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This article investigates the effect of efficiencies on market risk using a sample of Chinese commercial banks from 2000 to 2015 using different measures of market risk; the Value at Risk (VaR) and Expected Shortfall (ES). The cost and profit efficiencies are estimated by the Stochastic Frontier Analysis (SFA) on the 12 biggest banks listed on the Shanghai Stock Exchange. In testing the effect between efficiency and market risk, this study applied four different models to uncover the relationship between VaR and ES as measures of market risk on cost and profit efficiencies. Utilising a panel data analysis, the results show that different banks efficiencies affect market risk measures differently. While bank cost efficiency reduces market risk, increase in profit efficiency increase market risk. The analysis in this study helps explain the unconvincing evidence of an inefficiencies-risk connection in the bank sector. Bank regulators and managers may need to focus on the cost and profit efficiencies-related initiatives to better manage the market risk. These findings provide bank managers with more understanding of bank risk and serve as an underpinning for bank supervision efforts aimed at strengthening the joint risk management of efficiency market risks.

The recurring crises have evidenced poor liquidity risk management and ineffective regulation in banking. Consequently, banking regulations have undergone continuous reforms to bolster stability in the banking system. Nonetheless, theoretical and empirical evidence provide conflicting results that warrant comprehensive research, particularly for emerging Islamic banking. This study examines the role of banking regulation on the liquidity risk of 245 conventional banks and 68 Islamic banks from selected 14 Organization of the Islamic Cooperation (OIC) from 2000 to 2017 utilising the dynamic panel GMM (generalized method of moments) technique. We measure liquidity risk using the Net Stable Funding Ratio (NSFR) and the total financing-to-total deposits and short-term funding (LDEP). Meanwhile, the regulatory measures are asset restriction (AR), private monitoring (PM), supervisory power (SP) and capital requirements (CR). The findings suggest that regulation has a limited impact on bank liquidity risk. The CR supports the value creation of regulation through the reduction in banks’ liquidity risks, while PM and SP are agency costs of regulation that lead to higher liquidity risks. The impact of CR is lower on liquidity risk in Islamic banking than conventional ones, probably due to limited Islamic liquidity risk management facilities. Thus, regulators should strengthen Islamic liquidity risk instruments and markets to facilitate Islamic banking growth.

The expansion of financial markets has enabled individuals to invest in a variety of securities and financial instruments. Consequently, behavioral finance has shed light on the characteristics and psychological processes that influence the investment intentions and decisions of investors. We performed a systematic review of the recent literature on the key elements that influence the behavioral intentions and investment decisions of individual investors. In combination with bibliometric and weight analysis, this review aims to propose a comprehensive approach to present quantitative and qualitative analyses of the rising elements influencing investors’ intentions and behaviors in financial investment products. Using the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) statement, this work comprises a review of 28 articles published in Web of Science and Scopus databases between 2016 and 2021. The findings identify six underlying themes of investor behavior determined using content: (1) personal factors, (2) social factors, (3) market information, (4) firm-specific factors, (5) product-related factors, and (6) demography. The future research agenda is highlighted based on the Theories, Constructs, Contexts, and Methods framework. The findings provide insights for both theoretical and practical application for corporations, financial institutions, and policy makers in understanding investors’ behavior so as to strengthen the financial industry and economy.

PurposeThis paper aims to explore the strategies used by venture capital (VC) firms in assisting entrepreneurs who have business potential but lack capital. The study also aims to investigate whether the VC strategy can be adopted by Islamic banks throughmusharakahfinancing.Design/methodology/approachApart from content analysis, primary data were gathered from several interview sessions with the management of three VC firms and two Islamic banks.FindingsIslamic banks in Malaysia have great potential to offermusharakahfinancing and mitigate risk by adopting the following five VC strategies: method of selection, channelling of funds, monitoring, non-capital assistance and period of investment. We propose the channelling of corporate social responsibility funds formusharakahfinancing as an initial step in applying VC strategy.Research limitations/implicationsGiven the limited number of willing and eligible respondents in Malaysia, the scope of this study can be widened to a cross-country analysis wheremusharakahfinancing is widely adopted.Practical implicationsThis study motivates regulatory bodies and Islamic banks to considermusharakahfinancing using the risk monitoring strategy adopted from the VC industry.Originality/valueThis study is the first to empirically explore the strategy adopted by VC companies and evaluate whether such a strategy is suitable for the concept ofmusharakahfinancing.

Tujuan dan Latarbelakang: Kajian ini bertujuan membuat penambahbaikan pengiraan indeks keterangkuman kewangan dengan mengambilkira dimensi teknologi kewangan digital (fintech) dan menggunakan data daripada sebelah penawaran (supply-side) dan permintaan (demand-side) yang melibatkan negara sedang membangun terpilih bagi tahun 2014 dan 2017 (68 buah negara). Metodologi: Untuk mengukur indeks keterangkuman kewangan, kajian ini menggabungkan kaedah bukan-parametrik melalui model ukuran multidimensi dan kaedah parametrik Analisis Komponen Utama (PCA). Dapatan: Keputusan empirik kajian dengan menggunakan analisis PCA mendapati bahawa indeks keterangkuman kewangan yang dikemukakan dengan penambahbaikan dimensi fintech mempunyai kepentingan relatif dan hubungan yang signifikan terhadap tahap keterangkuman kewangan. Kajian ini menunjukkan nilai indeks yang tinggi menggambarkan tahap keterangkuman kewangan yang baik dan inklusif, manakala nilai indeks yang rendah adalah sebaliknya. Sumbangan: Implikasi daripada kajian ini menunjukkan kepentingan penggubal dasar untuk membentuk strategi dalam konteks keterangkuman kewangan di sesebuah negara. Selain itu, akses kepada perkhidmatan teknologi kewangan digital harus diperluaskan untuk meningkatkan tahap kewangan yang lebih inklusif dan mencapai keterangkuman kewangan sempurna. Kata kunci: Analisis komponen utama (PCA), bukan parametrik, fintech, indeks keterangkuman kewangan, multidimensi, parametrik. ABSTRACT Background and Purpose: This paper aims to improve the construction of the index of financial inclusion with digital financial technology (fintech) dimensions, using supply-side and demand-side data from selected developing countries for 2014 and 2017 (68 countries). Methodology: To measure the index of financial inclusion, this study combines non-parametric methods through the multidimensional measurement model proposed by Mandira Sarma (2012) and the Principle Component Analysis (PCA) as a parametric method. Findings: The empirical findings of the study using PCA analysis found that improvement on proposed index of financial inclusion using fintech dimensions has a relative importance and significant relationship to the level of financial inclusiveness. This study shows that the higher index value reflecting the more inclusive of financial inclusion, while the lower index value is vice versa. Contributions: This study concludes that it is important for policy makers to shape policies and strategies within the context of financial inclusion in a country. In addition, access to digital financial technology services should be expanded to increase the level of financial inclusiveness and achieve complete financial inclusion. Keywords: Financial inclusion index, fintech, multidimensional, non-parametric, parametric, Principle Component Analysis (PCA). Cite as: Nizam, R., Abd Karim, Z., Abdul Rahman, A., & Sarmidi, T. (2020). Indeks keterangkuman kewangan di negara sedang membangun menggunakan kaedah bukan parametrik dan parametric [Financial inclusion index in developing countries using non-parametric and parametric method]. Journal of Nusantara Studies, 5(1), 80-103. http://dx.doi.org/10.24200/jonus.vol5iss1pp80-103

