International Research Journal of Finance and Economics
 Issue 110
 June, 2013
Industrial Development Horizons in Jordan under the WTO and GATT Agreements
Buthaina Muhtaseb and Amin Jaber
The aim of this study is to investigate Jordan's industrial performance in the context of its accession to the WTO. Examination of main performance indicators for total manufacturing shows that their growth was the highest in profit margin, followed by employment, exports / gross output and real labor productivity, but real wage per worker was nearly stagnant. Subsectors are categorized according to these indicators into four groups: successful, low productivity, adjusting and at-risk industries. The results of using a simple regression analysis suggest that the reduction in tariffs, caused by joining the WTO, has no apparent impact on the performance success of manufacturing subsectors.
Keywords: Jordan; WTO; industrial development; manufacturing performance; import tariffs.
JEL Classifications Codes: F13, F14, L60, L78.
Long Memory in the Egyptian Stock Market Returns
Amr Algarhi
This paper examines the presence of long memory in the daily returns of the Egyptian stock market, using parametric and semiparametric methods. Both techniques have their merits and demerits. Accordingly, the Exact Maximum Likelihood (EML) estimation is employed to estimate the ARFIMA model in the time domain; while two main semiparametric techniques, log periodogram (LP) and local Whittle (LW), were applied to estimate the memory parameter in the frequency domain. Unlike the findings for developed equity markets, the results show strong and significant evidence of long memory in the Egyptian stock returns, which refutes the hypothesis of market efficiency. As a result the Egyptian stock returns can be predicted using historical information. The findings of this paper are helpful to regulators, financial managers and investors dealing in the Egyptian stock market.
Keywords: ARFIMA; Egyptian stock market; Exact maximum likelihood; Local Whittle estimation; Log-periodogram regression; Long memory; Semiparametric estimation.
JEL Classification Codes: C14, C22.
Russia’s Forestry Sector: Realities and Prospects
Varvara Nazarova
The purpose of this article is to conduct a comprehensive analysis of the Russian forestry sector to identify the prospects for its further development. It is the presence of non-system (specific) risks inherent in the logging industry which complicate the decision making process for investing in the most promising projects. The practical significance of this work is to develop the tools to assess the non-systematic risks when implementing projects in the Russian forestry sector, making it possible to assess the risks to logging enterprises and sawmilling and woodworking enterprises.
Keywords: Forestry sector; a comprehensive analysis; investment decisions; the non-systematic risks; SWOT analysis of sector; the major risks that drive the Russian forestry sector’s lower investment potential; the reduction of non-systematic implementation risks.
Logistic Services in the International Trade Competitiveness
America I. Zamora-Torres and César Navarro-Chávez
International trade has become complex and highly demanding. In order to face the international environment the countries all around the world have to increasingly become more competitive. However this competitiveness lies not only in the product but in all the process necessary to send it to the person who demands it. The aim of this study is focused on determining the logistic services competitiveness of countries as an international trade key. A survey was collected from 29 countries that have the most dynamic international trade. The data were examined through the Principal Component Analysis considering 8 indicators. The findings point out according to the logistic services competitiveness index that the economies with the highest scores are Panama, China, India, Russian Federation, Korea, Turkey, Thailand, Singapore, Denmark, Japan and Hong Kong. This study can be a guide through the study of the behavior of the different variables involve with the logistic services and how these variables affect the competitiveness of the international trade. The comparison between the outcomes with the targets settled will determinate if performance is satisfactory.
Keywords: Logistic Services, Competitiveness, International Trade, Principal Components Analysis, Multidimensional, Multivariate.
Ownership Concentration and Bank Performance Empirical Evidence from Jordan
Maysa’a Munir Milhem and Abla Saeed Tahtamouni
The aim of this study is to examine the effect of ownership concentration on bank performance. We conduct an empirical analysis over all banks in Jordan over five-year period (2007-2011), that is banks in Jordan tends to be highly concentrated, Functional models are used in this study to determine the relationship between ownership concentration and bank performance, the dependent variable (bank performance) measured by return on assets and the return on equity, (control variables) include leverage ratio and firm size. Regression and t-test results suggest that there is a positive relationship between ownership concentration and bank performance, the study concludes that higher ownership concentration lead to better performance.
Keywords: Ownership Concentration, Banks Performance.
