Uncertainty and Challenges in Contemporary Economic Behaviour

Introduction: International migration, a complex, dynamic and multifaceted process, grasps important challenges for the European economies, through its advantages and pitfalls.

Aim: This research is conducted to examine the fundamental credentials of immigration in Europe and its perspectives within the Brexit framework, an ongoing process that induced profound implications.

Method: The authors have applied the cluster analysis and structural equations as the main research methods on a balanced panel comprising 10 receiving countries (most targeted by migrants), members of the European Union (EU-10), for the 2000–2019 timespan (2019 being a Brexit milestone year).The authors have separately extrapolated a sample for 2020–2025 that was further used to identify some perspectives after the Brexit timeline in terms of migration determinants and effects on EU-10 host economies. Cluster analysis is based on a key scenario related to wellbeing, living standards (income level) and poverty risk at destination. These credentials are essentialfor the migration decision and important elements of migrant labour market integration strategies with keen economic consequences, further assessed through the structural equation models.

Findings: Results show that during 2000–2019, among EU-10, the main destination country for immigrants and asylum seekers in terms of welfare and living standards is Germany (both for economic and humanitarian migration), along with the United Kingdom (in the case of economic migration). This situation tends to remain unchanged for the following years even in the Brexit context, as reflected by the 2020–2025 forecast scenarios. Immigration effects on labour market outcomes and economic welfare are extremely significant, being largely discussed within the chapter.

Introduction: Uncertainty plays an important role on economic stability and macroeconomic variables. Economic agents postpone decisions about investment and consumption in periods in which uncertainty is high. This situation affects economic growth negatively. Recently, uncertainty has focused on policy uncertainty. At this point, economic policy uncertainty (EPU) comes to the forefront. EPU is defined as conception that economic agents do not forecast consequences of economic policies adopted by policy makers and future economic policies. In terms of developing countries, statements presented by policy makers in the United States especially may appear as a source of uncertainty in developing economies.

Aim: Therefore, the aim of this study is to analyze the effects of US EPU on macroeconomic variables for Turkey and Brazil, Russia, India, China and South Africa for periods in which global risk perception is low and high.

Method: The authors used monthly data from January 1998 to December 2018. For this purpose, the authors used Threshold VAR. VIX index takes in consideration as global risk perception. The authors used US EPU index proposed by Baker’s vd. (2016) in order to measure EPU in the United States. Besides, the authors used macroeconomic variables such as industrial production index, inflation and exchange rate.

Findings: As is seen from the results of the analysis, for Turkey’s economy the macroeconomic variables significantly and strongly respond to the changes in the EPU index during the periods in which global risk perception is low; nonetheless, the so-called responses weaken due to the adopted policy of “wait and watch” by investors during the periods in which global risk perception is high.

Introduction: The word “zombie” is associated with the “living dead” in our minds from horror movies we watch on TV. Recently, this concept has been used frequently to identify the firms that are still standing while they should have been closed long ago. Zombie firms are apparently active, but their cash flows are only used to compensate interest expense of their debts. Banks prefer to re-finance these firms and restructure their sunken loans rather than following their debts and moving them out of the bank’s balance sheets. However, these inefficient and unproductive firms also consume the capital that can be transferred to more productive firms. Therefore, these firms live as long as the cash inflow, which is considered as fresh blood and meat for the living dead-zombie, and they consume the resources of other living healthy firms.

Purpose: The aim of this study is to investigate the existence of zombie firms which are listed in Borsa İstanbul manufacturing industry.

Methodology: The research period is between the years 2008 and 2018, and interest coverage ratio (ICR) is used for Borsa İstanbul manufacturing firms. There are several explanations of zombie firms in the literature, which are commonly constructed on a scope of profitability of a firm. In this research, the OECD’s preferred explanation and classification of zombies is chosen which describes a zombie firm as having an ICR (operating earnings to interest expenses) which is less than 1 over three consecutive years.