Purpose The purpose of this paper is to explore the Shariah governance practices of Islamic fund management companies (IFMCs) in Malaysia, with the principal goal of reviewing the need for a comprehensive Shariah governance framework for the Islamic fund management industry. Design/methodology/approach The study was conducted using a qualitative approach via 14 semi-structured interviews with three companies (i.e. Company A, Company B and Company C) involving face-to-face interviews, telephone interviews and emails. Data from the interviews were recorded and later analysed using content analysis. Findings The study finds that Shariah governance processes among the IFMC examined are well-managed; and the current regulations issued by the regulators are sufficient to ensure the Shariah compliance of Islamic fund management industry. In spite of the absence of a comprehensive Shariah governance framework for the industry, most Shariah functions (i.e. Shariah risk management, Shariah review and Shariah audit) are performed by the parent company, except for Shariah research. Nevertheless, Shariah research is not an important function in Islamic fund management because the investment instruments are generally selected from a predetermined list of Shariah-compliant investment options. Practical implications The study offers an overview of Shariah governance practices in the Islamic fund management industry to policymakers and practitioners for the future development of Shariah governance practices among IFMC. Originality/value This is the first paper to study Shariah governance practices in the Islamic fund management industry in Malaysia.

This study compares the performance of Shariah and conventional mutual funds in emerging markets. The performance of 833 Shariah and conventional funds in 6 emerging markets from 2000 to 2015 was analyzed. We analyzed the Sharpe index, Treynor index, and Jensen’s alpha to compare the performance of Shariah and conventional funds. Jensen's alpha results conform to those of Sharpe’s in indicating that Shariah funds slightly outperform their conventional counterparts particularly in the case of Malaysia, Pakistan, and South Africa. Conventional funds perform exceptionally well in Egypt. Further investigation using the Henriksson–Merton model shows that fund managers’ performance relies nearly completely on their stock selection skills because they have either inferior or ineffective ability in timing the market. This study is the first cross-country attempt to compare the performance of Shariah and conventional funds in emerging markets in terms of risk-adjusted returns, security selectivity, and market timing capability. Keywords: Emerging markets, Jensen’s alpha, mutual funds, risk-adjusted performances, Shariah mutual funds Cite as: Abdul-Rahim, R. Abdul-Rahman, A., & Ling, P-S. (2019). Performance of Shariah versus conventional funds: Lessons from emerging markets. Journal of Nusantara Studies, 4(2), 193-218. http://dx.doi.org/10.24200/jonus.vol4iss2pp193-218

The finance-growth nexus is gaining credence among researchers. Growing research interest in developing evidences for different economic sectors has ignited this study to examine the topic in agricultural sector for Malaysia. The analysis focuses on palm oil industry using data for the period 1981 to 2017 using the Autoregressive Distributed Lagged (ARDL-bounds) approach. Financial development measures financial depth, accessibility, efficiency, and stability. Other variables include production factors such as land, labour and capital. Findings/Originality : The findings show that the depth of financial market has positive impact on palm oil industry performance both in the short run and long run, though the depth of the financial institutions only take effect in the long run. Meanwhile the financial accessibility, efficiency and stability have no significant effect on the productivity of the industry. It implies that the equity market development is more relevant to affect the palm oil industry compared to credit market development.

