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The purpose of this paper is to provide insights of the Greek Hotel Industry practices in the field of Cost Accounting. To this end, a survey was conducted with 85 firms of the Greek hotel sector with the use of questionnaires. Results show that hotel enterprises have a high fixed cost structure and also face a high proportion of indirect costs. The gathered data led us to the conclusion that the majority of the hotels use traditional cost accounting systems. Nevertheless, the adoption rate of an activity based costing (ABC) system is considered rather satisfactory considering the rates that come from surveys conducted in hotel enterprises in other countries. According to the statistical analysis, the factors that mostly affect the managerial decision of hotels in favour of an ABC system include their cost structure and the cost calculation per customers' categories., tourismos, Vol. 2 No. 2 (2007)

We analyze a comprehensive sample of more than 10,000 U.S. OTC stocks. We provide much needed descriptive evidence on this market and show that the OTC market is a large, diverse, and dynamic trading environment with a rich set of regulatory and disclosure regimes, comprising venue rules and state laws beyond SEC regulation. We also exploit the institutional richness of the OTC market and analyze two key dimensions of market quality, liquidity and crash risk, across firms and regulatory regimes. We find that OTC firms that are subject to stricter regulatory regimes and disclosure requirements have higher market quality (higher liquidity and lower crash risk). Our analysis points to an important trade-off in regulating the OTC market and protecting investors: Lowering regulatory requirements (e.g., for disclosure) reduces the compliance burden for smaller firms, but also reduces market quality.

The value of information regarding risk class for a monopoly insurer and its customers is examined in both symmetric and asymmetric information environments. A monopolist always prefers contracting with uninformed customers as this maximizes the rent extracted under symmetric information while also avoiding the cost of adverse selection when information is held asymmetrically. Although customers are indifferent to symmetric information when they are initially uninformed, they prefer contracting with hidden knowledge rather than symmetric information since the monopoly responds to adverse selection by sharing gains from trade with high-risk customers when low risks are predominant in the insurance pool. However, utilitarian social welfare is highest when customers are uninformed, and is higher when information is symmetric rather than asymmetric.

In this short paper, we study the asymptotics for the price of call options for very large strikes and put options for very small strikes. The stock price is assumed to follow the Black-Scholes models. We analyze European, Asian, American, Parisian and perpetual options and conclude that the tail asymptotics for these option types fall into four scenarios.

Using a two-account model with event risk, we model life insurance contracts taking into account both guaranteed and non-guaranteed payments in participating life insurance as well as in unit-linked insurance. Here, event risk is used as a generic term for life insurance events, such as death, disability, etc. In our treatment of participating life insurance, we have special focus on the bonus schemes “consolidation” and “additional benefits”, and one goal is to formalize how these work and interact. Another goal is to describe similarities and differences between participating life insurance and unit-linked insurance. By use of a two-account model, we are able to illustrate general concepts without making the model too abstract. To allow for complicated financial markets without dramatically increasing the mathematical complexity, we focus on economic scenarios. We illustrate the use of our model by conducting scenario analysis based on Monte Carlo simulation, but the model applies to scenarios in general and to worst-case and best-estimate scenarios in particular. In addition to easy computations, our model offers a common framework for the valuation of life insurance payments across product types. This enables comparison of participating life insurance products and unit-linked insurance products, thus building a bridge between the two different ways of formalizing life insurance products. Finally, our model distinguishes itself from the existing literature by taking into account the Markov model for the state of the policyholder and, hereby, facilitating event risk.

Due to the strong complexity of financial markets, economics does not have a unified theory of price formation in financial markets. The most common assumption is the Efficient-Market Hypothesis, which has been attacked by a number of researchers, using different tools. There were varying degrees to which these tools complied with the formal definitions of efficiency and predictability. In our earlier work, we analysed the predictability of stock returns at two time scales using the entropy rate, which can be directly linked to the mathematical definition of predictability. Nonetheless, none of the above-mentioned studies allow any general understanding of how the financial markets work, beyond disproving the Efficient-Market Hypothesis. In our previous study, we proposed the Maximum Entropy Production Principle, which uses the entropy rate to create a general principle underlying the price formation processes. Both of these studies show that the predictability of price changes is higher at the transaction level intraday scale than the scale of daily returns, but ignore all scales in between. In this study we extend these ideas using the multiscale entropy analysis framework to enhance our understanding of the predictability of price formation processes at various time scales.

New risk-based solvency requirements for insurance companies across European markets have been introduced by Solvency II and will come in force from 1 January 2016. These requirements, derived by a Standard Formula or an Internal Model, will be by far more risk-sensitive than the required solvency margin provided by the current legislation. In this regard, a Partial Internal Model for Premium Risk is developed here for a multi-line Non-Life insurer. We follow a classical approach based on a Collective Risk Model properly extended in order to consider not only the volatility of aggregate claim amounts but also expense volatility. To measure the effect of risk mitigation, suitable reinsurance strategies are pursued. We analyze how naïve coverage as conventional Quota Share and Excess of Loss reinsurance may modify the exact moments of the distribution of technical results. Furthermore, we investigate how alternative choices of commission rates in proportional treaties may affect the variability of distribution. Numerical results are also figured out in the last part of the paper with evidence of different effects for small and large companies. The main reasons for these differences are pointed out.

