G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; GoodwillReturn

This study constructs two eight-asset green-energy portfolios, featuring stocks from the U.S. and Europe, to assess which portfolio delivers superior risk-adjusted performance. The analysis utilizes advanced performance metrics, the Stutzer and Omega ratios, with the traditional Sharpe ratio serving as a benchmark. Portfolios are evaluated across both pre-crisis and crisis periods. The results reveal differences in the structures of the Sharpe and Stutzer portfolios, underscoring the Stutzer ratio's ability to improve portfolio performance. Additionally, the Omega portfolio enhances the analysis by allowing the selection of varying thresholds, offering greater adaptability to align with diverse investor preferences. When comparing the U.S. and European portfolios, the U.S. portfolio consistently demonstrates better risk-adjusted performance. This advantage stems from factors such as favorable market dynamics, supportive government policies, greater access to capital, advanced technological innovation, and effective corporate strategies.

This paper investigates current budgeting practices of Czech companies. The article aims to provide recent empirical evidence on the impact of business complexity on budgeting in the Czech Republic, with the main focus on modern budgeting methods. Despite the plethora of critical voices against traditional budgeting, budgeting remains an essential part of most companies' corporate governance. The empirical investigation is based on a questionnaire survey and its statistical evaluation using tests of goodness of fit and cluster analysis. Fundamental research questions of the paper include the influence of business complexity on Czech companies' budgeting practices, factors that currently play an essential role and their importance, and the approach of Czech companies to modern budgeting practices. The results indicate that Czech firms use various financial management tools, including budgets. Traditional budgeting methods are still dominant in most companies; empirical data evaluation confirmed mild differences between companies financed by domestic and foreign capital; nevertheless, those distinctions were not confirmed by statistical testing. Essential factors in the budgeting practice of the respondents are the connection of budgets to strategic planning and the possibility of using budgets as a tool for business performance evaluation.

The aim of the paper is to analyse the association between the use of accrual-based and real earnings management practices before the company goes public and the decision of institutional investors on buying or refraining from buying shares offered in initial public offering (IPO). The sample consists of 258 Polish new stock companies over the period 2005-2020. We find that such companies refrain from massive earnings management in the pre-IPO period: both real and accrual-based. However, we find evidence that the presence of institutional investors in the IPO is related to earnings inflation (selling, general and administrative expenses). Our study contributes to the debate on the role of institutional ownership in the IPO process in Central and Eastern Europe.

This paper examines the impact of financial market development, financial crises and deposit insurance on bank risk based on macro data of 86 countries during the period 1998-2014. The results show that banking sector development and stock market development have opposing effects on bank risk measured as bank non-performing loan ratio. The introduction of an explicit deposit insurance system plays a significant role in reducing banks’ risk. However, the bank market development after the introduction of this system also increases banks’ risk. The impact of financial market development and deposit insurance system on banks’ risk was more significant before the 2008 financial crisis. It is found that there is a nonlinear relationship between financial market development, deposit insurance, financial crises and banks’ risk. The stock market development has an asymmetric effect on banks’ risk.

When there is bad news hoarding from managers, returns of stocks are no longer efficient. We hypothesize that a proxy for efficient returns predicts stock price bubbles, crashes and crash risk. We find evidence in support of our hypotheses. Lagged price efficiency significantly predicts bubbles, crashes and crash risk in multivariate linear regressions and logit regressions, as predicted by our hypotheses. We also find that the lagged probability of bubbles is only correlated with future returns. In contrast, the lagged probability of crashes is correlated with both future returns and fundamental values of stocks. This result validates our explanation for the formation of bubbles and crashes. Finally, the out-of-sample accuracy ratio of our bubble and the crash prediction model is higher than in previous studies. Our results provide alternative explanations of the mechanics of stock price bubbles and crashes and are helpful for academicians, investors and policymakers.

 The aim of this study is to provide an overview of the principles of IFRS 9 implementation and to analyse its impact on the Czech banking sector. Unlike the previous IAS 39 standard, valid until the end of 2017, the new accounting rules require banks to estimate forward-looking expected credit losses (ECL) while considering relevant exposure level information as well as available macroeconomic predictions. Due to the increased complexity of the ECL models and changing macroeconomic expectations, we hypothesize that the new standard leads to increased volatility of loan loss allowances. This hypothesis is empirically tested and more or less confirmed by an analysis of the quarterly flows of allowances for a sample of large Czech banks from the years 2016-2017 under IAS 39 and from 2018-2019 under IFRS 9.

