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March 2015 (International Review of Business Research Papers)

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March 2015 (International Review of Business Research Papers)

Total Articles - 10

Pages 1 – 10

Author: Thomas Hering, Christian Toll and Polina K. Kirilova

In this paper a potential buyer (valuation subject) is interested in purchasing a company (valuation object). Thereby, he strives for maximum income and acts in a real imperfect market. In order to sustain his economic interest, he must conduct a business valuation. To help him determine what maximum price he may afford to pay without the transaction proving disadvantageous, we implement an investment theory-based method. The purpose of our paper is to show how formulas derived from the state marginal price model are used to fulfil the described valuation task under realistic imperfect market conditions. As a main conclusion, the correct business value can usually not be calculated using the partial-analytic future earnings method.

Pages 11 – 24

Author: Frances Shaw, Fergal O’Brien and Finbarr Murphy

Integration of European Capital markets has coincided with the development and exponential growth of credit derivative markets. As credit derivatives have matured as an asset class, we can regard them as return generating assets and not simply as risk transfer vehicles. The Capital Asset Pricing Model (CAPM) suggests that the return of holding such assets should be commensurate with their risk. This paper examines the risk-return characteristics of European Credit Default Swaps (CDSs). We empirically test the higher moment CAPM using European CDS returns collected from 2007 to 2010 on a broad range of investment grade corporate reference entities. Our findings show that both systematic risk and higher moment risks are significant in explaining European CDS returns. These are significant findings in an area of finance where there is currently a paucity of research.

Pages 25 – 42

Author: Izah Mohd Tahir and Siti Nurzahira Che Tahrim

This paper employs the non-parametric Data Envelopment Approach (DEA) and Dynamic Malmquist Productivity Index (MPI) to examine the efficiency and productivity of Cambodian microfinance institutions during the period 2008-2011. We found that the microfinance institutions in Cambodia have exhibited an overall efficiency of 92% during 2008-2011 suggesting an input waste of 8%. The overall efficiency has improved slightly from 91% in 2008 to 92% in 2009 and remained stable in 2010 and 2011. In addition, the results suggest that the MFIs in Cambodia have exhibited productivity growth of 1.7% during the period 2008-2009, a regress of 0.6% during 2009-2010 and a positive change of 0.9% in 2010-2011. Technological Change had been consistently influencing the productivity change during the period of study. The growth in the productivity of the MFIs in Cambodia in 2008-2009 was mainly attributed to the growth in Technological Change of 1.4%. In 2009-2010, the decline is also attributed to the decrease in Technological Change of 1.5%. Similarly, the increase in 2010-2011, is also attributed to the positive change of 1.5% in Technological Change. When decomposing the Efficiency change into Pure Technical and Scale Efficiency Change, results from both DEA and MPI advocate that the dominant source of efficiency was scale related rather than pure technically related. This implies that MFIs have been operating at an appropriate scale of operations but relatively inefficient in managing their assets and operating costs.

Pages 43 – 59

Author: Yihua Zhao and Lin Zou

Prior research has documented both positive (John and Litov, 2009) and negative (Berger, Ofek, and Yermack, 1997) relationships between managerial entrenchment and the use of debt. This paper further investigates the impact of corporate governance on firm’s leverage by taking into account the substitution effect of different governance mechanisms. Consistent with John and Litov (2009), we find that antitakeover provisions have a positive effect on firm’s leverage. However, this effect disappears when we control for the interaction effect between antitakeover provisions and board power, measured by board independence. More specifically, we find that entrenched managers operate highly leveraged firms only if they are exposed to powerful boards. The result on this positive relationship between firm’s leverage and the interaction of board power and antitakeover provisions continues to hold even after we consider other governance variables.

Pages 60 – 77

Author: Samia Ben Messaoud and Chaker Aloui

Determining financial crises is a hard procedure to do. Financial crises are still exanimate an essential phenomenon known for its international influence and scope and its propagation indistinctively across developed and developing countries. There is no apparent consensus among researchers as to the adequate approach to adopt in order to test out contagion. In this paper, we develop a contagion-assessment model. We analyse the extreme dependence structure, stemming from the characteristics of the financialasset model to which we propose to add the copula functions in order to take into consideration the dependence structure present among the various increments. Moreover, we analyse the dependence relationship existing between financial markets productivity. To this end, we consider the studentcopula. This work shows nature of tail dependence which is an important dimension of contagion. Here, we propose to develop a contagionassessment model.

