International Research Journal of Finance and Economics
 Issue 136
 June, 2015
Returns, Order Imbalance and Speed of Efficiency: Evidence from India
Nikhil Rastogi, K Kiran Kumar and V Nagi Reddy

We check for the speed of efficiency for the Indian market pre and post the introduction of compulsory rolling settlement using the variables of lagged returns and order imbalance at the daily as well as intra-day intervals in the post rolling settlement period. As measured by lagged returns we find that the market has turned weak form efficient in the intra-day intervals of 120 minutes and 60minutes. We also find that the persistence in order imbalance is getting neutralized at daily interval such that it does not have any significant effect on returns. This brings out the ability of the Indian market in terms of absorbing imbalances at daily interval. At the 60 minutes and 120 minutes intervals we find that lagged imbalances continue to significantly impact the returns. Since order imbalance is not observable so this result is more a comment on strong form of efficiency of the Indian market.
Keywords: Efficiency, India, Order imbalance, Pre-2002 and Post-2002, rolling settlement
Tariff Shocks, Asymmetric Pricing-to-Market and Exchange Rate Dynamics
Chung-Fu Lai

This paper attempts to provide an analysis of the impact of tariff shocks on exchange rate dynamics, and tries to indicate the role of asymmetric pricing-to-market (PTM) behavior in a two-country New Open Economy Macroeconomics model.We find that the key factors determining whether the exchange rate overshooting are the parameters of the consumption elasticity of money demand and the degree of asymmetric PTM between countries.If the consumption elasticity of money demand is less than 1, and the fraction of domestic PTM firms is higher than that of foreign PTM firms, the exchange rate will exhibit the overshooting behavior in response tothe tariff shocks.
Keywords: Tariff Shocks, Exchange Rate Dynamics,New Open Economy Macroeconomics, Asymmetric Pricing-to-Market
JEL Classification: F12, F13, F40
The Effects of Credit Rating Changes on Corporate Excess Cash Holdings and their Marginal Value
Min-Shik Shin, Soo-Eun Kim, Jong-Ho Shin and Jae-Ik Lee

This paper examines the effects of credit rating changes on corporate excess cash holdings, and their marginal value. We find that downgraded firms may accumulate excess cash holdings from internally generated cash flows in an attempt to buffer the firm from negative market sequences, or to protect further downgrades.In particular, the firms downgraded from investment to speculative grade are more likely to accumulate excess cash holdings for precautionary purposes during increased financial constraints. However, upgraded firms do not significantly change their cash holdings behavior.Excess cash holdings following credit rating downgrades show a decline in their marginal value because shareholders appear to question the reasonsbehindsuch cash policy changes. From the agency theory perspective, downgraded firms are likely to accumulate excess cash holdings at the expense of shareholders.
Keywords:credit rating changes, excess cash holdings, marginal value, financial constraints, speculativegrade
JEL Classification Code:G30
Exchange Market Pressure and the Degree of Exchange Market Intervention: An Application for Turkish Economy
Arife Aycan Mutlu and Kursat Yalciner

Turkish Foreign Exchange Market has undergone several policy changes between 1990 and 2013. Major factors that contributed to these policy changes include economic and political crises along with local and global incidents that impacted money market. Exchange Market Pressure is considered as one of the major factors that affect the determination economic policies and this article analyzes the Foreign Exchange Market of Turkey using the measure of exchange market pressure index and the intervention index. The results show that there has been a high degree of exchange market pressurefor the Turkish lira in order to appreciate over the period 1990 to 2013.To remove the excessive fluctuations in currencies,foreign exchange reserves have been used as an important policy tool over this period byThe Central Bank of The Republic of Turkey. We also find that Turkish Economy has a high degree of intervention and the exchange rate policy should be defined as “managed float” rather than “independently free floating” in Turkey.
Keywords: Exchange Rates, Foreign Exchange Reserves, Intervention, Currency Crisis, Devaluation.
JEL Classification:F30; F31
Impact of Cost Behaviouron Profit Forecast of the Firms Adopted in Tehran Stock Exchange
Reza Gholami Jamkarani, Ali Akbar Farzinfar and Saeed Baseri

One of the common purposes of accounting is to prepare useful information to predict economical events from which prediction of profit is highly significant and is of the main studies in accounting Recognition of cost behavior is of the most important purposes of profit analysis for financial analyzers.
This study is going to survey the effect of a kind of cost behavior called sticky on the precision of the prediction of accepted companies ' profits in stock market of Tehran. It shows that the increasing amount in costs during the increasing of activity level is more than the decreasing amount of the costs during the decreasing of activity level. To do this and in order to understand the effect of sticky of costs in general, and its components like cost of goods sold and costs of sale, general and official costs on the precision of profit prediction, three multi – variable Regression models were used.
Required data were extracted from the financial statement of 760 year – companies during the period of fiscal years from 2000 to 2010. The results showed a meaningful effect of main independent variables of the models, including the costs, cost of goods sold, costs of sale, general and official costs on the precision of profit prediction by the financial analyzers. The study results also confirmed the meaningful effect of control variables of the models including: market value, sales variation rate, standard deviation of reported predictions, ratio of profit to sale, real loss, prediction of loss and profit variations in comparison on to the last period, on the precision of profit prediction by the financial analyzers.
Keywords:cost behavior, sticky costs and profit prediction.
China and Russia: A Path to Innovative Development
Dmitrii Kruglov and Vladimir Sinov

