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Über dieses Buch

This book contains a selection of the contributions presented at the conference. The articles reflect the extent, diversity and richness of research areas in the field, both fundamental and applied finance. The target audience of these proceedings includes researchers at universities and research and policy institutions, graduate students and practitioners in economics, finance and international economics in private or government institutions.



Econometrics of Financial Markets


Chosen Measures for Pricing of Liquidity

The financial crisis of 2007–2009 showed that especially liquidity risk was underestimated or was not taken seriously into account. The existing liquidity measures proved to be inadequate or incorrectly used. This is why the alternative measures should be considered. The aim of the article is to examine the specific measures of liquidity using a sample of daily data. The particular attention will be paid to the yield curve fitting error, precisely to root mean squared error. The analysis covers the time series of errors calculated from daily WIBOR data and yield curve construction using two types of parametric models—Nelson-Siegel and Svensson one. By employing chosen liquidity measures into Polish financial market one can confirm their effectiveness in case of market disturbances.
Ewa Dziwok

Not as Black as Is Painted? Influence of sCDS Market on Domestic Financial Markets Before and After the Ban on Naked sCDS Trade

In the article we analyze the impact of sovereign CDS on other financial market within a country and verify whether the impact changed after imposing the ban on trade of the non-covered sCDS in Europe (November 2012). We analyze European sCDS of both emerging as well as developed economies, who retained their own currencies, i.e. Poland, Hungary (emerging markets) and Sweden and United Kingdom (developed ones), over the period 2008–2013. We investigate the degree of influence between the sCDS and foreign exchange market, sCDS and sovereign bond, as well as sCDS and stock exchange ones. The results vary depending on the analyzed country, indicating clearly that the Central European markets are much prone to sunspots and volatility transmission than the Western ones. However, in general the results support the hypothesis that the impact of the CDS on the other financial markets diminished after November 2012.
Agata Kliber

Determinants of the Spread Between POLONIA Rate and the Reference Rate: Dynamic Model Averaging Approach

In the paper we consider the factors that determine the overnight interest rates in the Polish interbank market (measured by the POLONIA rate index). In 2008 the Polish central bank (NBP) adapted the policy similar to the European Central Bank (ECB) and since then it has been trying to place the POLONIA rate around the NBP reference rate, mainly by influencing the liquidity conditions through open market operations. We try to answer the question how effective this control was. We identify a set of factors that determine overnight rates, namely: liquidity, expectations, confidence in the banking sector and central bank operations. We analyze to what degree each of these factor has been influencing the POLONIA rate in the period from 2006 to 2016. To this end we have used a non-standard econometric method, namely dynamic model averaging, which allows to identify the set of variables that provide the best description of the explanatory variable. The results reveal that before the outbreak of financial crisis in 2008 the spread between POLONIA rate and reference rate could be explained mainly by liquidity conditions. After the crisis had begun, the importance of liquidity factor decreased and the expectations played a more important role in determining the spread. The liquidity situation has regained its importance in determining the spread since the beginning of 2012, after the central bank had undertook appropriate measures to normalize the situation on the interbank market.
Paweł Kliber

World Natural Gas Markets: Characteristics, Basic Properties and Linkages of Natural Gas Prices

In recent years the world natural gas market is changing mainly due to the wider access to LNG (Liquefied Natural Gas). This technology allows to trade between the market participants all over the world. The natural gas prices on the American and European market are predominantly benchmarked to Henry Hub and National Balancing Point (NBP) natural gas. The goal of this paper is to compare basic properties of selected time series and to investigate whether the listings of natural gas in the derivatives markets are linked. We show that the probability distribution of returns is not normal and that there is a strong ARCH effect. We use multivariate GARCH model to describe the linkages between several series. We are taking into account two return series of natural gas futures contracts (Henry Hub and National Balancing Point) and two returns series of crude oil futures contracts (West Texas Intermediate and Brent) to measure the strength of linkages across two commodity markets, the most important fossil fuels.
Blanka Łęt

Are Major Currencies Hedges or Safe Havens for Polish Stocks and Bonds?

