INCEIF Knowledge Repository (INCEIF University)
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Prospects and challenges of developing sukuk Islamic debt markets around the world
No full textThe sukuk securities or Islamic asset-backed debt securities truly started to be offered in organized markets as publicly listed instruments only in 2000, so at the time of writing it is a 12-year-old market. There is a record of its first private issue in 1978 in Saudi Arabia, after an article in Islamic Economic Studies some years earlier had suggested this instrument to be a suitable and safe debt instrument with safeguards for investors and being consistent with ethics long since forgotten in issuing debt instruments in past Islamic empires. It has since been widely accepted as an Islamic financial product for debt-raising with one important principle, namely asset ownership of part of the assets of a borrower which gives this instrument asset backing, a unique feature in debt markets. Historical reference to sukuk is found in the records of the Abbasid Empire established in circa 900 soon after Islam spread to the Byzantine region in what is known today as Jordan, Iraq, Palestine and Syria
Financial integration and international capital mobility: evidence from ASEAN
No full textThis study was conducted to explore the linkages between savings and investment and to further test whether there is any evidence of relationship between financial integration and international capital mobility. The empirical model to test the capital mobility hypothesis applied here employs the panel data approach to the basic regression model used by Feldstein & Horioka (1980). The study covers ASEAN5 and ASEAN+3 (with China, Korea and Japan included). The findings of this study corroborate with other studies that savings and investment are cointegrated and this can be interpreted as a manifestation of the inter-temporal budget constraint rather than evidence of low capital mobility. The long-run equilibrium between savings and investment is in line with the inter-temporal budget constraints of an open economy as current account deficits cannot be sustained indefinitely. The relatively high degree of capital mobility when China, Korea and Japan are included in the ASEAN5 sample suggests that there is great potential for integration in the financial markets in these eight economies in the futur
Political patronage and firm performance: further evidence from Malaysia
No full textThis paper investigates the characteristics, performance, and share price reaction of politically connected firms versus a control sample of independent firms in Malaysia. Politically connected firms had higher level of leverage, lower profitability, and lower sales to profitability, and paid lower taxes and lower dividends compared to independent firms. Their share prices increase with the announcement of favorable political events. In terms of performance, the active rent-seeking activities in return for preferential treatment produce comparable performance to independent firms during an economic upturn. However, their performance deteriorates more than independent firms during an economic downturn. The percentage of ownership of government institutions in politically connected firms is also much lower, and these firms use more Tier 1 auditors than the independent firms. Overall, the findings are consistent with expectations and evidence from similar studies in developed and developing economie
Effect of corporate governance on firms' credit ratings: the role of board of directors
No full textMalaysia experienced rapid economic growth at an average annual Gross Domestic Product (GDP) growth of 8.5% during the 1990s due to its financial liberalization policy. This rapid growth came to a halt after the impact of the Asian financial crisis occurred on 1997-1998 causing the economy into recession. This prompted the Malaysian government to urgently develop a sophisticated capital market backed by an efficient regulatory framework to instil investors' confidence in order to attract capital inflow from the local and foreign investors to restart the economy
Survival of the interest rate based debt financing system
No full textEvidence has been mounting (over the centuries) that the interest based debt financing regime is under ever increasing distress. All of the earlier crises whatever label they carried? exchange rate crisis or banking crisis have been debt crises in essence. At the present, empirical research suggests that the debt-to-GDP ratio of the richest members of the G-20 threatens to touch 120% mark by 2014 while by 2020 the U.S and the other major European centers would amass a ratio of at least 150%, with Japan and U.K going to 300% and 200% respectively. Even more disconcerting is the projected interest rate paths on their debts which would increase from now almost 5% to 10% in all cases, and as high as 27% in U.K. Moreover there is also evidence that out of securities worth $200 trillion in the global economy, no less than three-fourth represent interest based debt. It is difficult to see how this massive debt volume can be validated by the underlying productive capacity of the global economy. This picture becomes more alarming when it is realized that the growth of the global economy is anaemic at best while the interest rate on debt is sure to exceed the rate of growth of global GDP for the foreseeable future. Hence, a more serious financial crisis may be in the offing and a general collapse of asset prices may occur. This paper argues that the survival of the interest based debt regime is becoming less tenable, as is the process of financialization that has accompanied the growth of global finance over the last four decades. It further argues that Islamic finance, with its core characteristic of risk sharing, may well be a viable alternative to the present interest based debt financing regime
A small island aspires to introduce sukuk
No full textThe Maldives has embarked on the huge task of developing Islamic finance parallel to its existing conventional finance market. After establishing its very first Islamic bank in March 2011, the country also witnessed the issuance of its first Islamic equity in 2011. The first company in Maldives that was listed as a company issuing Shariah compliant equity was Amana Takaful Maldives. The country is subsequently moving towards the development of a sukuk market
Emerging entrepreneurship development: challenges & opportunities fo Malaysian SMEs
No full textIn the last few years, SMEs have witnessed a marked improvement in their performance. Real Gross Domestic Product (GDP) of SMEs has consistently outperformed that of the overall economy, expanding at an average annual growth rate of 6.8% versus 4.9% for the overall economic growth in the period 2004 - 2010
International evidence on understanding the determinants of crime
No full textThis study was conducted to investigate the relationship between crime and economic variables such as income, unemployment, inflation, interest rate, and also the political violence, both domestic and regional. The main motivation of the study was to have a better understanding of crime, finding and suggesting alternative way of approaching crime. We analyzed 21 countries, with data spanning from 1960 to 2001. We started our study on this objective by adapting model and framework that was introduced by Viren (2001) based on Becker (1968), Block and Heineke (1975) and we made slight modification by rephrasing it in order to not only capture the long run relationship but also the short run adjustment. We employed panel-error-correction based cointegration (Persyn and Westerlund (2008)) to analyze and estimate the model. A number of important findings were extracted from the analysis in accordance to the objectives of this study. Firstly, it determines the negative long run relationship between income and crime, positive long run relationship between inflation and crime, unemployment and crime as well as lending rate and crime. As for the political violence variable, domestic political violence seems to be negatively related; on the contrary regional political violence is positively related. We believe this be attributed to the spillover effect. All the signs are as anticipated and justified in this study and are concurrent with most of the past literatures
Comment on “Korea’s growth performance: past and future”
No full textKorea’s growth track record is truly extraordinary by any measure. It is not easy to explore Korea’s astounding development trajectory amidst the many obstacles that stood in its way or to gaze into the crystal ball for a glimpse of its future, given the numerous challenges and uncertainties that stare in its face. Noland (2012) has skilfully carried out this task. His excellent analysis bears testimony to his deep understanding of Korea’s history, psyche, and growth strategy