Capital Metrics Research Articles

The impact of capital on bank profitability during the COVID-19 pandemic

This study examines how various forms of capital in the years leading up to the COVID-19 pandemic affected bank profitability during the crisis in emerging economies. Using data from 819 banks in 26 countries during the 2019–2020 period, we find that banks entering the crisis with a superior capital position performed better during the pandemic. High-quality capital metrics such as Tier 1 capital and total regulatory capital ratios, not the standard leverage ratio, possess the capacity to affect bank profitability. These results are robust after controlling for Basel III liquidity requirements. We also find that the capital-profitability relationship is stronger for larger banks and for those that entered the crisis with better liquidity and credit risk position. Overall, our results imply that focusing on capital quality can help reduce the adverse effect of an external shock on bank performance.

The perspective of top management towards human capital measurement and disclosure in the Zimbabwean mining sector

Purpose: This study is set out to establish the perceptions of the Zimbabwean top management concerning the measurement and disclosure of human capital in the financial statements of listed mining companies. This study has been prompted by the fact that despite companies considering human capital as an important resource that drives value, and competitiveness and contributes to a company’s economic growth, its value remains not properly accounted for in the financial statements. This implies that human capital is not being accorded the importance it deserves in the financial statements. Methodology: This study adopted a qualitative research approach. Qualitative data were collected using semi-structured interview guides from the six largest Zimbabwean-based mining companies. The collected qualitative data was analysed through the thematic analysis process and the results established four main themes. Findings: Obtained results reveal that top management agreed that top management is of the view that human capital has a strong relationship with the value of a company and its financial performance. They also indicated that the value of a company, its competitiveness, and economic growth is largely dependent on employee competencies (skills and expertise). Recommendations: After a synthesis of results, this study suggests a context-based framework offering human capital metrics for enhancing its measurement and disclosure practices. This will help to provide a better valuation of human capital in the financial statements and also various stakeholders will be able to derive useful information for decision-making. Managerial Implications: The study gives more insight into the major roles played by the phenomenon in the achievement of companies’ strategic objectives which include value creation among others. Furthermore, it provides a better internal understanding from top management on how the companies gain competitive advantage and economic growth in the era of the fourth industrial revolution through utilisation of human capital. From the aforementioned, chances are high that the human capital reporting by the mining companies in Zimbabwe will be enhanced forthwith.

Human well-being and natural capital indicators for Great Lakes waterfront revitalization

Revitalization of natural capital amenities at the Great Lakes waterfront can result from sediment remediation, habitat restoration, climate resilience projects, brownfield reuse, economic redevelopment and other efforts. Practical indicators are needed to assess the cultural, health, and socioeconomic benefits of these investments. We compiled U.S. census-tract scale data for five Great Lakes communities: Duluth/Superior, Green Bay, Milwaukee, Chicago, and Cleveland. We downloaded data from the US Census Bureau, Centers for Disease Control and Prevention, Environmental Protection Agency, National Oceanic and Atmospheric Administration, and non-governmental organizations. We compiled a final set of 19 human well-being (HWB) metrics and 26 metrics representing attributes of natural and seminatural amenities (natural capital). We rated the reliability of metrics according to their consistency of correlations with metrics of the other type (HWB vs. natural capital) at the census-tract scale, how often they were correlated in the expected direction, strength of correlations, and other attributes. Among the highest rated HWB indicators were measures of mean health, mental health, home ownership, home value, life success, and educational attainment. Highest rated natural capital metrics included tree cover and impervious surface metrics, walkability, density of recreational amenities, and shoreline type. Two sociodemographic covariates, household income and population density, had a strong influence on the strength of associations between HWB and natural capital and must be included in any assessment of change in HWB benefits at the waterfront. Our findings are a starting point for applying already available HWB and natural capital indicators in a waterfront revitalization context.

ÇALIŞMA SERMAYESİ YÖNETİMİNİN İŞLETME KARLILIĞINA ETKİSİ: BORSA İSTANBUL İMALAT SEKTÖRÜ UYGULAMASI

Efficient working capital management is of vital importance for companies to reach their goals, work at full capacity, and sustain their growth in a profitable way. In this study, the 2010-2018 quarterly data of the 102 manufacturing companies operating on BIST have been analyzed through panel data analysis. This study reveals that there is a negative relation between ROA, which is taken as a profitability metric, and Days Sales Outstanding (Average Collection Period), Accounts Payable Period, Cash Trading Period (Cash Cycle) and Leverage Ratio, which are among working capital metrics and that there is a positive relation between Current Ratio and Company Size.

