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This study focuses on the efficiency measures of banking institutions from sixteen Eastern European countries, the Balkans and Turkey. Authors use a two-step approach to study the efficiency of banks at the regional level during the critical period 2007-2011. First, the study examines whether banks are actively operating differently at a regional level during the under-review period to focus on the development of the crisis. Secondly, authors use the performance measure (Technical Efficiency -TM) that was obtained from the analysis using basic banking accounting characteristics such as capital ratios, assets quality, leverage, liquidity, and operations financial ratio as independent variables. Authors also use Global Governance Indicators to describe the ability of the respective governments to formulate effectively and properly policies related to Political Stability and the Rule of Law. Their results suggest that bank accountant and managers of all regions should focus upon profit efficiency, proper capitalization, in order to increase their banks’ profitability. In all regions, there is a need for a benchmark in lowering Banks’ operating expenses, in order for them to become more efficient. Finally, credit expansion in Eastern Europe and Balkans countries needs to be under a cautious umbrella in order banks should take the momentum for reaching their more efficient operational levels.

Cultural differences influence the behavior of companies, including management styles, relationships with employees, stake- and shareholders or social responsibility. Obviously, the concept of corporate governance encompassing the Internal Audit Function (IAF) is seen differently in different cultures. Therefore, conformance with the globally effective “International Professional Practice Framework” (IPPF) for Internal Auditors presuming a culture-free, completely homogeneous IAF with uniform working standards worldwide, seems more than difficult. The focus of this study is to compare the IAF characteristics in China and Germany, based on data from Chief Audit Executives (CAE) from both countries. We identify more (culturally influenced) differences than similarities between the German and Chinese IAF, although there can be found a number of fundamental political, economic and cultural similarities between both countries.

The objective of this paper is twofold. Firstly, it portrays and evaluates the existing corporate governance structure and secondly, highlights its connection with internal audit function and management practices. It is adopted a descriptive research analysis using the quantitative approach on a sample of listed companies in Athens Stock Exchange for the year 2016. Our methodological research instrument is based on COSO (2013) Internal Control - Integrated Framework. The paper concludes that corporate governance is driven to managerial excellence and effective governance because of internal audit processes, risk assessment, control activities, information and communication, and monitoring activities. The research contributes to the corporate governance literature by providing valuable insights into the major aspects of a well-functioning internal control system and its relevance to management performance. Proposed areas for future research directions should be discussed.

This paper, having traced the evolution of anti-money laundering legislation, defines and frames money laundering and terrorism financing risk inside corporate dynamics. Principles that must inspire corporate actions on the construction of an adequate managing structure to contain risks are set out, considering the fact that there is no risk that this does not have an economical content. This is even truer in the presented case, given that the Italian legislation to counter money laundering is focused on the innovative and modern risk-based approach, which has to guide the organization and functioning of corporations. Possible configuration of corporate anti-money laundering supervisions is therefore analyzed, with the aim of underlining the present connection between anti-money laundering legislation and rules referring to the government and to the internal control system. The present study originates from the interpretation of the new Italian anti-money laundering law. In particular, the first consideration that derives is that the new law does not impose precise obligations in terms of corporate anti-money laundering structure, but a large area of autonomy is left to the will of each company.

The assessment provides evidence of market segmentation across Islamic and conventional banks in the Gulf Cooperation Council (GCC), leading to excess liquidity, and an uneven playing field for Islamic banks that might affect their growth. Liquidity management has been a long-standing concern in the global Islamic finance industry as there is a general lack of Shari’ah compliant instruments that can serve as high-quality short-term liquid assets. The degree of segmentation and bank behavior varies across countries depending on Shari’ah permissibility and the availability of Shari’ah-compliant instruments. A partial response would be to support efforts to build Islamic liquid interbank and money markets, which are crucial for monetary policy transmission through the Islamic financial system. This can be achieved, to a large extent, by deepening Islamic government securities and developing Shari’ah-compliant money market instruments.

The objective of this paper is to determine the impact of risk factors on the financial performance of the commercial banking sector in Barbados using quarterly data for the period 2000 to 2015. The empirical results indicate that Capital Risk, Credit Risk, Liquidity Risk, Interest Rate Risk and Operational Risk have statistically significant impacts on financial performance. The only risk variable which does not derive this result is Country Risk. In addition, of those variables which proxy external factors, only GDP Growth has a statistically insignificant influence on financial performance. Credit risk exerted a negative impact on the banks’ financial performance, thus the banks must ensure they adopt appropriate measures to minimise the impact of this risk. Higher levels of capital impacted positively on the banking sector’s profitability. This paper is the first effort employing such an extensive dataset based on Barbados’ commercial banking sector and shows the main factors that influence commercial banks’ financial performance in this developing economy.

