The network structure of the CDS market and its determinants

This paper analyses the network structure of the credit default swap (CDS) market and its determinants, using a unique dataset of bilateral notional exposures on 642 financial and sovereign reference entities. We find that the CDS network is centred around 14 major dealers, exhibits a “small world” structure and a scale-free degree distribution. A large share of investors are net CDS buyers, implying that total credit risk exposure is fairly concentrated. Consistent with the theoretical literature on the use of CDS, the debt volume outstanding and its structure (maturity and collateralization), the CDS spread volatility and market beta, as well as the type (sovereign/financial) of the underlying bond are statistically significantly related—with expected signs—to structural characteristics of the CDS market.     

Long and short-runs determinants of the sovereign CDS spread in emerging countries

In this paper, we study the long and short-runs determinants of sovereign CDS spread for eight emerging countries from 2008.Q4 to 2013.Q2. We estimate the spread of sovereign CDS using three macroeconomic determinants: current account, external debt and international reserves. Using the Pooled Mean Group cointegration approach, our findings can be summarized as follows: i, the existence of cointegration between the variables indicated above; ii, the coefficients of the current account, the external debt and international reserves are highly significant to explain the long-run sovereign CDS spread for all countries; iii, international reserves are more important than the current account in order to reduce the sovereign CDS spread in long-run; iv, when allowing for heterogeneous short-run dynamics, the short-run effects are not significant for all countries.     

Capital regulation and bank risk‐taking – new global evidence

This study investigates the link between capital regulation and bank risk‐taking. Using a sample of over 1,800 banks in 135 countries, I find that the relationship between capital regulation and bank risk‐taking (measured by z‐score) is an inverse ‘U’ shape. That is, as capital ratios increase, a bank will take less risk initially, then more risk. These results are robust to numerous additional tests, including estimation methods. I also find that more stringent regulations mitigate the effect of higher capital on lowering bank risk‐taking. Increased capital requirements, even when risk‐based, induce risk‐taking at higher levels, irrespective of whether banks are well‐ or under‐capitalised.     

Bank Failure,Mark‐to‐market and the Financial Crisis

This paper is concerned with the allegation that fair value accounting rules have contributed significantly to the recent financial crisis. It focuses on one particular channel for that contribution: the impact of fair value on the actual or potential failure of banks. The paper compares four criteria for failure: one economic, two legal and one regulatory. It is clear from this comparison that balance sheet valuations of assets are, in two cases, crucial in these definitions, and so the choice between ‘fair value’ or other valuations can be decisive in whether a bank fails; but in two cases fair value is irrelevant. Bank failures might arise despite capital adequacy and balance sheet solvency due to sudden shocks to liquidity positions. Two of the most prominent bank failures cannot, at first sight, be attributed to fair value accounting: we show that Northern Rock was balance sheet solvent, even on a fair value basis, as was Lehman Brothers. The case study evidence is augmented by econometric tests that suggest that mark‐to‐market accounting has had only a very limited influence on the perceived failure risk of banks.     

多层次市场中场外CDS工具发展与监管

券商经营活动中,在信用、市场规则、融资者与投资者等议题上面临特殊困境,核心体现在多层次资本市场建设的重要环节之一:即信用风险转移和分散功能难以实现,信用债券市场发展迟缓。基于对已有信用风险缓释工具现状的分析,券商从实务角度出发构建了涉及场外CDS业务市场准入、做市商交易、风险控制、会计、产品线、定价和业务监管等一系列制度。CDS具有不可替代的功能,并在海外成熟的多层次资本市场中与场内股票、债券交易一并构成基础性市场。盲目对CDS的抵触对我国多层次资本市场建设并无益处。     

The bright side of market power in Asian banking: Implications of bank capitalization and financial freedom

Using a sample of listed banks in the Asia-Pacific region from 2000 to 2016, this paper documents that higher market power reduces risk taking but increases loan growth and performance in banking. This highlights the "bright side" of bank market power in general. However, the positive effect of market power on bank stability is more pronounced for well-capitalized banks, although their performance tends to decline, and loan growth is unaffected by market power. Hence, bank capitalization plays an important role in strengthening financial stability due to an increase in bank market power. Moreover, banks with higher market power located in countries with a lower degree of financial freedom exhibit lower riskiness, higher loan growth, and better performance. Greater control by authorities in the financial sector is essential, not only to enhance financial stability, but also to boost financial intermediation and bank performance following an increase in bank market power.     

