Qualitative Research in Financial Markets

Are sovereign wealth funds “white knights”? : Table of Contents

Jerome Couturier, Davide Sola, Paul Stonham — Mon Oct 05 11:22:02 BST 2009

Abstract:
Purpose – In the continuing credit squeeze, sovereign wealth funds (SWFs) are still active in international lending and are eagerly sought out by large, cash-strapped companies in the West. The purpose of this paper is to examine their nature and strategies before and after the onslaught of the credit crunch and global economic downturn in order to advise corporates on how best to design their strategies and terms in approaching the SWFs for funds. Design/methodology/approach – An analysis is made of SWFs in their dealings with Western corporate borrowers and a case study made of Barclays Bank which, faced with three major options in 2008 to raise a large amount of cash, chose to attract funding from three Gulf SWFs. Findings – SWFs certainly qualify as lenders of last resort (“white knights”), providing ready loans, albeit on premium terms, at a current time of severely restricted credit supply from other sources. Alternative sources of funds – stockholders and government bail-out – also suffer from disadvantages relating to the characteristics of their loans. Practical implications – Corporate borrowers should currently view SWFs as attractive “white knight” sources of loans when other providers are constrained. The analysis in this paper, including the experience of a major borrower, Barclays Bank, suggests that SWFs are demanding tougher terms as a result of their strong bargaining positions and historical losses, and that companies should tailor SWF loan contracts to contain maximum incentives and safeguards to produce successful results. Originality/value – This is the first paper to analyse the new role and strategies of SWFs in the credit crisis context, as well as the required response of cash-strapped companies seeking loans from them.

The usefulness of accounting information; evidence from the Egyptian market : Table of Contents

Omaima Hassan, David M. Power — Mon Oct 05 11:22:02 BST 2009

Abstract:
Purpose – The purpose of this paper is to ascertain financial analysts' views regarding the usefulness of a number of items of accounting information via a postal survey. This usefulness is explored in the context of the Egyptian capital market. In addition the usefulness of different types of information is researched, namely: historical vs forward-looking information; mandatory vs voluntary information; and quantitative vs non-quantitative information. Design/methodology/approach – This paper uses descriptive analysis to investigate the views of a sample of 23 financial analysts regarding a number of items of accounting information. Analysts' ratings are obtained via a postal questionnaire, most of which are collected by hand. Fifteen out of 23 responses are collected in person, which offer the opportunity to ask follow-up questions about the information which the analysts see as valuable. Findings – The findings indicate that different items of information are valued differently. In the context of the Egyptian market, financial analysts tend to value: mandatory disclosure more than voluntary disclosure; quantitative information more than non-quantitative information; and historic information more than forward-looking information. This type of preference reflects the information environment in Egypt, where mandatory disclosure is comprehensive and detailed based on International Accounting Standards but where compliance is an issue. Voluntary disclosure is limited and other sources of information are less common. Since mandatory information in Egypt tends to be historic and quantitative in nature, this may explain the preference for these types of disclosures. Research limitations/implications – The findings suggest that the importance of different types of information may be affected by the degree of maturity of the market and how rich the information environment is. Practical implications – The results should be useful in informing companies and market regulators about the types of information that financial analysts find useful for investment decision making and the areas of disclosure where financial analysts suggest that improvement is needed. Originality/value – This paper contributes to the literature by investigating the views of a sample of financial analysts regarding the usefulness of accounting information and different types of disclosure in the context of an emerging capital market where a dearth of studies exist.

“Looking behind the veil”: Invisible corporate intangibles, stories, structure and the contextual information content of disclosure : Table of Contents

John Holland — Mon Oct 05 11:22:02 BST 2009

Abstract:
Purpose – This paper aims to use a grounded theory approach to reveal that corporate private disclosure content has structure and this is critical in making “invisible” intangibles in corporate value creation visible to capital market participants. Design/methodology/approach – A grounded theory approach is used to develop novel empirical patterns concerning the nature of corporate disclosure content in the form of narrative. This is further developed using literature of value creation and of narrative. Findings – Structure to content is based on common underlying value creation and narrative structures, and the use of similar categories of corporate intangibles in corporate disclosure cases. It is also based on common change or response qualities of the value creation story as well as persistence in telling the core value creation story. The disclosure is a source of information per se and also creates an informed context for capital market participants to interpret the meaning of new events in a more informed way. Research limitations/implications – These insights into the structure of private disclosure content are different to the views of relevant information content implied in public disclosure means such as in financial reports or in the demands of stock exchanges for “material” or price sensitive information. They are also different to conventional academic concepts of (capital market) value relevance. Practical implications – This analysis further develops the grounded theory insights into disclosure content and could help improve new disclosure guidance by regulators. Originality/value – The insights create many new opportunities for developing theory and enhancing public disclosure content. The paper illustrates this potential by exploring new ways of measuring the value relevance of this novel form of contextual information and associated benchmarks. This connects value creation narrative to a conventional value relevance view and could stimulate new types of market event studies.