Forthcoming articles


Afro-Asian Journal of Finance and Accounting


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Afro-Asian J. of Finance and Accounting (16 papers in press)


Regular Issues


  • An empirical study on index changes on the Indonesia Stock Exchange   Order a copy of this article
    by Abdur Rafik, I Wayan Nuka Lantara 
    Abstract: The presence of a positive (negative) price response to stock additions (deletions) to (from) an index has been getting attention owing to its deviation from the perfectly elastic demand curve of stocks. This study sheds light on this issue in the Indonesian context, using various index categories. The results intriguingly differ from prior research in most developed countries that have confirmed a positive (negative) price response to stocks added (removed) to (from) an index. Price response patterns are even opposite, which are negative (positive) for some additions (deletions), and they seem to reject the prediction of information-based hypotheses. The positive(negative) price response to (added) deleted stocks is associated with (low) high liquidity, (low) high leverage, and (high) low growth opportunity. These results seem to confirm the advantage of value premium strategy in the Indonesian capital market.
    Keywords: demand-based hypothesis, index changes, index rebalancing, index revisions, information-based hypothesis, price responses, price pressure hypothesis, stock additions, stock deletions
  • Impacts of the US monetary policy on the Vietnamese stock market   Order a copy of this article
    by Xuan Vinh Vo, Phuc Canh Nguyen 
    Abstract: Understanding the impacts of the US monetary policy on the Vietnamese stock market is important for many stakeholders since Vietnam has been gradually integrated into the global economy. There have been increased relationships in trade, investment and other activities between Vietnam and the USA in the last few decades. Employing dynamic panel data techniques, we find that the US monetary policy has strong impacts on the Vietnamese stock market. Moreover, we document that these impacts are affected by the Vietnamese firms' characteristics, including firm size, market-to-book ratio and financial leverage. The estimation results also confirm the impacts of firm size and market-to-book equity on stock returns as suggested by the Fama-French model. Vietnamese stock returns are also driven by the countrys macroeconomic condition, monetary policy, inflation, and stock market performance.
    Keywords: US monetary policy, stock market, Vietnamese firm stocks.
  • Determinants of Compliance and Disclosure Requirements by Top Listed Companies under Malaysian Code of Corporate Governance (2012)   Order a copy of this article
    by Prem Lal Joshi, Nik Mohammed Zaki Sallah, Hamsatulazura. .Hamzah, Shaista Wasiuzamman,, Anbalagan Krishnan 
    Abstract: This study examines the compliance and disclosure levels of corporate governance practices of Malaysian firms under the Malaysian Code of Corporate Governance (MCCG) 2012. Additionally, the study aims to deepen our understanding of the main drivers of corporate governance reporting in one of the fast developing countries in Asia. The study consists of 84 top companies listed with Bursa Malaysia by extracting data from their 2013 annual reports. The study uses 64 corporate governance disclosure items to develop a disclosure index which is taken as the dependent variable. The overall voluntary compliance and disclosure in Malaysias top listed companies is good with an average of 77.1%, with minimum compliance level being 50% and maximum being 90%. Firm characteristics and corporate governance mechanisms are taken as the independent variables. Using OLS regression, the study finds that board size, institutional ownership, foreign ownership, profitability, and auditor size are the main determinants of corporate governance disclosure in Malaysia under MCCG 2012. The paper contributes to the literature on disclosure, and the reported findings are broadly consistent with the notion that good corporate governance generally leads to better corporate disclosure and transparency in developing capital markets.
    Keywords: corporate governance, disclosure, ownership, profitability, auditor size, MCCG (2012), board size.
  • Financial instruments disclosure: the case of Qatari listed banks   Order a copy of this article
    by Abdolvahid Mohammadi, Ghassan H. Mardini 
    Abstract: The main aim of this study is to investigate determinants of International Financial Reporting Standard (IFRS) 7 disclosures and the impact of the standards implementation on Qatari listed banks. An un-weighted disclosure index (DI) and multiple regression analysis were employed. The sample includes data for only Qatari listed banks (eight banks) over the years from 2007 (the first year of IFRS 7s implementation) to 2012. The banks characteristics employed are company size, the existence of a Risk Management Committee (RMC), Net Assets Value (NAV), the Cost to Income ratio (CTI), Earning per Share (EPS) and the Price Earning (PE) ratio. The study documents that quite high levels of disclosure about financial instruments are provided by Qatari banks; in 2007, the level was 52% and by the end of 2012 it had reached 71%. Moreover, the study finds that the level of financial instruments disclosure is significantly and positively associated with a banks size and the presence of an RMC. This study contributes to our knowledge in a number of ways: for example, it provides a great deal of insight about the current level of compliance with IFRS 7 in Qatar. It indicates how IFRS 7s implementation has impacted on banks financial instruments disclosures. In addition, it provides evidence about some of the factors that may influence the level of financial instruments disclosure among financial institutions in a developing country such as Qatar.
