Finance

Once in Khaki Suits: Socio-economic Features of the Icelandic Collapse - Comparisons to the Roaring 20s in the USA

by Mar Wolfgang Mixa

Published in Thodarspegillinn 2010

While the general discussion focuses on quantitative factors regarding the financial mania in Iceland 2003-2008, this... more While the general discussion focuses on quantitative factors regarding the financial mania in Iceland 2003-2008, this essay focuses on qualitative precipitating factors of what might develop sociologically into a speculative financial bubble.  A comparison to studies by Robert Shiller is used. This essay is thus in essence a study of socio-economics by use of an approach often referred to in the filed of economics as behavioral finance or literary economics.  The aim is creating a different and more holistic viewpoint of past events. Some of those applicable factors are compared to the Roaring Twenties, showing a remarkable similarity between the two periods despite being 70 years apart.  The discussion should show that danger signs could not only be detected by glancing at macro numbers or balance sheets of banks but also by detecting the development of society in Iceland as a whole.

Learning from the worst behaved: Iceland's financial crisis and the Nordic comparison

by Mar Wolfgang Mixa

Co-authored with Throstur Olaf Sigurjonsson

This article explores how the financial crisis in 2008 could have been partially avoided by Iceland through observing... more This article explores how the financial crisis in 2008 could have been partially avoided by Iceland through observing the warning signs. Iceland experienced the harshest consequences from the financial crisis in the Western world, such as the total collapse of its banking sector. This article compares the prelude of Iceland's financial crisis to the Scandinavian one, less than 20 years ago, providing an understanding of the sources of the crisis and its impact. Results show that signs of over-expansion in Iceland were clear and numerous. Iceland's structural weaknesses resemble many other badly hit countries, simply more extreme.

History Shows European Monetary Union May Have Been 'Bridge Too Far'

by Gilles Bransbourg

A short reflexion about the Eurozone crisis, published under the form of a media column. A short reflexion about the Eurozone crisis, published under the form of a media column.

Organizational Isomorphism and Corruption in Financial Institutions: Empirical Research in Emerging Countries

by Bertrand Venard

Reference: Venard, B., M. Hanafi, M. (2008). Journal of Business Ethics, 81 (2): 481-498.

The globalizations of capital markets in the last 20 years has led to a historic degree of financial integration in... more The globalizations of capital markets in the last 20 years has led to a historic degree of financial integration in the world. It is clear, however, that globalization is not conducive to a complete homogeneity of financial markets and institutions. Among others, one element of diversity is the importance of the impact of corruption in emerging countries. Corruption decreases the credibility of financial institutions and markets.
Scandals and unethical behavior in financial institutions erode confidence in such firms. Relying on neoinstitutional literature, this article focuses on the link between corruption and organizational isomorphism in financial institutions in emerging countries. Therefore, our aim is to examine the institutional reasons for corruption in financial institutions in emerging countries. Our structural equation model is based on empirical research in financial institutions in emerging countries. A questionnaire was administrated to 70 top executives of financial institutions in 18 different emerging countries.

The psychographic segmentation of unit trust investors by factor analysis for Malaysia Financial Services

by Rohaizat Baharun

Market segmentation in Malaysia by using psychographic dimensions for unit trust products

by Rohaizat Baharun

Skewness and kurtosis in Japanese equity returns: empirical evidence

by Raj Aggarwal

Contracts and Exits in Venture Capital Finance

by Douglas Cumming

Cumming, D.J., 2008. “Contracts and Exits in Venture Capital Finance” Review of Financial Studies 21, 1947-1982.

Using a sample of European venture capital investments, I study the relation between venture capital (VC) contracts... more Using a sample of European venture capital investments, I study the relation between venture capital (VC) contracts and exits. The data indicate that ex ante, stronger VC control rights increase the likelihood that an entrepreneurial firm will exit by an acquisition, rather than through a write-off or an IPO. My findings are robust to controls for a variety of factors, including endogeneity and cases in which the VC preplans the exit at the time of time of contract choice. My findings are consistent with control-based theories of financial contracting, such as Aghion and Bolton (1992).

Private Equity Returns and Disclosure Around the World

by Douglas Cumming

Cumming, D.J., and U. Walz, 2010. “Private Equity Returns and Disclosure around the World” Journal of International Business Studies 41(4), 727-754.
- Reprinted as Cumming, D.J., and U. Walz, 2010. “Private Equity Returns and Disclosure around the World” Journal of Business Valuation, Vol 2., pp.1-33 (lead article)
- Winner of the Canadian Institute of Chartered Business Valuators (CICBV) Best Paper Prize ($5,000)
- PWC Global Competency Centre Research Excellence Award (€3,000)

To obtain more funds from the institutional investors, private equity fund managers may report inflated valuations of... more To obtain more funds from the institutional investors, private equity fund managers may report inflated valuations of private investee companies that are not yet sold. However, such overvaluations may result in a reputational cost when those investments are realized. Using evidence from 39 countries, we show that there are significant systematic biases in managers' reporting of fund performance. We find that these biases depend on the accounting and legal environment in a country, and on proxies for the degree of information asymmetry between institutional investors and private equity fund managers.

