Global Business and Economics Review (24 papers in press)

Regular Issues

• Foreign direct investment,exports,education, and growth in Malaysia  
  by Mohammed Yusoff 
  Abstract: Although it has been recognized that foreign direct investment (FDI), exports, and education are important ingredients in economic development, not much research has been carried out in developing countries to determine the effects of these three variables, taken together, on economic growth. Most of these studies focus on the effects of exports on growth or FDI on growth or exports and education on growth. This paper examines the relationship of these three variables together on economic growth using the cointegration technique, VECM, and the causality tests. The results suggest that real GDP per capita, exports, FDI and education spending are cointegrated. The estimated long-run relationship shows that exports, FDI and education expenditure could explain the variation in real GDP per capita. Both of the Granger and Toda-Yamamoto causality tests support the hypothesis that exports, FDI and education expenditure cause economic growth with no feedback. These imply that the Malaysian export-oriented, liberal FDI and education development strategies have played important role in the development of Malaysian economy.
  Keywords: FDI; exports; education spending; growth; causality.
   
• Exploring the Islamic View of Spirituality and Business  
  by Najim Najim, Ghaleb El-Refae, Jamal A. Abu Rashed 
  Abstract: While there is a growing interest in the relationship between spirituality and its role in the workplace, a limited number of studies have examined this issue. This study therefore examines spirituality and business from an Islamic perspective using a survey conducted among students in Al-Zaytoonah University in Jordan. The survey examines two issues. First, it investigates the relative importance of the different approaches to understanding the business-spirituality relationship. Second, it takes a closer look at the perception of Islamic ethical and spiritual work values.
  Keywords: work ethics, spirituality, spiritual value, business- spirituality relationships.
   
• Player contracts, athletic and financial performance of the Greek football clubs  
  by PANAGIOTIS DIMITROPOULOS, Vasilios Limperopoulos 
  Abstract: The scope of this paper is to examine the relation between the athletic and financial performance of Greek football clubs and how the investment in player contracts (playing talent) impacts this relation. We selected a sample of 20 football clubs participating in the three professional divisions of the national championship, which refers to the period from 2004/05 to 2008/09. By applying a panel data methodology, results indicated that the higher the investment in player contracts is, the more successful is the club on the field. However, as the investment in player contracts by football managers is increased, the club is becoming more unprofitable and insolvent suggesting that these decisions are not based on economic standards, a fact which verifies previous arguments that football clubs in Europe aim to maximize the athletic performance and not the financial. Useful policy implications and avenues for future research are also provided.
  Keywords: Greek football clubs; player contracts; athletic success; financial performance;
   
• The effect of heteroskedasticity on factors affecting stock repurchases  
  by Anup Nandialath, Bernardo da Veiga, Madan Annavarjula, Ramesh Mohan 
  Abstract: We demonstrate the effect of ignoring the role of heteroskedasticity modeling in applied corporate finance studies and show that it may have important consequences in corporate financial decisions. In this paper, we specifically focus on the effect of heteroskedasticity on the factors affecting the open market operations of the firm. We show that in the absence of modeling heteroskedasticity results from prior research are consistent. By explicit modeling of heteroskedasticity some results are reversed. In particular, we find that the effect of key variables such as dividends, leverage and the likelihood of takeover on the probability of repurchase differs after controlling for heteroskedasticity.
  Keywords: Open market stock repurchases, takeover deterrence, Discrete Choice Models, Heterosekdastic Probit.
   
• Are U.S. imports really hurting U.S. households?:An analysis of the relationship between U.S. households consumption and U.S. imports  
  by Florence Bouvet, Chong-Uk Kim 
  Abstract: This paper seeks evidence of the relationship between U.S. households consumption and imports, notably imports from China. Using MSA-level data from the Consumer Expenditure Survey from 1986 to 2007, we find that in general imports, and especially those from China, are positively related with households consumption. A one-percentage point increase in the size of imports relative to GDP increases consumption (total and non-durable goods consumption) by 2%. This positive relationship is stronger for imports from China.
  Keywords: consumption, Consumer Expenditure Survey, imports, China, Mexico, Canada, GMM, equivalence scale
   
