International Research Journal of Finance and Economics
 Issue 108
 April, 2013
A Cross-National Comparison of Entrepreneurial Opportunity Recognition: Application of a Self-Organizing Map with a Resource-Based view
Li-Min Chuang and Shu-Tsung Chao
Opportunity recognition is an important concept in research on entrepreneurship, and there is now a critical mass of literature to shed light on the concept. Many studies have addressed opportunity discovery and opportunity exploitation; however, very little research has focused on opportunity recognition and whether there are similarities or differences between the determinants of entrepreneurial opportunity recognition across countries. We analyzed Global Entrepreneurship Monitor (GEM) data from the resource-based perspective and applied the artificial intelligence self-organizing map (SOM) approach to fill this research gap. In this study, 45 countries that participated in GEM from 2005 to 2006 were selected for analysis. Our research found that each of the factors studied in this analysis were influential in entrepreneurial opportunity recognition. Furthermore, the factors result in four specific patterns of entrepreneurs. We also examined the stability on the SOM plane of the four patterns of entrepreneurial opportunity recognition. The study reveals interesting patterns of entrepreneurial opportunity recognition in the context of global entrepreneurial activities.
Keywords: Entrepreneurship, Opportunity Recognition, Resource-based View (RBV), Global Entrepreneurship Monitor (GEM), Self-organizing Map (SOM)
Modeling the Distribution of Brazilian Stock Returns via Scaled Student-t
Daniel Reed Bergmann and Mauri Aparecido de Oliveira
Some empirical comparative studies have shown that the Scaled Student's t distribution fits the data better with periodicity less than a month for some alternative distributions found in the literature, for example, logistics, Power Exponencial, the mixture Discrete Normal, etc.. The results of these studies have shown that the degree of freedom in general vary in the practice of 4 to 10. Thus, the Scaled Student's t distribution tends to better adapt to the stylized fact leptocurticidade returns, and besides, this distribution has finite moments of high orders. The results found showed that the the Kullback-Leibler test proves inferior to its competitors because it requires a larger amount of data than the other tests. Applying the methodology presented in this work to the stock returns of the market (Petrobras PN, Ambev PN, PN Telemar and Vale PNA) and IBOVESPA not rejected the hypothesis that returns follow a Pearson IV. Despite the results, and simulations are needed more studies considering other distributions to strengthen the methodology presented in this work. Being that these results can also be applied to other financial data such broaden its usefulness in terms of quantitative modeling in finance. The distribution Scaled Student t proved adequate to model stock returns Brazilian study as the Song’s entropy measure. Since the normal distribution and Pearson IV are not capable of efficiently modeling such stocks.
Keywords: Scaled Student t, Statistical Power Test, Normal Distribution, Pearson IV Distribution, Song’s Entropy Measure
Examination of Privatization Results with Ratio Analysis: A Turkey Example (Afyon Cement Plant Application)
Selami Güney
Privatization is carried out in order to increase the efficiency of public institutions and help the government to perform its fundamental duties. It is thought that privatized institutions increase their profits and efficiency following the privatization. Studied Afyon Cement INC. was privatized in 1989. Liqudity, profitability and leverage ratios of company before and after privatization were analyzed with this study and it was tried to put forward how the company was affected from privatization.
The Role of Inflation Regime in the Exchange Rate Pass-Through: Evidence from Mexico, Israel and Turkey
Özer Arabaci and Metin Özdemir
The degree of pass-through from exchange rate changes into domestic inflation-which is known as exchange rate pass through (ERPT) is crucial for implementing monetary policy. The level of the ERPT affects inflation forecasts and monetary transmission mechanism and setting monetary policy. Central banks aiming at stabilizing prices need to know how the previous exchange rate changes have affected the current import prices. As the ERPT lowers, central banks obtain more ability to conduct monetary policy freely. J.B. Taylor (2000) suggests that decline in ERPT in recent years is due to a change in the behaviour of inflation and ERPT is lower in low inflation environment and moving to a stable macroeconomic environment provides a weaker ERPT. The purpose of this paper is to examine the ERPT in the transition to low and stable inflation environments by using the data set of three emerging markets namely Mexico, Israel and Turkey. Because of the presence of nonlinear mechanisms in the ERPT, we use smooth transition models, and explore the existence of non-linearities. Our results reveal that ERPT is non-linear in these countries and the period of low ERPT is associated with the low inflation environment, in line with Taylor’s (2000) hypothesis.