The determinants of high‐interest entrusted loans in China

We examine the determinants of high‐interest entrusted loans in China from the perspective of corporate risk‐taking. The results of a baseline model illustrate that the propensity to offer high‐interest entrusted loans increases with loose monetary policies, corporate cash holdings and firm age, and it decreases with firm size and growth opportunity. These findings support the claim that firms offer high‐interest entrusted loans mainly for short‐term profits. Other determining factors include CEO behavior traits, market imperfections and the intensity of corporate governance. Specifically, market imperfections create an opportunity for risk‐taking while CEO behavior and the intensity of corporate governance affect a firm's tendency to take risk and engage in high‐interest entrusted loans.     

The role of international banking in the ‘oil surplus’ adjustment process

In the rapidly changing and dramatically volatile oil market in which the balances of payments of the various countries are characterized by an unpreeendented variability, the role of international banks in the intermediations between countries, has been crucial. The stabilization function of the banking system which is instrumental in allowing a more rational oil production policy and investment policy has been since 1980 under considerable stress due to a decline of deposits. In this paper we shall first analyze the general framework of the problem and then the specific decision process of the banking system by emphasizing the differences between micro- and macroeconomic aspects.     

Monetary policy, ‘dollarization,’ and parallel market exchange rates: The case of the Dominican Republic

Excessive money creation may give rise to inflation tax revenues and to a depreciation of the domestic currency. this in turn leads to a shift away from the domestic currency into a foreign currency (e.g., the US dollar, hence the term ‘dollarization’). From the domestic monetary authority's point of view, ‘dollarization’ is an unwelcomed phenomenomn, thus the monetary authorities will attempt to arrest the ‘dollarization’ phenomenon while maintaining the excessive money growth. This paper develops and tests a model which analyzes the effects of monetary policy on dollarization and the ‘parallel’ market exchange rates.     

The impact of total quality management adoption on small and medium enterprises’ financial performance

This paper examines whether the management accounting practice of total quality management (TQM) positively impacts on the financial performance of small and medium enterprises (SMEs). While research has investigated the impact of TQM on larger firms, to date, there has been no comprehensive analysis of the impact of TQM on SMEs’ financial performance. Our analysis of Australian Bureau of Statistics financial data for 3776 SMEs found no evidence that TQM improved financial performance after controlling for size and risk. Our results contribute to literature by highlighting that management accounting practices developed for larger companies may not necessarily be transposable to SMEs.     

The impacts of parent’s listing status on subsidiary’s financial constraint and cost of equity capital: the case of equity carve‐outs

We find that listed parents’ carve‐outs have investment‐cash‐flow sensitivities 70 per cent lower than unlisted parents’ carve‐outs, on average. Such a finding is stronger when we consider only equity carve‐outs in technological industries. The finding suggests that listed parents are more capable of alleviating the financial constraint of their carved‐out units than private parents. Our further analysis shows that listed parents’ carve‐outs also have a lower cost of equity than their counterparts, but such difference cannot be explained by corporate transparency, as implied by analyst coverage and analysts’ forecast dispersion. Therefore, we argue that the benefits from affiliation with a listed parent to the carve‐out come mainly from the parent’s financial support rather than an increase in corporate transparency.     

