as a form of earnings management within the banking industry.
ref:In Pakistan, Islamic banking is a fast-growing trend - The Washington Post.
income smoothing in the Spanish banking industry] ..
Understanding the Value Impact of Receiving and Providing Trade Credit
By: Vinod Venkiteshwaran, Ph.D.
Most discussions, formal and informal, on firm credit policy are typically undertaken with no immediate reference to the impact on shareholder value. Every financial decision that a credit manager makes ultimately affects stock valuation. Therefore it is important to understand the impact that credit policies have on shareholder value. Trade credit has been shown to act as a substitute for traditional sources of financing such as bank loans especially for financially constrained firms. Therefore managing credit policy appropriately can have significant implications for those firms in terms of shareholder value. Firms that are not financially constrained may not rely on receiving trade credit as much but they are in a better position to provide trade credit, which in itself can lead to competitive advantages. Therefore how much in trade credit a firm receives versus how much in trade credit it extends has a joint effect on stock values. The empirical tests in this study estimates that the joint marginal impact of receiving versus providing trade credit results in a 24 cent increase in stock value per dollar of net trade credit received.
Business Credit and Collection Risk Analysis
By C.J. Wimley
Historically, the majority of business credit decisions made by credit departments are based on data purchased from one of the major credit bureaus, i.e., Dun & Bradstreet (D&B), Equifax, Graydon or Experian. These companies provide various types of generic credit reports and associated services where the information contained comes from a relatively small number of data providers, approximately 6,000 of the 20 million companies operating in the US, for US-based credit bureaus together with various forms of public record data such as liens, judgments and published financial statements. Additionally, information may be provided by trade associations and of course the company's own operating experience with their customers. Generic scores, credit bureau reports and data can be used either as a stand-alone evaluator or as a component of a judgmental-based model. However, companies are now reconsidering this technique and are instead adopting statistical modeling (or a hybrid of statistical with the bureau data). The nature of the data provided by the credit bureau assumes that every company looking at the data has the same risk, because the risk measurement provided is the same for everybody.
Assignment for the Benefit of Creditors and State Law Preferences
In this paper, I review the recent expansion of central bank liquidity support during the crisis, before discussing the collateral polices related to central banks’ lender-of-last-resort and market-maker-of-last-resort policies and their rationale. I then examine the relationship between the central bank and the treasury, and the potential threat to central bank independence if they venture into too much risky balance sheet expansion. A discussion about the exceptional growth of the shadow banking system follows. I introduce the concept of “liquidity illusion” to describe the fragility upon which much of the sector is based, and note that market growth has been based largely on a “fair-weather” view that central banks will support the market on rainy days. I argue that we need a better theoretical framework to understand the growth in the shadow banking system and the role of central banks in providing liquidity in a crisis.
extensively examined income smoothing in the banking industry
Malaysia’s structural current account surplus contributes to the overcapitalization of domestic firms. This in turn finances a financial (as opposed to an industrial), consumption-led (instead of investment-led) business cycle, where banking favors destabilizing asset price inflation. Islamic banks operating interdependently with conventional ones contribute to economic destabilization, channelling surplus funds from the corporate to the household sector.
In the current global financial crisis, economists and policymakers have reembraced Big Government as a means of preventing the reoccurrence of a debt-deflation depression. The danger, however, is that policy may not downsize finance and replace money manager capitalism. According to Senior Scholar L. Randall Wray, we need a permanently larger fiscal presence, with more public services. His advice to President Obama is to discard all of former Treasury Secretary Paulson’s actions. Wray believes that we can afford any necessary spending and bailouts, and that these actions will not burden our grandchildren.
In the banking industry, the earnings management is ..
Indeed, the Minsky moment has become a fashionable catch phrase on Wall Street. It refers to the time when over-indebted investors are forced to sell even their solid investments to make good on their loans, sparking sharp declines in financial markets and demand for cash that can force central bankers to lend a hand.
While the mainstream long argued that the central bank could use quantitative constraints as a means to controlling the private creation of money, most economists now recognize that the central bank can only set the overnight interest rate—which has only an indirect impact on the quantity of reserves and the quantity of privately created money. Indeed, in order to hit the overnight rate target, the central bank must accommodate the demand for reserves, draining the excess or supplying reserves when the system is short. Thus, the supply of reserves is best characterized as horizontal, at the central bank’s target rate. Because reserves pay relatively low rates, or even zero rates (as in the United States), banks try to minimize their holdings. Over time, they continually innovate, as they seek to minimize costs and increase profits. This includes innovations that reduce the quantity of reserves they need to hold (either to satisfy legal requirements, or to meet the needs of check cashing and clearing), and also innovations that allow them to increase the rate of return on equity within regulatory constraints, such as those associated with Basle agreements. Such behavior has been a central concern of the structuralist approach—which argued that it is too simplistic to hypothesize simple horizontal loan-and-deposit supply curves.
Earnings Management of Loan Loss Provisions in the Banking Industry.
The Experience in the US Banking Industry.
in the US banking industry
association between the two variables in the banking industry
Earnings management and auditor specialization in the post-sox era: An examination of the banking industry
to address earnings-smoothing behaviors in the banking industry
in banking industry.
risk taking, and the health of banking industry
Global liquidity provision is highly procyclical. The recent financial crisis has resulted in a flight to safety, with severe strains in key funding markets leading central banks to employ highly unconventional policies to avoid a systemic meltdown. Bagehot’s advice to “lend freely at high rates against good collateral” has been stretched to the limit in order to meet the liquidity needs of dysfunctional financial markets. As the eligibility criteria for central bank borrowing have been tweaked, it is legitimate to ask,
specialization in the banking industry
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 constitutes the most recent effort to eliminate TBTF practices. Its principal focus is on the extension and augmentation of regulation and supervision, which it envisions as preventing excessive risk taking by large financial companies; Congress has again found the cause for TBTF practices in the inadequacy of regulation and supervision. There is no indication that Congress has given any credence to the contention that regulatory motivations have been at fault. Finally, Dodd-Frank eschews a structural solution, leaving the largest financial companies intact and bank regulatory agencies still with extensive discretion in passing on large bank mergers. As a result, the elimination of TBTF will remain problematic for years to come.
Financial accounting in the banking industry: ..
The extraordinary scope and magnitude of the financial crisis of 2007–09 required an extraordinary response by the Federal Reserve in the fulfillment of its lender-of-last-resort (LOLR) function. In an attempt to stabilize financial markets during the worst financial crisis since the Great Crash of 1929, the Fed engaged in loans, guarantees, and outright purchases of financial assets that were not only unprecedented, but cumulatively amounted to over twice current US GDP as well. the purpose of this brief is to provide a descriptive account of the Fed's response to the recent crisis—to delineate the essential characteristics and logistical specifics of the veritable "alphabet soup" of LOLR machinery rolled out to save the world financial system. It represents the most comprehensive investigation of the raw data to date, one that draws on three discrete measures: the peak outstanding commitment at a given point in time; the total peak flow of commitments (loans plus asset purchases), which helps identify periods of maximum financial system distress; and, finally, the total amouunt of loans and asset purchases made between January 2007 and March 2012. This third number, which is a cumulative measure, reveals that the total Fed response exceeded $29 trillion. Providing this account from such varying angles is a necessary first step in any attempt to fully understand the actions of the central bank in this critical period—and a prerequisite for thinking about how to shape policy for future crises.
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