Does knowledge sharing and withholding of information in organizational committees affect quality of group decision-making?

by Caroline Kamau

Kamau, C. & Harorimana, D. (2008)

In today’s knowledge economy, there is an emphasis on group performance, such as in organizations’ committees, yet... more In today’s knowledge economy, there is an emphasis on group performance, such as in organizations’ committees, yet this performance is prone to productivity deficits. Like many other groups, organizational committees are prone to irrational decision-making in the form of groupthink and group polarization. We review evidence that groupthink involves avoidance of contradictory information, biased information sharing, self-censorship, reducing information on the outgroup and poor information pooling. For example, committee members’ conformity to the standards and expectations of an organization can lead them to withhold information that contradicts the organization’s “traditional” viewpoint. In other instances of groupthink, committee members may withhold information from their seniors in order to shield them from opposing views. Committee members undergoing groupthink may also display bias in their information search, such that they seek only that information which supports the committee’s prevailing opinion. We also review evidence showing that highly cohesive groups, those isolated from outside influence, and those with forthright leadership, are most at risk of groupthink. Improving the structure of a committee and having a leadership style that is process-directive, rather than outcome-directive, can reduce groupthink. We also review evidence on group polarization, which involves a shift by a group to an extremely risky or an extremely conservative viewpoint as a result of members influencing each other. We also discuss the impact of novel information on group polarization. We provide an analysis of the impact of faulty decision-making on the downfall of the bank Northern Rock. We consider the possible lack of objectivity in elements of the bank’s decision-making. The fact that Northern Rock did not receive a sufficient amount of outside regulation may have exacerbated groupthink. We discuss the likely role of risky shift in the bank’s attitude to risk and also consider the possible impact of forthright leadership on groupthink within Northern Rock. Groupthink and group polarization pose a danger to organizations that are required to continuously create, update and utilise knowledge in their decision-making, and to implement change in order to compete in shifting markets.

The Food Crises: A quantitative model of food prices including speculators and ethanol conversion

by Marco Lagi

A Critical Analysis of Mudarabah & A New Approach to Equity Financing in Islamic Finance

by Salman Ahmed Shaikh

Financial intermediation serves a valuable purpose, but it can also be structured using equity modes of financing.... more Financial intermediation serves a valuable purpose, but it can also be structured using equity modes of financing. This can relieve the financee and increase diversity of entrepreneurial undertakings as in debt based commercial financing, there is little room for diversity with obligatory and stipulated servicing of debt. Using Islamic equity modes of financing poses the challenge of the agency problem and moral hazard. The extent of this agency problem in Mudarabah and its impact on economic payoffs between counterparties is analyzed in this study with a simulation model. Based on review of alternate solutions proposed, the author presents two possible covenants which could make Mudarabah mode of financing more acceptable and widely usable in financial intermediation. This would also further the egalitarian objectives of an Islamic economic order.

Efficient Financial Markets as Organizations: A Metaphoric Analysis

by Holly A. Bell

Published in 'Insights to a Changing World', 2012

Efficient financial markets have often been assigned almost mystic qualities devoid of definable or describable... more Efficient financial markets have often been assigned almost mystic qualities devoid of definable or describable organization. They’ve been described as being controlled by an invisible hand or as having non-ergodic qualities. However, if markets are at least informationally efficient, there must be an organizational structure within which markets operate. Without organization there would be chaos, not efficiency. The purpose of this paper is to explore the market from the perspective of organizational behavior. Two questions will be explored: 1) Are markets by definition and structure similar to organizations? (Markets as organizations), and 2) Do markets behave like organizations? (Markets as organizational metaphors) [Contact author for paper]

Coskun, Yener. (2012). A Brief Analysis of Turkish Housing Market. SPH Newsletter 10 (April): 10-12.

by Yener Coşkun, MRICS

Coşkun, Yener. (2012). A Brief Analysis of Turkish Housing Market. SPH Newsletter 10 (April): 10-12.

It is believed that home ownership offers
both material and non-material benefits
to the individuals and... more It is believed that home ownership offers
both material and non-material benefits
to the individuals and also society. However
this belief may be also related to
psychological/economical issues, economic/
financial agents enjoy to satisfy
the need of better housing. Turkey, having
nearly 68 percent home ownership
rate and also very dynamic housing
markets, is not an exception.

