ACRN Journal of Finance and Risk Perspectives
Vol. 7 ISSN 2305-7394
TABLE OF CONTENTS
Interest Rates and Investors Behaviour: Cointegration and Granger Causality
Mohammad Sami Ali
The Department of Banking and Financial Sciences, Zarqua University, Jordan
Research Problem: The review of literature revealed that though the economy of Jordan fluctuated considerably, there is no research evaluated the impact of the volatility in the rates of interest in the perception of Jordanian investors. Research Objectives: Therefore, the study aimed at exploring the causal correlation between the weighted average time deposit interest rates and the saving deposit interest rates along with the liquidity of Amman stock exchange as main proxies for investors’ behaviour.
Research Methodology: To achieve the aim of this research, the study employed empirical techniques like the ADF, Johansen co-integration test, VAR model and the short-run granger causality test to analyze a time series data covering the period Q1/2000-Q4/2016. Findings: Consequently, the study found that the tested variables became stationary only after converting them into the first difference. However, results from the Johansen test proved that the examined variables are not integrated on the long-run. Similarly, findings from the VAR analysis and the granger causality tests revealed that there is no short-run causality running from the volatility in interest rates towards the market’s liquidity as captured by the value traded and the turnover ratio.
Implications: Moreover, the study concludes that investors of Jordan can be classified as risk averse investors, since they are preferring to deposit their funds into the banks, though the level of interest rates is low. Eventually, the study recommends investors to rely on these rates to improve the quality of their investment decisions.
Keywords: Weighted Average Time Deposit Interest Rates; Weighted Average Saving Interest Rates; Amman Stock Exchange Liquidity; Turnover Ratio, Traded Value.
CFEBT Method as a Tool of Fraud Risk Management and Decreasing Information Asymmetry in Accounting
Department of Finance and Accounting, Faculty of Economics, University of South Bohemia in České Budějovice
Problem/ Relevance – The contribution deals with the possibilities of using CFEBT approach to identify potential risks of manipulated financial statements beyond their true and fair view of accounting including accounting errors and frauds. The contribution aims to analyse the selected techniques and tools to identify risks of manipulated financial statements or tools for decreasing information asymmetry among the users of financial statements.
Research Objective/ Questions - What important information is between the lines? How much can you rely on financial statements? What solution can be found to get the best information about the quality of financial statements?
Methodology – The existing research has verified the hypothesis of identifying the risk of manipulation of financial statements in the case study for 5 accounting periods with a CFEBT score in the condition of Czech accounting standards and International Financial Reporting Standards in case studies of particular accounting units.
Major Findings – The CFEBT results of the study cases were subsequently verified and compared with the results of Beneish and Jones Non-discretionary Accruals models.
Implications – Our research into risk of accounting errors and frauds has progressed since software of CFEBT risk triangle was created. We believe that the suggested CFEBT approach may be used by auditors to identify risks of accounting frauds and by any users of accounting for testing the risk of accounting errors and fraud to do better decision.
Key words: risk of manipulated financial statements, CFEBT M-score, true and fair view of accounting, triangle of risk of accounting errors and frauds.
Firm’s financing constraints and investment-cash flow sensitivity: Evidence from country legal institutions
(an earlier version was published in volume 1, issue 1)
Ahmed Marhfor1, Bouchra M’Zali2 and Jean-Claude Cosset3
1 Department of Administrative Studies, University of Quebec in Abitibi-Témiscamingue
2 Department of Finance, ESG/UQàM Montréal
3 HEC Montréal
In this paper, we investigate whether high investment-cash flow sensitivity can be interpreted as evidence that firms are facing binding financing constraints. Using institutional features and an intuitive measure of stock price informativeness to distinguish between most constrained and least constrained firms, we document that firms that are supposed to be more financially constrained exhibit greater investment-cash flow sensitivity. Our findings support the results of Fazzari et al. (1988) who also find that investment spending of firms with high levels of financial constraints is more sensitive to the availability of cash flow.
