Search results

Drawing upon underinvestment theory and clientele effect hypothesis, this paper aims to examine the effects of foreign currency (forex) exposure and Shari’ah-compliant status on firms’ financial hedging strategy.

Based on data of 250 nonfinancial firms listed on Bursa Malaysia from 2010 to 2018 (2,250 firm-year observations), the authors test the impact of forex exposure based on a vector of foreign-denominated cash flows (FCF) indicators and firms’ Sharīʿah-compliant status on two proxies of financial hedging decisions, namely, the ratio of the notional value of currency derivatives to total assets and a binomial measure of hedging status. The hedging decision models are estimated using panel logistic regression and system generalized method of moments.

The results indicate significant positive effects of the forex exposure indicators on firms’ propensity to hedge. However, the impact of forex exposure is most prevalent via total FCF. The results also reveal significant positive effects of Sharīʿah-compliant status on firms’ propensity to hedge but its negative impacts on the value of currency derivatives they use. The results suggest that Sharīʿah-compliant firms refrain from engaging in currency derivatives to avoid riba’ and subsequently subdue the clientele effect. However, when the forex exposure reaches higher levels, engagement in currency derivatives becomes a matter of tentative necessity (dharurat).

This study relies exclusively on the disclosure of foreign currency risk and management data in the annual reports of listed companies. Consequently, this limits the sample size to only those nonfinancial listed companies with complete data for the study period. Also, since none of the companies reports using Sharīʿah-compliant derivatives, the authors thus assume that they use derivative instruments that tolerate “riba.”

Given the significance of forex exposure on hedging decisions, the accounting profession must strictly adopt FRS 7 and FRS 139 for all listed firms to avoid market scrutiny and sustain their clientele. The results also call for the Islamic market regulators to include mandatory disclosure of conventional currency derivatives in screening firms for clearly prohibited activities to help enhance the credibility of its Islamic financial market.

Due to difficulty accessing relevant cash flow data, the study is among the few studies that measure forex exposure using FCF and test more proxy indicators. This study is perhaps the first to examine the Shari’ah perspective on currency derivatives in corporate forex risk management.

The purpose of this paper is to investigate the relationship between marketing mix (MM), information technology capabilities (ITCAP) and corporate entrepreneurship (CE). Additionally, the study has attempted to address the moderating influence of ITCAP on MM–CE relationship.

To achieve the objectives of the study, data was collected from managers working in the upper and middle departments in some major Algerian banks. To test the hypotheses of the study, simple regression and PROCESS macro with moderated multiple regression were used.

The results of the study revealed that the MM and ITCAP positively affect entrepreneurship, and the ITCAP of banks and their interaction with the MM contributed positively to promoting entrepreneurship for companies through the moderate influence of ITCAP on the relationship between the MM and CE.

It is very difficult to present the generalization of the results of this study because some of the major banks mainly drove the study sample. Therefore, researchers are encouraged to test the proposed propositions further.

The results of the study suggested that policymakers in the banking sector in Algeria seriously consider developing the MM for its direct role in the CE. Specifically, the moderate role of ITCAP indicated that an effective alignment of the bank’s ITCAP with elements of the MM could enhance the entrepreneurship position of the bank. Therefore, it is necessary to pay attention to the importance of these factors to foster entrepreneurship in the services sector.

The role of MM in CE has been overlooked in the extant literature, especially in the emerging economies. In addition, this study extends the body of knowledge through evaluating the moderating role of ITCAP using the effect of interaction in PROCESS macro with moderated multiple regression for path analysis.