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Article
Publication date: 10 October 2021

Mahmoud Fatouh and Ayowande A. McCunn

This paper aims to present a model of shareholders’ willingness to exert effort to reduce the likelihood of bank distress and the implications of the presence of…

Abstract

Purpose

This paper aims to present a model of shareholders’ willingness to exert effort to reduce the likelihood of bank distress and the implications of the presence of contingent convertible (CoCo) bonds in the liabilities structure of a bank.

Design/methodology/approach

This study presents a basic model about the moral hazard surrounding shareholders willingness to exert effort that increases the likelihood of a bank’s success. This study uses a one-shot game and so do not capture the effects of repeated interactions.

Findings

Consistent with the existing literature, this study shows that the direction of the wealth transfer at the conversion of CoCo bonds determines their impact on shareholder risk-taking incentives. This study also finds that “anytime” CoCos (CoCo bonds trigger-able anytime at the discretion of managers) have a minor advantage over regular CoCo bonds, and that quality of capital requirements can reduce the risk-taking incentives of shareholders.

Practical implications

This study argues that shareholders can also use manager-specific CoCo bonds to reduce the riskiness of the bank activities. The issuance of such bonds can increase the resilience of individual banks and the whole banking system. Regulators can use restrictions on conversion rates and/or requirements on the quality of capital to address the impact of CoCo bonds issuance on risk-taking incentives.

Originality/value

To model the risk-taking incentives, authors generally modify the asset processes to introduce components that reflect asymmetric information between CoCo holders and shareholders and/or managers. This paper follows a simpler method similar to that of Holmström and Tirole (1998).

Details

Journal of Financial Regulation and Compliance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1358-1988

Keywords

Content available
Article
Publication date: 7 September 2021

Wenwen Jiang and Hwa-Sung Kim

The authors show that there is a negative relationship between economic policy uncertainty (EPU) and firm overinvestment using Korean data from 2007 to 2016. Since Jensen…

Abstract

The authors show that there is a negative relationship between economic policy uncertainty (EPU) and firm overinvestment using Korean data from 2007 to 2016. Since Jensen (1986) shows that a firm's free cash flow is an important factor of overinvestment, the authors examine how free cash flow influences the sensitivity of overinvestment to EPU. The authors find that a high level of free cash flow attenuates the negative effect of EPU on overinvestment. The authors find that there is no significant difference in the effect of EPU on overinvestment between Chaebol (Korean family-run conglomerates) and non-Chaebol firms, which is consistent with the literature that the features of Chaebol are weakening.

Details

Journal of Derivatives and Quantitative Studies: 선물연구, vol. 29 no. 4
Type: Research Article
ISSN: 1229-988X

Keywords

Content available
Article
Publication date: 22 June 2021

Truong Thi Thuy Duong and Nguyen Xuan Thao

The paper aims to propose a practical model for market segment selection and evaluation. The paper carries out a technique of order preference similarity to the ideal…

Abstract

Purpose

The paper aims to propose a practical model for market segment selection and evaluation. The paper carries out a technique of order preference similarity to the ideal solution (TOPSIS) approach to make an operation systematic dealing with multi-criteria decision- making problem.

Design/methodology/approach

Introducing a multi-criteria decision-making problem based on TOPSIS approach. A new entropy and new similarity measure under neutrosopic environment are proposed to evaluate the weights of criteria and the relative closeness coefficient in TOPSIS model.

Findings

The outcomes show that the TOPSIS model based on new entropy and similarity measure is effective for evaluation and selection market segment. Profitability, growth of the market, the likelihood of sustainable differential advantages are the most important insights of criteria.

Originality/value

This paper put forward an effective multi-criteria decision-making dealing with uncertain information.

Details

Asian Journal of Economics and Banking, vol. 5 no. 2
Type: Research Article
ISSN: 2615-9821

Keywords

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Book part
Publication date: 1 August 2019

Svetlana V. Lobova, Anna V. Bodiako, Liudmila V. Dontsova, Yevgeniy An and Viktor N. Salin

Purpose: The purpose of the work is to study the approaches to classification of modern business systems from business managers through the prism of making of managerial…

Abstract

Purpose: The purpose of the work is to study the approaches to classification of modern business systems from business managers through the prism of making of managerial decisions.