I follow Baur and Lucey (Financ Rev 45:217–229, 2010) to examine whether the euro, the US dollar, the pound sterling, the Swiss franc and the Japanese yen are hedges or safe havens for Polish stocks and bonds. In doing so I use the daily sampled data on the major currencies exchange rates into the Polish zloty, the Warsaw Stock Exchange index WIG and the 10 year Polish government bonds covering the period 29 Nov 2005–31 Dec 2015. The analysis shows that all currencies are strong hedges for stocks and diversifiers for bonds in normal market conditions. When the markets extremely fall they serve as safe havens for stocks and either as diversifiers or weak hedges for bonds.
Paweł Miłobędzki

Copper Price Discovery on COMEX, 2006–2015

We estimate a VEC DCC-MGARCH model on the weekly sampled price series of 3 mostly traded copper futures on COMEX maturing within 2, 3 and 4 months in the period 4 Jan 2006–30 Dec 2015 and find that they are co-integrated and symmetrically revert to their long run equilibrium relation. We also reveal the existence of Granger causality running in both directions for all pairs of maturities. More interestingly, we observe 3 periods of an increased conditional volatility of the returns on copper futures resulting from the change of market sentiment that is due to the fall of risk appetite after the release of the April 2006 Global Financial Stability Report, the collapse of the Lehman Brothers Holdings Inc. in September 2008, as well as the next stage of the Greek financial crisis preceding the agreement to write-off 50% of the Greek debt in October 2011. At all times their conditional correlations remain almost stable and are close to one, however.
Marta Chylińska, Paweł Miłobędzki

A Copula Approach to Backward-Looking Factors in Market Based Inflation Expectations

The paper presents an analysis of the dependences between inflation expectations extracted from inflation-linked swaps quoted for EUR and three other variables: exchange rate, oil prices and interbank rate. To determine the existence of the dependences, also for the outliners, the methodology based on the DCC-t-copula model is applied. Time span covers 2009–2015. Dynamic Kendall’s τ and tail dependence coefficients for 2Y expectations prove to be negligible and counterintuitive. The explanations of the results can be found in the swap market features (illiquidity and negative inflation risk premium for some time) and the measure of expectations applied (being just the approximation of the expectations, highly volatile for daily quotations).
Piotr Płuciennik, Magdalena Szyszko

Stock Market Investments


Risk Parity Portfolios for the Grouped Stocks

Portfolios in which the contribution of all assets are equally weighted are called the risk parity portfolios. Very often, the idea of risk parity is considered as a special type of diversification strategy. This approach had become very popular among investors, after the last economic crisis. At that time many portfolios perceived as well-diversified suddenly had become undiversified portfolios. Usually the risk parity is calculated for the individual stocks. In this article, the method of estimating the risk parity portfolios for grouped stocks was discussed. The presented model was applied to selected stocks belonging to different groups (sectors) and quoted on the Warsaw Stock Exchange. The main goal of empirical research was the analysis of risk parity portfolios calculated for the groups of stocks and also for the individual stocks. Additionally the risk parity portfolios were compared with the naive portfolios and minimum variance portfolios. All portfolios were compared according to the risk, rate of return and future profits.
Agata Gluzicka

Order Imbalance Indicators in Asset Pricing: Evidence from the Warsaw Stock Exchange

The paper is devoted to the description of rates of return for stocks listed on the Warsaw Stock Exchange (WSE) basing on the information of order imbalance. The model employed in the research is a modified version of Fama and French (J Financ Econ 33(1):3–56, 1993) asset pricing model including additionally the ‘order imbalance factor’ built on the basis of the original imbalance indicators proposed by Nowak (Order imbalance on the Warsaw Stock Exchange, 2000–2012. Paper presented at the International Conference Financial Investments and Insurance – Global Trends and Polish Market, Wrocław University of Economics, Wrocław, 17–19 September 2014). The order imbalance is assumed as the temporary imbalance between buy and sell orders. Its estimation is preceded by an indication which side of the market was initiating the transaction, and a distinction between the so-called buyer- and seller-initiated trades [Lee and Ready (J Financ 46(2):73–746, 1991), Ellis, Michaely and O'Hara (J Financ Quant Anal 35(4):529–551, 2000)]. The imbalance indicators are calculated using the high frequency intraday data. The research hypothesis states that the proposed asset pricing model has good descriptive properties. The analysis is conducted for the selected stocks—index WIG20 constituents listed on the WSE over the period of 2000 to 2016. The model is validated using i.a. the underidentification test and the weak identification test [Kleibergen and Paap (J Econom 133(1):97–126, 2006)], overidentification test of all instruments [Hansen (Econometrica 50(4):1029–1054, 1982)] and endogeneity test of endogenous regressors.
Sabina Nowak