Literature and textbooks on capital budgeting endorse net present value (NPV) and generally treat accounting rates of return as not being reliable tools. This paper shows that accounting numbers can be reconciled with NPV and fruitfully employed in real-life applications. Focusing on project finance transactions, an average return on investment (AROI) is drawn from the pro forma financial statements, obtained as the ratio of aggregate income to aggregate book value. We show that such a metric correctly captures a project's economic profitability, as long as it is compared with a comprehensive weighted average cost of capital (WACC) that includes a correction factor that takes account of the capital foregone by the investors. In contrast to the internal rate of return, AROI is unique, and we provide an explicit functional relation that links it to the NPV. The approach holds for levered and unlevered projects, constant and non-constant leverage ratios, and constant and non-constant WACCs.

Publicly provided long-term care (LTC) insurance with means-tested benefits is suspected to crowd out either private saving or informal care. This contribution predicts crowding-out effects for both private saving and informal care for policy measures designed to relieve the public purse from LTC expenditure such as more stringent means testing and increased taxation of inheritance. These effects result from the interaction of a parent who decides on the amount of saving in retirement and a caregiver who decides on the effort devoted to informal care which lowers the probability of admission to a nursing home. Double crowding-out effects are also found to be the consequence of exogenous influences, notably a higher opportunity cost of caregiving.

Insurance companies use conservative first order valuation bases to calculate insurance premiums and reserves. These valuation bases have a significant impact on the insurer’s solvency and on the premiums of the insurance products. Safety margins for systematic biometric and financial risk are in practice typically chosen as time-constant percentages on top of the best estimate transition intensities. We develop a risk-oriented method for the allocation of a total safety margin to the single safety margins at each point in time and each state. In a case study, we demonstrate the suitability of the proposed method in different frameworks. The results show that the traditional method yields an unwanted variability of the safety level with respect to time, whereas the variability can be significantly reduced by the new method. Furthermore, the case study supports the German 60 percent rule for the technical interest rate.

Being active in both the insurance sector and the banking sector, financial conglomerates intrinsically increase the interconnections between the banking sector and the insurance sector. We address two main concerns about financial conglomerates using a unique database on bilateral exposures between 21 French financial institutions. First, we investigate to what extent to which the insurers that are part of financial conglomerates differ from pure insurers. Second, we show that in the presence of sovereign risk, the components of a financial conglomerate are better off than if they were distinct entities. Our empirical findings bring a new perspective to the previous results of the literature based on using different types of data.

We introduce a bivariate Markov chain counting process with contagion for modelling the clustering arrival of loss claims with delayed settlement for an insurance company. It is a general continuous-time model framework that also has the potential to be applicable to modelling the clustering arrival of events, such as jumps, bankruptcies, crises and catastrophes in finance, insurance and economics with both internal contagion risk and external common risk. Key distributional properties, such as the moments and probability generating functions, for this process are derived. Some special cases with explicit results and numerical examples and the motivation for further actuarial applications are also discussed. The model can be considered a generalisation of the dynamic contagion process introduced by Dassios and Zhao (2011).

The objective of our research is to highlight the concept, and especially the practices of the creative accounting or frozen assets and their implications for the company performance. More specifically, the practices and techniques of the creative accounting or frozen assets aim at assessing inherent risks related to the quality of the accounting information concerning company performance. The flexibility in the accounting normalization also takes into account the reality according to which the accounting truth is not an “absolute” truth in reflecting reality but rather a “built” truth.

Intellectual property rights are increasingly becoming an important asset of enterprises, so that an innovative business must carefully decide about the method of its valuation. The existing literature indicates three classical approaches to this issue: cost-based, income-based, and market-based methods, and a few more sophisticated ones such as: the option-based and patent citation methods, with their advantages and disadvantages. This paper proposes a novel methodology of non-linear corrections in the market model of patent valuation, when factors such as time to expiration, copying risk, or momentum in patent life cycle are taken into consideration. The proposed approach, based on evidence of the non-linear impact over time of the abovementioned factors on the value of patent, is anchored primarily in marketing science as well as in the theory and practice of accounting. This fine-tuning raises the accuracy and credibility of the market method of patent valuation.

We show that the results of ArXiv:1305.6008 on the Fundamental Theorem of Asset Pricing and the super-hedging theorem can be extended to the case in which the options available for static hedging (\emph{hedging options}) are quoted with bid-ask spreads. In this set-up, we need to work with the notion of \emph{robust no-arbitrage} which turns out to be equivalent to no-arbitrage under the additional assumption that hedging options with non-zero spread are \emph{non-redundant}. A key result is the closedness of the set of attainable claims, which requires a new proof in our setting., Comment: Final version. To appear in Risks

This paper discusses task performance fraud risk assessment and forensic accountant and auditor knowledge and mindset in the Nigerian public sector. The aim of the study is to examine the fraud risk assessment in the Nigerian public sector through the efficient utilisation of forensic accountant and auditor knowledge and mindset. The effect will enhance the corporate governance and accountability practices among public sector accountants and auditors in Nigeria.

