2005 Series

The UK Code of Corporate Governance: Link between Compliance and Firm Performance

Reference: 2005-17
Authors: Carol Padgett, Amama Shabbir

Abstract: Listed companies in the UK are required to comply or give reasons for non-compliance with the recommendations of the UK code of corporate governance called ‘The Combined Code’. Prior studies investigating the relationship between compliance and firm performance have found the link to be either non-existent or at best weak. This study, taking a more holistic view of complianceContinue reading

Investment Reputation Index: family firms vs. non-family firms in the UK

Reference: 2005-15
Authors: Suranjita Mukherjee, Carol Padgett

Abstract: Family firm researchers have found a host of characteristics that are unique to family firms. These familial attributes are often taken as plausible explanations for governance and operational differences between family firms and their non-family competitors. We use these familial characteristics as well as a host of ?non-family? specific provisions to build an Investment Reputation Index that measures theContinue reading

The Financial Services Reform Act 2001: Impact on systemic risk in Australia

Reference: 2005-12
Authors: Colin Beardsley, John R. O'Brien

Abstract: The rise of conglomerate banks and their interrelated balance sheets, pose new challenges to theories of financial regulation. We measure the impact of recent legislative changes in Australia upon systemic risk, for banking and near banking sectors, and demonstrate a significant reduction post the legislation. This is consistent with a major legislative goal, to promote global competitiveness, because itContinue reading

Joined-Up Pensions Policy in the UK: An Asset-Liability Model for Simultaneously Determining the Asset Allocation and Contribution Rate

Reference: 2005-11
Authors: John Board, Charles Sutcliffe

Abstract: The trustees of funded defined benefit pension schemes must make two vital and inter-related decisions – setting the asset allocation and the contribution rate. While these decisions are usually taken separately, it is argued that they are intimately related and should be taken jointly. The objective of funded pension schemes is taken to be the minimization of both theContinue reading

Merging Schemes: An Economic Analysis of Defined Benefit Pension Scheme Merger Criteria

Reference: 2005-09
Authors: Charles Sutcliffe

Abstract: The conditions under which pension schemes merge is an important issue that has been under-researched. Mergers can affect the strength of the sponsor’s covenant and the balance of power between the trustees and the sponsor, as well as the scheme funding ratio. This paper sets out two financial criteria to be met by any pension scheme merger:- no profitContinue reading

Reference: 2005-08
Authors: Adrian R Bell, Chris Brooks, Paul Dryburgh

Abstract: It has long been known that English Cistercian monasteries often sold their wool in advance to foreign merchants in the late thirteenth century. The abbey of Pipewell in Northamptonshire features in a number of such contracts with Cahorsin merchants. This paper looks again at these contracts in the context of over 200 other such agreements found in the governmentalContinue reading

Predicting Agency Rating Migrations with Spread Implied Ratings

Reference: 2005-06
Authors: Jianming Kou, Simone Varotto

Abstract: Investors traditionally rely on credit ratings to price debt instruments. However, rating agencies are known to be prudent in their approach to rating revisions, which results in delayed ratings adjustments to mutating credit conditions. For a large set of eurobonds we derive credit spread implied ratings and compare them with the ratings issued by rating agencies. Our results indicateContinue reading

The Extremes of the P/E Effect

Reference: 2005-04
Authors: Keith Anderson, Chris Brooks

Investigations into value-based ‘anomalies’ such as the P/E effect sort shares into quintiles, or at most deciles. These are blunt instruments. We test whether most of the extra value to be found in the lower end of the P/E spectrum is to be found in the very lowest P/E shares, and whether the worst investments are in the few sharesContinue reading

Decomposing the P/E Ratio

Reference: 2005-03
Authors: Keith Anderson, Chris Brooks

Abstract: The price-earnings effect has been a challenge to the idea of efficient markets for many years. The P/E used has always been the ratio of the current price to the previous year’s earnings. However, the P/E is partly determined by outside influences, such as the year in which it was measured, the size of the company, and the sectorContinue reading

The Long-Term P/E Ratio

Reference: 2005-02
Authors: Keith Anderson, Chris Brooks

The price-earnings effect has been thoroughly documented and widely studied around the world. However, it has always been calculated on the basis of the previous year’s earnings. We show that the power of the effect has until now been seriously underestimated, due to taking too short-term a view of earnings. We look at all UK companies since 1975, and usingContinue reading

Advance Contracts for the Sale of Wool in Medieval England: An Undeveloped and Inefficient Market?

Reference: 2005-01
Authors: Adrian R Bell, Chris Brooks, Paul Dryburgh

Abstract: While it is commonly believed that derivative instruments are a recent invention, we document the existence of forward contracts for the sale of wool in medieval England around 700 years ago. The contracts were generally entered into by English monasteries, who frequently sold their wool for up to twenty years in advance to mostly foreign and particularly Italian merchants.Continue reading