This article states that the development of innovative sphere creates the conditions for economic growth. The successful functioning of the national innovative system requires not only a strong science and education, but also a whole range of other institutional conditions. There is the strategic "Plan 2006 - 2020" in China which is an attemption of the government to create a Chinese growth model more viable, to make innovation a guide for future economic growth. According to international experts, China has a very high potential for the development of innovation (40th place), which is a prerequisite for the further growth of the innovative economy. This figure is slightly higher than in the Russian Federation. Further innovative development of China and Russia will contribute to the policy of regional alignment
Keywords: Innovations, innovation system, competitiveness, the Global Competitiveness Index, institutions, growth rate, economic indices, efficiency, innovation economy
The Effect of Liquidation Option on Return on Asset Persistence and Accruals
Daruish Foroughi, Ahmad Gougerdchian and Hami Deris Mahmoudi

This study has studied the effect of Liquidation Option onReturn on Asset (ROA) persistence, ROA, and accruals among listedfirms in Tehran Stock Exchange, (TSE). Liquidation option has measured using three criteria) persistence sales reductions, reductions in capital- expenditure and employee reductions. ROApersistence and accruals are some aspects of loss persistence level being used by financial statement users in order to determine loss persistence level. Obtained results of studying 152 firms from 2007 to 2012show that ROA persistence in loss-making firms is lower than that of profitable ones. Liquation option level in loss-making firms is more than other ones using two criteria, changes in sales and changes in number of employees; however, it is not higher using changes of criteria in capital expenditure. Moreover, liquidation option enjoys negative and significant effect using sales reductions, reductions in capital- expenditure and employee reductions. Although accrual level in firms with liquidation option is also lower than other ones considering two criteria – sales reductions and employee reductions, it is not lower in comparison with other firms concerning reductions in capital- expenditure.
Keywords: loss persistence, liquidation option, Return-On-Asset persistence, Accruals
Structure of a Performance Evaluation Model for Management of Banking' Products and Services
Ibsem Agrello Dias, Ademar Dutra, Carlos Rogério Montenegro de Lima and Leonardo Ensslin

Banks are important economic development agents of a country and have as business logic the capture of excess funds and the application of those funds to finance the development of companies, personals and governments. This article aims to build a performance evaluation model of banking'services and products management to the Tactical Unit of a nationwide bank, based on Multicriteria Methodology for Constructivist Decision Aid (MCDA-C). It is an exploratory research, in the form of a case study, with qualitative and quantitative approach, involving the collection of primary and secondary data. The results are: (i) the structuring of a evaluation model, with six Concerns Areas, eleven Fundamental Points of view and 89 descriptors (performance indicators) represented in the decision tree; and (ii) measuring of the performance of nine descriptors affecting the Fundamental Point of View Loan, the result shows that six descriptors are at level of excellence and three descriptors, with competitive results that under the decision-makers' perspective, that need improvement actions.
Keywords: Banking services. Performance evaluation. Strategic management. MCDA-C methodology.
The Role of Time Management and its Impact on Students’ Academic Achievement A Case (Students at Northern Borders University)
Odai Falah Mohammad Alghaswyneh and Wael Sh. Basri

This study aims to analyze students' perspectives at Northern Borders University (NBU) toward how time could be managed in terms of planning, organizing upon academic achievement, and what is the role of time and its impact on their academic achievement, in order to know how students spend their leisure during and after university. The study aims to identify the main reasons and obstacles that limit utilization of student's time.
Method: In order to get the outcomes of this study, a questioner designed as a tool to collect data. The sample of this study consists of (550) students at (NBU) in Saudi Arabia.
Results: The results of the study showed that: There is no statistically significant relationship between the elements of students' time management in terms of planning and organizing, and their academic achievement, with low level of time utilization. Findings of the study also showed there is no relation with statistically significant between student's personal variables (specialization, place of residence, and educational status) and academic achievement, and students' levels in planning and organizing area were neutral, with a lack utilization of time.
Recommendations: based on the results, its recommended that university administration should build-up a cohesive strategy to develop student's perception of time importance and the benefits of utilizing it fruitfully. It should develop a long-run plan to evolve students through training courses, to enrich leisure with beneficiary programs that positively effects their academic achievement by activating the role of academic supervision in faculties.
Keywords: Time Management, Academic Achievement, Planning, Organizing, University.
Relationship between Labor Unionsand Investment-Cash Flow Sensitivity
Min-Shik Shin, Soo-Eun Kim and Jae-Ik Lee

This study uses the panel data offirms listed on the Korea Exchange during the period 2000–2014 to examine the relationshipbetweenlabor unionsand investment-cash flow sensitivity. We find that labor unions have significant negative effects on corporate investment, which suggests that unionized firms are likely to decrease their capital investment in an attempt to prevent the union tax effect.Further, wefind that labor unions have significantpositive effects on investment-cash flow sensitivity. This finding suggests that unionized firmsare likely to increase theirinvestment-cash flow sensitivityin an attempt toreduce their cash liquiditiesfurther and to enhance theirbargaining power against the union.We find positive union effects on investment-cash flow sensitivity evenafter controlling for the Korean chaebol effects and using several proxies for financial constraints.
Keywords: labor union, corporate investment, investment-cash flow sensitivity,union tax effect, financial constraint.
JEL Code: G30