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China Finance Review International, vol. 9 no. 3
Type: Research Article
ISSN: 2044-1398

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Article
Publication date: 1 April 2008

A. Bezuidenhout, C. Mlambo and W.D. Hamman

In financial analysis, forecasting often involves regressing one time series variable on another. However, to ensure that the models are correctly specified, one needs to…

Abstract

In financial analysis, forecasting often involves regressing one time series variable on another. However, to ensure that the models are correctly specified, one needs to first test for stationarity, co‐integration and causality. In testing for causality, the variables should be stationary. If non‐stationary, one can estimate the model in difference form, unless the variables are co‐integrated. This article determines whether cash flow and earnings variables are stationary, and which variable causes the other, using econometric analysis. In most cases, cash flow variables are found to cause earnings variables. This is so when the models are estimated in levels. However, when estimated in first differences, the causal relationship tends to be reversed such that earnings cause cash flows. Further study is recommended, whereby panel data could be used to improve the power of the tests.

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Meditari Accountancy Research, vol. 16 no. 1
Type: Research Article
ISSN: 1022-2529

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Book part
Publication date: 29 December 2016

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Risk Management in Emerging Markets
Type: Book
ISBN: 978-1-78635-451-8

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Article
Publication date: 24 May 2021

Zied Ftiti

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Journal of Financial Reporting and Accounting, vol. 19 no. 1
Type: Research Article
ISSN: 1985-2517

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Book part
Publication date: 1 March 2021

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Recent Developments in Asian Economics International Symposia in Economic Theory and Econometrics
Type: Book
ISBN: 978-1-83867-359-8

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Article
Publication date: 7 May 2021

Syed Mehmood Raza Shah, Qiang Fu, Ghulam Abbas and Muhammad Usman Arshad

Wealth Management Products (WMPs) are the largest and most crucial component of China's Shadow banking, which are off the balance sheet and considered as a substitute for…

Abstract

Purpose

Wealth Management Products (WMPs) are the largest and most crucial component of China's Shadow banking, which are off the balance sheet and considered as a substitute for deposits. Commercial banks in China are involved in the issuance of WMPs mainly to; evade the regulatory restrictions, move non-performing loans away from the balance sheet, chase the profits and take advantage of yield spread (the difference between WMPs yield and deposit rate).

Design/methodology/approach

In this study, the authors investigate what bank related characteristics and needs; influenced and prompted the issuance of WMPs. By using a quarterly panel data from 2010 to 2019, this study performed the fixed effects approach favored by the Hausman specification test, and a feasible generalized least square (FGLS) estimation method is employed to deal with any issues of heteroscedasticity and auto-correlation.

Findings

This study found that there is a positive and significant association between the non-performing loan ratio and the issuance of WMPs. Moreover, profitability and spread were found to play an essential role in the issuance of WMPs. The findings of this study suggest that WMPs are issued for multi-purpose, and off the balance sheet status of these products makes them very lucrative for regulated Chinese commercial banks.

Research limitations/implications

Non-guaranteed WMPs are considered as an item of shadow banking in China, as banks do not consolidate this type of WMPs into their balance sheet; due to that reason, there is no individual bank data available for the amount of WMPs. The authors use the number of WMPs issued by banks as a proxy for the bank's exposure to the WMPs business.

Practical implications

From a regulatory perspective, this study helps regulators to understand the risk associated with the issuance of WMPs; by providing empirical evidence that Chinese banks issue WMPs to hide the actual risk of non-performing loans, and this practice could mislead the regulators to evaluate the bank credit risk and loan quality. This study also identifies that Chinese banks issue WMPs for multi-purpose; this can help potential investors to understand the dynamics of WMPs issuance.

Originality/value

This research is innovative in its orientation because it is designed to investigate the less explored wealth management products (WMPs) issued by Chinese banks. This study's content includes not only innovation but also contributes to the existing literature on the shadow banking sector in terms of regulatory arbitrage. Moreover, the inclusion of FGLS estimation models, ten years of quarterly data, and the top 30 Chinese banks (covers 70% of the total Chinese commercial banking system's assets) make this research more comprehensive and significant.

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Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

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Article
Publication date: 17 January 2020

Dinesh Jaisinghani, Muskan Kaur and Mohd Merajuddin Inamdar

The purpose of this paper is to analyze different seasonal anomalies for the Israeli securities markets for the pre- and post-global financial crisis periods.

Abstract

Purpose

The purpose of this paper is to analyze different seasonal anomalies for the Israeli securities markets for the pre- and post-global financial crisis periods.

