The development of the role of the audit in the Czech Republic

As the economies in Central Europe have commenced their transformation from centrally planned to market-led economies, each country has implemented a new legal framework for accounting and auditing. This provides a unique opportunity to research the implementation of aspects of accounting and auditing well known to Western market economies into different economic contexts. In particular, it provides an opportunity to revisit the role of the independent audit. This paper contributes to the research on the developing of auditing in Central Europe by analysing the role of the audit in the Czech Republic. It covers aspects of both regulation and practice and, in order to gain more understanding of how the audit role is developing in the Czech Republic, focuses on three areas: influences on the Czech audit legislation; the position of the audit report and perceptions of the objectives of the audit in the Czech Republic. After a brief review of the published literature on accounting and audit in the Czech Republic, the paper studies some of the country's recent economic and legislative developments in relation to auditing. These developments are put into the context of auditing before and after the ‘Velvet revolution’ of 1989. The paper then concentrates on the influences on the development of Czech audit legislation by comparing aspects of the Czech audit legislation with the German and UK equivalents. This comparison highlights some anomalies in the Czech legislation. The Czech audit legislation is then put into the local context based on a review of the contents of the audit report and its publication with interviews among a selection of users and preparers about how the audit is perceived.     

Purchasing Power Parity in Three Transition Economies

This paper uses cointegration analysis on monthly data over April 1994-December 2000 to test the relevance theory of Purchasing Power Parity (PPP) for two advanced transition economies (Poland and the Czech Republic) and one lagging transition economy (Romania). PPP is not rejected between the lagging reformer and developed market economies, but is rejected between the advanced reformers and the developed economies. However, PPP is not rejected between the two advanced transition economies, though it is rejected between the lagging and advanced transition economies. The evolution of the real exchange rates over 1994-2000 suggest that a significant explanation for these findings is the central role of the exchange rate in the disinflation strategies of Poland and the Czech Republic in the early part of this period, in contrast to the managed float followed by Romania throughout the period.     

Household wealth in the Czech Republic: A comparative perspective

This paper focuses on household wealth dynamics in the Czech Republic. We estimate benchmark levels of household financial assets and liabilities on the basis of a comparison with Group of Seven (G-7) countries and compare them with the actual levels. Our results show that a further increase in both assets and liabilities would be justified by economic fundamentals. Furthermore, the G-7 benchmark indicates that both the level and composition of assets will need to change in the Czech Republic in response to the pressures that will arise from an aging population and the expected transfer of risks to households.     

From inflation to exchange rate targeting: Estimating the stabilization effects for a small open economy

This paper attempts to estimate possible losses in macroeconomic stabilization due to a move from inflation to exchange rate targeting on the example of the Czech Republic. The authors use an estimated New Keynesian policy model, typical inflation and exchange rate targeting rules, and representative central bank loss functions to carry out these estimations. The authors find that for the Czech Republic, moving from the historically applied inflation targeting to optimized exchange rate targeting should not involve any significant losses in macroeconomic stabilization. However, the Czech National Bank could improve its stabilization outcomes while remaining an inflation targeter. This requires the Czech National Bank to respond more strongly to increasing expected future inflation and to be less concerned about an opening output gap when adjusting its policy rate. Moving then from such optimized inflation targeting to optimized exchange rate targeting can result in significant losses in economic stabilization in the magnitude of 0.4–2% points of GDP growth.     

Management strategies in the Czech telecommunications sector: a comparative study of Český Telecom and T-Mobile

This article compares employment relations (ER) strategies at the incumbent fixed line Czech telecommunications company (TelCo), ?eský Telecom (?T), and the T-Mobile subsidiary, T-Mobile Czech Republic (TMCZ). It considers the extent to which the firms were able to introduce Western-style HRM practices within the context of three changing dynamics. First, the collapse of communism in the former Czechoslovakia was followed by rapid economic liberalization and privatization in the Czech Republic. Second, telecommunications sectors worldwide were subject to deregulation and the rapid diffusion of new technologies. Third, fixed line and mobile TelCos were subject to differing challenges and opportunities. The article uses path dependency, institutionalist and strategic human resource management (SHRM) related theories to assist in this analysis. It concludes that by 2005 the introduction of Western-style HRM practices into the Czech telecommunications sector appeared less constrained by former institutional and historical constraints. TMCZ's ER policies were further influenced by its parent firm's transnational strategies that sought to coordinate better its subsidiaries and create a ‘global’ brand. Despite the differing circumstances of the fixed line and mobile sectors, by 2005 ER practices and strategies at the two firms were to an extent converging, as ?T continued to cut costs and TMCZ adjusted its strategies to better accommodate a saturated market. Given these changes the article postulates that the Czech telecommunications sector has now shifted towards a mature transformation stage, as ER strategies increasingly reflect Western-based SHRM practices and concepts.     