Creation of Financial and Environmental Values With Solar Photovoltaic Projects While Managing Risks

This study investigates 200 kWp roof-mounted solar photovoltaic system in a country where there is no legal, policy, and institutional framework to de-risk the solar energy market but present naturally conducive environment in the sun-drenched semi-arid country. The analysis of quantitative and qualitative data subject to interpretivist and positivist approaches paves the way to find out that the university, though created financial and environments values, has not addressed the risk associated with illiquid capital intensive investment and conventional financial metrics such as net present value, internal rate of return. Hence, it is recommended to manage the risk with four strategies including maintaining economic value added at 5% or more, leveraging the investment, and withdrawing a part of equity for reinvesting in diversified investment. The findings are significant for low carbon investors to identify opportunities and manage the risk in solar energy market. Energy engineers enable designing a system that meets the fundamentals of the business and environmental value.

Razões da ausência de associação entre sucesso escolar e capital social na Escola Judith Bezerra de Melo - Natal/RN

A literatura registra uma associação positiva entre o sucesso escolar e o capital social de alunos da educação básica. Causa estranheza a inferência, lastreada em parte dos achados empíricos resultantes de pesquisa realizada na Escola Estadual Professora Judith Bezerra de Melo – Natal/RN, de que não haveria associação entre o bom desempenho em língua portuguesa dos alunos da 2ª série do ensino médio dessa escola e o capital social existente na rede pessoal deles. Para realizar uma espécie de crítica interna aos inusitados achados empíricos dessa pesquisa, o arcabouço teórico e metodológico da análise de redes sociais mostrou-se o mais apropriado. As repostas mais prováveis para essa ausência de associação entre sucesso escolar e capital social admitem a seguinte discriminação: i) o sucesso escolar depende da natureza da relação que o aluno mantém com o saber; ii) as métricas de capital social podem ser insuficientes para captar, em sua plenitude, a associação entre as duas variáveis; iii) a singularidade, a diversidade, a incerteza, as trajetórias inesperadas que afloram do campo das possibilidades individualizantes, tecido pelas conexões entre espaço e redes pessoais, sinalizam certos fatores de ordem socioespacial que condicionam e singularizam as distintas formas de sociabilidade; e iv) as pesquisas referentes à aplicação dos princípios educativos da nova pedagogia em alguns países europeus revelam como principais fatores do sucesso escolar a pedagogia do esforço e a qualidade do professor.

Is social capital associated with synchronization in human communication? An analysis of Italian call records and measures of civic engagement

Social capital has been studied in economics, sociology and political science as one of the key elements that promote the development of modern societies. It can be defined as the source of capital that facilitates cooperation through shared social norms. In this work, we investigate whether and to what extent synchronization aspects of mobile communication patterns are associated with social capital metrics. Interestingly, our results show that our synchronization-based approach well correlates with existing social capital metrics (i.e., Referendum turnout, Blood donations, and Association density), being also able to characterize the different role played by high synchronization within a close proximity-based community and high synchronization among different communities. Hence, the proposed approach can provide timely, effective analysis at a limited cost over a large territory.

The evolution of the intellectual capital concept and measurement

This paper presents two dimensions of intellectual capital (IC): the concept itself and the measurement of IC. In the conceptual section, the importance of IC for competitive advantage and its evolution from practice to academia is discussed. The number and diversity of IC models is considered and their points in common are drawn out: namely, three categories, representing the individual, the collectivity and the relationship perspectives. The importance of social capital for the organization’s survival in the current economic environment is explained, a related bibliometric analysis is reported and an IC model acknowledging this component is suggested. The advent of new kinds of capital is explored and a perspective for their integration with the IC model is proposed. In the measurement section, the foundations of IC measurement and different metrics are discussed. A list of factors to be considered for the choice of the ideal set of metrics is presented. The ResultsBased Management and Accountability Framework is explained and the evaluation of the Canadian Chemical, Biological, Radiological and Nuclear Research and Technology knowledge management initiative is given as an example. Recommendations to the reader on how to build their own assessment strategy are made and, in conclusion, future research venues are suggested.Keywords: Intellectual capital. Intellectual capital models. Intellectual capital bibliometrics. Google trends. Intellectual capital metrics. Results-based management and accountability framework. Logic model.Link: http://revista.ibict.br/ciinf/article/view/4054/3573

