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Article
Publication date: 8 April 2014

Dennis Olson and Taisier A. Zoubi

This study aims to examine the determinants of the allowance for loan losses (ALL) and loan loss provisions (LLP) for banks in the Middle East and North African (MENA…

Abstract

Purpose

This study aims to examine the determinants of the allowance for loan losses (ALL) and loan loss provisions (LLP) for banks in the Middle East and North African (MENA) region using both a two-stage approach and simultaneous equation system to address the potential problem of estimation bias introduced by estimating the ALL and LLP separately. The paper also tests three competing hypotheses: the earnings management hypothesis, the capital management hypothesis, and the signaling hypothesis.

Design/methodology/approach

The authors adopt a simultaneous equation and three-stage approaches to test whether MENA banks jointly determine LLP and ALL and the determinants of the two accounts. The sample consists of all available electronic data for 75 banks (451 bank-year observations) in nine MENA countries over the period 2000-2008.

Findings

Evidence suggests that the two accounts are jointly determined. The results support the earnings management hypothesis – meaning that MENA banks have engaged in year-to-year income smoothing. The authors also find that LLP and ALL provide signals about future earnings.

Research limitations/implications

The authors acknowledge that the LLP account is only one of many accounts on the income statement that could be used for signaling or to manage earnings, and that the ALL is one of several accounts that could be used for signaling, earnings or capital management. Future studies could examine other accruals for their role in managing earnings, signaling and capital.

Practical implications

The results indicate that bank managers use LLP and ALL accounts to manage earnings management, policy makers may want to limit the ability of banks to manipulate earnings.

Originality/value

Prior research on the loan loss accounting practices has been based on single equation models of the determinants of LLP and ALL. An issue that has not been adequately addressed in this literature is that ALL and LLP may be interrelated and jointly determined by banks. If the two accounts are not independent of each other, failure to include one when estimating the other may lead to an omitted variable problem, while including both in the same equation induces a potential simultaneity bias. The study is the first empirical work examining whether ALL and LLP are jointly determined by banks. By jointly estimating LLP and ALL, the study permits an assessment of the magnitude of the potential error from adopting ordinary least squares estimation of a single equation model.

Details

Journal of Islamic Accounting and Business Research, vol. 5 no. 1
Type: Research Article
ISSN: 1759-0817

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Article
Publication date: 19 July 2019

Yamna Ghoul

This study/paper aims to present a separable identification algorithm for a multiple input single output (MISO) continuous time (CT) hybrid “Box–Jenkins”.

Abstract

Purpose

This study/paper aims to present a separable identification algorithm for a multiple input single output (MISO) continuous time (CT) hybrid “Box–Jenkins”.

Design/methodology/approach

This paper proposes an optimal method for the identification of MISO CT hybrid “Box–Jenkins” systems with unknown time delays by using the two-stage recursive least-square (TS-RLS) identification algorithm.

Findings

The effectiveness of the proposed scheme is shown with application to a simulation example.

Originality/value

A two-stage recursive least-square identification method is developed for multiple input single output continuous time hybrid “Box–Jenkins” system with multiple unknown time delays from sampled data. The proposed technique allows the division of the global CT hybrid “Box–Jenkins” system into two fictitious subsystems: the first one contains the parameters of the system model, including the multiple unknown time delays, and the second contains the parameters of the noise model. Then the TS-RLS identification algorithm can be applied easily to estimate all the parameters of the studied system.

Details

Engineering Computations, vol. 36 no. 6
Type: Research Article
ISSN: 0264-4401

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Article
Publication date: 15 March 2011

Torben Juul Andersen

Multinational structure has been linked to operational flexibilities that can improve corporate adaptability and a knowledge‐based view suggests that multinational…

Abstract

Purpose

Multinational structure has been linked to operational flexibilities that can improve corporate adaptability and a knowledge‐based view suggests that multinational resource diversity can facilitate responsive opportunities. The enhanced maneuverability from this can reduce earnings volatility and hence the corporate performance risk. But, the internationalization process may also require irreversible investments that increase corporate exposures and leave the risk implications of multinational enterprize somewhat ambiguous. Hence, the purpose of the paper is to present an empirical study of the implied relationships between the degree of multinationality and various risk measures including downside risk, upside potential, and performance risk.

