Global Financial Tsunami Research Articles

AN EVALUATION ON THE OPERATIONAL EFFICIENCY OF TAIWANESE SEMICONDUCTOR IC INDUSTRY

The purpose of this research is to elaborate a three-stage hybrid measure data envelopment analysis (DEA) with meta-frontier model, and then estimate the technical efficiency of Taiwanese semiconductor integrated circuit (IC) companies by using data from 2005 to 2016 on 92 firms. The study divided the Taiwanese semiconductor IC companies into two groups (IC design and IC manufacturing/packaging/testing) based on their different production characteristics and using the concepts of DEA meta-frontier models proposed by [O’Donnell, CJ, DP Rao, GE Battese (2008). Meta-frontier frameworks for the study of firm-level efficiencies and technology ratios. Empirical Economics, 34(2), 231–255] to estimate their efficiencies. The empirical results of this study show that the adjustment range of the average meta-efficiency values of all firms is higher than the adjustment range of the financial turbulent in 2007–2009 and 2011–2013. Second, before and after the adjustment, the distribution of the meta-technology ratio (MTR) changed slightly. The main reason may be that the global economic recession triggered by the 2007–2009 global financial tsunami and the 2011–2013 European debt crisis offset the impact of technological progress. Finally, under the considerations of environmental factors, the ratio of export to total sales, the degree of diversification, research and development spillover effects and the ratio of investment to mainland China are the main determinants influencing the operational performance of Taiwanese semiconductor IC firms and the impacts on MTR.

Corporate Governance and Bank Profitability: Lessons From Nigeria

Corporate governance is the framework by which the various stakeholder interests are balanced or the relationships among the management, board of directors, and others are monitored. It is argued that lack of good corporate governance in banks is responsible for excessive risk taking and irresponsible lending that often result in huge non-performing loans and the erosion of shareholders funds. Studies show that almost 60 percent of failed banks had board members who either lacked banking knowledge or were uninformed and passive regarding supervision of their banks affairs. It is suggested that a strong bank managing director and a weak board of directors are a recipe for weak corporate governance. Weak corporate governance became a major global concern of banks before and after the global financial crisis between 2007 and 2009 for bank management. Despite the difficult times banks that embraced the basic principles of good corporate governance continued to make profit and growing stronger today. Nigeria that was not isolated from the global financial tsunami boasts of its oldest bank that prides itself in banking excellence based on strong corporate governance ethics. The survey research design was used for the study. Data generated were organized before they were analyzed. Based on the analysis of data, it was found that corporate governance has strong positive relationship with bank profitability.

Does the Baltic Dry Index drive volatility spillovers in the commodities, currency, or stock markets?

This study examines the spillover effect of the Baltic Dry Index (BDI) on the commodities futures, currency, and stock markets by using a tri-variate VAR-BEKK-GARCH-X model on a dataset from October 1, 2007 to October 31, 2018. Results reveal that the BDI spillover effect is time-varying. The spillover effect of the BDI was insignificant during the whole sample period but significant during the 2008/2009 global financial tsunami, and its influence increased during the 2014–2016 economic slowdown in China. The BDI serves as a short-term rather than long-term indicator for the commodities, currency, and equity markets, especially during financial crises.

Study of optimal capital adequacy ratios

In response to international financial developments after the global financial tsunami in 2008, the Bank for International Settlements (BIS) proposed Basel III in 2010, whereby banks have to increase their minimum capital adequacy ratios year by year with a goal of 10.5 % by 2019. This study looks to answer two questions: (1) Is the capital adequacy ratio of 8 % required by Basel II too low to guide banks moving toward the efficiency frontier? (2) Is Basel III’s target capital adequacy ratio of 10.5 % in 2019 so strict that it might impact banks’ efficiency? The dataset herein consists of thirty-one Taiwan commercial banks over the period 2007–2009 for a total of ninety-three observations. The empirical results indicate that as many as 93.5 % of the banks have an optimal capital adequacy ratio greater than the 8 % regulation in Basel II. Approximately 88.2 % of the banks have an optimal capital adequacy ratio higher than 10.5 %. In addition, nearly 73 % of the banks should raise their BIS ratios in order to achieve the optimal BIS ratios. Hence, higher BIS ratios required by Basel III may pilot the Taiwan banking industry to reach the efficiency frontier.

