International Research Journal of Finance and Economics  Issue 176  November, 2019

 

Tests of the Stochastic Volatility with Jumps Model Driven by Moment Swaps	8-25
Ako Doffou
Abstract: This paper tests the pricing accuracy and the hedging performance of the stochastic volatility with random jumps model in markets extended to contain swap contracts whose payoffs depend on the realized higher moments of the state variable. Using a two-step iterative approach, latent model variables are first filtered and then used to estimate the model parameters. The tests on European options and variance swaps written on the S&P 500 index show superior pricing accuracies in-sample and out-of-sample and jump risk is priced. Hedging strategies involving higher-order moment swaps perform better across all moneyness and maturity classes. < /br> Keywords: Stochastic volatility; Random jumps; Variance swaps; Higher-order moment swaps; Self-financing portfolio JEL Classifications: C52, G12, G13
Effect of the Quality of the Accounting Information System Outputs on Customer Satisfaction in Lebanese Commercial Banks	26-40
Hiyam Sujud and Boutheina Hachem
Abstract: The aim of this study is to show the effect of the quality of the accounting information system outputs on the satisfaction of Lebanese commercial banks’ customers. The quality characteristics of the following banking service were adopted: relevance, reliability, comparability, and consistency. To achieve the objective of the study, a questionnaire, previously adopted in the same field, was modified and adjusted to suit the Lebanese context. This was distributed to the sample of the study represented by the staff of the financial management department in the companies operating in Lebanon, which consist of 411 clients of the Lebanese commercial banks. The descriptive analytical approach was adopted to analyze the results using SPSS statistical program. The study found a statistically significant effect of the quality of the accounting information system outputs on customer satisfaction in Lebanese commercial banks. It was also found that the quality characteristics of banking service mentioned above have a significant impact on customer satisfaction. The study recommended that Lebanese banks should keep abreast of the developments of the accounting information system to improve the quality of the banking services provided to customers. Keywords: The quality of the output of accounting information system, Relevance, Reliability, Comparability, The quality of banking services, Satisfaction of customers
What Determine the Speed of Adjustment towards Target Leverage? An Empirical Study on Egyptian Non-Financial Firms	41-57
Ramy William Hanna
Abstract: The purpose of this research is to study the dynamics of capital structure in Egypt to analyze the determinants of the speed at which Egyptian non-financial firms adjust towards target leverage. The author employs the partial adjustment model using GMM estimation technique, the model that has been extensively used in literature to study capital structure dynamics. This research uses two proxies for firm leverage to provide robust results and further evidence on employed model. Results provided robust evidence that there is target leverage determined by firm-specific determinants and political uncertainty, where Egyptian non-financial firms do adjust towards that target at a rapid speed (62 per cent). Speed of adjustment is determined by set of firm-specific determinants. This research is intended to fill literature gap where there is lack of empirical studies analyzing the determinants of speed of adjustment for Egyptian non-financial firms. Too, inclusion of political uncertainty among controlling variables falls outside the conventional use of firm-specific variables; the action that best suits the Egyptian market that was subject to political changes during the past years. Outcome of this study shall contribute to better understanding of implications of the choice of capital structure as one of the important and complex decisions in finance. Keywords: Speed of Adjustment, Capital Structure, Generalized Method of Moments, Egypt JEL Classification: G32
The Role of Islamic Finance in Achieving SDGs: Case Study- Egypt	58-79
Eman Hashem
Abstract: In 2015, leaders worldwide agreed to 17 SDG objectives for a better world by 2030. SDGs set quantitative targets for sustainable development in all dimensions: social, economic and environmental aspects. In order to implement SDGs, sufficient financial resources are required, much more than what was accessible. In particular in developing nations, there is a need to explore innovative sources of finance. The aim of this paper is to explore the role of Islamic finance in achieving sustainable development Goals (SDGs). Islamic finance can help to achieve SDGs through 4 dimensions: a) Islamic finance has an efficient tool to support mobilization of domestic resources. b) Islamic finance enhances financial inclusion C) Islamic finance has risk-sharing tools. d) Islamic finance has redistribution tools. Keywords: Egypt, Islamic finance, SDGs
