Small firm finance and public policy

Examines how a finance gap for small firms might be addressed by means of government policy to support informal financing initiatives. A review of both the finance and the government policy literature provides the basis for discussing and conceptualising the financing difficulties faced by small firms, the role of informal financing in alleviating certain of these difficulties and the areas where public policy is currently usefully employed in addressing such financing problems. Undertakes a questionnaire survey to collect data concerning small business awareness and use of informal finance and to identify issues concerning difficulties encountered in gaining access to finance. The results suggest that a debt finance gap may exist for a minority of firms, though an equity finance gap may represent a more significant issue for small firms. Four categories of policy action emerge from the study towards the achievement of economic and social policy objectives. © 2003, MCB UP Limite

Property rights institutions and bank performance across countries

Purpose – This paper investigates the relationship between the quality of property rights institutions (PRIs) and bank financial performance in an empirical study of 136 countries over the period 1999 to 2006. Design/methodology/approach – The quality of property rights institutions (PRIs) and financial accounting based measures of bank performance are obtained from the Economic Freedom of the World Project (Gwartney et al., 2006), the Polity IV Project, the World Bank data indicators database and the International Monetary Fund. Several multiple regression analyses are conducted to test the study hypotheses.Findings – Our results reveal that the quality of legal structure and security of property rights institutions positively (negatively) affects both bank cost efficiency (inefficiency) and profitability. The presence of a quality political structure negatively (positively) affects bank cost efficiency (inefficiency). The quality of political structure has no direct impact on bank profitability. The impact of PRIs on bank cost efficiency is more evident in the upper middle and high income group of countries than in the low and lower middle income group of countries. An appropriate level of PRI quality is essential to achieve both competition and development.Practical implications – The paper highlights policy implications for international policy makers, regulators and the management of banks who are interested in banking sector development across countries. Originality/value – The study investigates the fundamental importance of PRI quality in its effect on the banking sector and extends the largely US-focused literature to a broader international setting

Short run reaction to news announcements: UK evidence

In this paper we aim to investigate the behaviour of returns around corporate news announcements. The motivation of the paper is that neither the broad classification of news into “good” and “bad” in many previous studies, nor the focus on only one news announcement type such as earnings announcements, allows us to determine whether returns patterns are in general consistent with efficient markets explanations or behavioural finance models. We study a unique dataset of more than 8,000 news announcements collected for 100 UK companies over a period of 10 years. We compute both daily and cumulative abnormal returns over a 27 day event window to enable the observation not only of event day returns reactions but also pre- and post-event day returns. The results reveal that corporate events convey important economic information to investors. One interesting implication of this is an aggregated holistic approach towards firm events may not be appropriate. Some of the evidence found in this paper is not consistent with the efficient market expectations. Asymmetric reaction, sluggishness, over and underreaction, and leakage are found in many types of news announcements

A conditional regime switching CAPM

© 2017 Elsevier Inc. The standard Capital Asset Pricing Model (CAPM) is simple, intuitive, and grounded in sound economic theory. Yet, almost half a century's worth of empirical testing has so far failed to demonstrate its relevance. One major reason given for the CAPM's empirical failure is that beta is not the sole measure of systematic risk. In other words, the standard CAPM does not hold. Another important explanation is that the CAPM may hold conditionally rather than unconditionally. The standard CAPM fails to explain the cross-section of returns because it ignores the fact that both the risk and the price of risk are time-varying. The search for conditional models has led researchers to either disregard the theory behind the CAPM or to use statistical procedures that are too complex to be replicated by other researchers and practitioners. In this paper we propose a conditional model that is compatible with the standard CAPM while remaining simple and accessible to both researchers and practitioners. Beta and the risk premium are assumed to be time-varying, with the latter being associated with bull and bear states. We find strong support for the conditional CAPM with beta explaining both bull and bear markets. While the bear market ex-post risk premium is negative, the weighted average risk premium is positive and highly significant

An Approach to Measuring Impact and Effectiveness of Educational Science Exhibits

