temporal structures helps to highlight underlying assumptions and distinguish different narratives from one another. We begin by articulating our understanding of temporality, and we proceed to apply this to the evolution of financial practice during different historical epochs as recently delineated by Gordon (2012). We argue that the principles of finance were effectively in place by the eighteenth century and that consequent developments are best conceptualized as phases in which one particular aspect is intensified. We find that in different historical periods, the temporal intensification associated with specific models of finance shifts, over history, from the past to the present to the future. We argue that a quite idiosyncratic understanding of the future has been intensified in the present phase, what we refer to as proximal future, and we explain how this has come to be. We then consider the ethical consequences of privileging an intensification of proximal future before mapping an alternative model centred on intensifying distal future, highlighting early signs of its potential emergence in the shadows of our present.

The quality of financial information in the extractive industries: a value relevance analysis

The extractive industry is characterized by high levels of risk and uncertainty. These attributes create challenges when applying traditional accounting concepts (such as the revenue recognition and matching concepts) to the preparation of financial statements in the industry. The International Accounting Standards Board (2010) states that the objective of general purpose financial statements is to provide useful financial information to assist the capital allocation decisions of existing and potential providers of capital. The usefulness of information is defined as being relevant and faithfully represented so as to best aid in the investment decisions of capital providers. Value relevance research utilizes adaptations of the Ohlson (1995) to assess the attribute of value relevance which is one part of the attributes resulting in useful information. This study firstly examines the value relevance of the financial information disclosed in the financial reports of extractive firms. The findings reveal that the value relevance of information disclosed in the financial reports depends on the circumstances of the firm including sector, size and profitability. Traditional accounting concepts such as the matching concept can be ineffective when applied to small firms who are primarily engaged in nonproduction activities that involve significant levels of uncertainty such as exploration activities or the development of sites. Standard setting bodies such as the International Accounting Standards Board and the Financial Accounting Standards Board have addressed the financial reporting challenges in the extractive industry by allowing a significant amount of accounting flexibility in industryspecific accounting standards, particularly in relation to the accounting treatment of exploration and evaluation expenditure. Therefore, secondly this study examines whether the choice of exploration accounting policy has an effect on the value relevance of information disclosed in the financial reports. The findings show that, in general, the Successful Efforts method produces value relevant information in the financial reports of profitable extractive firms. However, specifically in the oil & gas sector, the Full Cost method produces value relevant asset disclosures if the firm is lossmaking. This indicates that investors in production and non-production orientated firms have different information needs and these needs cannot be simultaneously fulfilled by a single accounting policy. In the mining sector, a preference by large profitable mining companies towards a more conservative policy than either the Full Cost or Successful Efforts methods does not result in more value relevant information being disclosed in the financial reports. This finding supports the fact that the qualitative characteristic of prudence is a form of bias which has a downward effect on asset values. The third aspect of this study is an examination of the effect of corporate governance on the value relevance of disclosures made in the financial reports of extractive firms. The findings show that the key factor influencing the value relevance of financial information is the ability of the directors to select accounting policies which reflect the economic substance of the particular circumstances facing the firms in an effective way. Corporate governance is found to have an effect on value relevance, particularly in the oil & gas sector. However, there is no significant difference between the exploration accounting policy choices made by directors of firms with good systems of corporate governance and those with weak systems of corporate governance.

Financial sustainability of cooperatives: a case of portuguese olive oil cooperatives

