International Journal of Banking and Finance
The International Journal of Banking and Finance (IJBF) provides a publication forum for international scholars and practitioners in banking, finance and insurance to disseminate their theoretical, empirical and applied research through anonymously blind peer review process. The journal provides a global forum wherein academicians and practitioners share ideas, elucidate practices and enhance the existing theoretical and practical positions. The journal aims to reach contributors and readerships worldwide and, in particular, those in the developing countries whose needs are currently more acute. The editorial policy encourages and solicits research papers that reflect novel practical and theoretical breakthroughs in banking, finance and insurance in different financial and economic environments. It is published by the Universiti Utara Malaysia twice a year. Areas of interest for this journal include, but are not limited to, the following topics: behavioural economics, corporate finance, financial institutions and markets, financial services, insurance, international economics and trade, international finance, macroeconomics, monetary policy, financial economics, portfolio and security analysis, real estate, ethical finance, money and banking and accounting and financial reporting. This is an open access journal. The articles on this site are available in full-text and free of charge to our web visitors. This website does not require any personal information about its visitors to read, download, copy, distribute, print, search, or link to the full texts of these articles.
Does Shariah Screening Impose a Performance Trade-Off? Evidence from Large-Cap Portfolio Strategies in Malaysia
This study examined whether restricting the investable universe to Shariah-compliant equities was associated with a performance trade-off in the Malaysian equity market. Using monthly data from December 2000 to December 2023, the analysis compared unrestricted, non-Shariah, and Shariah stock universes. Within each universe, firms were ranked by market capitalisation, the 30 largest stocks were retained, and three portfolios were formed. They were value-weighted, equal-weighted, and a 10-stock dividend-yield portfolio drawn from the same top-30 group. Performance was evaluated using average return, compound return, the Sharpe ratio, the Treynor ratio, and Fama-French three-factor alpha. Pairwise differences in alphas and Sharpe ratios were formally tested using Newey-West HAC-adjusted long-short spread regressions and the Jobson-Korkie statistic with the Memmel variance correction. The evidence did not indicate a systematic performance trade-off associated with Shariah screening in the Malaysian large-cap segment. Across the full sample, dividend-yield portfolios produced the strongest results, with the non-Shariah dividend-yield portfolio leading on realised-return measures and the Shariah dividend-yield portfolio recording the highest factor-adjusted performance. Formal pairwise tests showed that within each universe, the dividend-yield rule significantly outperformed both value- and equal-weighted portfolios. Across universes, the Shariah and non-Shariah dividend-yield portfolios did not differ significantly. The same distinction remained visible in the later sub-period, even though market conditions were weaker. Additional tests based on alternative portfolio formation months showed that the main results were not driven by the January formation convention. Overall, the findings revealed that relative performance varied with the screen that defined the investable universe, the portfolio construction rule, and the performance measure used in the evaluation.
Copyright (c) 2026 https://creativecommons.org/licenses/by/4.0
Determinants of Malaysian Retail Investors' Participation in the Capital Market
Despite the rapid development of Malaysia’s capital market and broader access to investment platforms, retail investor participation remains limited due to low financial literacy, reliance on informal information sources, and cautious savings behaviour. This study aims to investigate the determinants of Malaysian retail investors’ participation in the capital market by examining demographic and socio-economic factors, capital market literacy, financial capability, access to financial product information and planning services, and perceptions toward financial planners. It further analyses the combined effects of these variables to provide a comprehensive understanding of the drivers influencing market engagement. This study employed a purposive sampling approach, involving 1,500 Malaysians aged 18 to 64 from diverse socio-economic groups, and collected data via closed-ended questionnaires. Data were analysed using SPSS with inferential statistics to examine their influence on capital market participation. The study finds that capital market participation in Malaysia is significantly influenced by education, employment status, income level, ethnicity, age, income adequacy, and investment allocation ratio. Specifically, graduates, employed individuals, higher-income groups, individuals of Chinese ethnicity, younger respondents, those with adequate income, and those with higher investment allocation ratios demonstrate greater participation in the capital market. Capital market literacy and financial awareness positively affect capital market participation, while financial behaviour is not significant. Access to product information through colleague support participation while negative perceptions toward financial planners hinder participation. The findings emphasise that improving market information, financial planner training, and investor education especially for lower-income and middle-income households, can encourage participation and promote inclusive financial growth in Malaysia.
