Dai, Tan, Tang & Xiao: IPOs, Organisational Change, and Management Accounting Change – Evidence from Chinese State-Owned and Non-State-Owned Enterprises

ABSTRACT:

This research aims to contribute to the literature on management accounting and organisational change through the lens of an important corporate event, the initial public offering (IPO). It explores to what extent and how IPOs may trigger management accounting and other organisational changes in two listed state-owned enterprises (SOEs) and one listed non-SOE in China. As informed by the organisational change framework developed by Laughlin (1991), it is found that following IPOs, changes have occurred in the actual management accounting systems deployed, the way in which existing mechanisms are adopted, the personnel involved in exercising control, or the significance attached to certain systems. Following IPOs, management accounting and control has become more formal, tighter, and geared more toward providing accountability to shareholders. However, IPOs tend to take through different organisations differently, and shape management accounting and control practices and other organisational arrangements of the listed firms in different ways.

 

Available for download here.

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Blundell-Wignall: The Bitcoin Question – Currency versus Trust-less Transfer Technology

ABSTRACT:

The financial crisis has led to a widespread loss of trust in financial intermediaries of all kinds, perhaps helping to open the way towards the general acceptance of alternative technologies. This paper briefly summarises the crypto-currency phenomenon, separating the ‘currency’ issues from the potential technology benefits. With respect to crypto-currencies, the paper argues that these can’t undermine the ability of central banks to conduct monetary policy. They do, however, raise consumer protection and bank secrecy issues. The valuation of Bitcoins and price volatility issues are discussed, as well as electronic theft, contract failures, etc., all of which could result in large losses to users and hence ultimate costs to the taxpayer (e.g. the failure to provide adequate private pensions resulting in increased reliance on public pensions). The anonymity features of the crypto-currencies also facilitate tax evasion and money laundering, both of which are major public policy concerns. The technology associated with crypto-currencies, on the other hand, could ultimately shift the entire basis of trust involved in any financial transaction. It is an innovation that creates the ability to carry out transactions without the need for a trusted third party; i.e. a move towards trust-less transactions. This mechanism could work to eliminate the role of many intermediaries, thereby reducing transactions costs by introducing much needed competition to incumbent firms. The generic issues that policy makers need to examine are summarised.

 

Available for download here.

Hülsmann: Financial Markets and the Production of Law

ABSTRACT:

Following the Italian jurist and legal philosopher Bruno Leoni, the economics of financial markets can be interpreted as a special case of the economics of law. Government interventions in money and finance tend to entail the same type of consequences as the production of statutory law. Just as statutory law tends to create short-term certainty at the expense of an ultimate destruction of the law, fiat-money-based finance tends to create short-term funding possibilities at the expense of an ultimate destruction of savings and productive investments.

 

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Poon: China and South-South "Self-Sustaining Growth" – An Opening for Industrial Policy and Catch-Up Development

Abstract
A revival in South-South economic relations has raised the possibility of a shift in global power with profound implications for economic progress and poverty reduction in the developing world. Despite burgeoning South-South economic ties, this discussion paper delves behind the headline numbers to examine the underlying factors driving South-South relations and areas of strategic developmental cooperation. For now, South-South economic flows are being driven by China and its ability to deploy an unorthodox growth model that tilts the economy in favour investment, which is crucial to its ambitious climb up the industrial value chain. Arthur Lewis’ five-sector framework (food, fertilizer, cement, steel and machinery) is used to assess China’s economic trajectory, which clearly remains a work in progress, but shows signs of indigenous technological capabilities taking root – particularly in medium technology capital goods industries. The gap between China’s industrial ambitions and its current capabilities provides a strategic opening for other developing countries to bargain for enhanced opportunities for domestic investment, learning, technical change and structural transformation. At the same time, China’s “real-time” formulation and practice of industrial policy processes are a source of inspiration for other developing countries searching for an alternative growth path. In a post-crisis setting, such demonstrations act as a useful template for re-thinking development priorities and to gradually begin re-casting economic policies within a national framework more conducive to catch-up and self sustaining growth.

