International Research Journal of Finance and Economics
 Issue 146
 March, 2016
Capital Reduction through Share Repurchases Financial Characteristics and Corporate Governance
Chin-Jinny Lee, Syou-Ching Lai and Hung-Chih Li

This study investigated the short-term announcement effect and long term performance of firms with capital reduction through share repurchases (CRSR). With respect to the short-term announcement effect, we found that the cumulative abnormal returns (CARs) of the CAPM one-factor pricing model of firms are positively significant, but those of the Fama-French (1993) three-factor pricing model of firms not. For the long-term performance aspect, the long-term CARs of firms with CRSR are significantly higher than those of matched samples when the CAPM one-factor - the Fama-French(1993) three-factor or the Carhart (1997) four-factor pricing models is used in the first or second year after the event. Our findings suggest that it is more objective to use the CAPM one-factor or the Fama-French (1993) three-factor pricing model to estimate firms’ expected returns when matched samples are used to test the performance of firms with CRSR, since using matched samples can control other factors in addition to capital reduction announcement. Moreover, regression analysis indicates that capital reduction through share repurchases, the ratio of capital reduction, the return on equity, the proportion of independent directors and supervisors, and the deviation of control rights and flow rights may affect the performance of firms in the first year after the event, but only the return on equity and the proportion of independent directors and supervisors may affect the performance of firms in the second year after the event.
Keywords: capital reduction through share repurchases, Fama-French three-factor pricing model, Carhart four-factor pricing model, matched samples.
Identifying the Factors Affecting the Sales Of Marketing Units Using Combination of FAHP and Monte Carlo Simulation Algorithm
Maryam Maleki and Abdolali Keshtegar

This study aims to identify and weigh factors influencing the sales of marketing units with emphasis on the role of staff. With the background of literature and expert opinions, factors affecting sales of the marketing units were identified. In addition, in selecting affective criteria on sales of the marketing units, those which were directly or indirectly affected by staff were selected. In order to weigh and identify the importance of these factors, the combination of fuzzy hierarchical analysis and Monte Carlo simulation was used. The results of data analysis show that between three main factors affecting the sales of the marketing units, staff group with 0.48 weight has the greatest impact on the sale and two other groups, factors related to customers and factors related to organization are in the second and third place with 0.37 and 0.20, respectively.
Keywords: sales, staff, marketing units, fuzzy hierarchical analysis, Monte Carlo
To Hedge or Not to Hedge Foreign Exchange Exposure: A GCC Perspective
Ahmad Bash

In this paper, we examine the performance of different hedging strategies for a domestic firm in the GCC that is exposed to foreign currencies, such as the GBP, CHF, and JPY. These strategies are always to hedge, to hedge or not to hedge, and always not to hedge. Our results show that, on average, there is no difference in performance and risk under these hedging strategies for all of the GCC currencies considered against foreign currencies. The results also show that in terms of risk, no strategy outperforms the other. Hypothesis-testing results suggest that firms do not have to worry about foreign-exchange risk, at least in the long run. Different reasons were suggested to verify such results.
Keywords: Foreign-Exchange Risk, Hedging, Gulf Co-operation Council, Fixed Exchange-Rate Regime
Exploring the impact of public education Expenditure on the economic growth in Egypt
Rasha Qutb and Ismail El Shennawy

Education has been regarded as one of the leading determinants of economic growth since the time of Adam Smith. The belief that education promotes growth has led governments of many developing countries to improve the human capital by pumping more investments in the education sector. But the issue is that whether improved level of education resulting from more education spending can promote economic growth is still controversial. In such a concern, this paper analyzes the impact of public education expenditures on economic growth of Egypt during the period (1908-2014) through the application of Johansen Cointegration technique, and Vector Error Correction Methodology. It examines the direct channel through which human capital investment can affect long run economic growth as being a direct input in the production function. The findings exhibit the existence of long run relationship between public education expenditure and economic growth in Egypt, whereas the impact is found to be negative in the short run owing to the growing rate of unemployment. More efforts should be exerted; the solution for moving forward - developing the current generation’s entrepreneurial capacities and skills and capitalizing on the existing potential — will only materialize through investing in the nation’s “oil”, its human capital.
Keywords: Economic growth, public expenditure on Education, Johansen Cointegration test, VECM model.
JEL classification: H520
Influence of Investor’s Personality Traits and Demographics on Overconfidence Bias, Self Attribution Bias and Availability Bias
Dr. Taqadus Bashir, Sulaman Jamil, Amna Anwar, Naila Afzaal and Adnan Tariq

This study aims to investigate the relationship between Demographics (gender, age, education level, investment experience, income) personality traits (extraversion, agreeableness, conscientiousness, neuroticism, openness) and behavioral biases i.e. overconfidence bias, self-attribution bias and availability bias in Lahore Stock Exchange. One of the unique features of this paper is the analysis of the relationship of self-attribution bias with overconfidence bias. Survey method has been used to collect data from a sample of 150 randomly selected investors of Lahore Stock exchange. The results showed the association between personality traits, overconfidence, self-attribution and availability bias. So on behalf of these findings it is concluded that investors of Lahore Stock Exchange are biased and do not make purely rational decisions.
Keywords: Overconfidence bias, Self-attribution bias and Availability bias, Extraversion, Agreeableness, Conscientiousness, Neuroticism and Openness
The Dilemma of Perceived Crowding to Sales Performance in Retailing: The Intervening Role of Perceived Work Overload
Chih-Hsiung Wei, Chung-Hsing Yeh and Shou-Lin Yang

