International Research Journal of Finance and Economics
 Issue 128 November, 2014
 
 
Risk Adjustment, Reversal Fear, and Momentum in the China Stock Market
7-13
Chih-Cheng Yeh

Abstract:
Prospect theory indicates that people have different risk attitudes when they are faced with gains and losses. This paper tries to judge the relative risk attitudes of bullish and investors with the tolerable reversal fear of investors in gains. I find that when faced with gains, and compared with bearish investors, bullish investors have positive attitude in the China stock market. Further, there is larger and larger difference when gains increase. In addition, their respective sensitivity is not symmetric, which results in that in the momentum strategy, if the value of reversal fear of winner group is higher than that of loser group, there are significant negative returns, leading to contrarian. If the value of reversal fear of winner group is lower than that of loser group, there are significant positive returns, leading to momentum.
Keywords: : reversal fear; momentum; contrarian; risk; adjustment
JEL Classification: C33; G11; G14
 
 
Using Probit Model To Measure Corporate Credit Risk At Vietnamese Commercial Banks
14-25
Nguyen Thi Canh and Nguyen Dinh Thien

Abstract:
The paper applies Probit model and Discriminant Analysis to measure corporate credit risk at Vietnamese commercial banks. The analysis employs data of 225 corporate clients of An Binh Commercial Bank from their 2011-2013 financial reports. The findings show that the determinants of bankruptcy probability are Cash Ratio, Total debt/Total assets, Short-term debt/Total debt, Earnings after tax/Equity, Current assets/Total assets. Among them, cash ratio has largest impact on corporate credit risk. Corporate risk reduces by 9.7% if its cash ratio raises by 1%. The most risky industry is Heavy industry with average credit risk of 26.75%. Using the study’s forecast of credit risk probability expected loss of the sample will be 7.86 thousands of billions VND.
Keywords: credit risk, Probit model, Discriminant Analysis, corporate customers
 
 
The Relationship between Corporate Governance and Profitability in Jordanian Insurance Companies
26-40
Ali Sulieman Al-Shatti

Abstract:
This study seeks at investigating the relationship between corporate governance and theJordanian insurance companies during the time period (2005-2012), twenty six insurance companies have been chosen to express on the whole Jordanian insurance companies. Three mathematical models have been designed to measure this relationship. Based on the research findings, the researcher concluded that, there is a relationship between corporate governance and profitability in the Jordanian insurance companies measured by ROA, ROE and EPS. This research indicates that Boards' Jordanian citizenship, Board compensation and Firm size contribute in increasing firms' performance, the outcomes from this study indicate that board’s compensation will positively contribute to firms’ performance. As a result, it is necessary for insurance companies to consider an appropriate and competitive compensation level of board’s members. The researcher further concludes that the corporate governance indicators considered in this research are important variables in explaining profitability in Jordanian insurance companies. Based on findings from the empirical analysis, the study offers the following recommendations, through which they can work to improve corporate governance and to have an effective role in achieving profitability, and support growth, as follows: Jordanian insurance companies should take into consideration, the indicators of Boards' citizenship, Board compensation, Firm size, and financial leveragethat were found significant in determining corporate governance.
This research focused on the relationship between corporate governance and profitability for the Jordanian insurance companies. It would be worthwhile to conduct further researches based on companies in other sectors and compare the results. Furthermore, increasing the research time period, from (2005-2012) to a longer period (2000- 2013), may provide interesting results for investigation.
Keywords: Corporate Governance, Financial Performance, Board of Directors, ROA, ROE, EPS.
 
 
Impacts of Agricultural Development Programme (ADP) on Rural Dwellers in Nigeria: A Study of Isan-Ekiti
41-55
Dare Ojo, Omonijo, Olumuyiwa Akinrole, Oludayo, Sunday Oluwadare Wright, Toluwase and Onyekwere Oliver Chizaram, Uche