Interaction Between Market Depth and Market Tightness on the Warsaw Stock Exchange: A Preliminary Study

The nature of market liquidity is multidimensional. According to the literature, the majority of researchers follow Kyle (1985) and they distinguish between three dimensions of market liquidity as special liquidity characteristics: market depth, market tightness, and market resiliency. The paper presents a preliminary study of interaction between market depth and market tightness on the Warsaw Stock Exchange (WSE). The order ratio (OR) is employed as a proxy of market depth, while market tightness is approximated using the relative spread (RS). The 20 most liquid WSE-listed big companies are investigated. The high-frequency intraday data covers the period from January 3, 2005 to June 30, 2015. Moreover, the paper provides a robustness analysis of the obtained results with respect to the whole sample period and three adjacent subsamples of equal size: the pre-crisis, crisis, and post-crisis periods. The hypothesis concerning the statistical significance of the Fisher’s z-transformed correlation coefficients between daily values of the OR and RS indicators for each stock is tested. The empirical results reveal that although, in general, low daily order ratios are accompanied by narrow daily relative spreads (as both indicate high liquidity), and high daily order ratios are accompanied by wide daily relative spreads, the majority of correlation coefficients between daily values of the OR and RS indicators are not significantly different from zero. Furthermore, the results turn out to be robust to the choice of the sample. Our findings indicate that both ratios seem to capture various sources of market liquidity, which is consistent with the literature.
Joanna Olbryś

Investment Opportunities in the WSE: Bull Versus Bear Markets

This paper investigates how mispriced equity in emerging economies is. To do so, we test for abnormal excess returns using classic and modern asset pricing models. We document that size, investment, and momentum effects are not unequivocal enough to advertise them as trading opportunities. Abnormal returns of profitability and value anomalies are statistically and economically significant and they are persistent throughout different investment climates. Further, we report higher degree of mispricing at an aggregated level, and thus higher abnormal investment opportunities, in the period of bear market and stable macro-conditions (2000–2006) than during and after the recent global financial crisis (2007–2013). We advocate that in emerging stock markets, like the Warsaw Stock Exchange, investors’ asset pricing skills outweigh the effect of international portfolio rebalancing in the process of asset pricing. Investors might benefit from acknowledging these findings in formulating their investment policies. For instance, they may consider switching towards less aggressive portfolio allocations during bear markets.
Paulina Roszkowska, Łukasz K. Langer



Development of Financial Systems in 1995–2014: A Factor Analysis

The aim of the research was to analyze financial system development patterns for both 19 post-communist and 21 non-post-communist counties over the 1995–2014 period. The use of a factor analysis allowed us to identify two unobservable factors. Those factors account for most of the variance of the nine observed variables characteristic of the economic and financial development, the banking sector’s financial position and the structure of the financial sector. We manage to identify factors representing variables correlated with financial system development and growth of the banking sector, but factors’ roles differ among the analyzed groups of countries. The development of the banking sector is significantly associated with the economic development in both groups. Yet, in advanced economies some importance might be also attached to the stock market, which is not the case for post-communist countries. The results show that there is higher homogeneity in the financial system development patterns in post-communist countries, while the roles of both factors are more heterogeneous among advanced economies. Lastly, we provide evidence that the global financial crisis did not cause a permanent structural change in the correlation patterns of variables associated with both factors.
Małgorzata Iwanicz-Drozdowska, Paweł Smaga

