International Research Journal of Finance and Economics
 Issue 165
 January, 2018
A Comparison of the Level of Economic Integration of Hong Kong between the Mainland China and the USA
Eric Wong

This study examines the level of economic integration of Hong Kong with the Mainland China and the USA in terms of selected economic indicators. The economic indicators being tested are real GDP growth rate, inflation rate, money market interest rate and money supplied growth rate. Bivariate models are set up in order to investigate if there are co-integration relationship and Granger causality between the regions. This results show that Hong Kong has higher economic integration level with the Mainland China than that of the USA. The study provides evidence for economic policy formulation and evaluation of the appropriateness of adopting US dollar as the anchor currency of Hong Kong dollar.
Keywords: Economic Integration, Economic Indicators, Co-integration Analysis, Granger Causality, Anchor Currency
JEL Classification: F150, F360, F440, F450
Conversion of Federal Tax Collection to Local Government
Haerial and Muh.Rum

This study aims to determine the extent of readiness of local governments in implementing the transfer of land and building tax as a tax Rural and Urban areas and determine the factors that supporting and obstacles in preparation for the transfer as a local tax. This study based on Law No. 28 The year 2009 on Regional Taxes and Levies. Data collection techniques in the form of research literature and field research consisting of interviews and documentation. The results of the study show that so far the Local Government is ready to manage this UN-P2. In this transfer process is certainly there supporting factors as well as inhibiting factors in the preparation of UN-P2 execution. However, the local Regional Revenue Office in cooperation with the relevant parties continue to make best efforts to make the switching process and management of PBB-P2 go well, successfully and smoothly.
Keywords: transfer implementation, Land and Building Taxes of Rural and Urban Areas, Local taxes.
JEL Classification:
Asking Corporate Commitment on Philanthropy: The Effect to Firm Value
Irwansyah, Fibriyani Nur Khairin, Yoremia Lestari Ginting and Siti Narsiah

Philanthropy is part of Corporate Social Responsibility in form of a contribution to society. Companies can interpret philanthropy as an investment, because the return on philanthropy expenditure can not be perceived by the company in the short term. Therefore, this study aimed to analyze the influence of philanthropy to firm value by using Profitability as a moderating variable. This research used purposive sampling method so that the sample qualifies as many as 30 companies listed in Indonesia Stock Exchange 2013-2014 period. Philanthropy’s variable is proxied by the ratio of corporate giving and firm value using Tobin's Q Ratio. Further, the profitability is proxied by Return on Investment (ROI). The tests carried out using multiple linear regression and Moderated Regression Analysis (MRA). Results of this study indicate that philanthropy negatively affects to firm value, and then with the existence of ROI, it strengthens the effect of philanthropy to firm value. This indicates that investors still doubt the commitment of company’s philanthropy, furthermore it will decrease the corporate image so that philanthropy has not been a positive influence on firm value. As well as from the corporate side also showed that management’s low commitment for philanthropy, because it has not been considered as part of the company's bottom line.
Keywords: Corporate Social Responsibility, Firm Value, Philanthropy, Profitability, Stakeholder Theory.
JEL Classification:
Challenges Facing Intra-Regional Trade among North African Countries
Abd Elrhman Elzahi Saaid ALI

The high rate of unemployment and the slow progress of economic growth in most North African countries have spotlighted the importance of inter-regional trade among them as an alternative solution to achieve inclusive growth in the long run. This paper investigates challenges facing intra-regional trade for the North African Arab countries, namely: Mauritania, Sudan, Egypt, Morocco, Libya, and Algeria. Beside that, the study attempt to identify the possible trade linkages and the elements of succession to boom inter-regional business among these countries. This study lays out the options that policymakers can adopt to overcome these challenges. The results reveal that in spite of the existent of the linkages between these countries that might lead to the successful inter-regional trade among them, there are more challenges which have hindered its contribution based on the highly requested inclusive economic growth. The results of this study show a strong policy implication for the policy makers in these countries that might support the facilitation and the promotion of inter-regional trade among them.
Keywords: Economic Integration, Inter- regional Trade, Trade-integration, OIC
JEL Classification: F02; F13; F15
Dividend Policy, Funding Decision and Share Price: Study in Kompas 100 Index in Indonesia
Helin Garlinia Yudawisastra, MBA Sumantri and Daniel T.H Manurung

This study aims to examine the relationship between dividend policy, funding decision and stock price at 100 compass index companies in Indonesia period 2011-2015. Sampling method using purposive sampling with total sample 21 company. Regression in this study using panel data regression. The result of research shows dividend policy by dividend payout ratio has significant effect on stock price which means higher dividend payout ratio will attract investment to invest in company so it will increase share price, dividend policy relation by using dividend yield has no significant effect on price stocks, which means dividend yields have no role in stock prices, this is because the tax burden on dividends is too high, the relationship of financing decisions using the debt to equity ratio does not affect the stock price, which means that the company prefers internal sources of funds rather than selling shares.
Keywords: dividend payout ratio, dividend yield, debt to equity ratio, stock price.
JEL Classification: G32
Influences of Quantitative Easing Policy on Volatility and Correlation among Asian Financial Markets
Szu-Lang Liao, Chien-Hsiu Lin, Chia-Wei Lai and Jung-Hsuan Lin

