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Fractional differencing in stock market price and online presence of global tourist corporations
Get PDFPurpose. This work aims to explore the behavior of stock market prices according to the autoregressive fractional differencing integrated moving average model. This behavior will be compared with a measure of online presence, search engine results as measured by Google Trends.
Design/methodology/approach. The study sample is comprised by the companies listed at the STOXX® Global 3000 Travel and Leisure. Google Finance and Yahoo Finance, along with Google Trends, were used, respectively, to obtain the data of stock prices and search results, for a period of five years (October 2012 to October 2017). To guarantee certain comparability between the two data sets, weekly observations were collected, with a total figure of 118 firms, two time series each (price and search results), around 61,000 observations.
Findings. Relationships between the two data sets are explored, with theoretical implications for the fields of economics, finance and management. Tourist corporations were analyzed owing to their growing economic impact. The estimations are initially consistent with long memory; so, they suggest that both stock market prices and online search trends deserve further exploration for modeling and forecasting. Significant differences owing to country and sector effects are also shown.
Originality/value. This research contributes in two different ways: it demonstrate the potential of a new tool for the analysis of relevant time series to monitor the behavior of firms and markets, and it suggests several theoretical pathways for further research in the specific topics of asymmetry of information and corporate transparency, proposing pertinent bridges between the two fields.
Doi: https://doi.org/10.1108/JEFAS-01-2018-001
An alternative formula for the constant growth model
Get PDFPurpose. The traditional one-stage constant growth formula has two main underlying assumptions: a company will be able to maintain its competitive advantage for completed investments in perpetuity, and each year in the future, it will be able to generate new investment opportunities with the same competitive advantage, which will also remain in perpetuity. The purpose of this paper is to develop a model that limits the duration of the competitive advantage.
Design/methodology/approach. A new model is developed, and it is used to value a public company.
Findings. In this study, the author introduces an alternative formula considering the duration of the competitive advantage, imposing a restriction on the fact that extraordinary returns cannot be sustained forever, and also separates the part of the value explained by the current investments from the portion of value created by future investments.
Originality/value. The traditional one-stage constant growth model used to determine the continuing value of a company has limitations regarding the duration of the competitive advantage. The developed formula corrects the problem limiting the time extraordinary returns will remain over time.
Doi: https://doi.org/10.1108/JEFAS-07-2018-006
The determinants of conventional banks profitability in developing and underdeveloped OIC countries
Get PDFPurpose. The purpose of this study is to investigate the effect of internal and external variables on the profitability of conventional banks operating on developing and underdeveloped countries, the Organization of Islamic Cooperation (OIC) states.
Design/methodology/approach. In this paper, the author uses ordinary least squares fixed-effects model on an unbalanced panel data set of all conventional banks operating in OIC countries (52 countries included from 57) over the period 1989-2008, 686 banks.
Findings. The results suggest that equity, foreign ownership, off-balance sheet (OBS) activities, real gross domestic product growth, real interest rate and concentration foster banks’ profitability. In addition, the results showed that the banking sector development and loans will increase banks’ profitability in the long run in the countries of the studies. In contrast, the study reported that deposits lower profitability. The study also revealed that GDP per capita, market capitalization and banks size have no impact on profitability.
Practical implications: The findings of this study have considerable policy implications. First, policymakers need to regulate nontraditional activities to avoid any financial crisis because banks in OIC countries are heavily engaged in nontraditional activities to boost its profit. Second, policymakers are advised to improve the deposit insurance system to insure the stability of the financial system as well as improving banks’ profitability. Third, policymakers need to improve the efficiency of the stock market, maintain small banking system and encourage foreign investments in the banking system.
Originality/value: The paper adds to the literature on the commercial bank’s profitability determinants. In particular, such study has not been conducted on OIC countries, and the study included all mainstream banks and incorporated the effect of deposit insurance system so far. Also, pure sample of conventional banks used as many conventional banks in OIC countries have Islamic windows or offer Islamic products. In addition, this study investigated the effect of OBS activities on net interest margin (NIM) because the studies that explored this interrelationship are limited especially for developing and under developed countries. The results showed that OBS activities contributed significantly and positively to return on assets and NIM. Moreover, this paper used a pure sample of conventional banks to avoid any biasness; see data section. Moreover, this study gives an idea about the economic situation and financial conditions of OIC countries during the period of the study.
Doi: https://doi.org/10.1108/JEFAS-05-2018-004
Does IFRS convergence really increase accounting qualities? Emerging market evidence
Get PDFPurpose. This study aims to examine whether International Financial Reporting Standards (IFRS) convergence process adds value to the accounting quality dimensions, including accruals quality, earnings smoothing, timely loss recognition and earnings persistence.
