In the wake of substantial losses suffered by derivatives dealers and end users in recent years, questions are being raised about the type of regulatory structure needed to…
Abstract
In the wake of substantial losses suffered by derivatives dealers and end users in recent years, questions are being raised about the type of regulatory structure needed to monitor and control the use of derivatives. Financial institutions believe that the issue can be resolved by tighter internal controls, whereas regulators believe there is a need for more direct oversight. The conventional view is that derivatives are highly useful instruments which simply need to be handled with care. In this paper, it is argued that this belief is misplaced and, although useful for hedging, derivatives are a high risk technology which pose inherent difficulties for regulation and control. As suggested by Perrow, where the environment of such technologies is both complex and tightly coupled, such that any significant failure cannot be contained, the potential for catastrophe is significant. The foregoing analysis shows that derivatives operate in a complex and tightly coupled environment, posing a significant threat to the financial system. Regulatory reform would require much greater cooperation between regulators and a proactive approach to regulation rather than a reactive one.
The most significant recent reform in international bank regulation has been in the area of capital adequacy, first instigated by the BASLE Committee and formally introduced in…
Abstract
The most significant recent reform in international bank regulation has been in the area of capital adequacy, first instigated by the BASLE Committee and formally introduced in 1988. These reforms have had, and continue to have, significant economic consequences. However, the concept of capital adequacy and its usefulness in bank regulation has attracted a significant amount of criticism from the academic community. This raises the question as to why it was that capital adequacy was adopted as a tool for international bank regulation, despite major concerns with its rationale and effectiveness. Although the topic of capital adequacy has attracted an increasing body of research, the reasons behind the adoption and implementation of capital adequacy by international bank regulators have remained unexamined in the literature. This paper investigates the rationale for capital adequacy, citing documentary and interview evidence surrounding the key decisions, and in the process traces the dynamics of international bank regulation. The principal finding is that regulatory reform was influenced by tradition, convenience and likely acceptability rather than by any serious considerations of regulatory objectives and potential effectiveness of the capital adequacy reforms. This corresponds to findings about the origin and dynamics of regulation in the political economy literature.
For many years, the banking industry has required close supervision owing to its central yet delicate role in economic life. In a short time, the business has moved from a local…
Abstract
For many years, the banking industry has required close supervision owing to its central yet delicate role in economic life. In a short time, the business has moved from a local, country‐based jurisdiction to a global arena, on a massive scale. This development has forced regulation to adopt an international perspective, to keep in step with the commercial developments. This paper analyses this move from local to global regulation of banking, finding that the efforts seem to be reactive rather than proactive. In addition, the regulatory endeavours have become enmeshed in international economic competition, and sophisticated regulatory arbitrage is being conducted on a global playing field. Thus, regulatory objectives and standards are being increasingly compromised or subverted. Paradoxically, just as the banking business is becoming increasingly risky and scandalous, regulation is becoming weaker, posing serious challenges to the future of the world economy and society.
As money has come to play a central role in modern society the risk of losing money, financial risk, is a major concern for individuals and societies. Yet the understanding and…
Abstract
As money has come to play a central role in modern society the risk of losing money, financial risk, is a major concern for individuals and societies. Yet the understanding and analysis of financial risk in modern finance theory is very weak and incomplete. Its definitions are muddled with risk management issues, implying that only manageable risks are relevant for scientific analysis. There is also an explicit bias towards measurable risks, implying that unmeasurable risks are somehow irrelevant. Risk analysis in finance is devoid of an ethical stance, a prerequisite for any reasonable discussion of risk. Beck's ‘Risk Society’ is a powerful critique of modern science and its inability to deal with the significant increase in social and ecological risks created by modern industrial society. This paper uses concepts generated by Beck to unravel the various dimensions of financial risk, many of which have hitherto been ignored in the mainstream finance literature. It reveals the extent to which the analysis and understanding of risk in modern finance theory is partial and incomplete. Suggestions are then made for how the analysis of financial risk could be modified to include a wide range of individual, ethical and societal dimensions.
