Managerial Finance

The development of numerical points systems, or credit scoring systems, have become increasingly important in this country as aids in the credit screening process. Most of the initial research on these techniques has been undertaken in the US, but in the last decade the principles have been used in this country, particularly by financial institutions operating in the consumer credit field. In broad terms, numerical points systems attempt to discriminate potentially bad from potentially good credit risks and offer an alternative to a purely subjective assessment of a credit applicant. The systems are particularly relevant in the consumer credit field where most of the information needed can be obtained from a credit application form. Under the system, numerical weights are assigned to certain types of information given (e.g. occupation, income, marital status, etc.), the total of the scores then being used as a measure of payment potential: the higher the score, the more likely is the applicant to possess characteristics which indicate a prompt payment disposition. In this article, it is emphasised that the construction of a numerical points system fits into the overall credit screening process, and it is important to appreciate the principles of the latter before full use can be made of any system. The empirical research is summarised both in the US and in the UK with a view to assessing the effectiveness of the systems, and a survey amongst UK financial institutions is also summarised to evaluate the extent of the use of the techniques in the UK. Emphasis throughout has been placed on the consumer credit field but the principles can also be applied to trade credit.

Asserts that the world needs to integrate economic issues with social demands and discusses ideas on the unity of knowledge (including Islamic theories). Develops a string model of the process of unification as seen by the Koran and applies it to the Islamic financing division of a Saudi Arabian bank to show how it can produce an “interactive financial index” encompassing social well‐being, economic development and financial profitability. Claims that this could not be achieved in any other way and contrasts the Islamic approach with mainstream economic ideas. Assesses how the Islamic approach works in practice by looking at the bank’s portfolio and relating it to social well‐being and policy.

The existence of weak‐form efficiency in the equity markets of the three main Central European transition economies (the Czech Republic, Hungary, and Poland) is examined for the period July 1995 through September 2000, using weekly Investable and Comprehensive indexes developed by the International Finance Corporation. Several different approaches are used. Univariate and multivariate tests provide some evidence that stock prices in these exchanges exhibit a random walk, which constitutes evidence for weakform efficiency. This differs in some cases from studies using data for the initial years of these markets. The variance ratio test (VR) of Lo and MacKinlay (1988) yields somewhat mixed results concerning the random‐walk properties of the indexes. A modelcomparison test compares forecasts from a NAÏVE model with ARIMA and GARCH alternatives. Results from the model‐comparison approach are consistent in rejecting the random‐walk hypothesis for the three Central European equity markets.

An account is presented of part of an extensive empirical research project concerned with the role of the internal auditing function within enterprises. The main focus of this paper is upon the propensity for bias in the information flows of the budgetary control process. A model of the “traditional” budget process is modified successively to take account firstly of the presence of information bias and secondly of the function of internal auditing as a process of feedback and “counterbias”. Further discussions of the implications for the role of the internal auditor within this context together with some prognostic conclusions are then presented.

Outlines previous research on the pricing of initial public offerings (IPOs), the particular characteristics of e‐commerce firms and the ways in which internet operations differ from traditional business contexts. Uses data from a sample of 28 US business‐to‐business, internet‐based e‐commerce firms to explore the links between industry‐specific and firm‐specific variables, IPO price and subsequent share price performance. Shows generally very high initial returns (115.2 per cent for the run‐up on the first day’s trading!) but negative long‐term returns; and the pricing is significantly positively affected by firm size, commercial strategies and management experience. Finds firms with the highest first day run‐ups were not necessarily the ones with long term underperformance and concludes that investors do actually use information on firm strategy.

Building societies, as we illustrated in the Preface, occupy an important position in the British financial system. There are at present over four hundred societies although this industry is highly concentrated, with the ten largest societies (with well developed branch networks) in 1978 accounting for 66 per cent of the total assets.