International Research Journal of Finance and Economics
 Issue 135
 June, 2015
Determinants of Dividend Policy in a Transitional Country: The Case of Viet Nam
Doan Ngoc Phi Anh and Mai Thi Hoai Thuong

This study seeks to empirically examine the determinants of dividend policy in a transitional country. The data was collected from 128 listed companies in both Hanoi and Hochiminh Stock Exchange during the period 2009-2013. Results reveals that previous year’s dividend payout ratio, profitability, sales growth and leverage have positive effects on the dividend payout ratio. Besides, the study also points out that firm size, cash flow and level of government ownership do not influence the dividend policy
Keywords: Dividend, dividend policy, determinants, stock exchange, Vietnam
Prvate Savings and Private Investment in Nigeria: What Determines what and what Causes what?
Anthony Orji, Jonathan E.Ogbuabor and Onyinye I. Anthony-Orji

This paper empirically investigates the determinants of private savings and private investment in Nigeria.The study also examines the direction of causality between savings and investments and tests the existence of structural breaks on savings and investment process in Nigeria. The study adopted linear regression models, granger causality model, and dummy regression models to address the objectives. The empirical results show that real disposable income and real interest rate are positively related to private savings in Nigeria. Also previous savings and inflation are found to be significant determinants of private savings in Nigeria. Furthermore, previous investment, interest rate and real exchange rate are found to be significant determinants of investment in Nigeria. The granger causality model shows evidence of independent causality between private savings and private investment in Nigeria. The dummy regression models show evidence of no significant structural break in private savings and investment within the pre-SAP and post-SAP periods under review (1970-2010). Given the prevalence of low saving rate and invariably low investment rate in Nigeria, we recommend that there is the need for government and monetary authorities to adopt serious income and monetary policy measures that will enhance savings and investment in Nigeria. This can also be achieved by enhancing people’s real income through provision of jobs, savings attitude re-orientation and making the economic environment more investment friendly..
Keywords: Private savings, Private investment, Granger causality, Structural break
JEL Classification: D14, D92, E21, E22, G21, O16
Towards a Theory of Financial Relativity: An Exploratory Review
Esosa Bob OSAZE and Jeffrey Ogie EGUAVOEN

Relativity theory is considered among the greatest scientific discoveries of our time. Apart from changing our view of the universe, it has practical implications for various areas of science. However, with several articles, papers and books written about relativity and its various implications, little is written about its implications for finance. This paper explores the implications of the theory of relativity for finance. Several issues in financial management are discussed not in absolute terms but always in relation to one another cutting across the same component and object of interest including profitability, return, the value of the firm and equilibrium of the pricing system in an economy. Whether there is financial crisis as a result misapplication or misappropriation of funds and a breach of the corporate governance mechanism, they are viewed with regard to intervening variables. Though many aspects of the theory of relativity are well tested empirically, there are still numerous open questions. And even if there are still no answers to every questions of relativity, and hence also not to financial relativity, there is an idea that relativity will play a number of roles in finance in the future as finance cannot run away from the fundamental laws of physics.
Keywords: Relativity, Financial Relativity, Financial Markets, Volatility, Speed, Velocity.
Distance to Default and Equity Returns: Evidence from the US Equity Market
Ghulame Rubbaniy, Yassine Anakhrouch, Bushra Naqvi and Abida Perveen

Using KMV approach of distance-to-default on S&P500 data spanning over almost two decades, we investigate the effect of sector default probabilities on sector returns in equity market of the United States. Our contemporaneous regression analysis shows no role of sector default probabilities in determining the contemporaneous sector returns. However, we find lagged sector default probabilities affecting significantly and differently to the sector returns of two sectors, financials and telecommunication services, out of ten sectors. To explain negative effect of lagged sector default probabilities on financial sector returns, we argue that an increase in sector default probability of financial sector makes investors wary of about the sector’s future performance and leads them to disinvest, which results in declining prices and negative contemporaneous returns to financial sectors. For a significantly positive effect of lagged default probabilities on contemporaneous returns of telecommunication sector, we argue that an increase in default probability of telecommunication sector is due to increased leverage of firms operating in the sector. The increased debt level sends a positive signal to the market participants who, in turn, increase investments in the sector causing positive returns in subsequent periods. In general, our results suggest a strong presence of informational efficiency in U.S. equity market.
Keywords: distance-to-default, Merton’s model, equity returns, the Efficient Market Hypothesis.
JEL Classification:G10, G12, G14
Liquidity Impacts on Profitability: Empirical Evidence from Vietnamese Commercial Banks
Tran Viet Hoang and Nguyen Anh Phong

The study aims to analyze the relationship between liquidity and profitability in 35 commercial banks of Vietnam in the years 2005-2013 and to define the determinants of the profitability of Vietnamese banks. Toward this aim, we first evaluate the liquidity positions through various liquidity ratios. We then identify determinants affecting profitability and use a panel data regression to examine the relationship between liquidity and financial profitability among Vietnam commercial banks. Results show that the banks’ profitability is positively related to their size, liquid assets, share of net loans in deposits and short-term liabilities while negatively related to the realization of the financial crisis and banks’ capital ratio.
Keywords: liquidity, profitability, panel data, efficiency of commercial bank
Determinants of Liquidity Risk in Transition Banking System
Truong Quang Thong

