International Journal of Monetary Economics and Finance (20 papers in press)
Herding behaviour in Turkish stock market sector indices: the effect of COVID-19 outbreak
by Kıymet Yavuzaslan, Nasif Ozkan
Abstract: Within the framework of isolation and social distance rules, the most important method of avoiding the COVID-19 virus, has taken place in the social life and the economic activities of people. The COVID-19 outbreak has driven uncertainty in all financial markets, and also recent studies have determined a direct relationship between the irrational decisions of investors and the pandemic. After the COVID-19 outbreak, principally, the herding behaviour has been observed in almost all the emerging stock markets. We analysed the sixteen Borsa Istanbul sector indices using the methodology of Chang et al. (2000). During the COVID-19 outbreak, we validated the existence of herding behaviour in the food, beverage, and banking sectors. Besides, we found evidence of herding behaviour in most of the sectors in upmarket conditions, while we confirmed only in the Food, Beverage sector in both the up and down market conditions.
Keywords: COVID-19; behavioural economics; stock market; herding behaviour; sector indices; Turkey; BIST.
Cyclicality of bank liquidity in Vietnam
by Van Dan Dang
Abstract: The study sheds new light on the link between the economic cycle fluctuation and the financial market by empirically investigating the cyclical patterns of bank liquidity. To draw a comprehensive picture, we conduct our analysis based on multiple different liquidity dimensions of the current liquidity position commonly used in traditional research streams, the long-term liquidity inspired by Basel III guidelines, and the conceptual and quantitative definition to measure liquidity creation of banks. Using a dynamic panel of commercial banks from 2007 to 2019 in Vietnam, we find that long-term bank liquidity and liquidity creation are countercyclical, while the current liquidity position is procyclical. The findings support the thesis that banks take less liquidity risk during economic upturns but tend to be less risk-averse during economic downturns. The estimation results are robust across alternative versions of the generalised method of moments and bank liquidity measures.
Keywords: Basel III liquidity rule; cyclicality; liquidity creation; liquidity position; Vietnam.
Payout policy, investment efficiency, and corporate performance in the Asia Pacific: does boardroom diversity matter?
by Ijaz Ur Rehman
Abstract: This study empirically examines the impact of board gender diversity on corporate performance, payout policy, and investment efficiency using a sample of 1021 firms listed in Asia Pacific markets for 20062016. Using fixed effect regression models, the results suggest that having a woman director on the corporate board enhances the investment efficiency and increases the propensity of dividend payout of the firms as compared to companies that do not have a women director. Nevertheless, the presence of a
women director has an impact on weakening corporate performance. The results are robust across alternative measures of gender diversity. The study concludes that the presence of a woman director in the boardroom grants company a competitive edge over its competitors.
Keywords: gender diversity; firm performance; dividend payout; investment efficiency; agency theory.
The Chinese banking sectors structured deposits: growth, role in interest rate pass-through, and implications
by Kerry Liu
Abstract: The Chinese banking sectors structured deposits have experienced rapid growth recently, especially after 2017. As a result of this, the Chinese regulatory authorities began to strengthen regulation in October 2019. Based onmonthly datasets between January 2016 and April 2020 and a robust least squared model, this study finds that the growth of structured deposits is significantly associated with the growth of the real economy and the expansionary monetary policy. Based on a series of tests using quarterly panel
data, yearly panel data, and quarterly time series data, this study finds that structured deposits play a significant positive role in interest rate pass-through from policy rates to the lending rates of commercial banks. This study also discusses the implications of structured deposits and the recent regulations for the Chinese banking sector. This study is the first of its kind in the academic literature and makes original and significant contributions to academia and policy-makers.
Keywords: structured deposit; industrial value-added; reserve requirement ratio; interest rate pass-through; interest rate liberalisation.
