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This study investigates the determinants of dividend pay-out of listed firms in Pakistan from the year 2011 to 2015. The focus of the study is the life cycle theory of dividends, agency theory and signaling theory. Corporate governance indicators, firm efficiency and cash flow volatility are the main determinants used in this study. This study also includes eight corporate governance indicators namely insider ownership, ownership concentration, institutional ownership, board independence, board size, CEO duality, audit committee independence and remuneration committee. It is found that ownership concentration, institutional ownership, CEO duality, firm efficiency and cash flow volatility are the significant determinants of dividend pay-out in Pakistan. It is also found that growth opportunities significantly moderate the impact of ownership concentration, institutional ownership, CEO duality, firm efficiency, cash flow volatility on the dividend pay-out. This research is among the pioneer studies which examine the impact of firm efficiency on dividend pay-out. Likewise, the study is among the first attempts to incorporate growth opportunities as moderating variable in the relationship between corporate governance indicators, firm efficiency and cash flow volatility with dividend pay-out. Results show that the management of an efficient firm pays a high dividend to increase its reputation in the market. Furthermore, the negative signaling effect of dividend omission may not exist for efficient firms. It implies that efficient firms at their growth stage may also skip dividends.

The increasing numbers of financially distressed firms in the Malaysian market demonstrate the importance of predicting financial distress among firms in Malaysia. Using firm financial ratios, this study focuses on predicting financial distress using the hazard model and logistic regression (logit model) based on the Malaysian market. This study used listed firms on the Malaysian stock market from 2000 to 2018 to create two sets of data comprising the main sample and holdout sample in order to compare the predictability between hazard and logit models. The results clearly show that the hazard model is better compared to the logit model in predicting financial distress for the Malaysian market since more variables were found to be significant in addition to the model being more consistent in terms of accuracy.

PurposeThe purpose of this paper is to examine the determinants of capital structure using a dataset of firms in Malaysia.Design/methodology/approachThis paper carries out a panel data analysis of 8,270 observations from 827 listed non-financial firms on the Malaysia stock market over the period 2008–2017. To estimate the model and analyse the data collected from the DataStream and World Bank databases, the authors use static panel estimation techniques as well as two-step difference and system dynamic GMM estimator.FindingsThe results show that profitability, growth opportunity, tax-shield, liquidity and cash flow volatility have a negative and significant impact on debt measures. However, the effects of collateral, non-debt tax and earnings volatility on measures of debt are positive and significant. In addition, firm size, firm age, inflation rate and interest rate are important determinants of the present value of debt. The results also show a significant inverse U-shaped relationship between the firm's age and its capital structure. In general, the results support the proposition advocated by the pecking order and trade-off theories.Practical implicationsThe results of this study necessitate formulation of various policy measures that can counter the effects of debt on firms.Originality/valueThe present study is among the earliest to use both the book and market value measures of capital structure. It also uses three proxies for each: total debt, long-term debt and short-term debt. It incorporates earning volatility and cash flow volatility as new independent variables in the model. These variables have not previously been used together with both book and market value measures of capital structure. The study also examines the non-monotonic relationship between firm's age and capital structure using a quadratic regression method. It applies both static panel techniques and dynamic GMM estimation techniques to analyse the data.

This study examined that if efficient firms at their mature stage of life cycle may skip dividends. For doing so, this study investigated the direct and indirect impacts of firm efficiency on the dividends. To calculate the firm efficiency, data envelopment analysis (DEA) was used and for analyzing the data, logistic regression models were used. This study uses data of 1010 firm year observations of the firm’s listed Pakistani non-financial firms over the period 2011–2015. Findings of this study indicated that the probability to pay dividends is high in the firms having high level of efficiency. Likewise, probability to pay dividend is high in the mature firms as compared to the growth firms. However, efficient and mature firms may skip the dividends. These findings present an alternative view on the signaling and life cycle theories of dividends in that the mature firms having high efficiency which may not necessarily pay dividends in contradiction to the life cycle theory. Likewise, efficient firms may not necessarily pay dividends to signal their future growth prospects. Therefore, the future research may focus more on the role of firm efficiency while examining the dividend pay-out under the life cycle and signaling theories of dividends. This study is among the first studies to examine the direct impact of firm efficiency on probability to pay dividends by examining the interaction effect of firm efficiency and firm maturity on probability to pay dividends.

Unstable economic conditions have an adverse impact on the financial performance of firms, leading to financial distress, which is an unfavourable situation for investors as it may affect their investment returns. Thus, this study attempted to predict financial distress and to examine the effect of financial distress on stock returns by using firms listed on Bursa Malaysia from 1990 to 2020. This study used the logit model to find the probability of bankruptcy and also as a proxy for financial distress risk in the asset pricing model. From this study, financial distress risk was found to be insignificant in pricing stock returns in all tested models. This finding demonstrates that financial distress risk does not affect stock returns since this risk may be eliminated through diversification.

