The accounting dimension in financial integration: International pricing under different accounting standards

We suggest that accounting homogeneity is a necessary step in the process of financial market integration. Specifically, we analyze the effect of integration in the “accounting sense” in the correct analysis of international investments and fund allocation by estimating several pricing and valuation models in a cross-country context. We design our analysis in such a way that we can control for differences in accounting standards of the firms contained in the sample. Our results show that the accounting dimension is relevant for cross-country pricing and valuation: the use of homogeneous accounting leads to higher goodness-of-fit of international versions of the models, at levels similar to those of domestic versions and superior to those of non-homogeneous versions. Our results imply that accounting integration is an additional, and important, dimension of financial integration and that progress towards further accounting homogeneity would lead to more accurate pricing of international assets and to an improvement of the efficiency of international fund allocation.

ANÁLISIS DE LA SENSIBILIDAD A LAS VARIACIONES EN LOS TIPOS DE INTERÉS DE LAS ACCIONES BANCARIAS

The main purpose of this study is to analyse interest rate sensitivity of the stockreturns of the Spanish bank holding companies. The results seem to indicate that thebanking system was not sensitive to interest rate risk for the period of December 1962to May 1996. An interesting alternative hypothesis is whether the interest sensitivity ofany bank stocks was significant before the introduction of MEFF in Spain. El estudio de la sensibilidad a variaciones del tipo de interés por parte de las acciones bancarias españolas es el propósito principal de este trabajo. Se observa que el sector bancario español, en su conjunto, no ha tenido un riesgo significativo de tipos de interés en el período comprendido entre Diciembre de 1962 y Mayo de 1996. También se analiza si algún banco individual soportaba un riesgo significativo de tipos antes de la introducción del MEFF en España.sensibilidad, riesgo sistemático y cambio estructural. sensitivity, systematic risk and structural change.

¿CÓMO AFECTAN CAMBIOS EN EL CONSENSO Y LA DISPERSION EN LA VALORACIÓN DE ACTIVOS?

There is empirical evidence in the finance literature showing that informationincorporated in the consensus estimate of earnings per share (EPS) is efficiently reflected byshare prices while the market is quite inefficient in discounting consensus shifts. In thissituation, it is possible that investors earn excess returns by trading on information related toearning revisions of financial analysts. The question of whether in all conditions EPS revisionsconvey valuable information motivates this article. Empirical results show that stocks with bestEPS monthly change and lowest dispersion earn higher abnormal returns. However, dispersiongives credibility to the prospective changes of a firm estimated by financial analysts. We haveobtained similar results with high followed firms and also for large ones suggesting thatattention and size are good proxies of quality of information incorporated in consensusrevisions. Existe evidencia que muestra cómo la información contenida en las predicciones de consenso es eficientemente reflejada en los precios, sin embargo parece que el mercado falla en ajustar instantáneamente la nueva información sobre el beneficio de la empresa. Si esto es así, se podrían diseñar estrategias rentables basadas en las revisiones del consenso. En este trabajo se intenta indagar bajo qué condiciones las modificaciones del consenso afectan a la rentabilidad de los títulos. Los resultados obtenidos muestran que las acciones cuyas variaciones del consenso han sido más positivas obtienen rentabilidades anormalmente elevadas siempre que la dispersión de la estimación de consenso sea baja. Por tanto, la dispersión otorga credibilidad al cambio de expectativas propuesto por los analistas financieros. Similares resultados se obtienen para empresas de alto seguimiento y elevada capitalización bursátil, sugiriendo que tanto la atención como el tamaño son buenos indicadores de la calidad informativa que se le otorga al cambio en el consenso.analistas financieros, estimación de consenso, dispersión, nivel de seguimiento, cambio del consenso. Financial analysts, consensus estimate, dispersion, coverage level, consensus change.

