THE COSTS OF RAISING EQUITY RATIO FOR BANKS Evidence from publicly listed banks operating in Finland

The solvency rate of banks differs from the other corporations. The equity rate of a bank is lower than it is in corporations of other field of business. However, functional banking industry has huge impact on the whole society. The equity rate of a bank needs to be higher because that makes the banking industry more stable as the probability of the banks going under will decrease. If a bank goes belly up, the government will be compensating the deposits since it has granted the bank’s depositors a deposit insurance. This means that the payment comes from the tax payers in the last resort. Economic conversation has long concentrated on the costs of raising equity ratio. It has been a common belief that raising equity ratio also increases the banks’ funding costs in the same phase and these costs will be redistributed to the banks customers as higher service charges. Regardless of the common belief, the actual reaction of the funding costs to the higher equity ratio has been studied only a little in Europe and no study has been constructed in Finland. Before it can be calculated whether the higher stability of the banking industry that is caused by the raise in equity levels compensates the extra costs in funding costs, it must be calculated how much the actual increase in the funding costs is. Currently the banking industry is controlled by complex and heavy regulation. To maintain such a complex system inflicts major costs in itself. This research leans on the Modigliani and Miller theory, which shows that the finance structure of a firm is irrelevant to their funding costs. In addition, this research follows the calculations of Miller, Yang ja Marcheggianon (2012) and Vale (2011) where they calculate the funding costs after the doubling of specific banks’ equity ratios. The Finnish banks studied in this research are Nordea and Danske Bank because they are the two largest banks operating in Finland and they both also have the right company form to able the calculations. To calculate the costs of halving their leverages this study used the Capital Asset Pricing Model. The halving of the leverage of Danske Bank raised its funding costs for 16—257 basis points depending on the method of assessment. For Nordea the increase in funding costs was 11—186 basis points when its leverage was halved. On the behalf of the results found in this study it can be said that the doubling of an equity ratio does not increase the funding costs of a bank one by one. Actually the increase is quite modest. More solvent banks would increase the stability of the banking industry enormously while the increase in funding costs is low. If the costs of bank regulation exceeds the increase in funding costs after the higher equity ratio, it can be thought that this is the better way of stabilizing the banking industry rather than heavy regulation.

Equity, equality and diversity : A cross-country comparison

Differences in the workplace, also known as workforce diversity, evoke varied approaches in different countries. These include equity, equal opportunities, affirmative action and managing diversity. This paper compares methods in the US, Canada, UK, India, and South Africa. The system in each country is described and compared using several parameters. These are: the emphasis on sameness or difference; focus on individuals versus groups, classes or categories; voluntary action versus compulsory requirements; and remedies available. All are examined within the context of the national background and culture. The paper concludes that each system has both benefits and drawbacks, and gives lie to the assumption that there is any perfect legislative or voluntary approach to workplace diversity.

Ratios and indicators that determine return on equity

This study aims to investigate factors that may affect return on equity (ROE). The ROE is a gauge of profit generating efficiency and a strong measure of how well the management of a firm creates value for its shareholders. Firms with higher ROE typically have competitive advantages over their competitors which translates into superior returns for investors. Therefore, seems imperative to study the drivers of ROE, particularly ratios and indicators that may have considerable impact. The analysis is done on a sample of 90 largest non-financial companies which are components of NASDAQ-100 index and also on industry sector samples. The ordinary least squares method is used to find the most impactful drivers of ROE. The extended DuPont model’s components are considered as the primary factors affecting ROE. In addition, other ratios and indicators such as price to earnings, price to book and current are also incorporated. Consequently, the study uses eight ratios that are believed to have impact on ROE. According to our findings, the most relevant ratios that determine ROE are tax burden, interest burden, operating margin, asset turnover and financial leverage (extended DuPont components) regardless of industry sectors.

For love or for money? A study of the marriage wage premium in Colombia

Being married may raise worker productivity and increase the probability of remaining in a job and, as consequence, obtaining a wage premium -- Yet, this effect may be different for males and females -- In developing countries, such as Colombia, the premium may be larger than in developed countries due to the differing social norms and labor market structures -- Using cross-sectional data from Colombian Household Surveys, this paper examines the marriage wage premium and its evolution in Colombia both at the aggregate level and by gender -- We find a marriage wage premium for both male and female populations; this wage premium is explained by the greater human capital endowment in married people and to employer favoritism due to the “social norms” which consider being married an appropriate behavior and reward it

Equity research - Brisa

Mestrado em Finanças

Equity Research - Cork Supply Portugal

Mestrado em Finanças

Equity research – CTT Correios de Portugal, S.A.

