nep-cfn 2010-03-20 papers

on Corporate Finance

Issue of 2010‒03‒20
two papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

On the necessity of five risk measures By Dominique Guegan; Wayne Tarrant
Corporate Lobbying and Financial Performance By Chen, Hui; Parsley, David; Yang, Ya-wen

By:	Dominique Guegan (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Wayne Tarrant (Wingate University - Department of Mathematics)
Abstract:	The banking systems that deal with risk management depend on underlying risk measures. Following the recommendation of the Basel II accord, most banks have developed internal models to determine their capital requirement. The Value at Risk measure plays an important role in computing this capital. In this paper we analyze in detail the errors produced by use of this measure. We then discuss other measures, pointing out their strengths and shortcomings. We give detailed examples, showing the need for five risk measures in order to compute a capital in relation to the risk to which the bank is exposed. In the end, we suggest using five different risk measures for computing capital requirements.
Keywords:	Risk measure ; Value at Risk ; Bank capital ; Basel II Accord
Date:	2010–01
URL:	http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00460901_v1&r=cfn

Corporate Lobbying and Financial Performance

By:	Chen, Hui; Parsley, David; Yang, Ya-wen
Abstract:	Corporate lobbying activities are designed to influence legislators and thus to further company goals by encouraging favorable policies and/or outcomes. Using data made available by the Lobbying Disclosure Act of 1995, this study examines corporate lobbying activities from a financial perspective. We find that on average, lobbying is positively related to accounting and market measures of financial performance. These results are robust across a number of empirical specifications and continue to hold when we account for potential sample selection. We also report market performance evidence using a portfolio approach. We find that portfolios of firms with the highest lobbying intensities significantly outperform their benchmarks in the three years following portfolio formation.
Keywords:	Corporate Lobbying; accounting performance; market returns; portfolio
JEL:	G30 G10
Date:	2010–01
URL:	http://d.repec.org/n?u=RePEc:pra:mprapa:21114&r=cfn

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