VALORACIÓN DE LOS ACTIVOS INTANGIBLES EN EL MERCADO DE CAPITALES ESPAÑOL

In the international context there are currently important differences in theaccounting rules that the firms must apply to intangible assets. In Spain the accountingfor intangibles and their recognition in the balance sheet is restrictive. The objective ofthis study is to test if the recognized intangibles have influence on the valuation andreturn of the shares of the Spanish stock market. In that sense we try to investigate inthe Spanish accounting regulatory framework if investors perceive intangibles to belegitimate assets. Moreover, we investigate if the level of non-recognized intangibleshas influence on the returns of the shares. We confirm this hypothesis, even when weadjust by risk. This fact calls the validity of the CAPM into question. En la actualidad existen diferencias en el contexto internacional respecto a la normativa contable aplicable a la capitalización de intangibles. En España existe una normativa estricta en cuanto al reconocimiento en el balance de los activos intangibles que posee una empresa, por ello el objetivo de este trabajo consiste en comprobar, si en nuestro mercado de capitales, el nivel de intangibles capitalizados afecta a la valoración y rentabilidad de las acciones. En este sentido, se pretende también indagar si los inversores, teniendo en cuenta la normativa contable española, perciben los activos intangibles como legítimos. Adicionalmente se analiza si el nivel de intangibles no contabilizados afecta a la rentabilidad, obteniéndose evidencia afirmativa, incluso cuando se ajusta por riesgo, cuestionándose así la validez del CAPM.Intangibles, valoración, normativa contable, capitalización de intangibles y errores de predicción. Intangible assets, valuation, international accounting practice, capitalization, forecast errors.

EL VALOR DE LAS RECOMENDACIONES DE CONSENSO DE LOS ANALISTAS FINANCIEROS EN EL MERCADO DE CAPITALES ESPAÑOL

In this paper we examine the value of analysts’ stock recommendations in the Spanish capital market in the period 1994-2003, using data from JCF Quant. In every month of the sample period the assets have been classified into five portfolios first attending its consensus recommendations level and second by changes of consensus level. The portfolio recommendations returns have been estimated using different models in the context of the portfolio calendar-time methodology. The results obtained show that sell-side analysts are able to detect profitable investment opportunities. Investors could obtain significant positive risk adjusted abnormal returns buying the best recommended assets and selling simultaneously the worst consensus stocks. However a portion of these returns could be attributed to their tendency to recommend the acquisition of big “value” stocks and the sell of small shares with negative prices momentum. Finally, the value of analyst’s recommendations is independent of the firm information level approached by the company size and the number of analysts following it. En este trabajo se analiza el valor de las recomendaciones de inversión de los analistas financieros en el mercado de capitales español en el periodo 1994-2003, con datos procedentes de JCF Quant. Los activos se han clasificado cada mes del periodo muestral en cinco carteras en función del nivel de consenso de las recomendaciones y de sus variaciones. La rentabilidad de las carteras de recomendaciones (cambios) se ha estimado utilizando modelizaciones alternativas con una metodología de tiempo de calendario. Los resultados obtenidos muestran que los analistas identifican oportunidades de inversión rentables, dado que con una estrategia de inversión autofinanciada, consistente en comprar la cartera con recomendaciones más favorables y vender la cesta de activos con peores recomendaciones, se pueden obtener rentabilidades significativamente positivas incluso después de ajustar por riesgo. Parte de esta rentabilidad no es atribuible a su propia capacidad sino a la tendencia a recomendar la compra de activos grandes de valor y la venta de activos pequeños con momentum de precios negativo. Finalmente, el valor de las recomendaciones no parece depender del nivel de información existente sobre las empresas aproximado por el tamaño de las empresas o el número de analistas.Analistas del lado de la venta; Valor de las recomendaciones, Evaluación resultados de carteras Sell-side research; Value of analysts’ recommendations, Performance evaluation, calendar time-portfolios