This study aims to provide an alternative model for understanding customers’ loyalty behavior by examining the effect of relationship marketing (RM) and service quality on customer satisfaction and customer loyalty moderated with switching costs. A laboratory experiment was carried out to ascertain the controlled variables based on factorial design: 2 (RM: high vs low) x 2 (service quality: high vs low) x 2 (the switching costs: high vs low). The study was based on bank clients as participants, and multiple linear regression was chosen to examine the causal relationship between the variables that are hypothesized. The results indicate that loyalty of banking customers is significantly influenced by RM, service quality and customer satisfaction. In addition, switching costs have a role in moderating customer loyalty. The implications of this study were discussed to give insight into contributions of theoretical and practical aspects, and for future studies

This paper is examining the purchase likelihood of hypothetical service brand extensions from product companies focusing on consumer electronics based on sector categorization and perceptions of fit between the existing product category and image of the company. Prior research has recognized that levels of brand knowledge eases the transference of associations and affect to the new products. Similarity to the existing products of the parent company and perceived image also influence the success of brand extensions. However, sector categorization may interfere with this relationship. The purpose of this study is to examine Greek consumers’ attitudes towards hypothetical brand extensions, and how these are affected by consumers’ existing knowledge about the brand, sector categorization and perceptions of image and category fit of cross-sector extensions. This aim is examined in the context of technological categories, where less-known companies exhibited significance in purchase likelihood, and contradictory with the existing literature, service companies did not perform as positively as expected. Additional insights to the existing literature about sector categorization are provided. The effect of both image and category fit is also examined and predictions regarding the effect of each are made.

The new Basel III Liquidity Coverage Ratio standard which encourages banks to maintain a diversified pool of high-quality liquid assets against their short-term expected net cash outflows although it appears to be noble from a theoretic perspective it may weigh down banks’ performance because liquid assets earn low returns. It is against this background that this study sought to evaluate the impact of the new Basel III liquidity regulations on the profitability of banks in emerging market economies. A sample of 40 banks operating in 11 emerging markets over the period 2011 to 2016 was used in the study. For estimation, system Generalized Method of Moments (GMM) estimator was employed. Surprisingly, empirical results demonstrated that regulatory pressure stemming from Liquidity Coverage Ratio requirement increased instead of diminishing the profitability of banks in emerging markets. The plausible explanation given for this evidence was that banks in emerging markets managed their liquidity in a manner that is consistent with Liquidity Coverage Ratio rule hence the regulation had no detrimental effects on banks in emerging economies.

This study seeks to examine the impact of Block Ownership structure on Credit Ratings in OECD countries. This research seeks to contribute to the extant literature by exploring the effects of Corporate Governance (CG) mechanisms on corporate credit ratings. The study uses a panel data of 200 companies from Anglo American and European countries between 2010 and 2014. The ordinary least square regression is used to examine the relationships. Additionally, to alleviate the concern of potential endogeneity, we use fixed effect regression, two-stage least squares using instrumental variables. The results show there is a negative and significant relationship between block ownership and credit ratings, with a greater significance among Anglo American countries than among European countries. The rationale for this is that Anglo-American system gives preferential treatment to individual shareholders and its accounting tradition leads to a decline in risk and increase in credit ratings. The result is consistent with the multi-theoretical framework predictions derived from the agency and stewardship theories. Future research could investigate credit ratings using other credit rating agencies, selecting a larger sample that includes small, mid-size and large companies. This paper extends, as well as contributes to extant CG literature by offering new evidence on the effect of block ownership on credit ratings between two different traditions. This will be explored by employing firm-level CG mechanisms by accounting for control variables. The findings will help regulators and policymakers in OECD countries in evaluating the adequacy of current CG reforms to prevent management misconduct and scandals.

Given the fact that a swift rehabilitation procedure is very critical due to the risk of the collapse of business foundation (e.g. falling asset value), this paper analyzes the effect of the Fast-track program, introduced to address insolvent companies swiftly. A Differences-in-Differences model is used to analyze and compare the prior-and-post effects of the program. The analysis result shows that the effect of this program on ICR (interest coverage ratio), representing the degree of rehabilitation, is positive; but its statistical significance is low. This is because the business foundation has been undermined around the time of receivership; and even after the termination of the receivership, the program effect is limited due to the bankruptcy stigma. The same result is observed in estimations by company size and by industry. This result has following implications. First, to improve the effect of Fast-track, institutional efforts are required to reduce disadvantages induced by the bankruptcy stigma (e.g. a fall in credit rating and high-risk premiums). Next, as observed in the empirical analysis of steel and shipbuilding, the effect of the Fast-track may not be exercised to the full with weakened industrial competitiveness. Therefore, restructuring efforts such as business reshuffle are necessary.

We examine the relationship between ownership structure and corporate risk-taking in Japan over the sample periods of 2000 2010. Reflecting the ongoing changes in the ownership structure in Japan, we incorporate the various kinds of insider and outsider ownership in the analysis. Ownership such as concentrated ownership, ownership by closely related parties, financial institutions comprising banks and insurance companies and managers are categorized into inside ownership, while ownership by foreigners or financial institution such as investment trusts or pension funds are categorized into outside ownership. The ownership structure is found to have a different impact on the firm’s risk-taking behavior. The study shows that concentrated ownership or ownership by closely related parties affect the firm risks in a convex manner and encourages the firm management to take more risk when the firms have growth opportunities. On the other hand, ownership by financial institutions such as bank and insurance companies, does not seem to affect the firm risk level. This implies that the financial institutions fail to play their role of a shareholder monitor. When managerial ownership is allowed, it is found that Japanese managers’ incentives are aligned with those of shareholders. Contrary to the conventional entrenchment hypothesis, however, managers seem to take more risk as the share of managerial ownership increases. Foreign investors are found to enhance corporate risk-taking in a monotonic manner and do not bias corporate investment in a conservative direction in pursuit of their short-term gains. Domestic institutions such as investment trusts or pension funds are found to neither affect the firm risk level nor enhance the firm value.

