Managerial risk-taking incentives and the systemic risk of financial institutions

Review of Quantitative Finance and Accounting - This paper examines whether the systemic risk of financial institutions is associated with the risk-taking incentives generated by executive...     

Role of banks in financial inclusion in India

Financial inclusion is emerging as a new paradigm of economic growth that plays major role in driving away the poverty from the country. It refers to delivery of banking services to masses including privileged and disadvantaged people at an affordable terms and conditions. Financial inclusion is important priority of the country in terms of economic growth and advanceness of society. It enables to reduce the gap between rich and poor population. In the current scenario financial institutions are the robust pillars of progress, economic growth and development of the economy. The present study aims to examine the impact of financial inclusion on growth of the economy over a period of seven years. Secondary data is used which has been analyzed by multiple regression model as a main statistical tool. Results of the study found positive and significant impact of number of bank branch and Credit deposit ratio on GDP of the country, whereas an insignificant impact has been observed in case of ATMs growth on Indian GDP.     

Influence of national and engineering culture on team role selection

Engineering education is an emerging field of research. Due to its applied nature, recent theoretical developments have been followed by empirical evidence and interdisciplinary research. The present study attempted to describe the team roles assumed by members of project teams composed of young engineering students. The study was conducted in Pakistan by using the Belbin Team Role Self Perception Inventory. It was found that young Pakistani engineers assumed the roles of implementer, coordinator, shaper and team worker. This study attempts to understand role choices through the framework of national cultural dimensions proposed by Hofstede and engineering education culture offered by Godfrey and Parker. The study strongly recommends that engineering curriculum should incorporate activities which could foster creativity among engineers. Moreover, engineering students should be motivated to innovate through collaboration in a problem and project based environment, which is seriously lacking in engineering education of Pakistan.     

Corporate ownership concentration and audit fees: The case of an emerging economy

The paper investigates the effects of corporate ownership concentration on audit fees in emerging economies, using Bangladesh as a case. Prior studies have indicated that audit fees in Bangladesh are significantly low. Also, the Bangladeshi private sector is dominated by high ownership concentration. Agency theory predicts that in an efficient market, managers in a highly concentrated ownership situation will have sufficient incentives to have more rigorous audits performed. However, managers in emerging economies, where the markets are not as strong, may not have similar incentives. We test whether audit fees in Bangladesh are related to corporate ownership concentration. Our results indicate that audit fees have a significant negative relationship with sponsor and institutional ownership concentrations. This indicates that in Bangladesh, companies actually pay lower audit fees when these are dominated by sponsor and institutional shareholders. For the public shareholders, we find a negative, but statistically insignificant relationship. The results seem to suggest that corporate ownership pattern may be a major factor in explaining the low audit fees in Bangladesh.     

Risks and the financing of PPP: Perspectives from the financiers

Public private partnerships (PPP) are an established model for most governments internationally to provide infrastructure-based services, using private finance. Typically the public authority will sign a contract with a special purpose vehicle (SPV), which, because of the holistic nature of PPP, in turn sub-contracts the finance, design, construction, maintenance and soft services to companies that are often related to its shareholders. Thus there is a considerable network of linked organisations that together procure and provide the PPP project.While there is an increasing body of research that examines these PPP projects, much of it is interview or case study based so that the evidence is drawn from a small number of interviews or cases in specific sectors. It also focuses on the public sector procurer and the private sector contractor in the network of organisations. Although it has been recognised that the perceptions of the financiers may vary from those of other key PPP players there is much less research that focuses on the financiers.In this paper we report the results of a postal questionnaire survey, administered to 109 providers of senior debt and equity, from which the response rate was just less than 40%. We supplement these findings with a small number of illustrative quotes from interviewees, where the cited quote represents a commonly held view. We used SPSS and Nvivo to analyse the data.The findings show that when assessing PPPs financiers perceive a very wide range of risks as important, and that it is important to them that many of these risks are either insured or allocated to sub-contractors. When considering participating in PPPs, financiers agree that working with familiar partners on familiar projects and in familiar sectors is important, which may raise barriers to entry and undermine competitive processes.     