This paper is to investigate the impacts of the U.S. quantitative easing (QE) policy on the volatility of stock and exchange markets and the dynamic correlation between stock and exchange markets in the Asian countries. Our empirical results show that the U.S. QE policy would ease the fluctuations caused by the 2008 global financial crises by reducing the volatility of stock and exchange markets in the Asian countries, especially during the QE1 period. Using the DCC GARCH model, we explore whether the QE policy made significant changes of the structure between stock and exchange markets. We find that the dynamic correlation coefficients of stock and exchange markets in Hong Kong, Malaysia, Taiwan and Thailand show a dramatic change during the period of financial crisis and QE policy. In particular, the stock indices rise more and the currencies appreciate more during the QE1.
Keywords: Quantitative Easing; Volatility; DCC-GARCH; Asian Markets; Dynamic Correlation.
JEL Classification: F31; G01
Analyzing Target Redemption Forward Contracts under Lévy Process
Jerry T. Yang, Szu-Lang Liao and Jun-Home Chen

The depreciation of the renminbi (RMB) in the last few years had caused many default events on the leveraged structural products called “Target Redemption Forward” (TRF). Analyzing the components of the TRF, we can find these products are composed of buying and selling exchange options. From the empirical analyses of the returns of the exchange rate of USD/CNY, there exist non-normal, leptokurtic and volatility clustering phenomena. Hence, we use the time-changed NIG-Lévy process to construct the dynamics of the exchange rate. Finally, we apply the Monte Carlo simulation technique to price the TRF and analyze the impacts of the clauses in the term sheet of TRF.
Keywords: Target Redemption Forward, volatility clustering, NIG-Lévy, Monte Carlo simulation.
JEL Classification: F31, G12, G13
Effect of Capital Adequacy Requirements on the Profitability of Commercial Banks in Nigeria
Ini S. Udom and Dr. Eze, Onyekachi R.

This study examined the effect of capital adequacy requirements on the performance of commercial banks in Nigeria. The study used secondary time series data sourced from the NDIC and CBN Annual and Bank Supervision Reports. The data analysis technique employed include the Ordinary Least Squares (OLS) regression method. The overall capital adequacy variables of the study shows that ASF, CRWA, TQC together have significant effect on the dependent variable, Return on Asset (ROA), which measures bank performance. The results further show that capital adequacy impact positively on the financial performance of commercial banks in Nigeria. This implies that capital adequacy strongly and actively stimulate, improve and grow the financial performance of commercial banks and that sufficiency of capital and adequate management can translate to improved performance. Based on the findings, the study recommends for improvement in the management of bank assets and liabilities, especially on the quality of assets portfolio and deposit liabilities in order to improve on the achievement of corporate objectives, and for the corporate governance process to be enhanced by adopting international best practices. The regulatory framework should also be enhanced to be more dynamic and effective as this will impact positively on bank management and enhance financial performance of commercial banks in Nigeria.
Keywords: Total Qualifying Capital (TQC), Adjusted Shareholders Fund (ASF), Capital to Risk Weighted Assets (CRWA), Return on Assets (ROA), GDP.
JEL Classification: C01, C22, G2, G21
The Variation of Fama-French Three-Factor Beta Risks by Interval Test in Taiwan Stock Market: Theory and Evidence
Wen-Gine Wang

In this research the three-factor Fama-French regression model (1992, 1993, 1995) is investigated in Taiwan stock market, in which the factors include the market risk premium (MRP), small-minus-big risk premium (SMB) and high-minus-low risk premium (HML) associated with the regression parameters (βMRP,) βSMB,) βHML). It is known that the MRP, SMB and HML can affect a stock portfolio’s return. Based on the Fama-French model, six types of stock portfolios (namely, BH, BL, BM, SH, SL, and SM) are created according to company size (Small or Big) and the ratio of book-to-market equity (High, Medium or Low). Using the data from the Taiwan Economic Journal (TEJ), a traditional multiple regression equation is proposed, which can explain the returns of six types of portfolios (BH, BL, BM, SH, SL, and SM) with R-square ranging from 93% to 97% based on the three factors (MRP, SMB, and HML). This study further tests the equivalence of the beta risk parameters (βMRP,) βSMB,) βHML) using two one-sided tests (TOST) for the six types of portfolios under each factor, and the economically meaningful equivalence margins of these risk parameters were empirically determined by the concept of risk and return. Compared with traditional point test, TOST for beta risk parameters provides more information for investors.
Keywords: Fama-French three-factor model, Traditional test, Risk and return, Two one-sided tests (TOST), Equivalence
JEL Classification: G11
Oil Subsidy Management and Performance of the Nigerian Economy
Agbaeze, E.K and Abner, Ishaku Prince

The study adopted the ex-post facto research design. Secondary data was sourced from Petroleum Products Pricing Regulatory Agency (PPPRA) and the Central Bank of Nigeria Statistical Bulletin for the period 2006 to 2015. Regression statistic was used to test the hypothesis formulated. The result revealed payment of subsidy had positive and significant impact on gross domestic product of Nigeria for the period 2006 to 2015 (coefficient of Log OPS = 0.3420, t-value = 2.133, p-value 0.045 < 0.05). This may not be unconnected with the use of such funds in productive sectors of the Nigerian economy. However, since government is insisting on the removal, the removal of subsidies should not be done in phases as it has never worked in any country and there is a strong likelihood that it may not work in Nigeria as well.
Keywords: Oil, Subsidy, Management, Nigerian Economy, Gross Domestic Product (GDP), Nigerian National Petroleum Company (NNPC), Petroleum Products Pricing Regulatory Agency (PPPRA).
JEL Classification: N00