    Keywords: IFRS 7, IAS 30, IAS 32, IAS 39, financial instruments disclosure, Qatari banks.
  • Testing the risk-return tradeoff in the emerging market of Jordan: What role for financial crises?   Order a copy of this article
    by Mohamed Abdelaziz Eissa, Hisham Alrefai 
    Abstract: This study investigates the risk-return relationship at sector level in the emerging market of Jordan (ASE) over the period 1999-2014. The results of an unconditional test with a structural breakpoint show that the relationship is not stable, owing to the effect of the recent global financial crisis (GFC). The conditional test proposed by Pettengill et al. (1995) shows that after the GFC, lower risk is compensated for by a lower return. This indicates that there are more risk-averse investors than risk-takers, which does not help to boost the overall market performance. The implications for diversification strategies suggest that, unless higher risk is rewarded by higher return, regional and international investors will not be encouraged to divert their channels of capital to the ASE. The results also carry signs warning policymakers after the recent market improvements, which were intended to attracting FDI inflows. More incentives are required to encourage risk-takers to incline their capital to flow toward the ASE market.
    Keywords: risk-return tradeoff, Jordan Stock Exchange market, financial crisis, Pettengill et al.’s 1995 model, conditional CAPM
  • The influence of corporate governance on corporate performance: evidence from an emerging economy   Order a copy of this article
    by Yousef M. Hassan, Kamal Naser, Rafiq H. Hijazi 
    Abstract: The objective of this study is to explore the relationship between corporate performance and corporate governance by companies listed on the Palestinian Stock Exchange. Accounting and market performance measures were used to proxy corporate performance. Corporate governance represented by the size of the board of directors, the frequency of the annual meetings of the board, the existence or otherwise of an audit committee, institutional investors' ownership and foreign ownership. To achieve the objective of the study, all non-financial companies listed on the exchange that published their annual reports during the period between 2010 and 2012 were used. The result of the analysis revealed that corporate performance is negatively associated with corporate governance. This implies that that the result is inconsistent with agency theory. This might be because corporate governance in Palestine is still at its infancy stage.
    Keywords: corporate governance, performance, emerging economy, Palestine.
  • Asset growth and the cross-section of stock returns: evidence from Vietnam   Order a copy of this article
    by Xuan Vinh Vo, Bui Dr 
    Abstract: This article sheds light on the question of whether asset growth is a strong candidate for firm stock returns prediction in the emerging market of Vietnam. We test for the asset investment effects in stock returns at the firm level by examining the relationship between the rate of asset growth and subsequent stock returns. We use a large and unique dataset of market and accounting variables of firms listed on the Ho Chi Minh City stock exchange for the period from 2008 to 2012. Employing a method similar to Gray and Johnson (2011), our results indicate that asset growth has no significant effect on stock returns in Vietnam stock market. Our results tend to support the findings of Fama and French (2008) while contradict the results of Cooper et al. (2008) and Gray and Johnson (2011) in the context of developed markets.
    Keywords: asset growth, stock returns, Vietnam stock market.
  • Return predictability in emerging markets during a unique market condition   Order a copy of this article
    by Sami Al Kharusi, Robert O. Weagley 
    Abstract: Very few studies have investigated the effect of the recent global financial crisis on the weak-form market efficiency. This paper seeks to investigate the weak-form market efficiency of the Saudi Stock Exchange (Tadawul), the Kuwait Stock Exchange (KSE), Qatar Stock Exchange (QE), Bahrain Stock Exchange (BSE), Dubai Financial Market (DFM) and Abu Dhabi Securities Exchange (ADX) before and after the recent global financial crisis. The sample includes daily price indices for the period starting from January 2007 to June 2008 for the pre-crisis and from June 2008 to December 2010 for the post-crisis. The results of parametric test (autocorrelation test using Ljung and Box, 1978 Q-Statistics test) show that the markets are inefficient during the post-crisis and efficient during the pre-crisis, except for the Saudi Stock Exchange where the opposite has been found for most lags. The non-parametric test (runs test) provides mixed evidence about the efficiency of these markets. This issue is important to security exchange regulators, investors and analysts attempting to understand investor behaviour in times of crisis.
    Keywords: GCC stock exchange, global financial crisis, market efficiency
  • Cash holdings and corporate governance: an empirical study on Malaysian publicly listed companies   Order a copy of this article