How Fintech Plays the Mediating Role of Risk Mitigation and Enhances Bank Profitability
FinTech has emerged as a critical engine of sustainable development in the banking sector. This study investigates how FinTech adoption affects bank profitability, with a particular focus on the mediating role of bank risk. Using panel data from 82 Chinese commercial banks over the period 2013–2023, we construct a bank-level FinTech adoption index based on textual analysis and the entropy weighting method. The results show that FinTech adoption significantly enhances bank profitability, with risk mitigation serving as an important transmission mechanism. Specifically, FinTech adoption reduces credit and liquidity risk, with the credit risk channel playing the most prominent mediating role. Heterogeneity analyses further indicate that these effects are more pronounced for regional banks and in regions with less developed digital infrastructure, highlighting FinTech’s role in alleviating structural disadvantages. The findings remain robust through a series of robustness checks and endogeneity tests. Overall, this study suggests that the profitability gains from FinTech adoption are closely linked to its capacity to reshape banks’ risk–return trade-offs through comprehensive risk reduction. These results emphasize the importance of aligning digital transformation strategies with risk management objectives and offer policy-relevant insights for regulators and policymakers in emerging economies.
Unravelling the Interplay Between ESG-Linked Executive Compensation, Board Climate Oversight, and Carbon Disclosure
This study explores whether ESG-linked executive compensation influences carbon reporting by China's A-share listed firms and whether this influence is mediated by board-level climate governance. Based on stakeholder theory, agency theory, and upper echelons theory, the study suggests that ESG-linked executive compensation positively affects carbon disclosure quality and that board-level climate governance mediates this relationship, reinforcing the effect of ESG-linked incentives on disclosure practices. The study of firm-level panel data spanning 2021 to 2023 indicates that companies with ESG-linked executive compensation tend to have credible and transparent carbon disclosures. Furthermore, ESG-linked executive compensation pushes companies to establish board climate oversight, and board climate oversight helps the quality of disclosure outcomes. The findings show that board climate oversight functions as a mediator that connects ESG-linked executive compensation with carbon disclosure practices. The mediation results show that ESG-linked executive compensation affects carbon reporting through two separate channels. Board climate oversight is seen as the governing mechanism that connects the two channels. The results of this research suggest that investors, regulators and boards can consider readjusting their climate practices in response to new regulatory requirements.
CEO Age and Firm Digital Transformation in China: The Moderating Role of Digital Financial Inclusion
This study examines how CEO age influences firm digital transformation and how regional digital financial inclusion moderates this relationship, using a large panel of Chinese listed firms. Drawing on upper echelons theory and resource dependence theory, the study conceptualizes digital transformation as a resource-intensive, high-uncertainty strategic investment that depends critically on executive capabilities and the surrounding financial environment. Employing firm-level panel regressions with industry and year-fixed effects, the analysis documents that CEO age is positively associated with firm digital transformation, suggesting that older CEOs are better able to mobilize resources, exercise authority, and sustain long-term digital initiatives. Further analyses show that digital financial inclusion negatively moderates this relationship: as regional digital financial infrastructure improves, the positive effect of CEO age on digital transformation becomes weaker. This finding indicates that digital financial inclusion serves as an institutional substitute for executive-specific experience and reputation by easing financing constraints through standardized, data-driven financial services. A series of robustness tests, including propensity score matching and placebo tests, confirms the validity of the baseline results and mitigates concerns about self-selection and spurious correlations. This study contributes to the literature by reconciling mixed evidence on the relationship between CEO age and digital transformation, highlighting the role of financial institutions in shaping managerial effects, and offering new insights into how executive characteristics and digital finance jointly influence firms’ strategic transformation in emerging economies.
Climate Risk Transparency and Firms’ Interest Coverage Ratio in Emerging Markets
This study investigates whether financial markets in emerging economies impose a cost on firms that disclose climate change risks. By leveraging a novel firm-level dataset of climate risk disclosures from Thomson Reuters/LSEG Eikon, we analyze the relationship between voluntary disclosures of asset exposure to climate transition risk and physical risk and a firm’s interest coverage ratio. Using a System Generalized Method of Moments (System GMM) estimator, we address potential endogeneity and dynamic effects in the relationship between disclosure behavior and financing costs. Our results indicate that firms that disclose climate risk exposure face a higher cost of debt compared to their non-disclosing peers. This suggests that in the institutional context of emerging markets, creditors may interpret transparency as a sign of unmitigated vulnerability rather than a marker of sound governance. The study highlights a critical unintended consequence of climate disclosure, suggesting that regulatory efforts must be coupled with mechanisms that build market confidence in firms’ adaptive capacities to prevent transparency from inadvertently restricting access to capital.
