International Journal of Accounting and Finance (7 papers in press)
The determinants of liquidity creation of conventional and Islamic banks
by Turki Alshammari
Abstract: This study uses the liquidity creation concept developed recently to empirically identify the determinants of liquidity creation function of banks in the Gulf Cooperation Council (GCC) countries during the period 20032018. The importance of the study comes from the fact that it is that it differentiates between conventional banks and Islamic banks. The study uses all chartered conventional and Islamic banks in the GCC countries. In order to substantiate the findings, the study employs numerous statistical techniques, such as cross-sectional regression models as well as the GMM method. The results of the analysis show that the larger and more profitable conventional banking system creates more liquidity than the more capitalised and credit riskier Islamic banking system in the GCC area. Further, the most notable determinants of liquidity creation of conventional banks are credit risk, capital ratio, inflation rate, and profitability, while those of Islamic banks are only credit risk and equity ratio. The difference in results might be due to the difference in the adopted business model (financial for conventional banks versus commercial for Islamic banks). The study is the first to apply the theoretical liquidity creation definitions on conventional versus Islamic banks in the GCC countries. It is the first study that differentiates between the determinants of liquidity creation in two different banking systems.
Keywords: liquidity creation; Islamic banks; conventional banks; credit risk; GCC countries; inflation rate.
Auditor type and TYPE AND IAS 1 compliance nexus: do size and industry effects matter?
by Kingsley Opoku Appiah, Simon Kofi Tetteh, Rabiatu Kamil
Abstract: This study examines whether size and industry effect influence the nexus between auditor type and IAS 1 compliance in the developing economies context, while controlling for firm age, multiple listing, profitability, and financial leverage. Our analysis is based on ordinary least squares, random-effects, quantile regressions, 2SLS and hand-collected data from the 2008 to 2014 annual reports of 31 listed firms on the Ghana Stock Exchange (GSE). We find 97% compliance level with IAS 1 disclosure requirement of GSE listed firms. The auditor type, measured by Big Four auditor, is significant and positively related to IAS 1 disclosure. This positive association is further strengthened by firm size and financial industry effect. The quantile regression analysis shows the interaction between auditor type and firm size is related to IAS 1 compliance, if a critical threshold of size is attained. Our results are robust in all estimations. The high IAS 1 compliance rate may indicate that preparers do not consider materiality in their disclosure choices. The study documents auditor type and IAS 1 compliance nexus is moderated by firm size, in an environment of lax enforcement regulations.
Keywords: disclosure; corporate reporting; IAS 1; comparative study; emerging economies.
The perceived social responsibility in the banking activities by Puerto Rican entrepreneurs
by Ahmad Juma'h, Doris Morales-Rodríguez
Abstract: Banks, as part of the financial institutions, are the cornerstone of a country's expansion and economic development. In Puerto Rico, where there is a need to decrease the dependency on multinational manufacturing entities, small and medium-sized companies can contribute to the economic development of the island. Financial institutions, e.g., banks and cooperative financial unions, are an essential part of the solution to the problem of financing economic activity. Commercial banks need positive perceptions from entrepreneurs to improve their profitability. Financial institutions use corporate social responsibility strategies to influence public perception to increase customer satisfaction. To examine the Puerto Rican entrepreneurs perceptions of banks social responsibility, we distributed a questionnaire to micro, small, and medium-sized business persons. As one of the confirming conclusions, banks operating in Puerto Rico enjoy a negative perception among entrepreneurs.
Keywords: corporate social responsibility; perception; micro-companies; small-medium enterprises; economic growth; Puerto Rico.
IFRS adoption and cost of capital: moderating effects of growth opportunities and informational environment
by Hela Turki, Senda Wali, Younes Boujelbene
Abstract: The present paper is primarily designed to investigate the relationship binding the IFRS mandatory adoption and the corporate capital cost. Additionally, it is focused on assessing this relationship associated growth opportunities, along with an evaluating of the informational environment moderating role. This study is focused on the French context through implementation of longitudinal data. The study sample involves the entire companies belonging to the CAC All Tradable index, observed over the period ranging between 2002 and 2012. The results appear to reveal that the IFRS mandatory adoption proves to help greatly in reducing the French listed firms' capital cost. Actually, no evidence has been discovered to prevail as the informational environment moderating effect on the relationship binding the IFRS adoption and capital cost. Conversely, some evidence was found of the interaction between the company's growth opportunities and IFRS adoption highlighting cost reduction.
Keywords: IFRS; information asymmetry; cost of capital; informational environment; growth opportunities.
The role of independent directors, bank loan and institutional holding on discretionary accruals - some Indian evidences
by Satyajit Dhar, Somnath Banerjee, Anirban Dutta
Abstract: Earnings management encompasses the methods and techniques of inflating or deflating reported income to serve some inappropriate objective of the management or the managers of firms. We wanted to examine whether bank loan and institutional holding, and proportion of independent directors in the board have any influence on earnings management in India. We have collected data of 246 firm years of industry representative firms and have computed discretionary accruals for them using Jones model and then computed statistical correlation of discretionary accrual with bank loan and institutional holding, and the proportion of independent directors in the board. As we expected, we have found negative correlation of discretionary accruals with bank loan and institutional ownership, and independent directors. We have finally shown a regression to establish this.
Keywords: earnings management; discretionary accruals; bank loan; institutional holding; independent director.
Investigating the determinants of foreign direct investments in developed countries
by Musa Essayyad, Banamber Mishra, Stephen Caples, Omar Ahmad Al-Titi
Abstract: This paper employs a more robust econometric methodology to investigate the foreign direct investment phenomenon, expand the data horizon from 2004-2013 to 1996-2016, and generate more solid research outcomes on the determinants of foreign direct investments (FDIs) in 32 developed countries. Specifically, this paper uses both static and dynamic estimation models to investigate the determinants of foreign direct investments in developed countries.
Keywords: foreign direct investment; FDI; panel data; static panel estimation models; dynamic panel estimation models; pooled OLS estimation.
Multiple market asset trading during information arrival: US depository receipts and equity share market response to firm disclosures
by Michael H. Senteney, David L. Senteney
Abstract: The purpose of this study is to employ zero-investment approaches in order to jointly investigate the usefulness of non-US firms' earnings releases and subsequent SEC Form 20-F disclosures in both the US ADR and home country equity share markets. Results suggest that both markets exhibit abnormal returns associated with the earnings and SEC Form 20-F disclosure dates, but the response to the 20-F filing is less pronounced than the earnings release. Furthermore, we find indications that the equity share market response exceeds the US ADR market response for both the earnings release and the 20-F disclosure, suggesting that US ADR listing may provide new information to equity market investors and improve the price discovery process for home country equity shares.
Keywords: US depository receipts; ADRs; SEC Form 20-F disclosures; US Securities and Exchange Commission; earnings; firm disclosures; multi-market trading; cross-listing; price discovery.