nep-cfn New Economics Papers
on Corporate Finance
Issue of 2008‒09‒29
six papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. Banking Efficiency and Stock Market Performance: An Analysis of Listed Indonesian Banks By Maximilian J. B. Hall; Mulinman D. Hadad; Wimboh Santoso; Ricky Satria; Karligash Kenjegalieva; Richard Simper
  2. Japan: The banks are back! Or are they? By Maximilian J. B. Hall
  3. Codes of Good Governance in Hungary By Zsolt Bedo; Eva Ozsvald
  4. Nouveaux instruments d’évaluation pour le risque financier d’entreprise By Greta Falavigna
  5. Inheritance Law and Investment in Family Firms By Andrew Ellul; Marco Pagano; Fausto PAnunzi
  6. Q-theory of Investment and Earnings Retentions-Evidence from Scandinavia By Eklund, Johan

  1. By: Maximilian J. B. Hall (Dept of Economics, Loughborough University); Mulinman D. Hadad (Bank Indonesia, Jakarta, Indonesia); Wimboh Santoso (Bank Indonesia, Jakarta, Indonesia); Ricky Satria (Bank Indonesia, Jakarta, Indonesia); Karligash Kenjegalieva (Dept of Economics, Loughborough University); Richard Simper (Dept of Economics, Loughborough University)
    Abstract: This paper examines the monthly efficiency and productivity of listed Indonesian banks and their market performance through the prism of two modelling techniques, efficiency and super-efficiency, over the period January 2006 to July 2007. Within this research strategy we employ Tone’s (2001) non-parametric, Slacks-Based Model (SBM) and Tone’s (2002) super-efficiency SBM combining them with recent bootstrapping techniques, namely the non-parametric truncated regression analysis suggested by Simar and Wilson (2007). In the case of the SBM efficiency scores, the Simar and Wilson methodology was adapted to two truncations, whereas in the super-efficiency framework the original technique was utilised. As suggested by neo-classical theory, we find that the stock market values banks in accordance with their performance. Moreover, it is found that the JCI index of the Indonesian Stock Exchange is positively related to bank efficiency. Another interesting finding is that the coefficient for the share of foreign ownership is negative and statistically significant in the super-efficiency modelling. This suggests that Indonesian banks with foreign ownership tend to be less efficient than their domestic counterparts. Finally, Malmquist productivity results suggest that, over the study’s horizon, the sample banks displayed volatile productivity patterns in their profit-generating operations.
    Keywords: Indonesian Banking, Emerging Markets, Productivity, Efficiency.
    JEL: C23 C52 G21
    Date: 2008–08
  2. By: Maximilian J. B. Hall (Dept of Economics, Loughborough University)
    Abstract: Since fiscal 2003, the 'performance' of the Japanese banking sector, in terms of profitability, asset quality, and capital adequacy, has improved markedly as the real economy has recovered, suggesting that the widespread pessimism (see, for example, Hall, 2006 and IMF, 2003) expressed earlier concerning the fragility of the sector was somewhat overdone. Yet, despite these positive developments, a number of serious challenges still face the Japanese banking industry and their supervisors. Core profitability, for example, remains very weak, in part due to wafer thin lending margins at home and sluggish corporate loan demand. Asset quality has also widely suffered because of exposure to the re-regulated consumer finance industry and the US sub-prime market. And controversy still surrounds the issues of bank "under-reserving" and regulatory tolerance of "double gearing" on the capital adequacy front. These, and other, problems must be resolved if Japanese banks are to finally re-claim the ground lost to international competitors over the last 15 years or so and secure lasting improvement in their financial health.
    Keywords: Japanese Banking; Performance – Capital Adequacy and Profitability; Supervision; Financial Stability.
    JEL: G21 G28 G32
    Date: 2008–07
  3. By: Zsolt Bedo (University of Pecs); Eva Ozsvald (Institute of Economics, Hungarian Academy of Sciences)
    Abstract: The purpose of the paper is to account for the short history of the soft law regulation of corporate conduct on the Budapest Stock Exchange (BSE). In theory, voluntary codes of good governance are expected to improve the deficiences of the existing mechanisms of corporate governance. In case of the Hungarian public companies the most important corporate governance problems are those related to the fragile safeguards of the interests of minority shareholders and to the lack of incentives for a much higher degree of transparency and disclosure. It is these two sets of issues on which the present analysis concentrates. The empirical core of the paper assesses the quality of information to be gained from the corporate governance reports of listed companies on the BSE. In order to discover links between the quality of information and firm characteristics we categorized the declarations based on their adequacy and applied binary regression analysis. We found inverse relationship between ownership concentration and the quality of information, while the higher liquidity of shares enhanced the adequacy of declarations.
    Keywords: Corporate governance, company law, voluntary codes of governance
    JEL: G18 G34 K22 P34
    Date: 2008–09
  4. By: Greta Falavigna (Ceris - Institute for Economic Research on Firms and Growth, Moncalieri (Turin), Italy)
    Abstract: On a wake of Basel II in 2004, banks and financial institutions had focused on the default analysis of firms. In this contribution, artificial neural networks are used for extracting balance-sheet variables determining the default of enterprises on a base of prospective vision. A manufacturing sample and a services one are introduced in the network and then analysed. In this way, the goal has been to show that artificial neural networks were good tools for classifying firms on a base of balance-sheet data. Moreover, these models are also able to underline indices determining the default risk of firm.
    Keywords: Artificial neural networks (ANN), Determinant variables, Default risk, Manufacturing industry, Service industry.
    JEL: C63 G33 L60 L63
    Date: 2008–06
  5. By: Andrew Ellul (Kelley School of Business, Indiana University); Marco Pagano (Università di Napoli Federico II, CSEF, EIEF and CEPR); Fausto PAnunzi (Bocconi University, IGIER and CEPR)
    Abstract: Entrepreneurs may be constrained by the law to bequeath a minimal stake to non-controlling heirs. The size of this stake can reduce investment in family firms, by reducing the future income they can pledge to external financiers. Using a purpose-built indicator of the permissiveness of inheritance law and data for 10,245 firms from 32 countries over the 1990-2006 interval, we find that stricter inheritance law is associated with lower investment in family firms, while it leaves investment unaffected in non-family firms. Moreover, as predicted by the model, inheritance laws affects investment only in family firms that experience a succession.
    Keywords: succession, family firms, inheritance law, growth, investment
    JEL: G32
    Date: 2008–09–21
  6. By: Eklund, Johan (Ratio)
    Abstract: In a frictionless milieu retentions should have no impact on investment behavior. However, empirical studies typically find that retentions are an important determinant of investment. Managerial discretion and financial constraints are two alternative explanations that have been suggested. This paper uses a panel of listed Scandinavian firms to examine the importance of retentions as a determinant of investment. Measures of Tobin’s Q, marginal q and sales accelerator are used to control for investment opportunities. Scandinavian firms are found to depend on retentions to a high degree, more so than in other developed economies. This high dependence on retentions suggests that the Scandinavian capital markets are suffering from allocational inefficiencies. Moreover, these market frictions appear too large to per se be caused by information asymmetries or managerial discretion phenomena. Possible institutional explanations are suggested.
    Keywords: investment; liquidity; retained earnings; free cash flow; Tobin’s Q; marginal q;
    JEL: G00 G30
    Date: 2008–09–16

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