The research aims at identifying causes of liquidity risk in the system of Vietnamese commercial banks. Data are collected from annual reports by 34 local commercial banks in the years 2006-2012. The liquidity risk employed in the model is financing gap along with independent variables - factors affecting the liquidity risk – which are divided into two groups: internal and external ones. Estimation results show that the liquidity risk is affected by not only internal factors, such as total asset size, liquidity reserve, inter-bank lending, inter-bank borrowing and equity-to-capital ratio, but also macroeconomic variables – or factors outside the banking system – such as growth rate, inflation rate, money supply, and particularly, impacts of policy lag.
Keywords: bank, risk, liquidity, financing gap, Vietnam
JEL: E42, E52, G21.
Volume Trading Based Volatility Forecasting in Taiwanese Equity Market
Teng-Tsai Tu, Chih-Wei Liao and Szu-Lang Liao

The purpose of this study is to construct the ACD model for the block volume trading durations. The ACD model based on the block trading volume durations is referred to as Volume ACD (VACD) in this study. This study selects Chunghwa Telecom (CHT) Inc., offering the America Depository Receipt (ADR) in NYSE, to investigate the block trading volume in Taiwanese equity market. Therefore, combining with GARCH-type models, the VACD based GARCH type models employed in this study includes VACD-GARCH, VACD-IGARCH and VACD-FIGARCH models, respectively. The long memory in volume durations series increases dependence at level of volatility clustering exhibits relatively better performance of prediction on capturing volume durations. This volatility model is more appropriate in this study to portray the change of the CHT Inc. prices and provides more information about the volatility process for investment strategy which can be a reference indicator of financial asset pricing, hedging strategy and risk management.
Keywords: Volatility; Volume Durations; VACD; VACD-GARCH; VACD-FIGARCH
JEL: C1,C8, D4
What are Effective Triggers for Clawback Provisions?-Evidence from Voluntary Adoption of U.S. Firms
Yu-Chun Lin

This study examines whether particular types of clawback-provision triggers (i.e., fraud, error, and bad faith events) are more effective than others. Based on 963 U.S. firms that voluntarily adopted clawback provisions during 2003-2012, and the matched sample created from a propensity score technique, we find that clawback provisions are more effective when such provisions are triggered by ‘bad faith’ rather than restatement-based triggers. This study further separately examines clawback provision effectiveness under fraud- and error-based restatement triggers. We find that fraud-based clawbacks are more effective. Finally, clawback provision effectiveness is also strengthened by clearly specifying enforcement authority. Because concurrent regulations (i.e., the Sarbanes-Oxley Act (SOX) and the Dodd-Frank Act (DFA)) do not require bad faith to trigger compensation recoupment, our finding suggests that the regulators should define triggers more broadly to include bad faith events.
Keywords: Clawback provisions; Compensation; Restatements; Accruals quality..
Market Reaction and Insider Trading around the Announcements of Equity Issues: Evidence from Nigeria
Bello, Mohammed Aminu, Bala Ado Kofar and S.S. Maimako

The need to understand stock market response to announcements of new issues of corporate securities and the importance of curtailing the fraudulent operation of corporate insiders is paramount. In spite of that, little research attention was given to such reactions in Nigeria. Consequent upon that, this study sought to empirically examine stock market reaction to the announcements of equity issues by companies in Nigeria. Employing the event study methodology abnormal returns were computed as the residuals of the market model. Utilising a total of 62 announcements by 47 companies listed on the Nigerian stock exchange from 1st January, 2006 to 31st December, 2013. The study documented negative significant cumulative abnormal returns prior to the announcement date, a positive significant cumulative abnormal return on the announcement date and negative significant cumulative abnormal returns in both the 20 days after announcement and the 512 trading days observation after the announcement. The significant cumulative abnormal returns recorded in the period prior to the announcement date could as well be driven by insider dealings and the presence of abnormal return suggests the semi-strong form inefficiency of the Nigerian market.
Keywords: Insider Trading; Market Reaction; Equity Issue; Abnormal Return; Nigerian Stock Market.
Synchronization the Personnel Management Systems of Subsidiaries: Experience of the International Banking Group
Ruslan A. Dolzhenko

The article describes the experience of building the personnel management system in subsidiaries of the international banking group VTB. The headcount and the structure of staff in the banking group are analyzed by the start of the work concerning the changes of the personnel management group. The current system of the governance of the banking group is regarded and the reasons, which led the necessity of the changes, are marked out. The new personnel management system of the international banking group «VTB» (its objectives, principles of distribution of powers, formed governments) is described.
Keywords: Personnel management system of the international banking group, matrix management, synchronization of HR-processes, the motivation of staff.
JEL Code: J20, J31, J82