Functional strategies and practices of small and medium-sized family businesses : Table of Contents

July 22, 2011, 4:22 am

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Abstract:
Purpose – The aim of this study is to determine the context of short- , medium- and long-term functional strategies of small- and middle-sized family businesses carrying on activities in different sectors, as well as to discuss the findings from the point of view of the strategic orientations required by global competition. Design/methodology/approach – The data of this research, having explorative characteristics, were gathered from the 36 owners-managers (from 111 people) who were leaders in constituting the strategies of their businesses. The survey used in the study consists of 32 items regarding management/human resource management, marketing, production, and finance functions. The data were evaluated with the descriptive and variance analyses. Findings – The paper finds that the enterprises participating in this study apply or plan to apply, in the short term, institutionalism and customer-focused strategies. However, financial problems limit the attempts for developing and growing, which creates a risk for the life cycle of the businesses which cannot grow up to the right scale in the right time. Another major concern pointed out in this study is that the enterprises whose owners/managers are the members of any commercial and social organization respond to innovations and change more rapidly. Research limitations/implications – One of the main limitations of the study is that the owner/manager perceptions were the only source of data. The lack of a measure of the efficiency level of functional strategies and practices or performance of enterprises is the second limitation. On the other hand, the small sample size does not allow generalizations to be made. Originality/value – This study evaluates the potential of strategic management of small and medium-sized family businesses

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Islamic investment behaviour : Table of Contents

July 22, 2011, 4:22 am

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Purpose – In the past decade, there has been strong growth in Islamic finance and banking across the globe, there is little empirical evidence on the impact of religiosity on financial decisions. This paper aims to address this issue. Design/methodology/approach – This paper uses an experimental design to investigate the investment behaviours of a group of Muslims. Findings – The paper finds that Islam does influence investment behaviour, however, the degree to which it does this is influenced by the degree of religiosity of the individual. In addition, evidence is found of “Western style” wealth maximisation amongst Muslim investors as well as a desire to consider sustainable investment principles in asset allocations. Research limitations/implications – These findings have implications for investors, financial advisors, and policy makers. Originality/value – The paper is original its use of the experimental design to test the impact of religiosity in the context of investment decisions by Muslims.

Intellectual property regime and the global financial crisis: lessons from Nigeria : Table of Contents

July 22, 2011, 4:22 am

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Purpose – This paper aims to point out the vital role an effective regulatory regime can play in any sector of a nation's economy. Design/methodology/approach – The paper uses the regulatory mandate of the Nigerian Copyright Commission on the Nigerian copyright-based industries as an example. Findings – The paper underscores the vital role of an effective regulatory regime in facilitating the growth, development and crisis prevention in any sector of a nation's economy. Originality/value – The paper advocates an adoption of an effective regulatory regime to prevent a reoccurrence of the global financial crisis.

Implementation of the FATF 40+9 Recommendations: A perspective from developing countries : Table of Contents

July 22, 2011, 4:22 am

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Purpose – This paper aims to examine the extent to which the Financial Action Task Force (FATF) 40+9 Recommendations have been implemented by developing countries from the Asia-Pacific region and the issues pertaining to these countries. Design/methodology/approach – The paper uses the compliance ratings from published reports of assessments/mutual evaluations for these countries between 2004 and 2010 and makes comparisons with the ratings for FATF countries for that period. Findings – These developing countries have demonstrated positive developments in addressing anti-money laundering and combating the financing of terrorism (AML/CFT) requirements and having their level of compliance evaluated through the rigorous process of assessment/mutual evaluation. Nonetheless, the general level of compliance is quite limited, not least when compared with FATF countries. This may be due to complexities of the FATF 40+9 Recommendations, challenges in prioritizing AML/CFT development amidst other national priorities and general limited capacity in these countries. An appreciation of the challenges faced by these countries is essential in the formulation and implementation of AML/CFT measures for these countries. Originality/value – This paper considers implementation of international standards for AML/CFT from the perspective of developing countries, which is an important contribution given the needs and peculiarities of these countries.