The Link Between ESG, Firm’s Financial and Market Performance in Malaysia: The Moderating Role of Firm Size, Index Recognition, and Shariah Compliance
This study investigates the relationship between Environmental, Social, and Governance (ESG) performance and firm performance among 338 firms (747 firm-year observations) listed on Bursa Malaysia from 2018 to 2023. Using a fixed-effects panel regression approach, the analysis evaluates the direct impact of ESG performance on financial performance, measured by return on equity (ROE), and market performance, measured by Tobin’s Q (TQ). The results show that ESG performance alone does not significantly enhance firm outcomes, with ESG scores displaying a significant negative association with market valuation, suggesting that the high costs and complexities of implementing ESG initiatives may outweigh short-term benefits in investor assessments. Firm-specific characteristics are found to moderate the ESG - performance relationship. Larger firms show weaker market outcomes when ESG engagement is high, reflecting delayed returns and greater implementation challenges. In contrast, external validation through inclusion in the FTSE4Good Bursa Malaysia Index (F4GBM) positively moderates the ESG-TQ relationship, underscoring the importance of recognition by sustainability indices in strengthening market confidence whereas Shariah compliance does not exhibit significant moderating effects. The findings highlight the multifaceted and context-dependent nature of ESG outcomes in Malaysia, offering valuable implications for firms, investors, and regulators seeking to align sustainability with financial and market success.
Safe Haven and Hedge Performance of USD and Gold in ASEAN-6 Equity Markets
Investors in emerging ASEAN-6 equity markets face persistent challenges in identifying reliable safe-haven assets to protect portfolios during periods of heightened market volatility. Traditional safe havens, such as gold, may not consistently provide the expected protection in these markets, while the safe-haven role of the US dollar (USD) remains relatively underexplored. This study examines whether the USD and gold function as safe havens, hedges, or diversifiers for ASEAN-6 stock indices and evaluates their effectiveness within portfolio allocation strategies. Using daily data spanning 2013 to 2023, we estimate pairwise time-varying dependence between the USD, gold, and six ASEAN equity markets employing DCC-GARCH and dynamic copula models. The results indicate that the roles of the USD and gold vary across markets and over time. The USD consistently acts as a safe haven and a hedge, whereas gold’s role alternates between that of a hedge and a diversifier depending on market conditions. Portfolio allocation results further show that the USD is generally prioritized over gold, particularly in strategies focused on variance reduction and diversification maximization. Overall, the findings offer important insights for portfolio management and risk mitigation in emerging ASEAN equity markets.
Economic Policy Uncertainty and Earnings Management: Does Institutional Governance Matter
This study examines how economic policy uncertainty (EPU) affects earnings management (EM), and how institutional governance moderates this relationship, using data from 27,598 firms across 22 countries from 2014 to 2021. We find that higher EPU increases accrual-based earnings management (AEM) and reduces real earnings management (REM), suggesting a shift to less observable EM methods. Strong institutional governance moderates the EPU–AEM relationship but has limited effect on REM. The moderating effect becomes more evident when accounting for complementary effects between AEM and REM, lagged EM, and past EPU. The impact varies by market classification, with AEM tends to respond in a greater extent to EPU in developed markets and REM more so in emerging markets. The findings imply that firms strategically adjust EM practices in response to EPU, with institutional governance playing a critical role in constraining such behavior. These insights highlight the importance of strengthening governance mechanisms, particularly in emerging markets, to enhance financial reporting quality under uncertainty. JEL Classification: G38, M48, M41.
The Role of Digital Payments in Financial Development: Comparative Analysis Between BRICS and G7 Countries, with Implications for Central Bank Digital Currencies (CBDCs)
This study examines the impact of digital payments on financial development by comparing emerging and developed economies, specifically BRICS and G7 countries, over the period from 2012 to 2023. This study assesses how digital payment deepening, measured by the volume of electronic money payments, influences financial development and what this may imply for future CBDC readiness. The analysis considers macroeconomic variables, including interest rate, inflation, unemployment, and gross domestic product growth. Financial development is measured by domestic credit to the private sector as a percentage of gross domestic product. Panel data econometric techniques are employed, with model selection guided by statistical tests and robustness checks. The findings reveal that digital payment expansion significantly enhances financial development in BRICS economies, likely due to improved access to digital financial services and inclusion. In contrast, the effect is statistically insignificant in G7 countries, where mature financial systems may reduce the marginal impact of additional payment digitalization. This divergence highlights the varying developmental roles of digital currencies across economic structures. The results also offer implications for CBDCs, suggesting that economies with stronger digital payment ecosystems may be better positioned to support CBDC implementation and diffusion. Recommendations include integrating digital currency initiatives with broader financial inclusion and employment strategies in emerging markets and enhancing regulatory and cybersecurity frameworks in developed nations.