Pages 78 – 94

Author: Lien Dinh, Jen-Je Su and Tom (Duc-Tho) Nguyen

This paper analyses the impact of foreign bank presence on domestic bank accounting performance taking into account the role of bank ownership. The data covers the period from 1992 to 2012; this period reflects almost all significant restructuring programs and achievements. The results indicate that the entry of foreign banks has generated strong competitive pressure, such that domestic banks have to forego their excess profits, and instead, share the non-interest-bearing income with foreign banks. As leaders of the market, state-owned commercial banks experienced the adverse impact on profit, to a greater extent than privately owned banks.

Pages 95 – 113

Author: Nsambu Kijjambu Frederick

The study seeks to establish the underlying factors responsible for performance of domestic and foreign commercial banks in Uganda. The factors are analyzed in light of structure–conduct performance (SCP) and Efficiency hypothesizes (ES). This is supplemented by Global advantage theory together with Home field theory. The study analyses performance of all licensed domestic commercial banks, represented by the average performance.  Using Linear multiple regression analysis over the period 2000-2011, the study found out that, management efficiency; asset quality; interest income; capital adequacy and inflation are factors affecting performance of domestic commercial banks in Uganda over the period 2000-2011. Policy implications that emerged from the study are as follows; efficient management; credit risk management; capital adequacy levels; diversification and commercial bank investments. Monetary policy regulations and instruments should not enforce high liquidity and capital adequacy levels. Regulations on noninterest income activities should be put in place to harmonize the impact of diversification on all commercial banks’ performance and to avoid exploitation of bank customers.

Pages 114 – 132

Author: Sebastien. Dereeper and Quoc Dat. Trinh

The process firms use to choose their capital structures is explained by different corporate finance theories in which trade-off and pecking order are the two most popular hypotheses. Testing these two models will help to determine whether a target debt ratio exists, and if so, how rapidly firms adjust their current leverage levels to match this target level. The findings in this paper determined that the pecking order theory might not be applied in Vietnam when internal funds and new equity issuance are independent with the leverage level. In contrast, our empirical results proved that the long-run target debt ratio does exist in the Vietnamese market. The partial adjustment model has shown that both private firms and state-owned firms rapidly adjust to their optimal levels of debt. However, the state ownership structure does not affect the amount of debt taken during the year by the firms.

Pages 133 – 146

Author: Derek Ong Lai Teik, Gan Yi Hao, Iva Juniaty, Joseanne Wong Lirn Jhet, Ling Ai Rick and Subashini a/p Gullantheivello

This study examines the influence of environmental factors in a shopping mall on consumer behaviour especially during holiday season. Within a shopping mall there needs to be a balance of external environment elements that serves to elicit human stimuli to help induce different sensations and psychological effects on a person, ultimately leading to positive consumer behaviours and increased purchase intentions. However the wrong balance of these elements can hinder the positive reactions of consumers especially during the holiday season shopping where potentially sales are at the highest. This study employed a convenience sampling data collection method from 300 respondents in a selected shopping mall during the month of December 2013 to capture the consumer’s reaction to the mall’s atmosphere which were enhanced with festive decorations to help induce potential buying behaviour. Results were collated based on the analysis of four significant environmental variables which are interior settings, music, employee engagement and consumer density. The findings indicated that the effects of interior settings, music and employee engagement were found to be evident. Conversely, consumer density was found to elicit no effect on consumer behaviour. It was also noted that gender moderates the relationship between music and consumer behaviour. The implications of the results obtained are discussed along with the managerial implications, limitations and future research.

Pages 147 – 155

Author: Maya Katenova and Zhanat Syzdykov

This paper investigates the relationship between bank profitability and macroeconomic conditions. Such indicators as Return on Asset (ROA) and Return on Equity (ROE) are analyzed with such macroeconomic indicators as Gross Domestic Product (GDP), Customer Price Index (CPI), and IPI (Industrial Production Index). As the economy goes into a downturn, businesses and consumers default on loans, thus causing bank profits to decline. Alternatively, during economic expansions, lenders tend to take increasingly more risky loans and thus create a situation in which defaults increases. The banking industry is financial services industry, which follows economic needs. The results confirm the fact that banks’ performance depend on macroeconomic conditions.

Total Articles- 10

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