Club convergence of house prices: Evidence from China’s ten key cities

The latest global financial tsunami and its follow-up global economic recession has uncovered the crucial impact of housing markets on financial and economic systems. The Chinese stock market experienced a marked fall during the global financial tsunami and China’s economy has also slowed down by about 2%–3% when measured in GDP. Nevertheless, the housing markets in diverse Chinese cities seemed to continue the almost nonstop mania for more than 10 years. However, the structure and dynamics of the Chinese housing market are less studied. Here, we perform an extensive study of the Chinese housing market by analyzing 10 representative key cities based on both linear and nonlinear econophysical and econometric methods. We identify a common collective driving force which accounts for 96.5% of the house price growth, indicating very high systemic risk in the Chinese housing market. The 10 key cities can be categorized into clubs and the house prices of the cities in the same club exhibit an evident convergence. These findings from different methods are basically consistent with each other. The identified city clubs are also consistent with the conventional classification of city tiers. The house prices of the first-tier cities grow the fastest and those of the third- and fourth-tier cities rise the slowest, which illustrates the possible presence of a ripple effect in the diffusion of house prices among different cities.

Are investors rational, irrational or normal?

The nature of investor’s rationality vs. irrationality debate drawn attention of thousands of academic papers, hundreds of conferences, roundtables discussion leading to two ends: the classical theorist i.e. the proponents of efficient market hypothesis (EMH) and the behaviorist. From Fisher’s (1906) Nature of Capital & Income to Ross (1977); investor’s rationality has been considered as the principal assumption in the development of theoretical finance. Unfortunately though, various studies have shown repeated form of investor’s irrationality and incompetence in their decision process. Even the very proponents of EMH, Fama (1965) has later on in 1993 advocated the lack of market efficiency! Indeed the story of black Monday in the USA to the global financial tsunami (2007-2012) has put the proponents of EMH into the cluelessness. While, the behaviorists argument that the financial markets can be best understood by studying the psychology is also subject to criticism that there will be no existence of standard models to study agent’s behavior in the market! Therefore, this study aims at finding out the true scenarios of investor’s behavior by working on 200 individual investors in Dhaka Stock Exchange (DSE). Investors’ response to different questions relating to fundamental assumption of “rationality’ or ‘presence of irrationality. The result shows a complete absence of the assumption of rationality or irrationality in number of critical issues. Therefore, the idea of EMH or mere psychologically driven behavioral finance should become less acknowledgeable in understanding the agents of financial market i.e. the investors. Rather a combination of these two may give more insight in understanding the investor’s behavior in the financial market.

Uni-economics: impact of sunspot on quality, productivity & business growth

Purpose – Historically, the study of the world’s economy was classified into Micro-economics and Macro-economics. Perhaps, contemporary economists should learn from the universe which we are part of. Let us name this as “Uni-economics.” Many scientists have found that sunspots affect human behavior. Some research findings even relate the 11-year periodic cycle to war and peace of mankind. It is also widely known in the medical profession that sunspot radiation actually affects our human body. With all these evidence in mind, the purpose of this paper is to investigate how sunspot activities can affect business growth since 1960s when the global economy was building up fast since the Second World War. Design/methodology/approach – The econometrics methodology deployed is in three steps. First, time series techniques were deployed to track down the changes of Sunspot Counts over the last 48 years on the world’s four main financial indices, i.e., S & P, FTSE, Nikkei and HSI. Second, the long run function of a particular stock price index could be specified as a natural logarithm transformation function. Finally, Granger’s co-integration methodology is deployed to test the equilibrium relationships. Findings – This paper has harnessed a set of system and process that can ensure the long-term productivity and business growth of firms in this contemporary business world. It is predicted with 80 percent confidence that the next property depression in some affluent cities will happen in 2014/2015, with the global financial tsunami coming in 2019. Originality/value – More important is how organizations can make use of the trade-wind and avoid the counter-wind from the Uni-economics phenomena for their quality, productivity and business growth, in accordance to the Deming Cycle. As recalled from the previous two oil crisis (around 1975, 1986) and the two financial tsunami (1997 and 2008), 40-year-old organizations that can still survive today must have done something good, despite all these turmoil confronting them.

THE RISK OF PROPERTY BUBBLES IN HONG KONG AND SINGAPORE: ANOTHER AFTERSHOCK CRISIS OF THE GLOBAL FINANCIAL TSUNAMI?

This paper first provides a brief review of the global financial tsunami. It then explains why the quantitative easing in the US and the unique characteristics of the Asian property markets have contributed to the formation of property bubbles in some Asian economies. Thereafter, it discusses the possibility of a bursting of property bubbles in Hong Kong, Singapore or another Asian economy a few years from now, and highlights that the bursting of the property bubble in that economy could trigger severe corrections of property prices in this region through the contagion effect. After pointing out that the implied crisis could be more severe than that during the Asian Financial Crisis, it (i) discusses policies that could mitigate the damages of the potential crisis and (ii) draws important lessons and conclusions that could pre-empt similar disasters in the future.