We present some new evidence on the tail distribution of commercial property losses based on a recently constructed dataset on large commercial risks. The dataset is based on contributions from Lloyd's of London syndicates, and provides information on over three thousand claims occurred during the period 2000 - 2012, including detailed information on exposures. We use occupancy characteristics to compare the tail risk profiles of different commercial property exposures, and find evidence of substantial heterogeneity in tail behavior. The results demonstrate the benefits of aggregating granular information on both claims and exposures from different data sources, and provide warning against the use of reserving and capital modeling approaches that are not robust to heavy tails.

International audience; Abstract. Assume that claims in a portfolio of insurance contracts are described by independent and identically distributed random variables with regularly varying tails and occur according to a near mixed Poisson process. We provide a collection of results pertaining to the joint asymptotic Laplace transforms of the normalized sums of the smallest and largest claims, when the length of the considered time interval tends to infinity. The results crucially depend on the value of the tail index of the claim distribution, as well as on the number of largest claims under consideration.

In a diffusion model of risk, we focus on the initial capital needed to make the probability of ruin within finite time equal to a prescribed value. It is defined as a solution of a nonlinear equation. The endeavor to write down and to investigate analytically this solution as a function of the premium rate seems not technically feasible. Instead, we obtain informative bounds for this capital in terms of elementary functions.

We argue that the present crisis and stalling economy that have been ongoing since 2007 are rooted in the delusionary belief in policies based on a “perpetual money machine” type of thinking. We document strong evidence that, since the early 1980s, consumption has been increasingly funded by smaller savings, booming financial profits, wealth extracted from house price appreciation and explosive debt. This is in stark contrast with the productivity-fueled growth that was seen in the 1950s and 1960s. We describe the transition, in gestation in the 1970s, towards the regime of the “illusion of the perpetual money machine”, which started at full speed in the early 1980s and developed until 2008. This regime was further supported by a climate of deregulation and a massive growth in financial derivatives designed to spread and diversify the risks globally. The result has been a succession of bubbles and crashes, including the worldwide stock market bubble and great crash of October 1987, the savings and loans crisis of the 1980s, the burst in 1991 of the enormous Japanese real estate and stock market bubbles, the emerging markets bubbles and crashes in 1994 and 1997, the Long-Term Capital Management (LTCM) crisis of 1998, the dotcom bubble bursting in 2000, the recent house price bubbles, the financialization bubble via special investment vehicles, the stock market bubble, the commodity and oil bubbles and the current debt bubble, all developing jointly and feeding on each other until 2008. This situation may be further aggravated in the next decade by an increase in financialization, through exchange-traded-funds (ETFs), speed and automation, through algorithmic trading and public debt, and through growing unfunded liabilities. We conclude that, to get out of this catch 22 situation, we should better manage and understand the incentive structures in our society, we need to focus our efforts on our real economy and we have to respect and master the art of planning and prediction. Only gradual change, with a clear long term planning, can steer our financial and economic system from the turbulence associated with the perpetual money machine to calmer and more sustainable waters., Risks, 2 (2)

Business and credit cycles have an impact on credit insurance, as they do on other businesses. Nevertheless, in credit insurance, the impact of the systemic risk is even more important and can lead to major losses during a crisis. Because of this, the insurer surveils and manages policies almost continuously. The management actions it takes limit the consequences of a downturning cycle. However, the traditional modeling of economic capital does not take into account this important feature of credit insurance. This paper proposes a model aiming to estimate future losses of a credit insurance portfolio, while taking into account the insurer’s management actions. The model considers the capacity of the credit insurer to take on less risk in the case of a cycle downturn, but also the inverse, in the case of a cycle upturn, so, losses are predicted with a more dynamic perspective. According to our results, the economic capital is over-estimated when not considering the management actions of the insurer.

In a bonus-malus system in car insurance, the bonus class of a customer is updated from one year to the next as a function of the current class and the number of claims in the year (assumed Poisson). Thus the sequence of classes of a customer in consecutive years forms a Markov chain, and most of the literature measures performance of the system in terms of the stationary characteristics of this Markov chain. However, the rate of convergence to stationarity may be slow in comparison to the typical sojourn time of a customer in the portfolio. We suggest an age-correction to the stationary distribution and present an extensive numerical study of its effects. An important feature of the modeling is a Bayesian view, where the Poisson rate according to which claims are generated for a customer is the outcome of a random variable specific to the customer.

Shot-noise processes generalize compound Poisson processes in the following way: a jump (the shot) is followed by a decline (noise). This constitutes a useful model for insurance claims in many circumstances; claims due to natural disasters or self-exciting processes exhibit similar features. We give a general account of shot-noise processes with time-inhomogeneous drivers inspired by recent results in credit risk. Moreover, we derive a number of useful results for modeling and pricing with shot-noise processes. Besides this, we obtain some highly tractable examples and constitute a useful modeling tool for dynamic claims processes. The results can in particular be used for pricing Catastrophe Bonds (CAT bonds), a traded risk-linked security. Additionally, current results regarding the estimation of shot-noise processes are reviewed.