This paper aims at identifying which factors should be considered in the building of an economic evaluation model for the private label brand. In fact, some specific characteristics of private label, with respect to industrial brand, make unusable the consolidated models available. The results of the paper are the definition of some specific factors of private label, the assumptions about how these features impact on the traditional economic evaluation models and how these could be included in a model. Because of the complexity of the topic, the hypothesis is to build a model of synthesis, made of two parts: one part for a Financial-Based evaluation of Brand Equity, with the addition of some specific factors and indicators to the traditional formulas, while the other part is for a Consumer-based evaluation of Brand Equity, thanks to an index that summarizes the strength of private label brands from the consumer perspective. The private label economic evaluation has some relevant managerial implications on the retail system, on the vertical supply chain relationships and on the understanding of the strategic nature of this asset.

Based on theoretical literature review, the paper demonstrates the misgiving of market economy corporate performance management practices when applied in poor markets. Western developed management practices are incongruent to serve poor customers in low-income markets. The findings of the literature review are that these management systems are exclusionary and conflict with sustainable development as they reject the poor as unprofitable and worthless to pursue as customers. In addition, they are based on antiquated assumptions and contradict ideologies and cultural contexts of the poor. In recent times, corporates are under pressure to enter low-income markets as developed markets get saturated. The poor are, however, significantly different from the affluent customers obtained in higher income segments. Corporates find themselves poorly equipped to succeed. Because poor markets are only latent, firms are expected to do more in order to create value than they would do when entering developed markets. The paper provides recommendations for the firms from developed markets to adjust their performance management practices in order to be successful in emerging markets.

This paper experimentally investigates the effect of leniency clause on cartel formation and self-reporting by firms in an asymmetric cartel. The notion of asymmetric is used in terms of different market share of the firms, which form a cartel. This setting is used to bring the experimental design closer to reality. We experimentally controlled for ‘Provision of Deal’- when a firm with larger market share can offer some side payments to the firms with smaller market share and induce them not to report. We run three treatments: 1) Leniency without Deal (LWOD), 2) Leniency with Deal (LWD) and 3) Reward with Deal (RWD). In LWOD treatment players can come forward and self-report their communication to the authority. In LWD treatment before self-reporting there is another step where big players can transfer 10 points to the small player and induce them not to report. In RWD treatment players earn 25 points if they report, unlike LWD or LWOD where they paid some amount after reporting as well. The results of the experiment demonstrate that there is no notable difference in the formation of cartels among the three treatments. However, cartel members see the adverse effect of the provision of a deal on the self-reporting of cartels. The incidence of reporting falls significantly from 61.48% in Leniency without Deal treatment to 25.86% in Leniency with Deal treatment. Further, giving positive rewards to the self-reporters counteract the effect of the deal to a large extent. Thus, reporting is remarkably high at 41.44% in Reward with Deal treatment as compared to 25.86% in Leniency with Deal treatment. To sum up, the experiment accentuates the waning effect of leniency clause in an asymmetrical cartel.

In 2016, India demonetized 24% of its currency notes (viz. 86% in cash value) in circulation presuming this will remove “black” (illicit) and counterfeit cash holdings, and combat money laundering. This was the largest demonetization experiment in recent history. Although demonetization has occurred several times before, no unambiguous economic argument for, or against, it exists. This was a key enabler for demonetization, yet again. This paper argues that the St. Petersburg Paradox (SPP) provides a compelling argument against demonetization. Assuming the distribution of cash is lognormal, it is shown that the probability of black cash holdings will be small. If not, the holders would: a) be irrational because they are willing to accept, contrary to the SPP, the small probability of a large loss, by effectively perceiving it as zero, without using all means to immunize themselves against it; or b) be sure their cash can be legitimized via collusion with the State; or c) be sure they can incentivize law-abiding citizens to act as agents to legitimize the cash for a reasonable fee. Assuming rationality and no bureaucratic support, large probabilities of black cash holdings imply that many more law-abiding patriotic citizens have to be corruptible than seems rational.

This study aims to understand how governance change is triggered by cybernetics issues, such as the development of automotive navigation systems in German, Japanese and US automotive industry. Six points are discussed for the central question which are 1) GDP Trends for Manufacturing Activities, 2) Organizational Structure for Supply Chain Management (SCM), 3) Viewpoint related to Internet of Things (IoT) usability, 4) National IoT planning, 5) Definition of IoT, 6) Developing Navigation Systems. At first, the trend in manufacturing activity reveals two different trends: a downward trend in Japan and the USA, and a stable trend in Germany. We see several possible reasons for this difference; first, the “smiling curve concept” is applied to visualize the difference. And the organizational structure of SCM is concerned such as “Keiretsu” in Japan, “Konzern” in Germany and the “Anglo-American” model. Then, this paper addresses how the unique organizational features of SCM might react to the technological developments in the automotive industry such as autonomous driving, which has shaken the core of the industry. For this gradual change, the IoT technology is necessary. IoT means the progress of certain embedded system, which adds a network function into it. The embedded system for automobile orientation on a map (hardware and software) has to be upgraded with the network function. These technological developments could influence their corporate governance system. Then, the discussion matrix is formed for the six points, which are discussed in this paper and reveal the boundaries between Japan, Germany and the US. According to Beer, the societary maps (the cybernetic maps) are required for this structural progress to find the right way to go. Finally, we think a dynamic industrial movement is ensured by keeping fair competition, which ensures diversity as well as technological development. It could be the last resort to protect our “Designing Freedom”.

