International Journal of Monetary Economics and Finance (22 papers in press)
Socio-Economic, Information and Communication Technology, and Banking Performance For Financial Inclusion Index in Indonesia
by Sylviana Maya Damayanti, Ditasa Madira, Raden Aswin Rahadi, Arinda Mentari Putri
Abstract: Indonesia has 34 provinces spread across several separate islands, which means Indonesia has much diversity in its community. It is made difficult for the government to regulate and enhance overall economic growth, mainly to provide financial services. The government created a national financial inclusion strategy to fulfil these objectives by building five pillars and three strategic foundations. Financial Inclusion Index of Indonesia in 2013 is 59.74%, 67.8% in 2016 and 69% in 2017. However, the target of the Indonesian President, is 75% in 2019. In this study, the author analyse the factors that affect the Financial Inclusion Index. Variables used in this study include socio-economic conditions, ICT, and Banking Performance. The method used was descriptive and verification analysis by panel regression analysis. The results are obtained that the variables that influence the Financial Inclusion Index in Indonesia are Unemployment rate variables, Internet variables, and Non-Performing Loans.
Keywords: Financial Inclusion Index; Socio-Economic; Information and Communication Technology; Banking Performance.
Cultural Distance and Thailand's Foreign Direct Investment Attractiveness
by Piyaphan Changwatchai, Siwapong Dheera-aumpon
Abstract: Thailand tries to attract more FDI because it is an important driver of economic growth. From previous studies, the effect of cultural distance on FDI attractiveness is ambiguous. This study constructs Thailands FDI attractiveness index and analyze the effect of cultural distance on Thailand's FDI attractiveness. The results show that cultural distance between Thailand and its source country increases the FDI attractiveness of Thailand. This means that culture differences do not impede the FDI attractiveness of Thailand. To promote new inward FDI in Thailand, the government may educate potential investors about culture in Thailand.
Keywords: attractiveness; culture; cultural distance; FDI; Thailand.
Achieving Earning Target through Real Activities Manipulation: Lesson from Stock Exchange of Thailand
by Karoon Suksonghong, Azlan Amran
Abstract: This paper investigated earnings manipulation by engaging in real activities using case study of firms listed in the Stock Exchange of Thailand. Several types of operational interventions were explored, namely, discretionary expenses, sales manipulation, and overproduction activities. The analytical results demonstrated that Thais firms reporting small positive and small growth in earnings committed financial reports manipulation through real activities decisions. The executives of these suspected firms significantly cut discretionary expenses to avoid disappointed earnings announcement. This study also provided evidence supporting the fact that firms involved in real activities manipulations are more likely to enjoy greater sales and revenues while increasing their productivity to reduce the cost of goods sold.
Keywords: Corporate finance; earning manipulation; securities analysis; Stock Exchange of Thailand.
Financial Reporting Quality
by Hana Bohusova
Abstract: The study examines Czech and German listed companies' compliance with selected IFRS mandatory disclosure requirements. The main aim of this article is to analyze and compare the level of annual report disclosure quality for listed companies in the Czech Republic as a representative of European transition countries and Germany as a representative of highly developed country. The measuring compliance with IFRS mandatory disclosure requirements identifies proxies for explaining compliance in individual IAS and IFRS standards. It quantifies the range of disclosure of information in the financial statements of Czech and German companies using the disclosure index. The study proved that the disclosure index of the Czech listed companies is lower than the index of the German companies. These findings could be useful to potential investors, management and other users of corporate disclosures.
Keywords: IFRS; listed companies; disclosure index; dichotomous method.
EFFECTS OF INNOVATION FACTORS ON SME PERFORMANCE: STUDY ON SMEs IN FOOD AND BEVERAGES CENTERS IN CIMAHI, INDONESIA
by SAMUN JAJA RAHARJA
Abstract: This study aims to determine factors that affect the business performance of small and medium enterprises in food and beverage centres. The factors are related to innovation strategy, formal structure, customer relations with suppliers, innovation culture and technological capabilities. Overall performance is reflected in financial performance. Performance is an important foundation for the sustainability of business, either in domestic or international. Study uses a descriptive survey and quantitative analysis under the multiple linear regression technique. Results show that innovation culture has the most significant influence on performance compared to innovation strategy, formal structure, customer relations with suppliers and technological capabilities.
