IMFI Papers Coming Soon

This section contains information about articles which are already reviewed, accepted and waiting for publication in next issues of the journal.

The domestic resource gap and account deficit in Indonesia: a study case 2010-2014

Anhulaila M. Palampanga, Economic and Development Studies (IESP), Faculty of Economics, Tadulako University, Indonesia
Bakri Hasanuddin, Economic and Development Studies (IESP), Faculty of Economics, Tadulako University, Indonesia

Abstract. The purpose of this study was to determine the relationship between domestic resource gaps and current account balance in Indonesia by using data from 2010 to 2014. Gaps in the domestic economy are classified into three: 1) the gap between the absorptive capacity of the domestic to the national income (PNB), 2) the gap between gross national savings (TNB) and national investment gross (INB), 3) the gap in the private sector (private saving minus investment private), and the gap in the public sector (government spending minus tax). By using a concept of open economy that is described in a theoretical framework, the study results show that: 1) the gap absorption of domestic and PNB, 2) the gap between TNB and INB, 3) the gap private sector and government sector, resulting the deficit in the current account in Indonesia on 2010-2014 period.

A tactical asset allocation strategy that exploits variations in VIX

Richard Cloutier, CFA, Vice President and Chief Investment Strategist, Washington Trust Bank, Spokane, WA, USA
Arsen Djatej, CPA, Professor of Accounting, Eastern Washington University, Spokane, WA, USA
Dean Kiefer, CFA, Associate Professor of Finance, Eastern Washington University, Spokane,WA, USA

Abstract. Buy and hold strategies make staying disciplined difficult for investors, especially given the variability of returns for different asset classes/strategies during divergent market conditions. Market timing strategies, on the other hand, present significant theoretical benefits, but in reality these benefits are difficult to obtain. Tactical asset allocation where limited deviations from the strategic allocation are allowed permit the portfolio manager to take advantage of market conditions fits between these two extremes. We correlate daily returns for each of eighteen separate asset classes typically used in diversified institutional portfolios and daily closing values of the VIX. This information is used to select those classes whose returns are most responsive to the level of the VIX. Portfolio allocations for eight selected asset classes are revised depending on the level of the VIX at the daily close of the market. The portfolio is rebalanced on the business day following the day the VIX hits the trigger value. The VIX tactical allocation overlay yields an increase in return over the buy and hold portfolio of approximately 38 basis points. We conclude that the tactical asset allocation strategy based on the level of VIX provides a higher return than the neutral buy and hold allocation with a higher Sharpe Ratio and lower volatility.

Corporate governance mechanisms and bank performance: evidence from the Greek banks during crisis period

Andreas G. Georgantopoulos, Dr., Department of Public Administration, Panteion University of Social and Political Sciences, Greece
Ioannis Filos, Associate Professor, Department of Public Administration, Panteion University of Social and Political Sciences, Greece

Abstract. The recent financial crisis has heightened the research interest in the relationship between corporate governance mechanisms and firm performance. This paper is the first study that empirically assesses the impact of corporate governance on bank performance for the case of Greek banks using a variety of econometric methodologies. Results indicate the superiority of the system-GMM models over pooled-OLS and within estimator models to address well-known econometric problems, such as endogeneity, simultaneity and unobserved heterogeneity of individual banks. Empirical findings support an inverted U-shaped relation between board size and bank performance and between the proportion of independent board members and performance of Greek banks. Finally, the dual appointment of a CEO as Chairman appears to affect negatively two out of four proxies of bank performance. Overall, results provide support for the positive contribution of corporate governance mechanisms on the performance of Greek banks.

