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About the Calculation of the Compliance Value and its Practical Relevance
Full text linkCorporate investment in compliance in general and compliance management systems (CMS) in particular, follow the cardinal management obligation to always obey the law (so-called “management duty to legality”). But does the compliance function as any other corporate investment really add value favoring all shareholders? The socially desired answer should be probably “yes”, but the business reality shows a different picture: the measurement of the compliance value is a “blind spot” in the scientific theory and research as well as in the corporate practice. This paper analyzes reasons for that “blind spot” and explores the systematization of the compliance value drivers setting up a practical model that monetarizes these effects as well as calculating the added value and ROI of compliance. The author concludes that this quantification is particularly relevant to practice, as the compliance function must be able to measure the quantified impact(s) of the compliance function in order to demonstrate its value to management, shareholders, as well as all interested parties, and to justify and strengthen its role increasing the effectiveness of the CMS as part of the company’s “second line of defense”
Financial Innovation and Technology after COVID-19: a few Directions for Policy Makers and Regulators in the View of Old and New Disruptors
Full text linkInnovation and technology have led to the redefinition of business models and development of new ones in many bricks and mortar sectors. Similarly, blockchain and fintech have impacted the finance and banking industries and are expected to further affect them in the future, leading some media to coin the expression “Uberization of banking”. The authors extrapolate from sharing economy models to conclude that while blockchain and fintech are poised to advance finance and banking, there are no disruptive features that corroborate the term. By analogy and successive approximations, this article identifies the limitations of the arguments for disruption in finance and banking. Besides, hinging upon stylized facts, the article establishes similarities with sharing economy models to identify potential threats stemming from financial innovations such as Tokenomics, tagged as “no-ABSs”. Eventually, the authors identify entry points and ways forward arising from the COVID-19 pandemic for policy makers and regulators to regain their pivotal role in policing the market and ensuring transparency while driving innovation
Fiscal Policy as a Solution to Involuntary Unemployment
Full text linkWe show the existence of involuntary unemployment based on consumers’ utility maximization and firms’ profit maximization behavior under monopolistic competition with increasing, decreasing or constant returns to scale technology using a three-periods overlapping generations (OLG) model with a childhood period as well as younger and older periods, and pay-as-you-go pension for the older generation, and we analyze the effects of fiscal policy financed by tax and budget deficit (or seigniorage) to achieve full-employment under a situation with involuntary unemployment. Under constant prices we show the following results. 1) If the realization of full employment will increase consumers’ disposable income, in order to achieve full-employment from a state with involuntary unemployment, we need budget deficit (Proposition 1). 2) If the full-employment state has been achieved, we need balanced budget to maintain full-employment (Proposition 2). We also consider fiscal policy under inflation or deflation. Additionally, we present a game-theoretic interpretation of involuntary unemployment and full-employment. We also argue that if full employment should be achieved in equilibrium, the instability of equilibrium can be considered to be the cause of involuntary unemployment
Alcohol Availability Restriction Policy and Changes in Consumer Behavior in Lithuania in 2016–2019
Full text linkTo reduce alcohol consumption, in 2018 the Lithuanian Government introduced new restrictions on alcohol sales time, consumer age, and alcohol advertising. These restrictions apply to the entire population, regardless of alcohol consumption behavior. Such actions of the government were provoked by the scale of the problem; according to the data provided by the World Health Organization and the European Union Commission, Lithuania sits among the leading countries in alcohol consumption.The policies taken by the government to reduce alcohol consumption are described by many economists as paternalistic, as they reduce an individual’s freedom of decision. The aim of this paper is to evaluate the changes in alcohol consumption behavior after the regulatory measures entered into force and the public attitude towards these measures based on research results.This article presents the results of a study first conducted in December 2016 by the researchers of the Faculty of Economics of Vilnius University and the representatives of the Lithuanian Business Confederation*. The aim of the study was to distinguish the different groups of alcohol consumers and their alcohol consumption behavior and attitudes towards the alcohol restriction policies.** To achieve this aim, an analysis of scientific papers, a population survey, and statistical analysis methods were used.The authors conclude that alcohol restriction policies, met with a relatively favorable public attitude, may have adjusted levels of alcohol consumption and its patterns, but the increase in the number of young people among alcohol consumers is not in line with the expected policy outcomes. The measures adopted did not encourage respondents to give up alcohol in the longer term (12 months)
Macroeconomic Uncertainty and Empirical Research Results of its Quantitative Measurement in Georgia
Full text linkThe present article describes the approaches and definition of the concept of uncertainty proposed by its authors, a quantitative evaluation of uncertainty, and materials of the empirical study used to explore the said issues on the example of macroeconomics of Georgia. We hope that the views given in the article will be useful for developing countries, particularly for the economic policy-makers in the post-communist states, as well as for the academic and scientific circles engaged in the studies of the above-listed issues