Market Risk and Volatility Weighted Historical Simulation after Basel III

Regulatory capital requirements for market risk, also known as the Fundamental Review of the Trading Book (FRTB), were disclosed by the Basel Committee on January 2016. This major overhaul of the Basel 2.5 framework challenges risk model specification and backtesting. Given the prevalence of historical simulation approach within large financial institutions, we focus on the Filtered (Volatility Weighted) Historical Simulation (VWHS) approach associated with a EWMA volatility filter. Volatility dynamics is then directed by a single parameter. We discuss how this decay parameter, chosen within a reasonable range, at banks’ discretion, impacts capital metrics, backtesting statistics, as prescribed by the Basel Committee, and fouls the regulatory benchmarking of internal risk models. We show a trade-off between the resilience of risk models to periods of turmoil and the magnitude of capital metrics. Under the new regulatory rules, this would favour plain historical simulation, as compared with filtered or volatility weighed historical simulation. Understanding why, might be helpful for regulated banks, regarding the management of their market risk models, and supervisors involved in internal model approval.

Influence of working capital metrics on profitability: a critical examination on Indian manufacturing sector

The disbursement of working capital is usually considered as a short term cash flow and it is totally neglected by the policy makers to tag with profitability of a concern. Usually the variation in working capital will be observed at the end of the financial year. Such observations will be just a postmortem of financial events happened. Various metrics like Cash Conversion Cycle (CCC), Net Trade Cycle etc directly or indirectly controlling profitability of business. This work investigates how various working capital metrics influencing profitability of the firms by observing a data set of 100 manufacturing companies in India. This study comprehends ten year financial data from the FY 2005-06 to the FY 2014-15. All together a balanced panel set of 1000 firm-year observations form part of this research. The data analysis was carried out using both descriptive and inferential statistical measures. The results show that CCC is positively correlated to Net profit Ratio (NPR) but negatively related to the Return on Equity (ROE). Another major fact identified that the Indian manufacturing firms are having a high DPO (Days Payable Outstanding) while maintaining a moderate DSO (Days Sales Outstanding) and DIO (Days Inventory Outstanding). This situation spots towards the fact that the manufacturing firms are enjoying liberal credit policy from their suppliers. The study also looks into the impact of working capital on profitability at distinct economic phases. The result concludes that the influence of working capital on profitability was consistent irrespective of the economic cycle.

Credit Limits, Stress Testing and Model Risk for Capital Metrics

The topics of Economic Capital modelling, reverse stress testing and credit limits are inextricably intertwined as they all focus on exceptional loss events. In this paper, we use the KVA framework in to frame these three topics within a single unified approach. We propose setting credit limits based on an incremental KVA metric interpreted as a measure of capital consumption for each individual client. Compared to Potential Future Exposure (PFE), incremental KVA is more risk sensitive as i) it is portfolio sensitive and detects cross-selling opportunities, ii) captures wrong-way-risk, iii) accounts for idiosyncratic features such as granularity and credit risk concentration, iv) measures also other risks besides the default of the counterparty such as CVA and FVA mark-to-market losses and is suitable to generalisations driven by regulatory changes such as MVA.A reverse stress testing exercise based on KVA metrics reveals stress scenarios of two kinds: the ones where losses are due to an idiosyncratic vulnerability of the portfolio and the ones tied to systemic risk and the credit cycle. The latter are completely missed by the PFE, although crucially important during periods of market distress.Since different pricing models tend to diverge the most for stressed scenarios, model risk has a material impact on capital projections and, consequently, on the KVA metric. We discuss model risk comparing Gaussian interest rate models admitting arbitrarily negative rates with alternative models where rates are bounded from below.

Entrepreneurial Miscalculation and Business Cycles: How Interest Rate Targeting Distorts Capital Budgeting

This article, using Austrian Business Cycle Theory, shows how entrepreneurs and business managers are vulnerable to central bank monetary policies targeting interest rates. These policies distort market signals used as inputs in widely used capital budgeting metrics. Their reliance on nominal cash flows—together with their dependence on market-based discount rates, themselves directly or indirectly influenced by central bank policy—induces entrepreneurs to misestimate the real future profitability and feasibility of investment projects. Based on distorted market signals, entrepreneurs and business managers ignite an unsustainable economic boom. The divergence between ex ante and ex post profitable investment projects is widened because of business miscalculation leading to a cluster of errors that eventually results in the bursting of an economic boom. Therefore, although the exogenous distortion of market signals is a necessary condition of a business cycle, its ignition is purely endogenous.