Calendar anomalies in the Ukrainian stock market

Guglielmo Maria Caporale, Professor of Economics and Finance and Director of the Centre for Empirical Finance at Brunel University, London
Alex Plastun, Doctor of Economics, Professor of Chair of International Economics, Education and research Institute for business technologies "UAB", Sumy State University, Ukraine

Absract. This paper is a comprehensive investigation of calendar anomalies in the Ukrainian stock market. It employs various statistical techniques (average analysis, Student's t-test, ANOVA, the Kruskal-Wallis test, and regression analysis with dummy variables) and a trading simulation approach to test for the presence of the following anomalies: Day of the Week Effect; Turn of the Month Effect; Turn of the Year Effect; Month of the Year Effect; January Effect; Holiday Effect; Halloween Effect.The results suggest that in general calendar anomalies are not present in the Ukrainian stock market, but there are a few exceptions, i.e., the Turn of the Year and Halloween Effect for the PFTS index, and the Month of the Year Effect for UX futures. However, the trading simulation analysis shows that only trading strategies based on the Turn of the Year Effect for the PFTS index and the Month of the Year Effect for the UX futures can generate exploitable profit opportunities that can be interpreted as evidence against market efficiency.

Definition and parameter analysis of the accumulative pension system

Svitlana Berezina, Candidate of Economic Sciences, Assistant Professor of the Department of Insurance, Banking and Risk Management Taras Shevchenko National University of Kyiv, Ukraine

Abstract. The article studies the parameters of the accumulative pension system, particularly the rate of contribution into the accumulative system, contribution period of the system's participants, the coefficient of replacement of the salary with pension after the retirement, the number of years of the future pension payments, alternatives of profitability of the funds accumulated by the system. The structure of the accumulative system is based on the methods and models of determining the parameters during the period of resources accumulation after the retirement of the participant. The calculations are based on a variant basis. There are interconnected parameters of the system's determination. We have carried out formalization of determining the system's indicators and variant calculations. The most realistic for Ukraine is the introduction of accumulative system with the following parameters: contribution - 14% of salary (or preferably of income); contribution period - 35 years with the retirement of men at the age of 65 and women at the age of 60; the percentage of return on the savings - 3%. That is, in this case, the accumulation system will provide a pension with the income-replacement ratio of 0.6 over 18.4 years.
The model can be used at the state level (when determining the rate of contribution into the accumulation system, the contribution period and the income-replacement ratio with the fixation of other parameters) and by the system's participants (when determining the number of years using the accumulated pension, the income-replacement ratio and monitoring one's own resources).

Financial market imbalance: reasons and peculiarities of occurrence in Ukraine

Rostyslav Slav'yuk, Doctor of economic sciences, a professor of Banking at Lviv Institute of Banking University, Ukraine
Lyudmyla Shkvarcuk, Doctor of economic sciences, a professor of Finance at Lviv Polytechnic National University, Ukraine
Iryna Kondrat, Ph.D., an assistant professor of Lviv Polytechnic National University, Ukraine

Abstract. Financial imbalance is the reason of a macroeconomic instability. This study aims at identifying the institutional causes of financial markets imbalance. The authors consider that financial intermediaries in Ukraine work in a speculative market segment carrying out high-risk transactions with the purpose of earning a huge profit. In fact, in Ukraine, the role of these institutions in the investment process financing is insignificant. The authors show that soundness of banks along with the ease of access to loans and a low level of confidence in national banking system are the main reasons of instability in financial market in Ukraine. Due to scarcity of financial capacity and refusal to carry out transactions in a high-risk market segments, insurance companies are unable to entirely perform functions of risk redistribution. Competitiveness of Ukrainian financial market remains low with a limited financial services nomenclature and it may be considered to be attractive for potential foreign investors.

What is project finance?

João M. Pinto, Professor of Finance, Católica Porto Business School, Catholic University of Portugal, Portugal

Abstract. Project finance is the process of financing a specific economic unit that the sponsors create, in which creditors share much of the venture's business risk, and funding is obtained strictly for the project itself. Project finance creates value by reducing the costs of funding, maintaining the sponsors financial flexibility, increasing the leverage ratios, avoiding contamination risk, reducing corporate taxes, improving risk management, and reducing the costs associated with market imperfections. However, project finance transactions are complex undertakings, they have higher costs of borrowing when compared to conventional financing and the negotiation of the financing and operating agreements is time-consuming. In addition to describing the economic motivation for the use of project finance, this paper provides details on project finance characteristics and players, presents the recent trends of the project finance market and provides some statistics in relation to project finance lending activity between 2000 and 2014. Statistical analysis shows that project finance loans arranged for U.S. borrowers have higher credit spreads and upfront fees, and have higher loan size to deal size ratios when compared with loans arranged for borrowers located in W.E. On the contrary, loans closed in the U.S. have much shorter average maturity and are much less likely to be subject to currency risk and to be closed as term loans.