Findings: It has been noted from this research that ICRs differ in the research period of Borsa İstanbul manufacturing industry firms. About 62 of 109 firms traded on Borsa İstanbul manufacturing industry between 2008 and 2018 were classified as zombie firms because they had ICRs below one for three consecutive years or over.

Forensic accounting theory is an explanation of why and how the choice of methods or techniques used to detect creative accounting or manipulations in financial and non-financial reporting, and the outcome of using such methods or techniques, depends on the accounting and non-accounting decisions taken into consideration by the forensic accountant or investigator. This theory is useful in stimulating meaningful discussions in the literature. This theory is useful to both practitioners and academics, and the resulting contributions to accounting theory and forensic science are useful to the problem-solving process in the global financial reporting agenda. The chapter discusses forensic accounting theory under a set of hypotheses for forensic investigation.

Introduction: Monetary policy resolutions issued by central banks play effective role in economy when accompanied with interest variable. In Keynesian approach to finance, interest is treated as the main determinant underlying financial policy resolutions. Thus interest is a pivotal factor in monetary transmission mechanism. Tight monetary policy practices, essentially decreasing money supply, eventually lead to a slump in investments, total demand and national income due to the increase in real interest rates.

Objective: The aim of this study is to determine what type of effects do monetary policy practitioner in Turkey have on macroeconomic variables via the interest channel of monetary transmission mechanism.

Methodology: Based on this objective, variables that could help in unveiling CBT overnight interest rates, direct fixed capital investment (GSSO), real gross domestic product (RGDP), industry production index (SUE) and domestic producer price index (YUFE) variables and that could explain monetary functions of transmission mechanism’s interest channel were selected. For the variables constituting the research topic, collected data belong the period of 2003Q1–2018Q3.

Findings: In the study relation between the variables has been analyzed under two parts via harnessing Toda–Yamamoto casualty test. In the first part, results of Toda–Yamamoto causality test from RGDP, GSSO and interest rate (FO) variables have been presented. The results manifest that interest channel directly affects direct fixed capital investment and RGDP. Interest channel was found to be effective on these variables of the analysis. In the second part, Toda–Yamamoto causality test was harnessed for SUE, YUFE and FO variables. Interest channel did not provide a result that affected YUFE and SUE.

The kinds of decisions people make or how they react to certain situations could differ according to the society, atmosphere or environment those people come from. Studies about the influence of human behaviors on economics, business and actions were initiated by analyzing human behaviors and those studies carry on into behavioral finance and behavioral accounting.

In previous years, the models used were based on the assumption that people behave rationally while making decisions. These models lost validity recently and behavioral accounting started to search for the influences affecting human behaviors. They started considering not only the people who prepare accounting data but also the people who take advantage of this data. People’s environment, cultural differences, psychological and sociological factors have entered into the accounting’s field of interest as factors that have an influence on behavior.

The aim of this study is to try to analyze the theoretical bases and extent of behavioral accounting, which focuses on the human behavior factors being observed while creating or using financial reports. The authors also aim to contribute to the literature by including the neuroaccounting dimension into the analysis.

Purpose: This purpose of this chapter is to present several theories of financial inclusion. Financial inclusion is the ease of access to, and the availability of, basic financial services to all members of the population. Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs in a responsible and sustainable way. Financial inclusion practices vary from country to country, and there is need to identify the underlying principles or propositions that can explain the observed variation in financial inclusion practices. These set of principles or propositions are called theories.

Methods: The chapter uses conceptual discussions to formulate alternative theories of financial inclusion.

Findings: The study shows that financial inclusion theories are explanations for observed financial inclusion practices. It also shows that the ideas and perspectives on financial inclusion can be grouped into theories to facilitate meaningful discussions in the literature.

Originality/value: Currently, there are no observed or elaborate theories of financial inclusion in the policy or academic literature. This chapter is the first attempt to develop theories of financial inclusion. The theories are intended to be useful to researchers, academics and practitioners. The resulting contributions to theory development are useful to the problem-solving process in the global financial inclusion agenda.

