Environmental Risks : Should Banks Be Liable?

This paper studies the impact of banks' liability for environmental damages caused by their borrowers. Laws or court decisions that declare banks liable for environmental damages have two objectives : (1) finding someone to pay for the damages and (2) exerting a pressure on a firm's stakeholders to incite them to invest in environmental risk prevention. We study the effect that such legal decisions can have on financing relationships and especially on the incentives to reduce environmental risk in an environment where banks cannot commit to refinance the firm in all circumstances. Following an environmental accident, liable banks more readily agree to refinance the firm. We then show that bank liability effectively makes refinancing more attractive to banks, therefore improving the firm's risk-sharing possibilities. Consequently, the firm's incentives to invest in environmental risk reduction are weakened compared to the (bank) no-liability case. We also show that, when banks are liable, the firm invests at the full-commitment optimal level of risk reduction investment. If there are some externalities such that some damages cannot be accounted for, the socially efficient level of investment is greater than the privately optimal one. in that case, making banks non-liable can be socially desirable.

Financial crisis: theory and practice

In the last 50 years, we have had approximately 40 events with characteristics related to financial crisis. The most severe crisis was in 1929, when the financial markets plummet and the US gross domestic product decline in more than 30 percent. Recently some years ago, a new crisis developed in the United States, but instantly caused consequences and effects in the rest of the world. This new economic and financial crisis has increased the interest and motivation for the academic community, professors and researchers, to understand the causes and effects of the crisis, to learn from it. This is the one of the main reasons for the compilation of this book, which begins with a meeting of a group of IAFI researchers from the University of Barcelona, where researchers form Mexico and Spain, explain causes and consequences of the crisis of 2007. For that reason, we believed this set of chapters related to methodologies, applications and theories, would conveniently explained the characteristics and events of the past and future financial crisis This book consists in 3 main sections, the first one called "State of the Art and current situation", the second named "Econometric applications to estimate crisis time periods" , and the third one "Solutions to diminish the effects of the crisis". The first section explains the current point of view of many research papers related to financial crisis, it has 2 chapters. In the first one, it describe and analyzes the models that historically have been used to explain financial crisis, furthermore, it proposes to used alternative methodologies such as Fuzzy Cognitive Maps. On the other hand , Chapter 2 , explains the characteristics and details of the 2007 crisis from the US perspective and its comparison to 1929 crisis, presenting some effects in Mexico and Latin America. The second section presents two econometric applications to estimate possible crisis periods. For this matter, Chapter 3, studies 3 Latin-American countries: Argentina, Brazil and Peru in the 1994 crisis and estimates the multifractal characteristics to identify financial and economic distress. Chapter 4 explains the crisis situations in Argentina (2001), Mexico (1994) and the recent one in the United States (2007) and its effects in other countries through a financial series methodology related to the stock market. The last section shows an alternative to prevent the effects of the crisis. The first chapter explains the financial stability effects through the financial system regulation and some globalization standards. Chapter 6, study the benefits of the Investor activism and a way to protect personal and national wealth to face the financial crisis risks.

Financial protection in the UK building industry: a guide for clients and the construction supply chain.

There is a clear need for financial protection in the construction industry, both to guarantee satisfactory completion of construction projects and to guard against non-payment. However, the cost of financial protection is often felt to be disproportionately high, with unnecessary overlap between different measures. The Reading Construction Forum has commissioned and steered research which is published in this report in an effort to bring the problem out into the open and to clarify the various options open to the various parties and stakeholders in the construction process. "Financial Protection in the UK Building Industry" is the first definitive report on the subject, offering an accurate and simple guide that all levels within the construction industry can understand. This accessible new guide considers the problem of financial protection and clearly lays out the alternative solutions.It looks by turn at the client, the main contractor, and the sub-contractor, discussing which financial protection options are available to each of them, and considers the pros and cons of each option. The cost of each type of financial protection is weighed against the amount of protection provided and the risks involved. The book concludes with guidance for consultants, emphasising relevant points to consider when advising clients and contractors about which type of financial protection to choose. "Financial Protection in the UK Building Industry" was researched by a literature search, collection of statistical data, and financial data, as well as discussions with clients, contractors, sub-contractors and consultants. This investigation has shown that the direct costs of implementing financial protection measures are marginal, and that wider adoption of payment protection would create a more equitable situation between contracting parties.This guide will enable anyone in the construction industry to consider all the options, and determine what is the best solution for them. "Reading Construction Forum Financial Protection for the UK Building Industry" was complied by the University of Reading, funded by the Reading Construction Forum. The Forum has recently commissioned and steered a number of high-profile reports covering important aspects of the construction industry. Members of the Forum include major companies which are concerned with achieving high quality in the design, construction and use of commercial, retail and industrial buildings. All are committed to change and innovation in the British and European construction industries.