En Portugal, como en otros países, las cooperativas agrícolas tienen un papel económico importante en el sistema alimentario. Similar a otras organizaciones económicas, las cooperativas agrícolas han sido testigos de cambios estructurales en las últimas décadas en términos de modelos de gobernación y gestión. Las cooperativas agrícolas portuguesas se han visto constreñidas por su contexto a adoptar un modelo tradicional de propiedad y control. El objetivo principal de este estudio era analizar cuestiones relacionadas con la estructura de gestión y desempeño financiero de las cooperativas, basada en los datos recogidos de cooperativas de aceite de oliva situadas en la región interior norte de Portugal. La combinación de un análisis cualitativo de la estructura y toma de decisiones, una evaluación financiera y la aplicación de un enfoque en varios criterios (PROMETHEE II), los resultados están en línea con expectativas (por ejemplo, bajos niveles de participación de los miembros, gestión no profesional, ratios de rentabilidad bajos, bajo apalancamiento y una capacidad para cumplir compromisos financieros), excepto la relación entre la gestión profesional y el desempeño financiero. La existencia de gestión profesional no conduce a mejores resultados financieros. Este resultado refuerza la creencia de que las cooperativas que están estructuradas de diferente manera tienen intereses diferentes y contradictorios a las partes interesadas.

Building public policy on shifting sands: the case of the National Asset Management Agency

Over the last thirty years, there has been an increased demand for better management of public sector organisations (PSOs). This requires that they are answerable for the inputs that they are given but also for what they achieve with these inputs (Hood 1991; Hood 1995). It is suggested that this will improve the management of the organisation through better planning and control, and the achievement of greater accountability (Smith 1995). However, such a rational approach with clear goals and the means to measure achievement can cause difficulties for many PSOs. These difficulties include the distinctive nature of the public sector due to the political environment within which the public sector manager operates (Stewart and Walsh 1992) and the fact that PSOs will have many stakeholders, each of whom will have their own specific objectives based on their own perspective (Boyle 1995). This can
result in goal ambiguity which means that there is leeway in interpreting the results of the PSO. The National Asset Management Agency (NAMA) was set up to bring stability to the financial system by buying loans from the banks (which were in most cases, non-performing loans). The intention was to cleanse the banks of these loans so that they could return to their normal business of taking deposits and making loans. However, the legislation, also gave NAMA a wide range of other responsibilities including responsibility for facilitating credit in the economy and protecting the interests of taxpayers. In more recent times, NAMA has been given responsibility for building social housing. This wide-range of activities is a clear example of a PSO being given multiple goals which may conflict and is therefore likely to lead to goal ambiguity. This makes it very difficult to evaluate NAMA’s performance as they are attempting to meet numerous goals at the same time and also highlights the complexity of policy making in the public sector. The purpose of this paper is to examine how NAMA dealt with goal ambiguity. This will be done through a thematic analysis of its annual reports over the last five years. The paper’s will contribute to the ongoing debate about the evaluation of PSOs and the complex environment within which they operate which makes evaluation difficult as they are
answerable to multiple stakeholders who have different objectives and different criteria for measuring success.

Financial literacy and over-indebtedness in low-income households

Financial literacy can explain a significant proportion of wealth inequality. Among the key components of financial literacy are numeracy and money management skills. Our study examines the relative importance of these components in the determination of consumer debt and household net worth among credit union members in socially disadvantaged areas. The main finding from our analysis is that money management skills are important determinants of financial outcomes but that numeracy has almost no role to play. This result adds to a recent US-based behavioural finance literature on the role of attention and planning in consumer finance. Findings are found to be robust when the sample is reduced to only those who have a clear role in household financial decision-making and also when controlling for potential endogeneity. Our findings have policy implications in the UK and elsewhere as credit unions across the world are important players in national financial literacy strategies.

New Public Management: The Story Continues

New Public Management (NPM) has aroused significant interest amongst academe, policy makers and practitioners, since its first articulation in the seminal articles by Hood (1991 and 1995). However, in the 21st century, a body of opinion has developed which asserts that the NPM is passé. This paper seeks to determine the contemporary status of NPM in the context of the UK, one of the early adopters of NPM. Close inspection of UK Government policy underlines the importance of NPM ideas in the New Labour Government modernisation policy (1997-2010). Furthermore, the policy actions of the 2010–2015 UK Coalition Government reveal that the global financial crisis intensified the drive for NPM in the UK’s public sector. This discussion reveals no evidence in support of the demise of NPM.

