International Research Journal of Finance and Economics
 Issue 118
 Jan, 2014
Research Assessment of Anna University during 1979 – 2013: A Scientometric Study
R. Balasubramani, P. Baskaran and J. Venkatesh
This paper reviews the research contribution of the Anna University in period of publication output. The study period is taken from during the year 1979 to 2013. Data was analyzed various subject fields contributed by staff and research scholars of university to published in science citation indexed (SCI) journals, the Scopus citation database has been used to retrieve the publications. Whole study period the highest doubling time (DT) was found in the year 2003. The author Ramasamy P has been published 487 (5.96%) articles and stands in first place. Total 8084 papers were collected from 119892 citations.
Keywords: Publication, relative growth rate, institution, subject, journal
Market Timing and Capital Structure
Rim El Khoury
This paper revisits the determinants of the firm’s capital structure. The main focus is on ‘the market timing theory’ according to which the current level of capital structure is the cumulative outcome of past attempts to ‘time the market’ (Baker and Wurgler, 2002) and its impact on the capital structure. In this paper, the impact of mispricing on the capital structure is tested the short run and in the long run using a sample of US firms from 1993-2006 and insider trade as a good proxy of misvaluation, By controlling for a wide range of determinants of capital structure and by using several methodologies (leverage changes around securities choices, OLS regressions for the effect of past securities issues on leverage, OLS for the effect of historical market conditions on leverage, and OLS regression with cumulative change in leverage as the dependent variable, and partial adjustment regressions (SYS-GMM)), the results show that overvalued firms issue substantially more equity and lower their leverage ratios by more than undervalued firms. However, in contrast to Baker and Wurgler (2002), the negative impact of overvaluation on leverage ratio is not persistent. The effect of past securities issues on capital structure is due to that fact that firms slowly adjust toward their target levels. Overall, although equity issues are timed to period of stock overvaluation, they have no significant lasting effect on capital structure. These results suggest that firms can engage in equity market timing even if they have target debt ratios.
Keywords: Capital Structure, Market Timing, Mispricing, Equity Issues, Equity Repurchases
Does Total Petroleum Consumption Trigger Inflation: An Application for UpperMiddle Countries
Meliha Ener, Cüneyt Kiliç and Feyza Arica
The linkage between petroleum consumption and inflation has a special importance in designing the discretionary macroeconomic policies for stabilization purposes. The magnitude of the direction of this relationship between the series gives important signal in policy implementation process with respect to assess the long-run course of the energy policies to economic agents and policy makers. From this point of view, this study investigates the long-run relationship between total petroleum consumption and the inflation rate for 21 upper middle income countries for the period 1980 to 2011 by using the advanced Panel CUSUM cointegration test extended by Westerlund (2005). The empirical result showed a significant positive long-run relationship between petroleum consumption and inflation. This implies that petroleum consumption is an important factor in occurrence of inflation in the selected countries.
Keywords: Energy Consumption, Consumer Price Index, Panel Co-Integration.
JEL Classification Codes:
Q43, E31, C33.
Housing Finance in Ghana: Determinants of Mortgage Demand
Oware Kofi Mintah and Nkansah Eric
Housing is a basic human need. It underlies human existence by providing shelter and by enhancing social practices and the organization of families. The demand for housing has far exceeded the supply of housing and has resulted in inadequate housing conditions. The aim of the study was to ascertain the factors that influence housing acquisition through mortgage finance in Ghana. In addition to the above, this paper had other objective to understand the current market of mortgage finance and also evaluate the challenges faced by mortgagee. In this light, a combination of quantitative and qualitative approach was adopted in undertaking this study. Further, the study employed an exploratory and case study strategy using questionnaires and interviews as well as documentary reviews. The case study area was the Kumasi and Accra Metropolis of Ghana with a sample size of 200 with an actual responses being 120 representing 60 percent. The results of the study showed that many people are interested in acquiring or using mortgage to further their dream of house ownership. This interest is influenced by certain factors including their savings, place of housing and land disputes. The results showed that Place of Housing had a strong positive relationship with the demand for mortgage finance. However, for both active and potential mortgagees, this desire is also discouraged by certain challenges such as the terms of repayment, collateral requirements, documentation requirement, and ability to pay and worth of monthly income.
Keywords: Mortgage Finance, Multiple Regression, Challenges of Mortgage Finance.
