Optimization of Credit Activity of a Commercial Bank Based on a Parametric Model

In the past few decades, a line of research focusing on the financial portfolios of banking structures has been actively developed in the world’s economic science. The interest in deposit-and-loan portfolios is caused by the rapid growth of both the banking sector and the entire capital market in the world. This paper presents empirical research in the field of analysis of the credit and investment activities of a commercial bank with an extended set of criteria. The team of authors considered a certain approach to parametric modelling of the optimal banking portfolio taking into account unregulated exogenous (macroeconomic) and endogenous (set by the bank) parameters that affect its structure and composition. As part of the proposed method, a list of monitored parameters of the banking portfolio, which was developed due to financial stability and reliability indicators, was compiled. Accordingly, based on calculations with a modified parametric model and assessment of the level of their financial stability and reliability, shortcomings in the structure and composition of the portfolios of the banking organizations under research were identified with respect to the rationality of resource allocation and the adequacy of equity capital. Thus, it was concluded that taking into account the criteria for managing the banking portfolio, measures of profitability and risk, as well as the reliability of the financial and economic base and financial stability of the bank contributes to the growth of its rating and client base, which is especially important for universal commercial banks. Received: 4 September 2021 / Accepted: 22 November 2021 / Published: 3 January 2022

The review of the financial strategies of Polish pulp and paper companies listed on the Warsaw Stock Exchange

The review of the financial strategies of Polish pulp and paper companies listed on the Warsaw Stock Exchange. The main purpose of this paper is to evaluate the financial strategy undertaken by the polish pulp and paper companies listed on Warsaw Stock Exchange in 2018 - 2020. In this paper three most frequently used indicators characterising company’s financing strategy were analysed, namely: equity capital share in total capital, equity capital share in fixed assets and long-term debt share in total debt. The calculations used data from publicly available quarterly financial statements of the analysed enterprises for the period from 1st quarter of 2018 to 3rd quarter of 2020. The calculations showed that Kompap has a more moderate policy of financing its activity. The second company, Arctic Paper, was characterized by a more risky approach to the financing strategy.

The impact of audit quality on earnings management and cost of equity capital: evidence from a developing market

Purpose This study aims to examine the effects of audit quality on earnings management and cost of equity capital (COE) considering the impact of two owner types: government ownership and foreign ownership. Design/methodology/approach The study uses a panel data set of 236 Vietnamese firms covering the period 2007 to 2017. Because the two main dependent variables of the COE capital and the absolute value of discretionary accruals receive fractional values between zero and one, the paper uses the generalised linear model (GLM) with a logit link and the binomial family in regression analyses. The paper uses numerous audit quality measures, including hiring Big 4 auditors or the industry-leading Big 4 auditor, changing from non-Big 4 auditors to Big 4 auditors or the industry-leading Big 4 auditor, and the length of Big 4 auditor tenure. Big 4 companies include KPMG, Deloitte, EY and PwC, whereas the non-big 4 are the other audit companies. Findings The study finds a negative relationship between audit quality and both the COE capital and income-increasing discretionary accruals. The effects of audit quality on discretionary accruals and the COE capital depend on the ownership levels of two important shareholders: the government and foreign investors. Foreign ownership is negatively associated with discretionary accruals; however, the effect is more pronounced in the sub-sample of state-owned enterprises (SOEs), the firms where the government owns 50% or more equity, than in the sub-sample of Non-SOEs. Originality/value To the best of the knowledge, no prior similar study exists that used the GLM with a logit link and the binomial family regression. Global investors may be interested in understanding how unique institutional settings and capital markets of each country impact the financial reporting quality and cost of capital. Further, policymakers of developing markets may have incentives to improve the quality of financial reporting and reduce the cost of capital which should result in attracting more foreign investments.