Abstract:
This study investigatedthe impact of Agricultural Development Programmeson rural dwellers in Nigeria, using the people of Isan-Ekiti, in Oye Local Government Area of Ekiti-State as case study. Hence the study examined if ADPs have significantly: (i)propelled improved seeds for the production of basic food crops in Isan-Ekiti, (ii)resulted in increase in the provision of pesticides for farmers for food production in Isan-Ekiti, (iii)propel the establishment of new infrastructural facilities in Isan-Ekiti, (iv) resulted in the increase in the provision of fertilizer for farmers for the provision of food crops in Isan-Ekiti, (v)propelled the accessibility of famers to credit facilities in Isan-Ekiti, for the provision of food crops. Questionnaire was used to collect information from 773 respondents while ANOVA was used to test five hypotheses formulated for the study. The result revealed that.The analysis of the result shows that all variables of the Agricultural development programmes inform of establishment of new infrastructures in IsanEkiti, provision of improved seed for farmers, increase provision of fertilizers to farmers and increased provision of pesticides to farmers all indicate a significant influence on increase food stuff production in Isan –Ekiti state except for increases access of farmers to credit facilities in the area. This further implies that increases in establishment of new infrastructures in IsanEkiti, provision of improved seed for farmers, increase provision of fertilizers to farmers and increased provision of pesticides to farmers will further significantly increase food stuff production particularly in IsanEkiti and in Nigeria generally.
 
 
The Effect of 2008 Global Financial Crisis on Financial Ratios in Turkish Banking Sector
56-64
Pinar Avci, Engin Demirel and Ahmet Atakisi

Abstract:
The global financial crisis in 2008 affected the financial sector in the world negatively. Because of this financial recession some financial institutions went bankruptcy, some were sold or taken over and some were obliged to merge. In this study, using panel data analysis it is presented how the profitability ratios of the banks, which are the members of Istanbul Stock Exchange (ISE), were affected before and after the global financial crisis in 2008. For studying financial ratios profitability the banks, Net Profit (Loss)/ Total Assets ratio, Net Profit (Loss)/ Shareholders Equity ratio, Pretax profit (Loss)/ Total Assets ratio are tested according to the different selected financial ratios. Financial crisis change the financial causes on profitability ratios and that trigger ratios that defined as in depended variables are changed before and after 4 years period of 2008 financial crises. Only Net Interest Income after Special Provisions, Net Non-Interest Income and Other Operating charges remain as unchanged financial ratio as independent variables on profitability at different time intervals.
Keywords: ISE, Bank, 2008 Global Financial Crisis, Financial Ratios, Panel Data Analysis
JEL Classification Codes: G01, G21
 
 
Analysis of the Relation between Illustrative and Informational Package Elements of Saffron with the Purchase Behavior of Consumers and the Effect of such a Relation on Development and Promotion of Saffron Exports
65-84
Akbar Hoshyar, Hossein Morid Sadat and Mohammad Reza Aslani

Abstract:
Nowadays, because of high quantity of exported goods, competition in exports section is of special importance for all the countries throughout the world, and all try to offer their goods on a desirable basis, in various ways.In general, export of all kinds of goods requires good and attractive packing in accordance with the international standards, and each factor which may cause such packing to be performed in the best manner, may cause the goods to be successfully exported in the international market. Saffron is one of the most important export product of Iran, and every year a noteworthy amount of foreign exchange would be entered into the country through its production, cultivation and export, but, in spite of the share of Iran in production, cultivation and export of saffron, such a product plays no part in the international commerce. Therefore, the present research is performed with the purpose of indicating the effect of the illustrative elements of packing (color, shape, size and material) and the informational elements (presentation of the information and the technologies applied in packing) on the qualitative development of the export of saffron.From the point of view of target, the present research is classified as an applied research, and from the point of view of method, this research is classified as descriptive- survey research, with a population of 67 persons of the specialists and experts of Customs Department, Commercial Department and Agricultural Department and also Standard Department (case study: Hormozgan Province), and the data classified through the main tool (questionnaire) were analyzed and examined through SPSS software at the assurance level of 95%. As the hypothesis variants are of qualitative kind, in order to study on the hypothesis, Chi- square Test was applied. Research results indicate that in development of the export of Saffron, paying attention to the illustrative elements and also information elements of its packing might be valuable.
Keywords: Illustrative Elements of Packing, Informational Elements of Packing, Packing, Saffron, Exports, Qualitative Development and Customer’s Satisfaction
 
 
Criminal Activities and Rule of Law before and after the 25 of January Egyptian Revolution
85-97
Marwa Biltagy

