Conference Issue 2017

Zagreb International Review of Economics and Business
 
 
Special Conference Issue 2017

1st International Conference on Financial Analysis

Dubrovnik, Croatia, June 01 – 03, 2016

Guest Editors: 
Silvije Orsag
Lidija Dedi
Burhan F. Yavas
 
 
ABSTRACTS
 
Impact of Foreign Direct Investment and Barriers to MNC Supply Chain Integration in Vietnam
Hamdi Bilici
Loi Ta
Briant Carcamo

Abstract: The Vietnamese economy has been progressing to become a supplier to many multinational corporations (MNC). However, barriers presently exist that prevent Vietnamese firms from fully integrating into the supply chain of these global actors. Weak FDI overflow and block trading has government officials and business executives troubled that Vietnamese firms are still on the periphery of these global supply networks. Even as MNCs operating in Vietnam import many semi-finished products from other countries, Vietnamese firms are not benefiting from the opportunities to incorporate into the supply chain because of the lack of global experience, FDI, an educated workforce and outdated facilities. Vietnamese firms must upgrade their facilities and equip their labor forces to acquire MNC contracts and find global partners who can supply financing and knowhow.
 
Keywords:  FDI theory of OLI; supply chain management; multinational company; spillover of FDI; impact of FDI
 
JEL Classification: F4, F6, F65
 
 
Towards the Estimation of an Efficient Benchmark Portfolio: The Case of Croatian Emerging Market
Denis Dolinar
Davor Zoričić
Antonija Kožul

Abstract: The fact that cap-weighted indices provide an inefficient risk-return trade-off is well known today. Various research approaches evolved suggesting alternative to cap-weighting in an effort to come up with a more efficient market index benchmark. In this paper we aim to use such an approach and focus on the Croatian capital market. We apply statistical shrinkage method suggested by Ledoit and Wolf (2004) to estimate the covariance matrix and follow the work of Amenc et al. (2011) to obtain estimates of expected returns that rely on risk-return trade-off. Empirical findings for the proposed portfolio optimization include out-of-sample and robustness testing. This way we compare the performance of the capital-weighted benchmark to the alternative and ensure that consistency is achieved in different volatility environments. Research findings do not seem to support relevant research results for the developed markets but rather complement earlier research (Zoričić et al., 2014).
 
Keywords:  efficient benchmark; cap-weighted indices; risk-return trade-off; undeveloped and illiquid markets
 
JEL Classification: G11, G12
 
 
Managers’ Support – A Key Driver behind Enterprise Risk Management Maturity
Danijela Miloš Sprčić
Antonija Kožul
Ena Pecina

Abstract: Severe consequences of the global financial crisis resulted in re-thinking the risk management processes and approaches, highlighting the need for a comprehensive risk management framework. Consequently, more and more companies are moving away from the Traditional “silo-based” Risk Management (TRM) to a more holistic approach known as Enterprise Risk Management (ERM). This paper presents results of both exploratory and empirical research. First, we develop ERM Index that measures maturity of ERM process within the company. Then, we present empirical results on the level of maturity and determinants of risk management system development in listed Croatian companies. Research indicates low levels of ERM development: even 38 per cent of analysed companies have no elements of ERM system, from which 22 per cent do not manage corporate risks at all. Except the company’s size supported by the economies of scale argument, managers’ support is the most important determinant of ERM system maturity in Croatian companies.
 
Keywords: Enterprise Risk Management; ERM index; determinants of ERM; Croatian listed companies
 
JEL Classification: G320, G340
 
 
20 Years of the Croatian Capital Market
Mihaela Grubišić Šeba

Abstract:  From 1990s to the end of 2006 there have been two stock exchanges in Croatia – an official stock exchange in Zagreb and a so-called alternative capital market in Varaždin. The Zagreb stock exchange had a dominant role in the Western Balkan region until 2008, when its market capitalisation significantly decreased because of the influence of the global financial crisis and the economic downturn of the country. This paper analyses gradual regulatory and institutional development of the Croatian capital market, emergence and strengthening of institutional investors and assets under their management, key market development indicators related to market supply and demand and investor protection mechanisms. The research presented in this paper has shown the crucial role of regulation in attracting investors and sustaining their presence in the market. It also recommends more active role of regulation and stock exchange towards the issuers and small investors to encourage constant supply of corporate securities
 
Keywords: capital market; regulation; corporate governance; investor protection; Croatia
 
JEL Classification: G38, G23
 
 
The Analysis of Corporative Reporting Designed to Enhance Corporate Governance: Evidence from the Banking Sector in Croatia
Ivana Đunđek Kokotec
Marina Klačmer Čalopa
Kristina Detelj

Abstract: The main objective of this research paper is to examine whether the practice of corporate governance (CG) measured by the CGI-Crobank® index is significant for the explanation of variations in the performance of Croatian banks measured by the return on assets, return on equity, interest margin, margin of non-interest income, operating expenses margin, and by Tobin’s Q for the observed period from 2011 to 2015. The research is made on Croatian banks that form the CGI-Crobank® index using the data and information from annual questionnaires of CG codex, primarily to ensure objectivity, standardization and comparability. The goal of the literature analysis was to show present findings in the areas of corporate reporting and its impact on CG. Results obtained in the research indicate that a well implemented practice of corporate governance measured by the CGI-Crobank® index have influence on the variations in the performance of Croatian banks measured by Tobin’s Q and financial indicators.
 
Keywords: Corporate governance; bank sector; financial indicator; Tobin’s Q; CGI-Crobank® index
 
JEL Classification: G18, G21, G30, G32, G34