Keywords: Investment decisions, stock price informativeness, investment-cash flow sensitivity, financing constraints
The Effects of Global Financial Crisis on the Behaviour of European Banks: A Risk and Profitability Analysis Approach
(an eralier version was published in volume 1, issue 2)
Mehmet Hasan Eken1, Huseyin Selimler2, Suleyman Kale3, Veysel Ulusoy4
1 Kadir Has University
2 T.C. Ziraat Bank
3 T.C. Ziraat Bank
4 Yeditepe University
The effects of global financial crisis have been severe on banks. Many banks went bankrupt and many are in distress due to their sensitivities, stored in their balance sheets, to financial risks enlarged by the crisis. Some of banks, on the other hand, have felt the effects slightly. Recalling that total risk is sum of two parts of risk namely; volatility and sensitivity and that volatility is not under the discretion of banks, i.e. externally determined, it is assumed that the degree of banks getting affected by the global financial crisis is largely dependent on their sensitivities to risks. Banks’ sensitivities to risks are assumed to be under the control of banks. Thus, in line with their risk appetite, banks can always change the structure of their balance sheet to alter their sensitivities to financial and non financial risks. In this paper it is targeted to analyze and compare the balance sheet structure banks from 27 European countries in order to find their sensitivities to different financial risks such as credit risk and liquidity risk. It will further be analyzed how banks’ balance sheet structures have been altered after the crisis. To observe the behavioural variations (if there is any) of banks getting affected by financial crisis, the analysis is widened to include different characteristics of banks such as; the country where they are operating, region where they are belong to, scale of their operations, their ownership, their type and etc..
Keywords: Global crisis, banking, balance sheet structure.
Religious Holiday Effect on Borsa Istanbul
Jale Sözer Oran, Ömer Faruk Tan, Sezer Külah
Marmara University, Istanbul, Turkey
Problem/ Relevance: Calendar anomalies have been studied by a number of articles especially in the last two decades, which is considered against the efficient market hypothesis.
Mostly, anomaly researchers have examined the holiday effect, the day of the week effect, the month effect, the year effect, and the holy days effect in order to investigate the particular time period for abnormal returns. The holiday effect is regarded as a well-organized calendar effect in stock markets and it has significant theoretical background
Research Objective/ Questions: This study attempts to analyze the effect of the Religious Holiday - the feast of Ramadan and the feast of Sacrifice- on sectoral indices returns at the Borsa Istanbul for the time period between 1997-2015. BIST100, BIST30 and 23 sectoral indices are considered for this study. Their return performances’ at time Day-3 (three days before religious holidays), Day-2 (two days before religious holidays), Day-1 (one day before religious holidays), Day+1 (one day after religious holidays), Day+2 (two days after religious holidays) and Day+3 (three days after religious holidays) are studied.
Methodology: In order to compare the results of both regression analysis and non-parametric tests, they were analyzed together. Mann-Whitney, Kruskal-Wallis, and Wilcoxon Rank tests were used for non-parametric tests.
Major Findings: The analysis shows that average return of Day-2 is better than the other days. 12 sectoral indices display positively statistically significant results on that day. Returns of BIST Real Estate, BIST Services, BIST Transportation were positive and statistically significant at the 10% level; returns for BIST Electricity, BIST Industrial, BIST Inv. Trust, BIST Tourism, BIST Wood, Paper and Print were positive and statistically significant at the 5% level; BIST Food & Beverage, BIST Non-Material Products, BIST Leasing and BIST Textiles were positive and statistically significant at the 1% level.
Implications: This study indicated that there is religious holiday effect in the BIST for some indices, which have highest average returns at Day-2. This study aimed to contribute to the efforts of academicians who study this field, and investors for their investment strategies, which may now be developed by analyzing the volatility of these indices at those time periods.
Keywords: Behavioral finance, Islamic finance, Religious Holidays, Borsa Istanbul