Methodology: The methods of classification, comparative and systemic analysis, induction, deduction, and formalization are used.

Conclusions: As a result of the research, five conceptual approaches to classification of modern business systems are distinguished: organization-oriented, externally-oriented, management-oriented, socially-oriented, and innovations-oriented. Within each of them, various (mutually supplementing) criteria of classification are used, which allow distinguishing a lot of types of modern business systems. In the conditions of the Fourth Industrial Revolution, which includes transition to Industry 4.0, a new classification of modern business systems according to the criteria of their technological mode is offered, and the systems of the mode 3.0 and 4.0 are distinguished. Transition to the new technological mode is connected to additional business risks, which complicates the process of making of managerial decisions.

Originality/value: The performed analysis of classification of modern business systems from business managers showed that all peculiarities of these systems influence the process of making of managerial decisions in them, including the sectorial structure of business environment, size of business systems, sphere in which business systems function, involvement in business environment, internal and external integration of business systems, scale and complexity of business environment, organizational and legal form, business structure and business culture of business systems, types of benefits that they sell, level of legitimacy, responsibility, innovational activity, and technological mode of business systems.

Details

Specifics of Decision Making in Modern Business Systems
Type: Book
ISBN: 978-1-78756-692-7

Keywords

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Book part
Publication date: 1 August 2019

Olga G. Tretyakova, Olga P. Osadchaya, Elena I. Kostyukova, Mikhail V. Sirotenko and Irina V. Gimelshtein

Purpose: The purpose of the work is to study the essence and to determine the algorithm and methodology of decision making as a choice of the existing alternatives…

Abstract

Purpose: The purpose of the work is to study the essence and to determine the algorithm and methodology of decision making as a choice of the existing alternatives according to the scientific approach to this process of management of modern business systems.

Methodology: The research is conducted with the help of the method of process analysis, which allows determining the stages of the process of decision making in modern business systems and determining its algorithm; the method of formalization, which allows presenting the obtained algorithm; and the method of comparative analysis, which allows comparing the existing methods of decision making as a choice of the existing alternatives.

Conclusions: As a result of generalization and systematization of the existing scientific knowledge in the sphere of managerial decisions in modern business systems and reconsideration (logical analysis) of this process, its algorithm is compiled. Four stages of the algorithm of making of managerial decisions in modern business systems are distinguished – determining the needs of business system for managerial decisions, determining the possibilities of business system in making of managerial decisions, compiling alternative variants of managerial decisions, and implementation of the made managerial decision and further evaluation of its optimality. Also, methodological tools of each stage are determined.

Originality/value: The developed algorithm possesses the following advantages as compared to the existing scientific descriptions of this process: completeness, complex solution of the problems of the business system through managerial decisions, connection of the methodology of managerial decisions to each stage of the algorithm, and systemic character of the methodology of decision making as a choice of the existing alternatives.

Details

Specifics of Decision Making in Modern Business Systems
Type: Book
ISBN: 978-1-78756-692-7

Keywords

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Book part
Publication date: 10 February 2020

Özlem Kuvat and Burcu İşgüden Kılıç

The confidence in the qualifications and independence of the audit activities and professionals has been lost due to the financial scandals that have arisen over time…

Abstract

The confidence in the qualifications and independence of the audit activities and professionals has been lost due to the financial scandals that have arisen over time. These scandals in the accounting and auditing fields caused both enterprises and investors to suffer from large amounts of losses and thus the need for reliable financial statements and corporate governance increased.

Both investors and decision-makers need independent assurance to achieve transparent, reliable, and impartial financial information. The fulfillment of this requirement is possible through independent auditing activity and independent audit firms. Business management shall carry out the selection of independent auditors based on various criteria (fee, reputation, audit team, relations, etc.). In addition, it may also be necessary to periodically change an independent audit firm due to rotation or other reasons (fee, disputes, relationships, etc.).