Keywords: factor of innovation; business performance; financial performance; profitability.
Risk Governance and Bank Performance in Sub Saharan Africa: Dynamic Panel Evidence
by Adamu Yahaya, Matemilola Bolaji Tunde, Fauziah Mahat
Abstract: Risk governance practice is gaining prominence as a result of its active role in addressing risk related issues within the banking sector. The study investigate the effect of risk governance on the performance of listed commercial banks in Sub Saharan Africa region. A sample of 50 banks from six (6) SSA countries were drawn between the periods of 2010-2018. Data were collected from the annual report of the banks while World Bank database supplements the data for the macroeconomic variables. The system GMM technique was used to analyze the data collected and findings from the study revealed that, risk experience members have strong positive effect on the performance of banks. The study recommends among others to ensure adequate risk experience members in the risk committee of the banks. Moreover, recognizing the office of chief risk officer within the banking corporate governance contribute significantly to the bank performance in the region.
Keywords: Risk experience members; Risk committee; SSA; System GMM; ROA.
Flexible and standard fiscal rules in context of stability of public finances
by Agnieszka Przybylska-Mazur
Abstract: The main objectives of fiscal policy are to achieve balanced budget over the business cycle.and to achieve the stability of public finances: general government debt and general government deficit. One way of fiscal decision making is decision based on the numerical rule. The basis of the analysis is debt brake rule - an example of the fiscal rule applied for the first time in Switzerland. Thus, the objective of this article is to present of the modification of expenditure rule that is the core of debt brake rule and to take into account an exceptional circumstances in it. Making empirical analysis we compare the maximum expenditure levels calculated on the basis of a flexible and standard fiscal rules, general government deficit and debt. We present the results for one of the countries of the European Union
Keywords: fiscal rule; flexible fiscal rule; standard fiscal rule; exceptional circumstances; debt brake rule; general government deficit; general government debt; stability of public finances; Poland; maximum.
Expansionary Monetary Policy and Bank Lending: The Case of New Euro Area Member States
by Boris Fiera, Jana Kotlebova
Abstract: We study the effectiveness of the bank lending channel in the transmission of the unconventional monetary policies of the European Central Bank (ECB). We use the bias-corrected LSDV estimator to study the effect of ECBs unconventional policies on bank lending to private sector on a sample of 54 banks from the 5 new Euro Area (EA) member states over the years 2008-2018. We distinguish two groups of monetary policies
Keywords: Unconventional monetary policies; ECB; Quantitative Easing; Bank lending channel; LSDVC estimator; New EA member states; Monetary policy transmission.
BVAR MODELS IN SHORT-TERM PREDICTION OF MODERN CENTRAL BANKS: EMPIRICAL EVIDENCE OF THE EURO AREA
by Aleksandra Noco?
Abstract: It has been more than a decade since central banks, in the face of the global financial crisis, implemented unconventional initiatives. Monetary authorities' actions have led to a reduction of main interest rates to historically low levels and huge expansion of central banks balance sheet. So far, they have not returned to the pre-crisis framework and implemented the normalization process. Nowadays, there is observed a trend to use econometric models in monetary policy to forecast macroeconomic variables and plan normalizing activities. The main aim of the study is empirical verification of BVAR model in short-term predicting of macroeconomic and financial indicators, that might be used by the ECB in its normalization process. The conducted research indicate that the large BVAR model for the Eurozone has a significant predictive value in short-term forecasting. At the same time indicating its considerable precision and accuracy with a high degree of objectivity and flexibility.
Keywords: monetary policy normalization; central bank; BVAR model; European Central Bank; euro area; central banks forecast.