Keywords: Exchange rate, Inflation, Monetary policy, Smooth transition regression, Emerging markets
Jel Classification Codes: E52, F31, F41
Performance-Flow Relationship and Spillover Effect in Taiwan Fund Market
Feng-Huei Chang and Yeong-Jia Goo
This paper investigates the fund performance-flow relationship and spillover effect in the Taiwan mutual fund market. By examining the monthly data of open-ended domestic equity funds from Jan. 2001 to June 2010, we find a similar U-shaped fund performance-flow relationship, which is a little different from the convex-shaped results found in the U.S. fund data. Our results show that fund investors chase past winners but also redeem their cash flows from the past losers. Fund flows depend not only on the prior fund ranking within the same category but also on the fund’s position within the same fund family. In addition, a stellar fund attracts significant positive cash flows to its fund assets. However, we find a crowding-out effect rather than a spillover effect from other stellar funds within the same fund family. The total net asset of a fund that has worse management performance than the top-performing funds would be crowded out if there are other best performers in the same fund family.
Keywords: Mutual funds, fund performance, fund flow, spillover effect.
JEL Classification Codes:G11, G23
Inflation Targeting and Exchange Rate Volatility: The Role of Exchange Rate Regimes
Ali Lamouchi
This paper analyzes how the choice of a country's exchange rate regime may influence real exchange rate volatility within and outside the framework of inflation targeting policy. Using system-GMM estimator for a panel of 62 countries covering the period 1985-2009, the results show that among the costs of the adoption of both inflation targeting and flexible exchange rate regimes policies are the increase in the real exchange rate volatility. Moreover, using De facto classification, this paper finds that for developed countries, the mix of inflation targeting and fixed regimes policies are associated with the lowest degree of volatility. For developing countries, the mix of inflation targeting and intermediate regimes policies are most effective preventing real exchange rate volatility. However, the results have no clear tendency by using the De jure classification. We also concluded that, as in the developing countries, the Fear of Floating is also justified in the developed countries.
Keywords: Inflation Targeting, Real Exchange Rate, Exchange Rate Regimes, Two-Step System-GMM Method, Panel Data.
JEL Classification Numbers:C33, E31, F31, F41
Symmetry of Inflation and Economic Growth Transmission in the Euro Area in the Respect to a Single Monetary Rule
Marianna Sinicáková
The objective of the research is to investigate inflation and economic transmission among the Visegrad countries (Czech Republic, Hungary, Poland and Slovakia) and the euro area. Narrow external trade and integration relations suppose significant level of transmission within the observed countries. Level of (a)symmetry among inflation and economic growth shocks can be crucial for a single monetary rule application. Importance of this issue is not relevant only for Slovakia, the euro area member since 2009, but for the Czech Republic, Hungary and Poland, too, as the future euro area member. Estimation of inflation and economic growth transmission is based on the vector error correction model. Variance decomposition enables us to observe these interdependences among particular countries throughout several horizons. Dominance of the euro area is more obvious in the case of economic growth. Therefore, from the perspective of the Visegrad countries, a potential single monetary rule should put more weight on economic growth than inflation. However, due to an endogenous argument, level of these interdependences should increase gradually in time. The paper was elaborated within the project VEGA 1/0973/11.