Financing Sources of Exploration Works in the Light of Risk Related to their Activity

The article presents an overview of the determinants of exploration works and the definition of the role of junior mines in those processes. Junior mines, as special purpose vehicles, focus on the stages of exploration and documenting of the deposits, without going into theoperational stage related to the exploitation. Due to their nature, those entities finance their activities with equity capital in the formof share issues on the capital markets, addressing their proprietory securities to investors who accept a high level of risk. The largeststock exchanges on which the exploration companies obtain the required funds have been identified, and the trends that complementcapital raising, concerning the involvement of private equity funds, have been presented.

FEATURES OF LAND VALUATION IN PROJECT FINANCING USING ESCROW ACCOUNTS

Проведен анализ текущей ситуации на первичном рынке жилой недвижимости в рамках перехода на новые условия финансирования жилищного строительства. Выявлены преимущества внедрения проектного финансирования, а также проблемы, ограничивающие его эффективность на основе основных тенденций и направлений применения проектного финансирования в России в строительстве, при реализации инфраструктурных проектов и в деятельности институтов развития по привлечению в систему проектного финансирования частных инвестиций. Показаны принципы построения схемы для строительного проекта, реализующейся с проектным финансированием по заранее составленной модели, где применены эскроу-счета. Предложен метод оценки земельного участка при проектном финансировании с использованием эскроу-счетов. Для оценки инвестиционной стоимости земли, то есть стоимости, при которой доход от приобретения земельного участка соответствует норме интереса, установленной инвестором, или стоимости, удовлетворяющей требования инвестора к доходности конкретного проекта, рекомендовано использовать три денежных потока, а именно денежный поток от инвестиционной деятельности, финансовой деятельности и поток на собственный капитал проекта. Проведен анализ опыта иностранных государств в вопросе формирования стоимости земли в черте города и влияющих на неё факторов. Показаны преимущества оценки земельного участка при проектном финансировании с использованием эскроу-счетов: удобство, гарантии; прозрачность и поддержка. We carried out the analysis of the current situation in the primary residential real estate market as part of the transition to new conditions for financing housing construction. We identified the advantages of introducing project financing, as well as problems limiting its effectiveness on the basis of the identified main trends and areas of application of project financing in Russia in construction, when implementing infrastructure projects and in the activities of development institutions to attract private investment into the project financing system. We show the principles of constructing a scheme for a construction project, implemented with project financing according to a pre-compiled model, where escrow accounts are used. A method for assessing a land plot for project financing using escrow accounts of the intended use is proposed. To assess the investment value of land, that is the value at which the income from the acquisition of a land plot corresponds to the rate of interest set by the investor, or the value that meets the investor's requirements for the profitability of a particular project, it is recommended to use three cash flows, namely, cash flow from investment activities, financial activities and the flow on equity capital of the project. We analyzed the development of foreign countries in the context of cost formation of land within the city and relevant factors influencing this cost. The advantages of assessing a land plot with project financing using escrow accounts have also been revealed: convenience, guarantees, transparency and support.

Living up to your codes? Corporate codes of ethics and the cost of equity capital

PurposePrevious literature provides mixed evidence about the effectiveness of a code of ethics in limiting managerial opportunism. While some studies find that code of ethics is merely window-dressing, others find that they do influence managers' behavior. The present study investigates whether the quality of a code of ethics decreases the cost of equity by limiting managerial opportunism.Design/methodology/approachIn order to test the hypothesis, the authors perform an empirical analysis on a sample of US companies in the 2004–2012 period. The results are robust to a battery of robustness analyses that the authors performed in order to take care of endogeneity.FindingsEmpirical results indicate that a higher quality code of ethics is associated with a lower cost of equity. In other words, firms with a more comprehensive code of ethics and better-designed implementation procedures limit managerial opportunism and pay a lower cost of equity because they are perceived by investors to be less risky.Research limitations/implicationsPractical implicationsSocial implicationsOriginality/valueThe authors contribute to the literature in two ways. First, by looking at the market reaction to the code of ethics, thus capturing all its indirect possible benefits and second, by measuring not only the existence but also the quality of a code of ethics. Based on the results, policymakers may choose to further promote codes of ethics as an effective corporate governance mechanism.