Drawing from the Enlightened Shareholder Theory that the author first developed in 2011, this theoretical paper with practical and normative ambitions achieves a better definition of independent director, while improving the understanding of the roles he fulfils on boards of directors. The first part defines constructs like firms, Governance system and Corporate governance, offering a clear distinction between the latter two concepts before explaining the four main missions of a board. The second part defines the ideal independent director by outlining the objective qualities that are necessary and adding those subjective aspects that have turned this into a veritable profession. The third part defines the ideal process for selecting independent directors, based on nominating committees that should themselves be independent. It also includes ways of assessing directors who are currently in function, as well as modalities for renewing their mandates. The paper’s conclusion presents the Paradox of the Independent Director.

Corporate governance is one of the most vital issues in this compound environment at present, which is indicated by the fact that the success or failure of firms strongly depends on performance of the control that board of directors and executive board, take on corporations’ activities. This issue has attracted a variety of researches worldwide, and become a popular buzz lately, however there is still limited researches on this topic in Vietnam. In this paper, we focus on manufacturing sector, one of the most important industries in Vietnam economy, which account for 41.2% of total GDP in 2012. By using stakeholder theory and Kitamura’s paper as a corner stone, a model using OLS regression and log functional form for production function, showing the relationship between some external factors and internal factors including corporate governance is built. From the result of the research, it has been found out that internal factors (corporate governance) significantly affect the firm’s performance, whereas external factors (market share) do not really show any influence. In term of production function, this manufacturing sector still benefits from an increase of capital but not that of labor.

Recently, Saudi Arabia is undergoing major privatization and Public Private Partnership (PPP) projects, as guided by the Saudi National Transformation Program (NTP) 2020 and the Saudi Arabia’s Vision 2030, attempting to shift the oil-based economy toward more diverse and sustainable economy. The main purpose of the paper is to empirically examine the aviation-led growth hypothesis for Saudi Arabia by testing causality between civil aviation and economic development, applying econometric tests such as Granger causality tests for the time period from 1975 to 2011. Empirical results reveal the existence of the Civil aviation Led-Economic growth hypothesis (economic expansion causing the civil aviation sector to grow) for a developing country like Saudi Arabia. As guided by both the NTP 2020 and Saudi Arabia’s Vision 2030, policy makers should consider updating civil aviation infrastructure, nation-wide airport privatization programs, increase the number of airports in major cities and establish long term partnerships with international airlines and carriers. This will strengthen the private sector and diversify the oil-based economy toward a sustainable economy.

This paper explores behavior of oil market after volatility explosions (days with abnormally high price volatility). It examines possible price patterns and whether they create exploitable profit opportunities from trading. A number of statistical tests both parametrical (t-test, ANOVA, regression analysis with dummy variables) and non-parametrical (Mann–Whitney U test) confirm presence of price patterns after volatility explosions: the next day price changes in both directions are bigger than after “normal” days. Oil prices (case of Brent) for the period from January 2000 till the end of 2016 (for the trading robot analysis the period is 2014-2016) are analyzed in this paper. To incorporate transactional costs in results a trading robot approach is used. Testing of two trading strategies based on detected anomalies shows that a strategy based on counter-movements after volatility explosions produces profits and the one based on so called “inertia anomaly” does not generate profits in oil market. An important result of this paper is that presence of statistical anomaly does not necessarily means anomaly in price behavior and inconsistency with the Efficient Market Hypothesis

Application of project management methodologies in different countries is varied. The preference of a particular methodology largely depends on the specific features of a project management system in use. The aim of the paper is to draw the attention of project-involved readers to the need to develop, not a guide, but a specific project management methodology for projects in the public-private sector. The objective pursued by the paper is to provide useful recommendations for improving the existing methodologies on project management in the public-private sector. Kazakhstan’s experience in implementing project management methodologies in its public sector is sporadic while its private sector uses of modern methodologies build on external investor proven practices. At the background of the low exposure of the public sector to the best of project management methodologies, the paper reviews existing international project management methodologies and develops useful recommendations on the methodology, most suitable for a developing country’s public-private sector, on Kazakhstan’s example.

Legislation laying down the first two pillars of the institutional system of the Banking Union was finalised in April 2014. In accordance with the regulations, non-euro area Member States, including Hungary, may notify the ECB at any time if they wish to participate in the common system even before the euro is adopted. The paper aims at summarising the possible pros and cons vis-à-vis the Banking Union from a Hungarian perspective. It highlights the reasons for not opting in at the inception of the new supervisory system and also gives indications about those major milestones that could give rise to the reconsideration of the present position. In its existing form, the single supervisory and crisis management mechanism has not achieved the initial target, i.e. the separation of the stability of national banking systems and the fiscal capacity of Member States and the elimination of interdependencies. In addition, close cooperation implies weaker powers than those provided by actual membership, and the separation of central bank and supervisory functions carries risks in non-euro area countries. By contrast, the attraction of Banking Union membership lies in the opportunity to join a uniform European system, a wider analyst base and ultimately, the “ammunition” of the EUR 98 billion available for crisis management in comparison to the Hungarian banking system. In October 2013, a uniform supervisory system integrated into the central bank was set up in Hungary, and the domestic resolution institutional system was complete by the end of 2014. Therefore, until the finalisation of the Banking Union through the creation of the common deposit insurance fund and a common fiscal backstop, it is reasonable to put the decision to join on hold; indeed, such a decision should be made in light of several factors presented in this study.

