...Accounting and capital markets: a survey of the European evidence Dumontier, Pascal & Raffournier, Bernard Introduction The relationship between accounting information and capital markets has been studied a great deal especially in the US. However such research hasn’t been done in Europe and the purpose of Dumontier’s and Raffjournier’s article is to study the corresponding evidence in Europe. The reason why the topic has been interesting enough to conduct innumerable studies in the US during the past decades is that regarding capital markets accounting data are supposed to facilitate the prediction of firms’ future cash flows and help investors asses future securities’ risk and returns. The aim of the studies has been to help determine to what extend this objective of exploiting the accounting data was achieved. Theory and literature review Through their research, Dumontier and Raffournier were able to find different categories of how the relationship between accounting information and capital markets has been investigated in the European literature. Firstly, the primary objective of capital market research has been to assess whether accounting data provide value-relevant information to investors, incremental to all other sources of publicly available information. Through studies of the impact of accounting disclosures on stock returns or trading volumes it has been able to show clear market reactions to accounting announcements that have been detected in all European...
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...regulatory responsibility of the jurisdiction’s capital market regulators, the impact on national standard setters, and the consequences for other bodies responsible for the broader accounting standard-setting process” (page 4). The staff’s research has shown that “…jurisdictions generally have incorporated or intend to incorporate IFRS into their reporting requirements for listed companies by either: (1) full use of IFRS as issued by the IASB or (2) use of IFRS after some form of national or multinational incorporation process, which could lead to a full use of IFRS as issued by the IASB or some local variation thereof” (page 4). According to the staff’s research, very few jurisdictions use the first approach. Majority of jurisdictions use the second approach because it is easier to address country-specific issues, yet, it could impact the use of a single set of globally accepted accounting standards. The SEC and its staff continue researching different approaches to figure out which one will help lead to a consistent set of accounting standards, internationally. b. http://www.ifrs.org/Alerts/PressRelease/Documents/GovernanceReviewFinalReportFeb2012.pdf i. 1. Full membership of the Monitoring Board is limited to the authorities that are responsible for establishing the form and content of financial reporting that are used in the capital markets. 2. New members are chosen from developing markets...
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...Zingales Source: The American Economic Review, Vol. 88, No. 3 (Jun., 1998), pp. 559-586 Published by: American Economic Association Stable URL: http://www.jstor.org/stable/116849 Accessed: 06-07-2015 21:29 UTC Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at http://www.jstor.org/page/ info/about/policies/terms.jsp JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. American Economic Association is collaborating with JSTOR to digitize, preserve and extend access to The American Economic Review. http://www.jstor.org This content downloaded from 14.139.224.146 on Mon, 06 Jul 2015 21:29:52 UTC All use subject to JSTOR Terms and Conditions FinancialDependence and Growth By RAGHURAM G. RAJAN AND LUIGI ZINGALES* This paper examines whetherfinancial developmentfacilitates economic growth by scrutinizing one rationale for such a relationship: thatfinancial development reduces the costs of external finance to firms. Specifically, we ask whether in-dustrial sectors that are relatively more in need of externalfinance develop disproportionately faster in countries with more-developedfinancial markets. We find this to be true in a large...
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...TERM PAPER EFFECT OF DIVERSIFICATION ON FIRM VALUE IRENE TIURMA SIAGIAN 1.0 INTRODUCTION Corporate diversification reveal both benefits and costs to a company. Company can benefit from diversification through the creation of internal capital markets (Williamson, 1970), higher debt capacity (Lewellen, 1971; Shleifer & Vishny, 1992) and economies of scope (Teece, 1980). Meanwhile, the costs of diversification stem mainly from agency problems. Managers may diversify to protect their human capital (Amihud & Lev, 1981), to increase their private benefits (Jensen, 1986; Morck et al., 1990), or to entrench themselves (Shleifer & Vishny, 1989). Within a diversified firm, managers may have easy access to capital through cross subsidization (Meyer et all., 1992), which may lead to over-investment (Jensen, 1986; Stulz, 1990; Berger & Ofek, 1995). Recent literature shows that corporate diversification strategies are associated with significant value loss and that increasing corporate focus is value-enhancing. Examples of these studies include Lang and Stulz (1994), liebeskind and Opler (1994), Berger and Ofek (1995, 1996), Comment and Jarrell (1995), John and Ofek (1995), Servaes (1996), and Denis et. Al. (1997). The evidence in thse studies suggests that the costs of diversification outweigh the benefits. Given the extensive evidence that diversification is associated with a reduction in firm value. Even firms in the developing countries inclusive Malaysia...