Performance of Shariah compliance companies in the plantation industry

by Nuradli Ridzwan Shah Mohd Dali

Mohd Dali Nuradli Ridzwan Shah Bin, Mudasir Hamdi Hakeim, Abdul Hamid Suhaila, (2008) "Performance of Shariah compliance companies in the plantation industry", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 1 Iss: 2, pp.166 - 178

Purpose – The purpose of this paper is to identify the performing and non-performing companies by using multiple... more Purpose – The purpose of this paper is to identify the performing and non-performing companies by using multiple discriminant analysis (MDA) and multiple regression and the ratios that could distinguish between the performing and the under-performing companies.

Design/methodology/approach – First, the study applied the a Jensen technique to classify the Shariah compliance companies into performing and non-performing. Then, the results from the a Jensen technique with 20 financial ratios are applied to MDA in order to establish models that are used to identify non-performing and performing companies.

Findings – The growth turnover ratio is the only ratio that could discriminate between the performing and non-performing companies in the plantation industry.

Research limitations/implications – The paper only investigates a sector in the main board of Bursa Malaysia, which is the plantation industry. Future research may look into the whole Shariah counters in Bursa Malaysia.

Practical implications – The paper could assist investors to evaluate and select an optimal investment portfolio.

Originality/value – The paper applies multivariate analysis which does not depend only on one variable. Using the multivariate analysis it provides an alternative to establish models that discriminate between the performing and non-performing companies. This paper also investigates only the Shariah compliance counters in Bursa Malaysia.

A Brief History of Bankruptcy

by J. Holder Bennett

A COMPARATIVE STUDY OF DOLLAR COST AVERAGING VS. VALUE AVERAGING

by Pawel Stefan Benedykcinski

AUTHOR: PAWEL STEFAN BENEDYKCINSKI and ADVISOR: St. Olaf College ECONOMICS PROF. RICHARD GOEDDE

A COMPARATIVE STUDY OF DOLLAR COST AVERAGING VS. VALUE AVERAGING
Pawel S. Benedykcinski and Prof. Rick Goedde... more A COMPARATIVE STUDY OF DOLLAR COST AVERAGING VS. VALUE AVERAGING
Pawel S. Benedykcinski and Prof. Rick Goedde (Advisor)
Economics Department
St. Olaf College
Northfield, MN

My research compares three investment techniques, fixed and variable dollar cost averaging and value averaging to determine if any of the methods yield superior investment returns in the long run. Mutual funds, stocks, and exchange-traded funds were used to test the methods. Value averaging is a formula-based investment technique using a mathematical formula to guide the investment of money into a portfolio over time. With this method investors contribute to their portfolios in such a way that the portfolio balance increases by a set amount, regardless of market fluctuations. Dollar cost averaging invests equal amounts regularly and periodically over specific time periods in a particular investment or portfolio. By doing so more shares are purchased when prices are low, and fewer shares are purchased when prices are high.

After testing many mutual funds, ETFs, and individual stocks, I concluded that Value Averaging yields better Internal Rates of Return than fixed and variable Dollar Cost Averaging. The results also indicate that the three methods provide superior investment returns over extended investment time periods with little increase in risk, even if prices are volatile. One important difference between these three formula investment techniques is that value averaging requires larger sums of money to be invested at regular time intervals than fixed or variable dollar cost averaging do.

Walking The Streets: Shareholder Profiles and Perspectives on a High Technology Startup Venture

by Peter Mellalieu

Willis, A., Mellalieu, P. J., & Emerson, L. (2000). Walking the Streets: Shareholder Profiles and Perspectives on a High Technology Startup Company. Proceedings of the Annual Educators Conference of the New Zealand Strategic Management Society, 2 (Vol. 1). Presented at the Strategies for sustainability and success: the role and impact of strategic thinking in the development of sustainable enterprise, Canterbury University, Christchurch: New Zealand Strategic Management Society.

How does a high technology enterprise based in a remote, small sector economy raise over $US 10 million from 600... more How does a high technology enterprise based in a remote, small sector economy raise over $US 10 million from 600 shareholders for an ambitious new venture that challenges global corporations, and relies for its success on the creation of a market for the electric-powered motor vehicle – a product hitherto offering few – if any – consumer advantages over the ubiquitous fossil fuel-powered vehicle?

