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Article
Publication date: 21 August 2017

Miguel Rodriguez Gonzalez, Frederik Kunze, Christoph Schwarzbach and Christoph Dieng

This paper aims to investigate the long-term relationships of long-term European Monetary Union (EMU) government bond yields. From an asset managersā€™ or risk managersā€…

Abstract

Purpose

This paper aims to investigate the long-term relationships of long-term European Monetary Union (EMU) government bond yields. From an asset managersā€™ or risk managersā€™ perspective during the euro crisis, the relevance of sovereign credit and redenomination risk became a major issue. Furthermore, it has to be differentiated between core and non-core EMU member countries.

Design/methodology/approach

Methods of applied time series analysis are used to investigate EMU government bond yields and EMU government bond yield spreads for Spain, Italy, The Netherlands, Austria and Germany. Both standard unit root testing procedures and breakpoint unit root tests are used to examine cointegrating relationships and structural changes in these relationships.

Findings

The empirical results deliver clear evidence for structural shifts in the long-term relationship between German and the two non-core EMU countries (Italy and Spain). The timing of the breaks coincides with the timing of the euro crisis. On the contrary, the results for Austria and The Netherlands are different from the findings for the two non-core countries.

Research limitations/implications

One major limitation of the study is the limited availability of data regarding to the reaction of asset managers or risk managers to the euro crisis. Especially in the context of the discussion with regard to the relevant risk-free rate for investors, this strand of research is relatively new.

Practical implications

A deeper understanding of changes in the long-term relationship between government bond yields and the re-emergence of redenomination risk is important for asset managers and risk managers in the financial services industry. This is especially true for German life insurers.

Originality/value

The study provides various empirical contributions to the literature on the euro crisis and sovereign credit risk. First, previous results with regard to the structural changes in the long-term relationship between German and Spanish, German and Italian, German and Austrian as well as Germany and Dutch government bond yields are confirmed using unit root breakpoint tests. Second, investigating the autoregressive coefficient and the timing of the breaks delivers evidence that non-core countries have been more exposed to the fear of redenomination risk. Third, we raise the question which risk free interest rate is relevant for the affected countries.

Details

The Journal of Risk Finance, vol. 18 no. 4
Type: Research Article
ISSN: 1526-5943

Keywords

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Article
Publication date: 25 February 2020

Dorra Ellouze

The purpose of the paper is to investigate the role of customers and employees in the buffer effect of CSR around the 2008 financial crisis in the European context.

Abstract

Purpose

The purpose of the paper is to investigate the role of customers and employees in the buffer effect of CSR around the 2008 financial crisis in the European context.

Design/methodology/approach

Using a sample of 323 European firms listed in STOXX Europe 600 Index, different models are estimated to test whether the effect of CSR ratings on firms' relationships with their customers and employees could be different during the 2008 financial crisis relative to the pre-crisis and post-crisis periods.

Findings

The paper shows that CSR rating has a significantly negative impact on firms' accounts receivable and a significantly positive effect on employee productivity during the crisis period (from 2007 to 2009). However, there is no significant effect of CSR rating during the non-crisis periods. These results suggest that during negative events, customers are willing to continue supporting high-CSR firms by paying their invoices faster. Furthermore, these firms benefit from higher productivity of their employees who are willing to work harder in periods of uncertainty.

Research limitations/implications

Firms should invest in CSR practices to maintain strong and cooperative relationships with their customers and employees. Also, investors should choose firms engaging in more social capital. Moreover, policymakers should encourage implementing CSR practices which act as an insurance-like protection in times of negative events.

Originality/value

This paper adds to the previous studies by investigating whether the cooperative role of customers and employees can explain the buffer role of CSR around the crisis. Furthermore, it considers companies located in several European countries for a long period (from 2004 to 2012) to compare periods of crisis and non-crisis.

Details

Managerial Finance, vol. 46 no. 7
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 1 October 2000

Patricia Jackson and David Lodge

Discusses the recently published draft standard from the Bank of England that covers most controversial banking regulatory areas. States that there may well be advantages…

Abstract

Discusses the recently published draft standard from the Bank of England that covers most controversial banking regulatory areas. States that there may well be advantages in a fair value approach for banks but disclosure of fair values would probably be preferable. Looks at the S&L crisis in the USA and how legislation worked in its case. Elaborates on Denmarkā€™s comprehensive fair value approach that suggests that adjustments in this system do increase earnings and value of capital volatility. Pinpoints bond market problems and liabilities valuation. Contends that there would be advantages in adopting disclosure of fair values.