The Effect of Three Types of Agency Problems on the Firm Performance: Evidence from Indonesia
by Ratna Wardhani, N. L. Lydia Kusumadewi
Abstract: This study aims to examine the effect of agency problems on performance by using three types of agency relationships. This study uses 1.760 observations of nonfinancial companies from Indonesia during 2013-2017. The results show that agency problems Type I (manager vs shareholder) and Type II (majority vs minority shareholder) in general positively affect performance, whereas agency problems Type III (shareholder vs creditor) negatively affect performance. This study contributes to agency theory literature and to local and international investors that invest in the Indonesian capital market by showing that not all types of agency problems negatively affect performance.
Keywords: agency problem; market-based performance; accounting-based performance; Indonesia.
Revenue efficiency: a distributional analysis in the European banking
by Kristina Kocisova, Peter Sugerek
Abstract: This paper uses Data Envelopment Analysis (DEA) to compare efficiency estimated according to the traditional revenue model presented by Farrell (1957) and a new revenue model presented by Tone (2002). First, we estimated the revenue efficiency of 114 European banks during the period from 2010 to 2018. The results showed that the traditional revenue efficiency ranged from 35.74% to 38.85%, and new revenue efficiency ranged from 37.82% to 54.99%. The results of the analysis showed that banks located in Northern Europe and large banks seem to be most efficient. After the estimation of efficiencies, the nonparametric test for equality of densities was used to test whether two given distributions, estimated nonparametrically via kernel smoothing, differ statistically in terms of the size and geo-scheme for Europe. Based on the results of distribution hypothesis tests, we could confirm our research questions that depended on size, location and applied methodology.
Keywords: Commercial banks; Data Envelopment Analysis; Europe; Revenue efficiency; Software R.
MEDIA PROMOTION, ISLAMIC RELIGIOSITY AND MOSLEM COMMUNITY PERCEPTION TOWARDS CHARITABLE GIVING OF CASH WAQF
by Vika A. Qurrata, Linda Seprillina, Bagus S. Narmaditya, Nor Ermawati Hussain
Abstract: In Islamic countries, the Waqf fund is important and serves as a relief provided to facing poverty issues. However, in Indonesia, the concept and Muslim perception of cash waqf is relatively new as compared to the two traditional practices. Thus, this study intends to develop a conceptual model elucidating the Malang Muslim communitys willingness towards charitable giving of cash waqf. Using Structural Equation Modelling (SEM), these findings indicate that there is a significant relationship between media, Islamic religiosity, and perception of cash waqf contribution. The result strongly urges that the waqf institutions using media more to increase the awareness of the Muslim community in order to enhance involvement in waqf.
Keywords: Waqf; Media Promotion; Islamic Religiosity; Perception.
Profit-shifting through Panama Papers destinations: A case study for the Czech Republic
by Veronika Solilova, Danue Nerudova, Marek Litzman, Marian Dobranschi
Abstract: This paper exploits firm-level data from the ORBIS database to identify international tax planning by the Czech multinational enterprises (MNEs) through Panama Papers destinations. Profit shifting is measured by comparing a tax payable per unit of profits of the Czech MNEs having links to the Panama Papers destinations with the results of the same indicator of the Czech non-multinational entities i.e. without any cross-border links and thus without any profit shifting opportunities. Results are based on the sample of 116,312 entities and provide evidence about the importance of the Panama papers destinations in profit-shifting from the Czech Republic, mainly in case of service-oriented industries. Overall, the estimated base erosion ranges from EUR 159 up to EUR 2.92 mil., which corresponds up to approximately CZK 14 mil. of corporate tax revenues losses.
Keywords: Panama Papers; profit shifting; Czech Republic; ORBIS; individuals; MNEs; base erosion; tax havens; tax revenues losses; service-oriented industries.
Can an Integrated Reporting System in Thai Context Create Sustainable Value to Users?
by Neungruthai Petcharat
Abstract: This study examines an integrated reporting system of Thai-listed companies for incorporating business information in annual reports to create sustainable value. A set of questionnaires is employed to conduct the integrated information in the annual reports of the sample companies. A multiple regression analysis is utilised to test the hypotheses. Results reveal that the integrated reporting of the sample companies enables them to satisfy the information needs of the stakeholders. Business information in relation to the environmental and social performance, effective investment decision and sustainability targets in the annual reports of the sample companies create sustainable value from the perspective of stakeholders.
