Towards Enhanced Firm Investment Management
This paper discusses the tentativeness of short selling on finding company performance, finding that often short sellers adjust their positions prior to the release of a quarterly earnings statement, to effectively use their own data advantage on company investment inefficiencies. The paper goes into explaining some of the more common short selling methodologies and strategies utilized by short sellers. It also delves into explaining how a fundamental analysis of company financial statements may not necessarily be completely accurate in depicting accurate Company Performance. Lastly, the paper discusses how a fundamental analysis of company financial statements may fail due to missing or misleading information. Finally, this paper discusses two competing analyses that conclude that one or the other is correct. The choice between these analyses ultimately leads to the identification of a preferred short selling technique.
A working paper is a document prepared for a peer review purpose within a research paper format. It contains all of the ideas and results of research studies performed on a particular subject. It is released to the public for everyone to view for their educational purposes. This is essentially how bank supervision is regulated at the state level today.
When banks are taken over by a regulatory body, such as the Fed, all of their activities are subject to being supervised. Supervisors are appointed and they are responsible for ensuring that the activities of the banks are conducted in a proper and efficient manner in order to contribute to economic growth and consumer prosperity. In doing so, the supervisors are attempting to create more economic activity and consumer wealth within the economy.
Recently, there has been a debate concerning the merits of the theory of firm investment. Proponents argue that it provides the foundation for international investment policies. Additionally, they maintain that it provides a sound argument for why domestic banks are required to participate in European monetary policy. Opponents argue that it lacks credibility because many European country members already have substantial sovereign debt and would be unlikely to take on additional debt through centralised banking. Lastly, some argue that a number of the world’s largest banks have large balance sheets that would make it difficult for them to engage in fiscal policy.
Regardless of which side of the debate you fall on, this ongoing debate is important to watch. For those who feel that there is a need for increased governmental oversight, watching the supervisory architecture of banking will help them understand how to ensure the financial health of their firm. On the other hand, those who believe that increased government intervention is necessary, particularly through the European Union and the United Kingdom’s impending application of a firm investment policy, will watch for the implications of this type of policy with regards to the firm’s balance sheet. Finally, those who believe that economic stimulus package won’t be effective argue that increased government regulation of the financial system is needed to increase economic efficiency. Whether or not these arguments hold merit remains to be seen.
In addition to watching the supervisory architecture of banking, observers also need to closely examine the implications of changes in bank supervision policy. The European Financial Stability Act (FSCO), the Basel II implementation, and the FSA introducing enhanced supervisory standards are notable examples of changes to look for in the future. In the United States, this can be found in the passage of the FDCC amendments and the establishment of the Office of the Comptroller of the Currency. These measures were brought about by the government’s decision to overhaul the role of the bank and push for greater banking Union accountability. Similar measures will likely be implemented around the world as a result of the global recession. Nevertheless, effective supervisory architecture will still need to be developed to ensure that financial risks are reduced.