Research Highlights This study investigates the antecedents of organisational citizenship behaviour (OCB) and its dimensions (i.e. altruism, courtesy, civic virtue, conscientiousness, and sportsmanship) among Malaysia Public Hospital nurses. The operational definition of leader-member exchange (LMX) in this study is the quality of the exchange relationship between the leader and the nurses which are developed based on perceived contribution and affect dimensions. An operational definition of OCB in this study is a personal choice of extra-role behaviour among Malaysia public hospital nurses U29. This behaviour is not stated in job description, it is discretionary, and not directly or explicitly recognised by the formal reward system, but it can promote the organisational effectiveness. OCB compromises five dimensions which are altruism, courtesy, civic virtue, conscientiousness, and sportsmanship. Research Objectives The objectives of Wawasan 2020 have forced Malaysia organisations to confront unanticipated challenges. These challenges include changes in technological structure, shocks in economic trends, social changes, and structural transformations (Kim & Hunsaker, 2018). Meeting all these challenges is indispensable for an organisation’s survival but it has become a tough trade to do (Baek-Kyoo & Sung, 2017; Chen & Jin, 2014). One possible way to survive in this unpredictable situation is to make the best use of available resources such as organisational human resources (Baek-Kyoo and Sung, 2017; Bitmis and Ergeneli, 2011). It is believed that the practise of OCB among employees can enable an organisation to cope with these challenges (Bitmis & Ergeneli, 2011; Chen & Jin, 2014; Wu & Lee, 2017). Considering all of the above statements, it is necessary to find out how to increase nurses’ OCB in the workplace. Hence, this study was conducted to determine the direct effect of LMX on OCB as prior to the Social Exchange Theory. It is believed when subordinates have a high quality LMX, they will reciprocate the positive influence and perform OCB in the workplace. Methodology The data collection in this study was conducted through distribution of questionnaires. Multi-stage cluster sampling is used in this study because it involves a wide area and large population size which makes it difficult or impossible to list the subjects. There are more than 133 public hospitals all over Malaysia. Applying multi-stage cluster sampling method is useful because the researchers have no access to the entire population and it is geographically convenient. Hence, this study managed to get 539 respondents from four selected government hospitals with the return rate about 35.5 percent. In this study, the researchers adapted the Leader-member Exchange Scale by Bhal and Ansari (Bhal & Ansari, 1996, 2000) to measure LMX. While the Organisational Citizenship Behaviour Scale by Podsakoff et al. (1990) was adapted to measure OCB. Structural Equation Modelling is employed in this research as a statistical approach to measure the comparative strength of the indirect and direct relationship between the variables. Results The result indicated the model has yielded a good fit with RMSEA = 0.05, GFI = 0.90, AGFI = 0.88, CFI = 0.95, TLI = 0.94, NFI = 0.90, and chisq/df = 2.01. Overall, the perceived contribution and affect found to explain 5.1 percent of altruism occurrence, 2.6 percent of courtesy occurrence, 5 percent of civic virtue occurrence, 1 percent of conscientiousness occurrence, and 4 percent on sportsmanship occurrence among Malaysia public hospital nurses. Specifically, perceived contribution was found to significantly give an effect to only sportsmanship (𝛽 = 0.242, p < 0.001). That is, high quality of perceived contribution increases the occurrence of sportsmanship among nurses. However, perceived contribution has an insignificant effect on altruism, courtesy, civic virtue, and conscientiousness. The second dimension of LMX which is affect was found to significantly contribute to altruism (𝛽 = 0.153, p < 0.05), courtesy (𝛽 = 0.102, p < 0.05), civic virtue (𝛽 = 0.228, p < 0.001), and sportsmanship (𝛽 = -0.164, p < 0.001). That is, high quality affect relationship between the leader and the subordinate increases the occurrence of altruism, courtesy, civic virtue, and sportsmanship among nurses. However, affect was found to have no significant contribution to conscientiousness. Findings This study expanded the Social Exchange Theory by providing empirical evidence on the association of LMX on OCB. From the empirical evidence, it was found out that high-quality of work-based relationship has a valid influence on sportsmanship. The findings also revealed high-quality of personal-based relationship between the leader and the subordinate has a significant positive influence on altruism, courtesy, and civic virtue, while the negative influence on sportsmanship. It is suggested that personal-based relationship between the leader and the subordinate needs to be practiced with precaution since high-level personal relationships could manifest the occurrence of negative effect towards sportsmanship. Acknowledgement We are grateful for the opportunity provided by Quest International University and Universiti Teknologi Malaysia to publish our research finding.

This paper investigates whether FS affects bank liquidity risk. Using the Malaysian banking data sets, we compare the FS-liquidity risk relationships between the Islamic and conventional banking institutions. FSs are measured by real estate financing, financing concentration, short-term FS stability, and finally medium-term FS stability. Meanwhile, for liquidity risk measures, we adopt the BASEL III approach such as liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) in quantifying short- and long-term liquidity risk, respectively. The unbalanced static panel regressions of 27 conventional and 17 Islamic banks from 1994 to 2014 were analyzed to evaluate the relationships. Our results illustrate that increasing number of real estate financing and short-term FS stability of the Islamic banks may increase both their short- and long-term liquidity risks. On the other hand, even though real estate financing does not affect liquidity risks of the conventional banks, increasing short-term FS stability and financing specialization may increase their long-term liquidity risk. As the liquidity risk behavior, to some extent, differs between the two banking systems, we recommend the regulatory bodies and market players to develop a separate liquidity risk management framework for conventional and Islamic banking institutions.

Money laundering is a global threat to financial institutions especially the banking industry since it may weaken and expose the institutions to serious risks such as operational, legal and reputational risks. Against this background, the objectives of the study are to analyse the current practice on the prevention of money laundering in selected banks in Malaysia, to investigate the barriers to the implementation of effective Anti-Money Laundering (AML) regulations and to identify the ways to improve the implementation of AML in Malaysia. The study was conducted using qualitative method via interviews with 6 respondents from 6 Islamic & Conventional banks in Malaysia. The preliminary findings showed that the banking institutions’ current practice is fully complying with AML regulations under the AMLA 2001. The findings also demonstrated that the barriers to effective implementation of AML regulations are in line with those of previous study, which are lack of expert staff as the top factor together with an additional factor, which is lack of customers’ education and awareness on money laundering. Hence, to improve the implementation of AML in Malaysia, this study suggested to firstly strengthen the collaboration with government and relevant authorities to ensure strong enforcement action is taken against the criminals. Secondly, collaboration of BNM with banks and local media to increase public awareness and education on financial crime. Thirdly, to invest on employee training, upgrading system management as well as sufficient resources in compliance unit and finally to intensify the “Three Lines of Defence” in Bank Risk Management.

Kertas ini bertujuan untuk mengkaji kesan keterangkuman kewangan terhadap pertumbuhan firma dalam kalangan firma kecil, sederhana dan besar (275 buah firma) di negara Malaysia dan Indonesia dengan menggunakan teknik penganggaran regresi ambang keratan rentas. Tahap keterangkuman kewangan diukur berdasarkan agihan perkhidmatan kewangan merentasi firma iaitu akses kepada kredit. Keputusan kajian mendapati wujud kesan tidak monotonik dalam hubungan antara keterangkuman kewangan dan pertumbuhan firma, yang mana kesan keterangkuman kewangan terhadap pertumbuhan firma hanya signifikan dan positif di bawah tahap ambang. Implikasi dasar daripada kajian ini mencadangkan pemilik firma dan institusi kewangan perlu mengekang pengagihan akses kepada kredit supaya berada dalam lingkungan nilai optimum atau tahap ambang untuk menjamin pertumbuhan firma. Abstract This paper aims to investigate the effects of financial inclusion on the firms’ growth from selected small, medium and large firms (275 firms) in Malaysia and Indonesia countries using a cross section threshold estimation technique. The levels of financial inclusion across firms were measured based on the distribution of financial services across the selected firms (access to credit). This paper reveals that there is a non-monotonic effect in the financial inclusion-firm’s growth nexus in which the impact of financial inclusion on firm growth is significantly positive below a certain threshold point. The main finding suggest that the firms’ owners and banking institutions should restrict the distribution of credit access within the optimum value or threshold level in promoting the growth of the firms. Keywords: Financial inclusion; firm growth; threshold estimation.