COVID-19 Pandemic Power Play in Bursa Malaysia: How Glove-Related Announcements Shaped Stock Market Investors’ Reaction
This study investigates how the Malaysian stock market reacted to glove-related corporate announcements during the COVID-19 pandemic. Focusing on the period between March and September 2020, we employ the event study methodology to analyze 69 announcements from both established glove manufacturers and new entrants listed on Bursa Malaysia. Our findings reveal significant abnormal returns following initial announcements, particularly those signaling diversification into glove manufacturing by nontraditional firms. These early disclosures were perceived as material by investors, while subsequent updates drew diminishing reactions. By examining this sector-specific response during a global crisis, the study contributes original insights into investor behavior, market efficiency, and the informational value of corporate disclosures in emerging markets. Future research could further explore trading volatility and firm-specific determinants influencing stock market responses.
The Effect of Macroeconomic Variables on the Performance of Mortgage-Offering Banks in Tanzania
This study investigates the effect of macroeconomic fluctuations on performance of mortgage market in Tanzania in terms of nonperforming loans (NPLs), with a focus on 10 commercial banks over the period 2014 to 2024. Employing panel data analysis, the study examines the impact of lending interest rates (LIs), GDP growth, inflation, and foreign exchange rates on NPLs of mortgage-offering banks while controlling for bank size, customer deposits, and net income. The study adopts Pedroni cointegration tests, panel ARDL models, and Hausman tests to ensure reliability and accuracy in the results. Insights from the analysis partially support the dual trigger hypothesis, emphasizing the interplay between borrower financial strain and broader economic stressors. The findings reveal that GDP and inflation have an insignificant effect on NPLs. However, a one percent appreciation of the Tanzanian shilling against the U.S. dollar is associated with approximately three times higher NPLs, and this exchange rate effect is statistically significant. Lending rate was the most influential factor on NPL with around 12 times higher NPL for each percentage increase in the lending rate. The research contributes to the broader discourse on financial stability by bridging gaps in the literature on emerging markets and suggests bolstering the resilience of Tanzania’s mortgage market amid economic fluctuations.
Intellectual Capital, Staff Development and Profitability of Banks in Nigeria
This study investigates the relationship between intellectual capital (IC), staff development, and profitability in the Nigerian banking sector. By employing a quantitative research design, the study analyzes how staff training and education moderate the effect of IC on profitability. Using data from 12 listed banks spanning 2013–2023, the research identifies that value-added IC significantly contributes to profitability, with capital employed efficiency emerging as the most consistent driver. However, SCE presents challenges, reflecting inefficiencies in operational frameworks and resource utilization. The findings underscore the critical role of staff training as a moderating variable, amplifying the impact of IC on profitability by enabling employees to harness and optimize intellectual resources effectively. Policy implications of the findings are significant, suggesting regulators, such as the Central Bank of Nigeria, to mandate the disclosure of IC metrics in annual financial reports to promote transparency and enhance the stakeholders’ understanding of its impact on performance. In addition, banks should integrate comprehensive training programs into their strategic plans, fostering continuous professional development to maximize intellectual resource efficiency. Addressing structural inefficiencies through investment in advanced technologies and streamlined processes can further enhance profitability. Finally, the study advocates for policymakers to create enabling environments that support IC development, recognizing its potential to drive sustainable growth in the banking sector. These findings align with the resource-based view, contributing to the literature on IC’s contextual role in emerging economies.
Determinants of Digital Financial Inclusion Among Low-Income Households: Comparison Between Peninsular and East Malaysia
Digital financial inclusion is a fundamental component in alleviating poverty and enhancing prosperity. A comprehensive financial system lays the foundation for a basis of robust and resilient households, enhancing the welfare of low-income groups. This research examines the determinants of digital financial inclusion among low-income families in Malaysia, specifically focusing on digital literacy, financial literacy, trust, infrastructure and financial service providers. Total of one thousand one hundred seventy-one respondents with income below the national poverty line were surveyed. The Partial Least Squares-Structural Equation Modelling (PLS-SEM) and the Multigroup Analysis (MGA) techniques were employed. This study separated the total sample into two groups, Peninsular Malaysia and East Malaysia. The results demonstrate that trust, digital literacy and infrastructure are positively and significantly related to digital financial inclusion for all the groups. The role of financial service providers is only supported for the complete sample set and Peninsular Malaysia. Surprisingly, this study found no association between financial literacy and digital financial inclusion. In addition, the MGA results further evidence significant differences between Peninsular Malaysia and East Malaysia in achieving digital financial inclusion. Peninsular Malaysia shows stronger digital literacy and infrastructure, while East Malaysia demonstrates more potents effects of financial service providers and trust in boosting digital financial inclusion. These findings provide practitioners valuable insights into fostering a digitally inclusive financial society. This research includes strengthening consumer protection regulations on digital financial services to address cyber threats, implementing digital literacy campaigns to enhance awareness, and ensuring affordable and reliable internet access. These policy recommendations highlight the importance of formulating and designing tailored strategies to enhance digital financial inclusion among low-income households in Malaysia.
