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Financial Performance of Czech Subsidiaries under Control of the EU Listed Companies

Author(s): David Procházka / Language(s): English / Publication Year: 0

Keywords: IFRS adoption; financial performance; parent-subsidiary links;

Entities under foreign control play an important role in economy. In the Czech context, companies with foreign owners generate around 50% of industrial output (Ernest, 2014). Many of these subsidiaries are controlled by parents listed at regulated markets, for which consolidated financial statements in compliance with the IFRS shall be prepared. Czech subsidiaries might form a significant share of corresponding group’s results, taking into evidence of Procházka (2016) that just 0.3% of Czech non-financial companies make 30% of aggregate output in non-financial sector (measured by share on total turnover). Furthermore, the analysis of individual corporate data and macroeconomic time series unveil a wide dispersion in the effective tax rates of these companies (Procházka, 2016). The finding implies a conjecture about two-way profit transfers both into and out of the Czech Republic. This paper aims at assessing empirically the financial performance of Czech subsidiaries under control of EU listed companies, including cross-sectional differences in terms of geographic affiliation of the parents. The results indicate relatively evenly distributed return on assets (ROA), but significant differences in return on equity (ROE). Furthermore, the values of ROA are on average higher than ROE, suggesting profit shifting in the groups.

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Practical Application of Sentiment Indicators in Financial Analysis: Behavioral Finance Approach

Author(s): Zuzana Rakovská,Martin Svoboda / Language(s): English / Publication Year: 0

Keywords: sentiment indicator; behavioral finance; heuristics and biases;

Behavioral finance assumes that individual financial decisions are influenced by emotions and mood. A public sentiment and its effect on collective decision-making have been studied in a number of publications giving the vast variety of research design. This paper examines various techniques in measuring market sentiment and its applications in analysis of financial data. Using a qualitative, exploratory approach, the study identifies trends in sentiment indicators and also tries to analytically categorize heuristics and behavioral biases connected to public mood.

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The Impact of the Features of Healthcare Providers in Poland on their Costs in the Accounting System

Author(s): Monika Raulinajtys-Grzybek,Katarzyna Frankowska,Wojciech Matusewicz / Language(s): English / Publication Year: 0

Keywords: accounting system; cost data; healthcare providers;

The article presents the analysis how costs of healthcare providers are explained by their main characteristic features. Cost data was obtained from the accounting systems of several healthcare providers operating in Poland. The study involved the costs of hospital wards, which are the final cost centers providing inpatient services. Cost data for each ward was grouped into categories related to main resources used. The information from the accounting system has been prepared in an uniform manner by the hospitals for the purpose of regulatory pricing of health services.The analysis included the impact of features of healthcare providers on the level of costs as well as unit costs of key resources, such as doctors, nurses, or the ward’s infrastructure. Explanatory variables were nonfinancial features describing the activity of the ward, including medical specialty, location, type of hospital, legal form (public or private), and number of mandays.

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Prediction of Future Development of the World Economy under Conditions of Negative Interest Rates

Author(s): Oldřich Rejnuš / Language(s): English / Publication Year: 0

Keywords: economy; financial system; interest rates; monetary policy; household wealth;

The paper deals with the problems of contemporary way of using interest rates within the framework of monetary regulation, with special focus on cases when extremely low, or even negative rates are applied. The first part is focused on theoretic definition of the meaning and function of interest rates in financial and economic system in the sense of „standard“ economic theory, or in accordance with individual economic approaches. Subsequently, the influence of contemporary extremely low or even negative interest rates of central banks are analyzed, as well as their influence on the activities of economic subjects, with special attention to individual sorts of financial institutions, namely its influences on their economic results and on fulfilment of their mission. And, subsequently, it defines and characterizes the impacts of contemporary monetary policy of the world most important central banks on functioning of economy of individual the most important states or multinational economic units, as well as world global economy. Based on achieved results, future development is predicted, both from the point of view of economic development and from the standpoint of future impacts on contemporary human society.