Kajian ini bertujuan memahami jangkaan awal ke atas kekuatan, kelemahan, peluang dan ancaman yang dihadapi oleh syarikat Unit Amanah (SUA) di Malaysia yang terlibat dalam Perjanjian Komprehensif dan Progresif bagi Perkongsian Trans Pasifik (CPTPPA) yang telah ditandatangani pada 8 Mac 2018. Oleh kerana CPTPPA akan memberi kesan kepada portfolio aset pelaburan bagi pasaran modal dan pasaran saham, maka SUA perlu membuat persediaan dari segi kekuatan dan kelemahan serta mengenalpasti peluang dan ancaman yang bakal dihadapi. Kajian ini menggunakan kaedah kualitatif melalui temu bual mendalam ke atas pengurus dana. Hasil kajian ini mendapati bahawa SUA perlu menggunakan kekuatan seperti kemahiran analisa pasaran, menghasilkan instrumen kewangan yang menarik, memenuhi permintaan pelabur, dan membuat pelaburan baru merentasi sempadan. Hasil kajian menunjukkan bahawa tiada persediaan yang dilakukan oleh SUA menghadapi CPTPPA disebabkan ketiadaan maklumat terperinci oleh agensi kerajaan. SUA telah mengenal pasti beberapa peluang seperti kenaikan KDNK dan eksport akibat daripada CPTPPA. Antara ancaman yang telah dikenalpasti adalah liberalisasi ke atas pasaran tempatan serta ketiadaan regulasi khusus. Oleh itu, SUAM perlu membuat analisa dan merangka strategi untuk menghadapi CPTPPA.

Malaysia adalah antara negara yang mendominasi pengeluaran minyak kelapa sawit dunia. Kajian ini menganalisis kesan perubahan faktor makroekonomi terpilih dan persaingan harga terhadap eksport produk utama sawit Malaysia, iaitu minyak sawit mentah (CPO) dan minyak isirung sawit (PKO). Perubahan faktor makroekonomi mengambil kira pemboleh ubah harga tempatan sawit, harga dunia sawit, pengeluaran sawit dan kadar pertukaran efektif benar. Persaingan harga pula menggunakan pemboleh ubah harga produk barang pengganti bagi minyak kelapa sawit iaitu minyak kacang soya, minyak kanola, minyak bunga matahari dan minyak kelapa. Kajian merangkumi tempoh dari tahun 1985 hingga tahun 2016. Kajian ini menggunakan pendekatan model kaedah Auto Regresif Lat Tertabur (ARDL) iaitu kaedah penganggaran untuk melihat hubungan jangka panjang dan pendek. Hasil kajian empirikal mendapati, harga tempatan sawit, kadar tukaran dan harga barang pengganti, sangat mempengaruhi eksport sawit di Malaysia. Oleh itu, dalam usaha untuk meningkatkan eksport sawit Malaysia, kestabilan harga tempatan sawit, kadar pertukaran asing dan harga barang pengganti sawit perlulah diberikan perhatian untuk memastikan daya saing eksport sawit Malaysia terus meningkat. Di samping itu, memandangkan kajian ini mendapati bahawa krisis kewangan Asia 1997/98 dan krisis kewangan Eropah 2007/2008 memberi kesan negatif kepada eksport minyak sawit, maka Malaysia harus mengambil langkah berjaga-jaga terhadap petanda krisis di rantau Asia dan global.

This paper examines the effect of financial inclusion on the firm growth of the manufacturing sector (513 firms) in selected ASEAN countries (Malaysia, Philippines, and Vietnam) using a cross-section threshold estimation technique. The levels of financial inclusion across firms were measured based on the distribution of financial services (access to credit). The main findings revealed that there is a non-monotonic effect of financial inclusion on the firm&rsquo, s growth. These findings show that the impact of financial inclusion on firm growth in the manufacturing sector is significantly positive below a threshold point, and turns to significantly negative after a certain threshold point has been reached. These new findings suggest that manufacturing firm owners and banking institutions should deepen their financial inclusion efforts, and limit the distribution of credit access within the optimum value or threshold level in promoting the growth of the firm.

This paper aims to examine the effect of macroeconomic condition on microcredit coverage in Malaysia. The Microcredit Organizations (MO) was established to complement the mainstream financial institutions but challenges remain with microcredit performances associated with microcredit coverage. The paper accordingly investigates the effects of macroeconomic condition on microcredit coverage in the Malaysian context. To achieve the objective, the static panel data technique is adopted, which comprises 13 states and three Federal Territories in the country, spanning 2011 to 2015. The findings reveal the resiliency of MO towards macroeconomic conditions in Malaysia. The increase in the inflation rate and agriculture GDP (LNAGDP) share shows significant negative and positive effects (non-resilient) on microcredit coverage. The main findings will assist in addressing the newly identified macroeconomic condition to improve on micro credit performance. Policy implications emanating from the study are expected to be relevant to the government, MOs and borrowers. The government accordingly can make important contributions to borrowers by maintaining macroeconomic stability (inflation and LNAGDP share) through appropriate policies in order to achieve good microcredit coverage. MOs may revisit the existing quality regulation (MOs risk weighing loan disbursement) based on the macroeconomic condition which, in turn, can be used in outreaching more microcredit borrowers. Finally, this study may also help to elucidate specific understanding of the government and MO objectives in outreaching microcredit borrowers. Keywords: microcredit coverage, macroeconomic condition, microcredit organisation, Malaysia

Recent resurgence of interest in understanding the transmission mechanism of monetary policy focuses on two main channels of explanation, i.e. the money and credit channel. This paper investigates a version of the credit channel, i.e. the bank-lending channel for the Malaysian economy. The bank-lending channel assigns a critical role for the supply of bank loans in transmitting the effect of monetary policy on real economic activities. The study analyzes the effect of monetary policy on the ability and willingness of Malaysian banks to issue loans with respect to the development in the open financial market. Specifically it argues on the changes of the pattern of influence as progress in the open financial market takes place. A multivariate system analysis of vector auto regression (VAR) is used. The results show that prior to the progress in open financial market, the monetary authority has a direct influence on supply of loans of banks. However, this direct influence lessens as the open financial market develops. Loans are more affected by interest rates spread that dictates conditions in open financial markets. Thus, the ability of the monetary authority to steer real economic activities is subjected to development in the financial market.

