International Research Journal of Finance and Economics
 Issue 132
 April, 2015
Social Effects of Foreign Direct Investments: International Empirical Evidences for Education, Health and Social Security
Mustafa Unver and Mahmut Erdogan

This paper examines the effects of foreign direct investment (FDI) on different types of social spending (i.e., education, health, and social security) by using fixed effect panel data from the 1995-2011 period. It also presents empirical data from 88 countries by comparing eight regional and economic level country groups, including Asia, Euro, Latin, Developing, Middle income, OECD and Transition economies. The results shows that while FDI inflows have a statistically significant negative effect on education spending in only the Asian Economies, there is a statistically significant negative effect of FDI inflows on health spending in the Euro, OECD and Transition economies, for which the Latin economies show positive and significant results. On the other hand, FDI inflows are also found to have some implications on social security spending that are negative and statistically significant in Developing, MINC and OECD economies in contrast to the statistically significant but positive effect seen in the Latin economies.
Keywords: Social Spending, Foreign Direct Investment, Human Capital, Dynamic Panel
Jel Classification: C33, F21, I15
The Determinants of Total Factor Productivity Change in the Jordanian Banks
Ammar Jreisat

Based on a two stage approach this paper investigates the determinants of productivity change in the Jordanian banking sector during the financial liberalisation period, 1996-2007. In the first stage, input-oriented Malmquist indices of productivity change are estimated with DEA to measure total factor productivity (TFP) change using time series data for 14 domestic and 3 foreign banks. The TFP changes are decomposed into the product of technological change and technical efficiency change (catch-up). In the second stage, potential determinants of productivity change are studied using a regression model. The results reveal that during the sample period Jordanian banking sector shows a productivity growth of 3.5% per year which is largely due to the technological improvement. The second stage regression results reveal that loan to deposit ratio, return on equity and age of the bank have positive effects on productivity. The size of bank is accompanied with a productivity decline.
Keywords: Two Stage Data Envelopment Analysis, Deregulation, Jordanian Banks, Malmquist Productivity Indices, Total Factor Productivity
JEL Classification: D22, D24 and G21
Testing the Market Efficiency of some Small Stock Markets
Christoph S. Weber

The efficient functioning of markets should be a feature of all competitive markets. In financial market, efficiency mainly refers to the efficient processing of information. Risk is the second important parameter of financial markets. Whilst most stock markets of industrialised economies work efficiently, this does not apply to financial markets of emerging and developing countries. Thus, the aim of this study is to analyse information processing and the stock market risk of selected countries that have not been studied before. Firstly, we study weak form efficiency by applying several approaches (unit root tests and diverse variance ratio tests). Secondly, we estimate the overall risk of the respective stock markets. Thus, we apply volatility models. We find some market inefficiencies for most stock markets analysed. Moreover, there is overwhelming evidence for time-varying volatility of the stock market returns.
Keywords: Emerging Stock Markets, Market Efficiency, Stock Market Volatility, Variance Ratio Tests.
JEL Classification:G14, C58, G15
Consumer Sentiment and Personal Consumption Expenditure: Evidence for US
Mohamed Ebeid

In this paper we examine the relationship between consumer confidence and consumption expenditure in the U.S. The increasing interest in consumer confidence indices reflects a widespread belief that consumers’ opinions and expectations about the actual and future economic and financial situations directly affect the real economy through the consumption expenditure channel. We investigate whether there is a long run relationship between the University of Michigan’s consumer sentiment index (UMCSI) and consumption expenditure by applying cointegration analysis and the vector error correction model (VECM). Our empirical analysis suggests that consumer confidence – taken alone – has important predictive ability for forecasting consumption expenditure for 4-quarter-ahead horizon. However, this forecasting ability declines in the presence of macroeconomic variables that are commonly included in consumption function. Hence, the consumer sentiment index has small incremental information above and over the other macroeconomic variables about the future of the consumption growth. Our cointegration analysis indicates that the movements of consumption expenditure, income, wealth, interest rate and consumer sentiment index are tied together and this long run relationship is stable. Therefore, we can conclude that there is a significant relationship between consumer confidence and consumption expenditure for both the short and long run period. Finally, we can say that the University of Michigan’s consumer sentiment index UMCSI offers timely information about future US consumers’ expenditure.
Keywords: Personal Consumption, Consumer Sentiment index, Unit Root Test, Cointegration Analysis, Vector Error Correction Model (VECM).
JEL Classification Codes: C32, E21
Globalization & Contemporary Trends in Innovation of Business Education: A Study of Jordon’ Business Schools
Abdussalam Mahmoud Abu Tapanjeh and Ajay Singh

The purpose of the paper is to study the contemporary trends in business education and its impact on country's overall growth. The paper analyses the present scenario & trends of business education of Jordan’s business schools and their impact on overall education systems addressing how is these business schools are competent in maintaining total quality management in business education through contemporary industry expectation at national & global level. The data analysis has done through statistical tests of Chi-square Goodness of fit tests of hypothesis testing and Spearman correlation to find out the correlation among distinguished variables undertaken in the study. Principal Component Analysis (PCA) and Regression analysis is used for further extension of the research. As the globalization of business education is the way to fulfil the future demand for the skilled managers through making creative change in the course structure of industry demand and pattern of management education. Our samples have adapted a strategy of multiple universities' business schools and an attempt has been made for analysing different patterns of globalization & innovation through assessing the appropriate mechanisms to business education in various B- schools of Jordan. The study pays a significant role to understand the sophisticated methodology and business curriculum worldwide in present Industry’s changing demand and changing global business environment.
Keywords: Globalization, B-Schools, Business Schools, Management Education, Business Management Education, Jordan
The World Bank: Between Transformation and Resilience
Yrd. Doç. Dr. Murat Turgut