Design/methodology/approach

The closing values of six indices of the Tel Aviv Stock Exchange (TASE) of Israel have been considered. The time frame ranges from 2000 to 2018. Further, the overall time frame has been segregated into pre- and post-financial crisis periods. The study employs dummy variable regression technique for assessing different calendar anomalies.

Findings

The results show evidence pertaining to different seasonal anomalies for the Israeli markets. The results specifically show that the anomalies change considerably across the pre- and post-financial crisis periods. The results are more apparent for three anomalies including the day of the week effect, the month of the year effect and the holiday effect. However, anomalies including the Halloween effect and the trading month effect are found to be insignificant across both pre- and post-financial crisis periods.

Originality/value

The study is first of its kind that analyzes different seasonal anomalies across pre- and post-financial crisis periods for the Israeli markets. The study provides newer insights about the overall return patterns observed in different indices of the TASE.

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Managerial Finance, vol. 46 no. 3
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 15 August 2016

Mingyuan Guo and Xu Wang

– The purpose of this paper is to analyse the dependence structure in volatility between Shanghai and Shenzhen stock market in China based on high-frequency data.

Abstract

Purpose

The purpose of this paper is to analyse the dependence structure in volatility between Shanghai and Shenzhen stock market in China based on high-frequency data.

Design/methodology/approach

Using a multiplicative error model (hereinafter MEM) to describe the margins in volatility of China’s Shanghai and Shenzhen stock market, this study adopts static and time-varying copulas, respectively, estimated by maximum likelihood estimation method to describe the dependence structure in volatility between Shanghai and Shenzhen stock market in China.

Findings

This paper has identified the asymmetrical dependence structure in financial market volatility more precisely. Gumbel copula could best fit the empirical distribution as it can capture the relatively high dependence degree in the upper tail part corresponding to the period of volatile price fluctuation in both static and dynamic view.

Originality/value

Previous scholars mostly use GARCH model to describe the margins for price volatility. As MEM can efficiently characterize the volatility estimators, this paper uses MEM to model the margins for the market volatility directly based on high-frequency data, and proposes a proper distribution for the innovation in the marginal models. Then we could use copula-MEM other than copula-GARCH model to study on the dependence structure in volatility between Shanghai and Shenzhen stock market in China from a microstructural perspective.

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China Finance Review International, vol. 6 no. 3
Type: Research Article
ISSN: 2044-1398

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Book part
Publication date: 21 November 2014

Alex Maynard and Dongmeng Ren

We compare the finite sample power of short- and long-horizon tests in nonlinear predictive regression models of regime switching between bull and bear markets, allowing…

Abstract

We compare the finite sample power of short- and long-horizon tests in nonlinear predictive regression models of regime switching between bull and bear markets, allowing for time varying transition probabilities. As a point of reference, we also provide a similar comparison in a linear predictive regression model without regime switching. Overall, our results do not support the contention of higher power in longer horizon tests in either the linear or nonlinear regime switching models. Nonetheless, it is possible that other plausible nonlinear models provide stronger justification for long-horizon tests.

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Essays in Honor of Peter C. B. Phillips
Type: Book
ISBN: 978-1-78441-183-1

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Article
Publication date: 27 May 2020

Ajaya Kumar Panda and Swagatika Nanda

The purpose of this paper is to empirically analyze the determinants of capital structure and their long-run equilibrium relationships with firm-specific and macroeconomic…

Abstract

Purpose

The purpose of this paper is to empirically analyze the determinants of capital structure and their long-run equilibrium relationships with firm-specific and macroeconomic indicators for Indian manufacturing firms.

Design/methodology/approach

The study is conducted using the panel semi-parametric and non-parametric regression models to identify the key determinants of capital structure. Panel cointegration models are also employed for analyzing the long-run equilibrium association of capital structure with its determinants.

Findings

The study finds that each manufacturing sector has unique determinants of capital structure. The debt level is significantly affected by asset tangibility, growth opportunity, effective tax rate, non-debt tax shield, cash flow, profitability, firm size, foreign investment, government borrowing, economic growth, and interest rate. All these firm-specific and macroeconomic variables have strong long-run equilibrium relationship with capital structure as a whole.

Practical Implication of the Study

The study analyzes the determinants of capital structure for eight manufacturing sectors of India, which helps firm managers and policy-makers to identify appropriate factors that maximize firm value. The sector-specific features of firms may lead to a new path with regard to corporate governance and ownership structure to enhance stakeholder's satisfaction.

Originality/value

The use of semi-parametric and non-parametric panel regression models to analyze the determinants of capital structure, and the use of panel cointegration approach to explore the long-run equilibrium relationship between the determinants and its factors are the unique contributions of the present research.

Details

International Journal of Productivity and Performance Management, vol. 69 no. 5
Type: Research Article
ISSN: 1741-0401

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