Issue #2 (cont. 2) (Volume 13 2016)

We examine a sample of 674 SEOs from 1999-2010 where reduced R&D spending is significantly associated with the lowering of insider ownership proportions. With this association established, we derive an R&D manipulation variable measuring underinvestment in R&D. We add to the SEO-R&D literature by examining the relation between R&D underinvestment and common stock valuation around SEOs. In contrast to the IPO research, we do not find that underinvestment in R&D leads to greater SEO stock valuations during the offer price setting process. Like the IPO research, we find that underinvestment in R&D leads to lower stock valuations for short-run post-offering tests. In contrast to the long-run IPO results, we find a significant association between R&D manipulation and stock valuation for long-run post-offering tests where underinvestment in R&D is associated with lower stock valuations. We also find the five % owner group for SEOs is important in explaining R&D manipulation and discover that underpricing for SEOs is not related to R&D manipulation. These latter two findings are different from IPOs. In conclusion, SEOs can be quite different from IPOs when examining the association between the insider manipulation of R&D and stock valuation

This paper investigates whether inverse exchange-traded fund (ETF) trading can predict future negative underlying index returns. Using inverse ETF’s turnover rates and price volatilities to represent trading activities, this paper discovers that inverse ETF trading is significantly and positively related to future index returns and infers that the trading of inverse ETFs may not reflect informed pessimistic trading and cannot convey a bearish signal to the market. The trading activities in inverse ETFs do provide information about future index returns, yet what they reflect may be a lagging or less-informed bearish signal

This paper examines the earnings management behavior of large, family-controlled business groups (so-called ‘chaebol’) in Korea from 2006 to 2010. Specifically, the author studies whether the methods of earnings management are different between chaebol firms versus non-chaebol firms. The author finds no significant difference in accrual-based earnings management by these two types of firms. However, the author shows that chaebol firms’ real-based earnings management is greater than non-chaebol firms, based on their higher abnormal production costs and lower abnormal discretionary expenses, in order to manipulate accounting income upward. The results suggest that owner-managed firms tend to choose real manipulation which negatively affects future corporate performance and consequently mislead investors about the firm value

In this research the authors tried to solve the adverse selection problem in the Mudaraba contracts with respect to the projects privately known prospects. The authors introduced a model of two contracts characterized by an adverse selection index for each contract. They have managed to find that a case of market breakdown can occur because the efficient agent might mimic the inefficient agent. The authors, then, managed to develop a ‘Mimicking Likelihood Index’ whereby one can infer whether a type of an agent has a tendency to mimic the other type. In the same context, the authors developed a “Relative Adverse Selection” index to measure which type of agents has more tendencies to select a specific type of contracts. These findings should help Islamic financial institutions in their agent selection process and hedge its risky Mudaraba contracts

The article analyzes the effect of the Lithuanian legislation on hydropower development via the document content analysis and comparative analysis of legislation and scientific literature. The main focus of the article is on assessing the hydropower potential in line with the environmental legislation and establishing the possible development priorities. Effective legislative activity and energy sector management stimulate the production and consumption of electricity from renewable energy (RE) sources, which serve as an alternative to organic fuel, while in Lithuania, non-harmonized legislation creates barriers for effective and socially beneficial use of hydropower. The environmental policy in Lithuania is one of the most rigorous in the European Union. The unconditional prohibition of dam building in ecologically and culturally valuable rivers means that the untapped hydropower potential in Lithuania is only 5%

This study aims to detect failure processes on the example of old bankrupted European manufacturing firms. Two study designs are applied, namely the original six variables from Laitinen’s (1991) model and an extended dataset with eleven variables for a five-year timespan before declared bankruptcy. On both occasions, two different failure processes are detected which indicate elements of either quickly or gradually failing firms. Clear contingencies between detected processes and firms’ countries of origin exist. There is some evidence that firms of different sizes follow varying failure processes, but this does not apply when discriminating between exporters and non-exporters

The authors examine the negative relation of traditional accruals and % accruals with future returns in the Greek stock market. Positive abnormal returns from hedge portfolios on both accrual measures summarize the economic significance of this negative relation. The magnitude of returns obtained from traditional accruals is higher than that obtained from % accruals, contrary to existing evidence from the U.S. capital market. The analysis suggests that the accrual anomaly appears to be present in the Greek stock market: this has macroeconomic implications because firms with low reported accruals may exhibit higher stock returns and at this time, during the ongoing Greek capital market crisis, investors are more likely to gain substantial abnormal returns in the future – if and when the Greek economy returns to positive growth

Engen Refinery plant is part of the Engen Petroleum Limited, with operations in Southern Africa. The plant is situated in KwaZulu-Natal province of South Africa and it operates 24 hours a day, every day, including weekends. Although Engen operates 24 hours 7 days a week, the plant has to be shut down occasionally for maintenance. These shutdown periods are also used as an opportunity to implement most projects, especially those that could not be implemented during the normal run of the plant. In order to ensure that the plant operations are not interrupted, it is preferable to work on the equipment while the plant is not operational. The shutdown periods are very limited in time, so it is of utmost importance to complete tasks within the given turnaround period in order to get the plant back on line in time to deliver products as scheduled to customers. The main objective of this study is to explore the causes and consequences of delays in project execution and their impact on the success of the project. The study identified poor communication, repetition of tasks, resource allocation, scope change, procurement process management, inadequate planning and poor budget estimates as major contributors to delays and cost escalation during project execution. It is recommended that Engen Refinery put some means together to improve the above-mentioned issues

This research analyzes whether there is a link between economic growth and SMEs success in South Africa. The South African economy can only grow with the contribution of growing sustainably SMEs which will accelerate economic growth.
The research concluded that SME success has a positive impact on sustainable economic growth in South Africa and that there is a link between economic growth and SME success. The conducted research recommends that by improving the success rate of SME, the South Africa’s stagnating economy