This study examines the existence of the dynamism of capital structure in Pakistan for the period from 2003 to 2012, with specific objectives of estimating the adjustment speed and determining the factors affecting the adjustment speed towards target capital structure. Using difference Generalized Method of Moments (GMM) as the estimation technique, the study confirms the existence of optimal capital structure for Pakistani non-financial listed firms, and concludes that, depending upon the proxy of target debt used, firms make full adjustment towards optimal capital structure in 1.45 years to 2.25 years. Firms’ size, profitability, stock market development, and GDP are found to be relatively consistent determinants of the adjustment speed across different proxies of debt. This study contributes in the existing literature of the capital structure by providing evidence regarding the existence of target capital structure, estimating the adjustment speed towards target capital structure, and identifies factors affecting adjustment speed towards target capital structure for Pakistan using four different measures of leverage.

This paper identifies factors determining capital structure and estimates the speed at which firms adjust to optimal debt in Malaysian and Indonesian manufacturing firms. It uses the difference Generalized Method of Moments (GMM) estimator and the partial adjustment model in a sample of 141 Malaysian and 96 Indonesian firms, which include many of the major manufacture companies in these economies. The results suggest the existence of dynamic capital structure in both countries, but differences in adjustment speed towards optimal debt and factors affecting the optimal debt levels are evident between these countries. Firm-specific factors such as tangibility of assets, non-debt tax shield, and profitability significantly affect optimal debt in both countries. However, most countryspecific factors are insignificant determinants, GDP in Malaysia being the sole exception. The findings of this study are helpful for corporate managers, policymakers, and regulatory authorities in monitoring the amount of debt used by the firms and their adjustment speed towards target debt to avoid the bankruptcies. Financial reforms can be worked out in these economies to better support the firms in use of optimal debt.

Purpose The purpose of this paper is to investigate and compare the impact of oil and gas prices changes on bank deposits at the aggregate as well as at the level of commercial and Islamic banks in Qatar over the period 2000–2016. Design/methodology/approach Using the BankScope Database as well as bank-level balance sheet and financial statements data, the authors use one-step system GMM dynamic model to examine and compare the association between oil and gas prices changes with bank deposits in Qatar. The authors also test hypotheses of direct and indirect impacts of oil and gas prices changes on bank deposits. Findings The results indicate that oil and gas prices changes have a direct impact on deposits of banks at the aggregate level in Qatar. However, the authors find that oil and gas price changes significantly affect deposits of Qatari commercial banks directly prompting enhanced lending by banks and the consequent business activities in the economy, while their impact on the deposits of Qatari Islamic banks is indirect, i.e. the impact is permeated through the macroeconomic and institutional characteristics of the country that are reinforced by the growing expectations and commercial sentiment of the country. The authors find that significant association between oil price changes and deposit growth during the global financial crisis 2008 has been distorted. However, the authors find that there was a sharp rise in the deposits of Islamic banks during the period of global financial crisis. Practical implications The results of this study necessitate policy measures that can counter the effects of changes in oil and gas prices on the effectiveness of bank deposits. Originality/value It is widely recognized that oil and gas prices and the level of production are of great importance to the economic development of oil and gas exporting countries. So far, however, no econometric study has been reported in the literature which analyses and compares the impact of oil and gas prices changes on bank deposits of commercial and Islamic banks and also at the aggregate level in any of the oil-exporting economies. Thus, this study provides the first empirical evidence on distinct direct and indirect channels through which oil and gas prices changes may affect bank deposits.

In this paper, we analyze the evolution of the banking sector in the six GCC countries including concentration, trends in credit growth, balance sheets, and financial safety as well as oil price over the period 2000-2014. In general, our analysis finds that the level of capitalization of banks in GCC countries appears comfortable despite the adverse effect of the financial crisis. Despite apparent financial soundness, there are certain weaknesses in the banking sector of GCC countries which needs investigation. Firstly, GCC countries have registered sharp growth in of credit in consonance with the steady rise in the price of oil straining the liquidity position of banks. Secondly, some banking systems in GCC countries are highly exposed to households secured by their salaries especially in Bahrain (50 to 60%) and Qatar 70%). Thirdly, although the overall NPLs ratio in the GCC banking sector is at historically low levels, however, it has remained high when compared to the average NPLs ratio of the global banks. Finally, we find that banks in GCC countries seem to keep low levels of liquidity compared to international standards.Keywords: Oil price, Banking sector, Credit growth, Financial statements, Financial soundness, Global Financial Crisis, GCC countriesJEL Classifications: G20, G21, C23, L2DOI: https://doi.org/10.32479/ijeep.7074

