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PurposeThe objective of this paper is to investigate the validity of stock valuation theories and their forecasting ability by conducting an empirical study. It employs four most commonly used theories which are then tested using 19-year banking-firm market data. The usefulness of these models demonstrates with promising results.Design/methodology/approachThis paper conducts a multi-country study using the multi-model testing approach to evaluate validity of theories and forecast accuracy of banking firms. It employs four methodology models used in finance literature; (1) P/E multiples model, (2) accounting-information-based clean surplus model, (3) theoretical model based on Gordon and Shapiro (1956) method and (4) the Damodaran-Kottler Free Cash Flow or FCF theory based on discounting model.FindingsThe tests show that the four theories under tests have a significant fit with actual price formation. The explained variation ranges from 72 to 92%, so the explanatory power of the theories accounting for variations in bank prices over 19-year period is substantial. The models fit suggest that the P/E model has superior predictive power followed by the RIM, DDM and FCFE. These findings shed new lights on the relative performance of valuation models.Research limitations/implicationsThe study is limited in terms of the sample period size for 1999–2019. The availability of essential financial data prior to 2000 is very limited, so one can understand interpretation of statistical results under certain assumptions.Practical implicationsThe paper suggests that one-factor model is better than the two-factor model.Originality/valueThe work done in this paper is unpublished and original contribution to banking and finance literature and also not under consideration for publication in any other journal.

Assessing the sizes of active contrasts in un-replicated factorial and fractional factorial experiments by quick and powerful methods are required in analyzing the big data in various research areas of Human endeavors. One of the old methods based on Lenth (1989) is being used in some statistical and data analytical applications which is fast and less efficient. We propose a new class of tests which are simpler, faster, and more powerful using the location median-function ($${\psi }_{med}\left({\varvec{x}}\right)$$ ψ med x ) after being skipped one and/or two times. An empirical study of simulation experiments to compute the critical values, sizes and powers using various sample sizes demonstrate the superiority of our methods. The proposed methods are illustrated in examples which can be employed in various fields of research in conducting data analytics using high computing power and machine learning.

The distribution of the ratio of two independently distributed Lindley random variables $$X$$ X and $$Y$$ Y , with different parameters, is derived. The associated distributional properties are provided. Furthermore, the proposed ratio distribution is fitted to two applications data (COVID-19 and Bladder Cancer Data), and compared it with some well-known right-skewed variations of Lindley distribution, namely; Lindley distribution, new generalized Lindley distribution, new quasi Lindley distribution and a three parameter Lindley distribution. The numerical result of the study reveals that the proposed distribution of two independent Lindley random variables fits better to the above said data sets than the compared distribution.

The interaction of social norms and incentives is a subject of growing interest in economic literature. Basov and Bhatti (2013) pointed out that invoking a social norm is both a blessing, since it allows mitigating moral hazard problem, and a curse, since it restricts the class of admissible contractual arrangements. In this paper, we reiterate this point using particular example of the effects of restrictions imposed on contracts by Shariah law on the optimal risk-incentive trade-off. We show that extra rigidity imposed by Shariah law leads to a greater reluctance to invest into daring new ideas, which are profitable in expectation, but may also result in significant losses. A shared set of social norms between the lender and the entrepreneur allows mitigating adverse consequences of the excess rigidity through creation of good will and may even lead to an improved performance. The adverse consequences may vary according to the stages of business cycle. As a result, recessions can have negative long-term effects and longer booms may be followed by longer recessions. We also hypothesize that turning a social norm into a law will deprive it of the ability to generate good will, while leaving the negative aspects intact. We find a tentative support of this hypothesis by comparing relative performance of Islamic banks in three regions: South East Asia (primarily, Malaysia), Middle East, and the UK.

The last few years have witnessed an explosion of research on Sustainable development. Most of this research is concentrated on the developed countries related to the issues not compatible with developing countries. This paper fills the gap and reviews the literature related to developing and emerging economies and their environmental and social constraints under Renewable energy and sustainable development (RESD). It also investigates how RESD can be implemented in the presence of serious issues pertaining to population increase, shortage of energy supply, lack of transportation, shortage of clean water, less food production and bad environmental systems and these are coupled with war, and hunger and political instability. The main contribution of this paper is to present extensive discussion in the context of hypotheses of economic growth and its association with energy consumption, and renewable energy options for sustainable development.