The New Zealand venture capital market has in recent years faced a ‘bad press’, with many business and political leaders complaining at the dearth of capital made available by banks and other financial institutions for the foundation of small scale, high technology enterprise. Accordingly, the founders of Pacific Lithium Limited (PLL), resorted to ‘walking the streets and knocking on doors’. PLL eventually built up a loyal shareholder ‘family’ whose members included a diverse mix including a prestigious Japanese trading corporation, Nisho Iwai, the Singapore Government, several high-profile domestic businessmen and a gaggle of what initially appear to be ordinary New Zealand folk.

The article reports on a survey of the shareholder investors in PLL, a technology-based startup company whose foundation was reported in PECNZSM Vol 1, No 1, 1999. The survey identifies the demographic profiles of the shareholders, why and how they went about investing in PLL, and their attitudes to technology-based risk-venture investments in general. The article concludes with implications of the research for investors, entrepreneurs and Government policy makers – and speculates on the implications for investors of the NZSE’s New Capital Market due to be launched in mid-2000.

Note:
This article accompanies a series of cases. For a Case Resource library providing see:

Mellalieu, P. J. (n.d.). Pacific Lithium Ltd - Case resource library. Retrieved July 1, 2009, from http://tinyurl.com/pllcase1

"Europäische Schuldenkrise" als Demokratiekrise: Zur diskursiven Interaktion zwischen Politik und Finanzmarkt

by Georg Simmerl

To be published in: Berliner Debatte INITIAL, 2012 (3).

German:

Dieses Papier setzt Habermas' Demokratietheorie und post-strukturalistische Finanzmarktsoziologie... more German:

Dieses Papier setzt Habermas' Demokratietheorie und post-strukturalistische Finanzmarktsoziologie in Bezug zueinander, um die zentrale demokratietheoretische Problematik in der "europäischen Schuldenkrise" aufzuzeigen. Im Finanzmarkt-Kapitalismus haben sich die Finanzmärkte selbst zu einer Öffentlichkeit entwickelt, an die sich Exekutivpolitiker argumentativ wenden müssen - Gesellschaft und Ökonomie sind also nicht getrennte Sphären, sondern diskursiv verschränkt. Durch diese Verschränkung wird jedoch der öffentliche Diskurs seiner demokratiesierenden Kraft beraubt.
Dieses Argument wird in drei Schritten expliziert: Im ersten Teil wird zunächst Finanzmarktgeschehen poststrukturalistisch gedeutet, um davon ausgehend die diskursive Verschränkung von Gesellschaft und Finanzmarkt theoretisch zu erfassen und die politische Artikulationslogik im Finanzmarkt-Kapitalismus zu rekonstruieren. Im zweiten Teil wird diese Artikulationslogik mittels einer interpretativen Inhaltsanalyse von vier Reden europäischer Spitzenpolitiker aus dem Jahr 2011 nachgewiesen. Im letzten Teil werden die Erkenntnisse als Evidenz für eine Demokratiekrise diskutiert und gezeigt, dass eine Politisierung sozioökonomischen Wissens - wie sie auch von diesem Paper praktiziert wird – dabei helfen könnte einen Weg aus dieser Demokratie/Finanzkrise zu finden.


English:

This paper puts Habermasian democratic theory and post-structuralist sociology of finance in relation to each other to investigate the central threat of the current “European sovereign debt crisis” to democracy. In financial capitalism, financial markets have become themselves a public which the political executive has to address argumentatively. Society and economy are thus not separated spheres but discursively interconnected. This interconnection, however, strips the democratizing power off public discourse.
The argument is explicated in three parts. The first part interprets financial markets post-structurally to grasp the discursive interconnectedness between society and financial markets in theory and to reconstruct the logic of political articulation in times of financial capitalism. The second part demonstrates this logic of articulation in the European financial crisis by analyzing four speeches of European top politicians during 2011 interpretatively. The third part discusses the findings as evidence for a crisis of democracy and shows that politicization of socio-economic knowledge – as exemplified by this very article – could help finding a way out of this democratic/financial crisis.

Product Development Practices for Meeting Financial Objectives

by Nisheeth Gupta

Published in 33rd Product Development and Management Association (PDMA) Annual International Conference, Anaheim, CA, October 31-November 4, 2009

This paper reports product development practices that separate the most successful product development programs from... more This paper reports product development practices that separate the most successful product development programs from the rest. A detailed understanding of best product development practices is important because product development is fundamental to corporate success (Clark & Fujimoto, 1991; Eisenhardt & Tabrizi, 1995; Eppinger & Chitkara, 2006). Teams from the Massachusetts Institute of Technology and McKinsey and Company have collaborated to investigate practices used for 112 product development projects at 57 firms in the medical device, industrial, and high-tech industries. Preliminary results suggest that certain practices are particularly important for influencing project outcomes.