Liquid Assets Research Articles

СОВРЕМЕННЫЕ ПОДХОДЫ В ОПРЕДЕЛЕНИИ ИНВЕСТИЦИОННОЙ ПРИВЛЕКАТЕЛЬНОСТИ КОМПАНИИ С ЦЕЛЬЮ ЕЁ ПРИОБРЕТЕНИЯ

The investment attractiveness of a company is an important parameter that investors pay attention to when considering the possibility of acquiring a company. To date, many foreign organizations are selling their business in Russia, which is an excellent opportunity for domestic investors to acquire a profitable and liquid asset. In this regard, the determination of the investment attractiveness of the company is an urgent issue. This article discusses various interpretations of the concept of the investment attractiveness of a company, as well as the factors influencing this indicator. In addition, the paper considers modern methods for determining investment attractiveness.

CURRENT ISSUES OF THE PRACTICE OF REGULATING THE LIQUIDITY OF COMMERCIAL BANKS IN THE CONTEXT OF GLOBALIZATION

This article examines the role of the Central Bank in ensuring the liquidity of bank assets, the state of capital of commercial banks, and their impact on liquidity. At the same time, the impact of asset quality on its liquidity, as well as deposits and own funds, was analyzed using econometric methods. The article examines the effect of commercial banks' own funds on the liquidity of bank assets, the effect of economic normative indicators set by the Central Bank, and the effect of the Central Bank's monetary policy tools using econometric models

Theoretical and legal characteristics of the concept and specialities of virtual assets by the law of Ukraine

This article highlights the theoretical and legal analysis of the distinction between the concept of intangible assets and related concepts. The author of the article analyzed the concepts of understanding the essence of the legal regime of intangible assets, and also outlined the provision that an important step in the recognition of intangible assets is the project of the Law of Ukraine «On Amendments to the Civil Code of Ukraine aimed at expanding the range of objects of civil rights», namely, the introduction of the concept of digital things into the Civil Code.In particular, a digital thing is a subject of the digital environment, which is in circulation only in digital form, and in respect of which civil rights and obligations may arise. Digital things are virtual assets, digital content, online accounts, money and securities that exist exclusively in digital form.As for the concept of virtual assets, a virtual asset is an intangible good that is the object of civil rights, has a value and is expressed as a set of data in electronic form. The existence and liquidity of a virtual asset is ensured by the system of ensuring the turnover of virtual assets.The proposition that the division of things into material and digital things is relevant today is argued. A comparative legal characterization of the following concepts was carried out, in particular the place of virtual assets among virtual property. The concepts of virtual assets and digital content, virtual assets and electronic money are compared. As for distinguishing intangible assets from related concepts, this follows from the features inherent in virtual assets, as well as the peculiarities of legal relations with respect to these assets.

Economic Policy Uncertainty and Financial Innovation: Evidence from Commercial Bank in China

The empirical results show that the rise of economic policy uncertainty (EPU) makes the level of financial innovation at banks significantly improve; that is, there is an incentive effect of EPU on financial innovation at banks. In addition, the degree of incentive-induced EPU for different types of banks is significantly different. Compared with listed banks, this incentive effect is more significant for non-listed banks; rural commercial banks are the most significant incentive, followed by urban commercial banks, and state-owned banks and joint-stock commercial banks are more robust. This shows that EPU has a selective effect on bank financial innovation. Moreover, the incentive effect of EPU on financial innovation activities is affected by the return on assets and the asset liquidity ratio of commercial banks, which further validates the selective effect of financial policy uncertainty on bank financial innovation.

Global financial cycle and liquidity management

We use a tractable model to show that emerging markets can protect themselves from the global financial cycle by expanding (rather than restricting) capital flows. This involves accumulating foreign liquid assets when global liquidity is high to then buy back domestic assets at a discount when global financial conditions tighten. Since the private sector does not internalize how this buffering mechanism reduces international borrowing costs, a social planner increases the size of capital flows relative to the laissez-faire equilibrium. The model also shows that foreign exchange interventions may be preferable to capital controls in less financially developed countries.

Financing the R&D investment of Chinese firms: state-owned versus private firms

ABSTRACT We investigate the effect of financing constraints on the R&D investment of Chinese listed firms for the period 2010–2020. The sample is divided into state-owned versus private firms, which differ substantially in R&D patterns, financial structures, and other characteristics. We find that, in both state-owned and private firms, internal cash flow significantly affects R&D investment, suggesting the presence of binding financing constraints. Both state-owned and private firms actively manage liquid assets to smooth R&D spending. Debt finance is insignificant for both state-owned and private firms. New stock issues have a significant positive effect on R&D in private firms only, not in state-owned firms. Given that the contribution of private firms to aggregate R&D is increasing, stable stock market conditions may have an important aggregate impact on R&D.

