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1 – 10 of over 1000To investigate the extent to which finance managers in non‐financial firms speculate in the currency markets and particularly to investigate the effect of individual‐owners on…
Abstract
Purpose
To investigate the extent to which finance managers in non‐financial firms speculate in the currency markets and particularly to investigate the effect of individual‐owners on such speculation.
Design/methodology/approach
This paper uses survey data in order to analyse the extent of currency speculation in non‐financial firms. It uses survey data and publicly available data in an ordered probit regression analysis in order to analyse the decisive factors behind the extent of currency speculation in non‐financial firms.
Findings
Currency speculation is widespread among non‐financial firms and takes the form of selective hedging as well as speculation not related to the underlying business. The extent of speculation is positively related to the size of the firm, to the international involvement of the firm, and to the conservatism of its capital structure. If an individual (often the founder or a descendant of the founder) is the largest shareholder in the firm, the extent of such speculation is significantly reduced.
Research limitations/implications
The findings are based on Danish, non‐financial firms listed on the Copenhagen Stock Exchange.
Originality/value
The contribution of this paper is to provide evidence on the negative relationship between individual‐owners (ownership structure) and the extent of currency speculation in non‐financial firms and more generally to investigate the factors behind such speculation.
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The national objectives of forward exchange controls are to restrain speculation in foreign exchange, to limit international capital flows and to affect the forward exchange…
Abstract
The national objectives of forward exchange controls are to restrain speculation in foreign exchange, to limit international capital flows and to affect the forward exchange rates. Restrictions on forward transactions are economic welfare costs for enterprises and banks, which are analysed in terms of risk‐return and supply‐demand theory. Empirical answers to whether forward exchange control is really necessary await collection and disclosure of company currency exposure, which itself may contribute to the national objectives implicit in forward exchange controls.
The latest European Union summit in the fall of 2002 revealed that over 11 countries (Cyprus, The Czech Republic, Estonia, Hungary, Latvia, Malta, Poland, Slovakia, Slovenia…
Abstract
The latest European Union summit in the fall of 2002 revealed that over 11 countries (Cyprus, The Czech Republic, Estonia, Hungary, Latvia, Malta, Poland, Slovakia, Slovenia, Bulgaria, and Romania) have expressed their desire to join the European Monetary Union (EMU) and convert their currency to the “euro”. The European Commission will have to completely equalize interest rates and inflation rates of all these countries before admitting them to join the EMU or there will be arbitrage profits and currency speculation, which will slow down the growth of the overall European Community and negatively affect the value of the euro.
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Tom Aabo, Jochen Kuhn and Giovanna Zanotti
The purpose of this study is to explore the influence of founder families in medium‐sized manufacturing firms and to investigate the impact of such influence on risk management …
Abstract
Purpose
The purpose of this study is to explore the influence of founder families in medium‐sized manufacturing firms and to investigate the impact of such influence on risk management – more specifically foreign exchange hedging and speculation.
Design/methodology/approach
This empirical study uses survey data and publicly available data for descriptive analysis and ordinary least squares/ordered regression analysis.
Findings
The authors find that two thirds of medium‐sized manufacturing firms are founder family firms in which the founder of the firm or members of his/her family are active in the management team, are members of the board of directors, and/or are shareholders of the firm. The study finds no difference between such founder family firms and other firms in terms of the use/non‐use decision related to foreign exchange derivatives but a marked difference in terms of the extent decision. Thus, founder family firms tend not only to hedge but also to speculate more extensively than other firms.
Research limitations/implications
The findings are based on medium‐sized manufacturing firms in Denmark.
Originality/value
This study provides empirical evidence on the influence of founder families in medium‐sized firms and adds to the sparse literature on the impact of founder family influence on risk management.
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Dominique Besson, Alexis Downs, Rita Durant and Marco Roman
The purpose of this paper is to examine proposals for a Tobin tax to curb currency speculation in global markets.
Abstract
Purpose
The purpose of this paper is to examine proposals for a Tobin tax to curb currency speculation in global markets.
Design/methodology/approach
Financial markets are viewed from the perspective of Michel Serres.
Findings
Managing volatility is really about managing relationships that can buffer governments against risk. The resolution of a paradox is embracing the paradox.
Originality/value
The work of Michel Serres has not previously been used in analyses of global currency markets. His theory of parasitical relationships offers a novel response to proposals for a Tobin tax.
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Kulabutr Komenkul and Dhanawat Siriwattanakul
The purpose of this paper is to investigate the characteristics of the Initial Public Offering (IPO) market, IPO underpricing and the long-run performance of IPOs and to find out…
Abstract
Purpose
The purpose of this paper is to investigate the characteristics of the Initial Public Offering (IPO) market, IPO underpricing and the long-run performance of IPOs and to find out the ex ante difference in the market structure between the pre-, during and post-periods of the Unremunerated Reserve Requirement (URR) at the 30 per cent rate.
Design/methodology/approach
The sample is a total of 245 IPOs listed on the Stock Exchange of Thailand (SET) and the Market for Alternative Investment (mai), during the period 2001-2012. The explanatory variables consist of the age of the firm, the offer size, the time-lag between the IPO date and the first trading date, the proportion of shares owned by the government and the IPO subscription rates by foreign and institutional investors. In further analysis, the authors adopt a two-stage least squares approach to derive unbiased estimates of the relationship between government ownership, IPO underpricing and firm quality.
Findings
We find the ex ante uncertainty and earning management partially explain the IPO underpricing phenomenon in the Thai IPO market. Our findings support the impresario hypothesis shown by the negative relation between underpricing and the three-year after-market. In addition, the 30 per cent URR imposition by the Thai Central Bank promptly reduced the number of IPO issues and the proportion of foreigners and institutions subscribing to IPOs. However, it was able to enhance the degrees of IPO underpricing and the long-run performance of IPOs in Thailand.