Comparative Study between Solvencies of Islamic and Conventional Banks in a Financial Stable Period: Evidence from Heterogeneous Countries	80-99
Achraf Haddad, Anis EL Ammari and Abdelfettah Bouri
Abstract: The knowledge value produced by this research was established in particular by the methodological challenges of the comparative study. Based on a process of bibliographic research, available conditional observation and necessary statistical tests, we innovated an equiprobable comparison between the solvencies of Conventional and Islamic banks over the period (2010-2018). Our study is not only a matter of dealing generically with the financial solvency question of Conventional and Islamic banks, but also, we analysed the inherent implications and difficulties that may alter the results and influence the establishment of an operative evaluation of financial institutions. The core populations are all existing Conventional and Islamic banks in the selected countries. To solve this gap, two banks’ samples were taken, the choice is limited to countries whose banking systems incorporate both Islamic and Conventional banks without taking into consideration the proportion of each system in each country's banking market. Thereafter, each list bank was reduced on the basis of qualitative and quantitative filtering criteria. Therefore, each Conventional bank has its Islamic equivalence with a 95% rate in terms of capital and size taken from the same country. This restriction reduced the sample size to 63 banks each. The selected banks are all large and listed in different stock exchanges around the world. In conclusion, we found that Conventional banks are more solvent than Islamic banks in a mixture of heterogeneous contexts during a financial stable period. Keywords: Conventional banks, Islamic banks, Solvency, Comparative study, Financial stable period, Heterogeneous contexts JEL Classification: F33, G20, G21, G24, G30.
Determining the Ideological Approach of Finance-Growth Nexus in Bangladesh: New Evidence from Dynamic Factor Based Causality Approach	100-115
Altaf Hossain and Suman Biswas
Abstract: Applying an alternative econometric approach, this paper evaluates the long-run causal relationship between the Quantum Index of Manufacturing (QIM) and financial development. We use monthly data of Bangladesh for the period from 2004 to 2017 and apply dynamic factor model (DFM) and vector auto-regression (VAR) based Granger causality approach. Following the results of DFM, two factors, named as ‘Stock Market’ and ‘Banking Sector’ are formed with their respective variables or indicators. Results of factors-and-VAR based Granger causality exhibit a bidirectional relationship between QIM and ‘Banking Sector’ significantly causing each other. There are strong evidences that Bangladesh government has long been employing huge policy efforts (under neoliberal structural adjustment) on fostering supply leading approach, to increase industrial production by developing its stock market. But result shows a unidirectional and demand following relationship; the stock market is being developed in response to the demand of industrial production only. Since the existing relationship does not support government’s policy, its efforts might be missing due to the market’s deregulation-led inefficient and instable deepening. So, Bangladesh government should leave the ideology of fostering supply leading approach to economic growth and adopt policy efforts to let the demand following relationship function. Keywords: Banking Sector, Stock Market, Industrial Production, Bangladesh Economy, Dynamic Factor Based Causality, Demand-following, and Supply-leading Approach
The Impact of Taxation Alarm in Hurting Bahraini's Luxury Life	116-128
Hanan Naser and Fatema Alaali
Abstract: Although taxation has become a substantial part of the economic revenues in most of the countries, the GCC economies lack such a solid system till today. The great and accelerated drop in oil prices has led to intensive reductions in GCC government spending and economic activities since the year 2015. Although the GCC countries have started diversifying their budgetary revenues, most of these countries and in particular Bahrain are facing fiscal deficit that is projected to persist till the year 2022. There is a need for GCC to increase non-oil revenues reduce their reliance on oil and meet priority spending needs. One of the attempts to diversify revenues sources is the introduction of the value added tax (VAT). This paper discusses the history, current and expected status for the taxation system in the GCC with more focus on Bahrain's economy, its main elements and its implications. Although VAT implementation would provide the government with the necessary revenue needed, but at the same time it is going to lead to various challenges such as tax fraud. Bahrain government should follow IMF's refund processing model which combines a pre-screening with randomised sampling for auditing of high risk refund claimants. Keywords: VAT, TAX, GCC, Bahrain