The Adoption of the Multi-divisional Form in Large Czech Enterprises: The Role of Economic, Institutional and Strategic Factors

In the Czech Republic and elsewhere in the region, researchers have noted the widespread adoption of the multi-divisional form (MDF) by the former state-owned enterprises. In contrast to the accepted explanations in western capitalist societies, the spread of the MDF in post-Communist economies has had little or nothing to do with growth strategies such as diversification. Developing ideas from the existing western literature, the paper examines the role of economic, institutional and strategic choice factors in three large, former state enterprises within the Czech post-Communist context. The findings suggest that all three factors are theoretically important, but neither equally nor independently so. In particular, economic factors acted as a major constraint on structural choice only under extreme conditions, while institutional factors and strategic choice are best understood as interdependent moments in a recursive process of structural enactment.     

Prevalence and Forms of Workplace Bullying Among University Employees

Over the past decade, a growing number of Anglo-American and Scandinavian researchers have documented the extent to which the university environment provides opportunities for workplace bullying. By contrast, there has been a visible lack of similar studies in non-Western national contexts, such as the Czech Republic and other Central Eastern European (CEE) countries. The present article addresses this gap by reporting the findings of the first large-scale study into workplace bullying among university employees in the Czech Republic. The exposure to bullying was assessed with the Negative Acts Questionnaire-Revised (NAQ-R) in a sample of 1,533 university employees. The results showed that 13.6 % of the respondents were classified as bullying targets based on an operational definition of bullying (weekly exposure to one negative act), while 7.9 % of the respondents were identified as targets based on self-reports. This prevalence is comparable to bullying rates in Scandinavia but considerably lower than in Anglo-American universities. Differences between Anglo-American and Czech universities were also found with respect to the status of perpetrators (bullying was perpetrated mostly by individual supervisors in the Czech sample), perceived causes of bullying (structural causes perceived as relatively unimportant in the Czech sample), and targets’ responses to bullying (minimal use of formal responses in the Czech sample). The authors propose that cross-cultural differences as well as differences between the Anglo-American model of “neoliberal university” and the Czech model of university governance based on “academic oligarchy” can be used to explain these different findings.     

True and fair in the Czech Republic: a note on local perceptions

With the collapse of communism in Czechoslovakia’, and the subsequent desire of Czechoslovakia to join the European Union, in common with other countries in Central Europe, Czechoslovakia utilized the Fourth Directive as a ‘toolkit’ in designing part of its new accounting legislation. In incorporating the Fourth Directive, it has also included the requirement for financial statements to show a ‘true and fair’ view. Given the confusion over the exact meaning of ‘true and fair’ it is interesting to study how ‘true and fair’ has been introduced into the Czech Republic, and what it seems to signify for those who implemented it and for those who are preparing and using financial statements. Our initial findings indicate that ‘true and fair’ varies in its significance for the groups of individuals involved in preparing and using financial statements and that it may have particular significance for some groups of accountants who wish to secure specific advantage within the Czech economy.With the collapse of communism in Czechoslovakia’, and the subsequent desire of Czechoslovakia to join the European Union, in common with other countries in Central Europe, Czechoslovakia utilized the Fourth Directive as a ‘toolkit’ in designing part of its new accounting legislation. In incorporating the Fourth Directive, it has also included the requirement for financial statements to show a ‘true and fair’ view. Given the confusion over the exact meaning of ‘true and fair’ it is interesting to study how ‘true and fair’ has been introduced into the Czech Republic, and what it seems to signify for those who implemented it and for those who are preparing and using financial statements. Our initial findings indicate that ‘true and fair’ varies in its significance for the groups of individuals involved in preparing and using financial statements and that it may have particular significance for some groups of accountants who wish to secure specific advantage within the Czech economy.With the collapse of communism in Czechoslovakia’, and the subsequent desire of Czechoslovakia to join the European Union, in common with other countries in Central Europe, Czechoslovakia utilized the Fourth Directive as a ‘toolkit’ in designing part of its new accounting legislation. In incorporating the Fourth Directive, it has also included the requirement for financial statements to show a ‘true and fair’ view. Given the confusion over the exact meaning of ‘true and fair’ it is interesting to study how ‘true and fair’ has been introduced into the Czech Republic, and what it seems to signify for those who implemented it and for those who are preparing and using financial statements. Our initial findings indicate that ‘true and fair’ varies in its significance for the groups of individuals involved in preparing and using financial statements and that it may have particular significance for some groups of accountants who wish to secure specific advantage within the Czech economy.With the collapse of communism in Czechoslovakia’, and the subsequent desire of Czechoslovakia to join the European Union, in common with other countries in Central Europe, Czechoslovakia utilized the Fourth Directive as a ‘toolkit’ in designing part of its new accounting legislation. In incorporating the Fourth Directive, it has also included the requirement for financial statements to show a ‘true and fair’ view. Given the confusion over the exact meaning of ‘true and fair’ it is interesting to study how ‘true and fair’ has been introduced into the Czech Republic, and what it seems to signify for those who implemented it and for those who are preparing and using financial statements. Our initial findings indicate that ‘true and fair’ varies in its significance for the groups of individuals involved in preparing and using financial statements and that it may have particular significance for some groups of accountants who wish to secure specific advantage within the Czech economy.     