Measuring Systemic Risk with CoVaR Using a Stock Market Data Based Approach

The aim of the paper is to present and discuss an alternative method of calculating the CoVaR of the banking system. The authors build and empirically utilise the measure of systemic risk, which is based on the traditional CoVaR approach, as proposed by Adrian and Brunenmeier (CoVaR. Staff Report No. 348, Federal Reserve Bank of New York, 2008 [revised September 2014]; CoVaR. NBER Working Paper No. 17454, National Bureau of Economic Research, 2011; Am Econ Rev 106:1705–1741, 2016), but uses market-based data (instead of the book values) for calculation. The assumptions of this method, among all else are that 1) the aspects of systemic risk which closely relate to financial system stability, for relatively small financial systems, where the banking sector is the main provided of funding and liquidity, may be modelled with banking-sector-based methods; and 2) the stock market is efficient enough to price the risk related to those financial institutions, whose stocks are quoted on the relevant stock exchange. The empirical research is carried on the example of Poland, as in the authors opinion, also following the literature, the two mentioned assumptions hold for this particular country. The paper concludes with ideas for future research, including further development of the proposed method to include institutions other than banks, and a range of other central European countries for which this method is applicable.
Marta Karaś, Witold Szczepaniak

The Quality of Financial Information and Stock Market Development: A Panel Data Study for the European Economies

The main aim of the paper is to investigate whether the quality of financial information facilitates and promotes the stock market development. We test this hypothesis by using a sample of 36 European economies in the period 2006–2012 based on dynamic panel regression (system GMM) approach. The strength of auditing and reporting standards (SARS) is used as a measure of financial information quality, while the stock market capitalization relative to GDP measures the stock market development. The estimated results demonstrate positive and significant relationship between financial information quality and capital market development after controlling for the standard macroeconomic and financial specific stock market determinants, suggesting that financial reporting quality is one of the most important determinants of stock market development in European economies. The effects of financial reporting to stock market development are much more significant in the case of non-EU countries. Additionally, the results suggest that growth rate, foreign direct investment, banking sector and corporate governance quality are positively and significantly associated with stock market development, while inflation rate and stock price volatility as measures of macroeconomic and stock price instability have negative influence on stock market activity.
Darko Lazarov, Tanja Lakovic, Emilija Miteva Kacarski

Impacts of Urban Environmental Attributes on Residential Housing Prices in Warsaw (Poland): Spatial Hedonic Analysis of City Districts

The study aimed to investigate the home-buyers’ preferences in relation to urban environmental attributes (two types of air pollution and five types of noise) for Warsaw, Poland and test the applicability of hedonic pricing method (HPM) in Poland. The econometric classical hedonic housing price models are developed and estimated for the city of Warsaw and hedonic models with spatial adjustments (spatial autoregressive model and spatial error model) are developed for separate city districts. The AMRON database of Polish Banks Association is used with 6318 observations between 2012 and 2014 years. The GIS technique and MATLAB tool are applied for implementation to the database location, environmental and spatial attributes. Most of structural and location attributes occurred to be statistically significant with expected signs of influence on prices. Models for separate districts differ, with environmental variables: rail, aircraft, tram, industrial noise, NO2 and PM10 concentrations being significant in some districts.
Magdalena Ligus, Piotr Peternek

Macro- and Microprudential Regulations and Their Effects on Procyclicality of Solvency and Liquidity Risk

This paper aims to identify the effect of macroprudential policies and microprudential regulations and their interactions on the sensitivity of leverage and liquidity funding risk to the business cycle during both non-crisis and crisis period. In this paper we focus on major types of macroprudential instruments as designed by the International Monetary Fund, and on microprudential regulations’ indices. Applying the two-step robust GMM estimator to 782 banks from over 60 countries covering the period of 2000–2011 we find that both macroprudential and microprudential instruments have insignificant impact on procyclicality of leverage in the non-crisis period. Macroprudential instruments decrease procyclicality of liquidity during non-crisis period and increase procyclicality of leverage during the crisis. Restrictions on the range of activities conducted by banks reduce procyclicality of liquidity risk during non-crisis period. Interaction between macroprudential instruments targeted at risk-taking by borrowers and restrictions on the range of activities taken by banks has been found to be effective in reducing procyclicality of leverage during the crisis period.
Małgorzata Olszak, Iwona Kowalska

Banks and Other Financial Institutions


Balance Sheet Shaping Through Decision Model and the Role of the Funds Transfer Pricing Process