Deposit Insurance Premiums and Bank Risk

AbstractDeposit insurance premiums impose costs on banks’ balance sheets, narrowing profit margins and inducing banks to “search for yield.” This paper estimates the effects of deposit insurance premiums on bank portfolio rebalancing using supervisory data and a kink in the insurance premium schedule. We show that deposit insurance premiums weaken banks’ demand for reserves (a liquid asset with no credit risk) and strengthen the supply of short-term interbank loans (a less liquid asset with credit risk). We discuss the implications of these findings for optimal deposit insurance pricing. (JEL G21, G28)

Assets Value Added and Assets Liquidity on Stock Liquidity

The purpose of this study is to determine the impact of assets value added and assets liquidity to stock liquidity in the context and evidence in Indonesia and in relatively different situations and conditions. The novelty of this research is in the assets value added using net value-added measurements, the research was conducted in the context and evidence in Indonesia, this research was conducted in two different situations, namely 2018-2019 (before the corona virus occurred) and 2020 (the corona virus occurred). The contribution of this research fills the narrow research gap in the field of stock liquidity from the perspective of assets value added in the context and evidence in Indonesia. The population in this research are entities listed on the Indonesia Stock Exchange with a research sample of entities categorized as manufacturing entities, research year 2018-2020, data analysis methods in this research used multiple regression, moderate regression (MRA). Main Findings: (i) Assets Value Added, Assets Liquidity and Information Asymmetry simultaneously effect Stock Liquidity. (ii) Stock Liquidity is positively impacted by Assets Value Added. (iii) Stock Liquidity is negatively impacted by Assets Liquidity. (iv) Information asymmetry weakens the impact of Assets Value Added to Stock Liquidity. (v) Information asymmetry strengthens the impact of Assets Liquidity to Stock Liquidity. The results of this study provide evidence in favor of information asymmetry theory and signal theory.

Analysing SME investment, financing constraints and its determinants. A stochastic frontier approach

In this paper we explore the link between Small and Medium Enterprises (SMEs) investment and their economic characteristics, together the presence of financing constraints during the post-2008 crisis recovery period. We use novel survey data for Irish SMEs between 2016 and 2018, which disaggregates investment by asset type and allows a granular assessment typically not present in the existing literature. Our approach links investment to the marginal product of capital using a stochastic frontier model to explore and measure the presence of constraints. We also test whether liquid assets, indebtedness and investment dissatisfaction impact SMEs investment constraints. We find a clear link between investment and its marginal product with elasticities of between 0.55 and 0.65; indicating that a unit per cent increase in marginal product leads to 0.55–0.65 increases in investment. The investment efficiency estimates obtained show the presence of financing constraints. We find evidence of both internal and external finance sources explaining investment efficiency of small fixed assets. Higher collateral availability contributes to improve investment efficiency for all fixed assets.

Relationship of banking sector and environmental performance in Turkey

Purpose- With the global financial crisis in 2008, financial institutions have brought up the importance of the evaluation of the relationship between the environment and financial performance and its role in its development. In particular, examining the effects of environmental policies on the factors such as financial development, economic growth and financial performance is among the research subjects of researchers. In this respect, the aim of this study is to examine the relationship between the financial performance of the banking sector and environmental performance in Turkey. Methodology- While examining the effect of environmental performance on the financial performance of the banking sector, annual data for the period between 1990-2019 have been used, and short- and long-term relationships between the variables have been established by the ARDL bound test and the causality relationship has been established by the Toda-Yamamoto causality test. Return on assets (ROA) has been used as the financial performance indicator of the banking sector and carbon dioxide emission (CO2) as the environmental performance indicator in the study. In addition, deposits, loans and liquid assets have been used as control variables in the study. Findings- In the model established with the ARDL cointegration test in the study, it has been first investigated whether the variables are cointegrated in the long-term, and it has been concluded that the variables are cointegrated in the long-term. In the established ARDL model, it has been determined that carbon dioxide emissions have a positive effect on the financial performance of the banking sector in the long-term, but not in the short-term. In addition, it has been determined that deposits and liquid assets, the control variables, have a positive effect on financial performance both in the short- and long-term, while loans do not have any effect. The findings from the results of the Toda-Yamamoto causality test reveal a one-way positive causality relationship from carbon dioxide emissions and deposits to banking financial performance. Moreover, while a positive two-way causality relationship has been established between financial performance and liquid assets, no causality relationship has been found with loans. Conclusion- The results of the cointegration test and the causality test confirm each other. The findings show that an increase in CO2 emissions will lead a positive effect on the financial performance of banks. Consequently, it is thought that developing countries such as Turkey are increasingly addicted to non-renewable energy consumption and adopt a more flexible environmental policy and so that they provide a higher financial performance. With this result, the opinion that the Pollution Paradise hypothesis is valid for Turkey is supported. Keywords: Financial performance, environmental performance, ARDL, Toda-Yamamoto JEL Codes: C32, G21, O13