Trade credit transactions are quite common for businesses. The article carries out the trade credit analysis for an emerging economy, namely Indian corporate sector employing rich information dataset covering multiple industries such as manufacturing, services, construction and others, since the period of financial crisis including both firm specific and macro-economic factors. The annual dataset spans 13 years from 2006 to 2018 covering the crisis period. Applying dynamic panel framework, it is found that the inventory management and macro indicators are significant in determining trade credit for Indian firms. While trade payable is chiefly driven by raw material inventory, firms having reasonable stock of raw or finished goods inventory are less likely to offer trade credit. Large-sized firms are found to be both leading consumers and suppliers of the trade credit. The pecking order theory is clearly validated with net profits being preferred over the trade credit that is a more expensive source of finance. Credit from formal financial sources is found to act as a substitute to trade credit borrowing. JEL: G3, G21, E4, C23

In this article we explain how Islamic banks (IBs) maximize profitability in the presence of costly religiosity. Because of strong competition between IBs and conventional banks (CBs), a unique equilibrium emerges that affects the IB pricing structure. We propose a new model that identifies the optimal rate on the asset and liability sides of IBs. It shows that the financial products offered by IBs are not an exogenous function of religiosity; instead, they are endogenously determined by the nature of market forces in which IBs are operating. We show that in the presence of costly religiosity and competition, the rates of both converge. Moreover, the competitive pricing mechanism induces IBs to structure their asset‐ and liability‐side financial products (particularly Murabaha) with a risk profile similar to that of the CB loan system. This article empirically supports the theoretical propositions by using data from 17 Muslim majority countries where both IBs and CBs coexist from 2000 to 2015. We find that, holding other factors of bank returns constant, competition significantly affects IB asset‐ and liability‐side returns. The analysis also reveals that because of increasing competition between IBs and CBs, the market power of IBs has significantly declined over time.

This paper employs the VARMA-MGARCH-ABEKK model and Granger causality on 15 years’ daily time series data to examine investment opportunities in the oil and gas industries for ASEAN5 countries rela...

This paper uses various forecasting methods to forecast future crop production levels using time series data for four major crops in Pakistan: wheat, rice, cotton and pulses. These different forecasting methods are then assessed based on their out-of-sample forecast accuracies. We empirically compare three methods: Box- Jenkins’ ARIMA, Dynamic Linear Models (DLM) and exponential smoothing. The best forecasting models are selected from each of the methods by applying them to various agricultural time series in order to demonstrate the usefulness of the models and the differences between them in an actual application. The forecasts obtained from the best selected exponential smoothing models are then compared with those obtained from the best selected classical Box-Jenkins ARIMA models and DLMs using various forecast accuracy measures.

Cash holding is important for Chinese manufacturing firms coping with the increasing cost of financing and stiff market conditions. This study examines the impact of cash holding on the firm value of Chinese manufacturing firms. We find evidence that a non-linear relationship exists between cash holding and firm value in manufacturing firms of China. The study reveals that financially constrained firms having a higher level of cash holding negatively affects the firm value, while the unconstrained firms having a lower level of cash holding positively influences the firm value. Finally, this research is enriched by adopting the novel measure of managerial op-timism and reveals the interactive role of cash holding and optimism on firm value. The study concludes that managerial optimism influences the firm’s cash holding decisions and this is more costly for unconstrained firms.

Purpose The purpose of this paper is to explore the current strategic planning practices in the MENA region by highlighting the practices in the Saudi telecommunications industry (Saudi TI) and the external and internal factors that influence strategic planning in the Saudi TI. Design/methodology/approach The data comprised those from a questionnaire-based survey of a random sample of managers of Saudi TI firms, supplemented with data from secondary sources. Findings The results revealed that most participating managers recognized the potential benefits of using strategic planning in their firms. Several significant factors that impacted on the decision-making process with regard to strategic planning in Saudi TI firms were identified. Originality/value The main contribution of this paper is to fill an existing knowledge gap on strategic planning in a key industry such as the telecommunications industry in a country that is of importance as a business hub in the Middle East.

