The Predictive Value of Earnings, Cash flows and Accruals in the Period Surrounding the Asian Financial Crisis: Evidence from Hong Kong, Malaysia, Singapore and Thailand

This paper examines the predictive value of earnings, operating cash flows and accruals in Hong Kong, Malaysia, Singapore and Thailand for the period 1994–2001. We also examine the impact of the Asian financial crisis of 1997 on the predictive power of the accounting performance measures. We regress future cash flows and future excess returns on earnings (or cash flows and accruals) for the periods 1994–1996 (pre‐crisis period), 1997–1998 (crisis period) and 1999–2001 (post‐crisis period). Our findings indicate that the accounting measures have explanatory power for 1‐year ahead cash flows. Our analyses of 1‐year ahead excess returns indicate that investors may have undervalued the accounting measures in the pre‐ and post‐crisis periods, and overvalued the measures during the crisis period.     

VIX forecasting based on GARCH-type model with observable dynamic jumps: A new perspective

This paper proposes to study VIX forecasting based on discrete time GARCH-type model with observable dynamic jump intensity by incorporating high frequency information (DJI-GARCH model). The analytical expression is obtained by deducing the forward iteration relations of vector composed of conditional variance and jump intensity, and parameters are estimated via maximum likelihood functions. To compare the pricing ability, we also present VIX forecasting under four simple GARCH-type models. Results find that DJI-GARCH model outperforms other GARCH-type models for the whole sample and stable period in terms of both in-sample and out-of-sample forecasting, and for the in-sample forecasting during crisis period. This indicates that incorporating both realized bipower and jump variations, and combining VIX information in the estimation can obtain more accuracy forecasting. However, the out-of-sample forecasting using parameters estimated from crisis period shows that GARCH and GJR-GARCH models performs relatively better, which reminds us to be cautious when making out-of-sample prediction.     

Forecasting Australia’s economic performance during the Asian crisis

During the Asian economic crisis of 1997–98, published forecasts from a Bayesian vector autoregressive (BVAR) model consistently indicated that the crisis would have little or no effect on Australia’s economic performance, despite the deterioration in the trade balance. The worsening trade deficit led many other forecasters to predict a sharp fall in Australia’s GDP growth rate, as the countries most severely affected by the crisis represent over 60 percent of Australia’s export markets. This paper argues that the more pessimistic forecasts attached too much weight to the links between Australia’s external accounts and GDP growth. In particular, I show that forecasts for the period September 1997 to December 1998, conditional on the actual path of the merchandise trade balance, predict higher inflation and interest rates than unconditional forecasts from a model without the trade balance. There does, however, appear to be useful information in the individual components of the trade deficit. Conditioning on the actual paths of both exports and imports generally produces more accurate forecasts than conditioning on net exports. In particular, conditioning on the trade balance results in the least accurate forecasts for inflation and interest rates of any of the models considered here. On the other hand, conditioning on the individual trade flows produces the most accurate forecasts for inflation, and the second-most accurate for interest rates. Taken together, the results presented here lend support to the argument that Australia’s trade flows represent the outcomes of optimizing decisions, rather than defining constraints on economic growth.     

Loan Loss Provisions by Banks in Hong Kong, Malaysia and Singapore

This paper studies loan loss disclosures by banks in Hong Kong, Malaysia, and Singapore for the period 1993 through 2000. We find that unexpected loan loss provisions are positively related to bank stock returns and future cash flows. This indicates that Asian bank managers increase loan loss provisions to signal favorable cash flow prospects, and bank investors bid bank stock prices up when unexpected provisions are positive. These results are consistent with those obtained by Wahlen (1994) for US banks. We also examine the impact of the Asian financial crisis of 1997 on the loan loss variables. The results indicate that the association between the unexpected loan loss provisions and bank stock returns and future cash flows was significantly lower in the crisis years, relative to the non‐crisis period. Evidently, discretionary loan loss provisions had no signaling value during the crisis. This suggests that macroeconomic uncertainty influenced the strategic behavior of Asian bank managers and investors.     