    by Kiarash Ehtiat Karrahemi, Siti Zaleha Abdul Rasid, Rohaida Basiruddin 
    Abstract: The purpose of this paper is to shed light on the relationship between corporate governance characteristics and cash holdings. Cash holding has drawn researchers attention recently as many companies all around the world more than doubled their cash reserves. However, increasing cash holdings can bring about agency issues and that is why it is critical to have a strong corporate governance in order to compensate for the agency costs. This will provide managers with more cash reserves, which leads to more flexibility to take advantage of the investment opportunities. The sample of this study was taken from Malaysian publicly listed companies for a 10 year period from 2003 to 2012. The outcome suggests that corporate governance can significantly affect cash holdings and eventually corporate value. Therefore, companies with stronger corporate governance tend to keep higher cash holdings ratio.
    Keywords: cash holdings, corporate governance, board of directors, audit committee, independence, expertise, meeting.
  • The relationship between corporate governance, foreign investors shareholdings, and corporate performance: the case of South Korea   Order a copy of this article
    by Sun-Wung Hwang 
    Abstract: This study investigates the effects of improved corporate governance on firm value as well as firm performance. By using corporate governance index data for the period of 2006 through 2010 published by the Korea Corporate Governance Service, we got the following results. First, firms with relatively good corporate governance yield better firm performance, which in turn results in greater firm values. Specifically, we found through regression analyses that the corporate governance index has a significant positive relation with EBIT/SALES, Tobin's Q, and the market-to-book value ratio (MB). Second, the corporate governance index has a significantly positive impact on the ownership of foreign investors. Third, foreign investor share holdings positively affect the firm performance measured by MB, Tobin's Q, and abnormal returns.
    Keywords: corporate governance structure; firm performance; firm value; foreign investors’ share holdings
  • Share price behaviour around dividend announcements in Pakistan   Order a copy of this article
    by Naimat Khan, Bruce Burton, David Power 
    Abstract: This paper investigates the information content (signalling) of dividend announcements by firms listed on the Karachi Stock Exchange (KSE) over the period 2005 to 2009. This sample period was selected in order to avoid contamination of the dividend signal with a capital gains tax effect (Litzenberger and Ramaswamy, 1979; Lasfer, 1995; Bell and Jenkinson, 2002) since a capital gains tax was introduced in Pakistan from 2010 onward; there is some evidence about the impact of capital gains taxation on dividend policy in Pakistan (Hamid et al., 2011; Arif and Akbar, 2013). The paper contributes significantly to the literature about the Pakistani market, which has a unique institutional background: first, during the sample period, there was no taxation on capital gains but there was 10% taxation on dividends; second, the Pakistani stock market is dominated by family-owned firms; and third, dividends and earnings are announced at the same time following a board of directors meeting. The findings show that no significant unexpected returns can be earned on the announcement date by trading on dividend news across all 639 announcements for the 202 firms over the period 2005-09; it supports the semi-strong form of the efficient market hypothesis. The results also show that earnings are the dominant signal rather than the dividend announced. Moreover, there is some evidence of information leakage as significant unexpected returns were uncovered two days before the dividend announcements.
    Keywords: signalling, dividend announcements, event study, semi-strong efficiency, information leakage, Pakistan.
  • A quantile regression approach and nonlinear analysis with Archimedean copulas to explain the movements of residential real estate prices   Order a copy of this article
    by Nader Naifar, Khaled Meshal 
    Abstract: The primary objective of this paper is to explain the determinants of residential real estate prices in the largest real estate market in the oil-rich Gulf Cooperation Council (GCC) countries. We employ linear quantile regression analysis to investigate the impact of financial market conditions (stock market returns and volatility), key monetary policy, and macroeconomic variables (including short term interest rates, inflation rates, and crude oil prices) on the residential real estate price dynamics. The secondary objective of this paper is to investigate the nonlinear relationships among variables through the use of two different Archimedean copulas with upper and lower tail dependence. The empirical results consistently demonstrate that only the residential real estate index-inflation rate relationship is statistically significant for all quantiles. We also find a nonlinear relationship among stock market returns, crude oil prices, and the residential real estate index, where the dependence structure is asymmetric and orients toward the upper side of the distribution. This study has significant implications for the analysis of real estate markets, investors, portfolio managers and policy makers.
    Keywords: real estate market; Quantile regression; Copulas models, nonlinear analysis; Stock market; Monetary policy, Macroeconomic variables.

