Shareholder risk-taking incentives in the presence of contingent capital

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mahmoud Fatouh ◽  
Ayowande A. McCunn

Purpose This paper aims to present a model of shareholders’ willingness to exert effort to reduce the likelihood of bank distress and the implications of the presence of contingent convertible (CoCo) bonds in the liabilities structure of a bank. Design/methodology/approach This study presents a basic model about the moral hazard surrounding shareholders willingness to exert effort that increases the likelihood of a bank’s success. This study uses a one-shot game and so do not capture the effects of repeated interactions. Findings Consistent with the existing literature, this study shows that the direction of the wealth transfer at the conversion of CoCo bonds determines their impact on shareholder risk-taking incentives. This study also finds that “anytime” CoCos (CoCo bonds trigger-able anytime at the discretion of managers) have a minor advantage over regular CoCo bonds, and that quality of capital requirements can reduce the risk-taking incentives of shareholders. Practical implications This study argues that shareholders can also use manager-specific CoCo bonds to reduce the riskiness of the bank activities. The issuance of such bonds can increase the resilience of individual banks and the whole banking system. Regulators can use restrictions on conversion rates and/or requirements on the quality of capital to address the impact of CoCo bonds issuance on risk-taking incentives. Originality/value To model the risk-taking incentives, authors generally modify the asset processes to introduce components that reflect asymmetric information between CoCo holders and shareholders and/or managers. This paper follows a simpler method similar to that of Holmström and Tirole (1998).

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Md. Borhan Uddin Bhuiyan ◽  
Muhammad A. Cheema ◽  
Yimei Man

PurposeThe authors empirically examine the impact of the stand-alone risk committee on corporate risk-taking and firm value.Design/methodology/approachThe authors argue that the existence of a stand-alone risk committee enhances the quality of corporate governance, which reduces corporate risk-taking and strengthens the firm value that might improve investor protection.FindingsThe authors find corporate risk-taking decline significantly for firms that have a stand-alone risk committee compared with firms that have a joint audit and risk committee. The authors also find that the presence of a stand-alone risk committee is positively associated with firm value.Practical implicationsThe evidence is consistent with the proposition that firms with a stand-alone risk committee can effectively evaluate potential risks and implement a proper risk management system.Originality/valueThis is the first paper that investigates the association between the existence of a stand-alone risk committee and firm risk-taking in a multi-industry setting. Also, our research extends the association between a stand-alone risk committee and firm value.


2014 ◽  
Vol 116 (3) ◽  
pp. 527-543 ◽  
Author(s):  
Dragan Tešanovic ◽  
Milovan Krasavcic ◽  
Bojana Miro Kalenjuk ◽  
Milijanko Portic ◽  
Snježana Gagic

Purpose – The aim of this paper is to determine the sensory quality of food in restaurants by professional food evaluators and to research the impact of education, age and number of employees on the quality of food. Design/methodology/approach – In the first phase five trained food tasters evaluated the sensory quality of food. In the second phase, the analysis of the structure of employees was done by establishing their level of education, age and number of employees. In the third phase the regression and correlation analysis was done with the aim to establish the impact of the level of education, age and number of employees on the sensory quality of food. Findings – The sensory evaluation has shown that the evaluated food is of moderate quality. Correlation matrix has shown that the education level of employees has a high impact on the sensory quality of food. There is a correlation between the number of employees, their age and their education. Practical implications – Obtained results are the indicators of the quality of food in restaurants in the region and they can serve for the improvement of quality. They have shown that education and staff training can contribute to a better quality of food. Established methodology can also contribute to the practical evaluation of quality. Originality/value – This paper is reflected on the specific application of methodology of the sensory analysis of food in restaurants. The paper pointed to the impact of employees on the sensory quality of food by statistical methods. Statistical results which point to the great impact of the level of education of employees on the sensory quality of food in restaurants are particularly valuable.


2020 ◽  
Vol 36 (5) ◽  
pp. 13-15

Purpose This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings This research paper concentrates on the impact of entrepreneurial orientation (EO) on strategic choices when entering a foreign market. On balance the results reveal that combining all three EO trait dimensions – innovativeness, risk taking, and proactiveness – creates the best probability of success when entering a product into a new foreign market by deploying either an explorative or an exploitative product marketing strategy. Although a riskier explorative strategy is the most promising option for building longer-term competitive advantage, blending this with elements of a more conservative but growth-lacking exploitative strategy can yield synergistic benefits. Originality/value The briefing saves busy executives, strategists and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.