Keywords: Inflation transmission, economic growth transmission, the euro area, the Visegrad countries, monetary rules
JEL Classification Codes: F15, F42, E52
The Impact of Internal Control to E-commerce Activities on the Quality of Internal Auditing in the Financing Companies Operating in Jordan
Ahmad Adel Jamil AbdAlla, Othman Hussein Othman and Ali Ahmad Diab Mssadeh
The study aims to identify the impact of Security and protection, legislation and laws on the quality of internal auditing in the financing companies operating in Jordan, which are (26) companies. A questionnaire was designed by the two researchers and distributed for this purpose on the internal auditors in companies and non-executive committees emanating from the Board of Directors who have direct contact with internal audit in each companies, the number of questionnaires distributed were (150) questionnaires, (120) suitable questionnaires were recovered for analysis, with the rate of recovery reached (80%). The questionnaire data was analyzed using the (SPSS) and a number of statistical techniques through descriptive statistics, arithmetic means, standard deviations and percentages, the study hypotheses were tested by multiple regression tests. The study found that there was no significant impact for the combined independent variables (Security and protection , legislation and laws) on the quality of internal auditing, but there is a statistically significant impact of Security and protection on the quality of its own internal auditing. The study recommends the interest of existing and decision-makers in the financing companies operating in Jordan to raise the level of legislation and laws in order to positively affect the quality of internal auditing in those companies.
Keywords: Internal Control to E-commerce, Quality of internal auditing.
Interest Rate Elasticity of Demand for Money in Ghana
Anthony K. Ahiawodzi
The study sets out to examine the elasticity of demand for money to interest rate in Ghana during the period 1970 to 2010. In line with this objective, a theoretical model of demand for money function was specified with interest rate as the key independent variable. Other independent variables included are real income, general price level and exchange rate depreciation. The specified error-correction model was estimated by the Ordinary Least Squares (OLS) method based on Engel and Granger two-step estimation approach. Both the long-run cointegrated results and the short-run results have revealed that demand for money is sensitive to the interest rate. Furthermore, the CUSUMSQ test has revealed that the demand function of Ghana is not stable. The policy implications are that, the Ghanaian financial authorities should not focus only on using monetary policy to achieve price stability and growth of the country. The Bank of Ghana must combine the monetary policy with fiscal policy for the desired impact. For example, fiscal discipline by way of avoiding excessive budget deficits will combine effectively with monetary policy to achieve a sound monetary policy in the country.
Keywords: Interest rate elasticity, demand for money, theories of demand for money, stationarity test, cointegration test, stability of demand for money function.
Financial Literacy, Financial Education: A Road Map to Personal Financial Well-Being and Prosperity
Sunitha Kumaran
Large changes in the structure of financial markets, labor markets, and demographics in developed countries have offered consumers a bewildering array of complex financial products – from reverse mortgages to annuities – to choose from, making saving decisions increasingly complex. While financial literacy has always been important, the need for financial education has assumed greater urgency in many countries as such an ever wider range of financial products and financial services have been marketed to consumers. Financial literacy is very much about empowering individuals so that they can master this complexity and take full advantage of the benefits that flow from financial innovation and new financial products. Recognizing the importance of knowledge about financial decisions, a number of public agencies, private foundations, school systems, and employers have begun to sponsor financial literacy programs. Policymakers around the world have been wrestling with the idea of how to foster a population that is knowledgeable about and comfortable with basic financial planning. Building on these reviews and other market research findings, the article emphasizes the need for financial literacy and its impact on personal well-being, financial system and economy. The work has been extended to suggest A Learner-Centered Approach to Financial Education to increase the impact of financial literacy & its measurement and also ways to deliver financial education program to the society.
Keywords: Financial Education, Financial literacy, Financial Planning, Empowerment
An Empirical Analysis of the Impact of Mobile Broadband on Economic Growth in Emerging Economies
Mona F. Badran and Hosein F. Badran
Mobile broadband penetration in developing countries is expected to reach 8.5 percent by the end of 2011, up from 5.3 percent recorded in 2010 (ITU 2012). It is also expected that emerging regions will surpass the developed world in terms of the number of mobile broadband connections in first half of 2013. Thus the impact of mobile broadband on economic growth in these countries is a vital issue that needs to be vigorously investigated. The contribution of the present paper is in the estimation of this impact with a focus on emerging economies from 2008-2011. Results reveal the positive and highly significant impact of mobile broadband on economic growth in emerging countries. Our analysis shows that in emerging countries, 1 percent increase in mobile broadband per household would lead to approximately 7 percent increase in GDP growth rate, ceteris paribus. Adding additional controls, such as the Global Competitiveness Index and the Independent Regulator, the conclusion reveals that these controls are statistically insignificant.