Design/methodology/approach. It analyzes the hypothesis of accounting quality changes in postIFRS convergence by using the univariate and multivariate statistics. Particularly, the authors rely on panel data analyses using industrial companies’ data from 2008 until 2014, comprising 3,861 firm-years observations, in Indonesia.
Findings. The results indicate that there is no conclusive evidence that all accounting quality dimensions including accruals quality, earnings smoothing, timely loss recognition and earnings persistence increased in post-IFRS convergence.
Practical implications. The findings of this study may help regulators and standard setters to consider future adoption of IFRS, mostly to figure out the best “formula” to increase the usefulness of accounting information in post-IFRS convergence.
Originality/value. Rather than doing piecemeal work, the current study focuses on IFRS convergence on a broader aspect of accounting quality dimensions. It also focuses on the convergence process of IFRS as an alternative of full adoption, which has been the focus of many research studies.
Doi: https://doi.org/10.1108/JEFAS-10-2018-009
Internet financial reporting adoption Exploring the influence of board role performance and isomorphic forces
Get PDFPurpose. This study aims to examine the contribution of board role performance and isomorphic forces on internet financial reporting.
Design/methodology/approach. This study is cross-sectional and correlational. Data were collected through a questionnaire survey of 40 financial services firms. The study’s unit of analysis was a firm. Chief Internal Auditors and Chief Finance Officers were the study’s unit of inquiry. Data were analyzed through correlation coefficients and linear regression using Statistical Package for Social Sciences.
Findings. The results suggest that board role performance and isomorphic forces are significant predictors of internet financial reporting. However, board role performance is not a significant predictor of internet financial reporting in the presence of isomorphic forces. The control and strategic roles of the board are positively and significantly associated with internet financial reporting unlike the service role. Only the coercive isomorphism is positively and significantly associated with internet financial reporting unlike the normative and mimetic isomorphism.
Originality/value. This study provides initial empirical evidence on the contribution of board role performance and isomorphic forces on internet financial reporting using evidence from Uganda’s financial service firms. To the researcher’s knowledge, this is the first perception-based study on internet financial reporting.
Doi: https://doi.org/10.1108/JEFAS-11-2018-012
Should banks be averse to elections? A GMM analysis of recent elections in Ghana
Get PDFPurpose. Actions of incumbent politicians and firms’ managers during election years have been cited as sources of many problems that afflict economies and business entities. Given the controversies surrounding the impact of elections on firms’ soundness, this paper poses a question of whether banks should be averse to elections. Specifically, this study aims to investigate the impact of elections on the profitability and efficiency of banks.
Design/methodology/approach. Based on the authors’ knowledge, this is maiden analysis in this context for Ghana where relatively advanced appropriate GMM technique has been used on annual data from 2012 to 2016.
Findings. This study reveals that banks make higher returns in election years. Additionally, the authors report that government’s economic policies in election years are detrimental to management efficiency, though insignificant.
Practical implications. From an emerging economy perspective, this study would guide policymakers in designing policies that respond to, or minimize, the impact of elections on bank performance. The result of this analysis would also substantiate the market reaction to the changes in the economic, political and financial conditions.
Originality/value. This analysis suggests that firms’ performances in an election year depend on policies and political institutions in place. The authors argue that Ghana, with its exemplary democratic credentials and strong institutions, living alongside a high perception of corruption, is different. The contribution to literature is, first, by limiting this work to the banking sector of Ghana and, second, by incorporating the behaviors of incumbent governments and individuals in the regression specification model.
Doi: https://doi.org/10.1108/JEFAS-03-2018-002
Financial performance trends of United States Hockey Inc: a resource-dependency approach
Get PDFPurpose. The purpose of this paper is to examine the 2009 to 2016 financial performance of the US Hockey Inc., using financial effectiveness indicators and financial efficiency ratios.
Design/methodology/approach. With the assistance of financial trend analysis, archival data were used to examine the financial performance (evaluated by net income), financial effectiveness (indicated by total assets and total revenues) and financial efficiency (examined by programme services ratios and return on assets) of US Hockey Inc.
Findings. On average, the financial performance of the organization was positive ($30,895 net income per year). Financial effectiveness was steady with increases in assets and revenues. Financial efficiency was poor with 79% of revenues spent on programme services and 1.45% average return on asset.
Research limitations/implications. The results can be generalized to similar national non-profit sports federations but not corporate sports entities with dissimilar financial goals.
Practical implications. The results revealed that national non-profit sports federations can boost their financial performance by maintaining a double strategically focus on both financial effectiveness and financial efficiency.