An entropy-based financial decision support system (e-FDSS) for project analysis in construction SMEs

Uncertainty contributes a major part in the accuracy of a decision-making process while its inconsistency is always difficult to be solved by existing decision-making tools. Entropy has been proved to be useful to evaluate the inconsistency of uncertainty among different respondents. The study demonstrates an entropy-based financial decision support system called e-FDSS. This integrated system provides decision support to evaluate attributes (funding options and multiple risks) available in projects. Fuzzy logic theory is included in the system to deal with the qualitative aspect of these options and risks. An adaptive genetic algorithm (AGA) is also employed to solve the decision algorithm in the system in order to provide optimal and consistent rates to these attributes. Seven simplified and parallel projects from a Hong Kong construction small and medium enterprise (SME) were assessed to evaluate the system. The result shows that the system calculates risk adjusted discount rates (RADR) of projects in an objective way. These rates discount project cash flow impartially. Inconsistency of uncertainty is also successfully evaluated by the use of the entropy method. Finally, the system identifies the favourable funding options that are managed by a scheme called SME Loan Guarantee Scheme (SGS). Based on these results, resource allocation could then be optimized and the best time to start a new project could also be identified throughout the overall project life cycle.

The financial system reform in China: the lesson learnt from the global financial crisis

This paper reviews the impact of the global financial crisis on financial system reform in China. Scholars and practitioners have critically questioned the efficiencies of the Anglo- American principal-agent model of corporate governance which promotes shareholder-value maximisation. Should China continue to follow the U.K.-U.S. path in relation to financial reform? This conceptual paper provides an insightful review of the corporate governance literature, regulatory reports and news articles from the financial press. After examining the fundamental limitations of the laissez-faire philosophy that underpins the neo-liberal model of capitalism, the paper considers the risks in opening up China’s financial markets and relaxing monetary and fiscal policies. The paper outlines a critique of shareholder-capitalism in relation to the German team-production model of corporate governance, promoting a “social market economy” styled capitalism. Through such analysis, the paper explores numerous implications for China to consider in terms of developing a new and sustainable corporate governance model. China needs to follow its own financial reform through understanding its particular economy. The global financial crisis might help China rethink the nature of corporate governance, identify its weakness and assess the current reform agenda.

The post-financial crisis challenges for corporate governance and banking reform in China

The purpose of this paper is to review the impact of the global financial crisis on banking reform in China. The significant doubt concerning the efficiencies of Anglo-American model of corporate governance has raised a critical political question amongst scholars and practitioners as to whether China should continue to follow the U.K.-U.S. path in relation to financial reform. This conceptual paper provides an insightful review of the corporate governance literature and regulatory reports. After examining the fundamental limitations of the laissez-faire philosophy that underpins the neo-liberal model of capitalism, which promotes greater liberalization and less control, the paper considers the risks in opening China’s financial markets and relaxing monetary and fiscal policies. A critique of shareholder-capitalism is outlined in relation to the German’s “social market economy” styled capitalism. Through such analysis the paper explores a number of implications for China to consider in terms of developing a new and sustainable corporate governance model applicable to the Chinese context.

The role of big data in governance: a regulatory and legal perspective of analytics in global financial services

This paper discusses how global financial institutions are using big data analytics within their compliance operations. A lot of previous research has focused on the strategic implications of big data, but not much research has considered how such tools are entwined with regulatory breaches and investigations in financial services. Our work covers two in-depth qualitative case studies, each addressing a distinct type of analytics. The first case focuses on analytics which manage everyday compliance breaches and so are expected by managers. The second case focuses on analytics which facilitate investigation and litigation where serious unexpected breaches may have occurred. In doing so, the study focuses on the micro/data to understand how these tools are influencing operational risks and practices. The paper draws from two bodies of literature, the social studies of information systems and finance to guide our analysis and practitioner recommendations. The cases illustrate how technologies are implicated in multijurisdictional challenges and regulatory conflicts at each end of the operational risk spectrum. We find that compliance analytics are both shaping and reporting regulatory matters yet often firms may have difficulties in recruiting individuals with relevant but diverse skill sets. The cases also underscore the increasing need for financial organizations to adopt robust information governance policies and processes to ease future remediation efforts.