Copyright (c) 2025 https://creativecommons.org/licenses/by/4.0
Robo-Advisors and AI-Driven Funds: Catalysts in the Dynamic Evolution of Asset Management
Integrating Artificial Intelligence (AI) into investment finance has been transformative; however, its dynamic evolution in asset management remains underexplored. This study aims to comprehend and investigate the presence of AI in Malaysian asset management, its evolution in relation to current traditional practices, and its performance. A mixed-methods approach was employed. Qualitative text analysis was conducted on 702 fund reports and official AMC documents to identify the presence of AI technologies and their role in transforming traditional practices. Quantitative methods were utilised to evaluate performance: user ratings of robo-advisor applications were analysed to measure adoption and satisfaction, while Welch's t-test compared the annual returns of AI-driven and human-managed equity funds to assess performance. This study identified two prominent AI in asset management: robo-advisors and AI-driven funds. Robo-advisors automate investor profiling and fund recommendations, whereas AI-driven funds use algorithms for autonomous trading decisions. AI adoption varies among asset management companies (AMCs), with differing levels of integration. This transformation has supplanted traditional unit trust consultants (UTCs) with robo-advisors and human fund managers with AI-driven funds. Preliminary findings indicate high user satisfaction with robo-advisors because of their efficacy and convenience. AI-driven funds yield annual returns comparable to those of human-managed funds in the equity category, demonstrating their proficiency in managing complex investment strategies. These findings illuminate AI's transformative potential in asset management, suggesting it could replace traditional roles and achieve competitive performance. This study lays the groundwork for future research on AI's long-term impact and scalability in the industry, enriching the understanding of AI's evolving role in finance.
Method of Payment and Acquirer Shareholder Wealth Maximization in Mergers and Acquisitions: A Review of Literature
This paper aims to review existing literature to study the relationship between the method of payment and the acquirer firm’s shareholder wealth in mergers and acquisitions (M&A). The literature review is carried out in two areas: (1) payment methods offered to the target firm based on the acquirer firm’s internal factors, and (2) the impact of different payment methods on shareholder wealth during the announcement period. The paper is focused on providing suggestions for future studies on the payment methods, specifically on the mixed payment method. This paper is the first attempt to critique extant literature, beginning with selecting the payment method and ending with how it would affect the acquirer firm’s shareholder wealth. Since this is a review paper and not subject to empirical study, it could be directed for future research to investigate the impact of the cash-to-stock ratio in the mixed method of payment offer on the wealth of the shareholders of the acquirer firm.
Impact of Economic Policy Uncertainty on Herd Behavior in China Stock Market
This study explores the impact of economic policy uncertainty on herd behaviour in the Chinese stock market. As economic policy uncertainty increases, market information becomes highly chaotic and complex, making reliable information scarce and challenging for investors to make independent decisions. Particularly in the Chinese stock market, where retail investors dominate and generally lack professional financial knowledge and deep market analysis skills, these investors are more likely to mimic the behaviours of other market participants. Using monthly data from January 2011 to December 2023, and employing panel regression for empirical analysis, this research aims to explore the specific effects and mechanisms of economic policy uncertainty on herd behaviour, addressing a gap in the existing literature regarding how economic policy uncertainty directly influences investor behaviour in terms of manner and extent. The study's findings indicate that economic policy uncertainty has a significant and varied impact on herding behaviour across different market segments. Specifically, economic policy uncertainty significantly promotes herding behaviour in the Science and Technology Innovation Board, while it inhibits herding behaviour in the Main Board. Economic policy uncertainty also inhibits herding behaviour in the ChiNext, but not as significantly as in the Main Board. This diversity in impact highlights the complex nature of economic policy uncertainty's influence on herd behaviour.
Do Firm Characteristics Matter in Explaining the Lapse Rate of Life Insurance Policies and Family Takaful Certificates in Malaysia?