What actually confers adaptive capacity? Insights from agro-climatic vulnerability of Australian wheat.

Vulnerability assessments have often invoked sustainable livelihoods theory to support the quantification of adaptive capacity based on the availability of capital—social, human, physical, natural, and financial. However, the assumption that increased availability of these capitals confers greater adaptive capacity remains largely untested. We quantified the relationship between commonly used capital indicators and an empirical index of adaptive capacity (ACI) in the context of vulnerability of Australian wheat production to climate variability and change. We calculated ACI by comparing actual yields from farm survey data to climate-driven expected yields estimated by a crop model for 12 regions in Australia’s wheat-sheep zone from 1991–2010. We then compiled data for 24 typical indicators used in vulnerability analyses, spanning the five capitals. We analyzed the ACI and used regression techniques to identify related capital indicators. Between regions, mean ACI was not significantly different but variance over time was. ACI was higher in dry years and lower in wet years suggesting that farm adaptive strategies are geared towards mitigating losses rather than capitalizing on opportunity. Only six of the 24 capital indicators were significantly related to adaptive capacity in a way predicted by theory. Another four indicators were significantly related to adaptive capacity but of the opposite sign, countering our theory-driven expectation. We conclude that the deductive, theory-based use of capitals to define adaptive capacity and vulnerability should be more circumspect. Assessments need to be more evidence-based, first testing the relevance and influence of capital metrics on adaptive capacity for the specific system of interest. This will more effectively direct policy and targeting of investment to mitigate agro-climatic vulnerability.

Principles in selecting human capital measurements and metrics

Orientation: Physical and natural resources have been surpassed by human capital as aresource of wealth creation. As a result, senior management relies increasingly on appropriatepeople information to drive strategic change. Yet, measurement within the human resourcefunction predominantly informs decisions in support of efficiency and effectiveness. Consequently, dissimilar understanding of measurement expectations between these partieslargely continues.Research purpose: The study explored principles in selecting human capital measurements,drawing on the views and recommendations of human resource management professionals,all experts in human capital measurement.Motivation for the study: The motivation was to advance the understanding of selectingappropriate and strategic valid measurements, in order for human resource practitioners tocontribute to creating value and driving strategic change.Research design, approach and method: A qualitative approach, with purposively selectedcases from a selected panel of human capital measurement experts, generated a datasetthrough unstructured interviews, which were analysed thematically.Main findings: Nineteen themes were found. They represent a process that considers thecentrality of the business strategy and a systemic integration across multiple value chains inthe organisation through business partnering, in order to select measurements and generatemanagement level-appropriate information.Practical/managerial implications: Measurement practitioners, in partnership withmanagement from other functions, should integrate the business strategy across multiplevalue chains in order to select measurements. Analytics becomes critical in discoveringrelationships and formulating hypotheses to understand value creation. Higher educationinstitutions should produce graduates able to deal with systems thinking and to operatewithin complexity.Contribution: This study identified principles to select measurements and metrics. Noticeableis the move away from the interrelated scorecard perspectives to a systemic view of theorganisation in order to understand value creation. In addition, the findings may help toposition the human resource management function as a strategic asset.

Education in the age of biocapitalism: optimizing educational life for a flat world

Introduction: Biopolitics and Education: A Return to the Question of Life in Schools PART I: ORIGINS OF EDUCATIONAL BIOCAPITAL 1. Learning to be Homo economicus on the Plantation: A Brief History of Human Capital Metrics 2. Schooling for Value-Added Life: The Making of Educational Biocapital PART II: PROMISSORY FUTURE(S): LEARNING THE SCIENCE OF LIFE 3. Engineering Promissory Future(s): Rethinking Scientific Literacy in the Era of Biocapitalism 4. Learning about AquAdvantage(R) Salmon from an ANT: Actor Network Theory and Education in the Postgenomic Era PART III: GOVERNING STUDENTS FOR A FLAT WORLD AND ALTERNATIVES 5. The Biomedicalization of Kids: Psychotropic Drugs and Biochemical Governing in High Stakes Schooling Epilogue: Alternative Futures of Education: Exiting Education for Biocapital