• POSSIBLE EFFECTS OF THE STOCK MARKET MOVEMENTS ON INTEREST RATES, OUTPUT AND INFLATION: EMPIRICAL EVIDENCE FROM THE EMERGING MARKETS OF EUROPE  
  by Oguzhan Ozcelebi 
  Abstract: It is important to identify the effects of stock prices on financial and macroeconomic variables when the development of capital markets is concerned. In this study, type-SVAR models are employed, whereupon impulse response functions (IRFs) and forecast error variance decompositions (FEVDs) are used for determining the effects of stock prices on money market interest rates, industrial production and inflation expectations and in the emerging markets of Central and Eastern European (CEE) countries. Empirical results stress that central banks in these countries should incorporate the role of capital markets into their monetary policy formulations for maintaining price stability. It is also implied that development of capital markets in these countries should be fostered by the implementation of policies both on micro and macro basis for sustaining economic development.
  Keywords: Financial Intermediaries, Financial Markets and the Macroeconomy, Stock Markets, Short-term Interest Rates, Business Fluctuations, Cycles, Inflation, Inflation Expectation, Monetary Policy, Central Banking, Macroeconomic Stability, Forecasting and Simulation, SVAR Model
   
• FDI, Financial Development and Economic Growth: Evidence of Causality from East and South East Asian Countries  
  by Abdus Samad, Muhammad Akhtaruzzaman 
  Abstract: This paper empirically investigates causal relationshipshort run and long runamong foreign direct investment, financial development, and economic growth in ten East and South East Asian countries using Vector Error Correction model (VECM) and VEC Granger causality/ Wald Exogeniety tests. The paper finds that in Singapore, Malaysia, China, GDP growth Granger causes FDI. On the other hand, financial market development (FMD) Granger causes FDI in Singapore, Malaysia, and Sri Lanka. Bidirectional Granger causality between GDP and FDI is observed Indonesia and India. FDI does not Granger cause economic growth (GDP) in all ten countries under study during 1980-2010. It suggests that FDI follows either economic growth or financial market development in these countries.
  Keywords: Foreign Direct Investment, Financial Development, Economic Growth, Granger Causality
   
• Implied Returns, Costly Reversibility and the Value Premium  
  by Joseph Goebel, Manoj Athavale 
  Abstract: The countercyclical price of risk is revealed through declining earnings, dividends, equity book and equity market values, short-run earnings expectations and increasing market returns (k), risk premiums (MRP) and book-to-market (BM) with contractions. Consistent with costly reversibility, high BM firms with more fixed assets are less profitable and dispose of more fixed assets during contractions than low BM firms. Support for costly reversibility looking at k and MRP is found when firms are ranked according to fixed-assets-to-total-assets (FATA) but not BM. Low BM firms with generally lower k and MRP experience greater increases in k and MRP than high BM firms during contractions whereas high FATA firms with generally lower k and MRP experience greater increases in k and MRP than low FATA firms during contractions. With expected earnings growth increasing for high BM firms, BM as a measure to distinguish between growth and value is challenged. Thus, while support is provided for costly reversibility, it is limited in explaining the value premium.
  Keywords: Cross-sectional earnings model, Earnings forecasts, Expected market returns, Expected market premium, Implied cost of capital, Costly reversibility, Countercyclical price of risk, Value premium
   
• THE EFFECT OF SOFTWARE PIRACY ON RESEARCH AND DEVELOPMENT INTENSITY AT THE COUNTRY LEVEL: DO DEVELOPED COUNTRIES AND EMERGING ECONOMIES SUFFER THE SAME IMPACT?  
  by Peerayuth Charoensukmongkol 
  Abstract: This study investigated the impact of software piracy on research and development intensity at the country level. Although the negative effect of software piracy on innovation has been previously investigated in research, it is still unclear whether advanced economies and emerging economies tend to suffer the same consequences. Therefore, the objective of the present study is to advance the knowledge regarding the moderating role of economic development on this impact. While the software piracy problem is harmful to innovation in developed countries, it could benefit innovation in emerging economies, because the chance to gain access to a wide array of software packages at substantially lower costs encourage more people to develop the technical skills required for innovative activities. The hypotheses were tested using samples from 22 advanced economies and 11 emerging economies from 2003 to 2007. The results from the panel data regression analysis suggested that although software piracy negatively affected research and development expenditures, its impact was moderated significantly by the level of economic development. The author also found evidence that software piracy tended to be associated positively and strongly with the percentage of science and engineering graduates in the emerging economies. This could explain why innovation in these countries has not suffered much from the software piracy problem.
  Keywords: software piracy; research and development; innovation; emerging economies
   