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...Accounting Standards Building international opportunities for Australian business Corporate Law Economic Reform Program Proposals for Reform: Paper No. 1 © Commonwealth of Australia 1997 ISBN 0 642 26110 5 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Australian Government Publishing Service. Requests and inquiries concerning reproduction rights should be directed to the Manager, Commonwealth Information Services, Australian Government Publishing Service, GPO Box 84, Canberra ACT 2601. The Government is seeking comments from interested parties on the detail of the proposals in this paper which should be forwarded to the following address: First Assistant Secretary Business Law Division The Treasury Parkes Place PARKES ACT 2600 Telephone: 02 6263 3960 Fax: 02 6263 2882 Email: clerp@treasury.gov.au Copies of this paper are available from the Australian Government Publishing Service and on the Treasury web site (http://www.treasury.gov.au). Enquiries concerning the paper can be made to: Ms Veronique Ingram Assistant Secretary The Treasury Telephone: 02 6263 3970 Printed by the Australian Government Publishing Service TABLE OF CONTENTS Page Abbreviations PART 1: PART 2: Reform Proposals Introduction 2.1 2.2 PART 3: Background Key economic principles v 1 9 9 10 11 11 12 13 13 14 16 17 19 19 19 20 22 23 The Case for Reform 3.1 3.2 Impetus...
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...1) Better access to foreign capital markets and investment -Eliminating barriers to cross border investing Accounting information has a significant influences on the behaviour of investors and financial capital markets. The implementation of IFRS for financial reporting in Australia has allowed for better access to foreign capital markets and investment, eliminating barriers to cross border investing. The major benefits include the potential for lesser information asymmetry (Horton, Serafeim and Serafeim, 2012), improved reporting transparency, reduced information costs, increased comparability, accountability and increase in the quality of financial reporting (Ahmed, Neel and Wang, 2013). Therefore markets become more completive and efficient, benefiting investors. A major prospective benefit of implementation of IFRS for financial reporting is the increase in accounting comparability. The enhanced comparability is brought together though increased quality and convergence of accounting standards particularly in areas such as Fair value measurements, business combinations and revenue recognition (Jordan, 2013). The increased comparability hence allows Australian business to facilitate lower costs of capital and have better access foreign capital markets and cross-border investing. On the contrary however comparability may become worse in situations where IFRS implementation is not mandatory and countries have two varying accounting standards. Furthermore the full scope of...
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...A study on Investors Preferences towards various investment avenues in Capital Market with special reference to Derivatives. by Dr. K. RAVICHANDRAN, READER, Bharathidasan Institute of Management, (School of Excellence of Bharathidasan University), Tiruchirapalli. Introduction: In India, generally all capital market investment avenues are perceived to be risky by the investors. But the younger generation investors are willing to invest in capital market instruments and that too very highly in Derivatives segment. Even though the knowledge to the investors in the Derivative segment is not adequate, they tend to take decisions with the help of the brokers or through their friends and were trying to invest in this market. This study was undertaken to find out the awareness level of various capital market instruments and also to find out their risk preference in various segments. Need for the study: To educate investors who are risk averse for trade in derivatives Awareness about the various uses of derivatives can help investors to reduce the risk and minimize the losses REVIEW OF LITERATURE “Investment property portfolio management and financial derivatives” by Patrick McAllister, John R. Mansfield. His study on Derivatives has been an expanding and controversial feature of the financial markets since the late 1980s. They are used by a wide range of manufacturers and investors to manage risk. This paper analyses the role and potential of financial derivatives...
