Asian Academy of Management Journal of Accounting and Finance
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Published By Penerbit Universiti Sains Malaysia

2180-4192, 1823-4992

2021 ◽  
Vol 17 (2) ◽  
pp. 161-187
Author(s):  
Narapong Srivisal ◽  
Natthawat Jamprasert ◽  
Jananya Sthienchoak ◽  
Pornpitchaya Kuwalairat

Assets managed under sustainable investment criteria have been massively growing during the recent years. Among the criteria, environmental, social and governance (ESG) score leads the group as an important indicator of non-financial quality of a firm, which may reflect value to investors either through higher expected profit or lower risk. In this paper, we focus on the latter by exploring whether ESG score has linkage to the credit rating of firms due to the risk mitigation effect. Ordered logistic regressions are applied on a panel dataset of listed companies in Shanghai Stock Exchange and Tokyo Stock Exchange from 2009 to 2018. The results suggest that only in Japan, having ESG coverage is greatly associated with being awarded higher credit rating. However, only the environmental and governance pillars positively link to the Japanese firms’ credit ratings, while the social pillar shows negative correlation. The finding of heterogeneous effects translates to an important implication that investment in ESG should be taken with care as the impact of ESG may depend on different nature or culture of markets.


2021 ◽  
Vol 17 (2) ◽  
pp. 247-274
Author(s):  
Van Dan Dang

The Net Stable Funding Ratio (NSFR) liquidity rule under Basel III guidelines is designed to handle long-term liquidity risk, promoting the sustainable structures of bank funding. This study estimates the NSFR and analyses the impact of this liquidity ratio on banks according to a risk-return trade-off in Vietnam prior to the Basel III implementation. Using yearly data for commercial banks from 2007 to 2018, I find that banks with higher NSFR gain more potential benefits than banks with lower NSFR. Concretely, a rise in NSFR increases bank profitability and decreases bank funding costs, credit risks and liquidity creation, as evidenced by a comprehensive set of alternative measures. The findings of this study offer insightful implications on the bank policy framework advocating the Basel III liquidity regulation in Vietnam as well as other emerging markets.


2021 ◽  
Vol 17 (2) ◽  
pp. 133-159
Author(s):  
Ruzita Abdul-Rahim ◽  
Mohamed Cassim Abdul Nazar ◽  
Mohd Hasimi Yaacob Abdul-Rahim

This study investigates the role of corporate governance in influencing the debt financing decision of 198 non-financial listed companies in Sri Lanka from 2009 to 2016. Sri Lanka’s corporate governance (CG) code promotes dispersed ownerships, larger board size and balance of power and authority through various means, such as exclusivity between the Chief Executive Officer and Chairperson and the independent Board composition. This study tests the role of CG through four indicators while controlling for other firm-specific variables. Results of the two-step system Generalized Method of Moments on a balance panel data shows that the effect of CG indicators on financing decision depends on the financing terms. In general, the influence of CG indicators is significant on the two debt financing measurements, except for managerial ownership when investments in assets are involved. This influence appears eminent in predicting the debt ratio, although the effect is not necessarily consistent with the hypotheses. The latest revision on CG codes of best practices has also improved firms’ access to debt financing, except for raising long-term debt to acquire assets. Results imply that the Sri Lankan firms adopting the CG best practices would need to rely on other factors to access long-term debt financing or on other external financing sources.


Author(s):  
Meliza Zafrizal ◽  
Rubayah Yakob ◽  
Soo Wah Low

High competition in Indonesian banking sectors has resulted in the non-survival of rural banks in Indonesia in the long run. The lack of third-party funding becomes one of the most important factors that cause many rural banks to face liquidity risk. Hence, many rural banks use interbank borrowing fund as an alternative source of funding in order to meet their liquidity requirement. Moreover, this risk also leads to many rural banks in Indonesia having to deal with low efficiency problem. This research examines not only the influence of liquidity risk on efficiency but also the role of interbank borrowing fund as a moderator variable. Random effect regression analysis reveals that liquidity risk has negative influence on efficiency. Furthermore, as moderator variable, interbank borrowing fund is shown to enhance the influence of liquidity risk on efficiency. This research becomes guidance for rural banks in managing their liquidity risk and efficiency. In addition, this research also can provide direction for authority in setting some regulation regarding to rural banks’ activities in interbank market.