The dark side of European immigration policy : Table of Contents

July 22, 2011, 4:22 am

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Purpose – This article aims to highlight the dark side of the restrictive immigration policies, undertaken both at European and national level, paying special attention to the negative effects that these policies can cause. Design/methodology/approach – In particular, the article focuses on two of the main aims stated by these migration policies: the organization of legal immigration and the control of the illegal immigration. Findings – The paper demonstrates how the repressive instruments, today put into practice, not only have not been a solution, but they have produced destructive effects, such as: the increasing of illegal immigration and the consequential increasing of the exploitation of immigrants – making the borders between smuggling and trafficking more and more transitory – the strengthening of the more and more professionalized criminal organization and finally the enlargement of the black market's borders, of which the European single market feeds itself. Originality/value – The paper offers insights into the dark side of European immigration policy.

The EU's preventive AML/CFT policy: asymmetrical harmonisation : Table of Contents

July 22, 2011, 4:23 am

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Purpose – This article aims to consider the role of the European Union (EU) in the prevention of money laundering and to show that the EU has a lot more to win in this field of policy. Design/methodology/approach – This article is based on a literature study and a thorough analysis of the EU Directives on the prevention of money laundering. Findings – Whereas, the material norms for entities subject to regulation have been harmonised and adjusted to the risk-based approach at European level, the norms regarding the enforcement instruments have mostly been left to the Member States' legislation. As a result, there exists a “patchwork” of enforcement mechanisms throughout the EU. Research limitations/implications – This article focuses on the prevention of money laundering on the level of the EU only; no connection is made to the international or to the national level. Originality/value – This article does not provide a value judgment on the preventive rules at European level as such, but rather it offers an academic perspective on the role of the EU in the prevention of money laundering.

Arbitration of investment disputes under Iranian investment treaties : Table of Contents

July 22, 2011, 4:23 am

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Purpose – The purpose of this paper is to examine the remedies available under Iranian investment treaties for settlement of investment disputes. This includes the obligation of the Iranian Government to provide foreign investors access to international arbitration. The sensitivity of the controversial Iranian nuclear program and the imposition of economic and financial sanctions on Iran will lead to the termination of many contracts between companies from Europe and the West and Iran, therefore, a viable solution must exist to address the rights and remedies of foreign investors. This article aims to provide an insight into Iranian treaties. Design/methodology/approach – The main method was a survey of different treaties signed by Iran. Findings – The discussion revealed that there are currently more than 50 treaties signed and ratified by Iran which provide arbitration as a dispute resolution forum. There are many treaties between the member countries of the European Union which make it important for the research. Iranian treaties guarantee international law remedies to foreign companies with investment in Iran by allowing them to seek redress in an international forum. Practical implications – Iran has not signed the ICS1D Convention, meaning that the arbitration proceedings will be subject to ad hoc arbitration rules of UNCITRAL. Furthermore, ICSID rules on enforcement of the award do not apply. Therefore, the winning party must go through the Iranian courts to enforce its awards. Originality/value – The value of the paper is to government organization, international institutions and multinational companies with substantial economic interest in Iranian energy and natural resources. For the first time, the topic has been covered in a research paper. There are no articles in Iranian bilateral investment treaties (BITs) addressing dispute resolution through arbitration. This is the first piece of work that actually conducted a thorough analysis of Iranian BITs.

Citizenship: participation and exclusion in early modern Europe : Table of Contents

July 22, 2011, 4:23 am

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Purpose – The purpose of this article is to discuss the most recent results of the historiographical works on the subject “how to become a citizen” within the European continent in the early modern period (sixteenth-nineteenth centuries). Design/methodology/approach – The idea that citizenship status could not mark the difference between natives and immigrants on a geographical basis, as natives were entitled to it at various stages as well, stands out from the presentation of some case studies (the Republic of Venice, the Papal State, the Reign of Naples, France, Spain and Britain). Findings – In many contexts, citizenship was rather the political recognition of social and economic integration of somebody that already acted as a citizen within the new setting. Originality/value – The comparative perspective can lead us to some reflections, when we notice that participation in the life of the local community was often the main requirement for applying for its citizenship, at least until the spread of nation states in the nineteenth century.

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VIDEO: Cameron: UK wants strong eurozone

July 22, 2011, 4:25 am

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Prime Minister David Cameron has said it is in Britain's interests for the eurozone to "sort out its issues".

Macmillan ordered to pay £11.3m

July 22, 2011, 4:25 am

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Macmillan Publishers is ordered to pay £11.3m for "unlawful conduct" related to its education division in East and West Africa.

