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Article
Publication date: 18 November 2013

Jonathan Ben Shlomo, Wolfgang Eggert and Tristan Nguyen

The recent financial crisis has shown that in substantial parts of the banking industry, bonus payments have a short-term focus and are not risk-adjusted. These…

Abstract

Purpose

The recent financial crisis has shown that in substantial parts of the banking industry, bonus payments have a short-term focus and are not risk-adjusted. These remuneration structures persist as the banking industry is constrained by pressures on the labour market. The unilateral introduction of a longer-term focus in variable remuneration could put a bank at a first-mover disadvantage. The paper aims to discuss these issues.

Design/methodology/approach

The paper derives from a literature overview and empirical evidence possible reform measurements toward a longer-term focus in variable remuneration. The paper also discusses the recent reforms in European law regarding remuneration policy.

Findings

The paper argues that an efficient regulation of remuneration policy should be directed at ensuring that remuneration policies and practices are aligned with effective risk management. The financial authorities should therefore closely observe market developments in this perspective and take countermeasures if necessary.

Originality/value

This seminar work gives some interesting insights about opportunistic behaviour and a CEO's short-term incentives from an economic point of view. It provides lawmakers, regulators and firms with a comprehensive comparison of recent remuneration reforms in Europe.

Details

Qualitative Research in Financial Markets, vol. 5 no. 3
Type: Research Article
ISSN: 1755-4179

Keywords

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Article
Publication date: 26 July 2011

Tristan Nguyen

In the recent financial crisis, many observers have assigned monetary policy a central role in the crisis. Specifically, they claim that excessively easy monetary policy…

Abstract

Purpose

In the recent financial crisis, many observers have assigned monetary policy a central role in the crisis. Specifically, they claim that excessively easy monetary policy by the Federal Reserve in the first half of the decade helped to cause a bubble in housing prices in the USA. The purpose of this paper is to analyze the role of monetary policy within the regulatory frameworks of financial markets.

Design/methodology/approach

The authors show within a macroeconomic framework a possible trade‐off between price stability and financial stability by differentiating between a technology‐driven bubble and an animal spirit bubble. In their conclusion: if there is a trade‐off between price stability and financial stability, the central bank will have to make a choice between the two objectives. In that case, the question arises of which of the two objectives should take precedence: price stability or financial stability?

Findings

From this analysis, the authors conclude that a central bank which uses a lexicographic ordering favoring price stability over other objectives is likely to fuel the boom inadvertently (in the case of a technology‐driven bubble) or will decide to do nothing (in the case of an animal spirit bubble) allowing a process of excessive credit creation. The latter seems to be what happened between 2003 and 2008.

Practical implications

If one wants to reduce the likelihood of future major financial busts, it must be accepted that the central banks (especially the Fed and the ECB) cannot only be responsible for price stability. Maintaining financial stability by preventing excesses in financial markets should be an equally important objective.

Originality/value

The paper gives a new perspective on the role of monetary policy within the regulatory framework. With this macroeconomic framework, the authors are able to show possible trade‐offs between price stability and financial stability. The micro‐ and macro‐prudential approach of this paper is a useful contribution to the discussion about regulatory reforms of financial markets.

Details

Journal of Financial Regulation and Compliance, vol. 19 no. 3
Type: Research Article
ISSN: 1358-1988

Keywords

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Article
Publication date: 22 February 2011

Gerhard Wörtche and Tristan Nguyen

The purpose of this paper is to study the impact of merger and acquisition (M&A) transactions from private equity and hedge funds. Owing to the recent financial and…

Abstract

Purpose

The purpose of this paper is to study the impact of merger and acquisition (M&A) transactions from private equity and hedge funds. Owing to the recent financial and economic crisis, there is a controversial discussion about the implications of M&As from private equity and hedge funds. It is argued that acquisitions, which are driven by financial investors (FIs) like private equity and hedge funds, have solely short‐term profit interests and might be under certain circumstances a source for future financial crisis. Therefore, these FIs should be regulated more severely.

Design/methodology/approach

This paper examines the implications of M&As from different types of investors (FIs versus non‐FIs) by analysing the wealth effects of Austrian‐ and Swiss target companies. The authors use the event study methodology to analyze the effects of an merger announcement to see whether the financial markets believe the merger will create or destroy value.

Findings

Considering the wealth effects of the different types of investors, the findings of this paper support the necessity of special regulations for FIs such as private equity and hedge funds. This is due to the fact that lower performance is linked to the disgraceful business conduct of an FI who is oriented toward short‐term profit at the cost of the target company and their stakeholders.

Originality/value

This paper provided an overview of different event study methods and examined the implications of different types of investors by analysing the wealth effects of Swiss and Austrian target companies. It is the first empirical study about the impact of M&A transactions from private equity and hedge funds in Austria and Switzerland.