Incentive‐compatible contracts in merger negotiations: The role of acquirer idiosyncratic stock return volatility

We show that the acquiring firm's idiosyncratic stock return volatility (sigma) is an important determinant of the selection and perceived valuation effects of earnouts in Mergers and Acquisitions (M&As). Earnout‐based M&As are more often announced by high‐sigma acquirers (nearly 40% of all earnout‐based M&As), yet the documented higher risk‐adjusted returns accrued to acquirers in earnout‐based M&As, relative to M&As settled in cash, stock or mixed payments (the earnout effect), appear in deals announced by low‐sigma acquirers (nearly 20% of all earnout‐based M&As). High‐sigma acquirers employing earnouts appear to break even, or even experience losses, relative to their counterparts employing single up‐front payments. These results are confirmed based on a quasi‐experimental design through which the earnout effect is measured in isolation. We argue that in M&As announced by high‐sigma acquirers, the earnout effect is potentially elusive due to the presence of an acquirer‐specific information revelation effect, resulting from the heightened extent of information asymmetry between (small) acquirers’ managers and outside investors. On the contrary, the use of earnouts in M&As announced by low‐sigma (large) acquirers, whereby the acquirer‐specific information revelation effect is likely negligible, sends a strong signal for value creation that also prevents investors from inducing a size‐related discount.     

e‐Government in the Irish Revenue: The Revenue On‐Line Service (ROS): A Success Story?

The Revenue Online Service (ROS) is one of the first e‐government initiatives introduced in Ireland. The primary purpose of this paper is to examine this reform initiative in the Irish Revenue, assess it through the lens of the New Public Management (NPM) and e‐government literatures and to critically assess whether its implementation can be deemed ‘a success story’. Many of the components of NPM were evident in the introduction of ROS which facilitated its implementation: decentralisation, the use of private sector styles of management, an emphasis on performance measurement and a search for efficiencies. ROS has, inter alia, transformed both access to taxation information for taxpayers and their agents, and the system of tax payment and filing in Ireland. Assessing its implementation in terms of the objectives of an e‐government initiative, ROS is ‘a success story’, and the Irish Revenue organisation has clearly benefited from its introduction in many ways. Indeed, there is evidence to suggest that tax/accounting practitioners are also beneficiaries of this e‐government initiative. However, a critical analysis of the findings of this study contests the idea that ROS is an unqualified success story.     

Asset Write‐offs in Private Firms – The Case of German SMEs

This paper finds that private firms make the decision to write off, and write off more in terms of total amount, if they are: (i) more profitable, (ii) have more financial debt, and (iii) pay dividends. Our findings are contrary to expectations based on accounting standards and the existing revaluation literature. They are, however, consistent with the codified, high book‐tax alignment economic setting in which sample private firms operate. This includes agency problems faced by private firms’ stakeholders. We use a comprehensive sample of German SMEs reporting in local GAAP, based on the German commercial code (Handelsgesetzbuch) in 2003–2006. We view write‐offs as corrections of departures of book values from their underlying economic values, in contrast to upward asset revaluations. This governs our choice of estimation – the tobit regression.     

Transitory earnings components and the two faces of non‐generally accepted accounting principles earnings

Non‐generally accepted accounting principles (non‐GAAP) earnings reporting has been linked with both informative and strategic incentives. We seek to disentangle these conflicting effects by examining the association between non‐GAAP earnings disclosure and transitory items in GAAP earnings, conditional on managers' reporting incentives. We report evidence of a statistically and economically significant asymmetric relation between disclosure propensity and transitory items in GAAP earnings conditional on both the sign and magnitude of the GAAP earnings surprise. Our findings suggest that non‐GAAP earnings disclosures tend to be driven by a desire for informative (strategic) reporting when GAAP earnings beat (undershoot) market expectations.     

金融同业活动与实体企业经营风险——来自地区层面同业存单业务的证据

本文研究了地区层面金融同业活动对实体企业经营风险的影响。基于各省份金融机构开启同业存单业务的研究表明,地区层面金融同业活动显著提升了当地上市企业股价大幅下跌的风险。进一步研究表明,随着同业存单业务的发展,当地上市企业债务融资成本和风险水平有所上升,而业绩表现和市场价值有所下降。上述发现表明,企业融资链条变长后,信贷市场道德风险上升,部分企业因风险偏好增强导致经营风险上升,更容易突然出现负面事件而导致股价大幅下跌。本文的发现揭示了金融同业活动存在监管规避的可能性及其影响实体企业的潜在路径,凸显了完善金融监管以更好服务实体经济发展的重要现实意义。