THE EFFECT OF CREDIT RATING, DISCRETIONARY ACCRUAL, AND FINANCIAL DISTRESS ON CREDIT FACILITIES IN MANUFACTURING COMPANIES IN INDONESIA

This study aims to analyze the effect of credit rating, discretionary accrual, and financial distress on credit facilities, namely the rate spread, credit collateral, and maturity date extended by banks. This study uses static panel equations and panel data, consisting of 50 manufacturing companies in Indonesia from 2010 to 2017. The research methods used are the Pooled Least Square (PLS), Fixed Effect Model (FEM), Random Effect Model (REM), and logit panels. This study concludes that earnings management has a negative and insignificant impact on the rate spread and maturity date but positively and significantly affects the collateral variable. Financial distress has a positive and insignificant effect on the rate spread and maturity date but negatively impacts the collateral variable. The company's investment rating has a negative and insignificant impact on the three dependent variables, namely, rate spread, collateral, and maturity date.Keywords: credit rating, discretionary accrual, financial distress, credit facilitiesJEL Classification: C23, G21, G24

Optimal Selling Strategies under Regime-Switching Market Environment with Finite Expiry

This paper addresses an optimal stock liquidation problem over a finite-time horizon; to that end, we model it as an optimal stopping problem in a regime-switching market. The optimal stopping time is written as a solution to a system of Volterra type integral equations. Moreover, it reveals that when the risk-free interest rate is always lower than the return rate of the stock, it is never optimal to sell the stock early; otherwise, one should sell the stock in bear market if the stock price reaches a critical value and hold the stock in bull market until the maturity date. Finally, we present a trinomial tree method for numerical implementation. The numerical results are consistent with the theoretical findings.

The role of financial factors and non-financial factors on corporate bond and sukuk rating Indonesia

Purpose This study aims to analyze the determinants of ratings of corporate bonds and sukuk issued by firms listed on the Indonesia Stock Exchange (IDX) for the 2013–2019 period. Design/methodology/approach This study uses a quantitative approach by testing hypotheses and using logistic regression. Ordinal logistic endogenous (or dependent) variables (Y) in ordinal logistics use data in the form of levels (ordinal scale). Independent (or exogenous) variables (X), include financial and non-financial factors for dependent (or endogenous) variables (Y), namely, of corporate bonds and sukuk ratings. There are two approaches to the study they are Logit and Gompit (Negative Log-Log. The population of the study is Indonesian companies listed on the IDX that issued bonds and sukuk for the 2013–2019 periods. The sampling technique is purposive. In total, 16 corporate companies adhering to the above criteria and issuing bonds and sukuk were chosen. In total, 270 types of bonds and 280 types of sukuk were selected as samples. Findings The results of the Logit and Gompit regression show that leverage ratio, firm size, security structure and maturity date are important determinants of corporate bond ratings while profitability and liquidity ratios appear to have no influence on the rating. In the case of sukuk, profitability, liquidity and maturity date play important roles in influencing the corporate sukuk rating. However, there is no evidence to suggest that leverage ratio, company size and security structure may affect sukuk ratings. Research limitations/implications For both sukuk and bond issuers, it is necessary to pay attention to the factors that may affect the ratings. Specifically, Sukuk issuers need to pay attention to the return of asset, current ratio, growth and structure. On the other hand, bond issuers need to consider depth to equity, structure and maturity. As for investors, the findings of this study reveal that both bond and sukuk ratings reflect their performance. Practical implications This study provides useful information for investors that allows them to assess the risk of sukuk or bonds chosen based on rating and financial performance. Originality/value The novelty of this study lies in its econometric methodology used to identify factors which influence sukuk and bond ratings. Specifically, this study used two different techniques that allow a robust conclusion to be drawn. Furthermore, this study provides a systematic analysis which allows comparison between factors which affect bond and sukuk ratings in Indonesia.

Optimal timing of investments modeled as perpetual american options in a lévy market

Using a real option approach, this paper models an arbitrary real life investment, which typically has a long maturity date, as a perpetual American call option in a Levy market. Expressions for the moments, characteristic function and infinitesimal generator of the associated jump-diffusion Levy process, defined by two independent compound Poisson processes and two correlated standard Brownian motions, are derived and these fundamental results are employed to determine the optimal time for investment. An application of the results to a Build Operate and Transfer investment is furnished.

