Showing papers in "International journal of economics and finance in 2011"

An Empirical Study of Success Factors of Women Entrepreneurs in Southern Region in Malaysia

Abstract: This study investigates the key factors affecting success of women entrepreneurs in Southern region in Malaysia. Data was collected using a self administered questionnaire that was distributed through mail survey. Multiple regression analysis was used as a more suitable methodology to identify the important determinants of success of women entrepreneurs. The results suggest that family support, social ties and internal motivation affect positively and significantly to the success of women entrepreneurs in the small business. The survey result also shows that women entrepreneurs having problem when they enter into the business. The implications of this study are discussed along with some recommendations.

Corporate Governance Mechanisms and Performance of Public-Listed Family-Ownership in Malaysia

Abstract: The study examines the relationship of corporate governance mechanisms and performance between family and non-family ownership of public-listed firm in Malaysia from 1999 through 2005 as measured by Tobin’s Q, ROA and ROE. The findings show that on average, family ownership experiences a higher value than non-family ownership based on ROE. On the other hand, based on Tobin’s Q and ROA, the study finds that firm value is lower in family than non- family ownership. In addition, the corporate governance mechanisms such as the board size, independent director and duality for family and non-family ownership has a strong significant influence on firm performance.

Determinants of Corporate Cash Holdings: Evidence from Canada

Abstract: The purpose of this study is to investigate the determinants of corporate cash holdings in Canada. This study also seeks to extend the findings of Afza and Adnan (2007). A sample of 166 Canadian firms listed on Toronto Stock Exchange for a period of 3 years (from 2008-2010) was selected. This study applied co-relational and non-experimental research design. The results show that market-to-book ratio, cash flow, net working capital, leverage, firm size, board size, and the CEO (chief executive officer) duality significantly affect the corporate cash holdings in Canada. This study contributes to the literature on the factors that determine the corporate cash holdings. The findings may be useful for the financial managers, investors, and financial management consultants.

The Role of Macroeconomic Variables on Stock Market Index in China and India

Abstract: This paper investigates the relationships between stock market indices and four macroeconomics variables, namely crude oil price (COP), money supply (M2), industrial production (IP) and inflation rate (IR) in China and India. The period covers in this study is between January 1999 to January 2009. Using the Augmented Dickey-Fuller unit root test, the underlying series are tested as non-stationary at the level but stationary in first difference. The use of Johansen-Juselius (1990) Multivariate Cointegration and Vector Error Correction Model technique, indicate that there are both long and short run linkages between macroeconomic variable and stock market index in each of these two countries.

Behavioral Finance: The Explanation of Investors' Personality and Perceptual Biases Effects on Financial Decisions

Abstract: One of the important factors on investors financial decisions are perceptual errors which affect their decisions while buying and selling stock. The good of this study is to recognize the popular perceptual errors among investors and its connection with their personality. Therefore, 200 of the investors in Tehran's stock market were taken randomly as samples and the needed data was gathered through questions, using the parametric analysis and correlation we have tried to check the accuracy of the hypotheses. The finding demonstrates that the offered perceptual errors have got a significant correlation with the investors’ personality. The conclusions exhibit that there is direct correlation between extroversion and openness whit hindsight bias and over confidence bias, between neuroticism and randomness bias, between escalation of commitment and availability biases. Also, there is a reverse correlation between conscientiousness and randomness bias, between openness and availability bias.