This paper investigates the effect of financial inclusiveness on economic growth in selected developed and developing countries (63 countries) for the years of 2014 and 2017. The level of financial inclusiveness for each country is calculated using a new construction of the financial inclusion index. The role of financial inclusiveness on economic growth is subsequently estimated using a cross-sectional threshold regression technique. The main findings revealed that there is a threshold effect of the financial inclusiveness-growth nexus, which means that financial inclusiveness exhibits a non-monotonic positive relation with economic growth. The positive effect is more pronounced at a high level than in the low level of financial inclusion index. These new findings should motivate policymakers and the banking sector in each country to exert greater effort in raising the level of financial inclusion in stimulating sustainable economic growth.

This chapter is about two major components namely Shari'ah audit (SA) and Shari'ah compliance (SC). The chapter evaluates the role and function of Shari'ah audit and Shari'ah committee and observes to what extent the Shari'ah audit helps in reducing Islamic banks' risk exposure. Five banks were chosen to answer the research questions; and five Shari'ah officers from different groups of respondents, who are involved directly in the process of Shari'ah compliance/auditing in Malaysian Islamic Financial Institutions (IFIs), were interviewed. Findings of the in-depth interviews revealed that the Shari'ah Governance Framework (SGF) positively impacts SA. The research shows that the functions of Shari'ah audit are more specific and covers all aspects. It should possess good knowledge, both of Shari'ah and accounting/auditing. The majority of the respondents agreed that Shari'ah non-compliance risk in IFIs is minimal.

The highly prescriptive and technical provisions of MFRS 136 – Impairment of Assets represent a very considerable variation from past practices. This in turn raises questions about the span to which Malaysian businesses and their auditors have fared during the method of transition to a convoluted new reporting regime. Malaysia through Malaysian Accounting Standards Board (MASB) made the requirements of the MFRS 136 - Impairment of Assets mandatory progressively since 1 January 2006 for some or all listed firms in Malaysia. Since then, Malaysian companies are required to comply with the standard. The purpose of this paper is to investigate the compliance level of approved companies on the Bursa Malaysia main market towards the disclosure requirement of MFRS 136 - Impairment of Assets. This study also aims to identifying some factors associated with the level of compliance. The unweighted index was established by constructing the index checklist. The checklist was based on the requirement of disclosure of MFRS 136 (amended in 2009) and the annual reports of 50 sampled firms from 2010 to 2012 were examined. Then, we establish dependent variables and construct econometrical model to test the hypothesis in the research using Estimated Generalized Least Squares (EGLS) weights regression using cross-section weights. The result shows that 28 firms (56%), 27 firms (54%) and 24 firms (48%) out of 50 firms in 2010, 2011 and 2012 respectively failed to comply with requirement of FRS 136 pertaining to goodwill impairment. This study suggests that the performance of the top 50 listed companies should improve before Malaysian practice can attain a truly international standard. This study also found that firm size, profitability and auditor type are associated with the extent of compliance with MFRS 136. However, only firm size and profitability were positively associated with the level of compliance while auditor type were negatively associated with the level of compliance. This indicates that bigger and more profitable firms were more motivated to exhibit greater transparency of MFRS 136.

This paper aims to analyze the effect of partnership financing on bank efficiency. Partnership financing, which has similar concept with venture capital, refers to the equitable sharing of risks and profits between the client and bank. By employing output distance function on Malaysian and Indonesian Islamic bank over 1996 to 2012, we estimate bank efficiency score using Stochastic Frontier Approach and examine its determinants. Our results show that banks with partnership financing are more efficient than other banks. Banks with low capital risk coupled with large amount of partnership financing tend to be more efficient. However, when estimating the probability of crises using an early warning system, banks with high partnership financing appear to be less efficient during crises. The results suggest that the use of partnership financing improves efficiency, especially for banks with low capital risk except during crisis.

This paper investigates the effect of financial inclusion on a firm's growth (889 firms) in the ASEAN-5 (Malaysia, Thailand, Philippines, Indonesia, and Vietnam) countries using a cross-section threshold estimation technique. This paper showed a non-monotonic effect on financial inclusion-firm's growth nexus. The impact of financial inclusion on firm growth is significantly negative after a certain threshold point is reached. These findings suggest that the firm's owner and banking institutions should deepen their financial inclusion efforts and limit credit access distribution within the optimum value or threshold level.

This study examines the relationship between financing structure and bank liquidity risk. We compare the findings between Islamic and conventional banks for the case of Malaysia. We adopt four measures to represent financing structure; namely 1) real estate financing, 2) financing concentration, 3) stability of short-term financing structure and 4) stability of medium-term financing structure. Two BASEL III liquidity risk measures are tested; namely, liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) to measure short- and long-term liquidity risk, respectively. Based on panel data regression comprising 27 conventional and 17 Islamic banks from 1994 to 2014, our findings show that real estate financing and stability of short-term financing structure for Islamic banks are positively related to both liquidity risk measures. This implies that an increasing number of real estate financing and a stable short-term financing structure may increase Islamic banks’ short- and long-term liquidity risks. However, although real estate financing does not affect conventional banks’ liquidity risks, a stable short-term financing structure and increasing financing concentration can positively influence bank long-term liquidity risk. Our findings shed light crucial policy implications for regulatory bodies and market players in the context of liquidity risk management framework as well as the need to develop a separate framework between conventional and Islamic banking institutions.

Kebelakangan ini, Lembaga Tabung Haji (TH) telah terpalit dengan pelbagai tohmahan yang telah menyebabkan reputasi TH dipertikaikan. Hal ini telah mendapat reaksi daripada pendeposit sehingga menyebabkan kepercayaan dan kesetiaan pendeposit tergugat dan mereka mula mengeluarkan simpanan. Kajian ini bertujuan melihat faktor penentu kepercayaan dan kesetiaan dan melihat sama ada faktor kepercayaan dan kesetiaan bertindak sebagai faktor penengah (mediating factor) kepada risiko kecairan TH. Kajian ini menggunakan kaedah pensampelan tujuan (purposive sampling) dan sebanyak 200 orang responden menjawab soal selidik secara atas talian dan secara langsung. Analisis menggunakan teknik PLS-SEM mendapati kepercayaan bertindak sebagai faktor penengah hubungan antara maklumat kewangan, jaminan deposit, kualiti perkhidmatan dan imej dengan risiko kecairan.Selain itu, kesetiaan bertindak sebagai faktor penengah hubungan antara kualiti perkhidmatan, kepuasan pelanggan, dan imej dengan risiko kecairan. Oleh itu, ketelusan tadbir urus korporat perlu dititikberatkan untuk memperbaiki segala aspek yang sepatutnya dan dalam masa yang sama mengembalikan semula kepercayaan dan kesetiaan para pendeposit. Hasil kajian ini diharapkan dapat membantu pengurusan TH terutamanya dan kerajaan umumnya untuk mengambil tindakan yang sewajarnya dalam mengurus risiko kecairan bagi mengekalkan kedudukan TH sebagai institusi kewangan Islam yang kukuh pada masa hadapan Kata kunci: Kepercayaan; kesetiaan; risiko kecairan; Tabung Haji ABSTRACT Recently Lembaga Tabung Haji (TH) has been negatively accused from various aspects which may tarnish its reputation. This scenarioreceivesbad reaction from depositors, reducing their trust and loyalty, which leadsto withdrawal of deposits. This study aims to identify factors that influence the trust and loyalty of TH besides capturing the trust and loyalty traits of depositors as mediating factors of liquidity risk. This study adopts purposive sampling method and a total of 200 respondents respond to the questionnaires via online and enumerator service. Analysis using PLS-SEM technique revealed that trust mediates the relationship between financial information, security deposit, service quality and image with liquidity risk. Besides that, loyalty mediates the relationship between service quality, customer satisfaction and image with liquidity risk. Therefore, good corporate governance has to be enhanced to gain back the depositors’ trust. Results from this study are expected to assist the management of TH as well as the government to properly manage liquidity risk in ensuring the sustainability of TH in future. Keywords: Trust; loyalty; liquidity risk; Tabung Haji