Design/methodology/approach

The paper provides a brief literature review, develops hypotheses, and tests them in two‐stage least square regressions on archival data to control for pre‐selection biases.

Findings

The analyses indicate that multinationality is associated with lower downside risk as well as higher upside potential and leads to reduced performance risk. The study finds no trace of diminishing effects from higher degrees of multinationality.

Research limitations/implications

The empirical study uses a sample of large US‐based corporations, which could affect the generalizability of results. However, this is consistent with other studies and eases comparability of findings.

Practical implications

The findings add to the ongoing debate about the risk effects of a multinational corporate structure and confirms that a diverse multinational presence is associated with positive risk outcomes.

Originality/value

The paper complements a limited number of studies with equivocal results and adopts alternative risk outcome measures. The study extends the industry scope by introducing a comprehensive sample of firms operating in different manufacturing and service businesses.

Details

International Journal of Organizational Analysis, vol. 19 no. 1
Type: Research Article
ISSN: 1934-8835

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Article
Publication date: 25 October 2011

Chiung‐Ju Liang, Tzu‐Tsang Huang and Wen‐Cheng Lin

Previous empirical studies on the nature of the relationship between ownership and corporate value have produced mixed results. Meanwhile, effective management of…

Abstract

Purpose

Previous empirical studies on the nature of the relationship between ownership and corporate value have produced mixed results. Meanwhile, effective management of knowledge‐based intellectual capital has become a key factor to corporate success, both in firm performance and corporate value. Thus, this paper aims to reexamine the link among ownership, proxies for intellectual capital and corporate value in the emerging Taiwan market.

Design/methodology/approach

Using two‐stage least square estimation of panel data in a simultaneous equations framework, the authors focus on: What is the interdependent impact of ownership on corporate value through the mediating role of intellectual capital (IC)? Does ownership directly or indirectly (i.e. via IC) influence corporate value? Does it persist across industries?

Findings

The empirical results suggest that the relationship between ownership and corporate value mainly depends on industry characteristics and the nature of proxies for intellectual capital in the emerging Taiwanese market. Further, the impacts of ownership on corporate value in more traditional industries are even stronger, that is, there exists the direct impact of ownership mechanism on corporate value. Notably, for the high‐tech firms, ownership can indirectly affect corporate value through the moderating role of intellectual capital.

Research limitations/implications

The implication reminds managers and investors not merely focusing on ownership mechanisms as the main value‐creation information, but a thorough review of IC should be made in order to avoid making incorrect decisions. The limitations suggest areas for further research. For instance, it is important to extend the role of intellectual capital (i.e. to employ other variables to proxy for IC) in exploring the interdependent impact of ownership on corporate value.

Originality/value

The paper potentially adds to ongoing research by extending the importance of the concept of IC in assessing the interdependent impact of ownership on corporate value.

Details

Journal of Intellectual Capital, vol. 12 no. 4
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 16 July 2020

Muhammad Usman, Muhammad Abubakkar Siddique, Muhammad Abdul Majid Makki, Ammar Ali Gull, Ali Dardour and Junming Yin

In this paper, the authors investigate whether an independent and gender-diverse compensation committee strengthens the relationship between top managers' pay and firm…

Abstract

Purpose

In this paper, the authors investigate whether an independent and gender-diverse compensation committee strengthens the relationship between top managers' pay and firm performance in Chinese companies. The authors also investigate whether the independent compensation committee composed of all male directors is effective in designing the optimal contract for executives.

Design/methodology/approach

The authors use data from A-share listed companies on the Shenzhen and Shanghai stock exchanges from 2005 to 2015. As a baseline methodology, the authors use pooled ordinary least square (OLS) regression to draw inferences. In addition, cluster OLS regression, two-stage least square regression, the two-stage Heckman test and the propensity score matching method are also used to control for endogeneity issues.

Findings

The authors find evidence that an independent or gender-diverse compensation committee strengthens the link between top managers' pay and firm performance; that the presence of a woman on the compensation committee enhances the positive influence of committee independence on this relationship; that a compensation committee's independence or gender diversity is more effective in designing top managers' compensation in legal-person-controlled firms than they are in state-controlled firms; that gender diversity on the compensation committee is negatively associated with top managers' total pay; and that an independent compensation committee pays top managers more.