This study aims to enhance the empirical evidence on the determinants of collateralized borrowing by small and medium-sized enterprises (SMEs) by presenting new empirical evidence on emerging market countries. Using the data from World Bank Enterprise Surveys from nine emerging markets, we find that older SMEs are less likely to provide collateral for bank loans. The results also reveal that loans received by firms whose top managers are more experienced in the industry and firms with a higher percentage of material inputs and services purchased on account are less likely to be secured. SMEs in the manufacturing industry are more likely to provide collateral for bank loans than service industry firms. The likelihood that the loan is secured is higher for firms with larger loan sizes. Furthermore, our results indicate that the probability of pledging collateral is higher for SMEs that operate in countries with higher borrower-bank proximity.

For successful monetary policy implementation, it is crucial to know the pricing behaviour of banks and the determinants of banks' lending rates. With the onset of the global financial crisis, markets in unsecured lending ceased to provide a reliable level of market costs, while markets in cross-currency products gained significance. The aim of this research is to gauge the extent to which the EUR-CZK cross-currency basis spread is reflected in the corporate lending rates provided by Czech banks. We discovered that just over 50% of the changes in the basis pass through to the lending rates. The greater part of this pass-through can be identified in EUR lending rates, which are, as a result, higher. In the case of CZK, the negative basis should tend to decrease the lending rates. However, the impact is fairly limited, and we were not able to confirm any significant long-run relationship.

This paper investigates how lender-borrower relationships affect credit cost for small and medium sized companies (SMEs). We use data within the period 2006–2015 for the Polish SME sector and deploy panel regression models to analyse how the number and length of banking relationships influence the financial costs of a random sample of Polish SMEs. We document that the price of capital decreases as relationships progress. Outcomes of the research are thus inconsistent with the “hold-up” hypothesis. Moreover, we find evidence that supports the view that multiple banking relationships generate more financial benefits for companies than a relationship with one lender.

The aim of this article consists in the analysis of the beta coefficient presented in different areas for three types of financial institutions: banks, investment banks and life insurance companies. In the final evaluation, we analyse whether the beta coefficient has a high tendency to reach number one and whether there is a relatively stabilized position of the beta coefficient different from one for a certain period and a certain financial institution on a certain market and whether it is possible to avoid a relatively complicated process of beta coefficient identification in income valuation. For that reason, the analysis of the five-year beta coefficient in the years 2000-2014 was performed for the USA, developed European, emerging European, developed Asian and emerging Asian regions. The analysis proved that the beta coefficient values are lower than the "magic one", meaning that using a beta coefficient equal to one is possible only in some specific cases. Also, stability of the beta coefficient with some permitted deviation was identified only for some financial institutions and for some markets, for example 0.6 for banks on the developed Asian market and 0.35 on the US market.

This paper aims to study the dynamic relationship between dependent variables of trade credit (net trade credit to total assets and net trade credit to sales), and six independent variables (profit margin, liquidity ratio, and the dummies collection, credit, size, and crisis) using panel vector autoregression during the period 2004-2013 considering data from eight European countries. The results indicate that net trade credit is negatively influenced by crises, forcing firms to use it less due to survival effects but imposing higher trade restrictions. Notwithstanding, net trade credit to sales is positively influenced by the liquidity ratio and profit margin, and vice-versa, but has a negative relationship with credit and collection dummies, imposing credit shortenings and forcing reliance on short-term credit. For the overall period, firms seem to have sold more than having bought on credit due to tightening trade credit, an effect of the financial crisis.

This paper investigates the short and long-run relationship between credit risk and two bank profitability indicators ROA and ROE in Central and Eastern European countries during the period from 2000 to 2010. Results from previous research mostly confirm the negative relationship between profitability and credit risk by considering the current or one year lagged value of profitability. Certain crisis indicates that more profitable banks before the crisis became more risky during the time of crisis. These results motivate us to upgrade the model of credit risk by including earlier values of profitability. Results indicate that two or three years are necessary for growth of profitability to increase credit risk. However, the long-run relationship between foreign banks' profitability and credit risk is positive, for both indicators. For the domestic bank, the long-run effect of ROA on credit risk is positive, while for ROE this relationship is negative.