Construction-related environmental pollution has been increasing due to the massive number of ongoing urban development. The growth of construction and its impacts on environmental and human health are critical. The aim of this study is to measure the concentration of PM2.5 emitted from construction activities such as masonry, plastering, and mixing of concrete and to assess the lung function performance of the exposed construction workers. The concentration of PM2.5 was measured using Dust Track II Aerosol Monitor. The sampling period is 8 hours per day for 6 days for each activity. Meanwhile, the peak expiratory flow rate (PEFR) test was conducted by using peak flow meter. A total of 80 exposed construction workers were selected to participate in the PEFR test. Each activity exhibited a different pattern for different level of PM2.5 concentration. Masonry activity recorded the highest mean concentration of PM 2.5 which was 79.98 µg/m3, followed by concrete mixing and plastering activity each recorded 78.42 µg/m3 and 72.57 µg/m3 respectively. Participants from plastering activity has the highest mean of PEFR which is 343.65 L/min. Masonry and mixing of concrete activity had a lower mean of PEFR which was 329.26 L/min and 298.62 L/min respectively. As conclusion, the findings provided significant knowledge about the concentration of PM2.5 from various activities and the need of safety precaution among workers.

The cost of equity is a measure of the required return by investors. It is desirable for firms, especially banks, to lower the cost of equity. There are a number of factors related to the quality of information disclosed that could influence the cost of equity. The accounting regulators aim to improve the quality of information by requiring assets to be valued at fair value. However the application of fair value accounting potentially increases information asymmetry, especially if fair value is estimated and subjected to the judgment of the preparers of financial statements. This asymmetric information problem potentially lowers the information quality and increases investors’ estimation risk and thus influences the cost of equity capital. Therefore, this research investigates the effect of fair value accounting on the cost of equity capital for a sample of Asian banks since banks hold a relatively larger proportion of assets at fair value. Using the generalized method of moment model for dynamic panel data, this research finds significant and positive relationship between assets at fair value and the cost of equity. The results found are similar for both quoted and unquoted assets. Thus although to regulators, fair value accounting provide relevant and timely information to investors, assets at fair value are perceived to be risky and as a consequence investors require higher returns. Keywords: Fair value; cost of equity; information asymmetry; information quality ABSTRAK Kos ekuiti adalah ukuran pulangan yang dikehendaki oleh pelabur. Adalah wajar untuk firma, terutamanya bank, merendahkan kos ekuiti. Terdapat beberapa faktor yang berkaitan dengan kualiti maklumat yang dizahirkan yang boleh mempengaruhi kos ekuiti. Pengawal selia perakaunan bertujuan meningkatkan kualiti maklumat dengan memerlukan aset dinilai pada nilai saksama. Walau bagaimanapun pemakaian perakaunan nilai saksama berpotensi meningkatkan maklumat tak seimbang, terutamanya jika nilai saksama dianggarkan dan tertakluk kepada budi bicara penyedia penyata kewangan. Masalah maklumat tak seimbang berpotensi mengurangkan kualiti maklumat dan meningkatkan risiko penganggaran pelabur dan dengan itu mempengaruhi kos ekuiti. Oleh itu, kajian ini mengkaji kesan perakaunan nilai saksama pada kos modal ekuiti untuk sampel yang terdiri daripada bank Asia oleh kerana bank memegang sebahagian yang agak lebih besar aset yang dinilai saksama. Dengan kaedah masa umum untuk data panel dinamik, kajian ini mendapati hubungan yang signifikan dan positif antara aset dinilai saksama dan kos ekuiti. Dapatan kajian adalah sama untuk kedua-dua aset yang disebut harga dan aset yang tidak disebut harga. Oleh itu, walaupun kepada pengawal selia, perakaunan nilai saksama menyediakan maklumat yang relevan dan tepat pada masanya kepada pelabur, aset yang dinilai saksama dilihat sebagai berisiko dan akibatnya pelabur menghendaki pulangan yang lebih tinggi. Kata kunci: Nilai saksama; kos ekuiti; asimetri maklumat; kualiti maklumat