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Economic Condition of the European Union countries and Level of Rating

Author(s): Tomasz Rólczyński,Tomasz Kopyściański / Language(s): English / Publication Year: 0

Keywords: ratings and ratings agencies; economic outlook; synthetic measure; Spearman's rank correlation coefficient;

Credit rating agencies have a significant impact on the securities market facilitating investment decisions on the basis of ready-made benchmarks. In this way they contribute to reducing the asymmetries and costs of obtaining information necessary to make decisions regarding buying or selling financial instruments, taking into account the debtor’s estimated risk of default. The increased significance of the assessments made by the rating agencies refers closely to the rapid development of the debt security market and thus emerging demand on the part of the buyers of those securities for an independent analysis which would determine the issuer’s financial standing. The assessments which are published using special symbols reflects country’s ability to raise capital and its cost. The purpose of the article is to evaluate the relationship between the economic condition of the European Union countries and the assessment issued by the rating agencies such as Standard & Poor’s, Fitch, Moody's. The economic condition of country will be described using a synthetic variable, and ratings will be transferred to the ordinal scale, hence to assess the relationship with the use of Spearman's rank correlation coefficient.

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Factors Influencing Clients in Selection of Insurance Company

Author(s): Elena Šira,Katarina Radvanska,Zuzana Grančaiová / Language(s): English / Publication Year: 0

Keywords: insurance market; importance of selection the insurance company;

The aim of the article is to show, if clients have changed their preferences in selection of insurance company during 5 years. This article compares how the scheme of client’s behaviour has been changed. Our research compares the data from the years 2010 and the years 2015, which show factors influencing clients in selection of insurance company in Slovakia. We have also analysed and compared the factors with the biggest influence on clients in the year 2010 and 2015. In addition to analysis of client’s behaviour, we have also analysed and compared insurance market environment via selected indicators. We have analysed the volume of written premium, density, penetration and others. The level of economic development of the country may also affect clients in their preferences of the insurance company. We have analysed the unemployment, average monthly wage and other factors in the years 2010 and 2015 to gain the adequate findings.

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The Optimized Indicators of Technical Analysis by Anticyclic Assets

Author(s): Martin Širůček,Karel Šima / Language(s): English / Publication Year: 0

Keywords: technical analysis; optimization; relative strength; moving average; Bollinger bands;

The paper is focused on using the technical analysis and its indicators. It deals with the evaluation of investment strategies based on the optimized parameters of technical analysis indicators. The analysis focuses on using selected indicators of the technical analysis in the period from 11/1/2013 to 10/31/2014. The empirical analysis includes a back-test of optimized indicators, the results of which are compared with the recommended setting of these indicators, held in the period from 11/1/2014 to 10/31/2015. The optimization and the back-test were realized on anticyclical stocks, represented by the index S&P 500 Consumer Staples. The main aim of the paper is to bring to the speculators a higher investment return based on the change of the recommended (default) setting of these indicators.

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Budgetary Gaming Behavior and its Determinants

Author(s): Ladislav Šiška / Language(s): English / Publication Year: 0

Keywords: management accounting; budgeting; budgeting gaming; contingency factors;

Budgetary gaming behavior (such as spending money at year end to avoid losing it, deferring necessary expenditures, accelerating sales near year end to meet the budget, negotiating easier targets) belongs among arguments against using budgets for company management. Especially proponents of Beyond Budgeting movement propose to abandon budgets for this reason. The paper presents results of the survey among 214 companies domiciled in the Czech Republic and Slovakia dealing with budgeting gaming and its context. Descriptive statistics and formal statistical test (Kruskal-Wallis, Mann-Whitney) revealed that the problem of budgetary gaming is more prevalent in larger companies that are subsidiaries. On the contrary, in the small enterprises it is less present problem, but more correspondents with the use of budgets for management purposes. Albeit the occurrence of budgetary gaming behavior, the companies in the sample did not intend to abandon budgeting at all.