Although many special economic zones (hereinafter SEZs) currently identified themselves as a “platform (often as physical constrictions for zone enterprises),” the academic support is inadequate. This paper offers an introduction to the burgeoning literature on two-sided (or multi-sided) markets and illustrates a feasible analysis on how to adopt this model in designing a well-operated system focusing on the land rentals within a apecial economic zone (SEZ), and provides some theoretical support in this research area. In many industries, platforms match relevant parties, e.g. customers to retailers, advertisers to readers, and facilitate interactions between them. Based on this, the paper tries to design a structure for analysing SEZs, which is considered as an efficient method for economic growth. Key characteristics of these markets, regarding network externalities, fee charging strategies and the relation between platform users are discussed first. Afterwards, the possibility of introducing this model into SEZs land use fee charging policies is examined. Finally, the paper provides some key economic insights on SEZs development under the suggested platform model.

In recent years, the challenge posed by tax fraud and tax evasion has increased considerably and has become a major concern within the European Union. As a consequence, in the European initiatives a special emphasis has been laid on the actions aimed at reinforcing the anti-abuse provisions in bilateral tax treaties, national legislation and EU corporate legislation. Any artificial arrangement carried out for tax avoidance purposes would be ignored and companies would be taxed instead on the basis of actual economic substance. The aim of the article is presenting the European initiative aimed at implementing the automatic mode of the exchange of information on cross-border tax rulings and advance pricing arrangements. The paper investigates if the implemented measure can help Member States to detect certain abusive tax practices taken by companies, and to take the effective actions in response. It also tries to answer the question whether the initiative can result in more transparency and – as a consequence – in much better governance, both at the states’ and the corporations’ level.

The large size and complexity of Information Technology systems in systematically important banks raise the need for creating an IT governance architecture that could make IT strategy aligned with business strategy and delivers value while it effectively identifies and manages IT risk. This study traces the links between IT governance and two more applied risk management frameworks, COSO and BCBS’s principles for managing IT risk. Then it argues due to the magnitude of potential losses caused by any weakness in IT governance in D-SIBs, the assessment of IT governance in these banks should be one of the main concerns of local regulators and supervisors. As a case study, it assesses the relative rank of D-SIBs in Iranian banking system to see where these banks would stand in an ordered list of the banks including both private and public banks in terms of IT governance implementation. The application of the Fuzzy AHP technique shows that IT governance practice in Iranian D-SIBs is not as good as the private banks while it outperforms some state-owned banks.

This article addresses the topic of the surprise European Economy recovery in 2017 and its possible implications. The article aims to provide a broad and comprehensive understanding of the triggering factors that have contributed to this unexpected economic revival and to the slow and uneven economic recovery in Europe after the Global Financial Crisis of 2008 and the Great Recession. The article also aims to highlight the potential downside risks related to the still unsolved structural issues that caused the debt overhang and macroeconomic imbalances in Europe in the past decade. Thus, the European Union and the Eurozone seem to be on course for a potential brighter future in the years to come but internal and external risks might still undermine the path to sustained growth, full economic recovery, and stronger integration in the region unless proper political, economic, fiscal, and monetary governance and policies are assured to make the euro area more resilient to future systemic shocks.

The ongoing debate in the literature centres on the compromised auditor’s independence in consequence of the relevant provisions perceived for non-audit services provided to the audited clients. The accounting scandals that have occurred over the past two decades show the lack of competence and independence of external auditors, who kept quite in the face of attempted frauds. The case of Tesco represents an undeniable example of the loss of auditor’s independence, who failed to detect accounting manipulation confirming the importance of whistle-blowing procedures in disclosing concerns before they become serious problems. When turnover occurs in CEOs it is more likely that a rotation in external auditors occurs as well. Finally, changes in top management enable whistle-blowing actions to be successful, interrupting the organization’s dependence on serious wrongdoings and preventing a disastrous ending. The success of whistle-blowing in preventing company failure makes it an effective instrument of сorporate пovernance.

This paper examines the relationship between hedge fund activism and target firm performance, executive compensation, and executive wealth. It introduces a theoretical framework that describes the activism process as a sequence of discrete decisions. The methodology uses regression analysis on a matched sample based on firm size, industry, and market-to-book ratio. All regressions control for industry and year fixed effects. Schedule 13D Securities and Exchange Commission (SEC) filings are the source for the statistical sample of hedge fund target firms. I supplement that data with target firm financial, operating, and share price information from the CRSP-COMPUSTAT merged database. Activist hedge funds target undervalued or underperforming firms with high profitability and cash flows. They do not avoid firms with powerful CEOs. Leverage, executive compensation, pay for performance and CEO turnover increase at target firms after the arrival of the activist hedge fund. Target firm executives’ wealth is more sensitive to changes in share price after hedge fund activism events suggesting that the executive team experiences changes to their compensation structure that provides incentive to take action to improve returns to shareholders. The top executives reap rewards for increasing firm value but not for increased risk taking.