Exhibits are among the oldest educational media still in wide use today, and they continue to serve a particularly important role in a range of Extension and nonformal science communication settings. While agricultural and applied communicators have an established tradition of evaluating various information channels and media, there is very little published work in the discipline that describes procedures for measuring the performance or impact of educational exhibits. Evaluation is often complicated by the placement of educational exhibits in unique venues such as fairs and shopping malls that may not lend themselves to conventional research procedures or learning metrics associated with formal education settings. This professional development paper draws from the free-choice learning literature to describe some of the special challenges that can arise in the evaluation of educational exhibits. The authors then introduce an evaluation strategy used successfully in measuring the impact and effectiveness of multiple educational exhibits over a four-year span. Developed largely from the museum-studies literature and replicated through evaluations with several exhibits, the mixed-methods strategy described here can be tailored to meet applied communicators’ specialized evaluation needs and resources. Following a discussion of this approach, the authors draw on their collective experience in sharing 10 practical steps to help frame the essential phases of a successful exhibit evaluation process

Auditor choice in Italian non-listed firms

© Emerald Group Publishing Limited. Purpose – This paper aims to investigate auditor choice in those Italian non-listed firms adopting the “traditional” model of corporate governance. In Italy, non-listed firms can choose between two types of auditor: the Board of Statutory Auditors (BSA), that is the statutory auditors, or an “external” auditor. At the same time, a BSA conducts the administrative auditing for all companies with equity exceeding €120,000. Design/methodology/approach – The paper estimates a logistic regression model of firm auditor choice between an external auditor and the BSA, which incorporates variables proxying for both agency conflict and organizational complexity effects. Findings – The results show that of the potential agency factors, only board independence drives auditor choice, whereas organizational complexity and risk factors including firm size, investment in inventories, subsidiary status and complexity drive auditor choice. These results may be explained in the administrative audit role of the BSA, which monitors both day-by-day firm operations and the financial statements preparation “project”. Stakeholders as a result are reassured that, in general, their interests are protected. Finally, it was found that legal form and voluntary International Financial Reporting Standards compliance exert an impact on auditor choice. Originality/value – The paper provides support for an internal yet independent auditing body such as the Italian BSA as a wider model for corporate governance in European non-listed firms (OECD, 2004 and 2015). The BSA as an administrative and financial auditing body made up solely of independent highly qualified professionals can work within the firm on an operational basis, and in so doing can increase stakeholder protection

A new composite financial maturity index and its application to China’s province-level regions

This paper introduces a new regional “financial maturity index” (FMI) based on previous studies of financial development theory. We explore a unified measure of regional financial development by constructing a new composite financial maturity model. This paper presents a regional FMI measurement process to study 31 Chinese provincial level regions for the year 2012. Our empirical results correctly reflect the integrated financial development level of different areas, which can be summarized as gradually diminishing as we move from eastern to western areas within China. This trend is also consistent with the characteristics of China’s regional economic and social development

Ownership influence and CSR disclosure in China

© 2018, Emerald Publishing Limited. Purpose: This paper aims to examine the relationship between ownership type and the likelihood of publication of a corporate social responsibility (CSR) report. Design/methodology/approach: Drawing on stakeholder salience theory, the probit model is used for a sample of 1,839 Chinese listed firms to study how different types of owners influence firm CSR engagement. Findings: The analysis reveals that the Chinese stock exchanges exert a positive influence on the likelihood of a firm producing a CSR report, an effect which is more significant in state-owned enterprises (SOEs). Foreign investors lead to a greater likelihood of publication of a CSR report, though this effect is weaker in SOEs. In contrast, the holdings of state and domestic institutional investors are broadly neutral. Practical implications: The study helps corporate managers to recognise how particular types of shareholders will value their efforts regarding CSR activities and disclosure and also assists policymakers in improving the level of CSR disclosure through the development of new policy. Social implications: Apposite CSR disclosure enhances trust and facilitates the shared values on which to build a more cohesive society. Originality/value: The novelty of this study is that it addresses the effect of institutional investors on Chinese firm CSR engagement and thus provides an important insight for firms, investors and other stakeholders into the interplay of portfolio investment and CSR

The use of financial information by capital providers

In this brief literature review paper, we explore four areas of the theoretical and empirical literature to discuss the use of financial information by capital providers: (i) Who are capital providers to companies, including all forms of debt, equity, grants, soft-loans, trade credit, and so on? (ii) How do equity holders and their agents use financial statements as information sources in their own right and in their models and other metrics? (iii) How do debt holders and their agents use financial statements of their own accord and in their models and other metrics? (iv) What is the overall use of financial statement information and how does such financial information compare with that required by users? The review draws out key issues in relation to each of these questions, focusing on precisely where and how the literature tackles the use of information by capital providers, whether this is a primary or subsidiary consideration in the literature, how information usage relates to other issues such as governance, disclosure, performance and risk management, and so on, and how key developments in financial reporting have changed the way in which the information is employed