The banking industry is currently facing a number of challenges driven by the regulatory requirements, low or even negative interest rates and margin compression. As a result active and conscious balance sheet management has increased in importance and banks are required to optimize and allocate resources very precisely to their businesses. This article lunches the hypotheses that the application of the optimization technique improves the management of the banking book in terms of quantifiable impact on a bank’s P&L and that the Funds Transfer Pricing process could be used as a mean to achieve the target position of a bank. It proposes two steps approach to prove the above hypotheses, i.e. the application of the decision model and the FTP process. In addition, the article provides the reader with the main concepts of the FTP framework and details regarding the Balance Sheet shaping.
Beata Lubinska

Testing VaR Under Basel III with Application to No-Failure Setting

We investigated practical aspects of VaR model testing in case of no-failure series, with the special focus on significance levels recommended under Basel III. We considered alternative approaches to the standard likelihood ratio (LR) statistics, which are Wald and Lagrange Multiplier (LM) tests. The aim of the paper was to propose a VaR test available directly for no-failure setting and to compare VaR tests based on various rules—LR, Wald and Lagrange Multiplier. The comparative analysis involved both practical applicability aspects and formal evaluation of statistical properties of the tests. We showed that the LM rule applied to VaR test construction offers a practical advantage of direct applicability to all kinds of observed failure sequences, independent on the number of VaR breaches. We also presented possible power gains, resulting from the alternative approach, which result in more effective detection of misspecified risk models.
Marta Małecka

Factors of Influence on Relationship Banking of Polish Firms

In the field of business research, the relationships of firms to banks are not normally in a central focus, but for the survival of enterprises this issue may be important. Especially during a crisis, when cash from banks is extremely important to realize a plan of restructuring, the relationships to banks(s) becomes a crucial factor. One factor in the field of relationships to banks is the so called relationship banking, which is a well-known practice in the bank oriented economies in Europe. Relationship banking means a long run relationship between one or a small number of banks to firms, especially in lending, so the terminus is in this field relationship lending. Banks receive intensive information about the firm over a long period of time, so that the banks are able to estimate at a high level the economic situation of the firms. On the other hand the enterprises are looking for a higher level of understanding and help in critical situations. Relationship banking leads to lower competition among the banks, so that there is a fear of firms paying too much for banking products. On the basis of a huge telephone-questionnaire in Poland concerning financial management we have tried to answer some research questions in the field of relationship banking in detail in order to bring light into this somewhat dark area of relationships between banks and firms. The main aspect of relationship banking is the duration of this relationship. Using empirical methodology, we analyse this relationship on the basis of the length of time as well as aspects such as the age of the firm, the number of bank relationships, the industry, the influence of strategies and the access to credits.
Helmut Pernsteiner, Jerzy Węcławski

Bootstrap Mean Squared Error of Prediction in Loss Reserving

The prediction of total loss reserve in non-life insurance company is considered. One of the methods currently used in practice applies the generalized linear model (GLM). In the literature one can find the justified extension of the GLM to the hierarchical generalized linear model (HGLM) for loss reserving. A limitation in the use of the HGLM is the fact that the mean squared error of prediction (MSEP) is expressed by a complex analytical formula. An alternative to the analytical formula is to use the bootstrap procedure approximating the sampling distribution of the MSEP. This paper study two ways of bootstrap. The first one is the parametric bootstrap in which one simulates from fitted values of the HGLM. This approach is sensitive to incorrect fit of the model. Therefore the alternative is the simulation by resampling residuals and adding them back to the fitted values. The paper contains the comparison of this two approaches applying the loss triangle investigated by several authors. Bootstrap procedures are implemented in R software and the code is available to download (see http://​web.​ue.​katowice.​pl/​woali/​).
Alicja Wolny-Dominiak

Mixture Cure Models in Prediction of Time to Default: Comparison with Logit and Cox Models