The Impact of the Asian Financial Crisis on Conservatism and Timeliness of Earnings: Evidence from Hong Kong,Malaysia, Singapore,and Thailand

This paper examines conservatism and timeliness of earnings in the period surrounding the 1997 Asian financial crisis in Hong Kong, Malaysia, Singapore, and Thailand. Prior research suggests that managers tended to be more aggressive in reporting good news and delayed recognition of bad news during the financial crisis (less conservative and less timely in financial reporting). After the crisis, these four countries implemented corporate governance measures to stabilize their financial systems and improve regulation and supervision (that should improve conservatism and timeliness). We examine and find that conservatism and timeliness of earnings during the crisis period are low, but improved in the post‐crisis period. More importantly, conservatism and timeliness in the post‐crisis period is even greater than in the pre‐crisis period. We measure conservatism using Basu's model and the accumulation of non‐operating accruals suggested by Givoly and Hayn. The findings from both measures are consistent with an increase in conservatism after the crisis period. Overall, the results indicate that corporate governance reforms in these four countries had a positive impact on conservatism and timeliness of earnings.     

The duality of bankruptcy process in Finland

Standard bankruptcy prediction methods lead to models weighted by the types of failure firms included in the estimation sample. These kinds of weighted models may lead to severe classification errors when they are applied to such types of failing (and non-failing) firms which are in the minority in the estimation sample (frequency effect). The purpose of this study is to present a bankruptcy prediction method based on identifying two different failure types, i.e. the solidity and liquidity bankruptcy firms, to avoid the frequency effect. Both of the types are depicted by a theoretical gambler's ruin model of its own to yield an approximation of failure probability separately for both types. These models are applied to the data of randomly selected Finnish bankrupt and non-bankrupt firms. A logistic regression model based on a set of financial variables is used as a benchmark model. Empirical results show that the resulting heavily solidity-weighted logistic model may lead to severe errors in classifying non-bankrupt firms. The present approach will avoid these kinds of error by separately evaluating the probability of the solidity and liquidity bankruptcy; the firm is not classified bankrupt as long as neither of the probabilities exceeds the critical value. This leads the present prediction method slightly to outperform the logistic model in the overall classification accuracy.     

Volatility spillovers among the U.S. and Asian stock markets: A comparison between the periods of Asian currency crisis and subprime credit crisis

This paper examines the changing nature of volatility spillovers among the U.S. and eight East Asian stock markets between two financial crises: the Asian currency crisis and the U.S. subprime credit crisis. Our empirical results suggest that volatility is not always spilled over from the directly affected markets to surrounding markets in crisis periods. The East Asian markets who directly suffered from the Asian currency crisis are the ones to which volatility is spilled over from other markets during the Asian currency crisis period, whereas uni-directional volatility spillovers from the U.S. market to other markets are observed during both crisis periods. This difference can be explained by a pre-determined hierarchy in which volatility spillovers tend to start from the U.S. market regardless of the geographical origin of the crisis. Furthermore, our results reveal that the markets in three major Asian financial hubs, i.e., Japan, Hong Kong and Singapore, are the markets to which volatility is spilled over uni-directionally from several other countries during the subprime credit crisis period, but not during the Asian currency crisis period. We attribute this difference to crisis-specific (currency or credit crisis), market-specific (credit derivatives market participation and foreign currency reserves), and time-specific (more integrated global market) factors.     

Foreign exchange markets in South-East Asia 1990–2004: An empirical analysis of spillovers during crisis and non-crisis periods

The East Asian crisis of 1997 sparked an extensive literature in an effort to explain the causes and spread of heightened foreign exchange (FX) market pressures in the region. In this paper, we model FX movements and calculate spillover effects covering the extended period between 1990 and 2004. Using Markov switching vector autoregressions, we find evidence that FX correlations vary across crisis and non-crisis states, a result that bears implications for international portfolio diversification and reserve pooling. Even though the direction of effects does not follow discernible patterns, it is clear from the data that contagion effects are present.     

支持向量机在财务危机预警中的应用评析

信息技术的迅速发展和世界经济全球化使很多企业面临各种各样的经营困难,最终体现为财务危机。提前对其进行预警以协助企业有效地规避财务危机是十分重要的。随着研究的深入,各种财务危机预警方法逐渐成熟。本文从样本选择、模型建立和预测性能3方面对支持向量机（SVM）在财务危机预警领域的应用进行了评析,认为SVM方法具有强大的分类功能和优良的学习性能,在财务危机预警领域有着广阔的应用前景。     

内部控制学科体系构建

美国一些知名公司在金融危机中纷纷破产或被收购,凸显了内部控制的重要性.国内外研究文献大多是从制度建设的视角将其视为一种基于财务报告的可靠性、经营活动的效率效果、相关法律法规遵循的应用性的管理制度,没有从学科的角度阐述和解释内部控制.为丰富和发展内部控制理论,有必要从理论基础、学科定位、研究内容、研究方法等方面系统构建内部控制学科体系.     