Keywords: integrated information; integrated reporting system; sustainable targets; sustainable value; effective investment decision; stakeholders satisfaction.
Equity Markets and Investment Patterns: The Network Perspective
by Muhammad Mohsin Hakeem
Abstract: The close-knit networks such as the European Union (EU) influence the internal investment flows. The study explores the connectivity patterns, closeness, and clustering in the neighborhood. All these characteristics can influence the foreign portfolio investment flows for any country. Analysis of network connectivity and possible correlations patterns with major economic indicators of any member country can explain the patterns of investment decisions. The findings strengthen the belief about strong connectivity between economic stability or deterioration with better or weak connectivity patterns in the investment network as a result of changes in the economic state of affairs, even in strongly knit clusters.
Keywords: Investment Networks; Economic Indicators; European Union; Portfolio Investment; Network Analysis; Equity Markets; Liquidity; Network Centralities.
Transformation of labor relations in the context of global economic and social risks
by Alena Fedorova, Zuzana Dvorakova, Olga Koropets
Abstract: The theoretical and empirical study of the impact of global economic and social risks on the transformation of labor relations will allow us to identify causal relationships and factors that determine changes in the labor sphere. New trends emerge in the global labor market, leading to the degradation of labor relations, a decrease in the level of employee welfare and wellbeing. The authors research methodology involves the sequential implementation of long-term monitoring study that includes certain stages. The stage of monitoring changes in labor relations between employers and employees is implemented by the authors in countries with different economic models through a sociological survey of employees in various economy sectors. The survey results are evaluated in the framework of formal and informal labor relations that are built in the process of managerial interaction. The study represents an initial research step and outlines promising directions for a new labor economy development.
Keywords: global economic and social risks; labor relations; employees wellbeing; countries with different economic models; sociological survey; comparative analysis; managerial methods.
Corporate Governance and Voluntary Disclosures: A Story about Corporate Transparency from Indonesia
by Fitra Roman Cahaya, Gunadi Yoga
Abstract: This study examines the impacts of corporate governance attributes on Indonesia Stock Exchange (IDX) listed companies voluntary disclosures. Year-ending 2012 annual report disclosures of 100 IDX listed companies are analyzed using a disclosure index. The results show a low level of voluntary disclosures (25.97%). The regression analysis shows that board size is a positive and significant predictor of voluntary disclosure practices. Agency theory thus partially explains the variability of these disclosure practices. Older companies also provide more disclosures. It is implied that the number of commissioners determines the strength of the board of commissioners in pushing the board of directors to be more transparent. Thus, to be more informed, international investors should invest their money in older companies having a greater number of commissioners.
Keywords: Corporate governance; voluntary disclosures; Indonesia; agency theory.
Do managements tell us the whole truth and nothing but the truth? Impact of textual sentiment in financial disclosure to future firm performance and market response in Thailand
by Siriyos Chuthanondha
Abstract: This paper empirically explores causal relation between financial news and stock price performance by applying textual analysis to listed firms financial disclosure in Thailand. Managers generally use language in MD&A to communicate value-relevant information to investors and other stakeholders. I applied a dictionary-based approach to extract textual sentiment. It is found that higher values of net textual sentiment predict higher future performance. Particularly, this study revealed that investors reacted to this kind of information asymmetrically. The effect of the unfavorable tone of financial disclosures on stock market price was more pronounced and had more predictive power than the favorable tone. Furthermore, I find that constructing portfolios that long top quintile and short bottom quintile of stock ranked by changes in tone could gain abnormal returns. Overall, this paper highlights the important role of non-financial statement disclosure in affecting future company performance and could be applied to other international stock market.
Keywords: Textual analysis; financial disclosure documents; future firm performance; stock market returns.