The need for making optimal financial decisions is very important in small and medium enterprises (SMEs) especially as most SMEs are always financially constrained. Consequently, there has been an increasing interest from researchers to determine how well financial literacy skills can enable entrepreneurs to make decisions that result in optimal financial outcomes and possible enhance the performance and growth of their businesses. This study had as objectives to find out the impact of financial literacy on firm performance, as well as to examine the moderating effect of financial capital availability on the financial literacy – performance relationship, amongst SME in the Free State province of South Africa. The results showed that on average SME have low levels of financial literacy and financial capital availability. It was also observed that financial literacy positively influenced SME performance, and that the relationship is positively moderated by financial capital availability. It is, therefore, necessary for SME owners to develop financial literacy skills as an essential part of entrepreneurial activities. Likewise, since businesses rely on financial capital to invest, develop and grow, policy makers should put in place measures on how to bridge the access to finance gap, and, thus, ensure that entrepreneurs are relieved from financing constraints

Some studies published recently (Dejan Eric, 2009; R. Rosillo, 2013; Terence Tai-Leung Chong, 2008; Ülkü and Prodan, 2013) uncover that moving average convergence divergence (MACD) trading rules have predictive ability in many countries. The MACD trading strategies applied by these papers to execute the trading signals are various. This study analyzes the performance of a MACD trading strategy (MACD-4 in the current study), which is applied popularly by practitioners, but was not tested by prior academicians. Furthermore, the author compares the performance of each of the strategies on a group of markets to identify the best one. Before considering the costs, the author finds that the MACD-4 trading strategy has predictive ability. The best performance is MACD strategy applied by Terence Tai-Leung Chong (2008). This strategy is also the most effective one if it is applied in a high trading cost environmentm because the numbers of trades created are the lowest. Especially, the strategy applied by R. Rosillo (2013) is unpredictable in the selected samples

Business incubators were designed to sustain the deep-rooted image of entrepreneurs being self-reliant and by offering a broad spectrum of tailored services; it seeks to raise the success rate of small and medium size enterprises (SMEs) significantly. BIs have the characteristics to be completely dedicated to the success of a small business in its initial stages but, followed through, it puts in place the tools to achieve long-term success: space, funding, legal, accounting, computer services and other prerequisites to running a business, make BIs a one-stop shop for SMEs. This study has been conducted to establish if there has been a fairytale ending to the symbiotic relationship or whether the business incubator, like the SME, has had to traverse its own set of challenges towards achieving a happy union. The paper adopted a quantitative research approach in which the questionnaire was utilized as the relevant data collection tool. The Statistical Package for the Social Sciences (SPSS) software was used to analyze the data, with descriptive statistics at the end. As much as limited funding was reported to be a significant challenge that incubatees faced prior to joining the incubation programs, the results point to the fact that the need for multiple skills was the central force that seduced/lured the incubatees into the programs, but the majority of the participating respondents declare a complete lack of regret. Instead, they fully endorse the merits of the union, stating that BIs exists to effectively meet the objectives of SMEs

The objective of the study was to determine to what extent the selected skills contribute to the growth and the sustainability of small and medium businesses.
In an attempt to understand the underlying factors contributing to the high failure rate of small and medium businesses, this study focused on the extent to which small and medium business owners from two age groups perceived five identified skills generally associated with entrepreneurial and business behavior as conducive to either success or failure.
A lack of entrepreneurial and business skills impacts on the growth and survival of small and medium businesses in the Johannesburg Metropole. A quantitative study approach using structured survey questionnaires was used amongst 150 small and medium businesses in the Johannesburg Metropole. Factor analysis was used to analyze the responses gathered from the survey.
Findings indicated that all selected entrepreneurial skills (leadership, creativity and innovation, networking, goal-setting and time management) appeared to be critical for small and medium businesses sustainability and growth.
Although previous researches have indicated that entrepreneurial skills played crucial role in small and medium businesses sustainability, this study highlighted some of the key skills and attributes that SMEs owners should possess in order to operate their business ventures successfully

The main objective of this study is to explore the long-run and short-run relationship between trade and other macroeconomic variables of Malaysian and the BRICS countries. To test relationship between trade and other macroeconomic variables, the empirical investigation will be conducted based on the dynamic ordinary least square (DOLS) and fully modify ordinary least square (FMOLS) model for the period 1980-2015. Results of both DOLS and FMOLS show that out of all the variables included in the model distance between Malaysia and BRICS countries and corruption of both side have negative affect on bilateral trade between them. Whereas, GDP, GDP per capita and trade to GDP ratio are positively contribute in the bilateral trade. However, inflation and exchange rate of Malaysia and BRCIS countries have no effect on the bilateral trade between Malaysia and BRICS countries. The findings suggest that economic strengthening as the basis for increase in trade between Malaysia and BRICS members. Investment appears to be complementary to the trading relations in the Malaysia-BRICS case. The social capital also plays role in supporting the trade

The purpose of this paper was to determine if small craft producer businesses need strategic marketing to survive. Existing literature on strategic marketing and the craft industry in South Africa (SA) was used to answer the following question: do small craft businesses need strategic marketing to survive? Since craft producers lack access to the market, they face major challenges in marketing their products successfully. Secondary research was used to determine the need of strategic marketing by craft producers in SA. Strategic marketing is crucial since craft producers must research changes developments taking place in the market and to be able to develop an appropriate marketing strategy to sustain their businesses. This will enable craft producers to identify customers and to formulate an appropriate marketing strategy to reach their chosen target market. The research revealed it enables them to identify customers and to formulate an appropriate marketing strategy to reach their chosen target market. The study revealed that craft producers do need strategic marketing to survive in South Africa