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Oil Price and European Stock Markets

Author(s): Gábor Bóta,Mihály Ormos / Language(s): English Publication Year: 0

In this paper we investigate the effects of oil price changes on European stock returns. We run regressions for extended versions of different market equilibrium models: (standard CAPM, Fama-French 3 factor model, Carhart four-factor model) incorporating oil price changes. We also separate different market situations based on the oil price. Our results suggest that from among the investigated European industry indexes oil and gas companies have higher exposure to oil price changes than other companies from other industries. When examining the broad oil and gas industry on a sub-sector level we can detect some significant differences.

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The Limitations of E-commerce Development in Full Operating Cycle Firms: V4 Countries Case

Author(s): Emilia Brożyna,Grzegorz Michalski,Guenter Blendinger,Ahmed Ahmidat / Language(s): English Publication Year: 0

Financial efficiency of an entities operating in full operating cycle conditions is influenced by environmental characteristics. That paper analyzes one of the financial results measured by cash tied in inventories in e-commerce full operating cycle financially constrained V4 entities. In recent decades, the countries of Central and Eastern Europe there are significant changes in national economies. Many of them joined the European Union in 2004. Among the EU Member States noteworthy is the largest group of countries of Central and Eastern Europe: Czechia, Poland, Slovakia and Hungary. On 15 February 1991 they have concluded an agreement on the formation of the Visegrad Group. It was aimed at expanding cooperation between these countries and in the initial phase of accession to the European Union and NATO. Analysis of the changes that have taken place in companies using online sales in the countries of the Visegrad Group is the subject of this article.

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The Access to Instrument of Countercyclical Capital Reserves in the European Union and the USA

Author(s): Luboš Fleischmann / Language(s): English Publication Year: 0

Repeating financial crisis brings new actions in regulatory rules of the financial markets each time. Regulatory authorities seek to increase the resilience of the banking sector through modified and brand new instruments, especially against cyclical risks associated with fluctuations in credit activity. The same is happening in the post-lehman approach to macro-prudential tools. This paper deals with the impact of countercyclical capital reserves, one of the new supplementary capital reserves, which introduces the Third Basel Accord (Basel III). The paper analyzes the objectives of the countercyclical capital reserve instrument and the method for determining its amount. A comparison is performed among rates set in other European Union countries and approach to the countercyclical capital reserve in the USA. The method also carries out a comparison between the European and American approach. The primary question of the paper is answered using empirical data that relates to the effectiveness of the chosen instrument to achieve the objective, which is to ensure the stability of the banking sector during the crisis and what rate of the countercyclical capital reserve matches the above objectives. The paper also aims to assess whether the tool can fulfill the high expectations of regulatory authorities.

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Foreign Trade Finance: What is the Impact of the Global Financial Crisis of 2007-2009?

Author(s): Peter Haiss,Franz Binder,Kushtrim Hajzeri,Wadim Kalmykov / Language(s): English Publication Year: 0

We analyze the impact of the global financial crisis of 2007-2009 on international trade finance. Two different perspectives are covered: the demand side and the supply side of trade finance. Additionally, the implications for trade insurance and Export Credit Agencies are investigated. Furthermore, the role of the state is discussed as the link between trade, finance and GDP growth is of utmost importance for economic policy actors. Our research draws on survey and financial market data and gives a global overview. We find that on the demand side, both the volume of finance and its mix changed. On the supply side, volume and prices were affected as well. The role of the state has risen in course of the crisis in terms of insuring trade via Export Credit Agencies (ECAs). Ever since, the market moved back to normal, and will be more digital soon.

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The Interaction between Venture Capital and Innovation in Europe

Author(s): Özcan Karahan / Language(s): English Publication Year: 0

Venture Capital (VC) has been a significant source of finance for technologybased investments. Thus VC has played a key role in fostering innovative entrepreneurship and technological progress in new economies. Accordingly, it is generally argued that there is a positive causal relationship from venture capital to innovation, which called “venture capital-first hypothesis”. However, some studies in literature indicates an opposite causality that innovation stimulates venture capital, which called “innovation-first hypothesis”. The aim of this paper is to test these hypothesis to determine direction of causality between Venture Capital and Innovation in European countries. We use dynamic panel data analysis in order to investigate the direction of causality between innovation and venture capital based on annual data set related to European patent applications and venture capital investment. Empirical results of our study provide a strong evidence in favour of “innovation-first hypothesis” that innovation induces venture capital investment in Europe. This result presents significant implications for innovative entrepreneurship capacity of Europe. It seems that, although policymakers aim to make more financial resources available for innovation, the absence of innovative ideas is the big issue rather than the lack of available fund for innovative entrepreneurships in Europe.