Kajian ini menganalisis hubungan kecekapan bank dengan risiko kecairan ke atas 16 bank Islam dan 27 bank konvensional di Malaysia bagi tempoh 1994-2014. Kecekapan bank dinilai berdasarkan kecekapan kos, manakala risiko kecairan menggunakan garis panduan Basel III iaitu Nisbah Perlindungan Kecairan (Liquidity Coverage Ratio-LCR) yang bersifat jangka pendek (30 hari) dan Nisbah Pendanaan Stabil Bersih (Net Stable Funding Ratio-NSFR) yang bersifat jangka panjang (setahun). Analisis ini meliputi dua fasa pengujian: 1) skor kecekapan kos dianggarkan menggunakan Analisis Sempadan Stokastik (Stochastic Frontier Analysis-SFA). 2) Hubungan antara kecekapan kos tersebut dan risiko kecairan diuji menggunakan kaedah regresi panel statik. Keputusan kajian menunjukkan bahawa kecekapan kos kedua-dua sistem perbankan tidak mempunyai hubungan signifikan dengan LCR, manakala berhubungan signifikan yang negatif dengan NSFR bagi perbankan Islam dan konvensional. Ini bermaksud semakin tinggi ketidakcekapan kos semakin rendah kecairan, lalu semakin tinggi risiko kecairan dalam jangka panjang. Oleh itu, pengurangan kos dapat mengurangkan risiko kecairan bank bagi jangka panjang. Implikasinya, kecekapan kos bank perlu diambil kira oleh penggubal dasar Negara dan pihak pengurusan bank dalam merangka pengurusan risiko kecairan bagi memastikan kelestarian sistem perbankan di Malaysia. Kata kunci: Risiko kecairan; kecekapan kos; nisbah pelindungan kecairan; nisbah pendanaan stabil bersih ABSTRACT This study analyzes the relationship between bank efficiency and liquidity risks of 16 Islamic banks and 27 conventional banks in Malaysia for the period covering year 1994-2014. Bank efficiency is based on cost efficiency, while liquidity risk is measured based on the guidelines of Basel III using Liquidity Coverage Ratio (LCR), which is short term (30 days) and Net Stable Funding Ratio (NSFR), which is long term (one year) in nature. This analysis involves two phases: 1) the cost efficiency scores is estimated using Stochastic Frontier Analysis (SFA) and 2) the relationship between the estimated cost efficiency and liquidity risk is tested using static panel regression method. The results show that cost efficiency of both banking systems have no significant relationship with LCR, but significant negative relationships with NSFR for both Islamic and conventional banks. This means that the higher the cost inefficiency, the lower is the liquidity, and the higher the liquidity risk in long term. In short, cost saving can reduce bank liquidity risk in long-term. Hence, bank cost efficiency must be taken into account by policy-makers in formulating liquidity risk management to ensure sustainability of the banking system in Malaysia. Keywords: Liquidity risk; cost efficiency; liquidity coverage ratio; net stable funding ratio

Subjectarea The case is suitable for use in the topics related to the functions and roles of Islamic pawn-broking and the Islamic risk management framework. Studylevel/applicability The case is designed for undergraduate and postgraduate students taking courses in Islamic Banking, Islamic Finance and Risk Management for Islamic Banking Institutions. Case overview This case is meant to explain the mechanics of pawn-broking (Ar-Rahnu) in Islam as well as to understand the risk management of Ar-Rahnu in the bank. Ar-Rahnu is discussed, in general, from the perspective of muamalat and then is related to the financing service offered through Ar-Rahnu scheme at Al-Qamari Bank Berhad (a disguised bank). Ar-Rahnu means making an asset as a security or collateral for a debt. The collateral will be used to settle the debt when the debtor is in default. It may also be known as borrowing with either collateral or pawn-broking. In Al-Qamari Bank Berhad, gold and jewellery are the subject of collateral for Ar-Rahnu. In return, customers will get the cash based on the margin of loan with regards to the current market value of gold/jewellery as determined by the bank. The operation of Ar-Rahnu is discussed in Exhibit 1, while the risk management of Ar-Rahnu is discussed in Exhibit 2. Expectedlearning outcomes The learning outcomes include: to identify a problem and issue related to Ar-Rahnu; to evaluate the modus operandi of Ar-Rahnu; to analyze the risk management practices of Ar-Rahnu; and to develop decision criteria on whether Ar-Rahnu in Al-Qamari bank is Shariah-compliant or not. Supplementarymaterials Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

Organizational citizenship behaviour has been defined as the individual’s behaviour that is discretionary and not directly recognized by the formal reward system, but it promotes the effective functioning of the organization. Because the importance of organizational citizenship behaviour in organization especially in service sector, this study focused more details on how workplace spirituality enhance the performance of organizational citizenship behaviour among nurses. This relationship grounded by Social Exchange Theory. There were three dimension of workplace spirituality, which meaningfulness, sense of community, and organizational values alignment. While, organizational citizenship behaviour has been measured using five dimensions, which altruism, courtesy, civic virtue, conscientiousness, and sportsmanship. An 800 sets of questionnaire have been distributed in four selected public hospital in Malaysia. Cluster and simple random sampling were used in this study. SPSS 23 and Amos 23 have been used in order analyses the data. Overall, the result revealed workplace spirituality has significant relationship towards organizational citizenship behaviour.

Waqf is known as an endowment made by Muslims to charitable causes such as for education or religious purposes. Waqf is very important for the development of the Islamic ummah, and it is one of the practices recommended in Islam. However, there is no framework of Waqf management being developed in order to ensure that different types of waqf is managed efficiently. Therefore, this study would like to explore the Waqf management practices in Malaysia and propose a framework for Waqf Management. The study is conducted using qualitative approach which involved semi-structured interviews with the managers and employees of Waqf Johor Unit (UWJ) in Johor and the Waqf Selangor Corporation (PWS) in Selangor, Malaysia. The findings identified three important components that are crucial for efficient Waqf management, research management, investment management and property management. The existence of these components will enable the Waqf institutions to manage waqf effectively so that it will play an effective charitable role in developing the Islamic ummah. These findings will assist the policy makers and the management of waqf institutions to strategize Waqf as a driver for the social and economic development in Malaysia.

Subject area The case is suitable for use in the topics related to the functions and roles of hedging and the Islamic derivatives/hedging instruments. Study level/applicability The case is designed for undergraduate students, taking courses in Islamic Banking, Islamic Finance and Risk Management for Islamic Banking Institutions. Case overview This case describes the theory and application of Islamic Cross Currency Swap (ICCS) in the market. Having this understanding enables case analysts to understand the functions and roles of hedging and the Islamic derivatives or hedging instruments of ICCS comprehensively. The case begins with Yusof, the new finance officer of Al-Yemeni Sdn. Bhd to analyse the permissibility of hedging and derivatives to hedge against currency fluctuations from Islamic perspective. Yusof had to complete the report before the Board of Director's quarterly meeting, which was within a week. Having in mind that the company's mission was to be a Shariah-compliant stock by 2012, Yusof was responsible for ensuring that the company was administrated in an Islamic way. Besides, he also had to ensure that the company generated income and profit as planned. In doing so, he had to strategise all possible risk exposures that could be mitigated or hedged. This case ends by giving the case analyst information on ICCS offered by Al-Rizky Bank Berhad (ARBB). In this case, Yusof had to find out whether hedging is allowed in Islam. What are the Islamic derivatives? What are the different views of Shariah scholars on various types of derivatives? What is the modus operandi of ICCS? Is the ICCS offered by ARBB Shariah compliant? What are the possible risk exposures being hedged in ICCS? Expected learning outcomes To provide exposure on the concepts of hedging from Islamic perspectives; to provide exposure on the concepts of Islamic derivatives/Islamic hedging instruments; to stimulate understanding on the modus operandi of ICCS in ARBB; and to help case analysts understand what makes the Islamic hedging instruments become Shariah compliant. Supplementary materials Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