Originality/value. The study used both financial effectiveness and financial efficiency measures to evaluate the financial performances of a national non-profit sports federation – a neglected approach similar studies.
Doi: https://doi.org/10.1108/JEFAS-02-2018-002
Editorial
Get PDFWe would like to present the 47th issue of the Journal of Economics, Finance and Administrative Science, the first issue of 2019. Our journal is now receiving the best rating of citations according to the Scielo database, which locates it in the 88th percentile. According to new requirements for journals indexed in prestigious databases, we have increased the number of papers starting in this issue.
The first article, entitled “The determinants of conventional banks profitability in developing and underdeveloped OIC countries” investigates the effect of internal and external variables on the profitability of conventional banks operating on developing and underdeveloped countries, the Organization of Islamic Cooperation (OIC) states.
Doi: https://doi.org/10.1108/JEFAS-06-2019-12
Impact of information and communication technology in Nigerian small-to medium-sized enterprises
Get PDFPurpose. The purpose of this (qualitative, multiple-case) study is to determine how small-to medium-sized enterprise (SME) leaders in Nigeria use information and communication technology (ICT) adoption as a business strategy to increase profitability and compete globally.
Design/methodology/approach. The participants for this study consisted of executive-level SME leaders who had the authority to approve ICT implementation within their respective organizations. Individual interviews were undertaken with participants to gain an understanding of their experience of determining the merits of and implementing ICT. The technology acceptance model, which specifies the relationship between perceived usefulness, perceived ease of use, attitude toward computer use and intention to use technology, was applied as a framework to explain the Nigerian SME’s ICT adoption strategies.
Findings. Four major themes emerged from the data analysis: ICT adoption factors, ICT roles and benefits, role of government and SME success factors. The findings of this study may help SME leaders and government leaders address many of the factors inhibiting the adoption of ICT in SMEs in Nigeria.
Practical implications. This study may ensure that SMEs are successful and able to create jobs, which in turn may help to promote socioeconomic development through adoption of ICT.
Originality/value. The findings from this study contribute to the knowledge base regarding factors that affect ICT adoption by SME leaders as a business strategy to increase profitability and compete globally, particularly within SMEs in Lagos, Nigeria. It further addressed the gap in existing literature regarding other factors such as the influence of culture on ICT adoption, cost of ICT implementation, available ICT skills, infrastructure and ICT knowledge gap as the primary impeding factors of ICT adoption in Nigerian SMEs.
Doi: https://doi.org/10.1108/JEFAS-08-2018-008
Analysing the impact of a business intelligence system and new conceptualizations of system use
Get PDFPurpose. In this study, three models were empirically compared, the DeLone and McLean model, the Seddon model and the Modified Seddon model, by measuring the impact of a business intelligence system (BIS) in companies in Peru. After that, the mediators and dependent constructs were analysed to determine if they were behaving properly (a good level of variance explanation and significant relations with others constructs). The study used a sample of 104 users of the BIS, from companies in several important economic sectors, in a quasi-voluntary context and with six constructs: information quality, system quality, service quality, system dependence (system use), user satisfaction and perceived usefulness (individual impact).
Design/methodology/approach. To interpret the results, the authors used structural equations. The idea was to look for the best fit and explanations for the outcomes. The main difference in these models is that the DeLone and McLean model considers system dependence (system use) as a part of information system success, but in the Seddon model, it is a consequence of it.
Findings. The Seddon model seems to show the best fit and explanation for the outcomes. After that, a review of the system use construct was realised, because of its limited variance explained and the few significant relations with other constructs, to improve its explanation power in future research. Research limitations/implications – It is estimated that the sample includes more than 15 per cent of all the companies that use a BISs in Peru, so the size of the sample is adequate, but it is not entirely random and therefore limits the generalizability of outcomes. Besides that, a sample size that is bigger could be better for the sake of making a more detailed analysis, permitting the use of some items with less power, or the use of another statistical procedure for structural equations such as the Asymptotical Distribution Free, permitting a more detailed analysis (Hair et al., 2006).
Originality/value. Business intelligence (BI), one of the most important components of information systems (IS), is playing a very relevant role in business in this time of high competition, high amounts of data and new technology. Currently, companies feel pressured to respond quickly to change and complicated conditions in the market, needing to make the correct tactical, operational and strategic decisions (Chugh and Grandhi, 2013). BI is one of the most important drivers of the decade (Gartner, 2013). Big companies of IS are creating special units specialised in BI, helping companies become more efficient and effective in daily operations.
Doi: https://doi.org/10.1108/JEFAS-05-2018-005