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Stock Market Volatility in the European Emerging and Frontier Markets

Author(s): Lumír Kulhánek / Language(s): English Publication Year: 0

The main objective of this paper is to investigate and evaluate development both of stock market returns and volatility in the European emerging and frontier markets. Both main quantitative characteristics of the stock markets development will be analysed (daily returns, risk), as well as the relationships between daily stock market indices returns changes and volatility. The comparison with developed stock markets and MSCI European Union index is also performed. In analysis are used daily values of stock market indices for the sample period from May 2002 to May 2016, which is also divided into two non-equal length sub periods with the beginning of the Euro area sovereign debt crisis. We found that only three frontier markets of the European Union have positive returns both in pre-crisis and crisis period. The emerging stock markets in comparison with frontier markets are reasonably highly correlated with each other and with MSCI European Union index. Very weak correlations of frontier markets of the European Union furthermore decreased in Euro area sovereign debt crisis period.

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Examination of Stock Market “Temperature” Using Price-Dividend Dependence for European Shares

Author(s): Sergey Petrov,Oksana Kashina,Roman Murashkin / Language(s): English Publication Year: 0

The paper aims to investigate some European stock markets (whether they are overheated or undervalued) on the basis of price-dividend dependence analysis for a number of liquid shares. Our approach applies the procedure of revealing of shareholders’ expectations through econometric analysis of share price movement compared to changes in the dividend payments. As a result one may comprehend whether speculative motive of shareholders is responsible for market evaluating of the share or, on the contrary, shareholders are predominantly attracted by dividend payments on it. In such a way analysis of changes in price-dividend dependence for representative group of assets makes it possible to monitor when stock market overheats and generates a bubble. Moreover, the model developed permits to investigate how the company's industry is related to predominant motive of the representative shareholder when investors’ expectations are substantially heterogeneous.

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Functioning of Bancassurance in Selected Countries in Which the Financial Group Erste Group Bank Operates

Author(s): Lenka Přečková / Language(s): English Publication Year: 0

This paper shall evaluate the level of internal integration among bancassurance products and financial institutions belonging to the financial group Erste Group Bank AG in selected countries of Europe. There shall be selected six countries which are located in Central and Eastern Europe: the Czech Republic, Slovak Republic, Hungary, Romania, Croatia and Serbia. These are the countries in which a strategic partnership agreement between the Vienna Insurance Group and the Erste Group Bank was concluded in 2008 which shall be taken into consideration in the evaluation. The research was conducted as of February 1, 2016. This paper aims at determining whether similarities in how the financial group Erste Group Bank is organized also mean similarities in how bancassurance in the selected countries functions. To make this possible, a critical analysis of bancassurance-related literature shall be conducted and a hypothetical basis for the practical evaluation shall be formulated. Characteristics for evaluation of the level of integration inside the financial group and also a banc-assurance product shall be also set. To evaluate how bancassurance functions in practice, a qualitative research based on data available on web sites and also financial and annual reports shall be used. The qualitative research shall contain a detailed analysis, sorting and a comparison of the set characteristics. Finally, it will be determined which attributes are identical and which are different in the integration of financial groups and bancassurance products.

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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

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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Economic Condition of the European Union countries and Level of Rating

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

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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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

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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Evaluation of the Business Cycle Synchronisation in Europe

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

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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European Evidence on the Long-Run Superneutrality of Money

Author(s): Oleg Deev,Martin Hodula / Language(s): English Publication Year: 0

This paper investigates the validity of the money superneutrality concept for the sample of 30 European economies. Using a structural vector autoregressive framework, we examine the long-run response of real output to a permanent inflation shock for each country. We find that for the majority of countries in our sample the long- run superneutrality concept is confirmed as the original increase/decrease in output growth fades in time. We also fail to proof the additional hypothesis that the exception to superneutrality validity is a group of countries with smaller in-sample inflation mean.

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Nexus of Ruble Exchange Rate and Other Macroeconomic Factors in the Period of Recent Economic Instability

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

Primary cause of recent Russian economic downturn was the decline in global oil prices, which led to currency crisis in Russia. But more factors need to be taken into consideration, specifically commodity prices, Russian interest rates, development of Russian stock market and development of the USD exchange rate. Existence of direct relationship between these individual factors and ruble exchange rate is likely. However, it is not sufficient to investigate only correlational relationships between these variables - causal relationships need to be identified as well.