Purpose The purpose of this paper is to examine and compare the impact of oil and gas prices shocks on the non-performing loans (NPLs) of banks at the aggregate as well as at the level of commercial and Islamic banks in Qatar over the period 2000-2016. Design/methodology/approach Using the West Texas Intermediate Database, BankScope Database, World Bank’s World Development Indicators Database, and International Monetary Fund Database, the authors use a one-step system generalized method of moments dynamic model to examine and compare the association between oil and gas prices shocks with NPLs in Qatari banks. The authors also test the hypotheses of direct and indirect impacts of oil price shocks and gas price shocks on bank NPLs. Findings The results indicate that oil price shocks and gas price shocks do not have directly affect NPLs of Qatari banks at the aggregate level, while they have indirect effects that are channeled through the country-specific macroeconomic and institutional factors. The authors find that oil and gas prices shocks affect NPLs of Qatari Islamic banks directly through extended oil and gas-related cash flows, while their impact on the NPLs of Qatari commercial banks is indirect. In other words, Islamic banks in Qatar greatly benefits from increased cash flow caused by the rise in the oil and gas prices, which make their NPLs, much lower than that in commercial banks. Better capital cushion, better managerial efficiency, better risk management, and liquidity management systems should be used by the Islamic banks in Qatar to expand their customer base. The authors also find that positive fiscal stance of the government reduces the NPLs in both commercial and Islamic banks. Practical implications The results of this study necessitate policy measures that can counter the effects of changes in oil and gas prices on the growth of bank NPLs. Originality/value It is widely recognized that oil and gas prices and the level of production are of great importance to the economic development of oil and gas-exporting countries. So far, however, no econometric study has been reported in the literature which analyses and compares the impact of oil and gas prices shocks on the NPLs of commercial and Islamic banks and also at the aggregate level in any of the oil economies. Thus, this study provides the first empirical evidence on distinct direct and indirect channels through which oil and gas prices shocks may affect bank NPLs.

The paper examines the impact of oil and gas price shocks on bank performance in the major oil and gas exporting GCC countries, using data for the period 2000–2017. Results indicate that oil and gas price rises have a direct bearing on bank performance through the channel of price-induced bank deposits and related lending to business activities. The negative impact on bank performance due to a drop in oil and gas prices is greater than the positive effect of a rise in prices. Findings suggest that oil and gas price volatility has an asymmetric effect on conventional and Islamic banks. Conventional banks reap more benefit from the increased cash flow created by oil and gas prices, compared to Islamic banks. While Islamic banks are generally vulnerable to adverse oil and gas price shocks, conventional banks tend to benefit more from positive oil and gas price shocks. The association between oil and gas price shocks and bank performance in GCC has been distorted by the global financial crisis, the Arab Spring, and the ongoing Yemen War, which have lowered performance. The findings of the study have significant policy implications for the central banks as well as the governments in the oil and gas-exporting countries.

Predicting financial distress have significant importance in corporate finance as it serves as an effective early warning system for the related stakeholders. The study applies the most admired financial distress prediction O-score model and compares its predictive accuracy with estimated logit model. The study estimates logit model by including the profitability ratios, liquidity ratios, leverage ratios, and cash flow ratios. This study filled the gap by using the cash flow ratios to predict financial distress for Pakistani listed firms. The sample for the estimation model consists of 290 firms with 45 distressed and 245 healthy firms for the period 2006-2016 and covers all sectors of Pakistan Stock Exchange. The study provides important insights on the role of different financial ratio in predicting financial distress and shows that estimated logit model produces higher accuracy rate in predicting financial distress.

This study is intended to identify the predictors of financial distress for the Pakistani firms. Variables used are the financial ratios representing profitability, liquidity, leverage, and cash flows, as well as two important market factors which are size and idiosyncratic standard deviation of each firm’s stock returns (SIG). The sample consists of 290 firms stretching from 2007 to 2016 and logit regression is applied to predict financial distress. The findings reveal that profitability, liquidity, leverage, cash flow ratios, and firm size are significant, while SIG is insignificant in predicting financial distress. Results of the estimated logit model I, model II, and holdout model reveal that the models perform consistently. This study contributes to the literature by testing the market variables in relation to financial distress as these variables were ignored by the previous studies in Pakistan. Findings of this study are precise as the study covers a longer time horizon and a larger sample size.

The aims of this study are to investigate the determinants of credit risk and to examine the impact of earnings management on credit risk prediction. The results showed that the liquidity ratio was significant in determining credit risk before and after earnings management was adjusted. Meanwhile, the productivity ratio was significant in the unadjusted model, while the profitability ratio was significant in the adjusted model. The overall percentage of correct prediction showed that the unadjusted model predicted better than the adjusted model. This study provides knowledge about the effect of earning management on bankruptcy prediction.