This study investigates the sensitivity of financing, investment, and distribution decisions to changes in operating cash flow, and whether these sensitivities depend on whether or not firms are financially constrained. Using a sample of 2,650 firm-years of Turkish firms for the period 1996 to 2013, we find that an increase in the short-term cash flows is associated with an increase in cash balances, irrespective of whether or not firms are financially constrained. However, unconstrained firms hold a larger cash balance than constrained firms. Dividends are positively related to the short-term cash flows of both types of firms. Investments are not sensitive to cash flow for either type of firms. An increase in their short-term cash flow induces the financially constrained firms to reduce debt financing, but makes the unconstrained firms increase their debt financing and reduce equity financing. Although firms in general prefer to use part of the saved cash in the long term, they do not deplete their cash savings. Constrained firms resort to debt financing in response to an increase in their long-term cash flow.

This article focuses on bank valuation standards as some recommended steps how to evaluate some concrete commercial bank by the market value. Different approaches, methods and models were analysed and the final recomendations were stated. Basic valuation approaches such as the income approach, the market-based approach and the asset-based approach used for traditional entreprises valuation are recommended also for the commercial banks valuation, but it is necessary to adjust them according to some specifics of banks. After the precise analysis it is possible to recommend the application of Market-Based Valuation or in other words Relative Valuation in the combination with Bond Pricing Model. This is the best choice, but only in case there is some comparable bank or comparable transaction available. In the opposite case it is possible to recommend the application of the income approach based on DDM or DCFE in the combination with Bond Pricing Model or with Excess Return Model. Asset-Based Valuation could be used in case of valuation of different type of bank´s asset or in case of the valuation for accounting or tax purposes. The most important problem lies also in the identification of the coefficient beta that oscillates in case of the large maturity banks according to the "magic one".

This article aims to evaluate the research of the different published opinions on the insurance company valuation, to analyse them and to judge their use in practice. The process of the va-luation of the insurance company is very complicated and there are not many theoretical studies concerning this problem. The valuation of insurance companies should take into account the specifics of insurance activities and should look for the optimal approach. There were different approaches available - the income approach, the market comparison approach, the assets-based approach and the Bond Pricing Model. They can be combined and so there can be created different types of models. The two most important models of Massari, Gianfrate and Zanetti (2014) and Hrdý, Ducháčková (2014) were analysed and compared. Both models are applicable in practice. For the final valuation standards it could be recommended to use minimum of two methods of valuation or one of the two in detailed analysed models. Keyword: valuation, insurance company, standards, models

I document a new channel that can be used by managers who can take advantage of investors preference for logo colours to influence their perception of the financial reports and thus indirectly affect firm value. Evidence suggests that firms having warm colours as a major logo colour, fewer colours used in the logo, and recognizable elements in the logo are associated with lower earnings management and higher firm value. My findings remain stable across different robustness checks.

The choice of averaging method has considerable impact on the average yield of a financial variable. Usually, geometric average is preferred, though dissenting opinions exist. Here it is shown that the problem has a consistent solution, which is called the horizon-consistent average. It is shown why geometric and arithmetic average calculations are almost always biased. When using company valuation's most common SP500 dataset by Ibbotson Associates for 1928-2012 and the recommended 10-year forecasting horizon, consistent with the 10-year government securities in a CAPM model, the arithmetic average is severely flawed. On the other hand, the geometric average for similar horizons does not deviate much from the horizon-consistent average.

This paper relates to the initial public offering problem and companies' profitability levels before and after this event. In the presented study, profitability ratios in the year before initial public offering increase over the previous year, and then, after the IPO, fall. This confirms the phenomenon of distorting the level of profit before the IPO and partially equity dilution after the IPO.

This study investigates the exchange rate exposure of Turkish energy firms from 2002 to 2010. We employed a regression model that is constructed by adding exchange rate and oil price factors to Fama-French Three Factor Model. Empirical results suggest that exchange rate risk appears to impact energy firms diversely. Among the 9 energy firms in our sample, only 2 firms seem to be exposed to exchange rate risk. These two energy firms appear to have larger open foreign currency positions and do not use any hedging methods. On the contrary, rest of the energy firms that are not found to be affected by exchange rate risk either seem to have smaller open foreign currency positions or employ hedging methods to manage exchange rate risk. Overall, our results provide evidence that energy firms exposed to exchange rate risk share similar characteristics.