Since its creation at Bretton Woods in 1944, the World Bank has taken important growing through the multiplication of its associated organizations and the extension of the scope and volume of its shares. Result of this process, its influence in the definition and implementation of policy development in the poorest countries is not commensurate with its importance today actually quite modest in international flows of official development assistance. In this article we will show the confinement of this institution in a narrow vision of development based on the paradigm prégnant market vision favored by the hegemony that the World Bank has won over the years. Thus, the adoption of strategies against poverty does not fundamentally challenge the "post-Washington consensus' that continues to inspire the policies it advocates.
Keywords: Development Agency, Economics, The World Bank, IBRD, Structural Adjustment Programs: SAP, Poverty Reduction Strategy Credits
Determinants of Audit Committee Effectiveness: Relationship with Audit Committee Composition according to Egyptian Code of Corporate Governance
Dalia Adel Abbass Elsayed Nasser

This study examines the determinants of audit committee (AC) effectiveness according to the Egyptian Code of Corporate Governance (ECCG). These determinants include AC composition which includes independence, financial literacy and ongoing training, and compensation. It is found that AC effectiveness is higher when AC members are more independent affected mainly by being nonexecutive directors and receiving compensation within the acceptable limits, when AC members are financially literate and have ongoing training for missing skills and knowledge like IT and industry knowledge affected mainly by the existence of at least one member who has strong accounting, financial and auditing expertise who is the chair of the AC and ongoing training by the Egyptian Institute of Directors (EIoD).
Keywords: Corporate Governance (CG), AC effectiveness, AC composition, Egyptian Code of Corporate Governance, (EIoD).
JEL Classification: M42; G43
Harmony Sale Pricing Based on Kejawen Tradition Teaching of Panca Eka Lumaksana
Whedy Prasetyo, Iwan Triyuwono, Ali Djamhuri and Imam Subekti

This study builds Kejawen tradition teaching of Panca Eka Lumaksana to determine harmony sale pricing. The approach uses teachings Kejawen where the value of a way of life Panca Eka Lumaksana used as an analytical tool. Data is collected through participant observation. Research results show that concept of sale pricing is not only based on measurable economic value (material) but also immeasurable economic values (immaterial). Non-economic value is behavior based on above approach.
Keywords: Kejawen teachings tradition of Panca Eka Lumaksana, harmony sale pricing.
A Re-examination of the Finance-Growth Nexus for the MENA Region using Static and Dynamic Panel Data
Naeem Muhammad and Abu Reza M Islam

This paper contributes to the existing empirics of finance-growth nexus of MENA countries based on a longer time period (1975-2012). It incorporates additional control variables such as FDI and an interaction term of FDI and financial development variables. It employed four estimation techniques, Pooled OLS, Fixed effect estimation, Random effect estimation, and the system GMM estimation, and used static and dynamic panel data. It obtains a robust finding of consistently no impact of financial sector development (FSD) on economic growth of MENA countries to all estimation techniques. The paper exemplifies that FSD especially, the banking sector has not been strong and efficient enough to effectively influence the economic growth. It strongly recommends the strengthening of the ongoing efforts of financial sector reforms, its supervision, monitoring and evaluation. The FDI effect on economic growth is positive and significant in all four estimation methods. Fixed capital formation contributes positively while trade openness and government expenditures have not played any significant role in the growth of MENA countries during the study period.
Keywords: Financial development, economic growth, Panel data, MENA countries and system GMM
JEL Classification Codes: F21. G1. G28. O4
The Effects of Credit Rating Changeon Capital Structure Change
Min-Shik Shin, Soo-Eun Kim, Jong-Ho Shin and Jae-IkLee

This paper proves that credit rating changes can be particularly valuable for capital structure changes. Financial managers undertake capital structure activities to target credit rating levels over time because of the benefits of higher ratings after considering target leverage behavior. Firms are more likely to reduce debt and less likely to issue debt or reduce equity following a downgrade. These relationships persist within a partial adjustment model of target leverage behavior. Firms adjust leverage asymmetrically following credit rating changes, lowering leverage after downgrades but responding little to upgrades. Therefore, these results imply that managers target specific credit rating levels, and that credit ratings are deemed an important determinant of capital structure, along with tax shield effects, financial distress factors, agency costs, and asymmetric information.
Keywords: credit rating change, capital structure change, partial adjustment model, speculativegrade
JEL Classification Codes: G35
The Relationship between Trading Volumes and Returns in the Nigerian Stock Market
Aniekan Okon Akpansung and Matthew Oladapo Gidigbi

This study uses data from the Nigerian Stock Exchange to investigate the relationship between trading volume and stock returns, being a contending area in the field of Financial Economics, and for the fact that is a main intermediation outlet for the longterm investible fund, which need wider examining beyond the happening in the sector. After testing for the stationarity of the relevant variables, Granger Causality test was conducted to ascertain the direction of causality between the duo, and adding two influential macro-economic variables, exchange rate and interest rate, the study found that the primary variables are only moving together but none is Granger - causing the other; except interest rate and exchange rate. Unidirectional relationship exists between interest rate and the change in the volume of trading; the relationship runs from interest rate. In addition, bidirectional relationships exist between the exchange rate and the change in the volume of trading. By implication, policy makers need to pay painstaking attention to the manipulation of interest and exchange rates since they have meaningful influence on the change in the trading volume. In as much, the duo could determine the extent of inflow and outflow of long-term investible fund..
Keywords: trading volume, stock returns, Nigerian Stock Exchange, unit root test,Granger Causality, Co-integration Test.
JEL Classification Codes: C32, G14, G10, G15