A discourse on human rights, is built on including such rights as part of a broader, universal framework (accommodating for moral, ethical claims) that go beyond any constitutionally derived claims and rights or any given set of legitimate laws that are defined by the sovereign of a country. In recent decades, invoking a discussion on safeguarding human rights has become a major way of challenging the level of inequities and oppression within and across countries today that are circumscribing the possibilities of realizing any form of developmental growth. This paper makes an attempt to study the basic formulation of rights, particularly in context of a human rights based approach to development (through a right to development) and exploring its analytical affiliation with the discipline of social choice theory. The social choice approach, as discussed in the paper, has something substantial to offer within the moral, ethical considerations involved in human right(s) formulation by offering a more systematic, non-arbitrary, analytical reasoning basis to the subject. Without getting into the mathematical details of the axioms involved in the theoretical construction of social choice, I draw a general linkage between the formal reasoning behind social choice theory (i.e. involving a diverse set of individual values and preferences in its social welfare function) and its operational connection with human rights, using freedoms as an integral part of the human rights based approach to development.

The aim of this study is to determine the local government support needed for increasing the performance of Small and Medium-sized Enterprises (SMEs). There are contradicting points of view among researchers with regard to the necessity for the government to intervene in the operation of the enterprises. This study attempts to answer questions on the effect of such interventions in a developing country. The data were collected through questionnaires that were distributed to the SMEs in certain territories in a developing country. Structural Equation Modeling was used to analyze the data. The results show that the government support process, the government support policy and social networking have a positive influence on the performance of SMEs. The government support process exhibits the strongest effect on SMEs’ satisfaction as a moderating variable.

Finding the proper balance between economic benefit and sustainable development has been an issue for many local governments, especially in the regions that depend strongly on natural resources. One of Canada’s largest contributors to environmental degradation is the oil sands in Alberta. The degradation occurs on land, in water, and in the air as a result of oil extraction and tailings ponds. The purpose of the paper is to argue that although the government of the province of Alberta and the federal government have developed legislation including licensing and policies (frameworks and directives) to reduce and prevent environmental degradation, they fail to ensure compliance with the legislation and policies because the governments prefer economic gain to environmental sustainability. The lack of strong compliance enforcement suggests a lack of effectiveness and efficiency. Subsequently, a failure in the rule of law occurs because oil corporations, due to their economic impact, are treated as above the law. The bias for the corporation over the environment hinders good governance. Overall, both governments find balancing protecting the environment and gaining financial benefits challenging.

This paper examines the links between global oil price movements and macroeconomic and financial developments in the Gulf Cooperation Council (GCC). The GCC economies can be adversely affected by low oil prices due to their high dependence on oil and gas exports and macro-financial linkages which can amplify the effects of oil price movements over the financial cycle. Historically, systemic financial sector risks rose in the GCC countries with the oil price upswing in the years before the global financial crisis. Against this background, a range of multivariate panel approaches, including a panel vector autoregression approach, were applied to macroeconomic and bank-level data covering the six GCC economies and span 1999–2014. The paper finds strong empirical evidence of feedback loops between oil price movements, bank balance sheets, and asset prices. Empirical evidence also suggests that bank capital and provisioning have behaved countercyclically through the cycle. That is, these ratios increase during good times. This has helped strengthen the resilience of the financial system to the oil price decline since mid-2014.

Inflation Targeting (IT) has gained much popularity in recent years, with fifteen countries formally adopting it as a monetary policy framework since 2000. However, in developing countries, where the contribution of food prices to headline inflation is generally higher than in advanced economies, the adequacy of an IT framework for curbing inflation is very much contested. In this paper, we use a difference-in-differences approach to evaluate the treatment effect of adopting IT. Controlling for reversion to the mean, we find that economies that function under an IT regime do no better than countries that use alternative policy instruments. We verify the robustness of these results using panel unit-root tests and find that food inflation rates converge across economies irrespective of the monetary policy framework implemented.

The purpose of this study is to determine the factors influencing the accounting conservatism for banks in the UAE over the period 2006-2013. Design/methodology/approach – Multiple regression analysis is used to test the relationship between accounting conservatism as a dependent variable and the independent variables intellectual capital performance, market structure, level of protection against risk, bank size, and bank profitability. The results indicate that intellectual capital performance, market structure, bank size, the level of protection against risk and bank profitability have significant impact on the accounting conservatism for banks in the UAE. These results might help the banking and accounting regulators to address the factors affecting accounting conservatism. This study adds to the literature on the determinants of accounting conservatism in banks. In particular, it tests whether the new theories of intellectual capital performance, market structure and level of protection against risk have an impact on accounting conservatism in the banking industry in the UAE.

China（Shanghai）Pilot Free Trade Zone (“SHFTZ”) as well as other Pilot Free Trade Zones established in China carries on the mission to make the test for, inter alia, China’s strategic financial reforms and for Renminbi(“RMB”) internationalization in particular. However, the financial reforms in SHFTZ according to its design and relevant provisions can only provide very limited rather than fully effective test for the reforms of free convertibility, international capital transactions as well as risk hedging needed by RMB internationalization. The aim of the paper is to investigate the test effect that SHFTZ have on the above capital account reforms. It argues that the main reason for the test failure lies in “outward free and inward control” mode designed for SHFTZ which makes it an insulated customs territory, a situation which differs from the circumstances in which a currency gets internationalized. Moreover, SHFTZ runs the risk of evolving into an offshore RMB market set up inside China, a trend China should prevent because it cannot serve the testing missions mentioned above.