From Burden to Advantage: Leveraging AI/ML for Regulatory Reporting in US Banking

Machine Learning (ML) revolutionizes prediction processes, making them more cost-effective and precise. As the volume and diversity of financial data continue to grow, ML becomes increasingly valuable. One significant implication for regulators is the banking sector's growing reliance on ML methods for decision-making, which inherently lack full understanding by their creators. Consequently, regulators across all levels will increasingly encounter ML models that are challenging to fully grasp.Regulatory scrutiny is affected as supervisors must assess model risk. ML models incorporate numerous and intricate features, requiring examiners to comprehend their implications for transparency and associated operational risks. Moreover, utilizing historical data to train models may raise concerns related to fair lending practices. Already, some banks and FinTech firms employ ML across various banking services, including fraud detection, risk management, and pricing.Policy formulation may also feel the impact through two main channels: operational risk and market behavior. ML directly influences model risk, a subset of operational risk. Banks, bound by model risk management regulatory guidance established in April 2011, may find certain aspects of this guidance challenging to apply to ML tools due to their opaque nature. Furthermore, ML could potentially alter market behavior for certain liquid assets.

Blockchain tokenization of real estate investment: a security token offering procedure and legal design proposal

ABSTRACT The article addresses the legal design challenges of real estate crowdfunding, proposing potential solutions that combine blockchain technology, tokenisation, finance, and law. We propose a blockchain tokenised security design, based on a sertificate similar to Sukuk, an Islamic finance asset, that draws inspiration from Equipment Trust Certificates and is managed by a Special Purpose Vehicle (SPV), that may issue blockchain tokenised certificates. These certificates grant rights related to an investment property. Each series of certificates represents specific property and will be a liability of the SPV that owns the property. In general, the tokens used resemble but remain categorically distinct from asset-backed securities. Their performance still depends on the underlying asset’s performance. Most important, token owners do not become partners in the SPV but are granted fractional ownership and rights on the underlying property. The proposed token mechanism could prevent delays in the transaction process related to transferring ownership of a property. It could split at some point to allow for the creation of ownership and income rights. The proposed security design potentially protects investors’ legal rights better without standard application of investors becoming partners in the SPV while shortening the transaction times, and increasing transparency and asset liquidity.

Precautionary Saving and Liquidity Shortage

Most of the canonical macroeconomic models simulate liquidity anomalies by changing the economic fundamentals or adding massive financial shock to firms’ collateral constraints, but a few facts somehow tell a different story. Instead of relying on the exogenous shocks, we introduce uncertainty into an otherwise classical liquidity framework and try to answer what worsens the aggregate liquidity in the absence of exogenous simulations and what a firm dynamics and financing strategy would be. Our analysis shows that (1) uncertainty induces agents to make decisions under the worst-case scenario and hence generates a unique expectation threshold that drags market (or firms) liquidity from sufficiency to insufficiency even without any shock or economic changes. (2) Precautionary saving occurs before the real liquidity shortage as the expectation shifts, causing firms to secure external financing by raising the equity issuing price and hoarding liquid assets, such as fiat money, against liquidity tightening. (3) To achieve liquidity stability and sustainability, an extra mathematical constraint is supplemented for the uniqueness and the existence of equilibrium under uncertainty. Other properties of firms’ intertemporal allocations, such as the bid-ask spread and return of holding of the illiquid asset, are derived. Moreover, some approaches for further empirical research are discussed.

Sudden stops and reserve accumulation in the presence of international liquidity risk

We propose a small open economy model where agents borrow internationally and invest in liquid foreign assets to insure against liquidity shocks, which temporarily shut out the economy of short-term credit markets. Due to a pecuniary externality, individual agents overborrow and hold too little liquid assets relative to a social planner. This inefficiency rationalizes macroprudential policy intervention in the form of reserve accumulation at the central bank to stabilize trade and the real exchange rate. Our model quantitatively matches the depreciation of the real exchange rate and contractions in output, gross trade flows, and foreign reserve holdings during Sudden Stops.

