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March 2018 (International Review of Business Research Papers)

March

2018

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March 2018 (International Review of Business Research Papers)

Total Articles - 12

Pages 1 – 18

Author: Annie Hin-cheung Ko, Pimtong Tavitiyaman, Ben Kin-fai Wong and Raymond Siu-yeung Chan

This exploratory research aims to investigate (1) the strengths and weaknesses of the hospitality and tourism industry in terms of governance practices; and (2) the governance compliance level of the industry in Hong Kong. A rating instrument is created to test five major governance areas: ‘Board Responsibilities’, ‘Disclosure and Transparency’, ‘Equitable Treatment of Shareholders’, ‘Rights of Shareholders’ and ‘Role of Stakeholders’. Results show that companies perform best in ‘Disclosure and Transparency’ and worst in ‘Role of Stakeholders’. The total corporate governance score of the industry has improved over 300% during 2003 to 2015. Nevertheless, majority of companies barely meet the minimum requirements set by the regulators; only a small number of them allocate resources to promote good governance voluntarily. According to the literature review, this is the first over-a-decade-long longitudinal research to study the trends of the corporate governance performance of the industry.

Pages 19 – 29

Author: Dominic C. Muteshi, Zachary B. Awino, Reginah K. Kitiabi and Ganesh P. Pokhariyal

Manufacturing companies operate in a dynamic environment and require to continuously cultivate firm-level strategies for performance improvement. Currently, the main discussion in social sciences has centred on the links between firm-level strategy, capabilities and performance with varied result. To investigate this connections, we gathered and analysed data from 125 Large-Scale Food and Beverage Manufacturing Companies (FBMC) in Kenya. The study covered a two year period. The paper tested the hypothesis that firm capabilities have a significant effect on the relationship between firm-level strategy and performance using regression analysis. The results supported the hypothesis with human capital and research exhibiting the highest moderation. These findings will contribute to government policy development for the sector’s expansion and competitiveness and management practises on resource utilization.

Pages 30 – 53

Author: Mohamed Taieb Kchaou, Anis Jarboui and Chiraz Karamti

What is the link between governance and firm’ characteristics in forecast error? More specifically, how can female affect analyst forecast? This study sheds light on these questions while taking into account the endogeneity and granger causality test of the relationships among corporate governance and forecast error made by leaders. The authors make more additional contributions about female participation and forecast error to the literature. With a selective selection of the sample by eliminating firms that does not contain a woman in such a leading position, our sample is made up of 83 companies belonging to the SBF 120 index during the period 2010-2014. Our methodology is to estimate the linear regression, which connects the forecast' error to the explanatory variables. The originality of this study focuses on the examination of the women's participation in the explanation of the forecast error committed by the leader in the French context. Our results show that the diversity in the board improves significantly the reliability of the forecasts. Contrary to our hypothesis, the authors found a positive and significant relationship between the female leader and the forecast error. Added to that, the size, age and audit quality are as well are different compared to our assumptions but this is not the case for external directors. Concerning the structure of the undertaking, the results of the three models show a significant and positive impact on the size of the Directors' board and the duality on the forecast error. In this study, the authors proved that the firms belonging to the service sector suffer from a forecast error that is considered very high.

Pages 54 – 67

Author: Anna Grazia Quaranta, Silvana Tartufoli and Maria Zifaro

Assessing the insolvency risk is certainly a central issue for economic and financial analysis and of prime importance to financial intermediaries. Despite that, no agreement yet exists. Institutional factors specific to each country, as well as a large variety of other causes which can lead to the failure of a firm, obstruct the way to a general theory. It is instead necessary to deal with this issue, not only because it is central to credit management by banking operators, but also for its overall impact on the economy. This paper analyzes how to forecast the financial status (non-defaulting/defaulting) of a firm. To this aim, alternative procedures were tested on the same data set. Specifically, after analyzing the adequacy of Altman’s Z-score model, (i) it was attempted to solve its well-known limit due to the consideration of the same number of non-defaulting and defaulting firms in the group, (ii) explicative variables related to a firm’s risk of bankruptcy were selected, and finally, (iii) an alternative approach based on panel data was used to divide firms in non-defaulting/defaulting sub-groups. In this way, a considerable reduction of errors in the prediction of a firm’s financial status was progressively obtained.

Pages 68 – 93

Author: Muntasir Murshed

The significance of enhancement in energy consumption in order to boost the respective national output level within any economy cannot be denied. Moreover, the United Nation’s 2030 Sustainable Development agenda had also called for an improvement in efficiency of energy-use through the adoption of renewable energy technologies in particular, with the ultimate goal of attaining sustainability in global energy supply. The rationale behind escalating the associated efficiency levels is that by doing so the level of energy consumption can be reduced which would complement the direct energy conservation policies as well. However, there has been ambiguity with regard to the precise relationship between efficiency in use and consumption of energy. The aim of this paper is to shed light on the energy efficiency-energy consumption nexus in context of the two South Asian Lower Middle-Income Countries, Bangladesh and India. The study makes a novel attempt at investigating the ‘Jevons Paradox’ by disaggregating energy consumption into primary and secondary energy consumption and by expressing each of these as separate functions of energy-use efficiency and other control variables. This study considers annual data stemming from 1990 to 2016 and employs Fixed Effects (FE), Random Effects (RE) and Three-Stage Least Squares (3SLS) panel regression tools for robustness check. Furthermore, the paper also analyses the long run causal linkages using the Granger causality tests. In light of the estimated results, evidence of a Jevons paradox is found in the context of non-renewable energy, electricity and coal consumption. In addition, no long-run causal association is found to exist.

