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The Eminence Of Risk-Free Rates In Portfolio Management: A South African Perspective
Get PDFThe traditional Capital Asset Pricing Model (CAPM) suggests that the minimum return required by an investor should be equal to the return of a risk-free asset (Reilly & Brown, 2003), which should be stable (Reilly & Brown, 2006), not influenced by external factors (Harrington, 1987), and certain (Bodie, Kane & Marcus, 2010). Evidence, however, suggests that risk-free asset returns vary (Brunnermeier, 2008), and that “there is really no such thing as a truly riskless asset” (Brigham & Ehrhardt, 2005:312). The pioneering studies of Mehra and Prescott (1985) and Weil (1989) only justified the size of the equity premium and risk-free rate puzzle but failed to provide a consensus on the specifications for the most ideal risk-free rate proxies. The results from this paper accentuated the problem of selecting a risk-free rate proxy, as all proxies under evaluation exhibited a level of risk and volatile returns. No regularities between the pre-, during and post-financial crisis regarding the choice of most ideal risk-free rate proxy were found. Overall findings suggested that the ideal proxies are the 3-month T-Bill rate and the 3-month NCD rate for the pre-, during and post-financial crisis periods, respectively.
The Spatial Dimension Of Take-Offs And Sustainability: The Case Of East Asian Countries
Get PDFThis study examines the relationship between the size of a country and its “take-off” for economic development. We find that most countries which experienced economic upheavals in the past decades are relatively small in terms of area. Specifically, take-offs appear to be quicker for smaller landmasses with larger potential workforce and higher population density, controlled for financial markets maturity, corporate governance, economic openness, and human capital development. We also find that take-offs are not sustainable by nature as most countries in East Asia that which experience take-offs are currently facing slow-downs of their economies. Through this finding, we predict that China may experience a slow-down at around 36% and may reach to the 50-60% of income level of the U.S.
Analyzing Internal Efficiency Dynamics Of Turkish Banks: Activity Based Multi-Objective Dynamic DEA Model And Its Application
Get PDFEfficiency measurement is an important analysis for institutions in order to investigate their performance comparatively. On the other hand, evaluating efficiency of institutions carrying out more than one activity using common resources is important management problems. Since both efficiency and priorities may change in time, the problem set is getting more complex.Sub-activities of total system (Decision Making Sub-Units/DMSU) of institutions may act in different ways since they have different priorities or goals. In addition, factors effecting efficiencies of these DMSUs may differ. Each DMSUs' countermeasures can vary in order to reach the efficient frontier. Therefore, total system efficiency results may not represent the DMSUs' efficiencies.In line with these inferences, the aim of this study is to analyze efficiency differences between DMUs and DMSUs in terms of their behaviors, efficiencies and countermeasures in a dynamic manner. A hybrid non-parametric dynamic efficiency evaluation model, "Multi-Activity Window Data Envelopment Analysis (MA-WDEA)", is developed first[1]. Then, internal dynamics of DMUs and DMSUs are analyzed via dynamic returns to scale(RTS) analysis and Tobit regression models. Both analysis are established on efficiency results of the MA-WDEA model.The proposed process is applied to measure the performance of Turkish banking system. The results first show that MA-WDEA is a suitable tool to measure efficiency trends of DMUs/DMSUs. There exist important differences among Turkish banks with respect to their operating and non-operating activities’ efficiencies. The results of the dynamic RTS and regression models also show that behavioral attitudes of DMUs and DMSUs are significantly different.[1] The developed hybrid model is first presented in 3rd International Conference on Governance, Management and Entrepreneurship in Crotia by Kaya and Cinar, (2015)
Is Foreign Direct Investment Effective From The Perspective Of Tax Avoidance? An Analysis Of Tax Avoidance Through The International Transfer Pricing Behaviors Of Korean Corporations
Get PDFThis study examines whether multinational companies carry out tax avoidance through subsidiaries. An empirical analysis was conducted of 4,585 Korean firms from 2001 to 2010 by company and year. The results are as follows. First, MNCs that have become more internationally diversified through the establishment of overseas subsidiaries generally show a higher tendency to avoid tax. Thus, the analysis results show a positive correlation between globally diversified MNCs and corporate tax avoidance. This correlation is established due to the firms' active use of tax strategies (investment tax credits, tax cuts) applicable to the various countries in which they have expanded their businesses. Second, the analysis results showed that these firms actively avoided tax with overseas transfer pricing behaviors when compared to companies without overseas subsidiaries. Thus, the adjustment of sales prices and purchase value through actual transactions increased the propensity of the parent company to avoid tax.