A certain spectrum, indexed by a\in[0,\infty], of upper bounds P_a(X;x) on the tail probability P(X\geq x), with P_0(X;x)=P(X\geq x) and P_\infty(X;x) being the best possible exponential upper bound on P(X\geq x), is shown to be stable and monotonic in a, x, and X, where x is a real number and X is a random variable. The bounds P_a(X;x) are optimal values in certain minimization problems. The corresponding spectrum, also indexed by a\in[0,\infty], of upper bounds Q_a(X;p) on the (1-p)-quantile of X is stable and monotonic in a, p, and X, with Q_0(X;p) equal the largest (1-p)-quantile of X. In certain sense, the quantile bounds Q_a(X;p) are usually close enough to the true quantiles Q_0(X;p). Moreover, Q_a(X;p) is subadditive in X if a\geq 1, as well as positive-homogeneous and translation-invariant, and thus is a so-called coherent measure of risk. A number of other useful properties of the bounds P_a(X;x) and Q_a(X;p) are established. In particular, quite similarly to the bounds P_a(X;x) on the tail probabilities, the quantile bounds Q_a(X;p) are the optimal values in certain minimization problems. This allows for a comparatively easy incorporation of the bounds P_a(X;x) and Q_a(X;p) into more specialized optimization problems. It is shown that the minimization problems for which P_a(X;x) and Q_a(X;p) are the optimal values are in a certain sense dual to each other; in the case a=\infty this corresponds to the bilinear Legendre--Fenchel duality. In finance, the (1-p)-quantile Q_0(X;p) is known as the value-at-risk (VaR), whereas the value of Q_1(X;p) is known as the conditional value-at-risk (CVaR) and also as the expected shortfall (ES), average value-at-risk (AVaR), and expected tail loss (ETL). It is shown that the quantile bounds Q_a(X;p) can be used as measures of economic inequality. The spectrum parameter, a, may be considered an index of sensitivity to risk/inequality.

This paper supports the understanding of the definition of intellectual property rights and strong connection with intangible assets and, on the other hand, provides a brief presentation of the organizations supporting the protection of such rights. The essential aim of this article is represented by the detailed information obtained as a result of research carried out in order to define, identify and study the application of IPR in general and especially in our country. At the end of the paper I mentioned what involves protecting intellectual property rights and brought little concerned how our country is perceived to protect such rights. Most often, intellectual property is defined as a formal document of title, like a lease, which means that the property is a legal concept distinct from real property that are actually good without concrete material form. Constitute a special category of assets being perceived as an original creation, derived from creative ideas; has or may have a commercial value due to its contribution to earnings for its owner. The need for protection of intellectual property rights has emerged because of the changes in the contemporary society. The aim and purpose of which is to protect human intelligence product and, at the same time, ensuring that consumers benefit from the use of the attributes of this product. Always remember that the violation of intellectual property rights, causes injury to major economic, signifying a strong threat to the consumers health and safety.

This paper provides empirical evidence of the impact of firm specific characteristics on corporate financial disclosures amongst UAE companies. A total of 153 public, joint-stock companies, listed and unlisted, were incorporated at the time of study. Both descriptive statistics and multiple regression analyses are used to test the relationship between the characteristics of UAE firms and the extent of their financial disclosure. Eight hypotheses were established to examine the relationship between a number of explanatory variables (namely, type of industry, listing status, return on equity, liquidity, market capitalization, foreign ownership, non-executive directors, and audit committee) and the extent of disclosure in corporate annual reports. The results of this study show that listing status, industry type, and size of firm are found to be significantly associated with the level of disclosure. This finding not only provides support for previous studies, but also is of relevance to those in the UAE who want to understand corporate disclosure and should also be of interest to UAE user-groups. Conclusions drawn from this study may be of interest to policy makers and regulators who want to improve corporate financial disclosure in their countries.

We present the optimal consumption and investment strategy for an investor, endowed with labor income, searching to maximize utility from consumption and terminal wealth when facing a binding capital constraint of a European (constraint on terminal wealth) or an American (constraint on the wealth process) type. In both cases, the optimal strategy is proven to be of the option-based portfolio insurance type. The optimal strategy combines a long position in the optimal unrestricted allocation with a put option. In the American case, where the investor is restricted to fulfill a capital guarantee at every intermediate time point over the interval of optimization, we prove that the investor optimally changes his budget constraint for the unrestricted allocation whenever the constraint is active. The strategy is explained in a step-by-step manner, and numerical illustrations are presented in order to support intuition and to compare the restricted optimal strategy with the unrestricted optimal counterpart.

Business combinations under common control are “business combinations in which all of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory” (IFRS 3.B1). These issues often are undertaken for many different reasons to achieve purposes that vary from business combinations of entities not under common control, i. e. reorganise group activities with an aim to achieve synergies or to obtain tax efficiency within the group. The European Financial Reporting Advisory Group explains that the often complex structures and arrangements to effect such changes raise considerable challenges for financial reporting. International Financial Reporting Standards (IFRS) are currently silent on how the entity receiving a business under common control should account for the transaction.