Current paper has focused on the capital structure management theories. The theoretical part of the study firstly highlights the differences between trade-off theories and pecking order theories. In the empirical part there are then proved some significant relationships between financial indicators (debt/equity ratio and return on equity) of homogenous data sample from the Czech branch of building area. The aim of the study is to prove the differences between the capital structure development that are based on the type of the Czech companies' ownership in the selected NACE industrial branch and to point out some other particularities. The contribution of the paper is a comparison of the theory as well as practice of this issue in the Czech Republic. For pooled sample there are used selected financial indicators of 57 building companies, all with turnover of more than CZK 1.5 billion. The choice of this criterion was a result of a change in efficiency in Czech economy observed in the selected period. We can assume that this factor will have low influence on the selection of financial resources of large corporations. We may even say that for large companies the availability of financial resources remain unchanged. We have obtained annual data from 2004 to 2011. Due to such short estimation period, but the width of pooled sample on the other hand, it is used generalized method of moments (GMM) panel regression. There are also arguments of motivation to analyse business branch of building specifically. Moreover, an analysis is split according to ownership of companies into two categories, for the Czech and foreign owners. Based on the recent literature there has been made and tested three hypotheses. Results of the article have clearly proved the separation of managers from owner's positions. On the top of that, domestic companies are not pushed to distribute the realized profit so much as foreign owners that prefer the return of their means invested into business. There is also a suggestion of future interests in research focused on other Czech business branches, too.

In the last few decades, a valuation of intangible assets is an activity of particular importance, not only because of growing number of transactions with intangibles but for accurate financial reporting as well. In this discipline, a special area is dedicated to the research of different factors that affect the value of intangibles. Royalty rate, a price of the licensed intangible, is a typical measure of an intangible asset's value. This research paper aims at testing empirically selected factors that have been identified by theoretical literature as well as by licensing practice as relevant in determining the level of royalty rates. For this purpose, a multi-factor linear regression model is built using the latest possible sample of licensing transactions from consumer durables industry from 2002 to 2006. The authors make tests of dependent variable (royalty rate) on financial factors as well as on factors coming from different provisions of licensing agreements. Based on a sample of 67 transactions, the financial factors revealed themselves to be statistically negligible, while some license provisions, in particular the extent of rights granted and the license term appeared to be highly significant in determining the royalty rate level.

The 2007-2009 global financial turmoil was exacerbated by a low level of financial market regulatory coordination. Historical experience has shown that despite implementing regulations, supervision and macroeconomic policies, the financial industry regularly experiences crises. Consequently, a similar impact might be expected from the Basel III new bank regulatory framework. The aim of this paper is two-fold; in the first part dedicated to theory we describe the Basel III regulatory standards and argue that this regulation is not sufficient and will not prevent financial markets from experiencing future crises. Moreover, we discuss implementation of new banking regulation in Europe: the Capital Requirements Directive IV and stricter capital requirements for European banks set by the European Banking Authority in 2011. In the second part, we focus on an empirical analysis of the impact of stricter capital requirements as defined in the Basel III framework on the market value of European banks. Our analysis employs the fixed effects methodology on the financial data collected from 172 banks listed on European stock exchanges during the 2005-2011 period. We conclude that the impact of the Basel III regulation on the value of bank shares will probably be perceived negatively by the market, which could be reflected in a drop in the market value of the observed banks.

We examine the relationship of selected Board of Directors' characteristics and firm's financial performance. Using a sample of large U.S firms in 2005-2009, we find that the degree of insider ownership influences positively firm performance, because it reduces agency problems. The age of the Board of Directors matters, to a certain degree, as well. Younger members are probably willing to bear more risk and to undertake major structural changes to improve firm's future prospects. On the other hand, we find that independent directors reduce firm performance and this negative effect was even more important during the recent financial crisis. We suppose that independent directors prefer overly conservative business strategies in order to protect shareholders, but this goes at the cost of lower firm's performance. All in all, our results suggest that corporate governance is important for firm's financial performance.

This paper presents the construction of a new indicator (named the JT index) evaluating the economy's financial stability, which is based on a financial scoring model estimated on Czech corporate accounting data. Seven financial indicators capable of explaining business failure at a 1-year prediction horizon are identified. Using the model estimated in this way, an aggregate indicator of the creditworthiness of the Czech corporate sector (the JT index) is then constructed and its evolution over time is shown. This indicator aids the estimation of the risks of this sector going forward and broadens the existing analytical set-up used by the Czech National Bank for its financial stability analyses. The results suggest that the creditworthiness of the Czech corporate sector steadily improved between 2004 and 2006. However, the JT index for 2007 and 2008 deteriorated what could be explained through global market turbulences while the further decrease in 2009 rather by the global recession. The used methodology for the construction of the JT index might be suitable for decision makers when evaluating the economy's financial stability. Although our research is done as a case study on the Czech Republic, its basic idea might be easily applied to other countries as well.