This study discovers the influence of the firm’s characteristics (i.e. firm size, firm leverage, aggressiveness of sales, board of directors’ size and diversity) on the lapse rate of life insurance policies and family takaful certificates in Malaysia. The panel data includes 25 insurance operators consisting of 14 conventional insurers and 11 takaful operators available between 2014 and 2022.The cross-sectional Ordinary Least Square (OLS) estimates show that firm size has a negative influence on lapse rates of life insurance (2019-2021), while a positive sign for firm leverage (2017, 2020 and 2021). The aggressiveness of sales shows the inconsistent influence on the lapse rate of life insurance in 2017 (positive) and in 2021 (negative). The firm leverage negatively influences on the lapse rate of family takaful for 2017 and 2018. The panel data estimates show that firm leverage and diversity of the firm’s board of directors significantly impact the life insurance lapse rate while only firm diversity significantly impacts family takaful lapse rates. This study offers policy implications for the insurance industry in Malaysia, especially by the Bank Negara Malaysia (BNM).
Copyright (c) 2024 https://creativecommons.org/licenses/by/4.0
Customers' Perceptions on Banks' Cybersecurity and Their Use of Mobile Banking Services in Tanzania
In this contemporary era, mobile banking services enable customers to organise and accomplish cashless financial transactions using mobile devices. However, the general state of banks' cybersecurity systems significantly impacts the usage of banking services offered through mobile networks among customers. The analysis was performed to assess how customers perceive the cybersecurity systems of banks and their association with mobile banking usage. By adopting a cross-sectional research design under the guidance of the Unified Theory of Acceptance and Use of Technology (UTAUT), the Partial least squares structural equation modelling (PLS-SEM) analysis reveals that banks' cybersecurity systems' performance expectancy had a significant positive impact on the use of mobile banking services. Further, banks' cybersecurity systems' effort expectancy, significant others' comments and facilitating conditions significantly and positively influence bank customers to use mobile banking. Aligning with these findings, banks and financial institutions should prioritise and strengthen cybersecurity systems and simplify mobile banking processes for enhanced mobile banking adoption and usage among bank customers.
Dividend Policy in Mainland China and the US: A Study on Non-Financial Listed Companies
This paper aims to assess the common characteristics of dividend payers and non-payers in both China and the US, as well as the stability of dividend policies in each respective nation. The study addresses issues related to catering theory, signal theory, smoothing assumptions, and Fama-French hypotheses. Our analysis covers 509 non-financial firms during the period 2006-2016, comprising 419 firms from the US and 90 firms from China. The multinomial regression reveals that past dividend payouts are critical in explaining dividend policy in both the US and China. Firms that have consistently paid higher dividends in the preceding year are more likely to opt for dividend increases rather than omitting dividends, thus aligning with the dividend smoothing hypothesis. Additionally, firm size and stock market performance were found to be significantly influencing dividend payouts across different categories in both the US and China. However, US firms primarily drove dividend payouts through profitability and the dividend premium, while firm size and leverage heavily influenced Chinese dividends. Interestingly, Chinese firms appear to practice a less sticky dividend policy than US firms, implying that the role played by dividend policy in signalling and catering theories in China is less significant than in the US.
A Global Comparison of Credit Bureaus Based on Data Utilization in Credit Scoring
The basic concept of credit scoring is to assess an individual`s payment ability as well as the specific individual`s credit default risk, hence determining an individual`s creditworthiness. Based on the credit score, financial institutions, insurance companies, telecommunication companies and other businesses decide whether consumers are eligible for a mortgage, credit card, auto loan, and other credit products. However, in many countries, potential tenants and insurance applicants also use credit scores extensively for screening. Accordingly, Credit Bureaus (CB) or Consumer Reporting Agencies (CRA) exert an essential gatekeeper function for important economic areas of consumers’ everyday life. However, when examining CBs globally, there are considerable differences in the use of data to calculate credit scores. Interestingly, the influence of CBs on credit rating receives little to no attention in academic research. This is particularly evident in the absence of a framework for classifying Credit Bureaus. Therefore, 24 traditional and non-traditional Credit Bureaus operating in 17 different countries are analyzed. First, the study identifies the different data types underlying credit reports and credit scores. Second, CBs are classified and clustered according to the type of information used for credit scoring. Furthermore, promising areas of research, in particular the ethical conflict between data protection and economic participation are highlighted.
