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The purpose of this paper is to examine the usefulness of statistical studies of financial reports and stock market data for improving corporate financial reports.
Abstract
Purpose
The purpose of this paper is to examine the usefulness of statistical studies of financial reports and stock market data for improving corporate financial reports.
Design/methodology/approach
Analytical writing.
Findings
It is often claimed that statistical studies of co-variation between financial and stock market data can help set better financial reporting policy. Such co-variation, even when it can be estimated, tells us little about which financial reports help to make better financial decisions. A case in support of such claims remains to be made.
Practical implications
The readers are advised to be extremely careful in drawing inferences from studies of co-variation between accounting and stock market data for financial reporting policy.
Social implications
Inference from accounting empirical studies to policy needs better rationale to avoid bad policy consequences.
Originality/value
This paper raises original questions about policy inferences from a large class of empirical research in accounting.
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Product intervention power is introduced under the markets in financial instruments regulation (MiFIR) and packaged retail and insurance-based investment products (PRIIPs…
Abstract
Product intervention power is introduced under the markets in financial instruments regulation (MiFIR) and packaged retail and insurance-based investment products (PRIIPs) Regulation for all EU Member States and gives National Competent Authorities (NCAs), European Securities and Markets Authority (ESMA), and European Banking Authority (EBA) powers to monitor financial products (and services) under their supervision and to “temporarily” prohibit or restrict the marketing, distribution, or sale of certain financial instruments, or to intervene in relation to certain financial activities or practice. This extends the supervisory measures defined in MiFID II to any PRIIPs (including insurance-based investment products “IBI products”) that would not otherwise fall under the scope of MiFID II. Product intervention power is given to the NCAs, and in order to use power, it requires to take the specifics of the individual case into account and a series of conditions, criteria, and factors to fulfill. Moreover, ESMA and the EBA have a type of control function and ability to override national regulators on product. The aim of product intervention powers is to ensure strengthening of investor protection, but given the potential significant impact of this power, calls into question of possibility to delay innovation and slow down product developments on the capital market.
This paper provided an overview of supervisory measures on product intervention, that is, scope of the product intervention power, criteria, factors, and risks which have to be taken into consideration when using this regulator’s tool.
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This chapter analyses the causes and effects of the financial crisis that commenced in 2008, and it examines the dramatic government rescues and reforms. The outcomes of…
Abstract
This chapter analyses the causes and effects of the financial crisis that commenced in 2008, and it examines the dramatic government rescues and reforms. The outcomes of this, the most severe collapse to befall the United States and the global economy for three-quarters of a century, are still unfolding. Banks, homeowners and industries stood to benefit from government intervention, particularly the huge infusion of taxpayer funds, but their future is uncertain. Instead of extending vital credit, banks simply kept the capital to cover other firm needs (including bonuses for executives). Industry in the prevailing slack economy was not actively seeking investment opportunities and credit expansion. The property and job markets languished behind securities market recovery. It all has been disheartening and scary – rage against those in charge fuelled gloom and cynicism. Immense private debt was a precursor, but public debt is the legacy we must resolve in the future.
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Debashis Mazumdar, Mainak Bhattacharjee and Jayeeta Roy Chowdhury
This chapter seeks to analyze the development across the length and breadth of the Indian financial system in the post-reform period, based on the “flow of funds” accounts…
Abstract
This chapter seeks to analyze the development across the length and breadth of the Indian financial system in the post-reform period, based on the “flow of funds” accounts estimates by RBI. Besides, this chapter also analyzes the integration of the Indian capital market with the stock markets of the United States, the United Kingdom, Japan, China, Hong Kong, and Singapore using the movements in their stock prices during 1998–2015. Moreover, this chapter is intended for examining the potential implication financial integration, particularly the financial openness of India, on volatility spillover and financial contagion in as much as these two issues have emphatic significance in the determination of the relevant policy roadmap. Our findings broadly confirms the expectations by revealing significantly positive correlations in stock prices, in returns to investments in stock markets, and in mean returns and risk. The integration of the capital markets is also manifested in the cyclical fluctuations of the stock price indices, signifying the underlying sensitivity to random shocks.
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The chapter contains a methodology for formalized evaluation of the role of the Central Bank of the Russian Federation (Bank of Russia) in ensuring monetary and financial…
Abstract
The chapter contains a methodology for formalized evaluation of the role of the Central Bank of the Russian Federation (Bank of Russia) in ensuring monetary and financial sustainability with the help of the monetary policy transmission mechanism and its inflation target regime. The significance of the research of the Bank of Russia operations to ensure financial sustainability is due to a number of circumstances: the uniqueness of the Bank of Russia that appeared only 27 years ago and experienced several devastating events related to the 1998 financial crisis, the global financial crisis of 2008–2009, and the stagnation of the Russian economy in 2014–2016, as well as high volatility of world prices for Russian commodity exports and the latest contra-Russian sanctions that significantly affected the volatility of the Russian ruble. Taking into account all the above, the issue of the Bank of Russia’s effective activities in the long run is aggravated by the fact that there are still more open questions than proven relationships of causes and effects regarding the potential of specific monetary policy instruments in the context of low-growth and high-volatility environment. The modeling of the Bank of Russia strategic and operational targets has been based on the parameters’ dependencies presented by the money (credit) multiplier in the interpretation of G. Schinasi (2006) and on the instability of stable economy hypothesis of H. Minsky (2008). As a result, there have been established the marginal levels of definite indicators of the banking system performance that could allow the Bank of Russia to ensure financial sustainability in the low-growth and high-volatility environment.
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Jing Chi and Martin Young
While China is currently moving toward the full development of its own financial derivatives markets, to date, China's experience with these has been a negative one. This…
Abstract
While China is currently moving toward the full development of its own financial derivatives markets, to date, China's experience with these has been a negative one. This paper examines the importance to China of developing a fully integrated financial derivatives market from both the economic and financial market perspectives. It examines the best way forward for derivative trading, both market based and over-the-counter, and the types of products best suited to both, given the current state of the Chinese financial markets. Consideration is given to market structure, regulation, trading and settlement systems and international cooperation.
Hung-Chi Li, Syouching Lai, James A. Conover, Frederick Wu and Bin Li
Lai, Li, Conover, and Wu (2010) propose a four-factor financial distress model to explain stock returns in the U.S. and Japanese markets. We examine this model in the…
Abstract
Lai, Li, Conover, and Wu (2010) propose a four-factor financial distress model to explain stock returns in the U.S. and Japanese markets. We examine this model in the stock markets of Australia, and six Asian markets (Hong Kong, Indonesia, Korea, Malaysia, Singapore, and Thailand). We find broad empirical support for the four-factor financial distress risk asset-pricing model in those markets. The four-factor financial distress asset pricing model improves explanatory power beyond the Fama–French (1993) three-factor asset pricing model in six of the seven Asian-Pacific markets (12 of 14 portfolio groupings), while the Carhart (1997) momentum-based asset pricing model only improves explanatory power beyond the Fama–French model in three of the seven markets (4 of 14 portfolio groupings).
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