Details

Journal of Financial Regulation and Compliance, vol. 19 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

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Article
Publication date: 29 July 2014

Eva-Maria Kalteier, Stephan Molt, Tristan Nguyen and Peter N. Posch

– The purpose of this paper is to introduce a methodology to evaluate sovereign risk. Hereby, a value-based approach using different market measures is introduced.

Abstract

Purpose

The purpose of this paper is to introduce a methodology to evaluate sovereign risk. Hereby, a value-based approach using different market measures is introduced.

Design/methodology/approach

This study’s approach aims to provide a value-based assessment of sovereign risk, combining market measures from government bond, credit derivatives and other markets as well as economic indicators.

Findings

The study finds that the assessment of sovereign risk is only possible when using information from different markets and adjusting according to the information included in these measures. Combining both market-based and economic information leads to a value-based evaluation of sovereign risk.

Practical implications

The practical implications are given for any institution with sovereign risk on their asset side. In fact, part of this research was done for the German Actuarial Foundation which uses the recommendations of this paper for the insurance industry.

Originality/value

The study’s approach is novel because it is the first to include several market-based and economic measures of a sovereign and combines it into a value-based assessment.

Details

Qualitative Research in Financial Markets, vol. 6 no. 2
Type: Research Article
ISSN: 1755-4179

Keywords

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Article
Publication date: 1 April 2014

Tristan Nguyen and Joerg Lindenmeier

It is essential for the welfare and growth of a society that it is able to share risk efficiently in the economy. However, extreme events have increased enormously during…

Abstract

Purpose

It is essential for the welfare and growth of a society that it is able to share risk efficiently in the economy. However, extreme events have increased enormously during the last decades, so that catastrophe risks seem to become uninsurable in a free-market economy. With insurance-linked securities (ILS) or catastrophe bonds (cat bonds), the limits of insurability can be ex-tended by using the resources of capital markets worldwide. Interestingly, to date the issuers of cat bonds must guarantee excessively high returns in order to attract investors from the financial markets. Therefore, the authors aim to discuss in this paper the hypothesis that at least parts of these excessively high returns can be explained by an individual innovation resistance to cat bonds.

Design/methodology/approach

In the first step, the authors examine the criteria for insurability of catastrophe risks and explore the potential reasons for lack of insurance, specifically for extreme events such as catastrophic environmental risks. The authors especially focus on the criteria which are considered to be problematic for the insurance of catastrophic events. In the next step, the authors discuss the new financial products “ILS” or “cat bonds” and analyze to what extent ILS represent an innovative opportunity to increase the insurability of catastrophe risks. Starting from the model of the consumer resistance by RAM, the authors consider different factors that can prevent the acceptance of ILS by private investors.

Findings

The authors found out that catastrophe risks do not really fulfil important actuarial criteria in order to be insurable. Thus, insurance exists only if risk can be transferred, not only to reinsurance companies but also to capital markets (through securitization or catastrophe options). In line with Ram's seminal model of consumer resistance, the authors assume that product-related, diffusion mechanism-related and psychographic factors influence individuals' resistance to cat bonds. In particular, the authors expect that perceptions of immorality influence private investors' decision-making. Within this context, Robin and Reidenbach's “Multi-dimensional ethics”-scale represents a possibility to assess perceptions of immorality.

Originality/value

In this paper, the authors provide a new approach to explain the excess spreads on cat bonds versus comparable corporate bonds. These abnormal high turns from cat bonds have been subject of intensive research in the last decade. To date, the insurance literature has identified “novelty premium”, “market size” and “cliff risk” as the reasons for the excess spreads. The authors assume that at least parts of these excessively high returns can be explained by an individual innovation resistance against ILS. In the authors' opinion, persuasive communication can be used to alleviate individual resistance towards ILS. The paper provides implications for management and suggestions for further research.

Details

Qualitative Research in Financial Markets, vol. 6 no. 1
Type: Research Article
ISSN: 1755-4179

Keywords

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Article
Publication date: 18 November 2013

Bruce Burton

Abstract

Details

Qualitative Research in Financial Markets, vol. 5 no. 3
Type: Research Article
ISSN: 1755-4179

Content available
Article
Publication date: 1 April 2014

Bruce M. Burton

Abstract

Details

Qualitative Research in Financial Markets, vol. 6 no. 1
Type: Research Article
ISSN: 1755-4179

Content available
Article
Publication date: 29 July 2014

Bruce Burton

Abstract

Details

Qualitative Research in Financial Markets, vol. 6 no. 2
Type: Research Article
ISSN: 1755-4179

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Abstract

Details

Advanced Modeling for Transit Operations and Service Planning
Type: Book
ISBN: 978-0-585-47522-6

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Abstract

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International Schooling and Education in the ‘New Era’
Type: Book
ISBN: 978-1-78769-544-3

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