International Research Journal of Finance and Economics
 Issue 127
 November, 2014
A Comparative Analysis between a Mature & an Emerging Market Business Environment: Case study of United Kingdom and South Africa
Assamoi Valerie Christian and Yabin Zhang

In recent years, Business Environment is becoming more complex, interdependent and dynamic. Managements have to restructure their strategies and management styles according to the regions of the world, they are operating in. The typical challenges that managements face are political, economic and cultural changes along with advancement in technology. This paper highlights the result of the comparative analysis between the business environment of a mature market and that of an emerging one. To enable us to do so, we had carried out assessment on two countries: United Kingdom, as the relatively mature market and South Africa as the emerging country. Sphere of the assessment was based on the influence of Economic condition, Legal System, Socio-cultural environment as well as the status of Economics and Trade of the two countries. The analysis shows that business environment is quietly different in both countries. Indicators from both countries as representatives of Mature and Emerging markets, give justification that the status of development is dependent upon their respective business environment. Entering foreign countries is into a challenge for all market, the international business environment influences life and development of a firm.
Keywords: Mature Market, Emerging Market, Business environment, United Kingdom, South Africa
Microinsurance Premium Setting in Zimbabwe
Walter Gachira, Washington Chiwanza, Dingilizwe Jacob Nkomo and Runesu Chikore

We extend literature on the pricing of microinsurance products by considering the Hospital Cash Plan, a product that was introduced as a first of its kind on the Zimbabwean Insurance market. Due to the perceived slow product uptake, viability of the product has become a concern. This concern is further accentuated in that lack of precision in setting premiums may expose microinsurers to substantial risk of insolvency in case of underpricing or make insurance unaffordable when risks are overpriced. The research thus tests empirically whether the Hospital Cash Plan is adequately priced. We employ the formula approach, which gave a gross premium of $46, 09, hence the null hypothesis was rejected and it was found that the product was inadequately priced. However, using the Monte Carlo simulation, calculation of the net premium resulted in an implied net premium of $0.08 which meant that the null hypothesis was accepted and under this net premium valuation, the product was adequately priced at the current price of $1, 50. It was therefore noted that, overally as expenses are incurred, the fund gets into deficit. The researchers recommend employment of agents to generate more business. This will in turn improve premium revenue generation.
Keywords: Microinsurance, Hospital Cash Plan, Monte Carlo Simulation, Formula Approach, Gross Premium, Implied Net Premium
The Resource-Based View and Global Expansion during the 2008 Financial Crisis—the Case of United States
Li-Wen Huang, Hsin-Hong Kang and Shuang-Shii Chuang

This study revisits the question of global expansion strategy of multinational enterprises. Model estimation is by general linear squares random-effect models and probit models. Systemic risk exists in an entire financial system or an entire market and made many multinational enterprises face to the challenge of survives during the 2008 financial crisis. We examine factors affecting firm performance on the manufacturing firms of United States. Empirical results indicate that dividing a firm’s regions based on different degrees of international diversification is inappropriate because all firm types contain a horizontally S-shaped international diversification. This study also finds that multinational enterprises with respect to selecting the location of firms are formed from different firms’ resources and capabilities.
Keywords: Globalization, Multinational Firms, Technological capability, Marketing Capability
JEL Classification: F60, F230, O33, O32
Type of Earnings Management and the Effect of Institutional Investors: China Evidence
Tangmei Yuan Zhoue He