General equilibrium with multiple liquid assets

This paper studies, analytically and numerically, economies with multiple liquid assets: fiat currency; fixed-supply real assets; and reproducible capital. Cases are considered where assets provide direct liquidity, and indirect liquidity via over-the-counter trade. The results shed new light on how monetary policy affects asset markets and investment. We also provide novel results on endogenous fluctuations (self-fulfilling prophecies), including coexistence of multiple equilibria with very different correlation and volatility patterns. Then we investigate if monetary policy can eliminate multiplicity. A calibration exercise assesses the impact on asset markets and on welfare of different policies, including changing inflation, and eliminating currency altogether.

Corporate income tax, asset turnover and Tobin’s Q as firm performance in Pakistan: Moderating role of liquidity ratio

This article finds the impact of corporate income tax and asset turnover on financial performance of the corporate sector with panel data in Pakistan. Panel data of sixteen non-financial firms listed in Pakistan Stock Exchange during the time period from 2006 to 2021 are used for analysis. Panel data are collected from the Data Services & Innovations Department, State Bank of Pakistan (SBP). The fixed effect model (FEM) estimates are found more appropriate for estimation on the basis of Hausman test. The study utilizes Tobin q as an indicator of firm financial performance. Findings of study explain that corporate income tax effects firm financial performance positively. However, this impact is not significant. Further, the impact of asset turnover is negative and significant. Negative relation is found between liquidity ratio and firm financial performance. It indicates that a lesser amount of liquid assets evade from expensive borrowing. Tax structure is important for firm financial growth and performance. The improvements in corporate tax structure to boost the investment in the corporate sector of Pakistan are recommended. Further, sales of Pakistani firms do not meet the neck and neck of firm’s assets. Firm is advised to improve product quality for its sale promotion and government can play its role in this regard by devising export policy.

Remuneration Packages of Executive Directors and Financial Performance of Money Deposit Banks: Evidence from Nigeria

The robust and expensive lifestyles of bank executive directors have drawn negative criticisms stakeholders in the banking sector. This was particularly so when the performance of such banks were not at par with their lifestyles. This study was therefore conducted to investigate the effect of pay packages offered to executive directors on the financial performance of deposit money banks. The main objective of the study was to determine whether compensations packages made to the executive directors in deposit money banks are able to motivate them to better productivity. Executive compensation was proxied by cash, bonus, stock and perquisites of office compensation. The dependent variable was proxied by return on liquid asset. The study used ex-post facto research design. Data were extracted from the financial statements of five randomly selected deposit money banks in Nigeria for years 2015 to 2019. The data were analysed with correlation and regression models and SPSS version 20 was used to analyse the data. The results of analysis show that the return on liquid asset were significant and positively related to various proxies of executive compensation. However, though the result shows a positive relationship between cash compensation and return on liquid asset, it was not significant. The study concluded that compensation packages made to the executive is significantly related to the financial performance of deposit money banks. The study recommends amongst others that a uniform compensation packages be developed for all deposit money banks by the regulatory authority in Nigeria.

The dynamic role of the Japanese property sector REITs in mixed-assets portfolio

PurposeThis study examined the dynamic role of the Japanese property sector, particularly the real estate investment trusts (REITs), in mixed-asset portfolios of stocks and bonds, as well as office, retail, hotel and residential REITs.Design/methodology/approachDaily data were retrieved from 01 January 2008 to 31 December 2019. The sample time frame consisted of in-sample and out-of-sample periods. The dynamic conditional correlation-generalised autoregressive conditional heteroskedastic (DCC-GJRGARCH) model was deployed to obtain the forecast estimates of time-varying volatility of REITs and correlations with other assets. The estimates were employed to construct out-of-sample portfolios based on the three assets for daily investment. The five sets of portfolios with each individual property sector REITs, as well as a portfolio of stocks and bonds that served as a benchmark, were produced. The average utility for each set of portfolios was estimated and compared with the average utility of the benchmark portfolio. The average transaction cost (TC) for portfolio rebalancing was calculated as well.FindingsThe forecast of volatility estimates for each property sector revealed that each asset displayed a similar pattern with the differences in the volatility magnitude. Notably, hotel and retail REITs were more volatile than other property sector REITs. The property sector REITs exhibited a positive correlation with stocks but negatively linked with bonds. The results unveiled the diversification benefits of incorporating property sector REITs. The portfolio with property sector REITs had higher risk-adjusted returns and utility, compared to portfolio consisting of stocks and bonds. The benefits outweighed the TC for portfolio rebalancing.Practical implicationsThis study highlights the importance of quantifying the conditional time-varying volatility and correlations of the property sector REITs with other asset returns, especially for investment decision, to select and include property sector REITs in mixed-asset portfolios. For fund managers seeking liquid assets in daily investment, this analysis suggests the inclusion of hotel and retail REITs to enhance REITs' portfolio performance.Originality/valueThis study is the first to investigate the dynamic characteristics of the volatility and correlation of each property sector REITs with other financial assets by employing the conditional framework that accounted for short- and long-run persistency in economic shocks. The reported outcomes shed light on the differences in the underlying properties that contribute to the variances in dynamic volatility of each sector REITs, as well as REITs' correlations with stocks and bonds. This application enables the authors to transmit the dynamics of variance-covariance matrix amongst each property sector REITs, stocks and bonds into asset allocation problem on a daily basis.