Financial crisis and relative productivity dynamics in Korea: evidence from firm-level data (1992–2003)

We have estimated the relative TFP growth at firm level and analyzed the firm dynamics in view of entry and exit of firms in Korea during 1992–2003, which includes the turbulent financial crisis of 1997–1998. Following Pyo and Ha, Hitotsubashi J Econ 48(1): 67–81, (2007), we have adopted a gross output model rather than a value added model of relative TFP analysis. We have found that the cyclical variation of productivity growth plays a dominant role in the decomposition effects before and after the 1997 financial crisis in Korea. Productivity growth is modest before the crisis and strong after the crisis owing to the recovering market efficiency. There is the likelihood that the productivity growth of stayers during the post-crisis period was significantly higher than new entrants. The net entry effect is found to be more sensitive in small business and export-based firms than in large business and domestic market-based firms. Our findings suggest that Korean firms have recovered a modest level of technical change after its severe financial crisis owing to the improvement of management transparency and the build-up of market efficiency during the IMF-mandated restructuring process. But since the entry effect is estimated to be still negative in Manufacturing and the exit effect is negative in Service sector after the crisis, the Korean economy has not fully recovered its metabolism in the post-crisis period and still lacks a creative destructive process to resume another round of sustainable growth path.     

Has bank consolidation in Korea lessened competition?

This paper examines market concentration and competition in the Korean commercial banking market for the period of 1992–2004. While market concentration decreased due to financial regulation before the Asian financial crisis, the Korean banking industry has become increasingly concentrated in the process of restructuring and consolidation since the crisis. Contrary to a growing concern over market power in Korean banking, this study finds that increased concentration has not lessened competition. The H statistic of the Panzar–Rosse model indicates that the Korean commercial banking market was monopolistically competitive during the pre-crisis period and the post-crisis period with temporary deviation to the level of perfect competition during the crisis period.     

Economic policy uncertainty effects for forecasting future real economic activity

Recently introduced measures for economic policy uncertainty (EPU), included in the data from 1997 to 2016, have a role in forecasting out-of-sample values for future real economic activity for both the euro area and UK economies. The inclusion of EPU measures, either for the US, the UK or for overall European economies, improves the forecasting ability of models based on standard financial market information, especially for the period before the 2008 global crisis. However, during and after the crisis period, the slope of the yield curve and excess stock market returns improves the out-of-sample forecast performance the most compared to an AR-benchmark model. Hence, the EPU information is important in times of normal business cycles, but might contain similar information components to financial market return variables during turbulent crisis periods in the financial markets and in the real economy.     

Structural changes,competition and bank stability in Malaysia’s dual banking system

This paper assesses Malaysia’s competition landscape and its risk implications subsequent to conventional banking consolidation and Islamic banking penetration in the aftermath of the 1997/1998 Asian financial crisis. Employing a panel sample of conventional and Islamic commercial banks, it arrives at the following conclusions. First, the consolidation exercise, which has led to a significant reduction in the number of domestic commercial banks, has not stifled banking competition. Second, the paper provides empirical support for the competition-stability relationship, particularly for the conventional banking sector. Islamic banking sector risk appears to be neutral to market competition or market power, although there is limited evidence that it increases with overall market concentration. Finally, the analysis uncovers the risk-increasing effect of the Islamic banking market structure on the conventional banking sector. By contrast, conventional banking market concentration tends to reduce the credit risk of Islamic banks.     

Multinomial modeling methods: Predicting four decades of international banking crises

This paper examines banking crises in a large sample of countries over a forty-year period. A multinomial modeling approach is applied to panel data in order to track and capture end-to-end cyclical crisis formations, which enhances the binary focus of previous research studies. Several macroeconomic and banking sector variables are shown to be emblematic of leading indicators across the idiosyncratic stages of a banking crisis. Gross domestic product is an early warning signal across all phases, and a concomitant deterioration in consumption spending and fixed capital formation, preceded by a credit boom, signal a banking crisis to come. Currency depreciation exemplifies ensuing financial distress, reinforced by developmental constructs and regional integration. Lower real interest rates, increasing imports, and rising deposits are frequently harbingers of a recovery. Period effects underscore the dynamic evolution of common contemporaneous precursors over time. Premised on pursuing cyclical movements through multiple outcomes, our findings on forecasting performance suggest enhanced predictive power. Several multinomial logistic models generate higher predictive accuracy in contrast to probit models. Compared to machine learning methods (which encompass artificial neural networks, gradient boost, k-nearest neighbors, and random forests methods), a multinomial logistic approach outperforms during pre-crisis periods and when crisis severity is modeled, whereas gradient boost has the highest predictive accuracy across numerous versions of the multinomial model. As investors and policy makers continue to confront banking crises, leading to high economic and social costs, enhanced multinomial modeling methods make a valuable contribution to improved forecasting performance.     