Practical implications

The study results highlight the role of an independent compensation committee in designing optimal contracts for top managers. The authors provide empirical evidence that a woman on the compensation committee strengthens its objectivity in determining top managers' compensation. The study finding supports regulatory bodies' recommendations regarding independent and women directors.

Social implications

The study findings contribute to the recent debate about gender equality around the globe. Given the discrimination against women, many regulatory bodies mandate a quota for women on corporate boards. The study findings support the regulatory bodies' recommendations by highlighting the economic benefit of having women in top management positions.

Originality/value

This study contributes to literature by investigating the largely overlooked questions of whether having a gender-diverse or independent compensation committee strengthens the relationship between top managers' pay and firm performance; whether an independent compensation committee is more efficient in setting executives' pay when it is gender-diverse; and whether the effect of independent directors and female directors on top managers' compensation varies based on the firm's ownership structure. Overall, the main contribution of the study is that the authors provide robust empirical evidence in support of the managerial power axiom.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 15 June 2020

Uche Abamba Osakede

This paper aims to analyze the relationship between public health spending and health outcome using time series data in Nigeria over the period 1980 to 2017, taking into…

Abstract

Purpose

This paper aims to analyze the relationship between public health spending and health outcome using time series data in Nigeria over the period 1980 to 2017, taking into account the role of governance by assessing how the quality of governance directly affects health status and indirectly as a mediator for the effectiveness of public health spending.

Design/methodology/approach

Using the Hausman statistical tests to check for the existence of endogeneity, the proper method for estimating the model for this study is the two-stage least square regression model. The two-stage least squares regression model addresses the problem of endogeneity using instrumental variables. The mediating role of governance on the effectiveness of public health spending on health was considered by an interaction of governance indicators with public health spending.

Findings

The results showed that public health spending had no significant effect on health outcome except when interacted with governance quality. The interaction of government health spending with governance effectiveness as well as that for control of corruption improved health by inducing a fall in maternal deaths, whereas government health expenditure interacted with rule of law raised maternal mortality. Public health spending interacted with regulatory quality improved life expectancy while that for political stability with public health spending induced a fall in life expectancy, poor maternal and infant health. Political stability and the control of corruption had direct influence on maternal health.

Practical implications

Given the predominance of public health spending in promoting access to health care and population health status for developing economies, the effectiveness of such spending should be top priority in policy makers’ agenda. This again is important because for developing economies, government revenue is generated from a small tax base due to their highly informal nature. To improve health status from public intervention in the health sector, there is indeed need for improvement in the overall state of governance in Nigeria.

Originality/value

This paper is one of the few country case studies which uses time series data to examine the role of governance on the efficacy of public health spending with extension of findings to maternal health and covering more measures of governance quality. The results fundamentally illuminate the importance of governance in fostering development in health and consequently enhancing economic development and growth.

Details

International Journal of Development Issues, vol. 20 no. 1
Type: Research Article
ISSN: 1446-8956

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Article
Publication date: 5 October 2015

Faqin Lin, Hsiao Chink Tang and Lin Wang

The purpose of this paper is to quantify how the People’s Republic of China’s (PRC) export volume affects the anti-dumping (AD) petitions filed by its major trading…

Abstract

Purpose

The purpose of this paper is to quantify how the People’s Republic of China’s (PRC) export volume affects the anti-dumping (AD) petitions filed by its major trading partners against the country.

Design/methodology/approach

Focusing on the AD petitions at the Harmonized System (HS) Code eight-digit level and the PRC’s exports at the HS two-digit level to its major trade partners during the financial crisis, we construct three instrument variables for export volume within HS two-digit level variation in the variables. These instruments – documents required, time taken and container charges incurred for goods traded across borders – represent trade costs obtained from World Bank’s Doing Business Project. We find rising exports from the PRC lead to rising AD petitions against the country.

Findings

Instrumental variable estimates indicate that a 1 percentage point rise in the PRC’s export volume raises the number of AD petitions against the country by about 0.25 percentage points, and the probability of receiving AD petitions by 3.5 per cent. These estimates are about 10 times larger than that found in ordinary least square regressions.

Originality/value

Their quantitative significance underlines why it is important to consider the issue of export endogeneity in the estimation, and that the failure of the current trade statistics to account for the true value-added of traded goods particularly disadvantaged the PRC given its position as the factory of the world.

