an academic and professional review

n° 127
November-December 2013
ISSN 2101-9304
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an academic and professional review
ARTICLES
4
Determinants of the Financial Performance
of Major European Banks
Pascal BARNETO, IAE, Université de Poitiers
Georges GREGORIO, IAE, Université de Pau
16 Market Risk Measurement Models:
Estimation of Volatility and Correlation
Isam MOUALLIM, PRO BTP FINANCE, Paris
Jean-Laurent VIVIANI, IGR/IAE de Rennes, CREM, Université de Rennes
36 Stock Index Futures Dynamics: Evidence from France
Alassane DIAW, Al Jouf University, Saudi Arabia
Bernard OLIVERO, Université de Nice Sophia Antipolis
42 Herding in French Stock Markets: Empirical Evidence
from Equity Mutual Funds
Mohamed AROURI, CRCGM-Université d’Auvergne & EDHEC Business School
Raphaëlle BELLANDO, LEO-Université d’Orléans
Sébastien RINGUEDÉ, LEO-Université d’Orléans
Anne-Gaël VAUBOURG, LAREFI-Université Montesquieu-Bordeaux IV
60 Microfinance Institutions Ratings:
The Influence of Board Characteristics
Hubert TCHAKOUTE TCHUIGOUA, KEDGE Business School
In partnership with
Association française de finance
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Bankers, Markets & Investors n° 127 november-december 2013
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Abstracts
■■Determinants of the Financial
Performance of Major European Banks 4
Pascal Barneto, IAE, Université de Poitiers, Georges Gregorio,
IAE, Université de Pau.
The purpose of this paper is to question the financial performance of the banking sector measured through their accounting documents. Using a ten-year study based on
■■Herding in French Stock Markets:
Empirical Evidence from Equity Mutual
Funds
42
Mohamed Arouri, CRCGM-Université d’Auvergne & EDHEC Business School,
Raphaëlle Bellando, LEO-Université d’Orléans, Sébastien Ringuedé, LEO-Université d’Orléans, Anne-Gaël Vaubourg, LAREFI-Université Montesquieu-Bordeaux IV.
a sample of the top 50 European banks, we test whether it is possible to detect diffe-
Using the traditional herding measure of Lakonishok, Shleifer and Vishny (1992) (LSV)
rences in performance with the application of IFRS. In particular, we examine whether
and the more recent measure of Frey, Herbst and Walter (2007) (FHW), we assess her-
fair value for AFS securities has played an important role in financial performance mea-
ding by French equity mutual funds between 1999 and 2005. We show that LSV herding
sure. Our findings show that financial performance stems from business growth and
amounts to 6.5%, while FHW herding is approximately 2.5 times stronger. We find that
improved margins but also by regulatory constraints specific to the banking system.
herding is stronger in small-capitalization firms than in medium- and large-capita-
The fair value has had little impact on the financial performance of banks caused by
lization firms. Herding is also more severe among foreign stocks than among EU-15
the variations of AFS securities.
or French stocks. Moreover, French mutual funds are shown to partially use positive
Keywords: Financial performance; Banking sector; Fair value; Equity; Tier One.
feedback strategies. Finally, we establish that sell-herding has a destabilising impact
on stock prices and that this impact is larger for foreign stocks.
JEL Classification: G21, M41
Keywords: herding, herding measures, mutual funds, fund managers, feedback trading.
JEL Classification: G11, G23.
■■Market Risk Measurement Models:
Estimation of Volatility and
Correlation
16
Isam Mouallim, PRO BTP FINANCE, Paris, Jean-Laurent Viviani, IGR/IAE
de Rennes, CREM, Université de Rennes.
The objective of the paper is to compare the capacity of various market risk measure-
■■Microfinance Institutions Ratings:
The Influence of Board
Characteristics
60
Hubert Tchakoute Tchuigoua, KEDGE Business School.
ment models to take into account some empirical properties of financial asset returns.
This article aims to test empirically the relationships among board characteristics,
Through an empirical study, we show that financial markets have some empirical cha-
audit quality, and microfinance institution (MFI) ratings. An ordered logistic regression
racteristics known as «stylized facts» that conventional market risk measurements are
enables the study of a sample of 260 international MFIs that were rated between 2002
unable to reproduce. We propose Value-at-Risk (VaR) measures of market risk, based
and 2008. Because of the potential for selection bias, a two-step Heckman selection
on dynamic modeling of portfolio volatility and correlations between asset classes,
model procedure is used to test the findings’ robustness. The results show that board
using two risk measurement approaches: the univariate risk measurement approach
expertise, activity, and the audit have a significant influence on MFI ratings. This influence
and the multivariate risk measurement approach. We first describe how to estimate
varies, however, from one rating agency to another, indicating that the informational
the parameters of these models and then test their quality predictive using backtesting
value of ratings differs across rating agencies. A comparative study of the impact of
procedures. The results obtained show a great ability of the different risk measurement
board characteristics shows that board activity becomes a more important factor when
models to capture the stylized facts characterizing financial markets. Multivariate VaR
an MFI has been rated by Planet Rating.
models integrating correlations dynamic outperform the univariate VaR measures.
