March 2016 (International Review of Business Research Papers)

March 2016 (International Review of Business Research Papers)

Total Articles - 12

Pages 1 – 16

Author: Hounaida Daly and Mounir Smida

Recently, monetary authorities have increasingly focused on implementing policies to ensure price stability and strengthen central bank independence. Simultaneously, in the fiscal area, market development has allowed public debt managers to focus more on cost minimization. This « divorce » of monetary and debt management functions in no way lessens the need for effective coordination of monetary and fiscal policy if overall economic performance is to be optimized and maintained in the long term. This paper analyzes the interaction between monetary and fiscal policies in Greece from 1980 to 2012. The particular stance of monetary policy affects the capacity of the government to finance the budget deficit by changing the cost of debt service and limiting or expanding the available sources of financing. The evidence does not let hear strong political interactions in Greece, and supports the idea that the monetary policy is more stabilizing in its influence on the economic activity than the budget policy.

Pages 17 – 28

Author: Hong V. Nguyen

This paper provides a framework to show that the OTC derivatives market is important for improving the welfare of market participants. This framework is built on the idea that heterogeneity of market participants is the basis for innovations in financial products. The OTC market provides a flexible structure to make it possible for firms and their heterogeneous clients to trade in new products. The data provided in this paper support this framework.

Pages 29 – 42

Author: Jiandong Li and Lin Tan

This paper investigates whether short sales have increased the market efficiency since short sales were allowed in 2010. Evidence from regression R-squared method and from Dimson beta method shows that short sales do increase the revealing of firm specific information, and individual stock prices react to their own information quicker than before. This paper also checks whether short sales contain information in the earnings announcement events. Results confirm that short sellers are able to make profit through increasing their short positions at pre-announcement period.

Pages 43 – 63

Author: Nadia Ben Sedrine Goucha and Ines Hamdi

This study investigates the impact of 2008 financial crisis on the links within two regions, the GCC markets (Bahrain, Kuwait, Oman, Qatar and United Arab of Emirates) and the MENA markets (Egypt, Jordan, Morocco, Tunisia and Turkey). The study main objective is to capture possible time-variant stock market integration in GCC markets and in MENA countries before and during the crisis 2008 using daily stock market indexes retrieved from MSCI over the period 1st June 2005 to 1st July 2010. The study uses Johansen cointegration theory (1988) to test the existence of long-term relationships within the GCC stock markets and within the MENA stock markets. The Cointegration results suggest that the GCC stock markets and the MENA stock markets are more integrated during the crisis period than prior to it. Further, the vector error correction model (VECM) of Engle and Granger (1987) results suggest that linkages among GCC and among MENA stock markets are also larger during the crisis period than prior to it. These results may require further study, but so far they show that the 2008 financial crisis form a common stochastic trend in both the MENA and the GCC stock markets.

Pages 64 – 75

Author: Iqbal Thonse Hawaldar

The study tests the reaction of Bahrain Bourse to 2014 annual financial results announcement. The study is based on 30 companies. The researcher used event study methodology. The behaviour of average abnormal returns (AARs) and cumulative average abnormal returns (CAARs) are examined for 30 days prior to and 31 days after the announcement of annual financial results. Runs test, sign test and t-test statistics on AARs are statistically not significant. However, t-values on CAARs are statistically significant. Therefore, we conclude that Bahrain Bourse is not efficient in the semi-strong form. The findings help regulators to initiate measures to ensure market efficiency.

Pages 76 – 96

Author: Lucyna Kornecki and Ekanyake E. Ekanyake

The United States is the largest recipient of foreign direct investment (FDI) in the world and the largest investor abroad. The significance of this study relates to the fact, that it will enhance the knowledge of the factors affecting USFDI and might have policymaking implications. It identifies literature related to the factors determining US FDI outflows and generates database that will be benefiting researchers. The goal of this research is to illustrate the impact of the following variables on outward US FDI in the European Union countries: the financial variables include: the real interest differential and real exchange rate; the economic variables are represented by: GDP per capita and GDP growth rate, the globalization process includes openness and is measured as total trade as a percentage of GDP; structural and location variables focus on education, infrastructure, telecommunication, civil liberty, perception of corruption, business environment; the labor quality variable incorporates labor productivity, unemployment rate, and the labor cost. The other factors integrate; inflation, tax on capital, Research and Development and corporate business tax.In order to test the implications of our models, we collected a panel of aggregate data on the outward US FDI to all 28 member countries of the European Union for which FDI and all other relevant variables are reported over the 2000–2013 period. The results of this research identified major statistically significant determinants influencing positively outward US FDI in the EU countries. These determinants include: real GDP per capita, the openness of the economy, railway mileage, labor quality, unemployment rate and inflation rate. The panel data regression analyses proved as well negative and statistically significant impact of several determinants on outward US FDI in Europe, such as: corporate tax rate, the labor cost, tax on capital, the growth rate of real GDP, research and development and literacy rate.