Existing organizational culture typologies and organizational commitment at a selected higher education institution in South Africa

Ndlovu Wiseman, Department of Human Resource Management & Labor Relations, University of Venda, South Africa
Ngirande Hlanganipai, Department of Human Resource Management & Labor Relations, University of Venda, South Africa
Sam Tlou Setati, Dr., Department of Human Resource Management & Labor Relations, University of Venda, South Africa

Abstract. The aim of the study was to investigate the effects of existing organizational culture on organizational commitment at a higher education institution in South Africa. The study employed a quantitative research design and 30 employees were randomly selected from two groups of non-academic and academic staff members of a selected school at the institution. A structured questionnaire was utilized to solicit information regarding the effects of existing organizational culture on organizational commitment at the institution from the participants. The IBM-Statistical Package of Social Sciences (IBM-SPSS) version 23 of 2013 was used to determine the relationship of different existing organizational culture typologies on the different facets of organizational commitment through correlation analysis. The results revealed significantly varied levels of organizational commitment with different culture types. The study further revealed that organizational culture, particularly support culture, has a significant effect on normative and continuance commitment. Hence, that's, if employees have shared norms and are supported by the organization, they will develop a sense of obligation to remain with organization and contribute meaningfully to its functionality.

Working capital management and shareholders wealth creation: evidence from non-financial firms listed on the Johannesburg Stock Exchange

Oseifuah E.K., Department of Accountancy School of Management Sciences, University of Venda, South Africa
Gyekye A.B., Department of Economics, School of Management Sciences, University of Venda, South Africa

Abstract. Working capital plays a vital role in shareholders' wealth creation, yet, there is a dearth of empirical studies on the relationship between working capital management and firm value in the South African economic environment. This study attempts to fill this gap by using Richards and Laughlin's (1980) Cash Conversion Cycle theory to investigate the impact of working capital management efficiency and its separate components on firm value of South African firms listed on the Johannesburg Stock Exchange (JSE). Panel data regression methodology was used to analyze accounting data obtained from I-Net Bridge and BF McGregor for 75 firms for the 10 year period, 2003 to 2012 to determine the nexus between WCM and profitability (proxied by return on assets). The key findings of the study are as follows: 1) there exists a significant positive relationship between firm value and both inventory conversion period and receivables conversion period; 2) the relationship between the cash conversion cycle and firm value is positive, but insignificant, 3) there is a significant positive relationship between accounts payable deferral period (PDP) and profitability; 4) firm size and firm value are significantly positively related, and 5) there is a significant negative relationship between leverage and firm value.

Investment evaluation in renewable projects under uncertainty using real options analysis: the case of wind power industry

Ioannis Kinias, Department of Business Administration, Business School, University of the Aegean, Greece
Ioannis Tsakalos, Department of Business Administration, Business School, University of the Aegean, Greece
Nikolaos Konstantopoulos, Department of Business Administration, Business School, University of the Aegean, Greece

Abstract. Investment analysis is a crucial process for any investment's success. This process can be supported by both the discounted cash flow analysis and the real options analysis. Many researchers have pointed out restrictions for the first one, in cases of uncertainty in the entrepreneurial environment. The main types of uncertainty concerning the wind energy sector include uncertainties related to the price of electricity by RES, the public policy regulatory policies, the demand, the initial capital costs, the technological progress, the weather conditions, the political and economical situations and, generally, the RES market structure. In this paper, we try to find the optimal investment strategy in a liberalized global electricity market, where the price of electricity is uncertain, while the other parameters are configured separately in each country. We consider about the factors of the time for investment and the electricity's price level in wind energy by using the real options theory. We select a variety of data for the wind energy industry from different countries in several continents and we also create a model for the investment analysis in this entrepreneurial sector.