This study investigates the role of firm specific factors, macroeconomic factors, and firms’ heterogeneity in determining the debt levels of non-financial listed firms of Pakistan. Study implies static panel data modeling using pooled OLS and fixed effect regression as estimation techniques, with two different proxies of debt. Profitability, tangibility, and size of the firm appear to affect debt level significantly across different proxies and different estimation techniques. Interest rate and inflation are significant determinants of debt in fixed effect estimation. Study also confirms the existence of firm specific influence on debt.

Recent banking reforms in Saudi Arabia fostered the entry of foreign banks to increase competition and improve the financial stability of the Saudi banking sector. There is, however, no comprehensive econometric study which has analysed the profitability of domestic and foreign banks on a standalone and comparative basis. Present paper fills in this gap and assesses the profitability of Saudi banks using the parameters of the CAMEL framework over the period 2000-2014 using pooled OLS and fixed effect model. Our results indicate that domestic banks are more profitable than foreign banks. We also find that both foreign and domestic banks with higher capital are more profitable. Banks with a higher non-performing loan are less profitable: foreign banks carry more credit risk in their portfolio. In contrast to domestic banks, operating expenses to total income for foreign banks is significant but negatively related to profitability, indicating that cost management inefficiency adversely affect the profitability of this group. Our results also indicate that banks with larger size are less profitable. We also find that steep rise in lending activities lead to increase in the profitability of domestic banks but has adversely affected the profitability of foreign banks in the country. The findings of the study have many policy implications.

Islamic banks are playing an important role in the financial sector in various economies, especially in Islamic nations. They provide most of the banking services as are provided by the conventional banks, albeit different in nomenclature and specific characteristics. So far, however, no econometric study has been reported in the literature which analyses and compares the contribution to shareholders’ value by Islamic and conventional banks. This paper uses pooled OLS and random effect model to investigate and compare the contribution to shareholders’ value by the Islamic and conventional banks in Saudi Arabia over the period 2000-2015. Our results indicate that Islamic banks in Saudi Arabia contribute more to the shareholders’ value than conventional banks. We find that higher capital ratio and credit risk lead to a decline in shareholders’ value of the conventional banks but this is not true in the case of the Islamic banks. We also find that higher level of loans decrease the conventional banks' shareholders’ value but increase the same in the case of the Islamic banks. In contrast to Islamic banks, we find that conventional banks with higher liquidity have a lower shareholders’ value. Lastly, our results indicate that in general, shareholders’ value is associated negatively with declines in cost efficiency and bank size. Policy implications and possible strategic interventions have also been discussed.

This paper presents a comprehensive assessment of the impact of competition on bank fragility pre and post financial crisis period in the GCC banking market as measured by bank risk-taking behavior and bank stability during the period 1998–2016. Our results indicate that a higher level of bank competition and the greater degree of concentration adds to financial fragility. The findings further shows that during the 2008 crisis, lower bank competition maintain the stability of GCC banks. We also find that lower level of competition and lower concentration in the banking market increases the risk-taking behavior of the low capitalized, low liquid and small banks which add to fragility in the banking system. Our findings suggest that countries with greater capital stringency, greater supervisory power, greater market discipline, and private monitoring, with explicit deposit insurance schemes, higher shareholder protection, and higher legal efficiency decrease banks’ risk-taking and increase their stability. We also find that greater regulatory restrictions and higher creditor protection decrease banks’ stability and increase risk in concerned countries. We find support for both competition-fragility and competition-stability hypotheses in the GCC banking market. The results also confirm that the use of a single measure of competition is insufficient to assess the role of competition in banking stability.

Caught in financial distress has never been an objective of any company. Nevertheless, many companies collapsed due to controllable and uncontrollable factors. There is inconclusive evidence as to whether changes in ownership attributes improve firms' performance and therefore could reduce the likelihood of firms going through financial distress. This study attempts to understand whether type of ownership have significant relationship with companies that experienced financial distress. This study is useful to directors who can evaluate the existence of these factors in their companies and to authorities who can use this study to measure the effectiveness of government linked institutional investors in preventing distress. 

The main objective of the paper is to find out whether bankruptcy risk is a systematic risk. In particular, we investigate the contribution of size, bookto-market, excess market returns and bankruptcy probability in explaining returns. We allocate stocks into portfolios according to the probability of bankruptcy from the hazard model. Results show that bankruptcy risk is not a systematic risk. The results consistently show that excess market returns and size have strong power to explain returns in the UK for the period from 1988 to 1997. Book-to-market and bankruptcy risk only matt er in portfolios with higher probability of bankruptcy. Keyword: Bankruptcy risk, bankruptcy probability, hazard model. JEL Classification: G12, G33