Pages 97 – 109

Author: Jivendra K. Kale and Arnav Sheth

This research paper tests the effectiveness of Power-Log optimization for managing the downside risk of investment portfolios. It uses Power-Log utility functions, which are based on tenets of behavioral finance, to give investors the ability to build downside protection directly into a portfolio. Comparing optimal Power-Log portfolios with matched mean-variance efficient portfolios, we find that the optimal Power-Log portfolios have lower downside risk, while delivering higher geometric average return. They also provide much better downside protection against unanticipated market shocks, such as the one in 2008, in contrast to the disastrous performance for matched mean-variance efficient portfolios. Power-Log optimization succeeds in managing downside risk effectively, while mean variance analysis fails to protect investors from such risk.

Pages 110 – 120

Author: Ying Ma and Bin Wang

Nowadays, the international oil price remains high and has frequent volatility, the global oil supply and demand risk has turned into the volatility of financial risk. This study aims at uncovering the mystery behind the volatility of international oil price mechanism and finding a better way to calculate the value of Risk (VaR) of the volatility international oil price. This paper calculated VaR using traditional ARCH-class models and SWARCH model. Based on the results which is calculated by the two models, we found out that the SWARCH model is better on the prediction of international oil price volatility risk, which will have a very important reference meaning, for making the corresponding rules and regulations, and also, it is important for expanding the analysis of financial market.

Pages 121 – 143

Author: Nadisah Zakaria and Glen Christopher Arnold

This paper investigates the short- and long-run share return performance of Malaysian spin-off firms. Using daily and monthly data, it examines the performance of spin-off firms against the benchmarks of Malaysian indices and matched-firm portfolios. The results show that parent firms significantly outperformed the market during the few days surrounding the announcement date even after adjustment for size. In the long-run analysis over three years, however, we do not find abnormal performance for parents, spunoffs and combined entities.  We also find evidence that the notable positive share returns for parent firms over the short-run period are related to political linkage rather than corporate focus or the size effect. Overall, this research allows us to plausibly argue that the market anticipates both increased value for parent shareholders and exploitable stock market inefficiency in the short-run period but not in the long-run period.

Pages 144 – 158

Author: Rahul Verma

This research attempts to uncover the following important relationships: (i) to what extent is the risk perceptions on financial markets of one country contribute to risk perceptions on another country’s financial markets; (ii) what is the duration of such international transmission mechanism of risk perceptions (if any) across countries; (iii) what is the lead-lag relationships of international transmission of risk perceptions in European financial market system. The results of the impulse response functions generated from a five VAR model suggests the following: (i) there exists a strong linkage among the risk perceptions on financial markets across the Europe; (ii) the risk perceptions on the U.K. financial markets seems to have the strongest international spillover impact on risk perceptions on Germany, France and Spain; (iii) the risk perceptions on France and Germany are transmitted to each other to a greater extent than to U.K or Spain; (iv) Italy seems to be the most segmented economy as its risk perception is transmitted least and is also impacted to a lesser extent by an increase in risk perceptions on other economies in the region.

Pages 159 – 170

Author: Tram Hoang Thuy Bich Nguyen

External capital flows enable developing countries to strengthen investment activities, increase economic growth and reduce poverty. Therefore, this research is conducted primarily to investigate the impact of the long-term and short-term capital flows on Vietnamese real GDP growth. The autoregressive distributed lag (ARDL) bound testing method is applied to examine the empirical relationship. The regression results show that there is a long-run relationship between foreign capital flows and economic efficiency. ODA is found to have a stronger impact on the economy than FDI and short-term capital flows.

Pages 171 – 192

Author: Nazreen Fauzel and Sheereen Fauzel

The efficient market hypothesis has been given lots of importance in the financial literature. Eventually, the importance of the efficiency of a market is that prices will fully reflect all available information. This study focuses on the weak-form market efficiency testing for three particular stocks (Bel-Fuse-Inc., Berkshire-Hills Bancorp, Inc.-and Beasley Broadcast-Group,-Inc.) and two decile indices (NYSE/AMEX/NASDAQ index capitalization based-Decile1-and-10). With the aid of autocorrelation testing, variance ratio tests and calendar effects testing, done under the OLS regression as well as the GARCH family models, two indices, DEC1 and DEC10, and three individual stocks, BBGI, BELFA and BHLB, were tested. Validated under both a daily perspective as well as on a monthly one, the returns of BBGI and DEC10 have consistently proven to follow a random walk while DEC1 and BHLB have shown the contrary. They showcased a day-of-the-week effect as well as a month-of-the-year effect. BELFA provided evidences that it does not follow a random walk when tested using daily data but these effects vanished

Total Articles- 12

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