Do intellectual capital and financing matter for the profitability of the Islamic banking industry in Indonesia?
by Fauziah Aida Fitri, Muhammad Syukur, M. Shabri Abd. Majid, Intan Farhana, Fakhri Hatta
Abstract: In Indonesia, the Islamic banking industry has been experiencing growth since its establishment in 1992. Although its profitability has declined slightly due to Covid-19, Islamic banks have recorded higher profitability than the average banking industry nationwide. Motivated to identify the factors that determine the banking profitability, this research empirically tests the contribution of intellectual capital (measured by VAICTM), banks liquidity (financing-to-deposit ratio), and financing ineffectiveness (non-performing financing (NPF) to the profitability (return on asset (ROA) of Islamic banks in Indonesia. We gathered data from the published financial information comprising a total of 130 observation years. The result shows that intellectual capital, banks liquidity, and financing ineffectiveness impacted the profitability of Islamic banks in Indonesia. The findings of this study provide policy implications for Indonesias Islamic banks to apply prudential banking principles in their financing activities.
Keywords: financing; liquidity; Indonesia; intellectual capital; Islamic banks; profitability.
How has Covid-19 infected the stock market and exchange rate? (A case study of infected vs. uninfected countries)
by Faishal Fadli, Vietha Devia Sagita Sumantri
Abstract: The Covid-19 pandemic has hit the stock market and exchange rates in the infected countries. By using the Difference in Difference method, the Event Study method and ordinary least square (OLS), this research has analysed the impact of Covid-19 on the stock market and exchange rate in the infected countries specified in this research. The result is a positive relationship between the cumulative new cases of Covid-19 and the exchange rate. The exchange rate depreciation in the countries infected by Covid-19 occurred after the countries announced the first case of Covid-19, except for in UK. For the countries that were not infected by Covid-19, they experienced an appreciation of the exchange rate. The price of the composite stock index decreased when the first case of Covid-19 was announced. There is a negative relationship between cumulative new cases of Covid-19 and the composite stock index prices, except for in China. The number of global cases of Covid-19 has a negative relationship with the world oil price. However, there is a positive relationship with the world gold price.
Keywords: Covid-19; stock market; exchange rate; oil price; gold price.
Investigating contagion effect of the recent turkey currency crisis
by Narinder Pal Singh, Suzan Dsouza
Abstract: This study empirically analyses the contagion effect of Turkey Lira crisis 2018 on the currencies of selected Asian (Indonesia, Malaysia, South Korea and India) and other six countries (Chile, Argentina, Mexico, Brazil, Russia and South Africa) using correlation and volatility analysis. The results of correlation analysis show that Turkeys lira bears a positive correlation with all the other select currencies in all the three periods; the whole period, the re-crisis period and the post-crisis period. Almost all the correlation coefficients are significant at 1% or 5% level of significance across the crisis and have increased after the recent turkey lira crisis. From the results of
volatility spillover analysis using exponential generalised autoregressive conditional heteroscedasticity (EGARCH) model, we infer that the Turkey currency crisis has affected the volatility of currencies of India, Brazil, Argentina & South Africa, and the effect being the least on the Indian rupee volatility while the maximum impact on the South African rand volatility
Keywords: contagion; Turkey crisis; currency; correlation; volatility.
Volatility contagion (spillover) between Chinese and Pakistani stocks market during COVID-19: pre and post analysis of trade-level data
by Syed Faisal Hasan Bukhari, Habib Ahmad, Hasan Hanif, Syed Farhan Shah
Abstract: This research study examines volatility contagion (spillover) before and during COVID period from Chinese stock market (Shanghai stock market) to Pakistani stock market (Karachi stock market). We used aggregate market datasets and various industries datasets (11 industries according to GICS classification), employed EGARCH model to investigate the volatility spillover. Our results indicate that volatility demonstrates different characteristics in aggregate data sample as compared to industries data samples. Moreover, this study finds returns spillover and volatility spillover in both
datasets (aggregate and industries). This study suggests that stakeholders should analyse both datasets (aggregate and industries) before taking investment decisions.
