ACRN Journal of Finance and Risk Perspectives
Vol. 5, Issue 3-4, ISSN 2305-7394
TABLE OF CONTENTS
IFRS 9: The new rules for hedge accounting from the risk management’s perspective
Thomas Bernhardt 1, Daniel Erlinger 1, Lukas Unterrainer 1
1 University of Applied Sciences Steyr
Abstract: Hedge accounting rules of IFRS ensure that earnings and expenses regarding hedging relationships are accounted simultaneously. These rules should avoid an economically not justifiable increase in earnings volatility through hedging relationship. The crucial issue in hedge accounting is the separation between financial instruments that are used for speculation purposes and financial instruments that are used by an entity to hedge a risk exposure. Hedge accounting rules of IAS 39 are often criticized as being too complex and not aligned with entities’ risk management strategies. Therefore, entities are faced by the trade-off between an optimal hedging strategy, which probably does not qualify for hedge accounting, and a sub-optimal hedging strategy, which qualifies for hedge accounting and decrease earnings volatility, but does not fully meet the objective of entity’s risk management. As a consequence of criticism the IASB published in November 2013 the new rules for hedge accounting under IFRS 9. The new rules should eliminate weaknesses of IAS 39 by making hedge accounting rules less complex. Furthermore IFRS 9 should align hedge accounting rules with companies’ risk management strategies.
Keywords: IFRS 9, IAS 39, hedge accounting, hedge effectiveness, risk management, derivative financial instruments
Opportunities and risks of IT solutions for ERM
Peter Mitterbaur 1, Johanna Pesendorfer 2, Elisabeth Schmidinger 3
1, 2, 3 University of Applied Sciences in Upper Austria
Abstract: Compliance with legal regulations as well as the increasing pressure from various stakeholders demand continuously growing standards in company risk management. Rising complexity of businesses due to issues like globalization or the evolving role of the internet forces companies to reconsider their risk management approaches. In order to implement enterprise risk management in a successful and holistic way, IT systems have proven to be essential. However, the increasing reliance on IT systems not only in case of risk management but also for use in daily business also poses a number of risks for companies. This paper analyzes advantages as well as potential threats in connection with the use of IT in companies.
Keywords: Enterprise Risk Management, IT Framework, COSO, GRC, IT Integration, IT Compliance, IT Security, Data security, cloud computing
Relation Between Share Price And Financial Indicators In The Brazilian Stock Market
Jailson Da Conceição Teixeira De Oliveira 1, Fernando Henrique Taques 2
1 Universidade Federal da Paraíba – UFPB and Faculdade Maurício de Nassau/JP
2 Universidade Presbiteriana Mackenzie
Abstract: Given the uncertainty in the financial market, it requires from the decision makers to have a greater care in their estimates. The expansion of the Brazilian capital market has generated the need for an understanding of the factors that determine the formation of the pricing of shares. This study aims to determine, through the panel data methodology during the period 2009 to 2013, the share prices of companies listed on the BM&FBovespa that keep some relations with some financial indicators, including earnings per share, the book value per share and total assets used as a proxy for the company size. The results show that such information is relevant in determining stock prices. The proxy for company size, set based on total assets by sector, showed statistical significance and positive sign, signaling that the size of the company is relevant to the extent that the market reacts asymmetrically between companies considering their size. Sector samples showed the size factor relevant in the sectors of industrial goods, construction and transport. It also notes that the financial statements are good predictors mainly in the sectors of consumer staples, utilities and industrial goods.