Details

Balance Sheet, vol. 8 no. 5
Type: Research Article
ISSN: 0965-7967

Keywords

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Article
Publication date: 1 February 2004

Lucie Thébault

Evaluates the effects of shipwrecks and peoplesā€™ reactions following them, with regard to their feelings of preventability on someoneā€™s part. In particular to the Erika in…

Abstract

Evaluates the effects of shipwrecks and peoplesā€™ reactions following them, with regard to their feelings of preventability on someoneā€™s part. In particular to the Erika in 1989, and the Prestige in 2002. The European Union (EU), which theretofore seemed to be neglecting maritime safety appears to have developed a maritime culture. The EU seems to have adopted the International Maritime Organisationā€™s (IMO) attitude regarding safety protocols, which must be a right and proper thing to do. Concludes that shipping has needed, and is now receiving, a proactive approach with regard to safety from the EU which should limit, as far as possible, disasters of both a human and ecological kind for the maritime world.

Details

Managerial Law, vol. 46 no. 1
Type: Research Article
ISSN: 0309-0558

Keywords

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Article
Publication date: 11 September 2009

Sebahattin Demirkan and Harlan Platt

The purpose of this paper is to investigate, using data on US manufacturing firms, how and when corporate governance affects managers' decisions to use discretionary…

Abstract

Purpose

The purpose of this paper is to investigate, using data on US manufacturing firms, how and when corporate governance affects managers' decisions to use discretionary accruals and thereby artificially influence company financial reports.

Design/methodology/approach

Threeā€stage least squares is employed to study the relationship between financial status, corporate governance and financial reporting discretion. The sample spans the years 2001ā€2003 during a severe downturn in the US stock market. Financial status is measured with the Altman Zā€score.

Findings

A significant difference is found between firms not classified as healthy or failed (i.e. the midā€range group) and the two extreme categories when examining governance quotient using a wellā€known index. A positive relationship is found between discretionary accruals and the governance index. Strong governance appears to reduce the incidence of midā€range firms engaging in accruals management. The least healthy and the most distressed companies have the weakest relationship with discretionary accruals. By contrast, midā€range firms are more likely to resort to discretionary accruals.

Practical implications

Nonā€executive members of boards of directors are warned to be particularly vigilant about discretionary accruals with firms transitioning between healthy and highā€failure risk.

Originality/value

The relationship between firms' financial health and discretionary accruals reveals an agency problem in credit markets with financially stressed firms. More attention is required on firms whose financial condition is uncertain. Also, it is documented that significant findings of importance to the earnings quality and corporate governance literature by documenting the role of corporate governance on discretionary accruals and financial status.

Details

Accounting Research Journal, vol. 22 no. 2
Type: Research Article
ISSN: 1030-9616

Keywords

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Article
Publication date: 3 October 2016

Keith J. Kelley

The purpose of this paper is to explore the largely marginalized role of distance or ā€œspaceā€ in multinationality and performance (MP) research. It argues that scholars…

Abstract

Purpose

The purpose of this paper is to explore the largely marginalized role of distance or ā€œspaceā€ in multinationality and performance (MP) research. It argues that scholars should adopt a more fine-grained, or relativistic approach when studying the link between MP and that conceptualizing multinationality as space may facilitate this.

Design/methodology/approach

By treating space as though it is liability forming, the paper examines frequently contentious research issues in domain of MP research such as: how is multinationality measured; what are the moderating variables; and what is the performance metric appropriate, as a framework to help illustrate the relativistic nature of MP studies.

Findings

The paper illustrates that the choice of distance dimensions, along which the ā€œspaceā€ is formed, alters the relationship between MP. Furthermore, this relationship is relative to moderating variables that include among others: when the space is measured (time), point of reference and perspective, the firmā€™s resources (e.g. human and technological capabilities), and the performance measure considered.

Originality/value

This paper suggests new avenues and approaches toward exploring the effects of multinationality to improve methodological rigor. It identifies several important methodological shortcomings of current and previous research and suggests areas in which current research gaps must be filled to advance this body of knowledge. It introduces the notion of spatial relativism as a concept that will facilitate more fine-grained and contextualized studies.

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