Keywords: Ratings; Board of Directors; Governance; Microfinance.
Keywords: Conditional Volatility; Dynamic Correlation; VaR; backtesting.
JEL Classification: G21, G24, G30, L31
JEL Classification: C01, C32, G32
■■Stock Index Futures Dynamics:
Evidence from France
36
Alassane Diaw, Al Jouf University, Saudi Arabia, Bernard Olivero, Université
de Nice Sophia Antipolis.
This paper studies the French stock index futures market using autoregressive conditional durations (ACD) models. Indeed, these models suggest that the inter-trades
durations convey information about the trading intensity of the market. We use a basic
ACD to study the volatility concentration and to test the role of the information asymmetry in the trading intensity. The results show strong temporal dependencies and
the negligible effect of the information asymmetry in the volatility process. The use
of ACD-GARCH model which better accounts for the information driven by the price
process confirms the results.
Keywords: ACD Models, Market microstructure, Information asymmetry.
JEL Classification: G10, C22.
bankers, markets & investors n° 127 november-december 2013
3
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Determinants of the Financial
Performance of Major
European Banks
■ I. Introduction
PASCAL
BARNETO*
Full Professor
of Finance
IAE, University
of Poitiers
GEORGES
GREGORIO
Associate
Professor of
Finance
IAE, University
of Pau
In recent years, the financial performance of listed
companies has been an object of study in much academic
research, notably following the publication of the Feltham-Ohlson evaluation model (1995) that linked book
value to market value. Reconciling accounting and stock
market information is a commendable objective as long
as the markets involved are efficient and if the prevailing
national accounting system of the firm in question tries
to convey asset values as fairly and precisely as possible
to reflect economic reality.
The purpose of the present article is to analyze the
financial performance determinants found within IFRS
standards on the basis of a business sector that has been
the topic of very few performance measurement studies
in Europe, ie, the banking sector. IFRS standards advocate an economic financial vision of accounting rooted
in the generalization of fair value. This construct which
became quite controversial in Europe when the 2008
financial crisis peaked following the fall of Lehman
Brothers, requires that most financial instruments be
evaluated either on a mark-to-market or else a markto-model basis – or, where this was impossible, in cash
flow terms. Financial institutions were the entities most
directly concerned with this standard since all variations
in the fair value of their financial portfolios’ assets and
liabilities would now impact net income and/or equity
capital1, i.e. the two variables used to measure performance in ROE (Return on Equity) terms. We know that most
banks measures are less than 50% of their assets at fair
value and that the major part of banks’ balance sheet is
measured at amortized cost, on average (KMPG, 2010).
But the present study is useful to determine whether there
was any real difference in performance before and after
the adoption of IFRS (mainly for securities classified as
available for sale, AFS), and whether the fair value construct
explains much of the positive and negative performance
witnessed since that date.
* Corresponding author :[email protected]
4
Barneto.indd Sec1:4
Banks’ financial performance cannot be reduced to a
mere choice of accounting criteria. Unlike industrial or
commercial companies, banks operate in a highly regulated
sector (Diamond, 1984). At national level, many European
countries feature both a banking supervision and control
system as well as an accounting system that is specific
to their own banking activities (i.e., France has specific
accounting regulations for credit institutions, called the
Plan Comptable des Etablissements de Crédit)2. At the same
time, IFRS standards do not offer a specific accounting
model for financial institutions even if a standard such
as IFRS 73 is very relevant to this category. In addition,
since 1 January 2004 the European banking sector has
been monitored by the Committee of European Banking
Supervisors (CEBS)4 ; a prudential supervision legitimized
by such directives as the MiFID (Markets in Financial Instruments Directive); other statutory equity capital-related
measures (i.e. the Capital Requirements Directive, CRD). A
number of international authorities, such as the Basel
Committee with its Cooke or McDonough ratios, also
receive banking sector reports to satisfy their own prudential regulations. Such rules are intended to reinforce
the banking sector’s Tier 1 capital and solvency ratios. At
this level, there exists an indirect link between the quality
of accounting information and banking regulation. By
impacting operational performance, IFRS standards affect
equity capital hence Tier 1 capital ratios which are required by regulators to exceed a certain threshold. Financial
performance measurements are thus conditioned by an
exogenous variable – regulation. Yet like any equivalent
attribute, performance (when calculated using accounting
data) is first and foremost the consequence of an entity’s
internal accounting choices.
Firstly, a bank’s performance stems from its commercial
strategy, i.e. its business positioning and the geographical
choices that it has made. Over the past 20 years, some
institutions have focused on business activities delivering
higher margin to the detriment of lending activities, where
banks simply serve as intermediaries (a core business for
commercial banks). Other institutions have expanded
internationally via external growth through the acquisition of existing bank networks or the development of
Bankers, Markets & Investors nº 127 november-december 2013
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Société ..............................................................................................................................................................................
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Nom ....................................................................................... Prénom ............................................................................
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