In this thesis I examine two aspects of these issues that have been intensified form the onset of the financial crisis: the Accrual Anomaly in the Greek capital market and Non-Performing Loans (NPLs, hereafter) in the framework of the International Experience. The accrual anomaly was first tested by Sloan in his influential paper (1996). In that paper he present evidence that accruals are less persistent than cash flows and that investors fixate on earnings failing to correctly distinguish between their different properties. My results strongly suggest that low accrual firms did have higher future returns, actually quite higher returns that firms with high accruals, in an environment of extremely high volatility, structural changes in the economy, market crashes and fiscal crises. Total accruals are negatively related to future profitability and stock returns, and the earnings and stock price performance of accrual hedge portfolios provide a meaningful economic summary of this relationship. The findings suggest that growth is mostly responsible for the lower earnings persistence, while accounting distortions are probably not. The results suggest that growth determinants do not behave as substitutes to efficiency determinants in motivating the accrual effect on future stock returns in the Greek capital market. In particular, the findings indicate that the growth component is dominant, as is evidenced by both regressions and hedging portfolios, and, furthermore, it appears that the results are mainly driven by the post 2001 period. The empirical evidence on NPLs implies that both macroeconomic, namely GDP, unemployment and interest rate and bank-specific, i.e. bad management and luck too, skimping, moral haphazard, too big to fail and size effect, factors may influence loan portfolio quality. Additionally, a common finding of related studies is that problem loans evolve counter cyclically in relation to the broader macroeconomic environment. These results should be taken into serious consideration by regulators and policy makers. Bank performance and inefficiency indicators should be thought as crucial determinants of future problem loans. Therefore, regulators trying to determine which banks may face increased problems with future NPLs need to concentrate on managerial performance and procedures so as to prevent future financial vulnerability. The results are consistent with the increased growth of the Greek economy after the introduction of Euro and the subsequent opening up pf the Greek product and labor market, and, mostly, the liberalization of the financial sector. It appears that in times of crisis companies that cannot operate efficiently on their accruals jeopardize their future profitability: growth obviously works pro-cyclically while efficiency countercyclically.
ADVERTISING, RESEARCH AND DEVELOPMENT, AND CAPITAL MARKET RISK: HIGHER RISK FIRMS VERSUS LOWER RISK FIRMS