Inflation and Economic Growth: Evidence from Pakistan

Abstract: This study empirically explores the nexus between inflation and economic growth in the context of Pakistan economy. Annual data for the period of 1960-2006 has been used. According to the results of the study, inflation is positively related with economic growth in Pakistan and vice versa. As for as, the concern of causality between these two variables, it is found to be uni-directed. In other words, inflation is causing growth but not vice versa. To examine the extent to which economic growth is related to inflation and vice versa, Error Correction Models (ECM) have been employed. With the help of this procedure, it is possible to examine the short-run and long-run relationship between two variables. The Error Correction Model (ECM) test is essential to see whether an economy is converging towards equilibrium in the short- run or not. According to the outcome of the study, inflation is away from its equilibrium value. For instance, the error correction term -0.49 implies that 49 percent of the adjustments towards the short-run equilibrium relation for Pakistan occur within a year through changes in growth rates. On the other hand, 58 percent (error correction term -0.58) of the deviation of the inflation from its short-run equilibrium level is corrected each year. Furthermore, the estimated threshold model suggest that 9 percent threshold level (i.e. structural break point) of inflation above which inflation starts to lower the economic growth in Pakistan. Pakistan must need inflation but in single digit for growth because too fast a growth rate may also accelerate the inflation rate.

Is Modified Jones Model Effective in Detecting Earnings Management? Evidence from A Developing Economy

Abstract: This study analyzes the effectiveness of Modified Jones Model in detecting earnings management among the initial public offerings that are listed between 1985 – 2005 in the Dhaka Stock Exchange (DSE). Prior research documented that the Modified Jones model is effective in detecting earning management in mostly developed economies. However recently an empirical research of Korean stock exchange revealed that the Modified Jones model was not effective in detecting earnings management in the context of Korea. Our findings are similar to the Korean experience. Results of our study confirmed that Modified Jones model is not effective in detecting earnings management in the context of Bangladesh. We employed the modified Jones model to detect earning management in context of Bangladesh capital market and found out that it was not found very effective as the explanatory power of the model was only about 9 percent. This study then attempted to extend the modified Jones model and found it to be very successful. The inclusion of few factors such as revenue, depreciation expenses, retirement benefit expenses, asset disposal gains/losses with the modified model was very effective in detecting earning management in the context of Bangladesh. The explanatory power of the model was increased to about 84 percent. Therefore it is concluded that the modified Jones model is not effective in gauging the extent of earnings management practiced by the IPO firms in the Bangladesh capital market.

Dividend Policy and Bank Performance in Ghana

Abstract: The main thrust of this study is to find out the relationship between dividend policy and performance of banks in Ghana. The study used panel data constructed from the financial statements of 16 commercial banks in Ghana for a period of 5 years, from 1999-2003. These financial statements were obtained from the Banking Supervision department of Bank of Ghana. STATA was used for the data analysis. From the results of the study, the average dividend paid by banks over the study period was 24.65%. Also, it is apparent that banks that pay dividend increase their performance. The results also reinforce earlier findings that leverage, size of a bank and bank growth enhance the performance of banks. The age factor presents mixed results. Generally, the result is in tandem with earlier studies that dividend policy has an effect on firm value.

Board Dynamics and Corporate Performance: Review of Literature, and Empirical Challenges

Abstract: This paper is an attempt to conduct a comprehensive survey of relevant literatures in respect of the relationship between board dynamics and firm performance. The investigation reveals that equivocal findings still dominates most of the previous studies on key board dynamics such as Size, composition, CEO Duality and Diversity amongst others. While the need to assess the connection between board characteristics and corporate performance would for a longtime remained a legitimate and interesting area of investigation, the paper recommend that the researchers avoid mistakes of the past. These include over reliance on singular theory, the use of lone performance measure and most importantly the assumption of express relationship between the two variables. The use of more purposeful process based approach that identifies the cause effect of the relationship would be of tremendous benefit to this vital field of study.