Dissertação de Mestrado, Gestão Empresarial, Faculdade de Economia, Universidade do Algarve, 2016

Equity Research - Luz Saúde

Mestrado em Finanças

Equity-focused health impact assessment of Portuguese tobacco control legislation

The World Health Organization recommend the Equity-Focused Health Impact Assessment (HIA) as a means to assess the impact of social and economic policies on the health of populations, and acknowledges their contribution to health inequality. We describe the application of the Equity-focusedImpact Assessment methodology on the Portuguese law on Smoking Prevention and Tobacco Control (Law No. 37/2007). A rapid assessment was carried out to issue recommendations which could be incorporated into the law during a revision in 2014. Quantitative (consumption and health status indicators; equity analysis) and qualitative (Focus Group) approaches were taken to evaluate the impact of the law and formulate recommendations. Young people, men and women of low socioeconomic status, and pregnant women were identified as requiring specific and appropriate interventions to prevent smoking and support smoking cessation.

Investigación de mercados como herramienta para determinar la disponibilidad a pagar un precio adicional o premium por carne de res certificada, mediante un sello de inocuidad en la empresa DIKA S.A. de C.V.

Los orígenes de esta investigación, tienen como base la implementación de un sello de inocuidad en la empresa DIKA S.A. de C.V. Para mejorar sus procesos en los destaces de las reses en su rastro, ya que en la actualidad los rastros no brindan un servicio de buena calidad para sus clientes. El objetivo primordial de la investigación es: Determinar mediante el trabajo de campo, si los clientes están dispuestos a pagar un precio adicional por carne de res certificada; y de acuerdo a la información obtenida la empresa pueda tomar las decisiones sobre la implementación del sello de inocuidad. La metodología que se utilizó fue, por la naturaleza de la investigación, basada en el tipo de muestreo no probabilístico ya que en Súper Selectos (principal intermediario) tienen como política no permitir encuestadores en sus locales de venta, esto nos obligó a tomar otras medidas de recolección de información, como los mencionados anterior mente. Los resultados obtenidos indicaron que de los 104 encuestados, el 64.4% está a favor o dispuesto a pagar un precio adicional, por el contrario u opinión diferente se encuentra el 35.6%. Estos porcentajes indican, que la inversión podría ser rentable. Después de analizar los datos brindados por las encuestas, concluimos que sí, el sello debe ser implementado; pero el alza en los precios debe ser pausado y estratégicamente, además buscar recuperar la inversión no solo en los precios sino en otras estrategias, las cuales recomendamos en el Capítulo III.

Horizontal fiscal equity: a theoretical contribution with an application to the portuguese municipalities.

Doutoramento em Economia.

Analisi delle "exit strategies" nel settore dell'Equity Crowdfunding

La tesi analizza il fenomeno dell'Equity Crowdfunding con particolare attenzione alle strategie di disinvestimento. Si basa sull'analisi di un campione di 100 progetti finanziati sulla piattaforma Crowdcube. Il crowdfunding è un meccanismo di finanziamento collettivo che nasce fondamentalmente dall’esigenza di piccoli progetti di reperire capitale per essere sviluppati. Si sviluppa mediante l’ausilio di piattaforme informatiche, che fungono da tramite tra le parti interessate, permettendo ai promotori di lanciare i progetti e presentarli al pubblico, ed ai potenziali investitori di informarsi riguardo le diverse opportunità ed eventualmente partecipare alle iniziative. Si crea in questo modo una community virtuale, che si muove attraverso meccanismi differenti rispetto ai classici canali di finanziamento, e offre nuove opportunità agli ideatori di progetti così come agli investitori. Esistono diversi modelli di crowdfunding, che si differenziano per le rispettive finalità, le modalità di raccolta fondi e le forme di compenso. In particolare, risulta importante soffermarsi sull’equity crowdfunding, che si distingue dagli altri modelli in quanto raccoglie denaro che viene impiegato direttamente nel capitale di rischio dell’azienda finanziata. È il modello che attualmente riscuote maggior successo in termini di quote raccolte. La ricompensa è di tipo economico e si realizza attraverso il disinvestimento della quota di partecipazione, entro una data finestra temporale e secondo le modalità delineate inizialmente dal promotore del progetto. Le modalità di disinvestimento sono dette “exit strategies” e consistono negli obiettivi che i promotori dei progetti si propongono di realizzare dopo aver lanciato ed amministrato per un certo intervallo temporale i propri business, e sono rilevanti per gli investitori in quanto rappresentano il meccanismo attraverso il quale essi si aspettano un guadagno dall’investimento effettuato.