LA RELACIÓN RENTABILIDAD-RIESGO EN UN CONTEXTO DE INFORMACIÓN ASIMÉTRICA: UNA APLICACIÓN AL MERCADO ESPAÑOL

The aim of this paper consists on seeing whether the information differential affects tothe stocks return in the Spanish market. Usually the firm attention by financial analysts,expressed by de number of earnings estimations, has been used as a proxy of the differentialinformation. Nevertheless, in this paper we use a different point of view based in the approachof Hong, Lim and Stein (2000). In particular, given the close relation between the firm size andthe analysts’ number following the firm, we use residual from the regression of the number onanalysts following a firm on size as a proxy of the information differential. The results show,firstly, that the CAPM cannot explain the return difference among portfolios constructed by theresidual coverage level. With this evidence, the next step is to explain how the informationdifferential can affect the stock return level. El objetivo de este trabajo consiste en comprobar si, en el ámbito del mercado español, la existencia de información diferencial afecta al nivel de rentabilidad de los títulos. En muchos trabajos es práctica habitual emplear como proxy del diferencial de información el grado de seguimiento de las empresas por parte de los analistas financieros, medido éste por el número de estimaciones anuales de beneficios que emiten. Sin embargo, en este trabajo se sigue un enfoque diferente basado en el planteamiento propuesto por Hong, Lim y Stein (2000). En particular, dada la estrecha relación existente entre el número de analistas que siguen a una empresa y el tamaño de ésta, se utiliza como proxy del diferencial de información la cobertura residual por parte de los analistas que se obtiene como residuo de la regresión entre el número de analistas que siguen a una empresa y su tamaño. La evidencia obtenida, en un primer momento, indica que el CAPM no es capaz de explicar las diferencias de rentabilidad observadas entre las carteras construidas por el nivel de cobertura residual. Tras obtener este resultado, el siguiente paso consiste en explicar la forma en que el diferencial de información afecta al nivel de rentabilidad.IBES, analistas financieros, diferencial de información, cobertura residual IBES, financial analysts, information differential, residual coverage.

Short-term Wholesale Funding and Systemic Risk: A Global CoVaR Approach

We use the CoVaR approach to identify the main factors behind systemic risk in a set of large international banks. We find that short-term wholesale funding is a key determinant in triggering systemic risk episodes. In contrast, we find weaker evidence that either size or leverage contributes to systemic risk within the class of large international banks. We also show that asymmetries based on the sign of bank returns play an important role in capturing the sensitivity of system-wide risk to individual bank returns. Since short-term wholesale funding emerges as the most relevant systemic factor, our results support the Basel Committee’s proposal to introduce a net stable funding ratio, penalizing excessive exposure to liquidity risk

Banks’ Net Interest Margin in the 2000s: A Macro-Accounting International Perspective

This paper re-examines the determinants of Net Interest Margin (NIM) in the banking industries of 15 developed and emerging economies. It presents three main contributions with respect to previous studies: first, we analyze the determinants of NIM in the years leading to the 2008 financial crisis; second, we account for the role of different accounting standards across countries; third, we use multi-way cluster estimation methodologies which control for cross-sectional and time-series dependence in macroeconomic and banking variables. We find that the introduction of International Financial Reporting Standards (IFRSs) contributed to lower NIM variations unexplained by standard accounting variables. Interest rate volatility is found to be positively and strongly related to NIM dynamics, whereas inflation risk is often found to be a relevant driver of NIM crosscountry differences

Drivers of depositor discipline in credit unions

In this paper, we analyze whether credit unions are subject to market discipline by their (member) depositors and examine the drivers of such discipline. We first provide descriptive evidence of depositor discipline in credit unions: shares and deposits as well as savings interest rates react to variables that reflect the financial health of the credit union and its asset risk. We show that this discipline is long-lasting and that it is mediated by the existence of a deposit guarantee scheme and by the strength of the relationship of members with the credit union. We then use proxies of the capability of members to process financial information to show that discipline is heavily influenced by member financial sophistication. Our results suggest that a type of market-based discipline acts as a complement for regulation in controlling credit union risk taking, thus contributing to overall financial stability

The risk implications of the business loan activity in credit unions

US credit unions have been subject to a strict regulation of their commercial lending which included both requirements for enhanced organizational practices and a cap on the proportion of business loans relative to assets (imposed in 1998 by US Congress). Since 2003, however, these limitations have been steadily relaxed, a process which has resulted in an increase in credit union business lending activity. Using data from the universe of US credit unions we provide comprehensive evidence that expansion of the business loan portfolio increases the risk of the asset side of the credit union. This is the case even for credit unions which benefit from partnership with the SBA, for which we observe an initial increase in the risk of non-SBA backed loans (an overconfidence effect) which reverses over time (a learning effect). Our results suggest, furthermore, that the risk of business loans is exacerbated for credit unions which initiate their business loan activity and which do so rapidly. In the second part of our analysis we provide descriptive and quasi-experimental evidence that expansions of credit union activity into business loans are associated with lower subsequent growth rates of deposits. This result is similar to the reaction to risk indicators found in the banking literature and might give an ex-ante incentive for the CU that could work as a market-based stabilization mechanism complementary to that of explicit regulation