In this paper, using a unique dataset of industrial firms obtained from enterprise surveys conducted across the Russian Federation in 2005 and 2009, we trace back structural changes in the corporate governance system before and after the global financial crisis. We also empirically examine the impacts of the crisis on the organization of boards of directors and audit systems. Our survey results reveal that, in the Russian industrial sector, the quality of corporate governance has been improved through the crisis. Furthermore, we found that, corresponding to the alignment hypothesis, in firms that decisively reformed their management and supervisory bodies in response to the 2008 financial shock, the total number of worker representative directors significantly declined, as did their proportion to all board members. On the other hand, we also found that, in firms that substantially reorganized their audit system to cope with the crisis, the independence of the audit system was undermined remarkably, corresponding to the expropriation hypothesis. Findings that management behaviors predicted by the two conflicting hypotheses are simultaneously detected—and that their targets are significantly different—deserve special mention.

The objective of this paper is to examine the impact of inclusive business on the internal ethical values and the internal control quality while conceiving the accounting perspective. I construct the hypothesis for this paper based on the potential impact on the organizations’ awareness to be directed to the inclusive business approach that will significantly impact the culture of the organizations then the ethical values and the internal control quality. I use the approach of the expected value and variance of random variable test in order to analyze the potential impact of inclusive business. I support the examination by discrete probability distribution and continuous probability distribution. I find a probability of 85.5% to have a significant potential impact of the inclusive business by 100% score on internal ethical values and internal control quality. And to help contribute to sustainability growth, reduce poverty and improve organizational culture and learning.

In this paper I study the behavior of prices in a growing economy in which the money supply is held constant. I show that with increasing levels of output, it is a natural outcome that prices of economic goods will decrease over time, which it is what we define as deflation. In this context, I study in particular the behavior of real and nominal incomes (wages and profits) over time, the evolution of nominal and real GDP and the effects of deflation on debt contracts. Specifically, I assess the common claims that deflation decreases incomes, postpone spending and favors creditors at the expense of debtors. I have found that none of these claims is supported by theoretical analysis in the case that price deflation is the consequence of economic growth with constant money supply.

All investors and stakeholders in general worry about the accuracy of both the financial information and the corporate governance, yet at different scales. Knowing that inadequacies exist in the financial information, would we be able to find some ways that would help us improve the credit rating of the firms? In order to answer this question, our research’s aim is to define the impact of analyst following (analyst quest) on firm’s credit rating throughout the period between 2002 and 2014. The research’ results exhibit that the level of analyst following has a positive influence on firms’ credit rating. However, this constructive influence occurs only when there is a significant degree of analyst following. Indeed, at a low analyst following, our results reveal a negative correlation between this factor and the firm’s credit rating. Consequently, we end up concluding that a high degree of analyst following makes it difficult for insiders to miscommunicate the right information related to firm’s value which reduces agency problems leading to a positive credit rating, thus a low cost of debt.

This paper adopts a multi-issue/multi-period approach to provide new insights into key determinants of constituents’ formal participation in the due process of the International Accounting Standards Board (IASB). Based on an analysis of 8,825 comment letters submitted during the period 2006–2012, we find imbalances in the representation of constituents. Multiple regressions reveal that among various economic and cultural variables equity market capitalization and the society’s level of individualism are the key drivers of the country-level of constituents’ participation, and each variable has explanatory power over the other. The level of constituents’ participation is positively associated with the number of input opportunities offered by a due process document but unrelated to the complexity of a standard-setting project. The results are robust across various sub-samples and to additional sensitivity tests. Our findings indicate threats to the input legitimacy of the IASB and suggest avenues to stimulate constituents’ participation.

This is a draft of an article that will be published - after some editorial revision - in the Journal of Governance and Regulation. It discusses first the differences between market economic models, socialist or planned economies, and economies controlled by monopolies or cartels, to make the case for competition supervision. Subsequently it argues for a broad approach to competition supervision - beyond a narrow view of antitrust law. This part discusses monopoly or dominant position and the criteria to measure them. It reviews the reasons for merger control as a preventive step against monopoly or dominant position. Finally it discusses the issues related to collusion in the form of cartels and how to detect them. The third part of the paper focuses on the best ways for developing and transition countries to introduce or reinforce comprehensive competition supervision: Functioning institutions and how they have to be empowered and structured; priorities to be set; how competition oversight has to be embedded in the legal system, including court review; and why effective enforcement is so important and how it can be promoted. In an annex, there are links to some 75 countries which have newly introduced competition laws in the past 25 years and their legislative materials. Finally, there are links to another 30 countries which have substantially revised their legislative bases in the same time frame.

We examine the effects of a mandated credit program to small and medium enterprises in the Philippines (Magna Carta Law) using a panel dataset compiled from official data published by the Bangko Sentral ng Pilipinas. The final sample of 109 financial institutions represented over 90% of total finance sector assets in the Philippines. We highlight three important findings. First, although the total lending levels to micro, small, and medium enterprises (MSMEs) grew slightly, the percentage shares of loans allocated to MSMEs declined drastically from a peak of 30% of total loans in 2002 to 16.4% in 2010. Second, following the upwards revision of the loan target (from 6% to 8%) for smaller firms in 2008, there was a sharp increase in noncompliance especially amongst universal and commercial banks. Kernel density estimates suggest that the revision of the Magna Carta in 2008 was binding for small firm lending particularly for the universal and commercial banks. On the other hand, total loans to medium enterprises were still more than threefold larger than the targeted 2%. Third, there is an increased heterogeneity in optimal loan portfolio across banks. Most surprisingly, the absolute level of MSME lending by rural and cooperative banks declined since 2008. Direct compliance amongst universal and commercial banks decreased beginning in the late 2007, while that of thrift banks increased to almost 100%. Abolishing the Magna Carta targets for medium-sized enterprise loans would most likely yield little adverse effects. Meanwhile, efforts to improve financial access to MSMEs should focus on alternative nondistortionary ways to increase financing supply, such as improving institutional framework for informational availability and development of equity and bond markets for MSMEs.