Credit risk assessment and decision making by a fusion approach

The sub-prime mortgage crisis of 2007 and the global financial tsunami of 2008 have undermined worldwide economic stability. Consequently, the timely analysis of credit risk has become more essential than ever before. The performance of early risk warning mechanisms may vary according to the criteria used and the underlying environment. This study establishes numerous criteria to assess the performance of classifiers and introduces a multiple criteria decision making method to determine suitable warning mechanisms. After undergoing these evaluations, the enhanced decision support model (EDSM), which incorporates the relevance vector machine with decision tree, is proposed. A decision tree is employed to overcome the opaque nature of the relevance vector machine; it yields knowledge as logical statements and aids in the interpretability of the forecasting results. The advantages of the EDSM involve overcoming the timeliness problem, fostering faster credit financing decisions, diminishing possible mistakes and reducing the credit analysis cost. This study also examines the feasibility of corporate transparency and the information disclosure (TD) criterion during an upturn in the economy, and finds that this procedure presents a suitable policy-relevant direction for regulators to design future measurements. Finally, this study shows that the EDSM is a promising way for investors, creditors, bankers and regulators to analyze credit rating domains.

Rethinking flexible welfare strategy in Hong Kong: a new direction for the East Asian welfare model?

Many East Asian countries or cities have experienced rapid economic growth since the 1990s, and at the same time have had to face increasingly worse economic situations such as that brought about by the Asian financial crisis in the late 1990s and the global financial tsunami in 2008/2009. This creates a rising demand for social welfare and an increase in grievances among the citizens. Some Asian states tend to resort to ad hoc ‘flexible welfare strategies’, such as handing out short-term and piecemeal cash subsidies to their citizens, reducing salary tax and waiving property rates and taxes. This article points out that such flexible welfare strategies are not new innovations, but an extension of the ‘flexible accumulation’ strategy (as described by David Harvey) in the post-Fordist society. A flexible welfare strategy is unlikely to meet the long-term needs of the citizens. At best, it acts only as a painkiller that temporarily pacifies the grievances of these citizens. Meanwhile, it wastes resources and is expensive and unsustainable and has no long-term effect. This article calls for a thorough evaluation of this ‘flexible welfare strategy’ and development of more appropriate welfare strategies for facing the age of uncertainty.

FINANCING REAL ESTATE DEVELOPMENT USING BONDS IN ASIA / NEKILNOJAMOJO TURTO STATYBŲ FINANSAVIMAS OBLIGACIJOMIS AZIJOJE

During the global financial tsunami, banks were very cautious in financing business needs due to tight credit conditions. Alternative ways for financing projects were sought after by real estate developers worldwide. Within Asia, notably in Hong Kong SAR and Singapore, a number of reputable property developers have been tapping the capital debt market for funds in recent years amidst an increasingly regulated loan market and competitive pricing. In the face of a growing bond market, some corporate bond issues arranged by these property developers have been successful. Apart from investment appetite, property developers have to gauge carefully the pros and cons of raising funds through bond issues. Successful bond issues need to be structured with suitable credit enhancement features since the perception of risk and rising interest rates are major deterrents to potential investors who would otherwise face bond defaults or bear high opportunity costs with the committed funds. Through a number of case studies, the suitability of bond financing for property development is compared with loan financing. It is found that a close monitoring of market conditions and some foresight are essential ingredients for successful bond financing, for both straight bond issues and convertibles. Santrauka Siaučiant pasauliniam finansų cunamiui, dėl griežtų kreditavimo sąlygų bankai verslo poreikius finansavo labai atsargiai. Visame pasaulyje NT vystytojai ieškojo alternatyvių būdų, kaip finansuoti projektus. Pastaraisiais metais, kai paskolų rinka buvo vis labiau reguliuojama, o kainos konkurencingos, ne vienas gerbiamas NT vystytojas Azijoje, ypač Honkongo specialiajame administraciniame regione ir Singapūre, lėšų ieškojo kapitalo (obligacijų) rinkoje. Obligacijų rinkai augant, kai kurios tokių NT vystytojų išleistos įmonių obligacijų emisijos buvo sėkmingos. NT vystytojams reikia atidžiai įvertinti ne tik investicijų poreikį, bet ir visus lėšų rinkimo leidžiant obligacijas ,,už“ ir ,,prieš“. Idant obligacijų emisija būtų sėkminga, ją formuojant būtina deramai sustiprinti kreditą, nes tikėtina rizika ir augančios palūkanos yra pagrindiniai aspektai, kurie atbaido potencialius investuotojus, nes kitaip jiems tektų nemokios obligacijos arba didelės patikėtų lėšų alternatyviosios sąnaudos. Atliekant kelis atvejo tyrimus NT statybų finansavimo obligacijomis tinkamumas lyginamas su finansavimu paskolomis. Nustatyta, kad atidus rinkos sąlygų stebėjimas ir įžvalgumas yra būtini komponentai sėkmingam finansavimui obligacijomis išleidžiant tiek paprastųjų, tiek konvertuojamųjų obligacijų emisijas.