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Implications of Low/Negative Interest Rates for Banks’ Asset and Liability Management – An Example

Author(s): Ľudomír Šlahor,Daniela Majerčáková,Mária Barteková / Language(s): English / Publication Year: 0

Keywords: asset and liability management; ultra-low interest rates; bank balance sheet; duration;

Asset and liability management (ALM) in the current low/negative interest rate environment is a major concern for all banks. ALM is defined as the simultaneous planning of all asset and liability positions on the bank’s balance sheet under consideration of the different bank management objectives and legal, managerial and market constraints, for the purpose of mitigating interest rate risk, providing liquidity and enhancing the value of the bank. ALM is heavily dependent on the movement of interest rates in the market. The history of ALM suggests that it is very important for a financial institution to measure, manage and control interest rate risk. The aim of this paper is to show how a sample bank’s balance sheet might have looked like before and after the advent of the persistently low/negative interest rates environment. Further, we will show a duration structure of the example-bank´s balance sheet before the period of low and further falling rates sets in. Also in this paper we will present most important implications for ALM after the period of persistently low interest rates. To attain this goal, we analysed the 2008 and 2015 balance sheets of a medium commercial bank facing conflicting goals such as returns, liquidity, solvency, and expansion of deposits and loans under uncertainty.

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The Recommendation of Safe Haven Interest Rates in the BEPS Context

Author(s): Veronika Solilova,Danuše Nerudova,Hana Bohušová,Patrik Svoboda / Language(s): English / Publication Year: 0

Keywords: loans; safe harbours; arm’s length principle; Base Erosion and Profit Shifting project; thin capitalization rules;

Intercompany financial transactions are subjected to scrutiny by tax authorities as they represent very popular tax planning instrument with results of a significant reduction of the group´s effective tax rate. Tax authorities have limited the use of intercompany debt or the tax-deductibility of interest by the arm’s length principle, thin capitalization rules or/and safe harbour for taxpayers. Moreover, the recent work of the European Union, OECD and G20 members as regards the BEPS project is also scrutinized with a focus on the elimination of profit shifting through intra-group debt financing. The aim of the paper is to recommend transfer pricing approaches for intra-group loans in EU, based on the analysis of experiences from the USA and recommendations of the BEPS project and the proposal of the EU Anti-Tax Avoidance Directive. We recommend to introducing safe haven rates for different compounding periods and amount of loan denominated in EUR altogether with the application of thin capitalization rules in the form of EBITDA ratio with the threshold of 30% or within a corridor of 10% to 30%. Based on it, the transfer pricing simplified measurements for loan can be ensured.

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Foreign Exchange Intervention by the Czech National Bank and its Consequences

Author(s): Miroslav Sponer,Martina Sponerová / Language(s): English / Publication Year: 0

Keywords: deflation; exchange rate; foreign exchange interventions; monetary policy; zero lower bound;

The article generally analyses the causes leading up to the foreign exchange intervention by the Czech National Bank in November 2013 and its consequences. The article examines the use of exchange rate by the Czech National Bank as a monetary policy instrument at the zero lower bound on interest rates. It explains the reasons for further easing monetary policy and for choosing the exchange rate instrument and its specific level, and discusses its expected benefits in the case of the Czech Republic.

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Nexus of Bank Risk-taking and Interest Rates

Author(s): Martina Sponerová,Miroslav Sponer / Language(s): English / Publication Year: 0

Keywords: interest rate; risk-taking; banking industry; non-performing loan; profitability;

Many researches proved that the gradual decrease of interest rates from the early 2000s to the present caused the increase of the risk-taking appetite of banks. This theory suggests that a low interest environment drives, ceteris paribus, bank margins and informational asymmetries down. As a consequence, banks react by softening their lending standards, thus raising the level of risk assets in their portfolios and increasing the risk of failure. This paper analyses impact of low interest rates to bank risk-taking in the Czech banking sector and answers following questions. Do low interest rates increase risk-taking appetite of banks in the Czech Republic? How the Czech banking sector faces to low interest rates in connection with profitability?