SEC approves rule banning Ânaked access to trading centers : Table of Contents

July 22, 2011, 4:26 am

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Purpose – This paper sets out to explain the new Securities and Exchange Commission Rule 15c3-5, which will require broker-dealers to adopt and implement risk controls to govern their provision of “direct market access” (DMA). Design/methodology/approach – The paper explains how the development and use of automated electronic trading processes and systems motivated broker-dealers to offer DMA, “sponsored access,” and “naked access.” It explains the systems of risk management controls and supervisory procedures a broker-dealer is required to maintain to manage the financial, regulatory, and other risks of sponsored access, including financial and regulatory controls and procedures. Findings – The SEC proposed the Rule to more effectively manage the financial, regulatory, and other risks, such as legal and operational risks, associated with market access. Originality/value – The paper offers practical guidance from expert broker-dealer lawyers.

PWG issues report on money market fund reform options : Table of Contents

July 22, 2011, 4:26 am

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Purpose – This paper seeks to explain the possible options detailed in the “Money Market Reform Options” report released by the President's Working Group on Financial Markets on October 21, 2010 for consideration by the Financial Stability Oversight Council (FSOC). Design/methodology/approach – The paper discusses reform options in the areas of: floating net asset values, privately sponsored emergency liquidity vehicles, mandatory redemptions in kind, insurance for money market funds (MMFs), a two-tier system providing enhanced protections for stable net asset value (“NAV”) MMFs, a two-tier system reserving stable NAV MMFs solely for institutional investors, regulating stable NAV MMFs as special purpose banks, and enhancing constraints on unregulated MMF substitutes. Findings – The Report concludes that more should be done to address systemic risks presented by MMFs and the structural vulnerabilities of MMFs to runs, and discusses various reform options for the FSOC to consider, but does not recommend any particular reform. Originality/value – The paper provides expert advice from experienced financial services lawyers.

SEC issues guidance to boards reviewing certain affiliated transactions : Table of Contents

July 22, 2011, 4:26 am

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Purpose – This paper seeks to explain recently published guidance from the Securities and Exchange Commission clarifying the responsibilities of mutual fund directors when they make the determinations required by Rule 10f-3 (permitting a fund to purchase securities from an affiliated syndicate), Rule 17a-7 (permitting a fund to engage in certain cross-trading) and Rule 17e-1 (permitting a fund to use an affiliated broker). Design/methodology/approach – The paper explains guidance that was delivered in the form of a letter to the Independent Directors Council and the Mutual Fund Directors Forum. Findings – Among other things, the Rules require that the board of a fund that relies on the Rules should undertake quarterly reviews and make certain determinations related to the potential conflicts of interest present. The guidance explains various ways in which a fund board may meet its responsibilities under the Rules, including review of each transaction, compliance officer summaries, and information from other experts. The guidance emphasizes fund boards' ultimate responsibility for making quarterly determinations required by the rules and the importance of meaningful dialogue in boards' evaluation of affiliated transactions. Originality/value – The paper provides practical guidance from experienced securities lawyers.

SEC approves sweeping changes to FINRA's regulatory reporting rules : Table of Contents

July 22, 2011, 4:26 am

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Purpose – This paper seeks to explain Financial Industry Regulatory Authority (“FINRA”) Rule 4530, which requires members to report to FINRA certain internal and external findings of violative conduct and quarterly statistical and summary customer complaint information. Design/methodology/approach – The paper explains the background and provides an overview of FINRA Rule 4530; analyzes key provisions of the Rule, including the way it differs from legacy NASD and New York Stock Exchange Reporting Rules; and discusses next steps for FINRA members. Findings – FINRA Rule 4530 requires members to promptly report findings of internal and external violations and provides interpretive guidance regarding these requirements. The new Rule imposes obligations beyond those set forth in current NASD Rule 3070, requires reporting of internal findings, and alters the now familiar materiality standard applied to NYSE Rule 351(a). Practical implications – The new Rule will require members to enhance their policies and procedures to address the reporting of internal findings to define potentially reportable violations, identify decision-makers to assess potential violations, create or modify reporting escalation procedures, and institute appropriate controls over reporting. Members may want to review their internal audit processes to reflect the new guidance regarding reporting based on internal findings of violations. Originality/value – The paper provides practical guidance from expert securities lawyers.