Keywords: volatility spillover; COVID-19; pandemic; contagious; portfolio diversification; financial crisis; interdependence.
Impact of Covid-19 on broader indices of Indian stock market
by Girija Nandini, Ratidev Sama, Alaka Samantaray, Rashmi Ranjan Panigrahi
Abstract: The purpose of this study is to identify the trend in price movement of the two indices of India and find any abnormalities present in the movement during the period of study. The data have been obtained from the NSE site over a period of one year and analysis is conducted on excel with the help of selected technical indicators like exponential moving average (EMA), moving average convergence divergence (MACD), and BB. A combination of technical indicators has been used. Covid-19 has a deep impact on the market but the recovery is also faster and behind any abnormal moment in the market. The
research captures different impetus of financial markets which enhances better decision making for swing traders and investors. To the authors knowledge, the paper is unique in terms of enhancing quantitative and qualitative decision-making aspects and the simplest language being used for the interest of society at large.
Keywords: stock market; price; indicators; technical analysis; trading; investment.
Impact of market competitiveness and risk management of NPAs of Indian banks on its efficiency
by Jagjeevan Kanoujiya, Shailesh Rastogi
Abstract: The efficient banking system of a country is an important factor of its economic growth. Hence, many banking sector reforms have been undertaken in India to improve market power and efficiency of the Indian banks. This study aims and contributes to the banking literature by providing insight about the impact of market competitiveness and risk management on technical efficiency (TE) using the sample of 34 banks in India over the period 20162019. The static and dynamic models of panel data have been performed
for regression analysis. Competitiveness and TE are assessed by Lerners index and Data Envelope Analysis (DEA), respectively. The risk management of non-performing assets (NPAs) is taken as provision coverage ratio (pcr). The findings of the study suggest that market competitiveness and risk management of NPA do not affect efficiency of Indian banks. This paper exerts the important policy implications through empirical investigation in the study.
Keywords: efficiency; Lerner’s index; competition; banks; DEA; data envelope analysis.
Stock jump, underperformance and undervaluation: evidence from emerging market
by Felizia Arni Rudiawarni, Dedhy Sulistiawan, Frendy
Abstract: This paper examines the ability of underperforming and undervalued stocks to stimulate stock jumps. Our study also considers firms systematic risk as an important factor stimulating positive skewness of return which proxied for the stock jump. Using Indonesian data from 2016 until 2018, our findings show that underperforming stocks generally experience a positive stock jump in the subsequent period. Overperforming stocks that are undervalued also produce higher positive skewness of return. Our findings show that undervalued high-risk stocks are likely to trigger a stock jump. These findings have practical implications for both risk-averse and risk-seeking investors.
Keywords: stock jump; underperformance; undervaluation; risk; earnings; behavioural finance.
The impact of economic freedom on risk-taking behaviours of Vietnamese commercial banks
by Buu Kiem Dang, Anh Dang Bao Phan
Abstract: This paper investigates the impact of economic freedom and its sub-components on bank risk-taking behaviour in the context of Vietnam. We utilise generalised method of moments (GMM) for a sample of 22 commercial banks during the period from 2006 to 2020. Economic freedom indicator is collected from annual publication of The Heritage Foundation. The results reveal that the economic freedom will increase bank stability, which is also enhanced by monetary freedom, financial freedom, and investment freedom.
Nevertheless, the higher the business freedom index is, the more probable the bank can face risks. The high economic growth and low inflationary control also improve bank stability. Besides, some internal banking factors such as size, diversification and operating expense control also affect the risk-taking behaviour of Vietnamese banks. The result underpins precise policies of Vietnamese government in promoting global economic and financial integration along with boosting the efficiency in management and scrutiny of state-owned institutions.
Keywords: bank risks; business freedom; economic freedom; financial freedom; monetary freedom.