2014 ◽  
Vol 15 (4) ◽  
pp. 497-515 ◽  
Author(s):  
Francesco Schiavone ◽  
Antonio Meles ◽  
Vincenzo Verdoliva ◽  
Manlio Del Giudice

Purpose – The purpose of this paper is to investigate the effect of being located in a science park (SP) on the level of a firm's intellectual capital (IC) performance. Design/methodology/approach – Using a sample of 183 Italian firms (i.e. 61 tenant and 122 non-tenant firms), and through the GLS technique, the authors regress the firms’ IC performance across various explicative variables including a dummy that discriminates tenant and non-tenant firms. Findings – Consistently with expectations, the results show that the location of a firm in a SP leads to improved IC performance. Moreover, the authors find that some other firm characteristics, such as size, age, and leverage, are important predictors of its IC-based performance. Research limitations/implications – The sample is small and the impact on performance might be biased by factors related to the regional context (e.g. level of industrialization, quality of education, and science system). Practical implications – Implications for policy makers: support the growth of firms in SPs especially in those industries full of firms with scarce performance in IC. Implications for SP managers: they could “sell” (in terms of marketing) to both entrepreneurs to attract and policy makers this result. Implications for institutional investors: they should look at SPs with greater interest to find high-quality firms and improve their screening activity. Originality/value – This paper aims to extend literature about factors explaining the level of a firm's IC performance and the current understanding of the impact of SPs at firm level.


2019 ◽  
Vol 51 (7/8) ◽  
pp. 396-408
Author(s):  
Mohit Yadav ◽  
Santosh Rangnekar ◽  
Anugamini Priya Srivastava

Purpose The purpose of this paper is to examine the impact of quality of work life (QWL) on organizational citizenship behaviour (OCB) of employees. Also, the paper examines the role of demographic variables, i.e. gender, position and type of organization as moderators of relationship between QWL and OCB. Design/methodology/approach A survey with sample of 375 was used in this study. PROCESS tool by Hayes (2013) was used to analyze the relation between QWL, OCB and demographic variables. Findings QWL was found to positively influence OCB. Gender and type of organization were found to moderate the relationship, whereas position failed to moderate the relation significantly. Practical implications The study reinforced the significance of QWL practices by organizations to improve extra-role behaviours of employees. Also, importance of considering gender and the industry you are in is emphasized in using and designing the QWL programme for employees. Originality/value While many antecedents have been studied in relation to OCB, QWL is rarely discussed. The paper attempts to reemphasize QWL’s importance in doing so in light of demographic variables as moderators.


2019 ◽  
Vol 31 (3) ◽  
pp. 336-357 ◽  
Author(s):  
Tu DQ Le ◽  
Son H. Tran ◽  
Liem T. Nguyen

Purpose The purpose of this study is to investigate the impact of multimarket contacts on bank stability in the Vietnamese banking system between 2006 and 2015. Design/methodology/approach The system generalized method of moments proposed by Arellano and Bover (1995) is used to examine the relationship between multimarket contacts and bank stability. Findings The findings show that multimarket contacts among Vietnamese commercial banks improve bank stability. In addition, more x-efficient banks appear to be more stable. The same is true for banks with less holding liquid assets, for those with less excessive lending, for smaller banks, for those with the greater level of intermediation and for those with a higher level of foreign ownership. Listed banks are found to be less-risk taking than unlisted banks. Originality/value This study is the first attempt to examine the relationship between multimarket contacts and bank stability in an emerging market in the Asia-Pacific region.


2020 ◽  
Vol 24 (3) ◽  
pp. 425-446
Author(s):  
José Manuel Hernández-Mogollón ◽  
Elide Di-Clemente ◽  
Ana María Campón-Cerro

Purpose This paper aims to develop an original model in the context of food-based experiences considering new experiential variables, such as to experience quality, memorability and quality of life (QOL), and their impact on marketing outcomes, namely, satisfaction and loyalty, approached from an experience perspective. Design/methodology/approach An empirical approach has been adopted. Data have been collected through an online and a paper-and-pencil method, using an original questionnaire addressed to tourists who had a food-based experience during their recent holidays. Partial least squares-structural equation modelling is the technique used for data analysis. Findings The results confirm that local food, enjoyed through quality experiences, is a determining factor in designing memorable products, achieving tourist satisfaction, improving their QOL and encouraging loyalty to experiential food-based practices. Research limitations Results should be interpreted within the context of this research because of the use of a sample conveniently selected. Practical implications Gastronomic experiences represent a successful strategic resource for tourist destinations and professionals who want to adapt their business/destination to the new requirements of the experiential context. Originality/value To the best of authors’ knowledge, this study is first to relate the impact of memorable and quality culinary experiences on the QOL of tourists, chasing, as a final result, loyal intentions towards a specific kind of experience (culinary) rather than towards the destination.