The Effect of Credit Rating Changes on Banks Stock Returns: Evidence from the GCC Markets
Mahmoud Abdulbaki
This paper presents empirical evidence concerning the effect of the announcement of credit rating change on banks stock returns in the Gulf Corporation Council countries (GCC). These changes occurred during the prosperity period from 2005 through 2006 and during rescission period from 2007 through 2010. The study analyzed the financial data of nine GCC banks, whose credit ratings were upgraded, downgraded or watched. Data consist of banks daily stock closing price, maximum, minimum and index price, for 157 trading days. The empirical evidence revealed that except for Oman, upgrade and downgrade announcements did not have any significant impacts on banks stock price and volatility. It also indicates that there was a significant effect on volatility in the case of outlook.
Keywords: Financial institutions, stock returns, credit rating, volatility, announcements, event study, GCC markets
JEL Classification Codes: G14, G21, G24, G28.
Seasonal Anomalies in Indian Stock Markets
Anvita Sharma and Vishal Deo
This paper primarily studies the possible existence of the January Effect or the Turn-Of-The-Year Effect in the Indian stock markets and the study proceeds on two propositions. First, if the January anomaly is ascribed to the tax-related selling, it should be clearly evident in the month of April in the Indian context. Second, if the phenomenon is due to some other reason then it should make itself visible in the month of January in Indian market given its interrelationship with international markets.This study also explores the chances of other common seasonal anomalies discrediting the efficient market hypothesis in the Indian market viz., Other January Effect and Beginning of the month and End of the month effect. This study has used CNX 500, S&P CNX Nifty, CNX Nifty Junior, CNX mid cap and CNX small cap indices of National Stock Exchange of India (NSE). Statistical techniques like dummy variable regression analysis, ARIMA modeling, parametric and non-parametric tests, etc. have been used to fulfill the objective of the study. The findings of the study exhibit a significantly pronounced April Effect in CNX smallcap and CNX midcap indices, with relatively much lower return in March (although statistically not significant).These findings are consistent with the tax-loss-selling hypothesis. An interesting finding of the study, which is apparently unique, is the presence of statistically significant and strongly positive December effect in all the studied indices.
Keywords: January Effect, Turn-Of-The-Year Effect, Other January Effect, Seasonality in Stock Returns, Efficient Market Hypothesis, Tax Loss Selling Hypothesis, ARIMA, ARCH.
Liquidity Determinants of Moroccan Banking Industry
KFerrouhi El Mehdi and Lehadiri Abderrassoul
This paper analyzes the behavior of Moroccan bank’s liquidity during the period 2001 – 2012. The research aims to identify the determinants of Moroccan bank’s liquidity. We first evaluate Moroccan banks’ liquidity positions through different liquidity ratios to determine the effects of financial crisis on bank’s liquidity. We then highlight the effect of banks’ size on banks’ liquidity. Finally, we identify determinants of Moroccan bank’s liquidity using panel data regression. From results obtained, we can conclude that liquidity has decreased during the last decade. This decline has increased since 2007 with the financial crisis. We also conclude that banks’ size is a determinant of banks’ liquidity since liquidity is correlated with size of banks. Large banks are more liquid than small banks. Results show that in Morocco, liquidity is mainly determined by eleven 11 determinants: size of banks, share of own bank’s capital of the bank's total assets, external funding to total liabilities, return on assets, foreign direct investment, monetary aggregate M3, foreign assets, growth rate of gross domestic product, public deficit, inflation ratio and the effects of financial crisis. Thus, liquidity of Moroccan banking industry is positively correlated with bank’s size, share of own bank’s capital of the bank's total assets, external funding to total liabilities, monetary aggregate M3, foreign assets, foreign direct investment and negatively correlated with return on assets, inflation rate, growth rate of gross domestic product, public deficit and financial crisis. However, bank’s return on equity, equity to total assets and unemployment rate have no impact on Moroccan bank’s liquidity.
The Relationship between Appraised Company Valuesand Future Stock Prices in the International Banking Sector
Andras Takacs
This study investigates how appraised (per share) company values can predict future stock prices in the international banking sector. Four regression models are designed in which share values based on different methods (net asset value, discounted cash flow, discounted earnings and economic value added) are used as independent variables and the average stock price realized one year later as a dependent variable. A sample of 60 company-years is examined, containing data of the 12 largest global banks for the period 2008-2012. In order to eliminate the effect of years 2008 and 2009, the peak of the global financial crisis, an alternative ‘non-crisis’ sample was created by excluding these two years. Results indicate that discounted earnings and the economic value added are reliable predictors of the future stock price, both in the original and in the non-crisis sample. The explanatory power of economic value added was 28% in both samples, whilst that of discounted earnings increased from 28% to 64% by ignoring the two crisis-years. Net asset value also emerged as a good predictor (but only in the non-crisis sample) whilst no significant relationship was found between the discounted cash flow-based value and the future stock price. The results obtained add new industry-specific findings to the current literature and can also serve as a guide for management in selecting the performance measures to be managed to improve the stock market position of the company.
