International Journal of Economics, Management and Accounting
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MONETARY POLICY TRANSMISSION MECHANISM UNDER DUAL FINANCIAL SYSTEM IN INDONESIA: INTEREST-PROFIT CHANNEL
Get PDFThis study aims to identify and determine conventional and Islamic monetary policies transmission mechanisms through interest or profit channel, in transmitting the monetary policy into real economy and prices, using Error Correction Model (ECM), Auto Regressive Distributive Lag (ARDL), and Vector Error Correction Model (VECM). Impulse Response Function (IRF) and Forecast Error Variance Decomposition (FEVD) results suggest that conventional interest based financial system tends to increase inflation and decrease economic growth, while Islamic interest-free financial system tends not to induce inflation and not to hinder economic growth. Estimation results of ECM, ARDL and VECM show that under dual financial system, the increase of SBI tends to increase inflation and tends to decrease economic growth, while the increase of SBIS gives insignificant impact to inflation and economic growth. SBIS mostly still gives unsatisfactorily results since it is based on juÑÉlah and benchmarked to SBI. So that SBIS should be improved using PLS mode of finance. Moreover, the adoption of ITF since July 2005 has consistently increased inflation, so that it needs to be reconsidered. In addition, low and stable inflation and accelerated economic growth under dual financial system could be achieved by increasing the share of Islamic finance, especially Islamic banking in Indonesian dual financial system. The study of monetary policy transmission mechanism under dual financial system is very scarce, so that this study will provide valuable information to monetary authority which implements dual financial system, such as Malaysia, Pakistan, Indonesia and most other OIC countries
THE IMPACT OF NEW REGULATIONS ON EARNINGS QUALITY AMONG MALAYSIAN FIRMS
Get PDFThe main purpose of this study is to examine the impact of the establishment of the Audit Oversight Board (AOB) on audit effort and the effect of the introduction of provisions 317A and 320A of the Capital Markets and Services Act (CMSA) and earnings management. Specifically, it is argued that the monitoring role of the AOB leads to auditors being more rigorous in conducting audits so as to achieve high compliance with auditing standards. Thus, auditors have to put in more effort, which requires them to increase audit fees to compensate the increase in hours spent on an engagement. This study hypothesizes that an increase in audit effort should mitigate earnings management due to consequent higher detection of earnings management. As for Sections 317A and 320A of the CMSA, the objective is to ensure the independent directors are more effective in discharging their monitoring roles. It is also hypothesized that the level of earnings management should be reduced as a result of the more effective monitoring by independent boards of directors and audit committees. The data sample comprises 2,124 observations collected from the annual reports of 708 firms for three years from 2009–2011, which covers the periods before and after the establishment of the AOB. The results indicate that there is an increase in audit effort from pre- to post-AOB. This suggests that the monitoring role of the AOB makes auditors more proper in carrying out the audit process and in collating supporting documentation. The regression analyses reveal the role of board independence in reducing earnings management after the new regime was enforced. This study contributes to the corporate governance literature by examining the effect on financial reporting quality after the changes in rules and legislation, especially in respect of the audit regulatory system with the establishment of the AOB and the issuance of Sections 317A and 320A of the CMSA
SUSTAINABLE ISLAMIC BANKING: A CONCEPTUAL FRAMEWORK FOR NON-INTEREST BANKS IN NIGERIA
Get PDFThis research proposes the use of structure, functions, capacities, Islamic moral economic mode, banking business and accountability as consolidated framework for Islamic banking sustainability in Nigeria. The study introduces the framework and assesses its suitability in Nigeria using content analysis of thematic coding units. Qualitative analyses of the six documents were carried out in the research, out of which five of them were issued by the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) drafted the remainder document. The paperalso uses exhortations from the noble QurÒÉn and HadÊth on good practice of morality, justice and equity relating to business and monetary issues. The findings reveal that all themes had met the criterion of acceptability and supported the framework applicability and suitability in Nigeria. It is suggested for the existing Islamic bank (Jaiz) to adopt this proposed framework for its sustenance in the system. Finally, the paper recommends for method and data triangulation in further research
ANALYSIS OF THE CONCEPT OF ISLAMIC CHOICE (IKHTIYAR) ON OPPORTUNITY COST AND TIME VALUE OF MONEY IN ISLAMIC ECONOMICS AND FINANCE
Get PDFThe paper discusses the concept of Islamic choices (ikhtiyar) and its implication on the opportunity cost’s concept. In choosing between good and bad, there is no opportunity cost involved as the good is the only choice. Opportunity concept only applies when the choice is between two or more good choices. To forgo investments in interest bearing deposits is not an opportunity cost. However, to forgo getting a fixed salary in an employment (ijarah) contract while choosing to work as mudarib has an opportunity cost. This concept of ikhtiyÉr also has an impact on the conception of time value of money as it is derived from the concept of opportunity cost. Compensation for time value of money in loan or receivable is not permitted, while that for credit sale is permissible. Time alone cannot be the basis for compensation and counter-value . It must be attached to other factors, such as guarantee, effort, and risk. Without meeting these requirements in credit sale, the sale such as murÉbaÃah would become an invalid  sale, which must not be chosen by Islamic banks
Comments on Muhammad Akram Khan's "Commodity Exchange and Stock Exchange in an Islamic Economu"
No full textComments on Muhammad Akram Khan's "Commodity Exchange and Stock Exchange in an Islamic Economu
The Economic Implication of Crime: A Case Study on The Malaysian Public Expenditures on The Criminal-Justice System
No full textThe Economic Implication of Crime: A Case Study on The Malaysian Public Expenditures on The Criminal-Justice Syste
THE IMPORTANCE OF SOCIAL ACCOUNTING INFORMATION RELATIVE TO FINANCIAL ACCOUNTING INFORMATION IN INVESTMENT DECISION-MAKING
No full textABSTRACTThis study empirically tests the use and importance of social accounting information, relative to financial accounting information in investment decision-making within the British Water industry. The study involves an experiment which utilises a computerised investment decision task followed by a questionnaire. Results show that though investors use some social information in their decision-making, they consider financial information to be more important. The study is unique as it uses information board methodology - a tool more commonly found in psychology.JEL Classification: C920, M140, M41
THE EFFECTS OF OPEN MARKET INTEREST RATES ON MALAYSIAN COMMERCIAL BANKS' INTEREST RATE SPREAD: AN EMPIRICAL ANALYSIS
Get PDFIn this paper we investigate the effect of changes in open market interest rates on the interest rate spread of Malaysian commercial banks. This is performed by examining the causality and patterns of reactions of banking rates with respect to variation in open market rates. Based on vector autoregression analysis we show that there is one-way causation running from the open market rates to banking rates. Changes in open market rates significantly cause changes in the spread and deposit rates. However, no significant causation is identified for lending rates. The impulse response functions indicate that spread declines following positive innovation in open market rates and this is mainly due to the greater sensitivity of deposit rates to open market rates. The response of lending rates is shown to be low and to occur with some lag, thus, contributing to the decline in spread. We also provide evidence of a dichotomy between banks' asset and liability rates by failing to support causality between the two rates. It is argued that this imbalance of sensitivity is partly due to the uneven process of interest rate liberalization that frees deposit rates more than lending rates. These results suggest that for the Malaysian banking firms, increase in open market rates hindered their activities and could affect bank performance. The findings are consistent with the role of banks as brokers as well as asset transformers.JEL classification: E44, G10, G21Key words: Interest rate spread, Bank profitability, Vector autoregressio