The Dynamics of Capital Structure in Transition Economies

This paper uses a dynamic unrestricted capital structure model to examine the determinants of the private companies' target financial leverage and the speed of adjustment to it in two transition economies, the Czech Republic and Bulgaria. We explicitly model the adjustment of companies' leverage to a target leverage, and this target leverage is itself explained by a set of factors. The panel data methodology combines cross-section and time-series information. The results indicate that the Bulgarian corporate credit markets were less supply -constrained than those of the Czech Republic during the period under investigation. Bulgariancompanies adjusted much faster to the target leverage than Czech firms. The speed ofadjustment related positively to the distance between target and observed ratio for Bulgarian companies while the relationship was neutral for Czech companies. The conservative policies of Czech banks and the exposure control were likely responsible for the slower adjustment among the larger companies while the opposite were true for Bulgarian banks and companies.     

How Globalized Really is European Trade?

Abstract

Using a new set of measures of concentration of trade, I suggest that the opening up of trade to date has been greatly exaggerated. At least judging on the basis of trade concentration, agriculture and service sectors should barely be seen as globalized at all. Contrary to other, recent studies, Europe's main economies lag behind the USA in terms of global openness, and most are behind Japan, Canada and China. The Balkans, Poland and the Czech Republic are near the bottom end of the global openness league table. Since there is a strong correlation between concentration of trade and poor economic performance, this should be of concern to those countries and to the EU.     

The Evolution Trajectories of Voucher Funds: Towards Western-type Institutional Investors? The Case of the Czech Republic and Bulgaria

The implementation of similar mass privatization programs in the Czech Republic and Bulgaria led to the emergence of hybrid voucher funds. The contradictions stemming from this hybrid nature gave rise to the evolution of the funds' nature and of their place in the national ownership structure. The dynamics of this evolution is apprehended through a comparative study of the portfolios of a sample of funds between 1998 and 2000. We show how the interaction between the strategies of economic actors have shaped two transformation paths of the initial funds: holding companies on one hand and more ordinary collective investment vehicles on the other, the Czech and Bulgarian evolutions being divergent. We also discuss to what a degree these mutations bring these funds closer to Western-type institutional investors, showing that there is some convergence, but also the emergence of original forms.     

Success factors for new businesses in Austria and the Czech Republic

New business start-ups play a significant role in maintaining as well as creating a functional market economy. However, as the business environment differs in established and emerging market economies, it seems appropriate to examine whether start-up success factors also differ in this context. This paper presents a comparative analysis of success factors for start-ups in early development stages in the traditional market economy of Austria versus the emerging market economy of the Czech Republic. The comparison uses binary logistic regression analysis and is based on an Austrian sample of 296 new businesses from 1998 and a Czech sample of 459 new businesses from 2000. This analysis reveals that the composition of significant success predictors differs in the two samples in question. In Austria, success in the early development stage can mainly be predicted on the basis of start-up process characteristics as well as two aspects of the entrepreneur's personal environment, while personal characteristics, personality traits and resources have no significant impact. In the Czech Republic, on the other hand, characteristics of the start-up process are also important, but in a different composition than in Austria. In addition, one aspect related to personality (i.e. need for achievement) as well as start-up resources play an important role in predicting entrepreneurial success in the Czech sample. As a result, the results support the hypothesis of the cultural embeddedness of entrepreneurship.     