ORGANIZATION OF ACCOUNTING AND ANALYSIS IN THE MANAGEMENT OF HIGHLY LIQUID ASSETS OF LARGE ENTERPRISES

The work provides a theoretical justification of the theoretical and methodological approaches to the accounting and analytical display of highly liquid assets. Based on the materials of reliable accounting reports of a large chemical enterprise, the basic principles of accounting organization and accounting policy of JSC "DNIPROAZOT" were determined. The accounting form (automated) and accounting registers are characterized. The formation of accounts for accounting of assets made it possible to establish the movement of assets and their transformation from medium liquid assets to highly liquid assets. Thus, journals of economic transactions for December 2020 were created based on the materials of the accounting registers. The main stages of the accounting and analytical display of the movement of assets (medium liquid) at the enterprise have been established. In particular, the reflection of the formation in the accounting of finished chemical products is presented: the a priori stage of such formation is the write-off of production stocks in production, having previously recorded them as purchased from suppliers. The structural and logical scheme of the accounting process made it possible to objectively form and evaluate the transformation of assets from production costs to a certain condition in the form of finished products on account 261 and to follow the moment of formation of highly liquid assets. In the process of forming a journal of business operations for the sale of finished products, the principles of forming accounts receivable and turning it into a highly liquid asset in the form of cash flow are determined.
 In the work, a study of the assessment of dynamic changes in cash flows based on the financial statements of a chemical enterprise was carried out. Characterized receipts and expenditures of cash flows (highly liquid assets) for the period 2018-2020. The expediency of the analysis of dynamic and structural changes in cash flows has been proven. The dynamics and structure of spending cash flows were evaluated. Certain regularities have been established regarding the efficiency of cash flows at a large chemical enterprise. Thus, analytical conclusions were made regarding the liquidity and solvency of cash flows for various types of activities: operational, financial, and investment. A certain assumption regarding the methodology of cash flow analysis (highly liquid assets) is substantiated and the need for its improvement is proven.

Investment policy of the enterprise

Introduction. The state of development of the economic system of Ukraine, the need to function in the conditions of martial law requires enterprises to search for more effective mechanisms for managing their own business, to achieve their goals faster, optimizing asset management processes, improving technological aspects of activity, effectively managing information. The increased level of riskiness of economic activity requires significant changes in the resource management system in order to ensure the stability of the production of goods and the processes of providing services in order to obtain an optimal level of profit. One of the areas of activity that can normalize profitability under conditions of uncertainty is investing. Working under the conditions of a reduced level of demand, trying to preserve the stability of economic processes, economic relations with the rest of the business entities enterprises maximize their own efforts to maintain stable sales volumes and the amount of their own income, constantly searching for optimal forms of capital management, ensuring a relative level of financial stability. Goal. The purpose of the research is to find ways to optimize the processes of managing investment activities, financial, material and informational resources to ensure the sustainability of economic processes. Methodology. The methods of analysis and synthesis, generalization and comparison, scientific abstraction were used in the process of work. Results. The article evaluates the effectiveness of capital management processes, outlines the main forms of investment activity, methods of resource concentration, directions for increasing the turnover of enterprise assets. The factors that influence the effectiveness of investment processes, the formation of investment policy and the acceleration of the turnover of resources are identified. Assessment of the needs of financial resources for the implementation of investment projects, forms of use of loan capital is carried out. The forms of optimization of investment activity of enterprises, methods of selection and concentration of resources, directions of increasing the level of their liquidity are outlined. The effects that can be obtained as a result of the implementation of individual investment projects are defined. Attention is focused on the ability of investments to ensure the stability of the company's financial system and ensure sustainable development. The need to solve the problems of information provision of investment activity, selection of methods of obtaining information, forms of its management is noted. The directions for the development of the scientific potential of enterprises, the forms of its use and the components of the optimal system of resource management are defined. The forms of influence of investment processes on the level of profitability of activity, liquidity of assets and solvency, methods of optimizing the turnover of assets, forms of increasing the efficiency of activity due to the introduction of innovations are outlined.