The Prudent Investor Rule and Market Risk: An Empirical Analysis

Schanzenbach, Max M.; Sitkoff, Robert H.

doi:10.2139/ssrn.2583775

Cited by 4 publications

(5 citation statements)

References 23 publications

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“…In particular, certain advances have led to extensive reforms of regulation laws in relevance to trust investments. The centrepiece of these reforms is the 'prudent investor' principle, which reorients investments from risk avoidance to risk management in accordance with the modern portfolio theory (Schanzenbach, 2017). Undertaking to only invest in assets and instruments, the risks of which they can properly identify, measure, monitor, manage, and control.…”

Section: Robustness Check: a General Methods Of Moments Approachmentioning

confidence: 99%

Household choices on investing in financial risky assets: Do national institutional factors have their own merit?

Apergis

Bouras

2020

Int. J Fin Econ

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Using data from household surveys in United Kingdom, Belgium, France, Germany, Japan, the Netherlands, Sweden, Norway, Denmark, Italy, Switzerland, Australia, New Zealand, Canada, and United States, spanning the period 2009–2018, we examine the institutional basis of households' portfolio choice decisions as related to investments in financial risky assets. We document that governance matters for households' investment decisions. A decomposition of the institutional factor effects on portfolio allocation reveals that a high degree of judicial independence and property rights protection drive households to invest in riskier assets. Our findings, which receive robust support from alternative panel data methodological approaches, have important implications for the literature on the factors dictating portfolio investments, as well as for financial choice decisions reached by investors and portfolio managers.

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Section: Robustness Check: a General Methods Of Moments Approachmentioning

confidence: 99%

Household choices on investing in financial risky assets: Do national institutional factors have their own merit?

Apergis

Bouras

2020

Int. J Fin Econ

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“…The author believes that the relationship between the tax risk attitude of corporate managers or shareholders and the early warning of tax risks is reflected in the following: Tax risk appetite is willing to accept higher tax risk levels and expect higher returns, and usually sets the threshold for tax risk early warning. Slightly higher; on the contrary, tax risk aversion is willing to bear a lower level of tax risk and can get lower expected returns, generally the tax risk early warning threshold is determined to be more conservative; while the tax risk neutral is between the two [14]. If the management of a company ignores tax risk management or believes that there is no tax risk if it operates legally, then the company loses its management basis for tax risk control.…”

Section: Mechanism Analysis Of Tax Risk Early Warning 41 Early Warnin...mentioning

confidence: 99%

Calculus Logic Function in Tax Risk Avoidance in Different Stages of Enterprises

Wang

Guan

2022

Applied Mathematics and Nonlinear Sciences

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During the entire development process of corporate tax risks, these risks will show different tax characteristics, which will result in four stages of tax risk evolution: the incubation stage, the development stage, the deterioration stage and the outbreak stage. During the evolution of tax risks and the establishment of an early warning mechanism, enterprises are facing both internal and external environments. From the internal perspective, the company's business management philosophy, the quality of its staff, and the tax risk management system and procedures of the company will affect the establishment of tax risk and early warning mechanisms; from an external understanding, the regional tax environment, the country's financial legal system, and the company's Social relations are also important factors that must be considered in constructing a tax risk early warning mechanism. From the perspective of supporting conditions, in order to optimize the corporate tax risk early warning mechanism, this article considers the following aspects: first, the establishment of an effective internal tax risk control system for enterprises; second, the establishment of a systematic and effective tax risk control procedures; third, Efforts to adapt to the macro environment and actively respond to tax risks; Fourth, adopt effective tax planning skills; Fifth, improve the quality of tax risk prevention for all employees. When discussing the realization of the goal of the tax risk early warning mechanism, the author uses calculus knowledge to make logical derivation; in the risk attitude and tax risk early warning selection, geometric figures are used to describe people's behavioural guidelines intuitively; in the construction of the early warning mechanism, the scoring method Visually integrated the values of various tax risk warning indicators.

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“…Elyasiani et al (2017) find a negative relation between BHCs' earning management and ownership by monitoring institutions (institutional investors with large and long-term stakes and independence from managers) when banks are larger and riskier. Schanzenbach and Sitkoff (2017) use data from reports of bank trust holdings and fiduciary income tax returns and find evidence that trust asset allocation is sensitive to trust risk tolerance after the reform of the prudent investor rule.…”

Section: The Role Of Institutional Ownership In Bankingmentioning

confidence: 99%

“…12. Schanzenbach and Sitkoff (2017) document the dates for the prudent investor rule and the principal-and-income reform, enacted in every state over the past 30 years. Other factors include the bank bailout of 2008 and the recent rapid rise of mutual funds, pension trusts and insurance companies.…”

Section: Bank Holding Companiesmentioning

confidence: 99%

Subsidiary ownership decisions by bank holding companies

Chiou

2019

JFEP

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Purpose This study aims to examine the intertemporal changes in the institutional ownership of publicly traded bank holding companies (BHCs) in the USA. The role of owned-subsidiary investing in the portfolio decisions is investigated as compared to unaffiliated banks and non-bank institutional investors. Design/methodology/approach The authors apply panel regressions that control bank-fixed and time-fixed effects to study the impact of prudence, liquidity, information advantages and historical returns on each type of the institutional ownership from 1986 to 2014. Findings The subsidiary banks tend to invest in more shares of their parent BHCs when they are traded for a short period of time and when they have low-market risk, low turnover, a low capital equity ratio and great reliance on off-balance activities. However, the impact of these determinants of institutional ownership is opposite for unaffiliated banks and non-bank institutions. Research limitations/implications This study provides evidence that the criteria used by subsidiary banks to invest in their parent company stock are different than the unaffiliated banks and non-bank institutions, raising concerns about the owned-subsidiary investing activities and banks’ trustees’ duty to work in the best interest of their trust clients. Originality/value This paper provides a comprehensive analysis of the level and market value of BHC institutional ownership over the past three decades and the impact of different determinants on the ownership of BHCs by subsidiary banks, unaffiliated banks and non-bank institutional investors.

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The Prudent Investor Rule and Market Risk: An Empirical Analysis

Cited by 4 publications

References 23 publications

Household choices on investing in financial risky assets: Do national institutional factors have their own merit?

Household choices on investing in financial risky assets: Do national institutional factors have their own merit?

Calculus Logic Function in Tax Risk Avoidance in Different Stages of Enterprises

Subsidiary ownership decisions by bank holding companies

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