F. Vitorino Martins

Real Estate Market Risk in Bank Stock Returns: Evidence for the EU-15 Countries

In countries with highly-developed financial systems bank portfolios have high exposure, directly or indirectly, to the real estate sector. Changes in the value of real estate can have a potentially significant impact on the default risk of banks and on their profitability as a result of this high exposure to the real estate sector. This scenario is especially critical during real estate crises, when bank losses tend to increase dramatically, placing the entire financial system at risk of collapse, as it was the case in the recent international subprime crisis. This article studies the sensitivity of bank stock returns to real estate returns. The results indicate that EU-15 bank stocks are sensitive to real estate returns; there is a positive relation between bank stock returns and real estate returns after controlling for general market conditions and interest rates. In particular, small banks with greater asset exposure to the real estate sector showed to be more sensitive to changes in the real estate returns.

The Management of Working Capital and Profitability of SMEs in the Euro Area

Short-term financial management involves the management of current assets and liabilities, which directly affect an organisation’s liquidity and profitability. This study aims to examine the relationship between the operating performance and short-term financial management of small and medium-sized enterprises in Europe. Return on assets is used as a proxy for profitability and the cash conversion cycle is used as a proxy for working capital management. The analysis in this study is based on non-financial firms in 19 euro area countries, over a six-year period from 2008 to 2013. The negative and significant relationship between profitability and each of its determinants, such as average collection period, average payment period, average inventory period, cash conversion cycle and profitability, was found using the GLS and OLS methods. This means that managers may create value for shareholders through shorter collection periods, a guarantee of fast moving inventories and longer payment periods (provided this does not affect their credit risk). In addition, the governance structure of a firm affects how it reacts to external factors and influences its financial performance, for which reason the number of directors variable was included in this study in order to test this relationship. The results indicate that there is an inverse relationship between the number of director and profitability, which can be explained by the fact that a larger board of directors generates communication and decision problems. The positive relationship found between liquidity and profitability can be explained by the fact that firms use first of all the amount generated and accumulated internally before seeking external resources, especially in the case of SMEs, which have difficulties in obtaining external financing.

Different Perspectives on Internationalization Research: A Bibliometric Review

A wealth of research has addressed the internationalization of firms using different theories and conceptual perspectives. This paper examines the extant research on internationalization specifically delving into seven streams of research: Market Power, Evolutionary Model, Internalization & Transaction Cost, Eclectic Paradigm, Resource-Based View, Institutional and International New Ventures & Born Global. Methodologically we conduct a bibliometric review in six leading journals recognized for publishing International Business (IB) research, during a forty one year period, from 1970 to 2010. Using citations and co-citations analyses on a sample of 1,459 articles, we sought to better understand the internationalization approaches and how they are interconnected, by examining its growth over time, the most used approaches, the works that have had the greatest impact, and the intellectual interconnections among authors. We conclude that there is no dominant approach in International Business research, albeit the Evolutionary Model has been the most cited - in almost 26% of the extant research, specially the paper – “The internationalization process of the firm: A model of knowledge development and increasing foreign market commitment”, by Johanson and Vahlne (1977). We present a broad discussion and point out limitations and directions for future research.

Effective Tax Rate in Portugal: Determinants and Financial Reporting Impact

In academic literature, it is usual to analyze the variability of effective tax rates, because some authors try to justify the reasons for the existence of differences between these taxes and statutory ones. However, this kind of research has never been done for the Portuguese case. The objective of this study is to examine the relationship between the effective tax rate and some specific characteristics of Portuguese companies. On the other hand, in the analyzed period we can verify the change of accounting standards which happened in Portugal in 2010, that is why it is also important to evaluate the impact of these modifications on the studied relations.Therefore, the results show that some characteristics, such as leverage, capital intensity, inventory intensity and profitability are statistically significant in the estimation of effective tax rates supported by companies. On the other hand, it has been checked that, according to the mean and median equality tests done to the dependent variables, we reject the hypothesis of these measures being equals when we compare 2010 with the other years. In the case of the test of permanent structures on the level of regressions, it has been verified that it is not identical either.In conclusion, we can say that the introduction of international accounting standards might have produced accounting impacts, as fiscal ones.