Previous research has indicated that the relationship between crowding and task performance is still not understood. In this study, sales performance replaces task performance is more practical in the retailing setting. Furthermore, it expands on the previous research and investigates the intervening effects of work overload on the relationship between perceived retail crowding and sales performance. After conducting a survey involving 346 frontline salespeople among Taiwan’s department store tenants, perceived work overload was determined to have an intervening (full mediation) effect on the relationship between perceived retail crowding and sales performance. In addition, the present study also presents some suggestions for managerial practice and future research.
Keywords: Perceived crowding, perceived work overload, sales performance
JEL classification: M31
Applications of Credit Default Swaps and Collateralized Debt Obligation
Amit Mahajan

This paper briefly explains the various applications of special type of derivatives, whose underlying assets are various grades of credits, popularly known as credit derivatives. Two main types of credit derivatives are Credit Default Swaps and Collateralized Debt Obligation. Credit Default Swaps finds its application in hedging dynamic credit risk, speculative trading, and exploitation of credit arbitrage opportunities and plays also an informative role in financial market. It can also be utilized to create other type of synthetic assets. Collateralized Debt Obligation, on the other hand, is a multi-name credit derivative which involves more than one credit issuers and more than one credit buyers in the process. This instrument finds application in shrinking the size of balance sheet, arbitration, construction of premium securities and development of micro collateralized debt obligation. This microfinance collateralized debt obligation is a viable way for micro borrowers to have an access to the capital of the global capital market.
Keywords: Derivatives, CDS, Credit Default Swaps, CDO, Collateralized Debt Obligation
Working Capital Requirement and Profitability: Evidence from Seafood Processing Enterprises in the Khanh Hoa Province of Vietnam
Nguyen Thanh Cuong and Nguyen Thi Hong Nhung

Investment decisions in working capital is crucial for any business organization. The purpose of this research is examining the relationship between working capital requirement and firm’s profitability. A sample of 38 seafood processing enterprises in Khanh Hoa province of Vietnam for a period of 9 years from 2006 to 2014 was selected. Panel data methodology was employed and Generalized Method of Moments (GMM) was used as estimation technique. The results show that there is an inverted U-shaped relation between investment in working capital and firm's profitability. This finding implies that there exists an optimal level of investment in working capital in order to maximize a firm's profitability. Specifically, companies should not invest more than 32% of working capital to total assets. To ensure and enhance the corporates’ profitability, optimal investment range of working capital should be below 32%. In addition, study results also showed that promoting revenue growth, improving asset efficiency and using reasonable financial leverage can increase firm's profitability. From this results, the article proposes some policies implications for seafood processing enterprises in Khanh Hoa province of Vietnam in making investment decisions on working capital reasonably in order to maximize a firm's profitability.
Keywords: Working Capital Requirement, Investment in working capital, Profitability.
JEL code: G31, G32
Environmental Accounting Application Obstacles in Industrial Companies from the Management Point of View and the Legal Auditor
Mah’d Al-jabali

Environmental pollution problem occupied the attention in the various countries of the world, the developed ones, where there is a big rise in the pollution that arise as a result for industrial companies practicing for various activities, which arises from these activities many of the harmful industrial waste as: fumes, gases and chemical liquids, therefore for this waste clear impact in air and water pollution.
Many Competent oversight bodies and disclosure of what caused the contamination of the environment and its demand began to preserve the environment through the adoption of appropriate means, most notably the use of appropriate machines and devices clean and ensure the maintenance of these machines. The disclosure of this practice during the environmental accounting system in those facilities and disclosure of accounting data for projects that contributes to the pollution of the environment.
Hence, this study was to clarify the most important obstacles facing the application of environmental accounting in the Jordanian companies from the perspective of corporate governance and legal auditor.
Keywords: Environmental accounting, Jordanian companies, legal auditor
The Impact of Earnings Management Against Market Reaction: Empirical Evidence from Indonesia
R. Adisetiawan and Ahmadi

This study aims to analyze whether there is a difference between market reactions: 1) the company that did the earnings management by not doing earnings management; 2) companies having income increasing discretionary accruals with who has income decreasing discretionary accruals; as well as 3) between large corporations who do the earnings management with small companies that perform earnings management. Research results using two independent samples test Kolmogorov-Smirnov Z pointed out that at the level of significance of 0.05 there is no difference between market reaction: the company that did the earnings management by companies that do not perform earnings management; and between companies having income increasing discretionary accruals with companies having income decreasing discretionary accruals. While market reaction among big companies that do earnings management with small companies that do earnings management is different from the value of Kolmogorov-Smirnov Z amounting to 1.480 and 0.025 significance probability.
Keywords: Earning Management, Market Reaction, Size