Risk Perception and the Financial System

Abstract

Abstract

Effects of International Institutional Factors on Earnings Quality of Banks

“…We do not offer directional predictions on the coefficients of these variables. Prior studies (e.g., Kwok and Tadesse 2006;Purda 2008) indicate that a firm's perceived risk (and the associated earnings quality due to earnings management) is influenced by whether the financial system in the country is bank-or market-based (BANK). 8 We control for creditor rights (CR_RIGHTS) since Shen and Chih (2005) and Fonseca and Gonzalez (2008) suggest that the rights accorded to creditors likely reduce earnings management, as stronger creditor rights against borrower expropriation reduce bank risk in lending activities and thus their incentives to manage earnings.…”

Financial System and Equity Culture Development in Central and Eastern European Countries: The Effect of Institutional Environment

“…Scholtens (2000) takes the view that local politics shapes the economic and institutional conditions in a country, and through these influences the type of financial intermediaries that are able to develop and the level of efficiency they can function at. In a more recent assessment of financial systems and their functionalities, Purda (2008) calls for a compatibility between economic policies and the existing political economy in a country, which encompasses the areas of institutional quality, politics and economics. In our study, we follow the view of Scholtens (2000) and account for the political influences through institutional indicators.…”

“…For instance, Purda (2008) points out that there is a need for further research on transition countries (e.g. transition economies of the CEECs) as 'caution should be used in extending the results from research on financial systems of developed economies with wellfunctioning financial markets to the context of transition and post-transition countries'.…”

“…In doing so, this paper makes several significant contributions to both theory and practice: Firstly, this study enriches the debate on the financial system development in transition economies and addresses the calls for more attention to this area of research (Purda, 2008;Lensink, 2000, Nord, 2000) and in particularly the calls for more studies focusing on equity financing (Smith, 2003, EBRD, 1998. Secondly, this paper joins an emerging strand of literature on the impact of the institutional environment on business (Henisz and Swaminathan, 2008;Peng et al, 2008) and by focusing on the impact of institutional factors on financial development in transition economies addresses the call by .…”

Corporation taxes and the debt policy of multinational firms

“…Country-specific creditor rights (La Porta et al 1997) give rise to similar issues. Weak creditor rights probably result in higher borrowing costs for external debt (e.g., Purda 2008) and the multinational could react by switching from external debt to internal debt. On the other hand, with collateral and bankruptcy laws protecting the rights of creditors, a country may encourage external debt financing and, at the same time, induce a substitution away from internal debt.…”