• Dimensional analysis of real estate portfolio selection methods  
  by Kenneth Strang 
  Abstract: This study explores the portfolio selection methods that property managers utilize for managing real estate investments during an economic recovery cycle. Knowing more about portfolio selection methods is especially relevant for property project managers and investors given todays financial uncertainties. To explore these issues, the researcher analyzed the methods property managers applied for buy-sell decision making of residential and commercial rental properties. Data were collected from a random sample of licensed real property project managers in the USA. A concurrent embedded mixed-method research strategy was applied to integrate quantitative and qualitative survey data (describing the portfolio selection method). Correspondence analysis produced a statistically significant symmetric model partitioned by five methodology attributes and six investment categories.
  Keywords: portfolio selection method, portfolio management; decision making; property project managers; real estate property; mixed methods; survey; correspondence analysis.
   
• INTERRELATIONSHIPS BETWEEN INWARD FDI AND INDIGENOUS INNOVATION IN DEVELOPING ECONOMIES  
  by Hannarong Shamsub 
  Abstract: The purpose of this study is to explore possible simultaneous relationships between inward FDI and indigenous innovation in developing economies. The results of simultaneous-equations analysis reveal that there exist reciprocal relationships between the two; however, in opposing directions. While increasing innovation attracts more foreign direct investment, more inward FDI reduces innovation. Indigenous innovation is increased mainly through improvements in absorptive capacity, particularly in research and development (R&D). Government effectiveness, as the mediating factor, lessens the adverse impact of FDI on innovation while amplifying the positive effect of R&D spending on innovation. Because innovation and FDI are crucial policies that enhance economic growth, this study suggests improving overall government effective as well as increasing R&D activities in order to channel FDI spillovers to trigger more indigenous innovations, which may eventually induce more FDI.rnrn
  Keywords: FDI spillover, FDI and Innovation, determinants of FDI, factors affecting FDI and innovation
   
• Post Acquisition Profitability of Banks: a Comparison of Domestic and Cross Border Acquisitions in the European Union  
  by Matthias Nnadi, Sailesh Tanna 
  Abstract: The study compares the post acquisition profitability of 62 large domestic and cross border completed EU banks. We standardised shareholders returns, using the standardised cumulative abnormal returns (SCAR) technique as a proxy for M&A, and a long window of 61 days to capture the impact and volatility in the abnormal returns of both domestic and cross border acquired banks. The abnormal returns of both the domestic and cross border acquired banks are found to be negative. However, the SCAR of the domestic acquirers shows higher level of volatility while the cross border acquired banks have significant abnormal returns. Our results establish that standardising abnormal returns helps investors by eliminating any biases in the estimation of the event, and giving equal weighting to all events surrounding the merger. Using basic profitability measures, we hierarchically regressed for both acquired banks to ascertain the degree of impact on post acquisition profitability. Our regression results show that the banks cost to income ratio (CIR) makes significant impact on the overall financial performance of both domestic and cross border acquired banks. Profitability enhances the cost efficiency of both acquirers but may expose the banks to risky lending.
  Keywords: Mergers; acquisition; profitability; standardised; abnormal returns; cross border; domestic.
   
• INTERNATIONAL RESERVES HOLDING AND THE POLITICAL RISK: EVIDENCE FROM SELECTED EMERGING ECONOMIES  
  by Siti Nurazira Mohd Daud, Abd Halim Ahmad 
  Abstract: The objective of this paper is to investigate the relationship between financial and economic uncertainty (risk) and the demand for international reserves. In addition, the association between this relationship and the political risk condition is further analyzed for selected emerging economies. By using panels of 20 emerging countries, the empirical results show that the decision by the emerging economies to hold international reserves is largely dependent on the fluctuations in the financial risk indicators. In addition, the interdependency between the demand reserves function and the type of financial risk indicator also varies across countries political conditions.
  Keywords: International reserves; self-insurance motive; country risk
   

Special Issue on: "Establishing a New World Order Post Financial Crisis"

• Innovation source and performance: a firm-level analysis of high-tech sector in China  
  by Zhengwei Li, Cindy Millman, Renyong Chi 
  Abstract: With a global focus on China regarding its significant growth phenomenon, this paper examines the relationship between innovation source and performance at firm level in China. Specifically, the focus is on two dimensions of innovation performance: patents and new product development, using data from 1,111 firms in the high-tech sector in Zhejiang province. Key findings are: 1) In-house R&D efforts are having impacts on firms' innovation performance. Specifically, R&D personnel are positively associated with patents applications, while investments in R&D are positively associated with new products. Moreover, existence of R&D institutions is positively associated with innovation performance using both measures. 2) Technology imports are having a direct impact on the development of new products. 3) Product exports prove to be positively associated with innovation performance using both measurements. The study contributes to the existing knowledge field in innovation management by providing an empirical and contextual analysis. Moreover, it provides insights to Chinese policy makers in the better promotion of indigenous innovation.
  Keywords: innovation; R&D; technology imports; exports; patent; China.
   