Auditors used to serve the interest of the shareholders only. However, there have been significant changes in terms of auditors’ role and their function. Auditors are now expected to verify financial statements, but at the same time give an assurance regarding the financial sustainability of the entity. Regarding the latter role, audit firms provide consulting services, including risk assessment and management services. However, the law does not assign the latter role to external auditors. This situation results in an expectations gap in relation to both the role of the auditors and the scope of the external auditing. In addition, the growing economic importance of consulting and the long years of auditor tenure is likely to impair auditor independence. This paper submits that the new form of auditing is not problematic but creates issues. First, the expectations between the users of the financial reports and auditors are wider. Second, auditors’ independence is damaged due to the long years of auditor tenure and dependence of non-audit fees generated from consultancy services that not related to audit. The recent law reforms issued by the European Commission has brought some important provisions in terms of filling the expectations gap, reinforcing auditor independence and reducing the familiarity threat. EU’s relatively strict rules on provision of non-audit services and audit firm rotation are expected to have an important impact in the audit market. A critical analysis of the new EU law is submitted with some policy recommendations.

Globally, the energy sector is fast nearing a tipping point of no return, transitioning from fossil fuel to renewable energy. Business is turning to the IT department to leverage technology that will reduce organisational wide production and operational cost in a fast changing economy. The business expects the IT department to be innovative and build new IT competencies for a rapid response to the transition towards renewable energy. This study contributes new knowledge regarding the impact of management theory and approaches on the successful implementation of IT in the African Oil and Gas industry. The research shows that capabilities such as innovation and people competencies are growing in importance while IT leadership is becoming a critical role in supporting and delivering on the business objectives as enabler and transformational agent of business. Capabilities such as systems thinking, business acumen and interpersonal skills are key IT management competencies for transformation innovation leadership. Knowing the business needs, the IT department can provide integrated solutions that support the complete business value chain without exposing the business to a rigid IT structure. Remaining competitive, business-driven IT innovation is a vehicle for business to meet new realities. The research followed a multistage mixed-model design using the African Oil and Gas industry as case study.

The healthcare system that the African National Congress (ANC) government inherited in 1994 can hardly be described as functional. Indeed the new government had inherited a combination of deliberate official policy, discriminatory legislation and at times blatant neglect. This paper presents an overview of the evolution of the healthcare system in South Africa. The structures set up under apartheid had implications for provision of public healthcare to South Africans and reveals how governance structures, systems and processes set up during apartheid had implications for the provision of public healthcare to South Africans.

Many perspectives have been propounded and written about the restructuring and privatisation reform. However, this paper endeavours to give a South African approach to the reform profoundly delving into its historical approach on the original definition, methods, factors, criteria and goals of the reform. This paper seeks to demonstrate that this reform has its origins in the apartheid government policy which was intended at strengthening and revitalising the apartheid political economy in the 1980s. The thinking that the private sector runs enterprises in a more efficient, effective, competitive and profitable way and that such an approach may be applied to the State Owned Enterprises with success in an effort to reduce government debt and improving the operational performance, attracted the then South African government into adopting this neoliberal trajectory. State Owned Enterprises compared to their private counterparts performed poorly and suffered heavy losses and ultimately drained government financially. The then South African government initiated a white paper on privatisation and deregulation in 1987 which culminated in the implementation of the restructuring and privatisation reform in South Africa. Thus, this paper posits that the privatisation and restructuring reform originated from the then South African government policy initiatives in the 1980s.

This article (i) iterates what is meant by credit risks and the mathematical-statistical modelling thereof, (ii) elaborates the conceptual and technical links between credit risk modelling and capital adequacy framework for financial institutions, particularly as per the New Capital Accord (Basel II)’s Internal Ratings-Based (IRB) approach, (iii) proffer a simple and intuitive taxonomy on contemporary credit risk modelling methodologies, and (iv) discuses in some details a number of key models pertinent, in various stages of development, to various application areas in the banking and financial sector.

This paper analyses the accuracy of professional forecasts of monetary policy interest rate decisions in South Africa since 2008. This is achieved by examining the dissimilarity between the professional forecasts of monetary policy stance and the realised monetary policy interest rate on the basis of proximity, temporal structure and sensitivity to forecast horizon. The results show that the forecasts of South African insurance companies and international banks are closest to the realised monetary policy interest rate on average based on proximity, while the forecasts of South African banks and interest groups are closest to the realised monetary policy interest rate based on temporal structure. The results finally show deterioration of the professional forecasts the further away the forecast horizon and that the heterogeneity in forecast accuracy neither emanates from the country of primary listing nor primary business of the professional forecasts groups.

To switch presumes two kinds of transactions carried out by the same person: on the one hand, the decision to exit an investment line (switch-out) and, on the other hand, the decision to enter into a new investment line (switch-in). What motivates the decision makers? This paper, considering a sample of Italian occupational pension funds, investigates the impact of short-term and long-term performance on the switch decision process and whether the same performance can lead investors to make opposite switch decisions. Some irrational behaviors are identified.