Financial Architecture and Economic Performance: International Evidence

The paper examines the relations between the architecture of an economy's financial system - its degree of market orientation - and economic performance in the real sector. We argue that the relative effectiveness of bank-based versus market-based financial systems depends on the strength of the contractual environment and the extent of agency problems in the economy. We find that while market-based systems outperform bank-based systems among countries with developed financial sectors, bank-based systems fare better among countries with underdeveloped financial sectors. Countries dominated by small firms grow faster in bank-based systems and those dominated by larger firms in market-based systems. The findings suggest that recent trends in financial development policies that indiscriminately prescribe market-oriented financial-system-architecture to emerging and transition economies might be misguided because suitable financial architecture, in and of itself, could be a source of value.http://deepblue.lib.umich.edu/bitstream/2027.42/39833/3/wp449.pd

Financial Architecture and Economic Performance: International Evidence

The paper examines the relations between the architecture of an economy's financial system - its degree of market orientation - and economic performance in the real sector. We argue that the relative effectiveness of bank-based versus market-based financial systems depends on the strength of the contractual environment and the extent of agency problems in the economy. We find that while market-based systems outperform bank-based systems among countries with developed financial sectors, bank-based systems fare better among countries with underdeveloped financial sectors. Countries dominated by small firms grow faster in bank-based systems and those dominated by larger firms in market-based systems. The findings suggest that recent trends in financial development policies that indiscriminately prescribe market-oriented financial-system-architecture to emerging and transition economies might be misguided because suitable financial architecture, in and of itself, could be a source of value.Banking and Finance, Corporate Governance

When corporate social responsibility matters: An empirical investigation of contingencies

Rather than re-examine the question of whether doing good generally helps a company to do well, this study draws on contingency theory to empirically examine when doing good helps a company do as well as possible. Using panel data, we examine the effects of industry life cycle, munificence, and instability on the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP). Our findings indicate that life cycle has a significant impact on the CSR-CFP relationship, as does industry instability. These findings suggest that CSR helps the bottom line considerably – if it is applied at the right time

OWNERSHIP STRUCTURE AND FIRM CASH HOLDINGS: EVIDENCE FROM THE PUBLIC FLOAT IN IPOS

Department of Management EngineeringI examine the effect of insider ownership on the level of cash holding by measuring the percentage of shares issued to the public, namely public float. Using a sample of 4,402 IPOs between 1990 and 2013, I find that public float has significantly negative relation with the level of firm???s cash holdings. Specifically, the reduced insider ownership by large percentage of shares issued to the public seems to motivate insiders to waste more cash, resulting in decrease in the level of cash holding. This relation persists even after controlling for various firm characteristics. High public float (or small insider ownership) also exacerbate agency problem evidenced by public float being positively associated with discretionary accrual proxy for agency problem. The level of cash holding reduced further when we interact public float with discretionary accrual term. Collectively, this finding suggests that large sales in insider ownership in IPO market worsen the agency problem and consequently motivate insider to squander firm???s cash holding.ope

Regional resilience in recessionary times: a case study of the East Midlands

Purpose: Since the 1990's the fashion industry has reflected the issues generally arising in the manufacturing sector, namely rapid and deep structural changes, the development of new supply chain relationships, ICT impacts and increasing globalisation with the attendant issues of ethical sourcing, off-shoring, new emerging markets and recessionary ripples. This paper focuses on one particular aspect of the fashion industry, namely the apparel sector and in particular 'fast fashion' to explore the issues arising for the SMEs in the supply chain. Approach: The research adopts a qualitative methodology and is longitudinal in nature, spanning 5 years from August 2006. The first stage of the research is reported here, where a series of focussed interview scenarios were conducted over an eighteenth month period. The sample of 12 SMEs was a convenience one, drawn from the 30 participants who took part in a business to business event in Leicester, a geographical location which acts as a microcosm of the apparel industry. Interviews were used to elicit narrative data about was what was actually happening in these apparel supply chains. Findings: The apparel supply chain has changed significantly due to recessionary ripples and structural changes. The SMEs have had more success in managing the upstream rather than the downstream relationships and relationships between buyer and suppliers continue to be fractious. Innovation has occurred but is hampered by the relationships that persist. Culture has proved to be a key dimension

From bust to boom: towards a strategic cognition perspective on Australian mining firms' adaption

While the role of executives’ cognition in organisations’ responses to change is a central topic in strategic cognition research, changes in firms’ environment are typically not measured directly but described either as an event (for example, new industry legislation) or represented by a time period (e.g. when a new technology impacted an industry). The Australian mining sector has witnessed a historically significant change in demand for its products and we begin by developing measures of changes in supply and demand for key commodities during the period 1992-2008. We identify sub-groups of firms based on their activities and commodity sector and examine the relation of these variables to executives’ cognition and to firms’ CapEx. We find industry, firm and cognitive variables are related to both strategic cognition and firms’ CapEx

Are exporting firms always a good hedge against currency risk? Evidence from Central and Eastern European Countries

This paper analyzes the exchange rate exposure of exporting firms in (the so far rarely addressed) largest Eastern European transition economies, i.e. Russia and three EU accession countries (CEEC-3). It also controls for possible effects of different exchange rate regimes. Substantially improving the results from the existing literature we find for more than 80% of firms in our sample a significant exchange rate exposure. However, the magnitude and direction of firms’ exposure depends on the particular exchange rate and clearly differs between Russia and the CEEC-3. We find that share prices increase with a depreciation of the domestic currency and only against the US Dollar in Russia, but decrease with a depreciation and only against the Euro in the CEEC-3. Such substantial differences may result from a differing dominance of exposure channels in the respective economies, such as the country-specific export structure and foreign debt. Finally, the switch from a pegged to a flexible exchange rate regime appears to be less important for exposure

Corporate responsibility reporting in the UK and Japan

There is an increasing concern for the environment and society in today’s world. Stakeholders call for corporations to take responsibility for the impact that their organisational activities have on the environment and society by publicly disclosing such impacts and how they are being managed. Thus, the practice of corporate responsibility reporting (hereafter CRR) has been established. Unlike the provision of financial information in an annual report, CRR tends to be a voluntary reporting practice. As firms have the choice to provide CRR, logical economic thinking says that they will only do so if they derive some benefit from it. Therefore, the objective of this study is to investigate whether CRR is associated with firms’ market values in order to assess whether CRR provides incremental value relevant information to investors