An Application of Conventional Sovereign Debt Sustainability Analysis to the Current Debt Crises

The developing international debt crisis has unleashed unanticipated fears that governments in some advanced economies may default on their sovereign debt and trigger a global financial tsunami. This article provides a primer on sovereign debt sustainability and interprets the recent experience of advanced economies in the light of a uniform approach that allows an answer to this question: What are the main factors that contribute to make a country’s debt sustainable or unsustainable?

Do supervisory mechanisms or market discipline relate to bank capital requirements and risk-taking adjustment? International evidence

This study proposed a modified method to investigate whether capital regulations have an effect on bank risk-taking, or whether their effects are channeled through supervisory mechanisms and market discipline. This study used data from 1,702 banks of 42 countries over the period 2000 to 2007 to verify the capital buffer theory (Marcus, 1984; Milne and Whalley, 2001). It was found that the empirical results supported the hypotheses proposed in this paper: (1) Banks with high capital buffer positions will adjust their capital adequacy ratio and risk-taking in the same direction; (2) Banks with low capital buffer positions will adjust their capital faster than banks with high capital buffers. The empirical results suggested that banks with stringent supervisory mechanisms tend to mitigate adjustments of the capital buffer, but take on higher credit risk-adjustments. However, the impact of market discipline was in the opposite direction. The results clearly suggested that regulations alone may not be adequate to control credit risk-taking and that thorough investigation of supervisory mechanisms and market discipline are also required. Furthermore, it appeared that ignoring the interactions between regulations and adjustment of capital and risk could lead to erroneous inferences about the impact of regulations on credit risk-taking. The results implied that incentives and tools that enhance market power self-monitoring could promote reductions in risk-taking. This paper attempted to provide some insights in the wake of the global financial tsunami. Key words: Supervisory mechanism, market discipline, credit risk-taking, capital buffer, regulation.

財務比率、投資決策與公司績效之實證研究－全球金融海嘯前後比較

本文研究係首次嘗試探討全球金融海嘯發生前後，台灣上市公司之存活分析，找出影響公司績效之顯著變數並比較其差異，建立財務預警棋型，期能在公司發生財務危機前，提前預測出可能發生之機率，降低公司發生財務危機之可能性，進而提高公司績效，達事前預警與風險管理之效。實證分析上，利用財務比率變數作為解釋變數，以統計科學方法羅吉斯迴歸模型，建構出企業財務預警模式。實證結果發現，預測金融海嘯前後企業之財務危機，其前一至前三年金融海嘯前的預測竿確率分別為91.62%，93.55%，90.38%；金融海嘯後的預測準確率分別為92.90%，91.67%，100.00%。除前二年外，其餘兩個年度金融海嘯後之預測準確率較金融海嘯前顯然有提高，財務比率變數可為投資人做投資決策分析之參考指標；就金融海嘯後之財務資訊觀察，企業適度增加負債比率、降低自有資金比率，可改善財務結構；增加總資產週轉率，可增強企業之經管能力；增加借款依存度，可提升現金流量；增加內部保留比率，可提高公司獲利能力，則發生財務危機的機率將下降，進而提高公司績效。準此，本文之實證價值與管理意涵為財務風險管理、投資決策與財務預測。

Power, Transparency and Control: Hong Kong People’s Adaptations to Life

This paper attempts to examine how the concepts of power, transparency and control are perceived in the life of ordinary Hong Kong people, and how the latter have been adapting to their perceptions and evaluations. The 2008 global financial tsunami and its aftermath will likely have a serious impact on their values. Hong Kong people’s experiences may in some ways represent those of modern men, especially those in East Asia. Democracy is premised on the ideal that life is meaningful through political participation. For most Hong Kong people, this is too demanding an ideal and they instead opt for economic power at the micro-level to secure an optimal measure of control over the socio-economic aspects of their own life. But even this objective has proven extremely difficult to fulfil because of the asymmetry in power between the individual on one hand, and authoritarian regimes, big businesses, organized interest groups, etc. on the other. Very often exit is not a viable option. There may be a tendency to seek satisfaction from religious pursuits, voluntary work, or other external agencies.