In this study, a ranking of the importance level of the evaluation criteria, for the selection and change of the independent audit firm in an enterprise in Borsa İstanbul (BIST) 100 in Turkey, was conducted. Analytical Hierarchy Process (AHP), which is one of the multicriteria decision-making techniques, was used for ranking. In the hierarchy established for the selection of the independent audit firm, the main criteria of the “audit fee” and the “reputation and qualifications of the audit firm” have been established. According to the findings obtained as a result of binary comparisons, the first four ranks among sub-criteria are “provision of international service,” “quality of technical expertise of audit firm,” “industry expertise of audit firm,” and “suitability of fee offered by audit firm.”

For the change of audit firm, four main criteria “audit fee,” “disputes arising during the audit process,” “relations with the audit firm,” and “rotation” are taken into consideration. For sub-criteria, first four criteria were “rotation of independent audit firm,” “rotation of independent auditor,” “audit firm’s inability to adequately practice proactive audit approaches,” and “inadequate communication.”

Details

Contemporary Issues in Audit Management and Forensic Accounting
Type: Book
ISBN: 978-1-83867-636-0

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Book part
Publication date: 1 August 2019

Aleksei V. Bogoviz, Leonid F. Malinovski, Tamara G. Stroiteleva, Maxim M. Sharamko and Vera V. Dvoretskaya

Purpose: The purpose of the chapter is to determine the connection between organizational culture and specifics of the process of decision making in modern business…

Abstract

Purpose: The purpose of the chapter is to determine the connection between organizational culture and specifics of the process of decision making in modern business systems and to determine the directions of managing the organizational culture depending on the set criteria of decision making.

Methodology: A proprietary classification of the types of organizational culture of modern business systems according to the criterion of employees' involvement into decision making is offered. This classification uses two dimensions of employees' involvement into decision making for classification of the types of organizational culture of modern business systems. First dimension: interest of business manager in involvement of employees into the process of decision making. Second dimension: employees' inclination for participation in the process of making of managerial decisions. The factors that influence these dimensions are determined.

Conclusions: Connection between organizational culture and specifics of decision making in modern business systems according to the criterion of employees' involvement in decision making is determined. The minimal level of involvement envisages independent decision making by business manager without participation of employees. In this case, a lot of problems of the business system remain unsolved and possibilities remain unused. Resource intensity of decision making is the highest, and their practical implementation is complicated by employees' dissatisfaction, but this process is conducted very quickly. The medium level of involvement envisages either collective discussion, but decision making by business manager, or collection of feedback by business manager with low interest in it from employees. In this case, resource intensity of decision making is lower, and decisions could be made and implemented faster. The highest level of involvement is connected to collective decision making by employees and business manager. This allows determining problems and using possibilities of the business system with minimal resources. Though the duration of the process of decision making is the highest, solutions are implemented quickly due to employees' support.

Originality/value: The determined specifics show the necessity for considering the influence of the organizational culture on specifics of the process of decision making in modern business systems. It is substantiated that no type of organizational culture of modern business systems according to the criterion of employees' involvement in decision making can provide a guarantee of decisions' optimality. The directions of managing the organizational culture depending on the set criteria (completeness, speed, resource intensity) of decision making are recommended.

Details

Specifics of Decision Making in Modern Business Systems
Type: Book
ISBN: 978-1-78756-692-7

Keywords

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Book part
Publication date: 1 August 2019

Aleksei V. Bogoviz, Andrei V. Berezhnoi, Igor S. Mezhov, Olga V. Titova and Olga G. Kryukova

Purpose: The purpose of the work is to determine the possibilities and consequences of decision making in modern business systems by the principles of outsource.Methodology

Abstract

Purpose: The purpose of the work is to determine the possibilities and consequences of decision making in modern business systems by the principles of outsource.

Methodology: During studying the perspectives of decision making in modern business systems by the principles of outsource, the method of logical analysis (analysis of causal connections), the method of structural and functional analysis, and the method of formalization are used.

Conclusions: Perspective directions, advantages, and drawbacks of application of outsource for decision making in modern business systems at different stages of this process are determined. Possible variants of decision making in a modern business system by the principles of outsource and their consequences are determined: information and consultation decision support, business system's overcoming a crisis, optimization of certain business processes, and loss of independence of business system and path to its reorganization.