Pages 94 – 108

Author: Antares D’Achille

The impact of comprehensive income (CI) in banks and financial institutions, in terms of value relevance compared to net income (NI), has been inadequately investigated. Most studies omit the banking sector, therefore this study is focused on value relevance of accounting data and uses a sample of financial entities in major European countries for the comparison between CI and NI, with particular attention to the company size. The company size is studied by splitting the sample in three size groups. The results highlighted some increase in value relevance of other comprehensive income (OCI) compared to NI but they are not clear about results with regards to CI and OCI components. The most original contribution came from the size analysis, which shows the original aspect compared to literature and to the results, while they are not clear with regards to individual groups, though they do provide some useful information for future research. In fact, they have to consider not only the industry sector but also the different entity dimension in that sector.

Pages 109 – 131

Author: Md. Nayeem Abdullah, Syed Manzur Quader and Jyotirmoy Saha

This study examines the impact of dividend payout on the market value of selected Bangladeshi firms. Generalized method of moments (GMM) technique have been applied to estimate the dynamic regression models using a panel data of 198 companies listed on the Chittagong Stock Exchange (CSE) during 2003 to 2015. A statistically significant positive relationship is found between pay out and market value of the sample companies. Therefore, the Dividend Irrelevance Proposition of Modigliani and Miller have been rejected for the Bangladeshi firms in our sample. The findings of this study which are in disagreement with the dividend irrelevance theory hint to the fact that the Bangladesh financial market is not fully efficient. Panel data set and dynamic model used to analyze the financial market in case of Bangladesh is novel.

Pages 132 – 145

Author: Carole Ibrahim

The aim of this research is to study the relationship between government effectiveness, control of corruption and regulatory quality on one hand, and economic growth, on the other hand, among the Gulf Cooperation Council (GCC) countries, using the panel Vector Error Correction Model (VECM) following Johansen’s procedure, for the period 2002-2015.Study findings indicate that government effectiveness, control of corruption and regulatory quality have a strong impact on economic growth in the long term. The study suggests that GCC countries and all developing countries need to improve the quality of governance to achieve sustainable growth.

Pages 146 – 163

Author: Luca Ghezzi

An insightful problem of passive management is considered, where an aggregate portfolio is rebalanced annually to restore the percent weights of its strategic asset allocation. As its annual total returns are assumed to be time uncorrelated and lognormally distributed, multi-period optimization boils down to single period optimization. Expanding on previous theoretical results, it is shown how a minimum-variance set based on linear returns turns into a minimum-variance set based on logarithmic returns. More precisely, it is found that there can be two different qualitative patterns, one of which is unprecedented and striking. Both patterns are tentatively portrayed by using historical data. The resulting efficient frontier is readily complemented by a dynamic shortfall constraint. Each threshold return can be turned into a threshold accumulation that has the same shortfall probability; coeteris paribus, the more distant the time horizon, the smaller the shortfall probability. As our procedure is analytically tractable, it might be operationally useful, especially to financial advisors and individual investors.

Pages 164 – 179

Author: Nidhal Ziedi Ellouz, Nesrine Gafsi and Haykel Zouaoui

This paper aims to examine the effect of board gender diversity on firm risk taking and firm financial performance. Based on a sample of 100 UK listed companies covering a 5-year period from 2010-2014, the authors use different econometric methods and find that greater female presence on company boards has a positive effect on firm financial performance and a negative effect on firm risk-taking. Our results are consistent with the perspectives of agency theory and resource dependence theory. This paper contributes to the literature on board diversity and offers empirical evidence of the women’s role on boardroom.

Pages 180 – 204

Author: Rima Bizri and Mira Baassiri

Credit risk management is considered one of the more difficult activities in the banking industry especially during periods of low growth. It is during those periods that default risk rises, and a large proportion of the banking industry’s loan portfolio becomes at risk of default. Consequently, it is the aim of this paper to investigate how the banking systems in the Middle East manage their asset quality during periods of low growth. This study examines a sample of Lebanese banks during a 6-year period of low economic growth to see how the Lebanese banking industry, an advanced and profitable economic sector, addresses asset quality issues. A variety of statistical tests were performed such as t-tests and regression analysis with SPSS. In periods of low growth, increasing the proportions of investments in portfolio securities (rather than increase their loan portfolio) is positively related to better asset quality and lower credit risk. Moreover, a higher percentage of non-interest-income is positively related to higher profitability as it provides income diversification while reducing market risk. This study was able to fill a gap in the literature by offering a deep understanding of how Lebanese banks manage the quality of their assets during unfavorable economic conditions.

Pages 205 – 225

Author: Young Cheol Jung

This paper evaluates the forecasting power of five CBOE Volatility Indexes (VIX; VXN; OVX; EVZ; GVZ) for the price interval. For the period of June 2008- March 2017, this paper builds a series of one-month ahead price intervals of underlying asset with a band of ± 1 or 2 times of its daily volatility index. Then assesses whether each volatility index is a good estimator for the price interval through comparing its performance to that of the ex-post realized volatility and normal distribution benchmark. Further this paper tests whether the expected shortfall (ES) beyond the price interval forecast of the volatility index is lower than ES of the realized volatility and the benchmark generated by Monte Carlo Simulation. Based upon the test results, this paper suggests that VIX and VXN are robust estimators for the future price interval and can be used in estimating the Value-at-Risk (VaR). VIX and VXN performed well particularly in predicting the upper bound of returns due to the feature of the asymmetric negative return/volatility index relation that exists in the stock markets. The evaluation for OVX, EVZ and GVZ is reserved because their performance was inconsistent and inferior to VIX and VXN.

Total Articles- 12

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