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Business Environment in V4 Countries

Author(s): Michaela Bruothová,František Hurný / Language(s): English Publication Year: 0

The aim of the article is to investigate the relationship between different indices of the quality of business environment on one side and selected macroeconomic indicators and country's credit rating on the other side. The analysis concentrates on the countries of Visegrad four region (V4) – Slovakia, Czech Republic, Hungary and Poland. The following indices are analyzed: Ease of Doing Business created by the World Bank Group, Global Competitiveness Index, Index of Economic Freedom, rating from The World Competitiveness Yearbook and Fragile State Index. We use the real gross domestic product, unemployment rate and inflation rate as the macroeconomic indicators and the results of the country's credit rating evaluated by Moody's, Standard & Poor's and Fitch Ratings. The analysis is based on the country level data for the 2005 – 2014 period derived from the official statistical reports of World Bank, World Economic Forum, Institute for Management Development, The Heritage Foundation, Fund for Peace and Eurostat. The analysis is performed through correlation analysis using Pearson as well as Spearman correlation coefficients. The results of our analysis indicate that relationship between different indices of the quality of business environment and selected macroeconomic indicators or country's credit rating is country specific.

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Models of financial crises and early warning system

Author(s): Bohuslava Doláková / Language(s): English Publication Year: 0

The issue of financial crisis will not only be considered from the economic perspective, but also from the sociological perspective, which brings new insight and attention to phenomena that purely economic perspective can hide. It was very visible during the last financial crisis where the media was focused too much on the economic effects and not enough awareness of the social nature of the crisis. There are three main sociological perspectives: functionalist, conflict theory, and symbolic interactionism. Functionalists believe that economic recessions are functional for society because economic downturn eliminates the poorly operating businesses, while the more useful businesses survive. Conflict theory is based on Karl Marx’s work. A Capitalist system can become so complex, abstract, and alienating, that even those who seem to be controlling the system of loans, secondary loans, and hedge funds, have no idea how it is working.

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RISK FACTORS OF CONTEMPORARY „FINANCIAL CRISIS“ AND THEIR INFLUENCE ON FUTURE DEVELOPMENT OF WORLD ECONOMY

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

The article deals with problems of contemporary “financial crisis” that appeared in 2008 and subsequently developed into very serious global economy crisis. First of all, factors that lead to the crisis are identified, consequently, their influence on contemporary developmental trends, intruding operation of world financial system and endangering future development of world economy are analyzed. At the same time essential issues regarding future “market economy", which depends on contemporary society are formulated.

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SELECTED MACROECONOMIC FACTORS AND THEIR RELATIONSHIP TO IMPAIRED LOANS OF DEUTSCHE BANK

Author(s): Natália Žoldáková,Boris Šturc / Language(s): English Publication Year: 0

There are three hypotheses considered in this article. As first stands hypothesis of mutual horizontal correlation of macroeconomic indicators in EU17 and in Germany separately. It establishes that these factors are highly correlated. Second hypothesis says that the same factors are correlated also vertically – between Germany and euro area. Third hypothesis is focused on claiming that the portion of impaired loans on total loans of Deutsche Bank correlates with the development of significant macroeconomic factors.

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Analysis of the problem of pro-cyclicality in the Eurozone and pro-cyclicality solutions in Basel III

Author(s): Eva Horvátová / Language(s): English Publication Year: 0

The main causes of changes in banking regulation were in negative impacts of the financial crisis, which has shown the weaknesses of Basel II. Basel Committee on Banking Supervision adopted in September 2009 the basic principles of international regulatory framework for banks under Basel III designation. In December 2009 has been published consultative documents Basel III.

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Utilization of Benford’s Law by Testing Government Macroeconomics Data

Author(s): Michal Plaček / Language(s): English Publication Year: 0

This article builds on research published in the article "Fact and Fiction in EU Govermnental Economics Data" (Rauch, Göttsche, Brähler, 2011). By exploring the possibilities of applying Benford´s Law as a useful instrument for detecting data manipulation, this instrument is applied to the Czech Republic, especially on monthly data of exports and imports for the period 1996-2012, which make up the trade balance. We use the Z test as the test criterion and the first and second digits are tested.

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