Corporate ownership interests hidden through cash-settled equity derivatives: impact on the companies' governance under the Italian legal framework : Table of Contents

July 22, 2011, 4:26 am

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Purpose – This paper seeks to analyze the impact on companies' governance of corporate ownership interests hidden through cash-settled equity derivatives. Design/methodology/approach – The paper outlines the definition and use of cash-settled derivatives and describes the recent proposal of the Italian financial regulator to extend disclosure obligations of significant shareholdings to positions held through cash-settled derivatives. Findings – Given the structure of Italian companies and the proven risk of evasion through cash-settled derivatives, it should be advisable to extend the concept of a major shareholding for mandatory bid purposes to this kind of instrument. Moreover, recent cases have shown that the lack of a common worldwide disclosure regime for cash-settled derivatives could result in misleading information and in turn in a lack of confidence by investors and an increase in the costs of raising capital. Practical implications – The disclosure regime to be implemented should neither completely ignore cash-settled equity derivatives nor impose excessive duties that may increase the costs of compliance. It should be empirical and concrete. Ownership disclosure is intended to improve corporate governance by enabling minority shareholders to monitor the abuse of control. Originality/value – This paper provides practical guidance from an experienced Italian securities lawyer. It explains and supports the Italian regulator's proposal to identify cases in which holdings of derivatives trigger mandatory bid obligation.

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Co-operative and competitive enforced self regulation: The role of governments, private actors and banks in corporate responsibility : Table of Contents

July 22, 2011, 4:28 am

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Purpose – The primary purpose of the paper is to demonstrate how corporate responsibility and accountability could be fostered through monitoring and the involvement of governments in the regulation of firms. Design/methodology/approach – In considering why practices which stimulate incentives for private agents to exert corporate control should be encouraged, this paper highlights criticisms attributed to government control of banks. However, the theory relating to the “helping hand” view of government is advanced as having a fundamental role in the regulation and supervision of banks. Findings – Governments have a vital role to play in corporate responsibility and regulation given the fact that banks are costly and difficult to monitor – this being principally attributed to the possibility that private agents will lack required incentives or the ability to supervise banks. Research limitations/implications – Banks are costly and difficult to monitor – this being principally attributed to the possibility that private agents will lack required incentives or the ability to supervise banks. Practical implications – The paper illustrates how structures which operate in various systems, namely, stock market economies and universal banking systems, function (and attempt) to address gaps which may arise as a result of lack of adequate mechanisms of accountability. Social implications – The paper also draws attention to the impact of asymmetric information (generally and in these systems), on levels of monitoring procedures and how conflicts of interests which could arise between banks and their shareholders, or between governments and those firms being regulated by the regulator, could be addressed. Originality/value – Through its supervision of banks, governments also assume an important role where matters related to the fostering of accountability are concerned – not only because banks may have the power to affect firm performance, but also because some private agents are not able to afford internal monitoring mechanisms.

Banking consolidation, credit crisis and asset quality in a fragile banking system: Some evidence from Nigerian data : Table of Contents

July 22, 2011, 4:28 am

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Purpose – The aim of this paper is to identify the major determinants of bank asset quality in an era of regulation-induced industry consolidation, using the Nigerian case to demonstrate how consolidation can heighten incidences of non-performing credits in a fragile banking environment. Design/methodology/approach – The paper makes use of panel data from 19 out of a total of 25 banks operating in Nigeria. A multivariate constant coefficient regression model is adopted as the estimation technique. The dependent variable in the model is quality of bank assets, proxied as the proportion of non-performing loans (NPL) to total loans; while operating efficiency, profitability, asset liquidity, loans to deposits ratio, predictability of depositors' behaviour, size of bank capital, and board skill constitute the exogenous variables. Findings – The study reveals that deterioration in asset quality and increased credit crisis in the Nigerian banking industry between the periods 2004 and 2008 were exacerbated by the inability of banks to optimally use their huge asset capacity to enhance their earnings profiles. It shows that excess liquidity syndrome and relatively huge capital bases fueled reckless lending by banks; and that increase in the level of unsecured credits in banks' portfolios ironically helped to mitigate the level of NPL within the studied period. Research limitations/implications – The findings here should be interpreted with caution. The reason is because of the relatively fewer number of observations and the likely biases associated with the use of pooled regression approach. Originality/value – This paper is one of the first to investigate the specific impact of banking consolidation on the quality of bank assets in an underdeveloped financial system. Among such countries facing such challenge, the Nigerian case is unique considering that the 2004/2005 banking consolidation in the country was recorded as the largest in the history of banking in Africa. The findings here make clearer the policy/practical implications of using regulation-induced consolidation to pursue the goal of increased credit flows in a less developed financial system.