We consider a one-period portfolio optimization problem under model uncertainty. For this purpose, we introduce a measure of model risk. We derive analytical results for this measure of model risk in the mean-variance problem assuming we have observations drawn from a normal variance mixture model. This model allows for heavy tails, tail dependence and leptokurtosis of marginals. The results show that mean-variance optimization is seriously compromised by model uncertainty, in particular, for non-Gaussian data and small sample sizes. To mitigate these shortcomings, we propose a method to adjust the sample covariance matrix in order to reduce model risk., Risks, 2 (3)

(ProQuest: ... denotes formulae omitted.)1. IntroductionCorporate governance refers to the "set of mechanisms through which outside investors protect themselves against expropriation by the insiders" (La Porta, Lopez-de-Silanes, Shleifer, & Vishny, 2000), where "insiders" include the controlling shareholders and management. The main objective of corporate governance is to protect the rights of stockholders and creditors and to ensure that the interests of insiders and outsiders converge. Good corporate governance can contribute to a country's social and economic development by enabling corporations to perform better.The 1997 Asian financial crisis, which exposed weak governance in many corporations, made the business community more sensitive to the need to examine the effectiveness of corporate governance systems within firms. In the following years, as increasing instances of fraud surfaced in the financial statements of several large corporations such as Enron, WorldCom, Tyco International, Aldelphia, Parmalat, the Taj Company and, very recently, the Olympus Corporation, many countries drafted codes of corporate governance to improve their corporate governance mechanisms. One of the key tasks of a corporate governance structure is to make sure that financial reporting procedures are transparent.Earnings management refers to attempts by firm managers to manipulate accounting figures, thereby making their financial statements less transparent. While there is no consensus on the definition of earnings management practices (Beneish, 2001), a widely accepted definition by Healy and Wahlen (1999) is that "earnings management happens when managers use judgment in financial reporting to either deceive some stakeholders about the underlying economic performance of the firm or to manipulate contractual outcomes that rely on reported accounting numbers."Earnings management entails purposeful involvement in a firm's external financial reporting procedures with the intention of personal gain (Schipper, 1989). It is legal if the described profits are modified in line with generally accepted accounting principles (GAAP), for example, changing the procedure for inventory estimation and depreciation. Earnings management becomes fraudulent, however, when it goes beyond GAAP, such as accelerating income acknowledgment and deferring cost recognition (Yang, Chun, & Shamsher, 2009).Financial statements present important information to outside firm stakeholders. Investors' heavy reliance on financial data gives managers a strong incentive to alter financial statements for their own benefit. Such incentives may stem from career security, contractual obligations between outside stakeholders and managers, personal concerns in the existence of the compensation system, or the need to meet target earnings and market expectations (Healy & Wahlen, 1999). Earnings management can take numerous forms, for example, structuring certain revenues, expenses, and transactions; altering accounting measures; and accruals management. Among these, accruals management is harmful to the integrity of financial information because shareholders are often ignorant of the scope of such accruals (Mitra, 2002).Corporations generally set annual earnings targets, which they might exceed or fall short of in different cases. For this purpose, managers use accruals to manage actual earnings and present their investors with a sound picture of the firm's targets achieved. However, total accruals do not necessarily represent earnings management. Rather, they are divided into discretionary and nondiscretionary accruals where only the former- for example, income-increasing and income-decreasing discretionary accruals-reflect earnings management. Investors are often ignorant of such actions and are thus vulnerable to making ineffective decisions based on manipulated information.In 1999, the Organization for Economic Co-operation and Development developed a set of basic criteria for judging a country's corporate governance performance. …

The issue is examined whether the growing importance of providing information to investors accompanied by the increased impact of IFRS, which is the dominant accounting system around the world, has ignited the discussions on the necessity of separated external and internal accounting so much that fresh possibilities of convergence of accounting standards have come to the forefront. Within IFRS, fair value accounting is both very significant and controversial. In May 2011 the IASB released a new standard regarding fair value measurement; IFRS 13 was intended to provide a uniform regulation for this central valuation. It is examined whether fair value is conceptually appropriate for use in controlling if the new IFRS 13 is adhered to. Admittedly, the new IFRS 13 brings no significant improvements in terms of taxation. Fair value balancing does have certain implications for performance measurement, shown in balance sheet ratio. This, however, can be assessed only for each individual case, and not across the board. Using fair value accounting, value-driven single-period performance measures such as EVA have a potentially better database, which reduces only the number of transitional positions.