Forecasting the Realized Volatility of Islamic Equities Using Multivariate Har-Type Models
This study proposes nine multivariate intraday models using various realized variation measures with the aim to improve volatility forecasting in the Islamic stock market in Malaysia using a dataset from 1st April 2008 to 31st March 2018. The findings show that considering independently the jump-robust realized volatility, additional daily jump realized volatility, and continuous and discontinuous jump sample path variations improved the in-sample predictive regressions compared to using the standard realized volatility. For the out-of-sample volatility forecasts evaluation, it is observed that the volatility models that disentangled the realized volatility into its continuous and discontinuous jump components have outperformed the rest of the proposed models. This is because both the continuous and discontinuous variation of returns exhibit distinctive substantial information in yielding the final volatility dynamic and thus should be modeled disjointedly. However, the empirical results suggest that the simple autoregressive specification using the standard realized volatility is often performing better or as well as the new extension models. Lastly, this study may provide useful insight in portfolio management, risk assessment, and asset pricing, particularly in the Shariah-compliant equities.
Zakat Disclosure Index by Islamic Banks and Development Financial Institutions in Malaysia
Paying zakat and disclosing it transparently to stakeholders is one of the ways to demonstrate the Islamic ethical value and accountability of Islamic finance institutions (IFIs). Nevertheless, comprehensive zakat information disclosure practices by Islamic banks (IBs) and Development Financial Institutions (DFIs) have received less attention. Therefore, this study was conducted to develop a comprehensive Zakat Disclosure Index (ZDI) for IBs and DFIs and measure the ZDI level of these institutions. Content analysis was performed through financial statements, annual reports, annual integrated reports and annual sustainability reports for four consecutive financial years from 2016 to 2019. The entire population of 16 IBs and 6 DFIs was selected. The ZDI was developed with two categories based on the liability of paying zakat. The scoring was divided into three groups: (i) mandatory financial information versus voluntary financial information versus mandatory non-financial information versus voluntary non-financial information; (ii) mandatory versus voluntary; and (iii) financial versus non-financial. The result showed that the overall disclosure level was at 60 percent, where mandatory disclosure was at 43 percent and voluntary disclosure was at 17 percent, while for financial and non-financial information, the scores were not much different at 25 percent to 33 percent. The study’s implication lies in establishing a standardised zakat index, enhancing comparability among reporting entities. Furthermore, the study holds importance for regulators as it aids in assessing the sufficiency of existing regulations and guidelines. It can guide regulatory actions to uphold the principles of maqasid shariah in reporting practices.
Macro-Econometric Analysis of Inward Capital Flows: A Case of Nigeria in Times of Security Challenges
This study used quarterly data for the period of 2014Q1–2021Q2 to investigate the macro-econometric implications of capital flows to Nigeria in the face of security challenges. The ARDL bounds test technique identified the long-run relationships between macroeconomic dynamics, insecurity, and total capital inflows to Nigeria, while the error correction mechanism (ECM) identified the short-run relationships. The Toda-Yamamoto test was used to determine whether the model variables were causally related or not. The findings pointed to a short-term negative relationship between insecurity, exchange rates, lending rates, and inflows of capital, while a positive relationship was found between industrial production capacity, the consumer price index, and the total inflows of capital to Nigeria, with insecurity, exchange rates, the consumer price index, and lending rates being the most significant variables. In the long run, insecurity, lending rate, and consumer price index had no significant impact on inward capital inflows, while exchange rate and industrial production capacity exerted significant impacts on capital inflows. The lending rate had a negative impact on overall inflows of capital, whereas the exchange rate, industrial production capacity, and consumer price index had positive impacts. The exchange rate and industrial production capacity were the most important variables that affected capital inflows. Based on the ECM, it was realized that aggregate inward capital flows were stabilized by a factor of roughly 47.2% per quarter in order to reach long-run equilibrium. The Toda-Yamamoto causality tests indicated that the interactions between macroeconomic variables and insecurity strongly influenced capital flows to Nigeria. The overall findings suggested that promoting macroeconomic stability and combating insecurity could improve the investment climate, encouraging foreign capital flows into Nigeria.
Impact of Peer Pressure on Dividend Policy: Evidence from Food & Allied and Power & Fuel Sectors in Bangladesh
Firms’ decisions are not independent of their peers. This study aims to assess the impact of peer pressure on firms’ dividend policy. In a sample of 29 firms from 2014–2020, this study employed a fixed effect regression model and revealed that Bangladeshi firms adjusted their dividend policy in response to their peers. Firms adjust the dividend payout ratio (DPR) by 5.6 percent as a response to their peers. Social learning theory, reputation-based model of peer influence, persuasion bias and rivalry-based theory of mimicking explain how peer influence affects a firm’s dividend policy. The findings of positive peer effects on dividend policy are robust to an alternative proxy of dividend policy – dividend yield. Therefore, the study implied that managers’ decisions regarding the dividend policy are not independent of their peer firms. Investors can adjust their expectations of a firm’s dividend policy based on the overall dividend policy in the industry.