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Selected Success Factors of Crowdfunding Projects

Author(s): Tomáš Štofa,Martin Zoričak / Language(s): English / Publication Year: 0

Keywords: crowdfunding; Kickstarter; success factors; seasonality;

Crowdfunding projects gained in popularity in the recent years. There is, however, significant number of projects which have failed. Our aim in this paper is to analyze following factors of failed projects: crowdfunding campaign timing, funding campaign goal and categories relative size. The study analyses approximately 100 000 finished projects from crowdfunding website Kickstarter for years 2009 - 2014. We used logistic regression models to analyze impact of mentioned factors on success of projects. Findings show correlation between success of project and campaign timing in the beginning of and in the middle of the year. Goal has impact on a project success, in general, the lower the goal is, the higher chance to success a project has. Both, in higher and lower competitive categories group, projects in creative categories (e.g. Art, Film & Video, Dance) have higher chance to succeed.

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Reflection of Customer Satisfaction in Selected Performance Indicators of Food Enterprises

Author(s): Petr Suchánek,Maria Králová / Language(s): English / Publication Year: 0

Keywords: consumer satisfaction; performance; food industry; ratios; investors’ strategy;

The aim of this article is to describe characteristic features of food industry enterprises in Czech Republic in relation to customer satisfaction with respect to investors’ diverse objectives. The performance of companies, measured by financial ratios such as ROA, ROE, ATO, EVA, etc., can be connected to different goals that investors might pursue (focusing on a long-term or short-term perspective, minimum risk, a preference for high turnover, etc.). The research shows what the typical values of selected financial ratios are in a group of companies with more satisfied or less satisfied customers and what financial ratios are significantly associated with customer satisfaction. These results may serve as a clue that helps investors to determine which companies best correspond with their goals. This paper is part of consumer satisfaction research based on a questionnaire on satisfaction completed by customers in 2015. The data related to the financial performance of enterprises are available in the Albertina database.

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Evaluation of the Business Cycle Synchronisation in Europe

Author(s): Veronika Šulíková,Marianna Siničáková,Ľubica Štiblárová,Slavomíra Šuliková / Language(s): English / Publication Year: 0

Keywords: business cycle; synchronisation; Granger causality; clustering;

The aim of the paper is to evaluate synchronisation in Europe throughout integration process in the European Union and/or the euro area. Gradually we apply Granger causality testing and cluster analysis to identify core and peripheral countries. These two alternative methodological approaches enable us to recognize synchronised countries, countries with rather asymmetric evolution, leading as well as lagging countries. Business cycle evolution is evaluated either through GDP growth or output gap indicators. In line with expectations, French and German business cycle have the most crucial impact on other countries´ cycles. Our findings prove that degree of integration process can lead to higher synchronisation. However there is still significant number of countries which are not synchronised with core countries. This fact complicates application of single monetary policy instruments in the euro area and economic performance in the EU as a whole.

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Sovereign Wealth Fund Ownership and Financial Performance of Companies Listed on the Warsaw Stock Exchange

Author(s): Dariusz Urban / Language(s): English / Publication Year: 0

Keywords: sovereign wealth funds; institutional investor; investing; emerging economies;

Sovereign Wealth Funds are investment vehicles established in order to manage in a profit oriented way pool of national wealth for future generations. Nowadays over 70 funds exist and operate on global financial markets. Similarly to other institutional investors, Sovereign Wealth Funds possess huge amounts of capital. What distinguishes them the most from other financial institutions is the fact that they are owned, managed and controlled by sovereign states, have limited liquidity needs, a lower-than-market-average-level of redemption risk, a long-term, intergenerational investment horizon and relatively high risk tolerance. The aim of this study is to test empirically the impact of Sovereign Wealth Funds’ ownership on the financial performance of targeted companies. Using the data of companies listed on the Warsaw Stock Exchange, we employ regression to analyze the relationship between the funds’ investment and financial performance of the company. The empirical findings of this research suggest that Sovereign Wealth Funds’ ownership has a positive influence on the price to book value of the firm. This article contributes to ongoing research in the field of studies related to financial aspects of SWF’s investment behavior by providing empirical evidence from emerging market.