• Capital market integration in a post crisis era: the case of India  
  by David Gray 
  Abstract: Since the collapse of Lehman Brothers, the co-dynamics of the Rupee and the India stock exchange index, the Senex, have altered. Although emerging markets could have been shielded from the vagaries of financial flows that have plagued the developed world, it is shown that, in the post financial era, rather than a decoupling, India has been integrated further into global capital markets.
  Keywords: contagion; capital markets; market integration; spectral analysis; India; exchange rates; stock exchange; emerging markets; financial flows; financial crisis.
   
• Exploring the developments in urbanisation, aid dependency, sectoral shifts and services sector expansion in Fiji: a modern growth perspective  
  by Ronald Ravinesh Kumar, Radika Kumar 
  Abstract: Using augmented Solow framework within the modern growth paradigm, we explore the contribution from agriculture, manufacturing and services sectors vis-à-vis per worker income in Fiji. Noting the highest contributory power from services sector, we unpack this sector into financial development, information and communications technology and tourism services besides taking into account the phenomenal growth in urbanisation and the economy's reliance on development assistance. We find these contemporary instruments are significantly shaping the growth and development path of Fiji. Subsequently, we put forward policy relevant discussions along sectoral lines, sustainable urban growth and aid management as critical discourse which can be mapped to other developing Pacific Island Countries.
  Keywords: sectoral analysis; urbanisation; overseas development assistant; ODA; ARDL Bounds approach; growth; Fiji.
   
• Economic future of China  
  by Syed Shahabuddin 
  Abstract: China has achieved economic dominance and continues to surpass many developed Western countries in economic growth. In addition, many economies depend on China for their economic and financial support. This dependence cannot continue forever, and China needs to control its own destiny by reducing its economic link to other countries and relying on its own domestic consumers to continue and sustain its economic growth without any threat of outside influences. My analyses of the available data indicate that China needs to protect itself from foreign economic and political influences. To achieve independence, China needs to increase its domestic consumption by increasing consumer and government expenditures.
  Keywords: China; consumption; economic growth.
   
• China and India leading a global insurgency within the software industry  
  by Paul C. Irwin Crookes, John McManus 
  Abstract: US companies more openly admit the growth of offshore outsourcing to countries like India and China now that presidential elections are over. The rise of India and China as potentially high technology software competitors and important participant in the world's software industry has seemingly come as a surprise to foreign observers. The surprise is often accompanied either by overestimations or underestimations of these countries actual capabilities, rather like foreign reactions to Japan in the 1980's. While there are many important distinctions to be made between the Indian and Chinese cases, they are similar in that the development of software and technological capabilities in both countries has long been a goal of political, administrative, and industrial elites, and both countries have records of policy intent, planning, and resource commitments for meeting that goal. This paper examines some of their competitive strengths and weaknesses and the future market challenges faced by India and China in the next decade.
  Keywords: China; USA; India; competition; foreign direct investment; FDI.
   

Special Issue on: "Time Series Applications, Macroeconomics/Trade Issues and Ethics"

• On the generalized Pearson distribution for application in financial time series modeling
  by Stavros Stavroyiannis 
   
• The Application of an Autonomous Decentralized System for Crisis Control A Lesson from the Great East Japan Earthquake -
  by Yasumi Matsumoto 
   
• Time Series Modeling of Real Estate Price and Its Application
  by Hiroshi Ishijima, Akira Maeda 
   
• A comparison of ethical perceptions of Earnings-management practices MENA region and USA
  by Leonie Jooste 
   
• Australian manufacturing exports to Asean: linking country, customer and enterprise risk in method of payment choice
  by Roberto Bergami 
   
• Ricardian Equivalence And Super Exogeneity: A New Approach
  by László Kónya, Bekzod Abdullaev