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...Internship Report On Effectiveness of DSE Monitoring System SUBMITTED TO: Md. Rafiqul Islam Professor Department of Business Administration Faculty of Business & Economics Daffodil International University SUBMITTED BY: Md. Nasir Uddin ID: 072-11-2038 BBA Department of Business Administration Faculty of Business & Economics Daffodil International University Daffodil International University September 10, 2011 Internship Report On Effectiveness of DSE Monitoring System Date of Submission: 10 September, 2011 4/2, Sobhanbagh, Prince Plaza, Mirpur Road Dhanmondi, Dhaka-1207, Bangladesh LETTER OF TRANSMITTAL August 10, 2011 Md. Rafiqul Islam Professor Internship Supervisor Department of business administration Daffodil International University Subject: Submission of internship report. Dear Sir, This is my pleasure to present my internship report entitled “Effectiveness of DSE Monitoring System” Which was prepared from my experience in Dhaka Stock Exchange. With your kind supervision I believe that the knowledge and experience gathered...
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...INTRODUCTION TO CAPITAL MARKETS What is investment banking? Investment banks act as intermediaries in capital markets, helping the matching of sellers and buyers of various securities and advising institutional investors, government and companies on their investment strategies, on their financing needs (helping them to raise money) and their acquisitions. Two main areas: (1) Securities or capital markets divisions: trading in the equity, fixed income ,FX and commodities markets and advising and intermediating for institutional investors in those markets. (2) Corporate Finance and public finance (often referred to as investment banking) advising corporations and governments on their financing needs, including the underwriting of securities, on their merger and acquisition activities, or on their restructuring. Securities and capital markets divisions Clients are usually * Institutional investors, corporates or public entities, not private clients; * Mutual funds asset managers; * Pension Fund asset managers; * The insurance companies; * Private Banks; * Hedge Funds; * The treasury departments of large banks or large companies. Capital markets divisions * Equity division: equity research, equity sales, equity trading on cash, flow derivatives and structured products * FIRC or FICC (Fixed Income, currencies and derivatives): * Fixed income cash products, interest and credit derivatives...
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...Learnings from Article Review – Finance Function in a Global Corporation As companies globalize, they face new financial challenges. Here, the major challenge faced by the Global CEO is giving companies a powerful mechanism for arbitrage across national financial markets as capital markets open up within them. CFO has to balance the traditional question with new questions which arises due to the globalization. By exploiting their internal capital markets, CFO can create value in 3 functions: 1. Financing the internal capital market. 2. Managing Risk Globally, 3. Global Capital Budgeting. 1. Financing the internal capital market – A CFO can significantly reduce a groups overall tax bill by borrowing disproportionately in countries with high tax rates and lending the excess cash to operations in countries with lower rates. But the global CFO needs to be aware of downside of getting strategic about financing in these ways. Saddling the mangers of subsidiaries with debt can cloud their profit performance. 2. Managing Risk Globally – The existence of an internal capital market also broadens a firms Risk management options. Instead of managing all currency exposures through the financial market, global firm can offset natural currency exposures through their worldwide operations. Given this potential for minimizing risk, it might seem perverse that many multinationals let local subsidiaries and regions manage their risks separately. Doing so, however, can obscure the performance...
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...the fundamental asset value concept. In other words, assessments of each individual business must be based on its ability to generate added value, rather than on subjective concepts. In our opinion, the economy of the future must become an economy of real values. How to achieve this is not so clear-cut. Let us think about it together.” From the Address of Vladimir Putin, Prime Minister of Russia, at the Davos Economic Forum (February, 2009) This Part analyzes the pre-analytical foundations and macro-economic impact of the Modern Portfolio Theory1 (MPT) tenets, on which much of the present Western investment theory and financial economics is erected. Our general inference is that while the former are tautological at their core and treat capital investment pricing processes as if those relate to an impersonal network of natural oscillators, the latter are perceivably dangerous in spite of the belief in the strong ‘performativity’ (self-fulfillment) of MPT (McKenzie, 2006). Performative the MPT may be, but this performativity comes it a cost: as year by year it only removes the universe of traded...
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...Ying – CEB 110716 Yap Hong Zhen – CEB 110084 GROUP REPORT 1 GROUP REPORT 1 Table of Contents Question No. | Details | Pages | 1 | Describe the roles and functions of financial markets in Malaysia. | 1 | 2 | Identify four (4) relevant regulators in Malaysia. | 1 | 3 | Choose two (2) regulators identified in (2) above and justify your selection i.e. explain the reasons for your choice. | 2 | 4 | Explain the roles and activities of the two regulators that you have chosen. | 2 | 5 | Give examples of actual enforcement actions that have been taken by the regulators chosen in (3) above. | 3 | 6 | References | 4 | 1) Describe the roles and functions of financial markets in Malaysia. Financial markets are forums in which suppliers of funds and demanders of funds can transact business directly. There are two operations of financial markets, which are primary market and secondary market. Primary market is financial market in which securities are initially issued; the only market in which the issuer is directly involved in the transaction. The function of the primary markets is to facilitate the efficient allocation of funds. Secondary market is financial market in which pre-owned securities (those that are not new issuer) are traded. There are also two key of financial markets: a)...