This paper evaluates the performance of East Asian banks during the period of 2000–2010 by controlling country-specific conditions comprehensively. Particularly, it seeks to show that country-specific conditions are significant factors in estimating the common frontier by which the performance of all banks are compared. Thus, disregarding political conditions, regulatory environments, and country risk would lead to inaccurate efficiency scores because of the inaccurate common frontier. Following this further, an inaccurate measure of bank performance can hardly reveal bank problems before turning into a crisis. Our results confirm the significant impact of country-specific conditions on the common frontier, and hence bank efficiencies. The findings suggest that researchers, bank managers, and regulators also consider other factors other than economic conditions in their evaluations and decisions.

Financial considerations play a major role influencing the internationalization of firms. However, it is not clear how integrated financial factors such as cost and capital are related to the export behavior of small- and medium-sized enterprises (SMEs). The purpose of this study is to examine financial profiles of SMEs in an emerging economy by discriminating between non-exporters and exporters. Survey data from 356 SMEs in Malaysia was analyzed to see how perceived costs, internal financial resources, and external capital constraint are associated with their export status. Through a multiple logistic regression model, it is found that exporters perceive higher internal financial resources and fewer constraints in accessing external capital. They also perceive higher export costs than non-exporters. This study offers academics, entrepreneurs, and policy-makers a comprehensive understanding of financial characteristics that explain the export behavior of SMEs in developing countries.

The study of human resource has become a crucial topic in understanding the determinants of operational risk. Given the various sources of operational risk, losses resulting from staff performance seemed to be the major cause as employees are the key players who manage the processes and systems of undesired events. This study explored the influence of staff performance attributes toward operational risk management, with a focus on ‘people risk’. The study was conducted using qualitative approach via face-to-face and telephone interviews with 14 respondents from 7 Islamic banks in Malaysia. Our preliminary finding showed that training, education, experience and compensation lead toward better management of ‘people risk’. Hence, a clear understanding of the factors affecting ‘people risk’ would help ensuring an effective and successful strategy in managing human resources especially in developing the operational risk management framework for the Islamic banking institutions. Keywords: Islamic banking institutions; operational risk management; staff performance ABSTRAK Kajian berkaitan sumber manusia telah menjadi topik penting untuk memahami faktor penentu risiko operasi. Walaupun risiko operasi berpunca daripada pelbagai sumber, kerugian akibat daripada tahap prestasi pekerja yang rendah menjadi punca utama disebabkan pekerja memainkan peranan penting dalam menguruskan aliran proses dan sistem bagi sesebuah institusi terhadap peristiwa yang tidak diingini. Kajian ini meneroka faktor-faktor yang mempengaruhi prestasi pekerja dalam konteks pengurusan risiko operasi dengan penumpuan kepada 'risiko pekerja’. Kajian ini menggunakan pendekatan kualitatif melalui temubual secara bersemuaka dan telefon terhadap 14 responden yang terdiri daripada 7 buah institusi perbankan Islam di Malaysia. Penemuan awal kajian ini menunjukkan bahawa latihan, pendidikan, pengalaman dan ganjaran mendorong kepada pengurusan ‘risiko pekerja’ yang lebih baik. Oleh itu, kefahaman yang jelas terhadap faktor-faktor yang mempengaruhi 'risiko pekerja' membantu dalam merangka strategi yang efektif bagi pengurusan sumber manusia terutamanya dalam membangunkan rangka kerja pengurusan risiko operasi bagi institusi perbankan Islam. Kata kunci: Institusi perbankan Islam; pengurusan risiko operasi; prestasi pekerja

This paper theoretically evaluates why profit–loss sharing (PLS) contracts in Islamic banking fails and its potential for improvement within the scope of the New Institutional Economic Theory (NIE). The objective of the evaluation is to draw conclusive theoretical arguments of whether Islamic banking institutions in Malaysia should act as either financial intermediaries or entrepreneurs. Further, we analyze this issue from the perspective of agency theory, financial intermediation theory and entrepreneurship theory with four economic agents in the Islamic banking sector, namely entrepreneurs, depositors, shareholders, and the Islamic banks. Specifically, the first three economic agents represent the asset (equity-based financing), liability, and equity of the Islamic banks, respectively; while the latter is the Islamic banks, which act as a separate legal entity. Finally, we suggest that PLS contracts would best be positioned if Islamic banks play the role of genuine entrepreneurs.

The study sets out to explore the role of L&D (organizational and individual) factors within engineering firms, based on the social exchange theory, a popular framework about psychological contract and maintenance of the employee- employer relationship. Testing these concepts with Malaysian engineers and managers, the current research will explore the extent to which organizations provide effective learning and development initiatives that counter commitment by creating a sense of obligation through professional growth. The notion of psychological contract will be used to conceptualize engineers’ intention to stay and is seen as mediating the relationship between learning and development opportunities and engineers’ intention to stay. Ten (10) manufacturing companies will be invited to fill up the questionnaire. These questions offer the possibility for identifying L&D factors which will influence the retention of Malaysian's engineers, as well as the influence of psychological contract on this relationship. Based on these results, it would be possible to identify the challenges of employee retention and the mismatch between L&D professionals and retention strategies, with engineer's needs, wants, and expectations (psychological contract) in relation to their retention.

This study contributes to the development of the knowledge management and strategic compensation literatures through developing the linkages between them. The study sample comprised of 301 employees from universities of medical sciences in Iran. Multiple and simple linear regression and path analysis were used to test the direct and mediated relationships among the variables. Results highlighted significant relationships between (a) strategic compensation practices and affective organizational commitment, (b) affective organizational commitment and knowledge sharing, (c) strategic compensation practices and psychological contract, and (d) psychological contract and knowledge sharing. Results revealed that strategic compensation practices are positively related to affective organizational commitment and psychological contract. In addition, the results provided evidence that affective organizational commitment and psychological contract have a significant mediating effect on the relationship between strategic compensation practices and knowledge sharing. Managerial and practical implications of the findings are highlighted.