Digital banking service in Indonesia: Does it really matter for bank performance? Evidence from Indonesian commercial banks
by Nurmadi Harsa Sumarta, Muhammad Agung Prabowo, Nugroho Saputro
Abstract: This paper aims to empirically investigate whether providing digital banking facilities to customers impacts on bank performance. Our study analyses secondary data from 91 commercial banks in Indonesia in 20172018 with total 182 observations using multiple regression analysis. We find that all commercial banks in Indonesia has engaged themselves in digital banking in 20172018 although smaller banks still have limited features. Further, our empirical evidence demonstrates that digital banking positively affects bank performance. Providing more digital banking facilities results in better financial performance, specifically in efficiency and profitability. Our study suggests
commercial banks in Indonesia to engage more in digital banking service, at least by providing high-quality digital services that suits the need of banks customers. Finally, considering the rapid development of digital financial services, we also suggest Indonesia Financial Service Authority to continuously conduct proper supervision to ensure the security of digital banking service in Indonesia.
Keywords: digital banking; commercial banks; bank performance; efficiency; profitability.
Islamic banking deposits in Indonesia: Do spatial effects matter?
by Eko Suprayitno, Silvia Vara Dhita
Abstract: This study aims to analyse the spatial effect on Islamic banking deposits and identify the factors that influence Islamic banking deposits in a province in Indonesia as an archipelagic country. This study used a Spatial Autoregressive Model (SAR Morans I), Spatial Error Model (SEM), and the
Local Indicator of Spatial Association (LISA). The result of the Morans I model showed a strong spatial influence on Islamic bank deposits. Jakarta and West Java Provinces enjoy high Islamic Bank Deposits. However, Banten Province enjoys only low Islamic Bank Deposits despite being surrounded by
high-value neighbouring provinces. The Lagrange Multiplier (SAR) test results on the factors that affect the geographic spatial concentration of the deposit distribution patterns are at the level of GRDP, offices, and total assets. Meanwhile, the LISA test shows how the value of deposits in a province affects a particular province.
Keywords: spatial effect; spatial analysis; Islamic bank; Islamic bank deposits.
Measuring the impact of exchange rate volatility on the depth and efficiency of financial sector: evidence from Nigeria
by Ezekiel Olamide Abanikanda
Abstract: This study examines the effect of exchange rate volatility on the depth and efficiency of Nigerias financial sector over the period of 19862018 via the autoregressive distributed lag cointegration technique. The study employs four models that consist of financial institution and financial market indicators of depth and efficiency. The results from the study show that exchange rate volatility exerts a negative effect on financial institution depth and efficiency in both short run and long run. The findings also show that exchange rate volatility wields a negative effect on financial market depth in the short run, albeit with no long run effect, whereas exchange rate volatility has an adverse effect on financial market efficiency in both short run and long. The paper recommends that Central Bank of Nigeria should put in place adequate measures to keep the exchange rate stable in order to broaden the depth and efficiency of the financial sector.
Keywords: exchange rate volatility; financial sector; financial sector depth; financial sector efficiency; Nigeria.
Analysis of the implications of role stress towards innovative behaviour and the success of womenpreneurs in Banten Province, Indonesia
by Sam’un Jaja Raharja, Rusdin Tahir, Sitti Ma’ani Nina
Abstract: Womenpreneurs play an important role in development, innovation and economic growth. This study aims to analyse the role of stress on innovation behaviour and its effect on the success of womenpreneurs. This study uses an explanatory survey method. Data collection is conducted by a questionnaire distributed to 312 womenpreneurs. Research results showed that womenpreneurs can play multiple roles, manage stress and draw
creativity from stress triggers. The relationship amongst role stress, innovative behaviour and success positively and significantly affects success and innovative behaviour, and innovative behaviour positively and significantly affects the success of womenpreneurs.
Keywords: role stress level; innovative behaviour; emotional intelligence; womenpreneur; success.