Market Reaction to the Implementation of Basel Capital in South African Banks: Event Study Approach
This study investigated the stock market reaction and the effect of the implementation of Basel II and Basel III on the stock returns of South African banks. In achieving this aim, this study focused on daily and annual data of six commercial banks from 3rd January 2004 to 31st December 2022. The event study methodology was employed to identify abnormal returns around the specified event dates. The effect of the changes in Basel capital requirements on stock returns was not uniform across the four events. The market reacted favourably to the implementation of the Basel II requirements in the country. There was a significantly negative market reaction to the subsequent full implementation of Basel III official. Finally, higher Basel capital requirements (CAR) was associated with lower bank stock returns. The findings implied that bank regulators increase capital to strengthen the banking system but constrain the maximisation of shareholders’ values.
Factors Influencing Students’ Cost of Living: Evidence from Malaysian Universities
It is widely evident that cost of living among university students are increasing over time. That said, little is understood about factors associated with general expenses among students in Malaysian universities. The present study uses primary survey data (n = 454) to examine the correlates of the total amount of money spent by students in a month. An ordered regression model was used to shed light on factors contributing to different magnitudes of expenses. The explanatory variables consisted of demographic factors, financial knowledge, parental income, peer influence, and personality trait of conscientiousness. Findings from the present study showed that a large proportion of students spent between Ringgit Malaysia (RM) 201 and RM400 per month. Young, male students tended to spend more than older, female students. Expenditure was higher among Chinese students than Malays. Educational levels and income were found to correspond to spending. Having good financial knowledge was associated with reduced expenditure. Students who were influenced by their peers were likely to indulge in high spending compared to those who were not. These findings have important implications for strategic planning and to assist policymakers, parents, and university authorities in formulating better intervention measures aimed at improving students’ spending behaviour, thereby lowering cost of living.
Determinants of the Long-Term Performance of Malaysian Initial Public Offerings
This study examined the determinants of the long-term performance of 351 initial public offerings (IPOs) launched in Malaysia over the 2002–2010 period. This paper used a panel regression analysis framework based on the ordinary least squares (OLS) technique to examine the potential determinants of IPOs’ long-term performance. The findings revealed that the volatility of aftermarket returns, the dummy ACE market and concentration ownership significantly influence the long-term performance of Malaysian IPOs. This paper offers important implications specifically for investors as the findings can help them understand more about public companies’ long-term performance and how to better predict their performance.
Analyzing the Double Crossover Moving Averages Strategy Before, During and After the Lockdown Period
Trading is a business, not an investment. Traders focus on minor to secondary trends, while investors focus on the primary trend. The trading timeframe is crucial in technical analysis. As such a trader who trades with a minor trend timeframe, must have a trading strategy. We aim to examine the impact of the moving averages double crossover strategy on traders’ profit factor based on minor and secondary trend timeframes before, during and after the lockdown periods. Dow Theory was adopted for this study as a trend should be in effect until it gives a definite signal for a reversal. Data was collected from the Nasdaq Composite Index for a five-year period, from 2018 to 2022. During this time frame, the required data for the study was obtained at the point of the golden crossover and exiting at the dead crossover, in which 2018 to 2019 was the period before the lockdown, 2020 to 2021 was the period during lockdown, and 2022 was the year after lockdown. By using trading profits and loss for both longs and shorts, we back tested three strategies of double crossover moving averages that were as follows: i) EMA5 crossover EMA10, ii) EMA5 crossover EMA20 and iii) EMA20 crossover EMA50. A non-parametric analysis of independent samples was used. The result shows that there was a significant difference among those three strategies before the lockdown period, but no significant difference during and after the lockdown period.
Mutual Fund Performance in a Bullish Market During the COVID-19 Crisis
Active funds vs passive funds represent one of the most prominent investment decisions that ought to be undertaken by investors over the decades. Our paper seeks to offer an insight into the average performance of equity mutual funds during the period when there were roughly 70 ‘all-time-highs’ recorded by S&P 500 amid the COVID-19 health crisis. Additionally, our paper aims to explore the robustness and persistence of the explanatory powers of Morningstar sustainability globes, ratings from agencies and growth tilt during the health crisis. Our results indicated that the benchmark indexes seemed to dominate mutual funds in most cases during our sampling period. The ratings from Morningstar and/or Lipper together with growth investing appeared to be ideal elements to contemplate when making investment decisions during the COVID-19 health crisis.