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...RBI 2012-13/358 IDMD.PCD. 07 /14.01.02/2012-13 January 1, 2013 All market participants Dear Sir/Madam, Guidelines for Issue of Commercial Paper (CP) In the light of the recent developments in the financial markets, the directions applicable to issuance of CP have been reviewed in consultation with the Technical Advisory Committee on Money, Forex and Government Securities Market. 2. A copy of the RBI Notification No IDMD.PCD. 1284 /14.01.02/2012-13 dated October 16, 2012, consolidating and amending all earlier directions issued in this regard and published in the Gazette of India is enclosed. Yours faithfully, (K K Vohra) Chief General Manager The Gazette of India EXTRAORDINARY Part III – Section 4 Published by Authority RESERVE BANK OF INDIA NOTIFICATION Mumbai, October 16, 2012 Reserve Bank Commercial Paper Directions, 2012 Whereas the Reserve Bank of India, in exercise of the powers conferred by Sections 45J, 45K, 45L of the Reserve Bank of India Act, 1934, and of all the powers enabling it in this behalf, notified the Non-Banking Companies (Acceptance of Deposits through Commercial Paper) Directions 1989 vide Notification No.IECD.1/87(CP)-89/90 dated December 11, 1989; And whereas the said directions having been amended from time to time vide Notification No.IECD.14/08.15.01/96-97 dated September 6, 1996; Notification No.IECD.21/08.15.01/97-98 dated June 17, 1998, and Notification No IECD 3/08.15.01/2000-2001 dated October 10, 2000 respectively; And whereas...
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...[pic] Bangladesh being a developing country, security market is very important source for the growth and development of the industrial section. SEC is working for a healthy economic capital, active administrated securities market. But BSEC it self is not smooth & efficient. There are few problems has been arise after it established. BSEC is working on some new projects and plans. SEC introduce an online database called EDGAR from which investors can access this and other information filed with the agency. In the same online system also takes tips and complaints from investors to help the BSEC track down violators of the securities laws. Apart from the macro policy of contributing to the development of the national economy through harmonization with monetary policy, securities policy dealing with securities houses and markets, generally pursue three broad objectives- Firstly, to improve the efficiency of securities market. Secondly, to ensure the stability and soundness of the financial system. Thirdly, to protect investors rights. In this paper we have shown the history of the organization, in the second section we have shown different functions done by the BSEC, in the third chapter shown types of stock exchange, registered under the BSEC. In the fourth and fifth section we have tried to discuss the different departments of the BSEC and effects of BSEC on the capital market. In the sixth section we have discussed registration and rules & regulation imposed...
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...Accounting Standards Building international opportunities for Australian business Corporate Law Economic Reform Program Proposals for Reform: Paper No. 1 © Commonwealth of Australia 1997 ISBN 0 642 26110 5 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Australian Government Publishing Service. Requests and inquiries concerning reproduction rights should be directed to the Manager, Commonwealth Information Services, Australian Government Publishing Service, GPO Box 84, Canberra ACT 2601. The Government is seeking comments from interested parties on the detail of the proposals in this paper which should be forwarded to the following address:| First Assistant SecretaryBusiness Law DivisionThe TreasuryParkes PlacePARKES ACT 2600|Telephone:Fax:Email:|02 6263 396002 6263 2882clerp@treasury.gov.au| Copies of this paper are available from the Australian Government Publishing Service and on the Treasury web site (http://www.treasury.gov.au).Enquiries concerning the paper can be made to:Ms Veronique IngramAssistant SecretaryThe TreasuryTelephone: 02 6263 3970| Printed by the Australian Government Publishing Service Table of Contents Page Abbreviations v PART 1: Reform Proposals 1 PART 2: Introduction 9 2.1 Background 9 2.2 Key economic principles 10 PART 3: The Case for Reform 11 3.1 Impetus for reform 11 3.2 What the Government is seeking...
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