Use of farmer-prioritized vertisol management options for enhanced green gram and tomato production in central Kenya

Green grams (Phaseolus aures L.) and tomato (Solanum lycopersicum L) are widely grown in the vertisols of the Mwea Irrigation Scheme alongside the rice fields. Green grams can fix nitrogen (biological nitrogen fixation) and are grown for its highly nutritious and curative seeds while tomatoes are grown for its fruit rich in fibres, minerals and vitamins. The two can be prepared separately or together in a variety of ways including raw salads and/or cooked/fried. They together form significant delicacies consumed with rice which is the major cash crop grown in the black cotton soils. The crops can grow well in warm conditions but tomato is fairly adaptable except under excessive humidity and temperatures that reduce yields. Socio-economic prioritization by the farming community and on-farm demonstrations of soil management options were instituted to demonstrate enhanced green gram and tomato production in vertisol soils of lower parts of Kirinyaga County (Mwea East and Mwea West districts). Drainage management was recognized by the farming community as the best option although a reduced number of farmers used drainage and furrows/ridges, manure, fertilizer and shifting options with reducing order of importance. Unavailability of labour and/or financial cost for instituting these management options were indicated as major hindrances to adopt the yield enhancing options. Labour force was contributed to mainly by the family alongside hiring (64.2%) although 28% and 5.2% respectively used hired or family labour alone. The female role in farming activities dominated while the male role was minimal especially at weeding. The youth role remained excessively insignificant and altogether absent at marketing. Despite the need for labour at earlier activities (especially when management options needed to be instituted) it was at the marketing stage that this force was directed. Soils were considered infertile by 60% but 40% indicated that their farms had adequate fertility. Analysis showed that ridging and application of farm yard manure and fertilizer improved fertility, crop growth and income considerably. Phosphate and zinc enhancement reduced alkalinity and sodicity. Green gram and tomato yields increased under ridges and farm yard manure application by 17-25% which significantly enhanced household income.

Policy for the Provision and Management of Cleaning Services (PDF 464KB)

This policy sets out the Department’s commitment to maintaining and improving environmental cleanliness in Northern Ireland (NI). It has been developed with the aim that best management practice, staff training and continued monitoring of performance will lead to services being maintained and improved in a challenging financial climate. The detail of the policy is presented in the three sections which follow this executive summary. Section 1 – Introduction and Background. This section sets out the aims, objectives and scope of the policy. It also sets out the key principles which should apply to cleaning services. Section 2 - Developments since the launch of Cleanliness Matters Strategy in October 2005. This outlines events and progress since 2005 and indicates how these are shaping the proposed strategic direction. Section 3 - The Way Forward. This section sets out the areas for attention over the coming years.  

Taxonomy of Institutional Issues that Act as Barriers to the Implementation of Pavement Management Systems, 1994

The benefits of pavement management system when fully implemented are well known and the history of successful implementation is rich. Implementation occurs, for purposes of this paper, when the pavement management system is the critical component for making pavement decisions. This paper addresses the issues that act as barriers to full implementation of pavement management systems. Institutional barriers, not technical and financial barriers, are more commonly responsible for a pavement management systems falling short of full implementation. The paper groups these institutional issues into a general taxonomy. In general, more effort needs to be put forth by highway agencies to overcome institutional issues. Most agencies approach pavement management as a technical process, but more commonly, institutional issues become more problematic and thus require more attention paid to institutional issues. The paper concludes by summarizing the implementation process being taken by the Iowa Department of Transportation. The process was designed to overcome institutional barriers and facilitate the complete and full implementation of their pavement management system.

Agency, Financial Flexibility, and Firm Value: Evidence from REITs

We show empirically that the use of unsecured debt, whose standard covenants commit management to the preservation of debt capacity, leads to lower and more stable leverage. We then show that firm value is sensitive to leverage levels and leverage stability, decreasing in the former and increasing in the latter. Our results support a liquidity-centric version of Jensen's (1986) free cash flow argument. In this version, self-serving managerial tendencies are reigned in without raising leverage indiscriminately, so that financial flexibility is preserved.