In this paper we introduce an intra-sector dynamic trading strategy that captures mean-reversion opportunities across liquid U.S. stocks. Our strategy combines the Avellaneda and Lee methodology (AL, Quant. Financ. 2010, 10, 761–782) within the Black and Litterman framework (BL, J. Fixed Income, 1991, 1, 7–18, Financ. Anal. J. 1992, 48, 28–43). In particular, we incorporate the s-scores and the conditional mean returns from the Orstein and Ulhembeck (Phys. Rev. 1930, 36, 823–841) process into BL. We find that our combined strategy ALBL has generated a 45% increase in Sharpe Ratio when compared to the uncombined AL strategy over the period from January 2, 2001 to May 27, 2010. These new indices, built to capture dynamic trading strategies, will definitely be an interesting addition to the growing hedge fund index offerings. This paper introduces our first “focused-core” strategy, namely, U.S. Equity Mean-Reversion.

Value-at-risk (VaR) and conditional value-at-risk (CVaR) are popular risk measures from academic, industrial and regulatory perspectives. The problem of minimizing CVaR is theoretically known to be of a Neyman–Pearson type binary solution. We add a constraint on expected return to investigate the mean-CVaR portfolio selection problem in a dynamic setting: the investor is faced with a Markowitz type of risk reward problem at the final horizon, where variance as a measure of risk is replaced by CVaR. Based on the complete market assumption, we give an analytical solution in general. The novelty of our solution is that it is no longer the Neyman–Pearson type, in which the final optimal portfolio takes only two values. Instead, in the case in which the portfolio value is required to be bounded from above, the optimal solution takes three values, while in the case in which there is no upper bound, the optimal investment portfolio does not exist, though a three-level portfolio still provides a sub-optimal solution.

Article analyses the suitability of the legal regulation model of tax advisory services in relation to their higher quality. A comparative preview of (non)regulation of tax advisory services in selected EU states is being discussed and several regulative models for Slovenia developed based on comparison. With empirical results from (i) different groups of professional tax advisory service providers and (ii) tax advisory service clients we try to identify elements of tax advisory services quality and risks. Based on the results new model of regulation of the profession and the level of regulation, suitable within EU law frame, has been suggested. The key finding is that higher level of regulation would improve the quality of tax advisory services, which is not only important for clients of services, but also in the public interest, as it increases confidence in tax returns and financial statements prepared by tax advisors.

In a randomized trial of two interventions on employer health benefit decision-making, 156 employers in the evidence-based (EB) condition attended a two hour presentation reviewing scientific evidence demonstrating depression products that increase high quality treatment of depression in the workforce provide the employer a return on investment. One-hundred sixty-nine employers participating in the usual care (UC) condition attended a similar length presentation reviewing scientific evidence supporting healthcare effectiveness data and information set (HEDIS) monitoring. This study described the decision-making process in 264 (81.2%) employers completing 12 month follow-up. The EB intervention did not increase the proportion of employers who discussed depression products with others in the company (29.2% versus 32.1%, p &gt, 0.10), but it did significantly influence the content of the discussions that occurred. Discussion in EB companies promoted the capacity of a depression product to realize a return on investment (18.4% versus 4.7%, p = 0.05) and to improve productivity (47.4% versus 25.6%, p = 0.06) more often than discussions in UC companies. Almost half of EB and UC employers reported that return on investment has a large impact on health benefit decision-making. These results demonstrate the difficulty of influencing employer decisions about health benefits using group presentations.

The financial equilibrium of pension funds relies on the appropriate computation of retirement benefits, taking account of future payments and discount rates. Short-term errors in the commitment for retirement benefits, ill-suited investment in the stock market, or improper mixture with pay-as-you-go payments have long-term consequences and may lead the pension fund to insolvency. The differential equation governing the current assets shows the respective weights associated with the error on the interest rate, the error on the extra bonus, and the error made in forecasting mortality. These weights are estimated through simulations. A short follow-up is sufficient to estimate the three errors. A threshold for the extra interest rate to be earned on the financial market is given to counter-balance the extra bonus when mortality is forecast correctly.

In order to maximise profit and to reduce the burden of tax in the jurisdictions with high tax, many of the multinational companies abuse transfer pricing by directing the profit towards subsidiaries which are localised in more favourable jurisdictions from this point of view. The cross-border transactions effectuated, more exactly the mechanisms used to establish the transfer pricing involved in them, vary from the perfectly legal to the illegal ones and very often it is almost impossible for the tax authorities to contest them. The purpose of this paper is to analyse the mechanisms and practices of determining transfer pricing and their effects on the financial flows at the international level. The conclusions emphasize both the role played by transfer pricing in tax optimization and in cross-border tax evasion.

This study examines the differences in the relationships between different stakeholders in conventional and Islamic financial institutions. The accounting and finance literature identifies the major contractual relationships as being those between managers and shareholders (employment contracts) and between shareholders and debt-holders (lending contracts). Both these types of contracts are usually considered to be financial-based contracts, because they rely, among other things, on the firm’s reported earnings. This paper applies agency theory to examine these contractual relationships in the two different financial system. The agency problem can have various forms in Islamic institutions. The agency problem has an additional dimension when managers deviate from the Islamic principles of Shariah. This study is intended to fill a gap which exists in the current literature, relating to the implications of Shariah rules for agency relationships. It also provides an analysis of how agency relationships are different as compared to conventional counterparts and the implications that this has for optimizing the agency relationships by reducing inherent frictions. In this way, this study extends and develops the literature on agency relationships in Islamic finance, thus paving the way for future studies in the direction of corporate governance, contractual relationships, and better disclosure in Islamic financial institutions. The study concludes that Islamic financial institutions have fewer agency problems than their conventional counterparts.