The deregulation of international banking and financial markets has raised a number of concerns about their fragility and risk of collapse through systemic contagion. A large…
Abstract
The deregulation of international banking and financial markets has raised a number of concerns about their fragility and risk of collapse through systemic contagion. A large amount of research has been conducted to explore policy solutions to this problem. However, there is little work in the literature which attempts to understand the various components and dimensions of systemic risk. This paper develops a comprehensive understanding of systemic risk, by using the theoretical framework provided by Perrow in his seminal book, ‘Normal Accidents’. It elaborates and exposes three of the central components — risk, complexity and coupling, which together make the modern global financial system significantly fragile. It is hoped that this understanding will create a common basis for future discussions of systemic risk and also help towards developing policy reforms.
Despite the existence of accounting standards, there still remains a degree of flexibility in their interpretation and gaps between rules. It is alleged that management practises…
Abstract
Despite the existence of accounting standards, there still remains a degree of flexibility in their interpretation and gaps between rules. It is alleged that management practises “creative compliance” to influence the picture of financial performance portrayed in the annual report. This practice is not necessarily “illegal” because it need not violate the letter of any rules, but may challenge their spirit. Since accounting is an integral part of the regulation and governance of the corporation, the practice of creative compliance makes accounting regulation appear weak and ineffective. Traces and analyses the objectives underlying the design and implementation of one major creative accounting scheme through a case study of financial innovation in convertible securities. The evidence highlights the pressures on management to perform on specific accounting ratios, and the extent to which companies were willing to go (with assistance from bankers and lawyers) to practise creative accounting. Shows that the conventional restraints on these practices, such as auditors, analysts and the media, have not been effective. What emerges is an unbalanced conflict between the regulators and the regulated corporations, where the latter, having access to significant financial and professional resources, appear to have a consistent upper hand.
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Juliet D’Souza and Atul K. Saxena
Reviews previous research on dividend policy, most of which is US‐based, and presents a worldwide study of the relationship between dividend payout, agency costs, market risk and…
Abstract
Reviews previous research on dividend policy, most of which is US‐based, and presents a worldwide study of the relationship between dividend payout, agency costs, market risk and investment opportunities. Finds that the dividend payout ratio is significantly negatively related to institutional ownership of a firm’s shares (i.e. agency costs) and its beta value (i.e. market risk) but independent of investment decisions. Discusses consistency with other research, recognizes that other factors are also likely to influence dividend policy and calls for further research.
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R.V. ShabbirHusain, Atul Arun Pathak, Shabana Chandrasekaran and Balamurugan Annamalai
This study aims to explore the role of the linguistic style used in the brand-posted social media content on consumer engagement in the Fintech domain.
Abstract
Purpose
This study aims to explore the role of the linguistic style used in the brand-posted social media content on consumer engagement in the Fintech domain.
Design/methodology/approach
A total of 3,286 tweets (registering nearly 1.35 million impressions) published by 10 leading Fintech unicorns in India were extracted using the Twitter API. The Linguistic Inquiry and Word Count (LIWC) dictionary was used to analyse the linguistic characteristics of the shared tweets. Negative Binomial Regression (NBR) was used for testing the hypotheses.
Findings
This study finds that using drive words and cognitive language increases consumer engagement with Fintech messages via the central route of information processing. Further, affective words and conversational language drive consumer engagement through the peripheral route of information processing.
Research limitations/implications
The study extends the literature on brand engagement by unveiling the effect of linguistic features used to design social media messages.
Practical implications
The study provides guidance to social media marketers of Fintech brands regarding what content strategies best enhance consumer engagement. The linguistic style to improve online consumer engagement (OCE) is detailed.
Originality/value
The study’s findings contribute to the growing stream of Fintech literature by exploring the role of linguistic style on consumer engagement in social media communication. The study’s findings indicate the relevance of the dual processing mechanism of elaboration likelihood model (ELM) as an explanatory theory for evaluating consumer engagement with messages posted by Fintech brands.
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Jonida Carungu and Matteo Molinari
This paper explores the stereotype of the accountant in Florentine medieval popular culture based on literary works and from a historical perspective. It aims to highlight how…
Abstract
Purpose
This paper explores the stereotype of the accountant in Florentine medieval popular culture based on literary works and from a historical perspective. It aims to highlight how stereotypes change with time and represent the cultural and historical evolution of a society. This research challenges Miley and Read (2012), who stated that the foundation of the stereotype was in Commedia dell'arte, an Italian form of improvisational theatre commenced in the 15th century.