PurposeThe purpose of this paper is to compare the return performance and persistence of ethical and conventional mutual funds during two extreme events, the Asian and the global financial crises under Shariah constraints.Design/methodology/approachThe overall sample comprises of 129 Islamic mutual funds (IMFs) and 350 conventional mutual funds (CMFs) in Malaysia, and the average monthly data cover two periods of market cycles, before and during a financial crisis. The net of all expenses data is obtained from the Morningstar Database. This study employs various market risk-adjusted performance measures (ratios) to estimate the funds’ overall performance during the crises, and then it uses CAPM model to estimate the parameters via panel data approach. Moreover, paper employs the two persistence performance measures on IMFs and CMFs through contingency tables. It tests for the performance persistence effects for IMFs, CMFs using repeat winner and the cross-product ratio (CPR) tests proposed by Malkiel (1995) and Brown and Goetzmann (1995), respectively.FindingsThe main findings of the paper are: on average, both funds IMF and the CMF outperform the market return during the entire sample period; none of the funds is better than the “others” during the financial crises and the pre-crisis periods; the ethical fund – IMF outperforms the CMF over the study period. This outcome also indicates that ethical funds are more persistent especially during and the pre-crisis AFC and the GFC periods.Research limitations/implicationsThe finding of this study is limited to only Malaysian data because the objective was to guideline investors and market players in Malaysia to prefer investing in Islamic ethical funds to diversify their investment portfolio.Practical implicationsCautions to use existing ratio measures and CAPM model rather persistence measures may be used with existing methodologies in light of extreme events which influenced investor decision making for better returns at lower risks.Social implicationsA class of ethical funds consists of religious sustainable, socially responsible and impact-investing (SRI) funds but Shariah implications of halal investment must be observed to avoid prohibited practices within the class of SRI funds.Originality/valueThe work done in this paper are original in the sense that the authors employed various ratios to measure fund performance in conjunction with CAPM model and then tested for two persistence performance measures; the repeat winner and CPR tests.

In recent years, copula models are being used in all areas of human endeavors including energy, environment, social, natural and physical sciences. Copulas are the most powerful tools that can model dependent structures between various complex correlated variables. In this paper, we specifically examine the development of copula models and their applications in the areas of energy, fuel cells, forestry and environmental sciences. It reviews the latest literature on the types of copula models, including Gumbel, Clayton, Frank, Gaussian, vine, and the theoretical development of a mixture of bivariate and multivariate copula distributions, in terms of both static and dynamic applications. A comparative review of literature is done using ARMA, DCC, and GARCH models relative to copulas.

This article proposes the GOAL-Framework for the evaluation of organizational goals based on an ontology. The aim is to capture and analyze relevant data for the organization goals because determining relevant data is a key to delivering value from massive amounts of data for better decision-making in relation to the organizational goals achievement. The framework will allow the domain experts and entrepreneurs to evaluate relevant organizational data to assist the decision-making process with respect to the organizational goals. Hence, they will be able to identify to what extent certain organizational goals could be achieved. In order to test the flexibility and applicability of the GOAL-Framework, a case study is presented to explain how the framework is implemented and applied to a real world situation. The outcome of the case study demonstrates that the framework can be applied for analysis and decision-making based on the metrics using the dashboard to evaluate the extent to which the organizational goals could be achieved.

This paper provides evidence of a significant exchange rate effect on stock index returns using data from seven selected countries practicing free-floating exchange rate regimes. This resea...

This paper extends the recent work of Mansor et al. [1] who use panel regression to measure ethics based Islamic mutual fund performance and note the various methodological issues in this respect. We attempt to capture the co-movement and dependence structure of the fund index with five major equity indices before and during the Global financial crises (GFC). Four models—CAPM, normal Copula, symmetrised Joe-Clayton Copula and Rotated Gumbel Copula—are used to analyse the co-movement and dependence structure of Islamic investment funds. Our findings show that the ethical investment funds have low dependence with the major market indices. The fluctuations in the financial markets in the U.S., the U.K., Germany and Japan are less likely to affect the Islamic investment funds than other financial assets. However, the time-varying dependence increases dramatically during the GFC indicating that the diversification merits of Islamic equity funds in the portfolio deteriorate in the bear market. Some of the empirical results drawn in this paper will raise awareness among both academicians and financiers about the importance of Islamic investment funds during and out of crises periods.

Financial innovation vis-à-vis economic policy uncertainty (EPU) without due regards being given to debt financing. This paper fills this gap and unveils the dynamic role of national culture in defining debt financing via EPU. We use a sample of 3831 non-financial firms of Asian economies and employ the System Generalized Method of Moments to estimate the regression coefficients. Our findings reveal an inverse relationship between the EPU and debt financing, which suggests that debt finance mitigation strategies are successfully executed in the region. The potential reasons for this include the policies by businesses to reduce business activities and avoid the unfavorable rising financing cost through EPU. On the supply side, the rising EPU induces the banks to accelerate their interest rate due to increased default risk. Similarly, we observe that high uncertainty avoidance (UND) has a negative and significant link with debt financing due to an unpleasant behavior of corporate managers towards debt when they have an alternate source of financing instruments instead of accepting long-term obligations. However, we find that the UND and EPU interaction has a significantly positive impact on debt financing due to the rigid behavior of managers, which forces them to consider cultural traits and converts their risk-averse attitude into risk-friendly behavior. This implies that corporate managers should reflect the sensitivity of the national culture while considering debt financing.