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Connection between Exchange Rate and Balance of Payments Accounts: The Case of the Czech Republic

Author(s): Tomáš Urbanovský / Language(s): English / Publication Year: 0

Keywords: Exchange rate; balance of payments; cointegration; VECM;

Relationships between nominal exchange rate, current account and financial account of balance of payments in the Czech Republic have been investigated in presented paper. Implemented cointegration analysis and vector error correction model suggest one pair of Granger causality. It has been discovered that change in current account balance Granger-causes change in financial account balance. This relationship has nature of two-way Granger causality, which means that reversed relationship holds as well. Other relationships implying Granger causality were not found. Error terms were significant only in regressions with both accounts as dependent variables, which imply that only these variables return to their long-term equilibria. Because increase in financial account surplus leads to decrease in current account surplus (or deepening the current account deficit), excessive liberalization of Czech financial system can lead to large capital inflow, jeopardizes current account sustainability and results in currency crisis in the Czech economy.

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Comparing Financial Performance of Slovak Excellent Companies

Author(s): Lukáš Vartiak / Language(s): English / Publication Year: 0

Keywords: Business Excellence; quality; financial performance; financial indicator;

Every company tries to achieve financial prosperity and overall success which leads to an achievement of the Business Excellence status. In Slovakia, Business Excellence is being assessed annually in the National Quality Award (NQA). The EFQM Excellence Model serves as an assessment tool in the NQA. Based on the results of selfassessment, companies can be awarded as winners, finalists, performance improvers and participants. NQA’s winners gain the highest possible degree of recognition which empowers them to differentiate themselves from the competitors in the field of quality management and performance. The aim of the paper is to compare financial performance of the Slovak NQA winners within a specified time frame. To achieve the aim of the paper, financial performance of the Slovak NQA winners in the year before winning, in the year of winning and in the year after winning the Slovak NQA is being compared. These financial indicators were selected for a comparison of the Slovak NQA winners’ financial performance: sales revenue (T), earnings after taxes (EAT), return on assets (ROA), gross margin (GM) and total indebtedness (TI). A comparison is being performed with an assumption that achievement of the Business Excellence status improves financial performance of a company. Methods of analysis, comparison, selection and mathematics are being used. As a main finding may be considered that our assumption was not confirmed among all of the analyzed companies. There can be various reasons of non-improved financial performance of the Slovak NQA winners which obliges us to future research aimed at finding these reasons.

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The Evaluation of Financial Health of the Insurance Sector in the World's Insurance Centers

Author(s): Eva Vávrová,Svatopluk Nečas / Language(s): English / Publication Year: 0

Keywords: financial crisis; insurance market; insurance company; premiums written; return on assets; return on equity;

Within the world insurance market the processes associated with the globalization of markets and the integration of financial institutions concur. These processes have been affected by the outbreak, continuance and subsequent lingering of the global financial crisis. The financial crisis has manifested itself in various regions of the world insurance market in varying extent. The main objective of this paper is to assess the development of the financial health of the global insurance market during the lingering financial crisis and to adopt conclusions driven based on the analysis of the insurance sector.

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Expenses and Revenue Classifications for Managerial Purposes in the Czech State Administration Units

Author(s): Jana Vodáková,Nela Sglundová / Language(s): English / Publication Year: 0

Keywords: expense; revenue; expenses classification; cost allocation; state administration;

This paper deals with classification of expenses and revenue mainly for managerial purposes in the area of the Czech state administration. From 2011 the Czech public sector units prepare accounting data under the accrual basis obligatorily. This means among others that they record and release expenses and revenue data to external users in accordance with mandatory regulations. The main aim of the paper it to examine obligatory rules of expenses and revenue classification used by the state administration units and possibilities of their utilization for managerial purposes. Further the paper concentrates on a current state of internal cost classifications and allocation especially in the context of financial management and 3E concept monitoring. As main data sources the paper uses the Ministry of Finance of the Czech Republic standardized data, the Ministry of Defence of the Czech Republic internal data, relating legal regulations and scientific papers. Description, analysis, comparison, and synthesis of main findings were used in the paper as basic scientific methods.

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