Global financial architecture, global imbalances and the future of the dollar in a post-crisis world : Table of Contents

July 22, 2011, 4:28 am

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Purpose – Financial globalization and global imbalances are two facets of the same phenomenon, which has resulted in the worst global economic and financial crisis since the Great Depression. The purpose of this paper is to analyze the complex interaction of several mutually reinforcing trends and factors – the global monetary easing of 2001-2004, financial innovation, regulatory failure, in particular in the USA and the UK, US fiscal indiscipline and Chinese currency manipulation – that contributed to the global financial crisis. The key to a return to global financial buoyancy will be the coordinated resolution of the global imbalances over the medium term, as well as the establishment of a strong global financial regulatory framework focusing on both macro- and micro-financial risks. Design/methodology/approach – In the paper, the author analyzes the role of the interaction of financial innovation, regulatory and global imbalances in the creation of the real estate bubble, shadow banking and the eventual collpase of what the author dubbed the Banking 2.0 structure (1980s). Findings – The main findings are that these factors contributed to a flattening of the yield curve in 2004-2006 despite the tightening of monetary policy and growing US fiscal deficits. Moreover, while the US dollar is on a long-term weakening trend, the lack of alternatives means that it will maintain its role as a reserve currency. Originality/value – This paper focuses on the role of the global imbalances in triggering the financial crisis and shaping the role of the dollar in the post-crisis world.

The notion of stewardship from a company law perspective: Re-defined and re-assessed in light of the recent financial crisis? : Table of Contents

July 22, 2011, 4:29 am

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Purpose – The Stewardship Code, the first of its kind for the Financial Reporting Council, seeks to encourage better dialogue between shareholders and company boards. Given the UK market's role as a governance paragon, the code principles will be critical to practices of good stewardship taking root globally. But this new Code raises concerns, for example, as to how to treat non-UK investors who collectively now hold upwards of 40 percent of the country's equity market. Would they voluntarily adhere to the code, and, if not, how relevant or effective would the code be? The purpose of this paper is to shed light on these topical questions. Design/methodology/approach – The paper focuses on stewardship as an important criterion for assessing the performance of larger shareholders (i.e. institutional shareholders). Section 2 explains the concept of “stewardship”. It also outlines its growing importance. Section 3 introduces the Stewardship Code, tracks back its genesis, focusing, in particular, on the underlying themes and the major principles and guidance in the Code. Section 5 then critically assess the Code, looking in particular at major possible obstacles. Finally, implications from the preceding discussion are drawn in Section 6. Findings – Section 4 reveals a hidden truth (the “stewardship spectrum”), i.e. in practice, companies operate in an ever-changing business world, a more rapidly changing business practice with more pressures and complexity and with more diverse “players” and conflicting interests at play. It is submitted that this hidden truth effectively poses a challenge to the success of the Code. Originality/value – This paper is geared towards providing the reader with critical tools to assess the likely impact of the Code.

The aftermath of the financial crisis: Poor compliance and new risks for the integrity of the financial sector : Table of Contents

July 22, 2011, 4:29 am

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Purpose – The purpose of this paper is to evaluate the international community efforts through the OECD and the Financial Action Task Force (FATF) in confronting tax evasion and money laundering (ML). Design/methodology/approach – The paper is based on the confrontation of OECD's and FAFT's results with data produced by the World Bank and Transparency International. Findings – The G20 has speeded up the fight against tax evasion. There is no dilemma between confronting tax evasion or organized crime/terrorist ML but a potential crowding out effect and a risk of facade compliance. Corruption and poor governance have regional aspects but generate money for global laundering. The OECD is impressive in countering tax evasion. Its listing is not universal and gives satisfaction to jurisdictions having bad corruption/governance indicators. The FATF's record is striking but governance remains an issue as well as fair cooperation, and the ML and terrorist financing (TF) threat is evolving. New risks include tax evasion know-how, facade compliance, rising bad banks and financial centres in poorly governed jurisdictions. There is a destabilizing effect in the competition and linkage between weakly and highly compliant institutions and jurisdictions. The misuse of the financial sector has a bright future as long as poor governance continues to affect jurisdictions. Practical implications – The paper is a call to practitioners, professionals and policy makers for keeping the momentum on ML and taking into account governance indicators. Originality/value – The paper puts a parallel between the actions of the international community on tax evasion and ML and confronts official results with relevant assessments on corruption and governance.