Introduction:Shareholder activism comprises a range of activities by public companies’ shareholders who desire some change in the corporation and intervene in the management’s decisions. The goals of activists are various. They may seek to change the company’s strategy, financial structure, management, or board in general. More specifically they may seek to change the capital allocation strategy (stock buybacks, dividends, or company’s acquisitions policies), the board composition, the company’s executive compensation plans, or the company’s certain functions (risk management, audit).

Purpose:The purpose of this literature review research study is to explore the concept of shareholder activism. According to a point of view, these activist actions stimulate better corporate governance practice in the companies and ultimately lead to an increase in the company’s stock price in the short term. The others claim that activism increases the company’s share price volatility in the long term. In the near future, the impact of shareholder activism will continue to rise and the ways how the companies respond to it is gaining importance. This study sheds light on the types of shareholder activism, when they are likely to approach a company and which tactics they most likely use.

Methodology:Considering the rapid expansion of shareholder activism concept in the world the author makes a review of literature on shareholder activism. The structure of this chapter is as follows. First, the characteristics of shareholder activism are introduced. Second, the theoretical background of this concept is given in detail. Third, the types of shareholder activism are discussed. Finally, the conclusion comprises a summary of shareholder activism.

Findings:The study finds out that shareholder activism has started to have a significant influence on corporate governance policy that a firm adopts in recent years. Shareholder activism increases levels of shareholder engagement in firm decisions and fosters a long-term corporate governance culture. As institutional investors get a higher portion from global equity investments, their role in shareholder activism will increase. There are opinions suggesting that investor activism will lead to better corporate governance practices in firms, leading to an increase in firm share prices in the short term. The shareholder activism phenomenon seems to be on the agenda of all companies in the near future.

Purpose: Investor sentiment in financial markets has a close relationship with the general mood prevailing in the environment such as economic, social and political life. Future economic expectations are important for both investors and policymakers. Investor sentiment and macroeconomic variables are likely to affect each other. Emerging countries are particularly sensitive to interest and foreign exchange risk. Turkey is an important emerging country. The effects of interest rate and exchange fluctuations are high in this country. The aim of this study is to reveal the relationship between investor sentiment and interest and foreign exchange rates in Turkey.

Methodology: This study investigates the relationship between economic confidence index, exchange rates and interest rates in Turkey during the period between January 2012 and November 2019 using monthly data sets. The economic confidence index is used to represent the investor sentiment in the study. Interest rate variables are the deposit interest rates and the commercial credit interest rates. The representative of the US dollar currency variables is included in the analysis. This chapter used the time series vector error correction model approach of stationarity test, cointegration test and Granger causality test.

Findings: According to the causality test, there is a two-way relationship between economic confidence index and exchange rate, and there is uni-directional causality from commercial credit interest rate to economic confidence index. The results show that foreign exchange and commercial credit interest rate variables are carefully monitored by market players and are effective and influential in the formation of future expectations.

Originality/value: The study shows the direction of the relationship between economic confidence foreign exchange and commercial credit interest rate. Policymakers can shape expectations by taking into account the direction of the relationship.

Climate change is emerging as an important issue increasing uncertainty in the business circle, and financial institutions through their inaction seem to be unmoved by climate change risk despite the potential for climate change events to affect the financial institutions and the financial system. In this chapter, the effect of climate change on financial institutions and the financial system are highlighted and discussed.

Purpose: Through globalization, financial markets have become more integrated and their tendency to act together has increased. The majority of the literature states that there is a cointegration between developed and emerging markets. How do positive or negative shocks in developed markets affect emerging markets? And how do positive or negative shocks in emerging markets affect developed markets? For this reason, the aim of the study is to investigate the asymmetric causality relationship between developed and emerging markets with Hatemi-J asymmetric causality test.