The current economic and financial crisis appeared without the anticipation of audit and control organizations, without objecting its manifestation or denouncing the practices that triggered it, that's why the limits and the potential were highlighted. To maximize the internal audit function, to expand the spectrum of risk management, to protect business and to deliver measurable values at world level, have been made a number of studies that have contributed by solving the fundamental causes of the emergence of the recession. In this sense, our research aims to discover the extent in which the scope of internal audit has expanded and strengthened along the current economic and financial crisis manifested globally and based on the recent large national and international studies regarding the state function of internal audit and its role in detecting risks. At the same time we want to highlight the opportunities for value creation by internal audit as well as opportunities to improve risk management process leading to the implementation of corrective and constructive solutions.

Este trabajo replica y adapta el modelo de Jones y Hensher (2004) a los datos de una economía emergente con el propósito de evaluar su validez externa. Se compara el desempeño del modelo logístico estándar en relación con el modelo logístico mixto para predecir el riesgo de crisis en el periodo 1993-2000, utilizando estados contables de empresas argentinas y ratios de nidos en estudios de Altman y Jones y Hensher. Como en estudios anteriores, rentabilidad, rotación, endeudamiento y flujo de fondos operativos explican la probabilidad de crisis financiera. La contribución de esta nueva metodología reduce la tasa de error del tipo I a un 9 %. Se demuestra que el modelo logístico mixto, que tiene en cuenta la heterogeneidad no observada, supera ampliamente el desempeño del modelo logístico estándar.------------------------------------This study is a replication and adaptation of Jones and Hensher (2004) model in an emerging economy with the purpose of testing its eternal validity. It compares the logistic standard model's performance with the logistic mixed model to predict bankruptcy risk of Argentinean companies between 1993-2000 by using financial statements and ratios defined in previous studies by Altman and Jones and Hensher. Similar to previous studies, profitability, asset turnover, debt and cash flow from operations explain financial distress' probability. The main contribution of this new methodology is the important reduction of error type I to the 9 %. This study asserts that the logistic mixed model, that considers the effect of non-observed heterogeneity, significantly improves the performance of the logistic standard model., Artículo revisado por pares

This study examines the level and structure of CEO compensation of 2,448 CEO’s from 1,622 firms spanning a range extending from 1997 through 2002. Based on agency and expectancy theories, this study tests the hypotheses that corporate diversification is associated with CEO compensation. The results found that the higher degree of international diversification, higher accounting earning performance, higher investment opportunities, and larger firm size, resulted in CEO’s receiving higher levels of compensation. In contrast, the higher the degree of industrial diversification, the fewer levels of total compensation, long-term compensation, and stock options corporate CEO’s received. In addition, this study finds that both international and industrial diversification is associated with a greater use of current compensation, as well as a greater reliance on accounting-based, rather than stock return earning (market-based measures) of firm performance.

Auditing is a field of action in financial accounting. Currently, audit means verification of audited accounts of enterprises, as the financial audit leading to certification. The paper highlights the results of a study conducted by the authors on the literature review regarding the risk assessment in financial audit. The main objective of this paper is to present some aspects related to audit risk assessment and also to analyse the three types of risks proposed by the International Auditing Standards.

The main role of the external auditor in the classical corporate governance scheme is to verify the accounting information provided by the firms’ managers. Lengthy audit engagements are viewed as a main threat to preserve auditor independence, and therefore regulators have established mandatory rotation rules in many countries worldwide. Researchers, however, have addressed the analysis of audit independence mainly by evaluating the role of the auditor not as an accounting verifier but as a substitute of bankruptcy prediction models. Our results show that the likelihood of audit qualifications decreases with audit tenure. This result is robust to the inclusion in the model of a proxy of accounting quality. Therefore, the potential explanation for this finding based on higher accounting quality associated to lengthy audit engagements is rejected. This threat to the independence of the external auditor has not been considered in the mandatory rotation rules established in most countries that only requires the rotation of the audit partner., La principal función del auditor externo en el esquema de gobierno corporativo clásico es el de verificar la información contable proporcionada por los gerentes de las empresas. Las relaciones largas de auditoría se consideran una amenaza importante para preservar la independencia del auditor. En consecuencia, los reguladores han establecido normas de rotación obligatoria en muchos países del mundo. Los investigadores, sin embargo, han abordado el análisis de la independencia del auditor, principalmente mediante la evaluación de su función no como un verificador de la contabilidad de la empresa, sino como un sustituto de los modelos de predicción de quiebra. Nuestros resultados muestran que la probabilidad recibir informes de auditoría con salvedades disminuye en función del número de años que el auditor lleva auditando a la empresa. Este resultado es robusto a la inclusión en el modelo de una proxy de la calidad de la contabilidad. Por lo tanto, se rechaza la posible explicación de este resultado a partir de la mayor calidad de la contabilidad que se logra en relaciones largas de auditoría. Esta amenaza a la independencia del auditor externo no ha sido considerada en las reglas de rotación obligatoria establecidas en la mayoría de los países que solo requieren la rotación del socio pero no de la firma de auditoría.