The Yen as an International Currency

Japanese policy-makers have spent many years attempting to increase the role of the Yen as a regional and international currency. In this article Francis Breedon and Geoffrey Williams look at its role both before and after the Asian currency crisis. Pre-crisis they find that the Yen was of less regional importance than economic theory would suggest, so that its rapid depreciation from 1995 to 1997 did not influence regional currencies as much as it perhaps should have. Since the Asian crisis they find that its regional role has increased markedly, largely at the expense of the Dollar. This suggests that Yen volatility, which remains considerable, is likely to have more impact on regional Dollar exchange rates and thus less impact on real activity than before.     

Adoption and Coverage of Performance‐Related Pay during Institutional Change: An Integration of Institutional and Agency Theories

Whether or not to adopt and how extensively to use a newly legitimized practice are discrete decisions made by firms undergoing institutional change. The aim of this paper is to identify the distinct effects of economic, social, and political factors on the adoption of performance‐related pay practices and their coverage (i.e. the proportion of employees covered by the practices) by integrating institutional and agency theories. An empirical analysis is performed with a unique sample of Korean firms that experienced the East Asian financial crisis of 1997. The results show that while performance‐related pay adoption was influenced by economic and social factors, performance‐related pay coverage was related to political factors as well as economic and social factors. This finding suggests that while firms adopt performance‐related pay practices in search of legitimacy, they do not blindly imitate such practices but rather proactively adapt them based on economic efficiency considerations. This study makes valuable contributions to research on institutionalism and remuneration by empirically identifying the conditions under which a pay practice adopted for social legitimacy fits or fails to fit the economic needs of the adopters.     

上市公司制造业财务预警实证研究

选取了2003-2006年上海、深圳交易所A股市场制造业90家财务危机公司和90家所配对的正常公司为样本。选取了能够体现公司四方面业绩的8个指标,通过因子分析和判别分析,建立企业财务预警模型来对公司情况进行预测。预测精度达到83%,所建立的模型具有较好的预测效果。     

Identifying contagion

Identifying contagion effects during periods of financial crisis is known to be complicated by the changing volatility of asset returns during periods of stress. To untangle this we propose a GARCH (generalized autoregressive conditional heteroskedasticity) common features approach, where systemic risk emerges from a common factor source (or indeed multiple factor sources) with contagion evident through possible changes in the factor loadings relating to the common factor(s). Within a portfolio mimicking factor framework this can be identified using moment conditions. We use this framework to identify contagion in three illustrations involving both single and multiple factor specifications: to the Asian currency markets in 1997–1998, to US sectoral equity indices in 2007–2009 and to the CDS (credit default swap) market during the European sovereign debt crisis of 2010–2013. The results reveal the extent to which contagion effects may be masked by not accounting for the sources of changed volatility apparent in simple measures such as correlation.     

Determinants of discretionary fiscal policy in Central and Eastern Europe

This paper explores economic, political and institutional determinants of discretionary fiscal policy in 11 Central and Eastern European (CEE) countries from 2000 to 2013 and compares discretionary fiscal reactions before and during the global economic crisis. We find that fiscal policy was procyclical to the output gap both before and during the crisis, while no fiscal reaction to the absorption gap was captured. Our results also indicate a negative relationship between the level of public debt and deficits over the entire period and the pre-crisis period, suggesting that rising public debt represented a brake on future deficits. We also find that election cycles affect the fiscal deficit, but only during the pre-crisis period, while no evidence of a relationship between fiscal policy and government fragmentation was captured. We find some evidence that in the pre-crisis period the CEE countries with a fixed exchange rate regime ran lower deficits than those with a floating regime, whereas during the crisis no impact of the exchange rate regime on the fiscal deficit was found. There is also some evidence that an arrangement with the IMF was associated with lower deficits for the entire sample period. However, no impact of EU accession on the fiscal stance was identified.