Modelling of the Dependencies of Industrial Development on Marketing Efficiency, Innovation and Technological Activity Indicators
Full text linkThis study is relevant due to the multidimensionality and interdependence of industrial development and the indicators of innovation and technological activities and marketing efficiency. The use of economic and mathematical modelling of dependencies between key macroeconomic parameters of the national economy development made it possible to qualitatively analyse the impact of the indicators of marketing efficiency, innovation and technological activities on the parameters of industrial development. The influence of the volume of financing for innovation activity, the introduction of new technological processes and the volume of production of innovative types of products on the change in the volume of sold industrial products is econometrically taken into account. The multidimensionality of the dependencies of choosing an effective model of the dependence of the volume of sold industrial products on the factors in innovation and technological activities was the reason for building a power model. The uniqueness of using an integrated model of the dependencies of innovation and technological activities and industrial development lies in taking into consideration latent factors that influence changes in industrial production, including funding for innovation in the country’s industrial sector, the number of new technological processes and the level of mastering the production of new innovative types of products. The effectiveness of the study is explained by the fact that the selected system of indicators and dependencies helped to identify a number of risks to Ukraines’ industrial development, for example, a critical decline in innovation and technological activities of industry
The Impact of Environmental, Social, and Governance (ESG) Performance on Financial Reporting Quality: International Evidence
Full text linkThis study investigates the relationship between environmental, social, and governance (ESG) performance and financial reporting quality (FRQ) through the use of data from Datastream, Refinitive Eikon and ASSET4 databases. The initial sample of the study covers all available firms in ASSET4. After eliminating firms with missing data, the final sample of the study consists of 16,072 firm-year observations from 35 countries, covering the years from 2010 to 2017. Several FRQ proxies and firms’ ESG performance indicators are used in the study. The panel regression findings reveal that firms’ ESG performance has a positive impact on FRQ. In other words, it has been found that improving the ESG performance of firms yields higher FRQs. As for ESG pillars, this study finds a positive and statistically significant relationship between FRQ and environmental and governance pillars. The study extends the literature by providing international evidence not only about the aggregate effects of firms’ ESG performance on FRQ but also the effects of each of the three ESG pillars on FRQ
Risky Mortgages and Macroprudential Policy: A Calibrated DSGE Model for Lithuania
Full text linkFollowing the financial crisis of 2009 there was an emergence of macroprudential policy tools, as well as a need to model the macroeconomy and the financial sector in a coherent framework. This paper develops and calibrates a small open economy DSGE model for Lithuania to shed some light on the interactions between the macroeconomy and the banking sector, regulated by macroprudential policy. The model features housing market, and endogenous credit risk a la de Walque et al. (2010), whereby the household can default on mortgage repayments, what leads to housing collateral seizure. Foreign-owned banks, that are subject to risk-sensitive macroprudential capital requirements, take into account not only the mortgage default rate but also the cap on loan to value (LTV) ratio when making lending decisions. Using this mechanism, we show that while a more stringent LTV constraint reduced credit demand, it can also lead to an expansion in credit supply via lower credit risk. Therefore, a tightening of LTV requirement should result in only a slight reduction in mortgage lending, coupled with lower interest rate margins. The article compares the impact of the tightening of three macroprudential tools, namely, bank capital requirements, mortgage risk weights and LTV limit. We find that broad-based capital requirements, such as the counter-cyclical capital buffer, are less efficient in leaning against the housing credit cycle, because of a relatively large cost incurred on the firm sector
Saving Tendency of Developed and Developing European Countries
Full text linkIn the previous literature studies, the saving condition is mainly examined focusing in Developing countries and Asian countries. The examination on the saving condition is crucial due to the linkages between saving accumulation and economic growth. The studies that focused in Developed countries are limited. This study extends the analysis by comparing the saving determination in Developed and Developing European countries and contributes to the literature of saving in two ways. First, the study compares the two panel groups, Developed and Developing European countries, which might reveal how economic development could affect the saving behavior. Second, the study considers the cross-section dependency effect in the panel data analysis by applying the testing (second-generation panel unit-root and cointegration tests) and the estimation approaches (Augmented Mean Group, AMG estimator). The study demonstrates that ignoring the cross-section dependency effect might lead to misleading results. Four determinants of savings are examined (GDP per capita, age dependency ratio on working group, inflation and government expenditure). Our results reveal the existence of cointegration and cross-section dependency in the saving relationship in both panel groups. Comparing the results across panel groups, it is observed that government expenditure is contributes to lower saving in both groups of countries with larger impact in the Developed European countries. On the other hand, GDP contributes to higher saving in both groups of countries. Inflation also leads to higher saving in the Developed group but not in the Developing group. Age dependency ratio is not influential in the Developed group but might trigger lower saving in the Developing group