In a world in which uncertainty and risk generate alternatives or options, economic life does not raise the question of choosing between risky situations and certain situations, but between different degrees of risk and different possible contexts. The existence of a wide range of risks with actual or potential impact on the enterprise’s activity is but a certainty, as well as their impact on the enterprise’s results. In accounting, identifying and taking on fraud risk contributes to giving increased attention to the financial and accounting activities achieved so that the desire of a true image reflected in the financial statements will not be overshadowed.

O ironie a timpurilor noastre, poate fi aceea că deşi sute de sateliţi monitorizează activitatea planetei şi utilizarea informaticii s-a generalizat, permiţând culegerea, acumularea, transmiterea şi prelucrarea unui volum impresionant de date – totuşi precizia datelor economico-financiare rămâne tributară referenţialului de raportare şi tehnicilor de manipulare a rezultatelor. În ciuda multiplelor surse de informare totuşi informaţia financiar-contabilă, rămâne ca principală sursă de reflectare a activităţii economice şi a rezultatelor acestor activităţi, atât pentru proprii manageri ai entităţilor dar şi pentru marea diversitate a terţilor: furnizori, clienţi, salariaţi, investitori, bănci, instituţii statale, etc.

This study proposes an application of two models based on non-classical logic, the paraconsistent logic and the fuzzy logic, in company profitability analysis. We conduct interviews with market specialists in order to identify the main explanatory variables related to company profitability and apply the paraconsistent model in order to classify the data and to attribute a degree of favorable evidence and of contrary evidence to each profitability ratio. In the fuzzy model, the collected data is analyzed and classified using inference rules and membership functions, thus assigning a qualitative variable to each profitability index. The empirical implementation indicates that both models can be used as tools for assistance and validation of opinions of specialists in the analysis of a company's profitability.

The existence of a wide range of actual or potential threats with effective impact on the business entities is a certainty, as well as their influence on the results of the entity (often negative). In this context, increasing economic performance and conducting effective activities are strictly related to implementing a system of internal control. With the possessed tools and techniques, internal control evaluates the activities accomplished by the entity and identifies the risks that it faces. Therefore, presenting a fair view of the entity requires the implementation and development of internal control processes.

Por una parte, muchos países de Latinoamérica vienen aplicando la Contabilidad Pública bajo el Método de Acumulación o Devengo. Por otra, el Internacional Federation Of Accountants (IFAC), a través de la Junta de Normas Internacionales de Contabilidad para el Sector Público (ISPASB), busca armonizar la información contable y financiera de las entidades públicas a nivel mundial. ¿Cuál podría ser la relación entre la práctica actual de la Contabilidad Pública en los países de Latinoamérica y las normativas propuestas por IFAC? El estudio refleja la conceptualización y aplicación del devengado en diversos países y la situación contable que vive Ecuador en estos momentos. El devengado, como principio, ha diferenciado los registros contables entre el Sector Público No Financiero Ecuatoriano y el Sector Comercial Privado. Sin embargo, este modelo se ha ido integrando con el Sistema de Administración Financiera (ESIGEF). Esta integración supone el primer paso en el camino de integrarnos internacionalmente en el campo de Contabilidad Pública. Dicha integración permitiría realizar la rendición de cuentas de forma clara y transparente.

As of January 1, 2011, most of the world financial market economies are using International Reporting Standards (IFRS) as the required framework for financial statements. A non-comprehensive listing includes the European Union Countries, Canada, Australia and New Zealand. In the United States, US Generally Accepted Accounting Principles (GAAP) is still required but adoption of IFRS has support of many accounting firms and professional organizations and is under consideration by the SEC. This case study focuses on differences in the treatment of leases and the impact of these differences on financial statements and selected financial ratios. Students take GAAP financial statements and prepare an IFRS based balance sheet and income statement. It is necessary to understand both GAAP and IFRS rules regarding leases to address this case study. This case study is suitable for use at both the undergraduate and graduate levels. It may be used in an Intermediate Accounting II, Accounting Theory, Financial Statement Analysis or an International Accounting class, as well as an Investment Finance course. The case can be offered as an individual case study or as a group project.

The income smoothing purposes tend to vary across firms and countries depending on firms characteristics and environment. Following an overview of hypotheses, the empirical analysis investigates whether the tendency of bank managers to convey private information over income smoothing depend on IFRS adoption through a panel data model. Regressions are estimated on an unbalanced panel of bank from different MENA economies. Factors related to the local economy, institutional background and bank's characteristics are found to control varying levels of the dependent variable across time and space. We use a panel data estimation approach in order to obtain robust results, overcoming the problems related to serially correlated error terms. Our result indicate that IFRS adoption decrease the tendency to signal over income smoothing. This appears to be because IFRS improve earnings informativeness which reduces bank manager's motivation to smooth income for communication goal.