Valuasi One Period Coupon Bond dengan Aset Mengikuti Model Geometric Brownian Motion with Jump Diffusion

<p>One period coupon bond gives coupon once a bond life together with the principal debt. If the firm’s asset value on maturity date is insufficient to meet the debtholder’s claim, then the firm is stated as default. The well-known model for predicting default probability is KMV-Merton model. Under this model, it is assumed that the return on the firm’s assets is distributed normally and their behaviour can be described with the Geometric Brownian Motion (GBM) formula. In practice, most of the financial data tend to have heavy-tailed distribution. It indicates that the data contain some extreme values. GBM with Jump is a popular model to capture the extreme values. In this paper, we evaluate a corporate bond which has some extreme condition in their asset value and predicts the default probability in the maturity date. Empirical studies were carried out on bond that is issued by CIMB Niaga Bank that has a payment due in November 2020. The result shows that modelling the asset value is more appropriate by using GBM with Jump rather than GBM modelling. Estimation to CIMB Niaga Bank equity in November 2020 is IDR 246,533,573,844,229.00. The liability of this company is IDR 4,205,751,155,771.00. The prediction of CIMB Niaga Bank default probability is 1.065812 ´ 10^-8 at the bond maturity. It indicates that the company is considered capable of fulfilling the obligations at the maturity date.</p><p><strong>Keywords: </strong>jump diffusion, extreme value, probability default, equity, liability</p>

Does the Nature of Index and Liquidity Influence the Mispricing in Future Contracts in India?

In this study, we investigate the variations in the mispricing of futures in Nifty (benchmark index), Bank Nifty and Nifty IT. Using a regression model on 1230 observations for the period of 1 January 2014 to 31 December 2018, we find no significant mispricing exists in the last week to the expiry of the contract in all three indices. This finding supports the existing literature that as the contract moves towards the maturity date, its value converges the market value. However, the main highlight of the paper is to reveal the difference in the life of mispricing in different indices. This difference in mispricing can be allocated to the liquidity in that indices. We report that being the most liquid, Bank Nifty is having mispricing only in 1 week (first week) of the contract, after that no significant mispricing exists in mispricing, Nifty shows significant mispricing for the first two weeks and Nifty IT shows mispricing for all weeks except last week. This is the pioneering work which considers the sectoral differences while evaluating futures mispricing. The findings of this study will provide a useful insight to the regulator and investors.

High-Throughput Phenotyping of Soybean Maturity Using Time Series UAV Imagery and Convolutional Neural Networks

Soybean maturity is a trait of critical importance for the development of new soybean cultivars, nevertheless, its characterization based on visual ratings has many challenges. Unmanned aerial vehicles (UAVs) imagery-based high-throughput phenotyping methodologies have been proposed as an alternative to the traditional visual ratings of pod senescence. However, the lack of scalable and accurate methods to extract the desired information from the images remains a significant bottleneck in breeding programs. The objective of this study was to develop an image-based high-throughput phenotyping system for evaluating soybean maturity in breeding programs. Images were acquired twice a week, starting when the earlier lines began maturation until the latest ones were mature. Two complementary convolutional neural networks (CNN) were developed to predict the maturity date. The first using a single date and the second using the five best image dates identified by the first model. The proposed CNN architecture was validated using more than 15,000 ground truth observations from five trials, including data from three growing seasons and two countries. The trained model showed good generalization capability with a root mean squared error lower than two days in four out of five trials. Four methods of estimating prediction uncertainty showed potential at identifying different sources of errors in the maturity date predictions. The architecture developed solves limitations of previous research and can be used at scale in commercial breeding programs.

Collecting Fees for Safekeeping of Collateral: Rules and Applications in the Contemporary Islamic Financial Institutions

The study aims to examine the Shari’ah legality of whether pledgor or pledgee should take care of collateral (marhun) during the period of the loan. Moreover, the study seeks to provide possible applications for the pledge (rahn) and clarify Shari’ah rules for each application. Malaysian Islamic banks apply pledge products by offering loans (qardh hasan) to the customers and requesting gold assets as collateral against a loan. The banks charge safekeeping fees to keep the gold until the maturity date of the loan. This practice combines loan and sale contracts in a single transaction. Accordingly, the study seeks to evaluate this practice from an Islamic point of view. Islamic law categorizes loans under charity contracts while the sale is categorized under contracts of exchange (mu’awadhat). The nature of the two contracts is different. Therefore, the study examines categories that combine loans and contracts of exchange in one transaction. The results reveal that it is not permissible for the pledgee to charge fees higher than market fees for the keeping of collateral. Charging fees that are higher than the market price is considered riba. According to Shari’ah rules, any kind of benefit derived from a loan is riba and thus it is prohibited. However, charging fees that are comparable to the market price and cover the actual cost for safekeeping of collateral is permissible. According to Islamic Fiqh Academy resolutions and AAOIFI standards, Islamic banks may charge fees for safekeeping of gold collateral considering that fees should be to the market fees and should only cover actual expenses.