The Impact of Mergers and Acquisitions on the Performance of the Greek Banking Sector: An Event Study Approach

Abstract: This paper examines the impact of Greek mergers and acquisitions on the performance of the Greek Banking Sector during the period 1996-2009 With the use of event study methodology, we reject the “semi-strong form” of Efficient Market Hypothesis (EMH) of the Athens Stock Exchange We find that ten days prior to the announcement of a merger and acquisition, shareholders receive considerable and significant positive cumulative average abnormal returns (CAARs) Also the results show that significant positive CAARs are gained upon the announcement of horizontal and diversifying bank deals The overall results indicate that bank mergers and acquisitions have no impact and do not create wealth We also examine operating performance of the Greek Banking Sector by estimating twenty financial ratios Findings show that operating performance does not improve, following mergers and acquisitions There are also controversial results when comparing merged to non-merged banks

An Empirical Study of the Motivational Factors of Employees in Nigeria

Abstract: The objective of this research is to draw attention to the importance of certain factors in motivating employees in Nigeria. Specifically, the study sought to describe the ranked importance of the following seven motivating factors: (a) job security, (b) personal loyalty to employees, (c) interesting work, (d) good working conditions, (e) good wages, (f) promotions and growth in the organization, and (g) full appreciation of work done. The 15 companies selected from Oyo, Kwara, Osun and Ogun States of Nigeria are mid-sized companies that involved in Educational Consultancy, Hotel and Catering Services, Transportation services, Retail services and Manufacturing. Data were collected through a well-structured questionnaire delivered to the employees of the companies. Findings of the study suggest that good working condition, interesting work, and good pay are key factors to higher employee motivation. Purposefully designed reward systems that include job enlargement, job enrichment, promotions, internal and external stipends, monetary, and non-monetary compensation should be considered. This will help the employer identify, recruit, employ, train, and retain a productive workforce.

Impact Analysis of Microfinance in Nigeria

Abstract: This paper applies the financing constraints approach to study whether microfinance institutions improved access to credit for microenterprises in Nigeria or not. According to this approach, microenterprises with improved access to credit rely less on internal funds for their investments. Thus, investment sensitivity to internal funds of micro enterprises in Lagos State (a municipal with significant presence of Microfinance Banks (MFBs) was compared to that of micro enterprises in Ekiti State (a municipal with no (or limited) presence of MFBs) using a cross sectional survey method and Microfinance Institutions (MFI) branch location data. Results indicate that MFBs alleviated micro businesses’ financing constraints. This approach is applicable to evaluating microfinance impact in other countries.

Development of Financial Market and Economic Growth: Review of Hong Kong, China, Japan, The United States and The United Kingdom

Abstract: The empirical evidence suggests that the development of stock markets in China, USA, United Kingdom, Japan and Hong Kong have independently a strongly positive correlation with their economic growth The result brings out an important theory to support for the proposition that the stock market development is one of the key drivers of economic growth in developed and developing countries, whatever the modes of their financial systems, stage of their economic development and types of economic system

Relationships between Oil Price and Stock Market: An Empirical Analysis from Istanbul Stock Exchange (ISE)

Abstract: The present study examined long-term relationships and short-term dynamics between National 100, National 50 and National 30 Index of Istanbul Stock Exchange (ISE) and international Brent oil price by using various econometric techniques. The study, in which relationships of three index with oil price are sought separately, encompasses the period between 04.01.2000 and 04.01.2010 and was performed with data consisting of 2437 days. As a result of applied Johansen cointegration test, it was determined that there was a cointegrated relationship between each index and oil price, with other words, there was a long term relationship between each of the three index and oil price. As a result of Granger causality analysis, it was observed that there was one way causality relationship from all index of the stock exchange market to oil price, but oil price was not the causal of each of the three index.

What is the optimum size of government: a suggestion

Abstract: What is the optimum size of government? When the rule of law and the establishment of private property rights are taken into consideration, it is clear that the answer will not be at some 0%. On the other hand, when the experience of the old Soviet Union, East Germany and North Korea is considered, the answer will not be at some 100% either. Therefore, extreme points should not be the right answer. This study offers using normal distribution to answer this question. The study has revealed the following findings: (i) The total amount of public expenditures as % of GDP, a) is at minimum level at 4.55% rate, b) is at optimum level at 13.4% rate, c) is at maximum level at 31.7%. (ii) Thus, as a fiscal rule, countries should: a) choose the total amount of public expenditures as % of GDP ≤ 31.7% b) target 13.4%. (iii) Tree dimensional (3D) normal distribution demonstrates that a healthy market system could be built upon a healthy government system (iv) This approach rejects Wagner’s law. In a healthy growing economy, optimum government size could be kept at 13.4%. (v) The UK, the USA and the European countries have been in the Keynesian-Marxist area, which reduces their average growth.