Details

Journal of Chinese Economic and Foreign Trade Studies, vol. 8 no. 3
Type: Research Article
ISSN: 1754-4408

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Article
Publication date: 29 June 2021

Rajesh Kumar Bhaskaran, K.S. Sujit and Saksham Mongia

This research study examines the impact of social and governance initiatives on financial performance of global banks. The study is significant in the context of massive…

Abstract

Purpose

This research study examines the impact of social and governance initiatives on financial performance of global banks. The study is significant in the context of massive changes in regulations, government policy, social attitudes and market development attributed to banking sector.

Design/methodology/approach

The source of data for this study was ESG database of Thomson Reuters. The study was based on 472 global banks. The research paper uses two-stage least square model and the study covered the five-year period 2015–2019.

Findings

Banks with high intensity of social and governance-related activities have positive market-based valuation effects. Adequately capitalized banks tend to invest more in social initiatives. Banks' governance initiatives directed toward the use of anti-takeover defensive mechanisms are skeptically perceived by markets. Riskier banks tend to have less investments in social initiatives.

Research limitations/implications

The findings are relevant in the context of expectations from policymakers, consumers and investors with respect to the role which banks ought to play in funding the development of a sustainable economy. The research finding that strong governance and social initiatives by banks are value-enhancing measures is a clear evidence of the significance of ESG initiatives as value-creating mechanisms as perceived by markets.

Originality/value

This study addresses the gap in the research, which examines the role of governance and social initiatives on value creation in the banking sector firms. The study examines the impact of different elements of governance and social initiatives on financial performance of banks.

Details

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

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Article
Publication date: 8 May 2018

Muhammad Tahir, SAF Hasnu and Mario Ruiz Estrada

Trade openness plays a significant role in the growth process of countries. The purpose of this paper is to examine the impact of macroeconomic determinants on the trade…

Abstract

Purpose

Trade openness plays a significant role in the growth process of countries. The purpose of this paper is to examine the impact of macroeconomic determinants on the trade openness of countries.

Design/methodology/approach

The study focuses on the South Asian Association for Regional Cooperation (SAARC) member countries and the data used were from 1971 to 2011. Panel data econometrics techniques and two stages least square method (TSLS) are used to carry out empirical analysis and robustness testing.

Findings

The main finding of the paper is that macroeconomic determinants such as investment both in physical and human capital and per capita gross domestic product (GDP) positively affect trade openness. Further, the size of labour force and currency exchange rate has also impacted trade openness negatively and significantly.

Practical implications

It implies that efficient macroeconomic management matters for higher trade openness. The sampled developing countries are suggested to pay favourable attention to macroeconomic variables if they want to grow in the long run through outward-oriented policies.

Originality/value

This paper is an original contribution in the context of SAARC countries by focusing on the relationship between macroeconomic determinants and trade openness.

Details

Journal of Asia Business Studies, vol. 12 no. 2
Type: Research Article
ISSN: 1558-7894

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Article
Publication date: 17 June 2019

Muhammad Umar Draz, Fayyaz Ahmad, Bhumika Gupta and Waqas Amin

This study aims to examine the impact of macroeconomic fundamentals on exchange rates of selected South Asian economies during 1981-2013.

Abstract

Purpose

This study aims to examine the impact of macroeconomic fundamentals on exchange rates of selected South Asian economies during 1981-2013.

Design/methodology/approach

The authors have used two econometric approaches to the data. For the pooled sample, estimated generalized least square (EGLS) and the two-stage least square method are applied. For the panel data, the authors have used the panel generalized method of moments and ordinary least squares (OLS) methods.

Findings

The results suggest that macroeconomic factors have a significant impact on exchange rates. The robust findings highlight that improvements in domestic economic and political systems are crucial for a successful exchange rate policy.

Originality/value

The existing literature on exchange rate fundamentals have either focused on exchange rates and international trade or investigated the relationship for the developed economies. Covering a period of more than three decades, and using both pooled and panel estimations, our study is unique in terms of its focus on the South Asian economies.

Details

Journal of Chinese Economic and Foreign Trade Studies, vol. 12 no. 2
Type: Research Article
ISSN: 1754-4408

Keywords

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