Prague Economic Papers, 2008 (vol. 17), issue 2

Original contributions, Original article, Research article

Cyclicality of the banking sector performance and macro environment in the Czech republic, Slovakia and Slovenia

Mejra Festić, Dejan Romih

Prague Economic Papers 2008, 17(2):99-117 | DOI: 10.18267/j.pep.323  

An exposure to macroeconomic risk factors across banks is a source of systemic risk that influences the banking sector performance. In this paper, we present some evidence on macroeconomic variables affecting the non-performing loans (NPL) ratio in the Czech Republic, Slovakia and Slovenia. The GDP growth might have improved borrowers' ability to serve their bank loans in Slovenia, meanwhile the accelerating NPL ratio dynamics has failed to support the hypothesis that the GDP growth fosters an improvement in the NPL ratio in the case of Slovakia. Meanwhile deceleration in the NPL ratio on export impulses has supported a procyclical theory in the Czech...

Exchange rate changes effects on foreign direct investment

Roman Hušek, Václava Pánková

Prague Economic Papers 2008, 17(2):118-126 | DOI: 10.18267/j.pep.324  

Foreign direct investment (FDI) is an important phenomenon in international economic relations. Generally, FDI is studied from the point of view of capital and technology transfers to the recipient countries while respecting a basic fact that profit is the main investor's interest. In this paper in Part 2, some representative examples of typical FDI models are presented, whereas Part 3 should justify the specification of a model which is formulated and applied in Part 4. Investors can be driven by the expectation of maximum profit which would be obtained by allocating FDI according to the exchange rate volatility, i.e. after a sudden large devaluation...

Indicators of financial system stability: towards an aggregate financial stability indicator?

Adam Geršl, Jaroslav Heřmánek

Prague Economic Papers 2008, 17(2):127-142 | DOI: 10.18267/j.pep.325  

This article sets out to describe and discuss the methodology of selected financial soundness and financial stability indicators, including the attempts to construct an aggregate financial stability indicator. The first part is devoted to discussion of Financial Stability Indicators by the International Monetary Fund and presents also the values of the IMF's core Financial Soundness Indicators for the Czech Republic and other selected countries, using the data from the 2005 pilot study. This part partly covers also other existing approaches to definition and collection of partial financial soundness indicators, such as the indicators regularly assessed...

Non-linear dynamic panel data analysis for debt-equity choice and its impact on moral hazard problems

Fauziah Md. Taib, Anton Abdulbasah Kamil, Augustinus Setiawan

Prague Economic Papers 2008, 17(2):143-156 | DOI: 10.18267/j.pep.326  

Moral hazard agency problems take place when risky debt is issued. The dominant shareholders have opportunities to make decisions which effect wealth transfer. In several recent theories, debt-equity choice, which deals with agency problems assumes that financing and investment decisions are separable. These studies have been criticized due to the fact that both decisions are interdependent. The purpose of the presented paper is to test empirically the moral hazard problem of debt-equity choice in Indonesia. This study provides evidence that the level of debt is not secured by the sufficient collateral and is also not supported by growth opportunities....

Are the public firms more innovative than the private ones?

Juan Carlos Bárcena-Ruiz

Prague Economic Papers 2008, 17(2):157-167 | DOI: 10.18267/j.pep.327  

This paper shows that the public firms can be more innovative and, thus, more efficient than the private firms. To verify this conclusion, a mixed duopoly is considered that allows both the public firm and the private firm to adopt a new technology with a positive fixed cost that reduces the marginal cost of production. The private firm maximizes profits while the public firm maximizes the weighed sum of the consumer and producer surpluses. In this framework, it is shown that if the cost of setting up a new technology takes an intermediate value when the weight of the consumer surplus in social welfare is high enough, the public firm is more innovative...

Economic value added (eva) as a performance measurement for glcs vs non-glcs: evidence from bursa malaysia

Ismail Issham, Abdul Samad M Fazilah, Yen Siew Hwa, Anton Abdulbasah Kamil, Azli Azli Ayub, Meor Azli Ayub

Prague Economic Papers 2008, 17(2):168-179 | DOI: 10.18267/j.pep.328  

EVA is a useful tool for assessing company performance. It combines factors, such as economy, accounting and market information in its assessment. This study employed EVA in an attempt to compare the companies' performances of GLCs (government-linked companies) and non-GLCs. Based on a 4-year pooled panel data of 37 GLCs and 208 non-GLCs, the results show that companies with government as their stakeholders tend to exhibit lower EVA scores than the companies without government stakeholders in Malaysia. Larger size companies were found to have lower EVA values. Companies which have both the characteristics - which are simultaneously large in size and...