China Trade Policy Review: A Political Economy Approach

Chinese trade policy has experienced ‘great reversal’ in the year of 2008. A series of constraining measures taken previously have been loosened eventually. We investigate this situation using a political economy approach. Unlike in democratic countries, where interest groups play a crucial role in trade policy change, in China, given the political reality, leaders’ will and trade partners’ pressure are the determinant factors. We call this top-down and outside-in trade policy. Actually the idea of ‘harmonious society’ and ‘scientific development’ emphasised by top leaders in October 2006 paved the road for the following trade policy adjustment: i.e. reducing tax rebate, limiting processing trade, compressing the catalogue for foreign investment, etc. However, with the shock of a global financial tsunami, these measures get coastal areas relying on foreign trade heavily into trouble. The economic downturn in Pearl River Delta even astonished the decision-making body, calling on a quick reversal in foreign trade policy. If interest groups had been allowed to express their demand formally and adequately from the very start, the cycle of ‘taking up first but giving up last’ in policy design would have not taken place. In other words, the bottom-up and inside-out trade policy should be more stable. Although flexibility is necessary in the face of uncertainty, frequent and discretionary trade policy change usually produces effects of ‘pro-government’ not ‘pro-market’. This is unfavourable for the transformation in China. The constraining trade policy in mid-2007 to mid-2008 has been a part of the government’s desire to seek healthier development. However, with the inside and outside surroundings getting worse, the structural adjustment (long-run objective) has had to concede to the economic growth (short-run objective).

Forecasting volatility and capturing downside risk of the Taiwanese futures markets under the financial tsunami

Purpose – The purpose of this paper is to apply alternative GARCH‐type models to daily volatility forecasting, and apply Value‐at‐Risk (VaR) to the Taiwanese stock index futures markets that suffered most from the global financial tsunami that occurred during 2008.Design/methodology/approach – Rather than using squared returns as a proxy for true volatility, this study adopts three range‐based proxies (PK, GK and RS), and one return‐based proxy (realized volatility), for use in the empirical exercise. The forecast evaluation is conducted using various proxy measures based on both symmetric and asymmetric loss functions, while back‐testing and two utility‐based loss functions are employed for further VaR assessment with respect to risk management practice.Findings – Empirical results demonstrate that the EGARCH model provides the most accurate daily volatility forecasts, while the performances of the standard GARCH model and the GARCH models with highly persistent and long‐memory characteristics are relati...

How Consumer Ethnocentrism and Animosity Impair the Economic Recovery of Emerging Markets

ABSTRACT Many developed nations have reportedly turned to protectionism to speed up recovery from the recent global financial tsunami. Emerging economies that rely on exports and tourism have been particularly hard hit by these barriers. This study analyzes a conceptual framework that captures the effects of product image, country image, ethnocentrism, and animosity on consumers’ attitudes for imports and overseas travel. The results offer a fresh perspective, beyond that which has been explained by literature on product evaluation and country-of-origin. The findings imply that an export-dependent nation will need a linkage strategy to defend against protectionism. Strategic implications are discussed.

The Performance of East Asian Markets upon the 2008 Global Financial Tsunami: Currency Crisis and Banking Crisis

The 2008 Global Financial Tsunami severely impacted global economies including the East Asian markets. Coming on the heels of the prolonged 1997 Asian Financial Crisis, economists are keenly interested to compare and contrast these two financial crises. An analysis of foreign exchange and money market pressure indexes indicates that the impact of the 2008 Global Financial Tsunami was far less severe than the 1997 Asian Financial Crisis. Therefore, we anticipate a speedy recovery in East Asian markets. Furthermore, speculative attacks were also less significant during the 2008 Global Financial Tsunami. It is obvious that the nature of the most recent Financial Tsunami was different from that of the Asian Financial Crisis. Our results provide a reference for nations which are going through a financial crisis.

China: Unscathed through the Global Financial Tsunami

AbstractThis paper investigates the reasons behind the resilience of China's economy to the global financial tsunami. China's economy is lowly leveraged in its banking, household, public and external sectors and, therefore, is less plagued by the global deleveraging than most developed economies. Chinese domestic sectors have improved significantly over the past decade, giving them larger capacity to cope with external shocks than during the Asian financial crisis a decade ago. Contrary to the conventional wisdom that China's economic growth is highly dependent on exports, we find that the main growth engine for China is domestic demand. Destocking, rather than falling exports, was the main cause of the sharp economic slowdown in China in late 2008 and early 2009. Therefore, the global economic slowdown should have limited impact on China's economy. We forecast a sustained economic recovery in China in 2009–2011, with real GDP growth exceeding 10 percent in 2010.