Social Capital is Associated with Earnings among Foreign-born Mexican Men but not Women in Los Angeles County

The mechanisms through which social capital is accumulated may influence its relationship with hourly earnings. Because Mexican men and women accumulate social capital differently, for instance, gender may be an important factor for understanding social capital’s association with Mexican migrant earnings. Unlike past research that often fails to differentiate between various social capital metrics (e.g., social network member reciprocity, participation in civic group organizations, neighbourhood trust), this article estimates two of these associations with wages while controlling for individual-, household- and neighbourhood-level characteristics. Results suggest that foreign-born Mexican men receive a wage premium from civic participation (bridging social capital) and a wage penalty from reciprocal social network exchange (bonding social capital). We also find that unauthorized legal status (among Mexican men and all migrants) and having children (among women) were negatively associated with hourly wages. We conclude with a discussion of the relative association of human and social capital with Mexican migrant wages.

Developing “community” in community gardens

Community gardens are enjoying a renaissance, thought to be due to people's desire to reconnect with food, nature and community. This paper presents results from an exploratory investigation of two community gardens in Nottingham, supported by regional and national contextual analysis. It examines the nature and construction of “community” in community gardens and how they benefit their local communities. Results from case-study work show how community gardens help to build cohesion and vitality in a community, contributing to the generation of bonding, bridging and linking social capital. The composition of these capitals varies between the case-study gardens, dependent on the type of community formed. Two categories of community garden are identified in the paper: “place-based” and “interest-based”. The former are more territorially embedded in the local community, while the latter may span across diverse communities, with the social capital generated remaining within an “interest community”. These categories may not always map neatly on to one community garden, although one category may be more immediately evident. The article also suggests directions for future research, including complementary research frameworks to further develop understandings of social capital metrics.

Human capital measures, strategy, and performance: HR managers' perceptions

PurposeThe purpose of this paper is to report the results of a survey and interviews with human resource (HR) professionals to identify and better understand their perceptions and expectations of human capital measures' (HCM) content, links to strategy, and impact on performance.Design/methodology/approachThis paper relies on a quantitative analysis of survey questionnaires collected from 104 HR executives, as well as on a qualitative investigation using six interviews. Two types of HCM are derived using principal component analysis. One factor measures employees' work efficiency and cost consciousness (efficiency indicators), whereas the second factor measures employees' entrepreneurial and innovative capabilities (innovation indicators).FindingsThe results confirm the following hypotheses: first, according to HR managers, the more advanced a company is in the development of HCM, the higher the company's performance; and second, in companies following a differentiation strategy, HR managers are interested in innovation indicators, while in those following a cost reduction strategy, HR managers are interested in efficiency indicators.Research limitations/implicationsResults are based on a cross‐sectional study of HR professionals' perceptions. However, it underscores the critical role that HCM plays in delivering performance in the HR managers' opinion. It also shows that HR managers are conscious that HCM should be aligned with strategy.Practical implicationsBased on HR managers' perceptions, the paper suggests that HR professionals might invest more effort in creating and implementing their HCM to deliver higher levels of performance. It also implies that HR managers and management accounting and control systems experts have a common interest to collaborate when implementing HCM.Originality/valueThe paper demonstrates the importance of implementing human capital (HC) metrics into a strategic performance management system to deliver performance from a company's HC. It contributes to a cross‐disciplinary (HRs, management control, and strategy) perspective on HC strategy.

Does R&D pay?

Pharmaceutical R&D is notoriously risky, lengthy and costly; moreover, it does not always produce products of blockbuster status. The conventional route of fully discovering, developing and marketing a new chemical entity is followed by the large pharmaceutical companies, whereas other organizations in the pharmaceutical sector--such as generic or specialty companies and biotechnology companies--only operate over portions of the full R&D process. Here, we compare the ten-year financial performance of these three subsectors through their price/earnings ratios and their return on capital metrics to understand which of these strategic alternatives offered the best return to investors.

Invariance and traceability for measures of human, social, and natural capital: Theory and application

Invariant, additive, and separable parameters for measures of human, social, and natural capital have repeatedly proven their value and utility globally over the last 50 years. Given growing demand for comparable living capital metrics, metrological organizations should position themselves to provide the needed calibration and traceability services.