Comparing Hedging Effectiveness on Dynamic and Static Hedge Ratios of Agricultural Commodity Futures in China: The Case of Wheat, Corn, Cotton and White Sugar
Li-Hua Lai, Hsien-Hsing Tu and Tung-Cheng Chang
This paper investigates the hedge ratios of agricultural products in China using the general regression (GR), the bivariate vector autoregression (VAR), the bivariate generalized autoregressive conditional heteroskedasticity (GARCH) models and hedging effectiveness analysis. The investment portfolio method was adopted to analyze the January 2006 to January 2012 hedge ratios of wheat, corn, cotton, and white sugar futures contracts. The empirical findings that the optimal results were obtained for white sugar was calculated by employing the general regression model whereas an optimal hedge ratio for wheat, corn, and cotton when the bivariate GARCH model was adopted, which can provide information beyond traditional approaches of comparing hedging effectiveness.
Keywords: Agricultural Products, Bivariate Vector Autoregression (VAR), Bivariate Generalized Autoregressive Conditional Heteroskedasticity (GARCH), Hedging Effectiveness.
Predicting SME Failure in Thailand
Jeeranun Khermkhan and Surachai Chancharat
This study compares the accuracy of three forecasting models in predicting the failure of SMEs in northeastern Thailand. The three models tested were the Logit, Probit and Multiple Discriminant Analysis (MDA) models. The study used secondary data in the financial statements from 2008 and 2009 to predict the situation of companies in 2010. A total of 1,032 companies formed the sample, of these, 327 were classified as failed and 705 as non-failed. Accuracy rate of MDA is 79.6 percent, Logit model is 90.4 percent, Probit model is 86.9 percent. Logit model can predict failure in SMEs more accurately than MDA and Probit models. This result 2 year before failure reveal that accuracy rate of MDA is 63.5 percent, Logit model is 82.5 percent and Probit model is 74 percent. The findings showed that the Logit model was consistently more accurate than the Probit and MDA models. All models provided more accurate predictions nearer the event (one year in advance rather than two).
Keywords: SME failure, Probit, Logit, Multiple Discriminant Analysis, Forecasting
JEL Classification Codes: C53 G17 M21
The Effect of Audit Quality Measures to Reduce Information Asymmetry between Investors and Managers in the Tehran Stock Exchange
Vali Khodadadi, Seyed Ali Vaez, Ramin Ghorbani and Saeed Hajizadeh
The aim of this study was to investigate the relationship between various measures of audit quality and information asymmetry between investors and managers of listed companies in the Stock Exchange of Tehran. For this purpose, three hypotheses using panel data regression for the period between the years 2004 to 2010 were investigated to study. The results showed that audit firm specialization and tenure are significantly negative relationship with information asymmetry, while audit firm size is significantly positive relationship with information asymmetry.
Keywords: Information asymmetry, audit firm specialization, audit firm tenure, audit firm size
A Pragmatic Study on Investors’ Satisfaction Towards Investment Avenues- An Indian Perspective
Senthil Kumar Kesavan, Vijayabanu Chidambaram and Amudha Ramachandran
Investment is the sacrifice of certain present value for the uncertain future reward. It entails arriving at numerous decisions such as type, mix, amount, timing, grade, etc. of investment and disinvestments. Further, such decision-making has not only to be continuous but rational too. Broadly speaking, an investment decisions is trade off between risk and return. There are many different ways we can go about making an investment. This includes putting money into stocks, bonds, mutual funds, or real estate (among many other things), or starting our own business. The present study on individual investment decision includes various distinct unique features. The study has been done covering both the rural and urban places with respect to Post office savings scheme, Bank deposits, Mutual fund, Shares, Gold, Real estate. The study has included the investor’s satisfaction and dissatisfaction towards above mentioned investment avenues. The study has been done on the reasons for the preclosure. The factors that are responsible for the satisfaction and dissatisfaction of an investment product has been analysed based on the occupational pattern of the by using various statistical tools ANOVA and Weighted ANOVA.
Keywords: Investment, investor, satisfaction, rate of return and preclosure.
JEL Classifications Codes: D14, D31, D71, D81.
The Impact of Merger and Acquisition on Value at Risk (VaR): A Case Study of China Eastern Airline
Terence Fung and Wilson Wan
This paper attempts to examine the impact of merger and acquisition on Value at Risk (VaR) of China Eastern Airline. The VaR is estimated for the whole sample and pre-merger periods by three methods: RiskMetrics , AR-GARCH and Generalized Extreme Value (GEV). The regression-based model reports the highest VaR followed by RiskMetrics and GEV. All models report a low VaR after the 11 June, 2009 merger, indicating a negative impact of merger and acquisition on VaR.