Based on prior researches on earnings management and order selection of real and accrual based earnings management. The purpose of this study is to investigate whether institutional investors influence the type of earnings management selections. Using multiple regressions and large sample, this study finds evidence that institutional investors have significant influence on the type of earnings management selected in China. Firms with a high proportion of institutional investors tends toward select accrual based earnings management(efficient earnings management) and restrain the real earnings management(aggressive earnings management). This evidence is not consistent with any prior views of institutional investors role. This may shed a new light on this reach area and have realistic meaning and practice value.
Keywords: Type of earnings management, Institutional investors, Effect, Selection
JEL Classification: M41, G14, G32.
Operating Efficiency of Commercial Banks in Vietnam: Technical Approach and Determinations
NGUYEN ThiCanh, LE Quang Minh and NGUYEN Thi Ngan
This study adopted Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA) to assess the technical efficiency of 29 commercial banks in Vietnam, in the period 2007-2012. The result indicated that the overall performanceof commercial banks in Vietnam during the period of study was about 70%, of which the highest efficiency reached 98.55% andthe lowest efficiency was 43.80%. Later on, the efficiency ratios of thesetwo approacheswere used as a dependent variablein Tobit regression to identify the influence of internalbank factors. The result pointed out five factors that impact the technical efficiency of commercial banks in Vietnam are: size, cost-to-total asset ratio, risk provision to total outstanding loans percentage, proportion of total outstanding loans over total assets and foreignownership. Based on the result of research, we provide implicationsonimproving technical efficiency ofcommercial banks in Vietnam.
Keywords: technical efficiency, DEA method, SFA method, Tobit regression, commercial bank, Vietnam.
Financial Markets and Economic Growth: A VAR-Garch Evidence for China
This paper investigates the finance-growth nexus in China in the period 1992- 2014. After a brief review of the theoretical and empirical literature, the paper reports the results of a survey based on a VAR-Garch (1,1) specification, for a total of 4863 observations.
The empirical findings suggest that there is unidirectional causality running from stock markets to growth in China, where the regressors generate spillover effects. In particular, these results confirm the new growth theories. In fact, the growth of the financial sector seems to have improved in the VAR-Garch the efficiency of investment and capital formation is favored of any kind (physical, human and knowledge capital) but also introduction of technological innovations.
Keywords: SSE Composite Index, GARCH model, Volatility spillovers.
JEL Classifications Codes: C32, F36, G15
Managerial Ownership, Financial Policy and Corporate Performance
Nejla Ould Daoud Ellili

The objective of this paper is to examine the possible relationships between the ownership structure and the leverage on one side and the impact of the managerial ownership on the corporate performance, on the other. In fact, this paper determines the impact of the ownership structure and more particularly the managerial ownership on the financial leverage. The empirical results show that all the shareholders (managers, blockholders or institutionals) are not motivated in holding important ownership in the high levered firms because of the bankruptcy risk. The results show also that the relationship between the managerial ownership and the corporate performance is nonlinear confirming the results of the previous studies showing that, at some levels of ownership, the managerial entrenchment affects negatively the performance of the firm. However, the empirical results of the simultaneous equations show that the entrenched managers don’t prefer the debt in financing the projects in order lighten the market pressure and protect their non-diversifiable human capital.
Keywords: Corporate Governance, Ownership structure, Managerial Entrenchment, Blockholders, Institutional Ownership, Leverage, Firm Performance, Simultaneous Equations, Panel Data, UAE.
JEL Classification Codes: G 32, C 33, N 65.
A Comparative Analysis of the Volatility of Conventional Bonds and Sukuk in the MENA Region
Sarah Wahab and Karima Saci

The main purpose of this study is to perform an empirical analysis to compare the volatilities of the MENA Bonds and Sukuk as well as determine the factors causing variation in the Bond spreads and Sukuk spreads in the MENA region. GARCH (2, 2) is chosen to estimate the Bond spread and Sukuk spread models. This study is among the few focusing on the volatility aspect of Bond and Sukuk yield spreads for the area comprising of the Middle East and North Africa. As the fixed income market, especially the Sukuk continues to grow in demand and popularity, more information is required to be understood and processed to give results that help the key players in the industry make beneficial decisions with regard to the risk premiums and valuation techniques. Also, this study assesses the impact of the recent event of the US debt ceiling and government shutdown crisis of 2013 on the volatility behavior of MENA Bond and Sukuk spreads. The results suggest that, for the MENA region, Sukuk spread variation is less impacted by the US debt ceiling crisis of 2013 than the Conventional Bonds apart from the past news/shocks. This research also found that the causal determinants of variation in the MENA Bond and Sukuk spreads are, slope and the autoregressive term. The robustness and viability of the chosen GARCH (2,2) methodology for the Bond spread and Sukuk spread models is further validated by means of the low value of Root Mean Squared Error (RMSE) implying that the ex-post forecasted values are very close to the actual values of the MENA Bond and Sukuk spreads.
Keywords: MENA, volatility, Sukuk, Bonds, GARCH, ex-post forecast
Interaction Modeling of the Russian, US, China and Mongolian Stock Exchange
YihChing Tsaih and HuiChen Chiang

This study examines the relationship of Mongolian Stock Market with three other markets, namely the U.S, Russia and China. The study is using the daily returns of each stock market from 1995 to 2010. This study suggests that when U.S stock market returns increase, the Mongolian stock market return increases at same time. However, the study also finds that there is a negative correlation between the Chinese stock market and the Mongolian Stock market.
Keywords: Stock market returns; Market correlations; Emerging market economies; Return forecasting
JEL Classification: C32; G15