Design/methodology/approach
The authors applied a qualitative research method to examine the accountant from a medieval popular culture perspective. The analysis consists of two phases: (1) categorisation of the accountant stereotype based on accounting history literature and (2) thematic analysis of The Divine Comedy (1307–1313) and The Decameron (1348–1351). The authors explored a synchronic perspective of historical investigation through a “cross-author” comparison, identifying Dante Alighieri as the first key author of medieval popular culture. During his imaginary journey through The Divine Comedy, Dante describes the social, political and economic context of the Florentine people of the 14th century. Then, with its various folkloristic elements, The Decameron of Giovanni Boccaccio becomes the “manifesto” of the popular culture in the Florentine medieval times.
Findings
This study shows the change of the accountant stereotype from the medieval age to the Renaissance. The Divine Comedy mainly connotes a negative accountant stereotype. The 14th century's Florentine gentlemen (“i galantuomini”) are apparently positive characters, with an ordered and clean aspect, but they are accused of being usurers. Dante Alighieri pictures the accountant as a “servant of capitalism”, “dishonest person, excessively fixated with money”, “villain and evil” and “excessively rational”. Giovanni Boccaccio mainly portrays a positive accountant stereotype. The accountant is increasingly more reliable, and this “commercial man” takes a more prestigious role in the society. In The Decameron, the accountant is depicted as a “hero”, “gentleman”, “family-oriented person with a high level of work commitment” and “colourful persona, warm, and emotional”. Overall, the authors provided new evidence on the existence of the accountant stereotype in the Florentine medieval popular.
Originality/value
This study engages with accounting history literature accountants' stereotypes in an unexplored context and time period, providing a base for comparative international research on accounting stereotypes and popular culture. Additionally, it addresses the need for further research on the accountant stereotype based on literary works and from a historical perspective. Therefore, this research also expands the New Accounting History (NAH) literature, focussing on the investigation of the accountant stereotype connotations in the 14th century.
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Sri Yogi Kottala, Ch Shankar and Atul Kumar Sahu
This study aims to present an integrated green transport sustainability model (GTSM) to comprehensively understand and explain the multifaceted dynamics of green transport…
Abstract
Purpose
This study aims to present an integrated green transport sustainability model (GTSM) to comprehensively understand and explain the multifaceted dynamics of green transport initiatives. The purpose of the study is to evaluate gaps in understanding the interactions between socio-economic and environmental goals in green transport systems using structural equation modelling (SEM) to help in drafting sustainable transportation policy for larger acceptance and true implementation by the stakeholders. The study examines different constructs that collectively influence green transport policy effectiveness (GTPE). Ultimately, the study aims to provide a robust framework for improving the effectiveness of green transport policies and regulations.
Design/methodology/approach
Grounded in empirical evidence, the study utilizes SEM to demonstrate the interplay between policymaking, socio-economic factors, technological consideration and environmental outcomes in green transport. The research framework is developed based on the comprehensive review of the literatures to embrace sustainability in transportation considering stakeholders perceptions. The study navigated a GTSM under socio-economic and environmental goals for road-mapping sustainability and larger acceptance of green transportation.
Findings
It is found that technological advancements in transportation are the most significant determinants of GTPE. This implies the need to develop advancements in technologies to embrace the larger acceptance of green transport. Promotion of environmentally sustainable transportation practices, socio-economic factors and use of eco-friendly transportation modes are also found as significant predictors of GTPE, which suggested that the policies aimed at up-gradation of socio-economic standards and the use of environment friendly modes of transport can help in promoting the active involvement of stakeholders to use green transportation.
Originality/value
The study originally investigated critical constructs to assist in preparing sustainable transportation policy for larger acceptance and true implementation by the stakeholders. The study reciprocated its originality by presenting an integrated model related with green transport sustainability dimensions based on theoretical constructs to examine the interplay between policy effectiveness, technological advancements, socio-economic factors and environmental outcomes. The study addressed the key pillars of green transportation and originally highlighted the importance of socio-economic factors and technological advancements in advancing green transport sustainability. It is recommended that the policymaker should make investments in green transport infrastructure and should design a policy for integration of green transportation with a focus on the engagement of all stakeholders for practical implementations.