Estimating systematic risk for the best investment decisions on manufacturing company in Indonesia

Zarah Puspitaningtyas, Dr., Lecturer, Department of Business Administration, University of Jember, Indonesia

Abstract. Estimation of systematic risk is one of the important aspects of the best investment decisions. Through systematic risk prediction will be known risks to be faced by investors, because systematic risk is a measure of investment risk. In addition to returns, investors always consider the risk of investment, because investors are rational individuals, i.e., individuals who always consider the trade-off between return and risk. At a certain level of return, investors will tend to choose investments with the lowest risk level. Conversely, at a certain level of risk, investors tend to choose investments with the highest return rate. The purpose of this paper is to analyze the influence of the financial information on the systematic risk of stock manufacturing companies listed on the Indonesia Stock Exchange over a period of five years from January 2011 to December 2015. The financial information is measured in four accounting variables, i.e., financial leverage, liquidity, profitability, and firm size. The results of data analysis using multiple linear regression method to prove that, at the 0.05 level, only variable sized companies significantly influence systematic risk. Meanwhile, the variable financial leverage, liquidity, and profitability do not affect the systematic risk. The results showed inconsistencies with the results of several previous studies. This inconsistency may be due to measurement problems variable accounting, the implementation period of the study, and the use of different research samples.

Credit risk estimate using internal explicit knowledge

Abdallah Al-Shawabkeh, MIS Department, College of Business Administration, Al Ain University of Science and Technology, PO Box 112612, Abu Dhabi, UAE 
Rama Kanungo, Newcastle University London, 102 Middlesex Street, London, E1 7EZ, UK

Abstract. Jordanian banks traditionally use a set of indicators based on their internal explicit knowledge to examine the credit risk caused by default loans. The banks are reliant on the personal and financial information of the borrowers obtained by knowing them, often referred to as internal explicit knowledge. Internal explicit knowledge characterizes both financial and non-financial indicators, such as: loan amount, educational level, occupation, income, marital status, age, and gender. We studied 2755 default or non-performing loan profiles of Jordanian Banks covering a period from 1999 to 2014. Our results show that low earning unemployed borrowers are very likely to default and contribute to non-performing loans by increasing the chances of credit risk. In addition, we find that the unmarried, younger borrowers and moderate loan amount increase the probability of non-performing loans. On the contrary, borrowers employed in private sector and at least educated to a degree level are most likely to mitigate the credit risk. Our study suggests improving the decision making process of Jordanian banks, making it more quantitative and dependable instead of using only subjective or judgmental based understanding of borrowers.

Integration of enterprise risk management and management control system: based on a case study

Ilhang Shin, Ph.D., Assistant Professor of Accounting, Division of Business Administration, Chonbuk National University, South Korea
Sorah Park, Ph.D., Assistant Professor of Accounting, Ewha School of Business, Ewha Womans University, South Korea

Abstract. Enterprise risk management (ERM) has emerged as a paradigm for managing various kinds of risks faced by organizations, and the trend is to focus on its role in improving risk management and ultimately enterprise value. ERM is designed to improve the board and executives' oversight of risks. This paper intends to discuss concepts and methodological issues of ERM, which is considered an extension of internal audit function. We study the case of company A in which ERM has been implemented as a means to integrate with management control and to increase firm value by monitoring its subsidiaries. This paper provides insight on the process how group-level internal auditor can use ERM as a tool to manage risk of subsidiaries, thereby filling the gap between academic research and practice. This successful ERM adoption case can be used as a guideline for other organizations, which plan to adopt ERM in the future with reduced costs and improved processes.

Evaluation of empirical attributes for credit risk forecasting from numerical data

Dimitras Augustinos, School of Social Science, Hellenic Open University, Patra, Greece
Papadakis Stelios, Dept. of Business Administration, T.E.I. of Crete, Lakonia, Aghios Nikolaos, Crete, Greece
Garefalakis Alexandros, School of Social Science, Hellenic Open University, Patra, Greece

Abstract. In this research, we proposed a new method to evaluate borrowers' credit risk and quality of financial statements information provided. We use qualitative and quantitative criteria to measure the quality and the reliability of its credit customers. Under this statement, we evaluate 35 features that are empirically utilized for forecasting the borrowers' credit behavior of a Greek Bank. These features are initially selected according to universally accepted criteria. A data set of historical data was collected and an extensive data analysis is performed by using non parametric models. Our analysis revealed that building simplified model by using only three out of the thirty five initially selected features one can achieve the same or slightly better forecasting accuracy when compared to the one achieved by the model uses all the initial features. Also, experimentally verified claim that universally accepted criteria can't be globally used to achieve optimal results is discussed.