Keywords: stock market, pricing, accounting variables, panel data
Impact Investment and Risk Management: Overview and Approach
Joseph Calandro, Jr. 1
1 PwC and the Gabelli Center for Global Security Analysis at Fordham University
Abstract: Managing financial risk has proven difficult over time as evidenced by numerous high profile failures over the recent past including and especially those experienced in the stock market crash of 1987, the financial crisis of 1997-1998 (also known as the “Asian Contagion”) and the 2007-2008 financial crisis (also known as “The Big Short”). Therefore, managing both the financial and social risks inherent in an impact investment, and across a portfolio of impact investments, could be particularly challenging in the absence of a practical framework. This paper profiles a framework for managing Impact Investment Risk as a function of investment risk, social impact risk, and the problem-set common to both. The taxonomy of the framework is illustrated, explained and then applied to a case study. The subject of the case is an actual impact investment that has been profiled as, “The Triple Bottom Line and Investing for Impact: The Case of Afram Plains District of Ghana.” The case analysis leads to a discussion of performance measurement, basic statistical analysis and potential enterprise risk management considerations such as exposure classification and tracking, tail risk analysis, and potential broader uses of impact investment risk information.
Keywords: Social Entrepreneurship, Impact Investment, Risk Management
Evaluation Factors of Money Supply of Bosnia and Hercegovina Banking Sectors
Almir Alihodžić 1
1 Faculty of Economics, University of Zenica
Abstract: The paper discusses the correlation between changes in monetary aggregates to establish the flow of formation of money regarding the currency board in B&H. Therefore, the primary objective of this study is to determine which independent variables in the regression models have an impact on the amount of money supply in a broad sense. The money supply will be the dependent variable in the study, while the following variables are to be independent: money supply in the narrow sense (M1), the growth rate of foreign deposits in the banking sector (GFD), real GDP growth, the growth rate of domestic deposits (GDD), the rate of increase of domestic loans(GDL), the growth rate of foreign loans (GFL), the consumer price index (CPI) and average reserve requirements (ARR).
Keywords: money supply, credit, multiplication, currency board, economic growth
Leaders’ Community and their Managerial Decisions in the Finance and Governance Domains
Louai Ghazieh 1, Nadia Chebana 2
1 University of Paris I Pantheon-Sorbonne, France.
2 University of Oum El Bouaghi, Algeria.
Abstract: The community of leaders occupies a prominent place in the scientific research. The role played by this type of community in decision-making within the company is less clear. There are numerous research studies dedicated to the identification of various types of communities, trying to reveal its borders, as well as explain its existence and functioning. Rare are the researches centred in looking beyond their existence and explaining their impacts. A community of leader is a new concept and little-used. This community is defined as an organization where all members maintain relations and interact mutually for a practice. In our study, we are not only interested in the existence of a leaders’ community, but also the influence that this can have on the community management decisions. These decisions affect investment, as well as financing and corporate governance. The main objective of this paper is to explain the impact of new behavioural factors as mimicry, as well as organizational learning and legitimacy, on the leaders’ decisions.
Keywords: Leader, community, mimicry, corporate governance, behaviour.
Insights into the Social Impact Bond Market: An Analysis of Investors
Alessandro Rizzello, Rosella Carè
University Magna Graecia of Catanzaro, Italy.
Abstract: In the last five years, the public and private sectors have shown considerable interest in Social Impact Bonds (SIBs), a financial innovation that enables the mobilization of private financing for public sector programmes. A SIB involves a contractual agreement for the provision of public services by a private sector consortium, ‘optimal’ risk sharing between the public sector and the private sector, and innovative design and delivery of public services by the private sector. A large number of actors – such as governments, social organizations, impact investment intermediaries, and banks – have contributed to the development of the global impact bond market over the last six years. Recent research efforts have explored the topic of SIBs from different theoretical perspectives. However, empirical studies are still lacking, and their limits, potential and effectiveness need to be explored. Many attempts have been made to map the SIB market. Moving from the widely varying results in both number and execution of SIBs around the world, this work aims to provide an updated analytical map of this promising field of activity worldwide, with a focus on the investors consciously pursuing a blend of economic, social and/or environmental value. Finally, this study identifies the issues investors face and suggests areas for future research in this field. These preliminary results are encouraging and offer several starting points for future works.
Keywords: Social Impact Bond, Impact Investment, Impact Investors, Financial Innovation