Commodity risks and the cross-section of equity returns

The article examines whether commodity risk is priced in the cross-section of global equity returns. We employ a long-only equally-weighted portfolio of commodity futures and a term structure portfolio that captures phases of backwardation and contango as mimicking portfolios for commodity risk. We find that equity-sorted portfolios with greater sensitivities to the excess returns of the backwardation and contango portfolio command higher average excess returns, suggesting that when measured appropriately, commodity risk is pervasive in stocks. Our conclusions are robust to the addition to the pricing model of financial, macroeconomic and business cycle-based risk factors.

Business Plan, financial and risk analysis from the start-up mathrix

Mathrix is an e-learning math website that will be launched in March 2016. This master thesis offered a unique chance to interact with experienced supervisors in venture capitalism and project investment. It could serve as guidelines for entrepreneurs who intend to raise funds. Starting with the company’s business plan, the thesis focuses on estimating the company’s value with its return on investment using three scenarios and taking into consideration the risks evolved.

Socio-demographic vulnerability: old and new risks for communities, households and individuals

Includes bibliography

Credit-Default-Swaps and the 2008 Financial Crisis: An Inquiry into the Underlying Legal Origins and the European Union’s Regulatory Reforms

After the 2008 financial crisis, the financial innovation product Credit-Default-Swap (CDS) was widely blamed as the main cause of this crisis. CDS is one type of over-the-counter (OTC) traded derivatives. Before the crisis, the trading of CDS was very popular among the financial institutions. But meanwhile, excessive speculative CDSs transactions in a legal environment of scant regulation accumulated huge risks in the financial system. This dissertation is divided into three parts. In Part I, we discussed the primers of the CDSs and its market development, then we analyzed in detail the roles CDSs had played in this crisis based on economic studies. It is advanced that CDSs not just promoted the eruption of the crisis in 2007 but also exacerbated it in 2008. In part II, we asked ourselves what are the legal origins of this crisis in relation with CDSs, as we believe that financial instruments could only function, positive or negative, under certain legal institutional environment. After an in-depth inquiry, we observed that at least three traditional legal doctrines were eroded or circumvented by OTC derivatives. It is argued that the malfunction of these doctrines, on the one hand, facilitated the proliferation of speculative CDSs transactions; on the other hand, eroded the original risk-control legal mechanism. Therefore, the 2008 crisis could escalate rapidly into a global financial tsunami, which was out of control of the regulators. In Part III, we focused on the European Union’s regulatory reform towards the OTC derivatives market. In specific, EU introduced mandatory central counterparty clearing obligation for qualified OTC derivatives, and requires that all OTC derivatives shall be reported to a trade repository. It is observable that EU’s approach in re-regulating the derivatives market is different with the traditional administrative regulation, but aiming at constructing a new market infrastructure for OTC derivatives.

Bank restructuring and financial institution reform in Indonesia

The banking sector underwent drastic reform in post-crisis Indonesia. Bank restructuring, driven by IMF conditionalities, resulted in the exit of insolvent banks and ownership changes of major private banks. Through recapitalization and sales of government-held shares, foreign-owned banks emerged as leading actors in the place of business-group-affiliated banks. As part of the restructuring process, an exit rule was created. The central bank, which up to that time had been given only partial authority under the jurisdiction of the Minister of Finance, now gained a full range of authority over banks. The central bank's supervision system on banks, risk management systems at individual banks, and their efforts to build risk management capacities, began to function. This is totally different from the old financial institution under the Soeharto regime, where banks had no incentive to control risks, as the regime tacitly ensured their survival.

Political influence in commercial and financial oil trading : the evidence from US firms

International politics affects oil trade. But do financial and commercial traders who participate in spot oil trading also respond to changes in international politics? We construct a firm-level dataset for all U.S. oil-importing companies over 1986-2008 to examine how these firms respond to increases in "political distance" between the U.S. and her trading partners, measured by divergence in their UN General Assembly voting patterns. Consistent with previous macro evidence, we first show that individual firms diversify their oil imports politically, even after controlling for unobserved firm heterogeneity. However, the political pattern of oil imports is not entirely driven by the concerns of hold-up risks, which exist when oil transactions via term contracts are associated with backward vertical FDI that is subject to expropriation. In particular, our results indicate that even financial and commercial traders significantly reduce their oil imports from U.S. political enemies. Interestingly, while these traders diversify their oil imports politically immediately after changes in international politics, other oil companies reduce their oil imports with a significant time lag. Our findings suggest that in designing regulations to avoid harmful repercussions on commodity and financial assets, policymakers need to understand the nature of political risk.

Information technology outsourcing in financial services

Regulatory pressures and strong competitiveness, as well as the need to control costs and remain up to date with information technologies have turned outsourcing into a basic tool at the disposal of financial entities. Our paper has as its aim to show the peculiarities of information technology outsourcing in the financial services industry, additionally suggesting a decision framework which can help firms minimise risks.