Design/methodology/approach: In this study, the Dow Jones Industrial Average (DJIA) index was used to represent developed markets and the Morgan Stanley Capital International (MSCI) Emerging Market Index was used to represent emerging markets. The asymmetric causality relationship between the DJIA Index and the MSCI Emerging Market Index was investigated using monthly data between January 2009 and April 2019. In the first step of the study, the Johansen Cointegration Test was used to determine whether there is a cointegration between the markets. In the next step, the Hatemi-J asymmetric causality test was applied to see the asymmetric causality relationship between the markets.

Findings: There is a weak correlation between developed and emerging markets. This result is important for international investors who want to diversify their portfolios. As a result of the Johansen Cointegration Test, it was found that there is a long-term relationship between the MSCI Emerging Market Index and the DJIA Index. Therefore, investors who make long-term investment plans should not forget that these markets act together and take into account the causal relationship between them. According to the asymmetric causality test results, a unidirectional causality relationship from the MSCI Emerging Market Index to the DJIA Index was determined. This causality shows that negative shocks in the MSCI Emerging Market Index have positive effects on the DJIA Index.

Originality/value: This study contributes to the literature as it is one of the first studies to examine the asymmetrical relationship between developed and emerging markets. This study is also useful in predicting the short- and long-term relationship between markets. In addition, this study helps investors, portfolio managers, company managers, policymakers, etc., to understand the integration of financial markets.

Introduction: Decision making is always based on several factors which may affect the possible outcomes, especially in financial markets. Instead of having many criteria which may be required for decision making, “Multiple Criteria Decision Making” (MCDM) models might be used as a tool to reduce all criteria into a single one.

Purpose: The aim of this study is to measure the financial performance of commercial banks listed on Borsa Istanbul (BIST) by the MCDM.

Method: To this end, data from 15 different financial ratios from 11 commercial banks were used between the periods of 2002 and 2018. Both TOPSIS and gray relational analysis (GRA) models were used, which are commonly used in the literature for detecting the financial performance of listed banks in BIST based on their consolidated financial statements.

Results: According to the TOPSIS method, while the best bank is QNB Finansbank, HALKB, a public bank, was determined as the best bank using the GRA method. There is no significant correlation between financial performance indicators and market returns obtained by either method, with exceptions. There is no generally significant correlation detected between financial ratios and market returns. Accordingly, it is concluded that the bank stock prices in the study are shaped by the influence of external factors and expectations. The study results include information that can be used for different purposes among bank managers, academics and financial investors.

The finance literature has not documented the feeling, the shock and the pain that ordinary people had to go through during the 2008 global financial crisis especially in the United States where it all began. In an effort to shed new light on the global financial crisis, it has become important to present a view of the financial crisis from the lens of those who were affected by the crisis, those who were responsible for the crisis, those who could have prevented the crisis, as well as the views of other observers. The views or quotes in this chapter are concise, useful and thought provoking. They create an opportunity to help reconsider the events of 2008 from a fresh perspective, so that a lot more can be done by everyone, including banks, governments and citizens, to prevent a repeat of those events in the future of finance. Finally, most of the views or quotes reported in this chapter have within them some important lessons and wisdom to guide us on what to do before another future crisis comes.

This qualitative study seeks to explore the grounded realities of live-in care workers in Malta. The growing economic affluence in Malta, coupled by an ageing population and the lowest fertility rate in the European Union, is resulting in a greater demand for live-in care givers, particularly from the Philippines. Reinforced through public policy wherein families who employ a qualified live-in carer are benefiting from government subsidy to ease burden on the state’s residential homes, Malta appears to be moving from a passive to a more active international recruitment of domestic migrant workers. This inquiry provides an evidence-based contribution to the appeal of the European Economic and Social Committee of the EU calling for more research about the rights of live-in care workers in Europe which has long remained almost invisible to EU and Member State policymakers. The majority of the findings reflect some of the concerns that have already been identified in international literature, like higher levels of precariousness, contractual agreements not being honoured, psychological obligations, fraudulent agents and the lack of separation between work and personal life. Other findings have endogenous characteristics that are closely linked to the island state of Malta, namely its safe environment, Catholic culture, bilingual coexistence of Maltese and English and the competitive nature of Filipino community groups that may discourage further social engagement. The chapter concludes with brief policy suggestions to trigger improvements in the wellbeing and dignity of migrant carers.