Keywords: Financial Performance Measure, Net Asset Value, Discounted Cash Flow, Discounted Earnings, Economic Value Added, Explanatory Power, Banking Sector
Practical Issues in the Design of Banking Regulation and Supervisionin Developing Countries
Giseok Nam
The strengthening of banking structure through prudential regulation and supervision is one of the essential steps to restore the financial stability in developing economies. There are many different ways to provide prudential banking supervision such as restrictions on asset holdings and activities; separation of the banking and other financial industries like securities, insurance, or real estate; capital requirements; disclosure requirements; bank examination and so on. I take up the two important issues for prudential supervision, capital adequacy requirements and banking activities restrictions, to describe how difficult or feasible to implement these measures in the face of the existing institutional rigidities and political obstacles confronting developing economies.
Keywords: Banking Regulation, Banking Supervision, Developing Country
JEL Classification Codes: G21, G28
Investigating Calendar Influence in the Karachi Stock Exchange
Anwar Halari
This paper examines the influence of the Gregorian and the Islamic calendar in explaining any variance in the share returns of the Karachi Stock Exchange (KSE). In addition to the calendar influence, this study sought to uncover whether any variation in share returns earned by the equities from the KSE were related to the size of the firms, the sector in which the firm was located or a particular year from the sample period. This paper reports the results of quantitative analysis based on the daily share price data for 106 companies listed on the KSE over the 17-year period from 1995 to 2011. The results indicate that investing on a sectorial or size basis is less effective than allocating the funds to firms in different months of calendar. More specifically, the analysis revealed that investors may benefit more from aligning their portfolios according to the Gregorian calendar months, and the patterns attached to it rather than the Islamic calendar months since the latter is less influential in explaining the returns of the KSE. Furthermore, the study highlighted that returns earned by equities in the KSE vary significantly from year-to-year; indicating the volatile nature of the KSE market.
Keywords: Calendar anomalies; efficient market; Karachi Stock Exchange (KSE); seasonality; stock returns.
JEL Classification Codes: C12; G10; G11; G14
Analyzing the Relationship between Economic Value Added and Accounting Measures with Share Market Value (MV) in Tehran Stock Exchange (TSE)
Habibollah Nakhaei, Nik Intan Norhan Bnti Hamid and Melati Bnti Ahmad Annuar
The purpose of this study is to examine the relationship between economic value added (EVA), return on assets (ROA), return on equity (ROE), net income (NI), and earning per share (EPS) with share market value (MV) in Tehran Stock Exchange (TSE). The sample involves 87 non-financial companies listed in Tehran Stock Exchange (TSE) over the period 2004–2008. Single and multiple regression methods were employed to analysis the scondary data. The results indicated there are meaningful correlation between EVA, ROE, NI, and EPS with MV, but there is not meaningful association between ROA and MV.
Keywords: Economic value added, return on assets, return on equity, earning per share, net income, share market value
Corporate Governance and Capital Structure Evidence from New Zealand-Listed Firms
Fitriya Fauzi, Abdul Basyith, Tri Widyastuti and Choiriyah Choiriyah
This paper investigates corporate governance mechanism and capital structure determinants of New Zealand-listed firms. Using a balanced-panel of 79 New Zealand-listed firms, this study employs a balanced panel method using dynamic-panel Instrumental Variable-Generalised Methods of Moments (IV-GMM) for capital structure determinants as it corrects heteroskedasticity and endogeneity problems which might result in an unbiased and inconsistent estimation. Meanwhile, the Generalised Least Square (GLS) is employed in determining the impact of corporate governance mechanism on capital structure. All variables apart from non-debt tax shields and profitability exhibit a significant impact on total debt. Overall, these variables confirm the trade-off theory even though the coefficient for non-debt tax shield confirms the pecking-order theory. While the GLS regression reveals that all corporate governance variables exhibit a significant impact in determining the capital structure.
Keywords: Corporate governance, capital structure, dynamic-panel IV-GMM, GLS, New Zealand-listed firms.