The Effectiveness of Business Development Services Providers (BDS) in Improving Access to Debt Finance by Start-Up SMEs in South Africa

Abstract: Start-up SMEs are very important to employment creation, poverty alleviation and sustainable economic development of South Africa One of the challenges facing start-ups is non-availability of debt financing The government of South Africa has put in place various intervention efforts to improve access to debt finance by start-up SMEs This study investigates empirically the effectiveness of Business Development Services providers (BDSs) in improving access to finance by start-up SMEs Data was collected through the use of self-administered questionnaire Data analysis included descriptive statistics, correlation and regression analysis The results indicate that most start-up SMEs are not aware of the programme The results furthermore indicate that start-up SMEs that are aware and use the programme have improved access to debt finance The recommendations focused on improving the awareness of the programme by start-up SMEs

Cointegration of Major Stock Market Indices during the 2008 Global Financial Distress

Abstract: This paper investigates the cointegration properties of major capital markets indices during the September, 2008 / August, 2009 episode of the financial and banking crises originated in U.S markets. Based on daily closing prices of international stock markets indices, the analysis shows that three set of indices of economies (OECD group, Pacific group and Asia group) have at least one cointegrating vector. Contrary to former studies that concluded on the independencies of Asian markets, this paper reveals that during the deeper financial crisis period, Asian major markets indices were cointegrated. This finding suggests that local investors in Asian capital markets cannot avoid any influence from outside capital markets even if some local markets are still entirely not opened to international investors.

Informal Self-Employment and Poverty Alleviation: Empirical Evidence from Motorcycle Taxi Riders in Nigeria

Abstract: This study examines the role of an urban informal transport sub-sector; the motorcycle taxis (popularly called ‘okada’), towards the provision of self-employment and income-generating opportunities for many of the urban unemployed in South West Nigeria. The data for the study was generated from a survey of 777 randomly selected auto cycle riders in two cities in Nigeria and the SPSS software aided data analyses. In addition to the descriptive analyses, two econometric models were specified and estimated using the OLS technique. The study revealed that the subsector is a high employer of young school leavers in the accident-prone job of okada riding. Earnings analyses show that 86% of the operators earn above the minimum wage level while human capital variables explain earnings distribution. Implications of the findings of the study point to the need for a more rigorous regulation of the sector to promote safety of operators and passengers.

The Intraday Behaviour of Bid-Ask Spreads, Trading Volume and Return Volatility: Evidence from DAX30

Abstract: This paper undertakes a fresh empirical investigation of key financial market variables and the theories that link them. We employ high frequency 5-minute data that include transaction price, trading volume, and the close bid and ask quote for the period May 5, 2004 through September 29, 2005. We document a number of regularities in the pattern of intraday return volatility, trading volume and bid-ask spreads. We are able to confirm the reverse J-shaped pattern of intraday bid-ask spreads with the exception of a major bump following the intraday auction at 13:05 CET. The aggregate trading volume exhibits L-shaped pattern for the German blue chip index, while German index volatility displays a somewhat reverse J-shaped pattern with two major bumps at 14:30 and 15:30 CET. Our empirical findings show that contemporaneous and lagged trading volume and bid-ask spreads have numerically small but statistically significant effect on return volatility. Our results also indicate asymmetry in the effects of volume on conditional volatility. However, inclusion of both measures as proxy for informal arrival in the conditional volatility equation does not explain the well known volatility persistence in intraday stock returns.