2018 ◽  
Vol 33 (1) ◽  
pp. 93-105 ◽  
Author(s):  
Chien-Chih Kuo ◽  
Chih-Ying Wu ◽  
Chia-Wu Lin

Purpose The purpose of this paper is to explore the role of supervisor gossip in the workplace. This paper proposes a hypothetical model in which supervisor gossip has an effect on leader-member exchange (LMX), in turn resulting in perceived supervisor ostracism among subordinates. Design/methodology/approach A dyadic research design was applied to collect data from Taiwanese employees. Supervisors participated in a survey containing measures of supervisor gossip and control variables, whereas subordinates responded to a questionnaire on LMX, perceived supervisor ostracism, and control variables. Findings The results indicated that positive supervisor gossip significantly affected LMX. Furthermore, healthy LMX reduced subordinates’ perceptions of supervisor ostracism. Research limitations/implications All participants were recruited in Taiwan, which is a limitation for generalising the research findings. Future studies should investigate multiple societies of various cultural profiles. Practical implications To improve the quality of the supervisor-subordinate relationship, supervisors should adopt a positive informal communication style, and organisations should provide supervisors with information regarding the implications of workplace gossip, illustrating the substantial benefits of positive gossip and the potential drawbacks of negative gossip. Originality/value The present study highlighted the role of supervisor workplace gossip in the field of leadership and empirically investigated the impact of supervisor gossip on subordinates’ reactions.


2020 ◽  
Vol 11 (1) ◽  
pp. 110-129 ◽  
Author(s):  
Naji Mansour Nomran ◽  
Razali Haron

Purpose This study aims to empirically examine whether there is any optimal Shari’ah supervisory board’s (SSB) size that maximizes performance of Islamic banks (IBs). Apparently, IBs adopt different SSB size based on their different regulations across jurisdictions, and then it is still questionable whether there is any optimal SSB size that can fit all and be recommended to IBs. Design/methodology/approach The paper investigates the impact of different SSB size on IBs performance using a sample of 113 banks over 23 countries for the period 2007-2015 based on the generalized method of moments estimator. Findings The empirical evidence documented in this study strongly highlights the importance of small SSB size in enhancing the performance of IBs as compared to the large board size. The findings confirm that the SSB size of IBs should neither be lesser than three nor greater than six. More specifically, it is found that the optimal SSB size seems to be five. Research limitations/implications First, the study does not investigate whether the findings are constant during crisis and non-crisis periods. Second, the optimal SSB size in IBs should be confirmed from the risk-taking perspective besides performance. Practical implications For both the IBs and the regulators, they should give due importance to small SSB size as an important element for improving the IBs performance. It is strongly recommended for the IBs to have a SSB size between three and six, and five is the most recommended. The Accounting and Auditing Organization for Islamic Financial Institutions also should revise their existing standards that only suggest the minimum SSB size of three to include the maximum size of six and the optimal size of five. Originality/value Despite the SSB size plays an important role in affecting the performance of IBs, it seems there are no empirical studies attempting to address whether there is any optimal SSB size that can enhance the IBs performance so far.


2015 ◽  
Vol 21 (3) ◽  
pp. 250-257 ◽  
Author(s):  
Jezdimir Knezevic

Purpose – The purpose of this paper is to address the maintenance errors caused by the lack of understanding of maintenance manuals. English is the official language of civil aviation and all relevant maintenance manuals are written in it, but – for 80 per cent of the global maintenance personnel who are using such manuals – English is not their native language. The majority of these users have knowledge of English that is rather limited and they are easily confused by complex sentences and by the number of meanings and synonyms that English words may have. Design/methodology/approach – Scientific analysis of the faulty maintenance tasks to determine the impact of the inability of maintenance personnel to correctly understand maintenance manual written in English. Findings – Analysis of the maintenance processes clearly shows that ineffective communication between system designers and maintenance personnel, through maintenance documentation, is a well-recognised contributor to the occurrence of a faulty maintenance task. Practical implications – Significant improvements in the direction of effective communication and improvement in a quality of maintenance could be achieved by applying Simplified Technical English (ASD-STE100), the benefit of which on the quality of maintenance is presented in this paper. Originality/value – Unique consideration of the quality of maintenance, which is to see it as a function of the comprehension of maintenance manuals written in English.


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