Abstract:
The weakness of rule of law was a fundamental reason for the Egyptian revolution in 2011. The main objectives of this paper are to analyze the aspects of absence of rule of law before the January 25 revolution and the situation of rule of law after the Egyptian revolution and to provide an economic analysis of the concept of criminal activities. The methodology of this paper is based on studying and analyzing the topic of criminal acts and rule of law before and after the Egyptian revolution by clarifying the concepts, identifying the indicators of the rule of law in Egypt, explaining the incidence of criminal acts and its different types and shedding light on the framework of the decision-making process of committing any criminal activity. The results ascertain that, a committee of constitutional and legal specialists and independent human rights experts should be tasked with conducting a review of existing legislation, particularly laws governing the judiciary, trade unions, civic work, media and press freedoms, and electoral laws. When drafting penalizing laws, the legislative authority is responsible for balancing the harm resulting from the crime with the penalty.
Keywords: Rule of Law; Legislation; Penalizing Laws; Crime; Egyptian Revolutions; Egypt
JEL Classification: K10; K41; K42
 
 
Interest Rate Policy and Bank Risk: The Role of Financial Innovation
98-114
Ping-Lun Tseng, Yeong-Yuh Chiang and Hsing-Hua Chang

Abstract:
A cut in policy interest rates decreases the attractiveness of safe assets relative to risky assets, and banks will increase holdings of risky assets and take more liquidity risk. Financial innovation such as the repo market and asset-backed commercial paper allows banks to post risky assets as collateral to obtain funds when they need liquidity. Furthermore, the funds raised through the repo market and asset-backed commercial paper are tightly linked to the policy interest rate. We find that such financial innovation reinforces the effect of interest rate policy on banks’ willingness to hold risky assets. Furthermore, when the efficiency of transforming risky assets into liquidity induced by financial innovation is high, banks prefer using risky assets to fight liquidity shock. Instead, banks’ liquidity risk is increasing with interest rate policy.
Keywords: Interest rate policy, Financial innovation, Liquidity risk, Lending channel
JEL Codes: E58, G01, G20, G21
 
 
Corporate Social Responsibility of Islamic Financial Institutions: the Case of GCC Countries
115-128
Abdolvahid Mohammadi and Ghassan H. Mardini

Abstract:
During the last three decades, Corporate Social Responsibility (CSR) has grown significantly both in practice and academic fronts (Hassan and Latiff, 2009; Hassan and Harahap, 2010). However, according to Naylor (1999) CSR is defined as “the obligation of the managers to choose and act in ways that benefit both the interests of the organization and those of the society as a whole” (p.8). The core principle of Islamic Corporate Social Responsibility drives from the Holy Quran, where it stated the significant of social justice, paying Zakat (religion tax), Qardul Hassan, engagement only in permissible activities and the concept of Brotherhood and Sisterhood (Farook, 2007; Hassan and Latiff, 2009). The main purpose of this research is to examine CSR activities of IFIs in the Gulf Corporation Council (GCC) countries and its disclosure. This in turn, leads to employ a Disclosure Index (DI) methodology to investigate the phenomena that being addressed. The DI includes 9 categories and 91 items. The average CSRD of all IFIs in the sample in 2010 was 0.50, however, in the next two years (2011 and 2012) reached to 0.53. The dimension of GG has the highest CSRD by 0.60; the second and the third highest closely goes for the IV and SSB categories by 0.59 and 0.58. Whereas the dimensions of community, others and Charity and Zakah have the lowest rate of disclosure by 0.33, 0.43 and 0.48 respectively.
Keywords: Corporate Social Responsibility, Islamic Financial Institutions, GCC, Islam
 
 
Liquidity Risk, Default Risk and Stock Returns
129-138
Shih-Ping Feng, Chia-Fen Tsai and Tzu-Hui Pan

Abstract:
This study examines the liquidity effect on stock returns in which the firms are at risk for default. Using Bharath and Shumway’s (2008) naïve distance to default model to measure the likelihood of default, we show a clear and positive return–illiquidity relation between stock returns and stock liquidity for each default portfolio, especially for a group of firms with a higher likelihood of default. Specifically, the return difference between low-high liquidity groups is higher for the group of firms with higher default likelihood than for firms with lower default likelihood. Empirical evidence highlights the fact that investors require higher risk premium for stock illiquidity when firms have a higher default risk. These results are robust for different liquidity measures.
Keywords: Liquidity Effect; Default Risk; Liquidity Measures
JEL classification: G10