Mixture cure models are an extension of the standard survival models used for predicting survivors in the case of two distinct subpopulations [Sy and Taylor (Biometrics 56: 227–236, 2000)]. The models assume that the studied population is a mixture of susceptible individuals, who may experience the event of interest, and non-susceptible individuals, who will never experience it [Corbière and Joly (Comput Methods Prog Biomed 85(2): 173–180, 2007)]. Mixture cure models were used for the first time in medical statistics to model long-term survival of cancer patients. Tong et al. (Eur J Oper Res 218(1): 132–139, 2012) introduced mixture cure models to the area of credit scoring, where a large proportion of the accounts do not experience default during the loan term. In this paper, we investigate the use of a mixture cure model for a sample of 5000 consumer credit accounts from a 60-month personal loans portfolio of a Polish financial institution. All loans have been observed for 24 months. Default is the event of interest, whereas earlier repayment is considered to be censoring. We develop and compare default prediction models using the logistic regression, Cox model and mixture cure approaches. Similarities with and differences to the study results obtained by Tong et al. (Eur J Oper Res 218(1): 132–139, 2012) are scrutinised. The final discussion focuses on the usefulness of mixture cure models in predicting the probability of default, and the limitations of these models.
Ewa Wycinka, Tomasz Jurkiewicz

Public Finance


A New Business Model in Health Care Between Public and Private: Low Cost High Value Healthcare

The aim of the paper is analyzing the phenomenon of low cost high value in healthcare, understanding its organizational paradigm, the motivations, the services offered and placement. Over the past years, we have questioned the possibility of creating new models of health care organization, able to respond to the demand for health care with new management tools to develop, implement and spread both the public and private healthcare system. The model focused on public control of health over the years has always been more trouble in responding to the demand for health care in increasingly complex social contexts. There is a need to innovate with new management tools to be disseminated both the public health and the private sector. The ways to contain health care expenditure, normally involve a decrease in the quality of services. Some of the measures are commonly adopted patient co-pay schemes, or practicing de-facto rationing, either by limiting the number of actual treatments provided in combination with long waiting lists, or carrying out consumer health campaigns focused on prevention, all with the aim of limiting the demand for public health services. The low cost high value in health care can be an answer at this stage of welfare change. In the research the case study method is used and it’s focused on two low cost high value medical centers: Centro Medico Santagostino and OdontoSalute, located in Northern Italy. The “cross-case analysis” is used to identify the specific features of the low cost high value business model and the contribution to the health system. This study demonstrated that the low cost high value business model in health care system is a solution to the welfare change. The need of more systematic studies in this area is highlighted.
Elena Querci, Patrizia Gazzola

The Heterogeneous Diversity of the Real Estate Transfer Tax in the EU

The real estate transfer tax is a factor in the economic policy of the EU member states and even the EU as such. Although, both EU and EU member states have been working towards the achievement of economic sustainable growth and financial stability in a harmonized manner, the national direct taxations are in the power of EU member states and have not grown any similar. A critical and comparative Meta-Analysis study of this heterogeneity is illustrative, provides practical information about the real estate transfer tax rates and testifies about the often overlooked inherent particularities and diversities of the EU member states, their laws and fiscal policies. The real estate transfer tax suggest that the EU and its policies and strategies, including Europe 2020, cannot crossed the Rubicon, represented by fiscal particularities generated by different legal, cultural, historical and other traditions and this is correct, except few countries.
Petra Jánošíková, Radka MacGregor Pelikánová

Impact of Financial Policies of Local Authorities on Entrepreneurship: Comprehensiveness of Policy Matters

The article is dedicated to the issues of promoting entrepreneurship by local governments on municipal level in Poland. The authors conducted an analysis of the financial policy’s impact of local government units on the development of entrepreneurship. As explanatory variables in the article, the authors adopted instruments of entrepreneurship support that were based on the revenue side and the expenditure side of the budget. The list of these variables is as follows: total tax income on real estate, total tax income on transport, total income from property, total expenditure on property, product of variables describing tax income and property expenditure. As outcome variable, the authors adopted level of entrepreneurship in municipalities measured by the number of newly registered business entities per capita. While the control variable was the ratio called population density. The output dependent variable was divided by the number of working age population, while the output independent variables (revenue and expenditure instruments of financial policy of local authorities) were divided by the total population. Analysis was performed based on logarithmic averages for annual data that was collected at the commune level. Based on collected data, authors had constructed six models that were later estimated. The estimation of parameters of models was done using linear regression. Regression model for averages proved that local government units fiscal policy expressed in tax instruments strongly affect entrepreneurship, with assumption of simultaneous usage of several stimulants. Income instruments most strongly influence the development of entrepreneurship. Among these instruments the biggest impact on entrepreneurship have tax instruments, in particular the real estate tax. Expenditure instruments that most strongly influence entrepreneurship are capital expenditures. Finally, the effectiveness of financial forms of support is conditioned by stability and continuity of fiscal policies implemented by local governments. Analyzed model positively verifies opinions from literature that use by local authorities single instruments of entrepreneurship support (especially taxes) brings weaker results than the use of a set of a tax-including instruments.
Tomasz Skica, Jacek Rodzinka, Rusłan Harasym