Originality/value: As a result, it is substantiated that outsource is a perspective tool of making of managerial decisions in modern business systems. Various directions of application of this tool are accessible at each stage of the process of making of managerial decisions in a modern business system. The advantages of decision making by the principles of outsource are attraction of additional resources, access to possibilities of automatization, and low expenses, and the drawbacks include the complexity of organization of this process and temporary character of obtained advantages. Too active usage of outsource and transfer of most managerial decisions to it may lead to loss of independence of the business system and increase of the risk of its reorganization. That's why the principles of outsource are recommended for making of certain managerial decisions by business systems in the period of crisis and by newly formed business systems and those that experience deficit of resources.

Details

Specifics of Decision Making in Modern Business Systems
Type: Book
ISBN: 978-1-78756-692-7

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Article
Publication date: 14 July 2021

Khandokar Istiak

Broker-dealer leverage volatility increases during booms and crisis periods, but its impact on stock prices is relatively unexplored. This paper aims to investigate…

Abstract

Purpose

Broker-dealer leverage volatility increases during booms and crisis periods, but its impact on stock prices is relatively unexplored. This paper aims to investigate whether broker-dealer leverage volatility is a key driver for stock prices.

Design/methodology/approach

This paper collects the US quarterly data of broker-dealer book leverage and three leading stock market indicators (S&P 500, DJIA and Nasdaq) for the period of 1967–2018. The research uses a multivariate GARCH-in-mean VAR to examine the impact of leverage volatility on each of the stock market indicators. A split-sample analysis (pre-1990 and post-1990) has also been performed to show the robustness of the result.

Findings

The research finds that broker-dealer leverage volatility does not have any significant impact on stock prices.

Originality/value

Broker-dealers are important financial intermediaries, and there is a huge literature exploring the relationship between their leverage and asset prices. But, the relationship between broker-dealer leverage volatility and asset prices is not explored yet. This study fills the gap and provides the first evidence that broker-dealer leverage volatility does not play any major role in the theory of stock pricing. The research proposes that the stock holding decisions of the investors should depend only on the first moment of leverage and not on the second moment of leverage. The study concludes that high broker-dealer leverage volatility is not a sinister signal for the US stock market.

Details

Studies in Economics and Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1086-7376

Keywords

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Book part
Publication date: 1 August 2019

Margarita V. Melnik, Tatiana V. Skryl, Elena A. Gureeva, Irina F. Vetrova and Aleksandr V. Vetrov

Purpose: The purpose of the chapter is to determine the regularities and tendencies of decision making in business systems by the example of modern Russia.Methodology: The…

Abstract

Purpose: The purpose of the chapter is to determine the regularities and tendencies of decision making in business systems by the example of modern Russia.

Methodology: The method of logical analysis (analysis of causal connections) and the method of dynamic analysis of development of socioeconomic systems are used. These methods are applied with the current statistical and analytical information. The information and analytical basis of the research is the materials of the Federal State Statistics Service for 2018.

Conclusions: The factors of functioning and development of modern business systems, related to development of E-commerce, liberalization of state regulation of business systems, growth of their competition and corporate responsibility, change of technological mode, and crisis are determined. Influence of these factors on managerial decisions is connected to reduction of resource provision of business systems, accessibility of new managerial tools, complication of made decisions (growth of the number of accessible decisions), growth of the number of new technologies of decision making, and increase of the risk component of decisions. Regularities and tendencies of decision making are determined: striving for saving resources during decision making, more active usage of new managerial tools during decision making, striving for acceleration of the process of making of more complicated managerial decisions, more active usage of new technologies during decision making, and striving for minimization of risks of made decisions.

Originality/value: It is substantiated that the determined regularities and tendencies of decision making lead to increase of contradiction during making of managerial decisions in modern business systems, connected to growth of complexity of this process and simultaneous reduction of resources and time that are accessible to business managers. In order to solve this contradiction, it is necessary to implement cardinal changes into the process of making of managerial decisions in modern business systems, which allow – with minimum managerial cost – determining multiple alternative variants of solutions of the whole specter of current problems of a business system and comparing them as to mutually excluding criteria, thus making complex decisions.

Details

Specifics of Decision Making in Modern Business Systems
Type: Book
ISBN: 978-1-78756-692-7

Keywords

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