The Relationship between Foreign aid and FDI in South Asian Economies

Abstract: This study investigates whether or not foreign aid attracts foreign direct investment (FDI) in South Asian economies. Using various econometric techniques, the investigation is performed based on the concept of substitutable and complementary relationship between FDI and classified foreign aid. Foreign aid classified into aid in the shape of physical capital, and aid for human capital and infrastructure development. The results suggest that both aid in the shape of physical capital and aid for human capital and infrastructure development serve as complementary factors to foreign direct investment rather than being substitutable in South Asian economies. Thus, we conclude that aid flow in South Asian countries attract FDI into the region.

Microfinance and Women Empowerment: A Panel Data Analysis Using Evidence from Rural Bangladesh

Abstract: Microfinance has long been associated with generating empowerment of women Over 90% of their clients in Bangladesh are women The rising demand for credit may seem to indicate the popularity of the program However, analysing why demand for credit is rising among women may offer a way to analyse empowerment of women Therefore, this paper utilises this fact and uses a panel data survey to measure individual level outcomes such as labour supply, asset accumulation and family planning and household level outcomes such as children education and household expenditure per annum from participating in a credit program These outcomes would then be compared to outcomes that can be achieved from borrowing loans from a non-program source By comparing these outcomes, the benefit of micro finance is extracted, which in turn, is further analysed in terms of whether they indicate empowerment of women

Role of Institutional Credit on Agricultural Production: A Time Series Analysis of Pakistan

Abstract: In our predominant and cash-strapped agrarian sector, adequate credit provision is a definite buttress to implant technological advancements, achieve technical efficiency and hire efficient inputs to uplift agriculture output/income collectively and eradicate poverty eventually. In the midst of beleaguered informal credit sector and recent spurt in banking services in last decade diverted the attention to envisage the formal sector’s optimum potential. In this backdrop, this study is going to explore the role of institutional credit in agricultural production using the time series data for the period of 1972 to 2008. Cobb-Douglas production function is estimated using OLS and all the variables are transformed to per cultivated hectare. Results show that agricultural credit, availability of water, cropping intensity and agricultural labor force are positively significantly related to agricultural production.

Stock Market Development and Economic Growth in Zimbabwe

Abstract: The main purpose of this study was to explore the causal link between stock market development and economic growth in Zimbabwe using annual time series data for the period 1980 to 2008. The study evaluated the nature of the relationship between stock market development and economic growth in Zimbabwe. The stock market development was measured using two variables namely stock market size as measured by stock market capitalization as a ratio of GDP and stock market turnover as measured by the value of stocks traded as a ratio of stock market capitalisation. The study utilised advanced econometric techniques of Unit Root Tests, Vector Autoregressive (VAR) and Granger Causality Tests to explore the relationships. The empirical results showed a uni-directional causal link that runs from stock market development to economic growth and there is evidence of an indirect transmission mechanism through the effect of stock market development on investment.

Corporate Social Disclosure during the Global Financial Crisis

Abstract: The significant amount of research related to corporate social disclosure (CSD) over the last few decades indicates its importance. Prior studies have revealed continuous improvement in the level of CSD by corporations in different sectors. The recent economic and financial crisis has been identified by many economic and financial experts as the worst since the Second World War and is likely to have an impact on level of CSD. This study examines the extent of CSD before and during global financial crisis for 48 selected Australian companies. The results of the study reveal that there is an insignificant upward change in CSD during the financial crisis. In addition, this study examines the association between several firm level factors (profitability, leverage, change in profitability, change in leverage and size) and the extent of CSD and change in CSD. The study finds that the extent of CSD is not significantly associated with leverage and profitability but it is significantly associated with size. Additionally, change in profitability and size do not have any significant influence on change in CSD. However, change in leverage has a significant negative association with change in CSD.