Big 4 auditing, earnings manipulation and earnings conservatism: evidence from an emerging market

Thabang Mokoaleli-Mokoteli, Wits Business School, Johannesburg, South Africa
George Emmanuel Iatridis, Department of Economics, University of Thessaly, Greece

Abstract. This study focuses on South African listed companies and investigates the relation between big 4 auditing, earnings management and earnings conservatism. The findings of this study show that companies that are audited by a big 4 auditor tend to recognize large losses more timely and to engage less in earnings management. This study has found that conditional conservatism is positively related to big 4 auditing. The findings report that the conditional form of conservatism is negatively related to unconditional conservatism. The study provides evidence of asymmetric disclosure of losses for firms with high leverage. The same holds for high quality disclosers that display bad news. The findings also show that firms that are in a growth phase tend to provide less conservative information in order to influence their growth prospects. The findings, in general, support the notion that the new companies' Act in South Africa and the King III are effective corporate governance tools and the observed cases of corporate failure may be due to other factors, including management hubris.

The effect of Dow Jones Sustainability Index on Consumer Sentiment Index

Nikolaos Sariannidis, Associate Professor, Western Macedonia University of Applied Sciences, Department of Accounting and Finance, Kozani, Greece
Grigoris Giannarakis, Adjunct professor, Western Macedonia University of Applied Sciences, Department of Business Administration, Grevena, Greece
Xanthi Partalidou, PhD Candidate, Democritus University of Thrace, Department of Agricultural Development, Orestiada, Greece
Bakas Evangelos, Postgraduate student, Western Macedonia University of Applied Sciences, Department of Accounting and Finance, Kozani, Greece

Abstract. This study intends to investigate whether stock returns affect the consumer sentiment. In particular, socially responsible companies are incorporated in the sample in order to capture the specification of socially responsible investors. For this reason, the University of Michigan Consumer Confidence Index is used as a proxy for consumer confidence, while data from Dow Jones Sustainability Index US are employed as a proxy for socially responsible companies for the period 1999-2016. The generalized autoregressive conditional heteroskedasticity model applied and illustrated that stock returns affect positively the consumer confidence. The result has important implications for investors and policy makers.

Wealth effects of delistings announcements in Europe

Apostolos Dasilas, Department of Applied Informatics, University of Macedonia, Thessaloniki, Greece
Chris Grose, School of Economics, Business Administration and Legal Studies, International Hellenic University, Thessaloniki, Greece
Theodoros Spyridis, Customs Office, Ministry of Finance, Athens, Greece

Abstract. Using a European dataset of 478 delistings, we investigate the role of corporate governance in the short-term performance of European stocks around a delisting decision. In order to achieve this, we utilize the event study methodology in multiple contexts and cross-sectional regression analysis. This is particularly evident in high shareholder protection environments in a finding related with investors' perception of the security they experience in the particular market, as well as the afterlife of the under delisting stock and the potential of value creation or destruction. In high investor protection environments, the delisting event causes negative abnormal returns both for voluntary and involuntary delistings. We conjecture that these delistings whether referring to LBOs, delistings from secondary listings or BOSOs, are strategic decisions and in this respect pre-delisting shareholders acknowledge that there is life after delisting. Under low investor protection, the above holds only for involuntary ones. Companies failing to meet capital market criteria and voluntary delistings appear to have significantly smaller losses than under bankruptcy firms, on average, on the eve of the delisting event. These abnormal returns are basically affected by the firms' financial soundness and the corporate governance level pertaining in the host market. Cross-sectional regression analysis shows also the inverse relationship between the degree of governance structures and market reaction to delistings announcements.