Special Issue on: "Recent Financial Developments in Vietnam,"

  • Key determinants of inflation and monetary policy in the emerging markets: evidence from Vietnam   Order a copy of this article
    by Mohammed Elgammal, Mohamed Eissa 
    Abstract: The study explores the key determinants of inflation in Vietnam for a period of ten year (2000-2011) using the explanatory variables: past inflation, real income, money supply, exchange rate, interest rate and world oil price. This study uses the vector error correction model to investigate the relationship among inflation and the above variables. We found a significant relationship among inflation and three variables, past inflation, real income and exchange rate. Moreover, the past inflation variable plays the most important role in explaining the current inflation in Vietnam. The exchange rate passthrough is found to have a remarkable influence on inflation in the short run; in particular, a reduction in exchange rate will lead to higher prices. Real income has a negative and small impact relationship with inflation, while the other explanatory variables have insignificant impact on inflation.
    Keywords: inflation; Vietnam; emerging markets; vector error correction model; monetary policy
  • Testing the existence of transfer pricing in Vietnam   Order a copy of this article
    by Nguyen Khac Quoc Bao, Nguyen Huu Huy Nhut, Tri Nguyen Dinh 
    Abstract: Transfer pricing or the manipulation of transfer prices is to set the price of intra-firm transactions different from market prices in order to shift incomes from high-tax locations to low-tax ones. Hence, a multinational corporation can decrease its global tax burden. This study applies the model of transfer pricing incentive of Swenson (2001) by employing the Generalized Method of Moments (GMM) to consider the effect of income tax rate and tariff rates on the setting of transfer prices in ten commodity groups of multinationals operating in Vietnam from 2008 to 2013. The study concludes a positive correlation between changes of transfer pricing incentives and changes of reported transfer prices. Furthermore, the findings also show that when the Vietnamese income tax rate increases, the income tax rate in the headquarters country of parent firms decreases, or when the Vietnamese tariff rate decreases, the level of reported transfer prices of imports from the parent firm to its affiliates in Vietnam increases, for the majority of investigated commodity groups (except motor vehicles).
    Keywords: transfer pricing, tariff rate, income tax rate, GMM

Special Issue on: "Recent financial developments in Vietnam"

  • Accessibility to credit of small and medium size enterprises in Vietnam   Order a copy of this article
    by Thieu Dao Ha Thi, Mai Nguyen Thi, Kim Nguyen Thien 
    Abstract: The growing prospect of a SME highly depends on its potential to invest in restructuring and innovating, which in turn, needs capital. Accessibility to financial resources, therefore, becomes a significant factor in the growth of a SME as well as economic growth in developing countries. This paper examines determinants of credit accessibility of SMEs in Vietnam. Both quantitative and qualitative approaches are applied, in which a logit model is employed to investigate the possibility of credit accessibility of 756 SMEs in Vietnam. Also, a semi-structured questionnaire is used to investigate the causes of the lack of connections between SMEs and banks in Ben Tre province. The results indicate that the factors that will increase the probability of credit accessibility of SMEs include education of the enterprises managers, collaterals and asset values of enterprises, loans of enterprises taken from the Vietnam Bank for Social Policies (VBSP), State Banks or even private banks, and the differences between enterprises and credit institutions. A number of recommendations are introduced to promote the credit accessibility of SMEs, such as providing unsecured loans and cooperating loans, improving the roles of State Banks of Vietnam, and decreasing the regional differences.
    Keywords: accessibility to credit, small and medium enterprises, lack of financing.
  • Foreign direct investment into real estate and macroeconomic instability in Vietnam   Order a copy of this article
    by Quoc Hoi Le 
    Abstract: In recent years, foreign direct investment (FDI) into real estate in Vietnam has been constantly increasing and is becoming the most attractive business area for foreign investors. Beside positive impacts such as augmenting capital resources and improving socio-economic infrastructure, this paper shows that FDI into real estate in Vietnam contributes to the derivation of macroeconomic instabilities, such as raising inflation, and causing instability in the exchange rate, payment balance, and the banking system. That reality requires the government to implement solutions relating to strengthening the control of FDI inflows into real estate, monitoring real estate credit risks, and directing FDI inflow into relevant business areas, both to use the capital effectively and to avoid causing macroeconomic instability.
    Keywords: foreign direct investment, real estate, macroeconomic instability.