Keywords: Value at Risk, merger and acquisition, GARCH
JEL Classification Codes: G11, G34
Continuity of Cash Flows in Predicting Accounting Earnings of Companies Listed in Tehran Stock Exchange
Ali Esmaeel zadeh, Ali Saadati and Mojtaba Asadpour
The information on cash flows may be beneficial for rational decision making of financial information users. The goal of this paper was to investigate continuity rate of cash components in future earnings. The statistical population included the companies listed in Tehran Stock Exchange from 2006 to 2010, from which the statistical sample was selected. In this paper, first, stability of every component of cash earning was examined and then the correlation between components of cash earnings and future earnings was analyzed using Spearman correlation coefficient and panel data regression. Results of the study suggested a significantly direct relationship between cash produced by operating activities and cash generated from financing activities on the one hand and accounting earnings on the other hand. In addition, a significantly inverse relationship was observed between the cash obtained from return of investments and the interest paid for financing, cash related to income tax and cash resulted from net flow of investment activities on the one hand and accounting earnings on the other hand.
Keywords: Components of cash flows, cash flow, future earnings, Tehran Stock Exchange.
The Effects of Consumption Needs and Ability to Borrow on Japanese Household Indebtedness
Ralph Abbey Ssebagala
What better explains household indebtedness – a household’s creditworthiness or a household’s consumption needs? Some households, given their relatively better economic status, are considered more attractive borrowers. They are granted more debt because they are expected to have the ability to service it. Other households may be ‘forced’ to take on more debt in their attempts to cope with the vicissitudes of daily life, especially when hit by income and health shocks that strain household resources. While households are expected to hold a certain level of debt from time to time, mismatches between expected and actual resources may render households more sensitive to a high debt build-up and may results in greater financial stress as defined by the debt relative to income. Data from the 2009 and 2010 Japan Household Panel Survey Data (JHPS) were used to estimate Tobit models for the factors affecting the amount of outstanding credit balance and the debt-to-income ratio. The factors affecting the level of outstanding debt were found to be the same as those affecting the debt-to-income ratio. The results suggest the need for greater awareness on the part of consumers and consumer educators on the influence of changing situational factors in the financial health of consumers. Political efforts that encourage household saving and investment are also recommended.
Keywords: Credit; Debt-to-income; Indebtedness; JHPS; Outstanding debt; Tobit.
JEL Classification Codes: C13, D10, D12, D91
An Empirical Examination of Clustering at Bahrain Bourse (BHB)
Bora Aktan
Classifying the firms listed at stock exchanges basing on their similar characteristics can be put away one of the major challenges on investors’ behalf in information-rich stock markets. In this paper, we discuss and examine whether the firms listed at Bahrain Bourse (BHB) can be grouped based on the mean and standard deviations of daily returns within the context of Ward’s method under the hierarchical clustering techniques over the period of January 2010 and August 2012. Findings indicate that the firms can be grouped into three main clusters.
Keywords: Bahrain Bourse, clustering, Ward’s method, Kingdom of Bahrain.
Family Firm Social Capital and Firm Performance: The Perspective of Social Capital
Valeriano Sanchez-Famoso, Amaia Maseda and Unai Arzubiaga
The present paper wants to provide new evidence of the ways in how different types of social capital can influence firm performance. For this purpose we distinguish between two new sub-constructs, bonding family social capital and bridging family social capital. Relative to the dimensions of social capital, we also analyze some specific sub-dimensions of each type of family firm social capital. Moreover, we propose a model to know whether the social capital in family firms affects firm performance taking into account these different forms of social capital and these specific sub-dimensions of each form. It is expected that the relationship between all the sub-dimensions of family firm social capital and firm performance will become stronger if the sub-dimensions increase.
Keywords: Social Capital, Family Firm, Dimensions, Competitive Advantage, Firm Performance.
Inventory Management Decisions - A Fuzzy Non-Linear Goal Programming Approach
Hari P. Sharma, Dinesh K. Sharma and R. K. Jana
Inventory management requires an on-going research using the latest innovative tools and techniques to support cost management functions. This research paper is an attempt to design and develop a Fuzzy Non-Linear Goal Programming (FNLGP) model integrating tolerance allowance fuzzy goal programming (TAFGP) technique. The TAFGP modeling technique converts fuzzy goals into deterministic goal constraints using their corresponding membership function values, and the deterministic equivalent of the fuzzy model is derived. This study demonstrates how to find optimal solutions for economic order quantity (EOQ) in a multi-item inventory problem using fuzzy goals such as estimated investment amount, warehouse costs, and order costs, which are critical to a decision-making process. We have tested the effectiveness of the model using different amounts of budgets for ensuring the usefulness, precision and simplification of the model for the inventory management decision-making process.
Keywords: Fuzzy Goal Programming, Multi-Item Inventory, Non-linear Goal Programming.