The Determinants Of Foreign Location And Market-Entry Mode By Multinational Banks: A Simultaneous Approach
Get PDFThe study aims to explain the determinants of banks’ choices of location of overseas activities and of market-entry mode (subsidiary, branch and representative office). Location of overseas activities and market-entry mode are considered as simultaneously determined. The determinants are based on the factors associated with the characteristics of the parent bank and host country. A 3SLS model is used to estimate these determinants. Based on sample of 63 banks from 18 countries in 2004, the results show that foreign location and market-entry mode are governed by the characteristics of both the host country and the parent bank. Our results also provide some answers about the impact of entry mode on location choice, and vice versa
Training And Development In SMEs: South Africa’s Key To Survival And Success?
Get PDFIn today’s competitive business environment, the capabilities and skills of employees are fundamental requirements for continuous productivity, innovation and success in small and medium enterprises (SMEs). However, the situation of SMEs with regards to training and development is characterised by a paradox and are considered to be crucial elements of competitiveness and success against the backdrop of globalisation. Previous studies have found that constant training and development initiatives are less likely to be available to employees working in SMEs than to those in larger organisations. The study therefore aims to determine the perception of entrepreneurs or SME owners towards the importance of training and development in their business. A self-administered questionnaire was sent to SME owners and a total of 60 usable responses were received. The study showed, amongst others, that a lack of resources is stronger than the influence of business management and external assistance.
Simultaneous Determination Of Stock Price Synchronicity And Dividend Payout Ratios: Evidence From The MENA Region
Get PDFThis paper examines the determinants of cross-sectional differences in stock price synchronicity and dividend payout ratio in the MENA region during the period between 2003 and 2013. These variables are related not only directly, but also indirectly, through their relationship with information environment of firms. To distinguish these effects, we examine the determinants of both variables within a system of equations. Our results indicate that both of these variables affect each other negatively. We argue that higher information asymmetries associated with firms exhibiting high synchronicity leads to lower payout ratios, while lower information asymmetries that accompany firms paying high dividends lead to lower synchronicity
Successor CEO Functional And Educational Backgrounds: Influence Of Predecessor Characteristics And Performance Antecedents
Get PDFThis study seeks to examine if boards consider CEO educational and functional background when choosing a new CEO. It also examines which factors determine whether the board of directors will seek an incoming CEO with a different educational and/or functional background from that of the current CEO. Using a sample of 832 successions between 1992 and 2009, we found that the outgoing CEO characteristics and the firm characteristics influence the selection of the incoming CEO functional backgrounds. We found an increase in the likelihood of firms hiring incoming CEOs with the same functional backgrounds as the outgoing CEOs. Incoming CEOs with functional backgrounds in engineering/manufacturing are more likely to be hired by research-oriented firms.Incoming CEOs with functional backgrounds in accounting/finance are more likely to be hired by poorly performing firms. We also find that firms are more likely to change the functional background of the successor relative to the predecessor when there has been poor prior performance and the firm has higher institutional investor ownership
Accounting Conservatism And Firms’ Investment Decisions
Get PDFThis study examines the effectiveness of accounting conservatism in monitoring and controlling managers’ decision-making regarding opportunistic investment. We find that accounting conservatism is negatively associated with over-investment. This suggests that conservative accounting policies serve as an efficient monitoring and controlling mechanism for opportunistic investment decisions. We also find a stronger negative association between accounting conservatism and over-investment in firms with low managerial ownership and low ownership by foreign investors. The results of our analysis imply that the impact of timely loss recognition on over-investment is more significant in firms with high agency problems and weaker monitoring ability, and that this factor complements other governance mechanisms, thereby helping to control managers’ myopic investment decisions. We provide evidence for a role of financial disclosure in mitigating managers’ opportunistic over-investment decisions. Though managers’ over-investment decisions are motivated by private gain, which reduces firm performance and compromises investors’ welfare, limited research exists on the role of financial information in alleviating such behavior. We suggest that timely loss recognition in financial statements can serve as an effective monitoring mechanism to aid in control of managers’ myopic over-investment
Corporate Reputation And Analyst Coverage: Evidence From Europe
Get PDFDoes corporate reputation affect analyst’s decision to cover a firm? This paper uses the data from Europe (Czech Republic, Denmark, Finland, France, Germany, Greece, Italy, Norway, Poland, Russia, Spain, Sweden, and Turkey) to show that analyst coverage is an increasing function of corporate reputation during the period between 2008 and 2013. Our results are consistent with Gabbioneta et al. (2007) who show that corporate reputation increases the emotional appeal of a firm in the eyes of analysts. Furthermore, we also argue that investors are interested in firms with better reputation. It is, therefore, possible that investors demand analyst research for more these firms, thereby resulting in higher analyst coverage for these firms. Our results are robust in different sub-samples and in different estimation procedures