Keywords: Mobile broadband, growth, emerging countries, panel data, endogeneity, instrumental variables. JEL-classification: L96
Corporate Income Tax and Asset Pricing
Chune Young Chung
This paper studies the theoretical implications of corporate income tax on asset pricing in a two-tree aggregate endowment economy. I study a mechanism through which corporate income tax could increase and decrease "portfolio risk" associated with the rebalancing motive in market clearing. I view an asset as a portfolio of stock and bond and the portfolio weights are related to financial leverage. The tax could decrease after-tax consumption from dividend (increases leverage), but also could increase tax shield and add to dividend (decreases leverage). Changes in dividend are responsible to the correlation between expected dividend growth and consumption growth and thus affect stock price/return. Overall, the model introduces the role of tax-induced portfolio risk on asset characteristics.
Keywords: Asset Pricing, Two Trees, Corporate Income Tax, Financial Leverage
JEL Classification Codes: G12
Detecting the Causality between Budget Deficit and Trade Deficit in Lebanon
Chawki EL-Moussawi and Ali Awdeh
This paper examines the link between government budget deficit and trade in Lebanon over the period 1975-2011. It uses cointegration and Granger causality tests to detect the short-run and the long-run relationships between the two deficits, and with other macroeconomic variables. The empirical results suggest that the budget deficit, the trade balance, the interest rate, and the exchange rate are cointegrated, suggesting the existence of an equilibrium relationship binding all these variables together. Besides, and most importantly, a bi-directional causality between budget deficit and trade deficit is detected, giving support to the “twin deficit” hypothesis.
Keywords: Trade Deficit; Budget Deficit; Cointegration; Causality.
JEL Classification Codes: F32; H62.
The Role of Financial Intermediation in Domestic Savings: Evidence from Savings and Credit Cooperative Societies in Tanzania
Xuezhi Qin, Benson Otieno Ndiege and Dickson Pastory
This paper determines how Savings and Credit Cooperative Societies (SACCoS) play a role in domestic savings. Panel data from 21 regions of Tanzania mainland, for the period of 2005-2012, published by the Ministry of Agriculture, Food and Cooperatives, are used. The study uses panel data regression model in analysis. Findings show that, the contributions of SACCoS sub-sector in financial intermediation and households’ savings are commendable. Numbers of SACCoS and number of members are positively affecting the level of savings and highly significant. However increase in number of SACCoS and members increases savings to a certain limit where savings start to diminish. Also external sources of funds show negative and significant effects to savings. Other significant factors include year, and gross loan portfolio. The government and policymakers need to develop more conducive environment for economic development and for people to join SACCoS so as to promote domestic savings. Also the linkage between SACCoS and formal financial institutions like commercial banks should be reviewed for the sake of building strong internal saving capacities.
Keywords: Tanzania, Savings, SACCoS, Microfinance, Cooperatives, Financial intermediation, Economic Development and Poverty
Effects of Energy Prices on Sectors: The Case of Turkey
Hakan Altin and Hüsnü Bilir
In this study, the effects of changing energy prices on Turkey’s some of key sectors such as industry, transportation, service and food sectors were examined. Besides, the effects of changes in gold prices, US dollar exchange rate and interest rates were calculated. This study, where PDP (Public Disclosure Platform) indices were used, covers 2009-2013 period. In accordance with the analysis carried out, it is seen that increase in energy prices increases share earnings of the aforementioned sectors.
Keywords: Energy Prices, Sectors, Gold, Brent, Interest, Currency
JEL Classification Codes: G10, G11