Liquidity, Governance and Adverse Selection in Asset Pricing

A plethora of recent literature on asset pricing provides plenty of empirical evidence on the importance of liquidity, governance and adverse selection of equity on pricing of assets together with more traditional factors such as market beta and the Fama-French factors. However, literature has usually stressed that these factors are priced individually. In this dissertation we argue that these factors may be related to each other, hence not only individual but also joint tests of their significance is called for. In the three related essays, we examine the liquidity premium in the context of the finer three-digit SIC industry classification, joint importance of liquidity and governance factors as well as governance and adverse selection. Recent studies by Core, Guay and Rusticus (2006) and Ben-Rephael, Kadan and Wohl (2010) find that governance and liquidity premiums are dwindling in the last few years. One reason could be that liquidity is very unevenly distributed across industries. This could affect the interpretation of prior liquidity studies. Thus, in the first chapter we analyze the relation of industry clustering and liquidity risk following a finer industry classification suggested by Johnson, Moorman and Sorescu (2009). In the second chapter, we examine the dwindling influence of the governance factor if taken simultaneously with liquidity. We argue that this happens since governance characteristics are potentially a proxy for information asymmetry that may be better captured by market liquidity of a company’s shares. Hence, we jointly examine both the factors, namely, governance and liquidity – in a series of standard asset pricing tests. Our results reconfirm the importance of governance and liquidity in explaining stock returns thus independently corroborating the findings of Amihud (2002) and Gompers, Ishii and Metrick (2003). Moreover, governance is not subsumed by liquidity. Lastly, we analyze the relation of governance and adverse selection, and again corroborate previous findings of a priced governance factor. Furthermore, we ascertain the importance of microstructure measures in asset pricing by employing Huang and Stoll’s (1997) method to extract an adverse selection variable and finding evidence for its explanatory power in four-factor regressions.

The Spanish equity market (2000-2014): stylized facts

Introduction. This thesis is framed in the last 15 years of history of the Spanish equity market (years 2000 to 2014). In this sense and, as an introduction of this work, in the first chapter the main features of the background of the electronic market for shares and the implications that the migration from out-c1y circles to this automatic system is explained. The main changes of this electronic system (Spanish stock exchange interconnection system) are detailed in this part. Also in this first chapter is explained the important European meeting, in December 1999, of eight stock exchanges which foresee, in a first step, to design a single market model for, lately, try to merge, final step that did not take place. After this initial moment in December 1999, in this work the main features of the market model of the main European markets (London, Paris, Germany and Italy) are generally described, given that it is important to consider the European context of the Spanish equity market, specially during these last fifteen years. Along chapter two, the thesis is supported with the theoretic frame explaining here the nature of markets and their important role in the economy, detailing afte1wards the Spanish case from the point of view of its institutional structure and legal framework. Besides, in this chapter, a deep review of initial public offerings (main concepts and calendar steps) is done as well as take-over bids (typology and key-concepts)...

Pairs trading in the UK equity market: risk and return

In this paper, we provide the first comprehensive UK evidence on the profitability of the pairs trading strategy. Evidence suggests that the strategy performs well in crisis periods, so we control for both risk and liquidity to assess performance. To evaluate the effect of market frictions on the strategy, we use several estimates of transaction costs. We also present evidence on the performance of the strategy in different economic and market states. Our results show that pairs trading portfolios typically have little exposure to known equity risk factors such as market, size, value, momentum and reversal. However, a model controlling for risk and liquidity explains a far larger proportion of returns. Incorporating different assumptions about bid-ask spreads leads to reductions in performance estimates. When we allow for time-varying risk exposures, conditioned on the contemporaneous equity market return, risk-adjusted returns are generally not significantly different from zero.