Fiscal imbalance, financial development and external debt accumulation in selected African countries
by Samson Edo, Felix Ashakah
Abstract: This study investigates external debt accumulation in four dominant African countries. It covers the period 2000Q12018Q4, and employs the generalised method of moments (GMM), auto-regressive distributed lag (ARDL) and vector error correction mechanism (VECM) techniques in
estimating the relative impact of fiscal imbalance and financial development on external debt. Estimation results from the three methodologies, which are largely similar, reveal that both factors exerted significant positive impact. The impact of fiscal imbalance is, however, greater than that of financial development. In view of these findings, some policy measures are proffered to stem the rising trend of external debt in African countries. The measures include reduction in fiscal imbalance through rational budgeting, encouraging
financial sector to provide domestic funds rather than facilitating external borrowing, diversifying export revenue base in order to minimise external borrowing, and lowering domestic lending rate to also discourage external borrowing.
Keywords: fiscal imbalance; financial development; external debt; export revenue; global lending; rational budgeting; domestic lending; developing countries.
Credit risk management resource efficiency in the implementation on Basel Accord: a study of Pakistani banking sector
by Syed Alamdar Ali Shah, Bayu Arie Fianto, Raditya Sukmana, Sri Herianingrum
Abstract: This research endeavours to examine credit risk management (CRM) capabilities for Basel accord implementation in Pakistani banks. The results obtained depict that the banks in Pakistan do not have adequate human resource capabilities for CRM that is affecting their risk performance and Basel accord implementation. This research introduces a new measure of credit risk measurement, which is credit risk weighted assets to credit risk employees
ratio. This ratio has been used for measuring capabilities of banks for implementation of Basel Accord. Keeping in view the results it is suggested that further work is required by the banks and the regulators to improve the availability and training of human resources for CRM and ultimately to reap the benefits of Basel Accord implementation.
Keywords: Basel Accord; Pakistan; post implementation; credit risk weighted assets to credit risk employees ratio; State Bank of Pakistan.
Do mosques use Islamic bank services? Evidence from Indonesia
by Khansa Fairuz, Adam Adhe Nugraha, Farhan Medio Yudantyo, Novat Pugo Sambodo, Evi Aninatin Ni’matul Choiriyah, Umminita Wahyu Pertiwi, Riswanti Budi Sekaringsih
Abstract: Previous research has proven that the use of formal financial services can support the performance of mosque financial management. Nevertheless, there is no study explaining the factors that influence Islamic financial inclusion in Indonesian mosques to date. Using data from The Indonesian Mosque Survey 2020, this study examined the determinants of mosques bank account ownership in Indonesian mosques. Our research revealed that only a few mosques have adapted financial services. We then investigated what factors influenced Islamic bank account ownership in Indonesian mosques by using ordinary least square (OLS) and probit methods. We found that the married and higher educated mosque leaders positively correlated to Islamic bank account ownership. At the mosque level, the mosques were located in Java and owned a general planning document, a large amount of donation, large building size and high number of congregants had a higher probability of having an Islamic bank account.
Keywords: : bank account; Indonesia; Islamic banking; mosque; leader; OLS; ordinary least square; probit.
Impact of COVID-19 pandemic on stock markets: a case study of selected countries
by Sonal Thukral, Amit Kumar Singh, Renu Ghosh, Murli Manohar Pant
Abstract: As the outbreak of COVID-19 resulted in a wave of trade restrictions, it is worthwhile to study its impact on India and its trading partners. Accordingly, the study aims to examine the effect of the announcement of COVID-19 pandemic on the stock market returns of selected
economies that are Indias largest trading partners. By employing event study methodology the study finds that the stock markets displayed an immediate negative response to the announcement. Soon after, when the markets began to recover it was observed that within a month, the majority of the markets adjusted to the announcement and began to converge with normal returns. The results also revealed that different markets recovered at varying speeds
contingent on the number of COVID cases. The study contributes to the existing literature on the response of stock markets to the outbreak of pandemic and disastrous events, besides the literature on market efficiency.
Keywords: pandemic; COVID-19; coronavirus; event study; stock market; economic impact; European markets; Asian markets; black swan event; recovery.