This paper focuses on operational risk measurement techniques and on economic capital estimation methods. A data sample of operational losses provided by an anonymous Central European bank is analyzed using several approaches. Multiple statistical concepts such as the Loss Distribution Approach and the Extreme Value Theory, including scenario analysis method, are considered. Custom plausible loss events defined in a particular scenario are merged with the original data sample and their impact on capital estimates and on the financial institution as a whole is evaluated. Two main questions are assessed - what is the most appropriate statistical method to measure and model operational loss data distribution and what is the impact of hypothetical plausible events on the financial institution. The g&h distribution was evaluated to be the most suitable one for operational risk modeling. The method based on the combination of historical loss events modeling and scenario analysis provides reasonable capital estimates and allows for the measurement of the impact of very extreme events on banking operations.

The results of stress tests of the Czech banking sector based on credit risk and credit growth models, applied to the household and corporate sector are presented in the paper. The use of these newly developed models enables the stress tests to be linked to the CNB's official quarterly macroeconomic forecast. In addition, the article updates the stress scenarios, including simple sensitivity analyses of credit risk for individual sectors. Based on the analysis, an answer is sought to the question of whether the observed credit growth to corporate sector and households poses any threat to the stability of the banking sector. The analyses conclude that the banking sector as a whole seems to be resilient to the macroeconomic shocks under consideration.

This paper examines sustainability of current account for Turkey during the period 1987:Q1 - 2002:Q4. Using the usual intertemporal borrowing constraint, I have tested for a long-run relationship between Turkey exports and imports (measured in real terms to real gross domestic product) using quarterly data. In my empirical analysis of the sustainability of current account for Turkey, cointegration approaches have been used. Empirical results suggest that there exists a unique long-run or equilibrium relationship among real exports and imports and their percentage to real GDP and their estimated cointegration factor (b) is very close to 1. The empirical findings suggest that the current account of Turkey is sustainable in the long-run.

This paper analyzes capital structure of listed companies in Visegrad countries during the period from 2000 to 2001. The results are based on the database, which assembles financial reports of listed firms. In general, leverage of these firms is relatively low if measured in book value, but it is relatively high if assessed in market value. Quasi-maximum likelihood estimation is used in order to investigate the determinants of capital structure. According to the results, leverage of a company is positively correlated with size and it is negatively correlated with profitability, tangibility and non-debt tax shields. There is a negative relationship between leverage measured in market value and growth opportunities. Moreover, leverage decreases with volatility, albeit on a lower level of statistical significance.

In this paper, the informative value of firm capital structure is analyzed. In the first part, a theoretical background regarding capital structure theories is presented. In the second (empirical) part, the Ohlson (1995) valuation framework is used in order to analyze the informative value of firm capital structure on a sample of data for the Czech (non-financial) companies. A contextual approach is adopted and the value relevance of debt is analyzed considering the signalling and the optimal capital structure theories. According to the results and in accordance with the optimal capital structure theory, debt is more penalized in case of the companies that deviate from the target debt level. Moreover, debt proves to be a positive signal for the firms with a higher earnings growth potential. This, in turn, is consistent with the signalling theory.

This paper works with a broad data sample of Czech voucher-privatized firms. The period of 1996 - 1999 enables to capture true post-privatization effects. It analyzes the effect of ownership structure on corporate performance and firm's characteristics. Results show that overall ownership concentration cannot be associated with improving corporate performance. Further, particular types of domestic owners do not affect firm's performance but they do affect firm's characteristics. Effect of foreign owners is limited. No clear or unambiguous effect of changes in ownership structure on corporate performance emerged.

This paper analyzes development of the ownership structures in Czech voucher-privatized firms during 1996 - 1999. The period can be characterized by increasing ownership concentration uniformly across all categories of owners with exception of banks. Within frequent changes uncovered by cluster analysis, higher ownership concentration was found to preserve itself. In general, investment funds and portfolio companies recorded the highest average concentration increase. Industrial companies and individual owners were found to be the most stable type of owner. Sector perspective shows that while in 1996 the firms do not exhibit excessive differences among sector specific attributes with respect to the proportion of stake held, in 1999 they do.