 

Available for download here.

Elasrag: Corporate governance in Islamic Finance – Basic concepts and issues

From the Introduction:

Islamic finance is the only example of a financial system directly based on the ethical precepts of a major religion, providing not only investment guidelines but also a set of unique investment and financing products.” Islamic finance is based on Shari’a, the Islamic law that provides guidelines for multiple aspects of Muslim life, including religion, politics, economics, banking, business and aspects of the legal system What Shari’ah compliant financing (SCF) seeks to do is to shape financial practices and accompanying legal instruments that conform to Islamic law. Major financial principles of Shari’ah include a ban on interest, a ban on uncertainty, adherence to risk-sharing and profit-sharing, promotion of ethical investments that enhance society and do not violate practices banned in the Qur’an and tangible asset-backing.(Elasrag 2011)

This book reviews Institutions offering Islamic financial services’ (IIFS’) corporate governance (CG) challenges and suggests options to address them. Four main concerns motivate this attention to the CG of IIFS:
1. CG is important for economic development;
2. the assets of IIFS are significant and growing,
3. sound CG may be more critical for financial than other
organizations, and
4. the CG vulnerabilities of IIFS may not have received adequate attention in conventional CG frameworks This book is one of few papers that highlight the importance of studying corporate governance for institutions offering Islamic financial services. The book is of value in describing governance in Islamic institutions and how there are many issues under the investigation process, especially issues related to the Shari’ah Supervisory board and its functionality.

One of the objectives of this paper is to discuss, and create greater awareness of, some of the crucial issues related to corporate governance in Islamic financial institutions. A second, but in fact more important, objective is to provide, in the light of this discussion, certain essential guidelines to improve corporate governance in these institutions and thereby enable them to not only maintain their momentum of growth and international acceptance but also safeguard the interests of all stakeholders. The paper gives particular attention to the mechanisms for corporate governance, including the Board of Directors, Senior Management, shareholders, depositors, and regulatory and supervisory authorities. It also focuses on the effective management of risks and, in particular, on creating a supporting environment through moral uplift, social, legal and institutional checks, greater transparency, internal controls, and Shari’a as well as external audit. The paper also indicates briefly the shared institutions that are needed for effective corporate governance.

 

Available for download here.

Cieślik: Investment strategy of sovereign wealth funds from emerging markets – the case of China

ABSTRACT:

Chinese sovereign wealth funds SWFs continue to expand rapidly and have become increasingly active in real-time strategic transactions recently. They have focused not only on financial markets in developed countries, but they also concentrate on commodity investment in emerging markets (mainly in African or Central Asian markets). The main goal of this paper is to examine investment patterns and performance of two large Chinese sovereign wealth funds: the State Administration of Foreign Exchange Investment Company (SAFE IC) and the China Investment Corporation (CIC). In the absence of official data on the activities of the funds, the article is based largely on press releases relating to the operation of funds and corporate reports of the companies invested in by the Chinese SWFs. The paper presents sectoral and geographical directions of China’s SWFs investment and tries to describe how the investment strategy of the aforementioned vehicles changed until mid-2013. The main limitation of the adopted methodology derives from the lack of information and poor transparency of the analysed vehicles. Moreover to obtain the correct information on the details of fund investments (size, value, date) each press release requires extensive verification.

 

Available for download here.

Belouafi & Chachi: Islamic Finance in the United Kingdom – Factors Behind its Development and Growth

ABSTRACT:

This paper aims at capturing the latest developments and growth of Islamic finance (IF) in the UK. The study also aims at shedding light on the driving factors that have been attributed to the rise of this phenomenon in this country. To meet these objectives, the paper utilizes historical and thematic analytical methodologies to draw some lessons and recommendations. The results show that the UK is the country number one in the West, in view of the number of institutions and Universities involved in the educational and training aspects relating to IF, the number of licensed intermediaries providing ‘Islamic’ financial services, and the number of law firms involved in legal and consultancy services in the IF field. Among the prime factors that have been explored to explain the gradual, but steady progress of IF in the country, are: (i) – The UK’s government proactive role, and (ii) – The active role played by a number of UK Muslim organizations.