This study delves into the determinants and praxis of derivative hedging instruments (DHIs) usage of Malta, a small island state. Empirical evidence is also provided in relation to the impact of DHI usage and the adoption of a hedge accounting (HA) model in entities’ financial statements. A mixed methodology design is deployed involving: (1) a series of statistical models and tests and (2) seven semi-structured interviews with senior professionals.

The data collected comprise proxy variable values collected from the financial statements of 568 firm-years from 107 Maltese entities between the years 2009 and 2014. Greater likelihood of financial distress, decreasing investment efficiency and increased levels of gearing, are identified as being significant determinants for the use of DHIs. Although DHI usage is low in comparison to larger states, it has been increasing over the period under study.

HA is evidenced to be less popular in Malta, but the study evidences correlation between certain DHIs and HA usage. The quantitative statistical model results in evidence with no significant earnings volatility (EV) or cash flow volatility (CFV) reduction effects through the application of HA. Albeit, the study finds a significant CFV reduction effect emanating from DHI usage, but no corresponding EV reduction effect.

Better education and dissemination of the HA treatment by auditors and regulatory bodies could help propagate the HA treatment, potentially enhancing the EV reduction effectiveness of DHI use. This research provides empirical evidence to substantiate the rationale behind utilising DHIs in smaller island states, especially when coupled with a sound risk management culture.

The urbanization process that develops in parallel with the increase in population, get volume in vertical level on the ground today just like the underground expansion of urban spaces in antique ages, in parallel with the intensification of spatial expansion, leading to new problems and research questions in urban spaces. Because the increase in the number of people per square meter as a result of vertical concentration on the ground makes the streets or the land we step on become a more rentable market. While this market has been filled with classical artisan businesses so far, street economy actors serve the population (consumer) where artisans are not sufficient for meeting the demand in highly populated streets. This situation confronted law enforcement and street sellers in cities for decades or may be centuries, and urban peace and harmony often deteriorated. In the integrated urban areas, in addition to a series of urban problems, the registration of the informal economy and the adaptation of the street economy actors to the urban identity and esthetics have become the problems that await priority solutions. Street economy is an aesthetic and ergonomic fact of living cities, in accordance with this microeconomic reality, sustainable legal regulations are essential. Such that, these legal regulations should be established on a solid basis not only in certain countries but also in all countries in the world.

Purpose: This research study addresses the key issues of the fiscal policies and tax system in Kosovo to align with the contemporary tax principles and requirements of the European Standards.

Design/methodology/approach: In order to explain the fiscal policies and tax system in Kosovo, the authors provide an overview of the fiscal policies and tax system in the country. The authors focused on the building and development of the tax system, the role of the tax policy in economic development and the macro-fiscal stability. The methodology approach is based on primary and other secondary sources, such as academic literature, the reports provided by the Ministry of Finance and international institutions, tax law and other available important statistical data.

Findings: The chapter substantiates and confirms the need for tax reforms in order to have an adequate tax system oriented to indirect tax, changing the structure of tax collection for border tax into domestic tax, simplification of the legal procedures, improvement of management and audit systems, reducing the informal gray economy and to have a gradual growth-friendly fiscal policy. Positive fiscal performance continued, although there is still room to improve the execution of revenues.

Practical Implications: This chapter highlights the fact that Kosovo needs to intensify their fiscal reforms to build a sustainable tax system in order to meet the criteria of the EU tax system and policies.

Originality/value: The authors define the needs for strengthening the budget revenues, taking strong and coordinated steps to improve the management and collection of the revenues from indirect and direct taxes. Moreover, the authors show that the Kosovo tax system is broadly in line with the EU acquis and needs reform in order to have a sustainable tax regime.