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In international accounting literature there are various approaches to assess the quality of national accounting systems with respect to specific key functions, e.g. the intensity of capital market information. An empirical approach often used measures the quality of disclosure by ranking the national systems with the so-called "disclosure index" (e.g. Choi 1973, Barret 1975, Cooke 1992, Taylor/ Zarzeski 1996). Concentrating on disclosure regulation in contrast to accounting practices, Cooke/ Wallace 1990 construct an index which measures the "degree of financial regulation". They identify groups of countries which can be clearly classified in highly regulated, regulated and moderately regulated national accounting systems.
In our analysis, we want to enrich the idea of the degree of financial disclosure regulation to a concept for evaluating the degree of determination of financial measurement. Assuming that a high degree of determination of a national accounting system leads to more comparable accounts than a low degree, the index can be interpreted as a quality measure of national accounting systems according to the intensity of capital market information. The following hypothesis is to be proved: the degree of disclosure regulation equals the degree of measurement regulation in order to serve the information needs of the national capital markets.
Three groups of different degrees of determination for national accounting systems can be easily identified which are compared to the results of Cooke/ Wallace. For some of the national systems the above hypothesis seems to be appropriate whereas some opposing results can be shown. Possible explanations are presented which can be causally related to these diverging results. They are based on historical developments, the differentiation between rules for individual and group accounts, and on conditions where different degrees seem plausible.
This paper provides a detailed empirical analysis of the call auction procedure on the German stock exchanges. The auction is conducted by the Makler whose position resembles that of a NYSE specialist. We use a dataset which contains information about all individual orders for a sample of stocks traded on the Frankfurt Stock Exchange (FSE). This sample allows us to calculate the cost of transacting in a call market and compare them to the costs of transacting in a continuous market. We find that transaction costs for small transactions in the call market are lower than the quoted spread in the order book of the continuous market whereas transaction costs for large transactions are higher than the spread in the continuous market.
We further address the question whether active participation of the Makler is advantageous. On the one hand he may accomodate order imbalances, increase the liquidity of the market and stabilize prices. On the other hand, the discretion in price setting gives him an incentive to manipulate prices. This may increase return volatility. Our dataset identifies the trades the Maklers make for their own accounts. We eliminate these trades and determine the price that would have obtained without their participation. Comparing this hypothetical price series to the actual transaction prices, we find that Makler participation tends to reduce return volatility. A further analysis shows that the actual prices are much closer to the surrounding prices of the continuous trading session than the hypothetical prices that would have obtained without Makler participation. These results indicate that the Maklers provide a valuable service to the market. We further calculate the profits associated with the positions taken by the Maklers and find that, on average, they do not earn profits on the positions they take. Their compensation is thus restricted to the commissions they receive.
Our article integrates the manager’s care in the literature on auditor’s liability. With unobservable efforts, we face a double moral hazard setting. It is well-known that efficient liability rules without punitive damages do not exist under these circumstances. However, we show that the problem can be solved through strict liability, contingent auditing fees, and fair insurance contracts. Neither punitive damages nor deductibles above the damages are required.
Compliance with prevailing accounting standards is induced if the expected disadvantage due to sanctions imposed if non-compliance is detected outweighs the advantage of noncompliant accounting choices. The expected disadvantage materialises the threat potential of sanctions imposed by an enforcement agency. The capital market mechanism unfolds an important threat potential if companies expect an adverse share price reaction suite to enforcement actions. Enforcement agencies in turn can make use of this capital market related sanction by releasing information on defections to the market after the settlement of an investigation. The present contribution analyses the capital market reaction on accounting standards enforcement activities of the British Financial Reporting Review Panel (FRRP). After a brief introduction into the legal basis and working procedure of the Panel, the analysis of its activities will serve a dual purpose: firstly, the significance of capital market related sanctions for the overall enforcement regime will be elaborated upon. Secondly, the extent to which capital market related sanctions accomplish their function within the overall enforcement regime will be assessed empirically. The results of the empirical analysis suggest that the capital market related sanctioning by the FRRP may not unfold a sufficient threat potential which is a prerequisite for compliance enhancement.
It is the objective of this paper to determine the voting premium for French shares by comparing the values of voting and non-voting shares, and to analyze the value of the voting rights. The study uses data for 25 French companies which had both types of shares outstanding and traded on the stock exchange during the entire period from 1986 to 1996, or for some time during this interval. The average value of the voting premium is 51,35%.
The paper analyzes the reasons for this surprisingly high value by testing different hypotheses based on dividend differences, the revival) of the voting right, capitalization, shareholder structure, and the share of non-voting capital in total equity capital. The regressions show that the shareholder structure strongly influences the value of the voting premium.
A case study of the attempted takeover of Casino by Promodes shows that investors attach a much higher value to the voting right during relevant situations than at other tomes. Both companies involved had, at the time, two types of shares outstanding and listed. Furthermore the paper shows that non-voting shares have never played an important role in equity finance in France since the companies have different alternatives.
In an international cumparison, France is found to have the second highest voting premium, exceeded only by that of Italy. A probable reason is the low quality of the national accounting standards and the low level of minority shareholder protection.
This study analyses the effects of public sector sponsored vocational training (PSVT) on individuals’ unemployment duration in West Germany for the period from 1985 to 1993. The data is taken from the German Socio-Economic Panel (GSOEP). To resolve the intriguing sample selection problem, i.e. to find an adequate control group for the group of trainees, we employ matching methods. These matching methods use the individual propensity to participate in training, which is obtained by estimating a panel probit model as the main matching variable. On the basis of the matched sample a discrete time hazard rate model is utilized to assess the effects of training participation on unemployment duration. Our results indicate that a significant positive effect on reemployment chances due to PSVT can only be expected for courses with a duration of no longer than six months. No significant positive effects on post-training reemployment chances where found for courses lasting longer than six months. In fact these PSVT courses are significantly less effective at increasing reemployment chances than those lasting no longer than three months. JEL classification: C40, J20, J64
The paper analyzes the incentive for the ECB to establish reputation by pursuing a restrictive policy right at the start of its operation. The bank is modelled as risk averse with respect to deviations of both inflation and output from her target. The public, being imperfectly informed about the bank’s preferences uses observed inflation as (imperfect) signal for the unknown preferences. Under linear learning rules - which are commonly used in the literature - a gradual build up of reputation is the optimal response. The paper shows that such a linear learning rule is not consistent with efficient signaling. It is shown that in a game with efficient signaling, a cold turkey approach - allowing for deflation - is optimal for a strong bank - accepting high current output losses at the beginning in order to demonstrate its toughness. JEL classification: D 82, E 58
During the last years the relationship between financial development and economic growth has received widespread attention in the literature on growth and development. This paper summarises in its first part the results of this research, stressing the growth-enhancing effects of an increased interpersonal re-allocation of resources promoted by financial development. The second part of the paper seeks to identify the determinants of financial development based on Diamond's theory of financial intermediation as delegated monitoring. The analysis shows that the quality of corporate governance of banks is the key factor in financial system development. Accordingly, financial sector reforms in developing countries will only succeed if they strengthen the corporate governance of financial institutions. In this area, financial institution building has an important contribution to make. Paper presented at the First Annual Seminar on New Development Finance held at the Goethe University of Frankfurt, September 22 - October 3, 1997