Debt and Profitability: Evidence from Bangladesh
by Mumtahina Islam, G.M. Wali Ullah
Abstract: This study investigates the relationship of different capital structure determinants with the profitability of Multinational Companies (MNC) in order to determine the optimal choice of the capital structure. We have used the financial statements of ten multinational companies listed in the Dhaka Stock Exchange (DSE) in Bangladesh in the year 2006-2017. The profitability is measured using the return on assets (ROA) and the return on equity (ROE). Data are analyzed using multiple panel regression which reveals that the financial ratios, namely, the long term debt (LTD) and debt to equity (DE) are the significant variables in predicting the optimal capital structure of those multinational companies. The research findings imply that MNC financial managers should avoid long-term debt financing and therefore rely more on short-term financing options from the perspective of the capital market in Bangladesh.
Keywords: Optimizing capital structure; Multinational companies; Bangladesh.
Static or Adaptive? The month-of-the-year and Intra-month Effects in African Stock Markets
by Paul-Francois Muzindutsi, Adefemi A. Obalade
Abstract: We investigated adaptive month-of-the-year (MOY) and intra-month/half-of-the-month (HOM) effects in African stock markets (ASMs) using the daily returns of All Share Indexes in Nigerian stock exchange, Johannesburg Stock Exchange, stock exchange of Mauritius, Casablancan stock exchange and Tunisian stock exchange from 1998:1 to 2018:2. This study employed rolling GARCH models for the purpose of estimations. Our results reveal that the behaviour of MOY and HOM effects are cyclical rather than being persistent. Hence, we proved that the behaviour of MOY and HOM calendar anomalies in ASMs is adaptive as opposed to being static, which is consistent with the adaptive market hypothesis (AMH) as opposed to efficient market hypothesis. Thus, investors (local/international) should not view ASMs as anomalous in absolute form.
Keywords: Calendar effect; month-of-the-year; Intra-month; AMH; Rolling GARCH.
Audit Committee Member Characteristics and Committee Effectiveness: Evidence from Turkish Banking Sector
by YAMAN ERZURUMLU, GURCAN AVCI
Abstract: Lack of corporate governance was addressed as one of the reasons for financial scandals and crises experienced during the 2000s. Financial crises were followed by audit committee mechanism revision, and focus shifted onto how audit committees governance quality could be improved. Using a unique data set, this study investigates the impact of audit committee membership characteristics on the governing quality of the audit committee measured by operational loss in the Turkish Banking Sector. Results imply that gender diversification and multiple directorships of the members improve the governance effectiveness while auditing background alone does not make significant improvement after controlling for industry experience. Differences in cultural background and insufficient funding of the committee could be detrimental to the effectiveness of banks audit committees at mitigating operational risk. Trends of the member characteristics for 2006-2012 suggest that the 2008 turbulence has mainly had a disciplinary effect on effective audit committees.
Keywords: Audit Committee; Audit Committee Membership; Operational Risk; Operational Loss; Corporate Governance; Banks; Turkey; LSDVC.
Determinants of Bank Profitability in India: Applications of Count Data Models
by Muhammadriyaj Faniband
Abstract: This paper employs count data models, namely Poisson and Negative Binomial regression to investigate whether macroeconomic factors increase or decrease the count of number of eighteen Indian public sector banks in losses. The analysis is based on quarterly data from Q3 2009 to Q4 2019. This paper also considers one and two lagged macroeconomic factors. The results provide a new perspective for understanding the determinants of bank profitability. The contemporary, one and two lagged gross domestic product growth rate and inflation increase the count of number of banks in losses. Further, the count of number of banks in losses surges with increase in contemporary and one lagged Index of Industrial Production. However, one and two lagged exchange rates are significant to shrink the count of number of banks in losses. This study enables banks and policy makers to deliberate on the macroeconomic determinants considered for this study.
Keywords: Macroeconomic Factors; Gross Domestic Products; Inflation; Index of Industrial Production; Exchange Rates; Bank Profitability; Count Data Models; Poisson Regression; Negative Binomial Regression,India.