In less than a decade, the Islamic Banking (IB) industry has become an essential part of the global financial system. During the last ten years, the IB industry has witnessed changes in economic conditions and proved to be resilient during the periods of financial crisis. This paper aims to examine the important issues related to credit risk in selected Islamic banks in nine countries from Association of South East Asian Nations (ASEAN) and Gulf Cooperation Council (GCC) regions. It employs the generalized least squares panel data regression, to estimate the ratio of non-performance financing to total financing as dependent variables and bank specific variables (BSV) to determine the credit risk. It uses 12 years of unbalanced panel data from 40 different Islamic banks. The overall findings show that financing quality has a significant positive effect on credit risk. It is observed that the larger IBs owned more assets with lower credit risk compared to smaller banks. The bank&rsquo, s age is also an important factor influencing the credit risk level. Moreover, regulatory capital significantly reduces the credit risk exposure adherence to the minimum regulatory capital requirements which help IBs to manage their credit risk exposures. It was also observed that IBs were not affected by the global financial crisis due to less credit risk compared to the conventional banks.

Recently, copula is being used in social, natural, and physical sciences due to its flexibilities in joint distributions and marginals and high computing power. They are the powerful instruments to model-dependent structures between various complex correlated variables in environmental sciences. This chapter studies the development of copula models and its applications in the area of environmental sciences. It reviews the literature on the types of copula models, including Gumbel, Clayton, and vine, and outlines the theoretical development of mixture bivariate and multivariate copula distributions. A brief review of literature is done using DCC, ARCH, and GARCH copulas.

Using a sample of U.S. firms during the 1989–2015 period, we study whether the efficiency with which managers generate revenue is sensitive to monitoring by institutional shareholders. We find that institutional ownership is positively related to managerial efficiency. Our identification relies on a discontinuity in ownership around the Russell 1000/2000 Index threshold and suggests that the positive effect of institutional ownership on managerial efficiency is causal. Furthermore, we document that monitoring by institutions helps improve managerial efficiency, and that an exogenous increase in institutional ownership leads to higher pay-for-performance sensitivity. Finally, we find consistent results after excluding from our sample forced CEO turnovers, suggesting that institutional shareholders force incumbent managers to exert greater effort rather than influence the replacement of less efficient CEOs. Taken together, our findings highlight the important role played by institutional shareholders in getting the most out of corporate executives.

PurposeThe purpose of this paper is to examine the new paradigm of Islamic corporate governance (ICG) in an emerging area of Islamic finance.Design/methodology/approachThe paper adopts an analytical approach to investigate the new executive and managerial roles that ICG is expected to play in the process of corporate financial decision making.FindingsThe authors argue that ICG is no longer expected to play the traditional supervisory and regulatory role within Islamic financial institutions. Indeed, the acuteness of competition, the observed failures of the Islamic finance industry, the unprecedented challenges, and the required ethical considerations levy as a new approach that improve the growth of the Islamic finance industry sustain its survival in the global financial world, and enhance the welfare of 25 percent of the world population who survived beyond all level of poverties.Originality/valueThe authors claim that ICG must be endowed with a multi-faceted, new paradigm for the purpose of improving the stakeholders’ interests and reaching the best business practices of the Islamic finance industry to cater investors’ need and the social well-being of the homeless and disadvantaged communities.

Purpose The main aim of this paper is to measure customers’ perception of car Ijarah financing transactions services provided by the Islamic banks and financial institutions in Pakistan. Design/methodology/approach The paper uses two research methodologies: Kruskal–Wallis and Mann–Whitney test (non-parametric) and logit regression model (parametric). Both methods are then applied to a real data set of 300 respondents from various cities of Pakistan in the car Ijarah financing industry. The demographic effects are also investigated to see the perception about the degree of Shari’ah compliance and the quality of service of transaction offered by banks. Findings Main finds of the paper reveal that the customers who used the car Ijarah facility from Islamic banks have positive attitude toward this sort of transaction. In addition, gender, income, marital status affect the perception about the quality of Shari’ah compliance, and the quality of service of transaction issues are very important to selected clients in the industry. Research limitations/implications These findings are limited to the car Ijarah financing industry and may not be applicable in other banking products in Pakistan and elsewhere. Practical implications Based on the results of this study, potential Islamic bank customers may find it helpful choose products or make product decisions conveniently. The findings of the paper also support Islamic banks in improving the Ijarah facility to increase their customer base in the geo-political locality with similar characteristics as Pakistan. Social implications Shari’ah compliance in the Islamic finance industry is a sensitive issue in Pakistan, and hence, car Ijarah’s Shari’ah compliance can affect banks’ reputation and sensitivity. Originality/value The work reported in this paper is original, unpublished and the paper is not submitted elsewhere for publication.