Practical implications
The results presented in this paper may be, therefore, useful for investors, security analysts, companies and regulators in many other emerging markets beyond Thailand. Given the results from the over-performance of IPOs in the post-URR period, investors may do better holding Thai IPOs for a long period with a likelihood of gaining a higher return.
Originality/value
This paper contributes to the literature concerning IPOs – in that we have considered two stock markets, namely, SET and mai. Furthermore, unique data such as the government ownership and proportion of IPOs subscribed by foreign and institutional investors are taken into consideration in our research model. To the best of our knowledge, for the first time in the Thai IPO market, the effect of the 30 per cent URR on IPO underpricing and the performance of IPOs in the long-run has been closely examined.
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Tom Aabo, Marianna Andryeyeva Hansen and Christos Pantzalis
The purpose of this paper is to investigate how non‐finance departmental involvement in the management of exchange rate risks impacts the extent of foreign exchange speculation in…
Abstract
Purpose
The purpose of this paper is to investigate how non‐finance departmental involvement in the management of exchange rate risks impacts the extent of foreign exchange speculation in non‐financial firms.
Design/methodology/approach
Non‐financial firms in a small open economy (Denmark) are surveyed to investigate the extent of foreign exchange speculation and how it is related to the degree of nonfinance departmental involvement in the management of exchange rate risks. The authors employ binary and ordered probit regression analysis.
Findings
A positive link is found between the extent to which departments other than the finance department are involved in the management of exchange rate risks; and second, the extent to which the firm is likely to speculate – whether in the form of selective hedging or active speculation – on the foreign exchange market.
Practical implications
The findings indicate that the trend towards a more integrated risk management approach in which the finance department is not the only department responsible for risk management may have the (unforeseen) consequence that foreign exchange speculation increases.
Originality/value
The paper's findings are important because the link between the extent of foreign exchange speculation and a more integrated risk management approach has not been addressed previously.
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PHILIP KAMAU, ENO L. INANGA and KAMI RWEGASIRA
The purpose of this paper is to investigate the extent to which multilateral banks (MBs) use currency derivatives (CDs) to hedge and speculate in managing currency risk. It aims…
Abstract
Purpose
The purpose of this paper is to investigate the extent to which multilateral banks (MBs) use currency derivatives (CDs) to hedge and speculate in managing currency risk. It aims to provide an empirical assessment of CDs products used by MBs as a group not studied before.
Design/methodology/approach
Quantitative hypothesis regarding the usage of CDs to minimize adverse impact of currency risk was tested using z test about population proportion.
Findings
The results show that MBs are using CDs in the following order of importance: currency swaps, currency forwards, currency options and currency futures primarily to hedge currency risk.
Research limitations/implications
The results of the study can be generalized only for MBs, given their peculiar characteristics as wholesale banks, which are owned mainly by governments and are generally not listed in the stock exchanges.
Originality/value
The study is of value to those interested in the multilateral banking industry. The authors acknowledge that it is the first study providing empirical evidence on CDs’ usage by MBs as a group. The results are particularly useful to managers of MBs in terms of helping them to make choices in usage of CDs. The paper has also policy implications in terms of justifying the current self-regulatory status, shareholder monitoring and governance of MBs, as they do not speculate with CDs.
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The most prominent and persistent problems of our global monetary system are instability and imbalances. We propose an international monetary model to solve these problems while…
Abstract
Purpose
The most prominent and persistent problems of our global monetary system are instability and imbalances. We propose an international monetary model to solve these problems while at the same time move the model closer to Maqāṣid Sharīʿah (objectives of Sharīʿah). We name this an organic global monetary model or abbreviated as OGM. OGM is an international monetary model directly built on the national monetary system of each member country so that the two can co-exist.
Design/methodology/approach
Model design, theory and literature.
Findings
The model can eliminate interest rates at the central bank level, create non-tradable international money, and make a more stable international monetary system.
Originality/value
Original.
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Muhammad Rizky Prima Sakti, Ahmad Syahid, Mohammad Ali Tareq and Akbariah Mohd Mahdzir
The purpose of this study is to investigate shari’ah scholars’ views and experiences pertaining the shari’ah issues, challenges and prospects in Islamic derivatives. Specifically…
Abstract
Purpose
The purpose of this study is to investigate shari’ah scholars’ views and experiences pertaining the shari’ah issues, challenges and prospects in Islamic derivatives. Specifically, this paper critically examines the criticisms toward conventional derivative instruments and the controversies surrounding underlying contracts and current Islamic derivative products.
Design/methodology/approach
This study uses qualitative methods to form a deeper understanding of shari’ah scholars’ perception and experience on Islamic derivatives. Semi-structured interviews were conducted with five shari’ah scholars who are currently working in Islamic financial institutions in Malaysia and Singapore. This study used phenomenological techniques for its data analysis.
Findings
This study has found that shari’ah scholars are aware of the shari’ah issues surrounding Islamic derivatives and have provided comprehensive insight on the solution to these issues. It was found that it is important to take into account the derivatives instruments in Islamic financial industry because of the need for hedging and risk mitigation within Islamic financial institutions. Nonetheless, the study has also found that the use of wa’ad contracts to structure Islamic profit rate swaps and foreign currency exchanges are problematic because of it having features of bay’ al-kali’ bil-kali (the sale of one debt for another).
Originality/value
This study is one of few studies that highlight the shari’ah issues of Islamic derivatives in Islamic banking and finance industry. This paper is of value in discussing risk management and Islamic derivatives in Islamic financial institutions and how there are many issues under the investigation process, particularly issues related to controversial underlying contracts and products.
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