Is earnings management opportunistic or beneficial in Taiwan

Abstract: This paper analyzes whether discretionary accruals affects firm value under the corporate governance mechanism via a panel of 277 Taiwanese listed companies from 1997 to 2007. Our results show that when managerial ownership is less than 9.67%, managers may engage in opportunistic earnings management. However, while managerial ownership higher than 9.67%, managers may tilt toward efficient earnings management. Only efficient earnings management is found in either board size less than 9 members or more than 12 members and institutional ownership less than 43.8%. Also, small board has greater impact on efficient earnings management than larger board. When the proportion of outside directors is below 38.73%, they can effectively supervise managers to engage in efficient earnings management.

Can Islamic Finance Constitute A Solution to Crisis

Abstract: The aim of this paper is to show that the Islamic finance is more stable than the conventional finance constituting, thus, a means to reduce the impact of financial crises. Using a VAR model for the financial indexes of France, United States, Indonesia and Saudi Arabia, we show that the effect of a shock on the American market during the period of crisis is negatively transmitted on all other markets, but with a small extent on the market using the method of Islamic financing.

Relationship between Financial Sector Development and Sustainable Economic Development: Time Series Analysis from Pakistan

Abstract: The study empirically investigated the contribution of financial sector in sustainable economic development of Pakistan. Annual data were used from the period of 1973 to 2007. The main objectives of the study were to analyze the long run relationship between financial sector development and sustainable economic development along with direction of causality between financial sector indicators and sustainable development. Auto Regressive Distributed Lag (ARDL) bound testing technique for cointegration was applied to estimate the long run relationship. A stable long run relationship was found between financial sector indicators and the sustainable economic development. Error Correction coefficient was statistically significant. It was concluded that financial sector had positive impact on the sustainable economic development in short run as well as in the long run. Causality test revealed that financial sector development was the basis for economic development.

Causal Relationship among Education Expenditure, Health Expenditure and GDP: A Case Study for Bangladesh

Abstract: This paper investigated the causal relationship among health expenditure, education expenditure and GDP for Bangladesh. First we present the extension form of the augmented Solow Growth model by including education expenditure and health expenditure as education and health capital. In our empirical study we used time series data for the period 1990 to 2009. From the ECM methodology we found that an including of health and education expenditure as an investment in health and education capital improve the significance of the coefficient of human and physical capital in the growth model for Bangladesh. Secondly, we find out the causal relationship among these variables by Var Granger Causality test. From the empirical study we found the existence of bidirectional causality from education expenditure to GDP and also from education expenditure to health expenditure and only unidirectional causality is obtained from health expenditure to GDP. This paper will provide a significant policy guideline to the policy maker.

Inflation, Unemployment and the NAIRU in Pakistan (1975-2009)

Abstract: In a developing country like Pakistan, Phillips Curve approach is employed on a data set of 35 years starting from 1975-2009. Phillips Curve helps in examining the relationship between inflation and unemployment. There is a non-proportional negative relationship between inflation and unemployment (if unemployment is reduced than there is a rising price level in the economy). Non-parametric estimates of the NAIRU are calculated. In this study, results are in the range of 3.21 – 9.01 percent. There is a long-run and casual relationship between inflation and unemployment over the above mentioned period in Pakistan. There is a transitory relationship (shocks) in the short-run, while there is a permanent relationship (shocks) in the long-run. By looking at the relationship established, one can forecast for next 10 years, that there will be an opposite relationship between both variables. This paper documents an empirical evidence for the existence of the Phillips curve in Pakistan i.e., inflation has decreased unemployment.

The Causal Relationship between Producer Price Index and Consumer Price Index: Empirical Evidence from Selected European Countries

Abstract: The purpose of this study is to examine the causal relationship between Producer Price Index and Consumer Price Index for the five selected European countries, using seasonally adjusted monthly data from August 1995 to December 2007. Toda and Yamamoto causality test (1995) are employed to investigate causality. The results indicate that there is a unidirectional causality between producer price index and consumer price index, running from producer price index to consumer price index in Finland and France and bidirectional causality between two indices in Germany. In the case of the Netherlands and Sweden, no significant causality is detected.