Economic Reforms, External Liberalization and Macroeconomic Performance in Vietnam	129-155
Huong Le
Abstract: This paper examines the macro-economic performance of Vietnam through the six phases of Doi Moi reform and analyzes the impact of external liberalization on economic growth, aggregate demand, employment and income distribution. The decomposition of aggregate demand suggests that private investment was the most important determinant of Vietnamese economic growth during the period of 1994 – 2011, while government expenditure has become more significant since 2005, and the external sector together with government expenditure are the important driving factors of Vietnamese economic growth since 2012. The decomposition of overall labor productivity highlighted the fact that sectoral productivity growth of the service sector plays an important role in the improvement of overall labor productivity in Vietnam. Keywords: Macroeconomics, economic reform, economic growth, external liberalization aggregate demand, employment JEL Classification: E1, E6
On the Relationship between Crude Oil Prices and Stock Market: The Brazilian Case	156-166
Andre Assis de Salles
Abstract: Crude oil is directly or indirectly present in every productive activity. Crude oil price fluctuations directly influence the international financial markets. This way the oil market is related to the capital market once it is the stock market that provides resources for investment and financing of production. The purpose of this work is to study the relationship between crude oil prices and selected sectors of the Brazilian economy. Moreover this study focus on the influence that international crude oil prices have on the Brazilian stock market. The main aim of this work is to determine the conditional correlation of the crude oil price and equity returns of nine sectors of the Brazilian economy as well as the performance indicator of the Brazilian stock market using bivariate volatility models. Keywords: Oil Prices, Stock Market, Causality, Cointegration, Dynamic Correlation
Bank-Specific and Macroeconomic Determinants of Bank Profitability: Evidence from Kuwaiti Banks	167-181
Husain Y. Alyousef, Rula O. Saffouri and Ahmad F. Alqassar
Abstract: This paper examines bank specific and macroeconomic determinants of bank profitability in Kuwait. The data was collected for ten banks; five Islamic and five non-Islamic banks for the period from 2009-2016. Profitability is measured by Return on Assets (ROA), Return on Equity (ROE), and Tobin’s Q ratio as functions of bank specific and macroeconomic determinants. Results show that Islamic banks have higher profitability than non-Islamic banks. Bank diversification toward non-interest income has a significant positive relation with bank profitability. Asset quality and expense management are other significant factors affecting bank profitability; higher NPA and Operating Expenses affect profitability adversely. Interest income which is the traditional income for banks has a significant positive correlation on bank profitability. Under Tobin’s Q model, there is a negative relationship between inflation and bank profitability. Keywords: Return on Assets, Return on Equity, Tobin’s Q; Conventional and Islamic Banks, determinations of bank profitability; Kuwait Banking System.
Bank Value using Camels Model Evidence from Balkans Banking System	182-195
Kyriazopoulos Georgios and Kondili Elvis
Abstract: This paper examines bank specific and macroeconomic determinants of bank profitability in Kuwait. The data was collected for ten banks; five Islamic and five non-Islamic banks for the period from 2009-2016. Profitability is measured by Return on Assets (ROA), Return on Equity (ROE), and Tobin’s Q ratio as functions of bank specific and macroeconomic determinants. Results show that Islamic banks have higher profitability than non-Islamic banks. Bank diversification toward non-interest income has a significant positive relation with bank profitability. Asset quality and expense management are other significant factors affecting bank profitability; higher NPA and Operating Expenses affect profitability adversely. Interest income which is the traditional income for banks has a significant positive correlation on bank profitability. Under Tobin’s Q model, there is a negative relationship between inflation and bank profitability. Keywords: Return on Assets, Return on Equity, Tobin’s Q; Conventional and Islamic Banks, determinations of bank profitability; Kuwait Banking System.