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on Accounting and Auditing |
| By: | Newbery, D. |
| Abstract: | State-owned electricity companies typically set prices that are too low to finance new investment when needed, and which create additional problems where private investment is sought. The paper asks to what extent this can be attributed to historic cost accounting, and finds that provided the required rate of return is appropriately set, this seems unlikely to be the main cause of under-pricing, although inflation in a period of excess capacity can amplify such under-pricing. It seems more likely that the main problem is a failure to charge an appropriate riskadjusted rate of return. The paper concludes by suggesting how such companies can move to a more efficient price structure, provided the correct cost of capital is recognised in the regulated pricing structure. |
| Keywords: | Electricity investment, pricing, accounting, cost of capital |
| JEL: | L32 L51 L94 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0830&r=acc |
| By: | Tobias Adrian; Hyun Song Shin |
| Abstract: | We study a contracting model for the determination of leverage and balance sheet size for financial intermediaries that fund their activities through collateralized borrowing. The model gives rise to two features: First, leverage is procyclical in the sense that leverage is high when the balance sheet is large. Second, leverage and balance sheet size are both determined by the riskiness of assets. For U.S. investment banks, we find empirical support for both features of our model, that is, leverage is procyclical, and both leverage and balance sheet size are determined by measured risks. In a system context, increased risk reduces the debt capacity of the financial system as a whole, giving rise to amplified de-leveraging by institutions by way of the chain of repo transactions in the financial system. |
| Keywords: | Financial leverage ; Financial risk management ; Assets (Accounting) ; Repurchase agreements ; Bank liquidity |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:338&r=acc |
| By: | Ojo, Marianne |
| Abstract: | This paper traces developments from the inception of the 1988 Basel Capital Accord to its present form (Basel II). In highlighting the flaws of the 1988 Accord, an evaluation is made of the Basel Committee’s efforts to address such weaknesses through Basel II. Whilst considerable progress has been achieved, the paper concludes, based on one of the principal aims of these Accords, namely the management of risk, that more work is still required particularly in relation to hedge funds and those risks attributed to non bank financial institutions. |
| Keywords: | risk;management;regulation;banks;Basel;Committee |
| JEL: | K2 G21 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:10051&r=acc |