An analysis of dependence between Central and Eastern European stock markets

We examine the dependence structure between four Central and Eastern European (CEE) stock markets (Czech Republic, Hungary, Poland and Romania) using static and dynamic copula functions with different forms of tail dependence. We find evidence of positive dependence between all CEE stock markets, although this dependence is stronger between the Hungarian, Czech and Polish markets than between these markets and the Romanian market. We also find evidence of symmetric tail dependence, although not for the Hungarian and Czech markets. The dependence is time-varying and intensified after the onset of the recent global financial crisis. These results confirm that CEE stock markets are gradually coupling, a fact that has risk management implications for policymakers and investors.     

Education and wages in the Czech and Slovak Republics during transition

An employer-based sample of over 400,000 Czech and 125,000 Slovak men is used to estimate the benefits of education in 1995–1997. By 1997, education of all types had become substantially more highly rewarded in both countries than it was either under communism or in the early years of the transition. Education's value began increasing earlier and reached a higher level in the Czech Republic than in Slovakia. Increases in the value of education were especially pronounced for types of education ideologically disfavored by communism.     

The interest rate spreads in the Czech Republic: Different loans,different determinants?

We analyze the determinants of interest rate spreads of different loan categories in the Czech Republic during 2004–2011. We employ a detailed bank supervisory dataset that allows us to construct the actual spreads for four loan categories, namely small and large corporate loans, consumer loans and mortgages, on a monthly basis. Our regression analysis shows that bank and macroeconomic characteristics matter more for setting the spreads for small corporate loans and mortgages rather than for large corporate loans and consumer loans. Interest rate risk determines the spreads for all loan categories. The global financial crisis has, to a certain extent, increased the responsiveness of spreads to interest rate risk and liquidity risk.     

Changing the mindset: the training myth and the need for world-class performance

Abstract Using data from Canada, the Czech Republic, Hong Kong and Indonesia, this paper tests the concept that training should be viewed as only one (perhaps small) factor in the drive towards world-class productivity. Rather, it is a combination of social science and physical science factors that must be managed, if productivity is to improve. This gap analysis technique focuses on reactive and proactive job analyses to develop programmes of workplace change. Even when utilized in widely varying cultures, the model yields comparable results.     

The Value Relevance of Financial Accounting Information in a Transition Economy: The Case of the Czech Republic

ABSTRACT

The paper investigates the value relevance of accounting information in the Czech Republic in 1994–2001. Value relevance is understood as the ability of financial statement information to capture or summarise information that affects share values and empirically tested as a statistical association between market values and accounting values. The objective of the study is to investigate the validity of the value relevance methodology by finding an accounting setting where the results of value relevance tests might be predicted unambiguously. If the results of these tests confirm the predicted results, the validity of the value relevance methodology might be assumed. A transition economy represented by the Czech Republic provides such an institutional and accounting setting. It might be assumed that value relevance of accounting information is lower in a transitional economy than in a well-developed market economy. It can also be assumed that the value relevance increases over time as a result of the progress in transition. The results of the study confirm these predicted results and give thus supportive evidence of the validity of the value relevance methodology.     

Inflationary bias in middle to late transition Czech Republic

A series of studies has now confirmed the Filer and Hanousek’s [Economic Systems 24 (2000) 285] suggestion that inflation mismeasurement during the transition is a serious problem of the same relative magnitude (and greater absolute magnitude), as in advanced market economies. During the 1990s in the Czech Republic, inflation was overstated by more than four percentage points a year. The largest portion of this bias is due to uncaptured quality changes. In effect, Czech consumers are living considerably better after the fall of communism, but this increase in living standards is manifested through better quality, rather than greater quantities of goods consumed.     

Czech female managers and their wages

This paper examines gender gaps in employment and wages among top- and lower-level managerial employees in the Czech Republic at the time of its accession to the EU. Using both least-squares and matching-based decomposition techniques, we find the wage gap among comparable men and women to be sizeable, but quite similar across firm hierarchy levels. The key reason why the average relative wage position of female top managers is worse compared to lower-ranking female employees is that women tend not to be at the helm of the highest-paying companies. Overall, the representation of women at the top of Czech firms as well as the structure of the gender wage gap there appears quite similar to those in the US.