An Investigation of Market Orientation (MO) and Tourism Small and Medium-Sized Enterprises’ (SMEs) Performance in Developing Countries: A Review of the Literature

This paper aims to build a structured literature review of the field of market orientation and its impact on tourism small and medium-sized enterprises (SMEs) performance in developing countries. This literature review will present a comprehensive survey of market orientation (MO) published articles to facilitate good understanding of MO. It serves as an archive and aims to help the scholars and practitioners to explore, analyse, and develop a clear understanding about the different research points and methodologies implemented in previous studies related to MO and its impact on tourism SMEs’ performance. The paper systematically reviews and categorizes the published literature implementing a three-stage methodology, and thereafter analyzes and reviews this literature methodologically. The review covered many areas and identified some factors that drive/hinder market-oriented activities within tourism SMEs. Furthermore, suggestions have been made to understand more thoroughly how market orientation influences tourism SMEs performance in developing economies. A research gap in the area of market orientation and tourism SMEs performance in developing countries was identified. The study provides great benefits for owner-managers, government policy makers, scholars, and educators by clarifying the concept of market orientation and its relationship with performance in the context of tourism SMEs.     

A Comparison of Consensus and BVAR Macroeconomic Forecasts

This paper provides a one-month-ahead, macroeconomic, Bayesian Vector Autoregressive (BVAR) forecasting approach that offers several advantages over conventional short-term forecasting procedures. In particular, it produces more accurate forecasts than the Bloomberg consensus forecasts, on average, for 20 major macroeconomic variables. In addition to a quantitative comparison of BVAR and Bloomberg consensus forecast, the paper focuses on five important areas of macroeconomic forecasting: the role of short-term macroeconomic forecasting, the importance of a robust forecasting approach, the importance of timing of data releases, forecast evaluation criteria, and the importance of changing model specifications as conditions warrant.     

The Deeper the Recession,the Stronger the Recovery: Is It Really That Simple?

Are deep recessions typically followed by strong recoveries? This paper investigates this question. There is not a single standard definition for a deep recession or a strong recovery. Therefore, our first step is to define what constitutes a deep recession and a strong recovery. Next we examine whether there is any causal relationship between deep recessions and strong recoveries. Our analysis shows there is no relationship between the depth of a recession and the subsequent pace of economic recovery when we use Gross Domestic Product, Gross Domestic Income, and employment as measures of recession and recovery. A modestly significant relationship does exist, however, between the magnitude of increases in the unemployment rate during a recession and decreases in the unemployment rate during the ensuing recovery.     

A New Framework to Estimate the Near-Term Path of the Fed Funds Rate

We propose a forward-looking method to estimate the path for the federal funds target rate. We utilize six-month out probabilities of inflationary and disinflationary pressures, along with a labor market index, to estimate the fed funds rate. We further suggest that due to the changing nature of economies and impending risks to the economic outlook, a time-varying method (consistent with the nature of risks) would help decision makers to improve effective decision making. Our econometric results suggest disinflation (or disinflationary pressure), not inflationary pressure, best explains fed funds rate movements from the 1990s forward. Based on June 2016 data, there is a 55 percent chance that the inflation rate would stay below 1.5 percent during the next six months. The recent higher disinflationary pressure probability may be one reason the FOMC has repeatedly lowered its path for the fed funds rate. Unfortunately, the low-inflation zombie is real.     

Is Predicting Recessions Enough?

We propose an ordered probit framework to simultaneously predict the probabilities of recession, weaker recovery, and stronger recovery. Our approach helps identify (a) whether the next phase is a recession, (b) when the recovery period starts, and (c) whether the recovery would be a weak or strong one compared to historical standards. We believe our approach would help policy makers decide when would be appropriate to (1) start expansionary policies (higher probabilities of recession), (2) continue expansionary policies (higher probabilities of weaker recovery), or (3) turn to neutral/contractionary policies (higher probabilities of stronger recovery). The ordered probit model shows the probabilities of recession staying above 50 percent during all five recessions in our simulated out-of-sample analysis of 1980:Q1–2016:Q1. The probabilities of weaker recovery are consistent with actual periods of below trend growth. Based on 2016:Q1 data, the model suggests a meaningfully higher chance of continuing below trend growth. One key result is that the probability of weaker growth has been persistently higher than the other two scenarios for the past several years. These higher probabilities of weak growth are consistent with the accommodative monetary policy stance of the past eight years.