Corporate Finance


Are Capital Structure Determinants Different Depending on Firm Size and Debt Maturity? Evidence from European Panel Data

The aim of the study is to verify whether and how the determinants of capital structure vary depending on the firm size and debt maturity. A number of firm-specific factors, as well as country and industry characteristics are compared across three size groups of firms in terms of their impact on various measures of capital structure. The study employs the BACH-ESD database provided by the European Commission and covers 11 EU countries during the period 2000–2013. Using panel data models for different size groups and for different measures of debt, findings provide evidence that both the direction and the significance of capital structure determinants vary along with the firm size, as well as depending on the debt maturity. As for the size-dependent findings, it appears that financing decisions of small firms generally seem to support the pecking order theory more, while medium and large-sized firms tend to follow the trade-off predictions on leverage. The results also indicate that the trade-off theory is more applicable for short-term debt, whereas pecking order predictions on capital structure are more suitable for long-term debt. The research confirms the prevalence of the country effect over the industry effect in the capital structure, although the difference between the importance of the two effects tends to decrease as firms grow larger.
Julia Koralun-Bereźnicka

Value Creation in a Firm Through Coopetition: Real Options Games Approach

The main goal and the original contribution of this paper is to find and describe (wait or invest) decision rules of firms based on market conditions (competition or coopetition), the net present value of a project and the investment option value. Investment decision making is described as a game between two players. Since a real options approach is used to find the value of an investment project, the paper falls in the field of real options games (ROG). Analysis of these games may help explain some aspects of firm behavior and give guidelines for managers. It appears that in a purely competitive environment a real options framework will only be applicable when the classic NPV is definitely negative, even if economic calculations indicate its use at positive NPV. Firms which create a coopetition relationship should be more interested in using real options approach. Furthermore, in order for firms to keep their coopetition agreement and receive greater benefits, high-risk projects should be a greater incentive than low-risk projects.
Elżbieta Rychłowska-Musiał

Household Finance


Does a Household’s Wealth Determine the Risk Profile of Its Financial Asset Portfolio?

The aim of this study is to identify and analyse the risk profiles of household financial asset portfolios and their determinants in 15 euro area countries. Financial assets relate to deposits, managed accounts, mutual fund units, bonds, shares, private lending, voluntary pension plans and whole life insurance contracts, private businesses, and others. The study uses a fractional multinomial logit model to recognise the importance of safe, relatively safe, and risky components of portfolios for households assigned to 5 wealth classes. The main results prove the primary importance of deposits for households in almost all the member states. Moreover, the features influencing the structure of portfolios lead to conclusions about the greater exposure to financial risks of wealthier respondents than those less affluent. However, the study identifies the countries where contrary preferences characterise households with real assets of high values.
Katarzyna Kochaniak

Supporting Family to Their Utmost—People’s over the Age of 50 Attitudes to Borrowing

The aim of this paper is to indicate factors which have a significant impact on having a consumer credit or a mortgage loan among people over the age of 50. The article contains results of a research which was carried out in the period from April to May 2016. Respondents of this research were people over the age of 50 who live in lubelskie region (Poland). The sample reflects the proportion of age groups in tested population (stratified sampling). In order to reach the goal of this paper and verify stated hypotheses, statistical tests of significance and binary logistic regression were used. The conducted study revealed that supporting family is a strong motive, which has an impact on having or not consumer or mortgage loan. Moreover, the willingness to help family financially is much more important than any other financial reason or obstacle. At the same time, the level of trust in family is not important when people borrow money for them.
Beata Lewicka
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