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This paper offers a framework for understanding the financial system using Marx’s theory of value. It examines how to interpret the Marxist concepts of the rate of profit and fictitious capital when analysing the financial sector, showing how accounting terms such as ‘return on equity’ and ‘leverage’ can also be understood in this context. The analysis argues that the capitalist system’s rate of profit should be conceptualised in a way that includes finance, but that one should not mix up the accumulation of financial assets with the accumulation of advanced capital. While the costs of finance are negative for the system’s average rate of profit, the paper concludes by noting how this is not inconsistent with financial operations being very profitable for imperialist powers that can use the financial system to appropriate surplus value from elsewhere in the global economy.

Purpose: The present study investigates how the performance of Greek bank branching varies when the external environment causes dramatic changes that are reflected in recession and capital control effects.

Design/Methodology: A unique dataset of accounting Profit and Loss statements of retail branches of a systemic Greek commercial bank, closely supervised by the European Central Bank (ECB), is utilized. A profit bootstrap Data Envelopment Analysis (DEA) model is selected to measure the bank branch efficiency. The derived efficiency estimates are analyzed through a second-stage panel data regression analysis against a set of efficiency drivers related to branch profitability, diversification of income, branch size, and branch activity.

Findings: The results indicate that recession negatively affects branch efficiency in the short and long run. The occurrence of recession significantly intensifies the efficiency premium of branch profitability, reduces the efficiency premium of diversification of income (i.e., a negative efficiency effect is recorded during the early recession period), while mitigating the generally negative efficiency effect of branch size. The analysis of efficiency effects from the deep recession period that encompasses capital controls reveals the importance of diversification of income for the improvement of profit efficiency at bank branch level.

Originality/Value: This is the first branch banking study that explores branch efficiency alteration and the dynamic of branch efficiency drivers when the economy suddenly enters recession and afterwards when conditions are becoming extremely difficult and consequently capital controls are imposed on the economy.

This chapter considers financial instability as a phenomenon endogenous to the functioning of capitalism. Consequently, it seeks to identify the main sources and different forms of the latter in financialised capitalism. According to Keynes, capital assets prices are conceived as the expression of financial conventions. It is, therefore, important to distinguish between the returns expected by company directors, bankers, holders of equity titles, risk-takers and, in contrast, risk-averse holders of debt securities. Minsky enriches the analysis by attributing a decisive role to the leverage effect, at the origin of an accumulation of financial weaknesses in the balance sheets of non-financial agents during the expansion phases preceding financial crises. Regulation theory leads to the introduction of a distinction between the financial accelerator and the leverage effect. The first establishes a procyclical relationship at the macroeconomic level between the price of capital assets and the debt ratio of non-financial agents; the second acts at the microeconomic level through shareholder corporate governance, which determines the institutional conditions inciting firm directors to integrate shareholder expectations into their return forecasts. The empirical analysis identifies three forms of financial instability in financialised capitalism: the long-term financial cycle governed by the debt ratio of non-financial agents; the business cycle governed by the impact of stock prices on investment; and the short-term or even very short-term expected return revisions of financial actors. Its originality is to show that these three forms of instability acquire different characteristics depending on the national economy considered.

The London Interbank Offered Rate (LIBOR) is considered to be the most important interest rate in finance upon which trillions in financial contracts are decided. In 2008, it was revealed that the LIBOR traders were rigging the interest rates. Yet, there is an unresolved question that regulators and banking officials did not address in their quest to seek answers to the fraud: Were the banks under financial strain when they underreported their LIBOR rates? To answer this question, the article posits that the pressure to meet market expectations led the banks to experience financial strain. Data were gathered from 2004 to 2008 on the banks that were involved in the fraud (fraud banks) and matched with a control group of non-fraud banks. The results from a logistic regression model found sufficient statistical evidence to support the claim that fraud will be greater in banks characterized by a higher level of organizational complexity. Variables such as percent of outside directors, board members on the audit committee, and number of employees were all found to be statistically significant. These variables may offer key insights into detecting and preventing frauds in banks.

At the end of this session, learners should be able to:

• Understand why interpretation of financial statements is necessary.

• Calculate accounting ratios for profitability, liquidity, efficiency, capital structure and investors.

• Utilise ratio analysis to critically appraise an organisation’s published financial statements.

• Explain the limitations of ratio analysis.

Understand why interpretation of financial statements is necessary.

Calculate accounting ratios for profitability, liquidity, efficiency, capital structure and investors.

Utilise ratio analysis to critically appraise an organisation’s published financial statements.

Explain the limitations of ratio analysis.

This paper investigates the relationship between organizational structures and the performance of FORTUNE 500 companies, which have always been among the most profitable and admired in the world. After a discussion of whether companies should organize regionally, nationally, or globally, the important assumption is made that each structural type utilizes resources differently in generating profit. Performance is conceptualized as Return on Capital Employed (RoCE) and Return per Employee (RpE). A sample of 50 companies was randomly selected. Testing revealed that structural types are positively related to financial performance, calculated as RoCE, with Multidivisional-structured companies outperforming Functional-structured ones; structural types are not related to human resource performance, calculated as RpE.

This paper documents the EU integration process using the uneven and combined development framework. Because capitalist social relations are territorially defined and politically built, unevenness between countries is not unconnected with that within countries and both involve antagonism between capital and labor. This is manifest in the ‘state form’ of the EU and its anti-democratic tendencies: public institutions at the community level play a major role in reinforcing unevenness in favour of leading countries, in both the productive and financial spheres.