 

Available for download here.

Goldhaber & Grout: Finding Common Ground In Pension Reform – Lessons from the Washington State Pension System

From the Introduction:

In the wake of the economic recession, public pension plans have emerged as an increasingly salient and contested public policy issue. The debate over public pensions is driven in large part by the fact that many public retirement systems are significantly under-funded. For example, numerous estimates peg the national shortfall in public pension assets relative to liabilities at several trillion dollars.

Given the pervasiveness of funding shortfalls, there have been proposals to shift public-sector pensions from defined benefit (DB) plans towards defined contribution (DC) plans which are, by definition, fully-funded.3,4 However, this approach is not without controversy, as it shifts the future risk associated with investment returns earned on pension assets away from taxpayers and towards employees and raises questions about employee preferences for different types of pension plans and how reform might affect retirement security and workforce composition. In addition, moving towards a DC-type pension system does nothing, by itself, to address existing shortfalls.

 

Available for download here.

Brunnermeier: Bubbles and Central Banks – Historical Perspectives

ABSTRACT:

This paper categorizes and classifies some of the most prominent asset price bubbles from the past 400 years and documents how central banks (or other institutions) reacted to those bubbles. We first describe the different types of bubbles, the economic environment in which they emerged, as well as the severity of ensuing crises. We then derive a number of hypotheses regarding policy responses, broadly distinguishing between cleaning, leaning, and macroprudential policies. These hypotheses are then evaluated by providing illustrative supporting or contradicting evidence from individual bubble episodes.

The historical evidence suggests that the emergence of bubbles is often preceded or accompanied by an expansionary monetary policy, lending booms, capital inflows, and financial innovation or deregulation. Bubbles preceded by a lending boom are typically followed by banking crises and severe recessions. The severity is less linked to the type of bubble assets than to the way of financing (debt vs. equity). Crises are most severe when they are accompanied by a lending boom, high leverage of market players, and when financial institutions themselves are participating in the buying frenzy. Regarding policy responses, we find that “cleaning up the mess” policies tend to be costly. “Leaning against the wind” through interest rate policies or macroprudential tools, such as the introduction of loan‐to‐value ratios, specific reserve requirements, or the restriction of lending in specific market segments, help to mitigate crises in some instances. However, the timing of the interventions is of the essence. Frequently, such measures are ineffective because they come too late or are too weak. Sometimes they are so strong that they lead to a bursting of the bubble. In such cases, “pricking” may still be better than having to face an even larger bubble later on but early intervention might have been even less harmful. The evidence suggests that macroprudential instruments can be a useful alternative to interest rate tools and may help to dampen bubble developments. However, they can also be ineffective if they are circumvented by an expansion of unregulated activities. The historical evidence has some resonance for today, and we derive a number of policy implications.

 

Available for download here.

 

Alfaro, Chari & Kanczuk: The Real Effects of Capital Controls – Credit Constraints, Exporters and Firm Investment

ABSTRACT:

This paper evaluates the effects of capital controls on firm-level stock returns and real investment using data from Brazil. Theory suggests that the imposition of capital controls can drive up the cost of capital and curb investment. Credit constraints are also more likely to bind for firms that are more dependent on external finance. The data suggest that there is a significant decline in cumulative abnormal returns for Brazilian firms following the imposition of capital controls in 2008-2009 consistent with an increase in the cost of capital. Conditioning on firm-characteristics such as firm size and export status, the data suggest that large firms and the largest exporting firms are less affected by the controls. Firms that are more dependent on external finance are however more adversely affected by the controls. The evidence is consistent with the hypothesis that capital controls increase market uncertainty and reduce the availability of external finance, which in turn lowers investment at the firm-level.

 

Available for download here.