Does Corporate Governance and Corporate Investment Affect Value Creation? A Comparative Study of Shariah Compliant and Non-Shariah Compliant Companies
Hamdouni Amina
There is an increase attention towards the needs for good corporate governance which leads to value creation. Hence, this study attempts to examine whether good corporate governance mechanisms and corporate investment may lead to a better performance. While corporate governance generally affects firm value creation, however, it could also entail different consequences for corporate investment. The investment problem can be attributed to the firms' governance structures, as the agency theory predicts. Most prior research focuses on performance consequences of investment policy or governance structure. These studies do not examine whether a direct relation exists between governance structure and investment policy. The main objective of this study is to examine the relationship between corporate governance mechanisms and corporate investment towards value creation. The first objective of this research is to provide empirical evidence on the direct effect of corporate governance, corporate investment and Shariah/Non-Shariah compliant companies on value creation. The second objective is to test the impact of ownership structure (ownership concentration and managerial ownership), board structure (board size, Board independence and Chairman-CEO duality), Free Cash Flow, debt and corporate investment on value creation and simultaneously the impact of corporate governance mechanisms on corporate investment to determine the indirect effect of these mechanisms. Applying the Shariah screening tests, we identify two sub-samples that represent distinct companies for Shariah compliant criteria: 308 firm-year observations in Shariah compliant group and 88 firm-year observations in Non-Shariah compliant group. The third objective is to determine how corporate governance improvements affect value creation’ sensitivity to investment. This study use a panel dataset of non-financial firms listed on Saudi Arabia Stock Exchange between the years of 2007 and 2010. Based on a panel of 366 firm year observations of 99 Saudi firms, we provide a comparison between Shariah compliant firms and Non-Shariah compliant firms as regards corporate investment and corporate governance. The preliminary result indicate that investment affect positively value creation in the first model when analyzing the direct effect of these mechanisms. Ownership structure (ownership concentration and managerial ownership), board structure (board size, Board independence and Chairman-CEO duality), Free Cash Flow and debt haven’t a direct effect on value creation. The secondary important result is concerning the interaction between investment and ownership concentration. For all firms, for Shariah compliant firms and Non-Shariah compliant firms, they are complementary mechanisms. The positive relationship supports the hypothesis that ownership concentration affect investment and then ownership concentration and investment are two complementary mechanisms to discipline managers.. Overall, the results of this study may be surmised to suggest that Ownership concentration affects directly and positively corporate investment and affect indirectly and positively value creation. The thirdly result indicate that the improvements in managerial ownership affect the value creation through investment. This improvement has reduced the importance of value creation. This is support the substitute hypothesis for all firms and for Shariah compliant firms. For Shariah compliant firms, the corporate governance improvements through ownership concentration affect value creation through investment. However, for Non-Shariah compliant firms, the corporate governance improvements through ownership concentration do not affect value creation through investment. The interactions of investment with members' number that composes the board, the separation in the functions of chairman and of CEO and the independent members that compose the board are positive and significant for all firms and for Shariah compliant firms. For Non-Shariah compliant firms, the only significant variable is members’ number that composes the board. These significant coefficients will imply that the corporate governance improvements through members' number, the separation in the functions of chairman and of CEO and the independent members that compose the board affect value creation through investment. The coefficients are positive when we choose all Saudi Arabia Firms and Shariah compliant firms and insignificant only when we select Non- Shariah compliant firms.
Keywords: Corporate Investment, Corporate Governance, Value creation, Shariah Compliant and Non-Shariah Compliant Companies.
Surveying Relative Improvement of Accounting Information Systems
Sadegh Alboali
Having accounting information systems with sufficient and effective capabilities in commercial and noncommercial units to accelerate of useful and related data acquisition is an inevitable necessity. In this study about obstacles of accounting information system developments of production firms of Khuzestan province, some ways for relatively improvement is presented. The current study is a surveying type and accordingly a questionnaire with 16 questions is sent manually to managers and financial professionals of 90 sample companies out of 578 companies and finally just the data that received from 80 companies used. In this research for theories testing, the data was used by application of SPSS software and Z and K square statistic method at first. Then, for re-emphasizing on acceptance or deny probability of each theory, the P values of each theory was calculated by MINITAN software. Generally, research results show that improvement of accounting information systems requires reforms and changes in cultural, technical, educational areas, which complete each other. In the other hand, one accounting information system can be useful when it is always used based on time condition in the way of continuous reform and improvement.
Keywords: Accounting information system, organizational culture, software and hardware, system training course.
Model with Cycles for Refinancing Individual Lending in Microcredit
Rajae Aboulaich, Mohammed Kaicer and Abderrahmane Habbal
This work proposes a new model for an optimal refinancing of individual lending contract in microcredit, in view of strategic default. The aim is to minimize the risk of no repayment related to this contract and to maximize the borrower’s welfare allowing him to have a financial and technical autonomy, and to be Self Risk Manager. The considered model permits to compute the most important parameters of the contract.
Keywords: Individual lending, Strategic default, Modeling, Risk of no- repayment, Cycles of refinancing, Self risk manager.