2021 ◽  
Vol 17 (2) ◽  
pp. 81-106
Author(s):  
Mohd Fahmee Ab-Hamid ◽  
Hawati Janor ◽  
Aisyah Abdul-Rahman ◽  
Mariani Abdul-Majid

This article investigates the effect of efficiencies on market risk using a sample of Chinese commercial banks from 2000 to 2015 using different measures of market risk; the Value at Risk (VaR) and Expected Shortfall (ES). The cost and profit efficiencies are estimated by the Stochastic Frontier Analysis (SFA) on the 12 biggest banks listed on the Shanghai Stock Exchange. In testing the effect between efficiency and market risk, this study applied four different models to uncover the relationship between VaR and ES as measures of market risk on cost and profit efficiencies. Utilising a panel data analysis, the results show that different banks efficiencies affect market risk measures differently. While bank cost efficiency reduces market risk, increase in profit efficiency increase market risk. The analysis in this study helps explain the unconvincing evidence of an inefficiencies-risk connection in the bank sector. Bank regulators and managers may need to focus on the cost and profit efficiencies-related initiatives to better manage the market risk. These findings provide bank managers with more understanding of bank risk and serve as an underpinning for bank supervision efforts aimed at strengthening the joint risk management of efficiency market risks.


Author(s):  
Awatif Alsheikh ◽  
Mohamat Sabri Hassan ◽  
Norman Mohd-Saleh ◽  
Mohd Hafizuddin-Syah bin Abdullah ◽  
Warda Alsheikh

This study examines the relationship between the mandatory adoption of International Financial Reporting Standards (IFRS) and the disclosures of corporate risk among non-financial firms in Saudi Arabia. Based on the observation of 320 firm-year from 2015 until 2017, this study reveals a positive relationship between the mandatory adoption of IFRS and the corporate risk disclosures. The relationship holds when we decompose corporate risk disclosures into financial and non-financial risk disclosures. The results are consistent for both the pooled Ordinary Least Squares (OLS) and random effects estimations. Additionally, the result is steady with all primary categories except risk management. We also provide evidence that large firms are more likely to adopt IFRS and reveal more risk information than small firms. This study’s findings are relevant for market regulators in their attempt to improve corporate risk disclosures among listed firms in Saudi Arabia.


2021 ◽  
Vol 17 (2) ◽  
pp. 189-215
Author(s):  
Aishwarya Nagpal ◽  
Megha Jain

The macroeconomic policies of a nation have a major bearing on the financial performance of the companies and their potential sustainability and growth. This study investigates the impact of monetary policy on the corporate leverage adjustment through microscopic monetary policy transmission channels, mainly the interest rate and credit channels, using a sample of 422 manufacturing firms in India from 2011 to 2017 by employing partial adjustment model. The findings suggest that contractionary monetary policy cuts down overall corporate debt. The study further asserts that corporate debt in Indian firms demonstrates target behaviour and the speed at which firms adjust their actual debt ratios towards target debt ratios is a function of not only firm-specific characteristics but also macroeconomic conditions prevailing in the country, proxied by monetary policy indicators in our study. The study has critical policy implications as the balance sheet situation of corporates is a crucial factor in the financial stability of the economy.


2021 ◽  
Vol 17 (2) ◽  
pp. 217-245
Author(s):  
Youngsoo Ra

This study examined Korean companies on whether ownership affects corporate social responsibility performance (CSP) to influence on the corporate financial performance (CFP). According to the results, ownership has causational relationship with financial performance of firms varies upon proxy of CFP. Ownership and CFP demonstrates reverse-U type with ROA but U-type with market to book ratio (MB ratio). Second, ownership and CSP does not prove to have any causality. Partly, ownership shows negative effects on corporate governance. Finally, CSP does not affect profit (ROA) but improve the market value. For the moment, CSP is not an active factor to find out that high proportion of the companies in the sample during the research period were credited low CSP. Most of the companies with high credits on CSP are efficient and stable profit earning companies which leave room to consider the slack-resource theory.


2021 ◽  
Vol 17 (2) ◽  
pp. 107-132
Author(s):  
Abdul Rahman Nizamani ◽  
Zulkefly Abdul Karim ◽  
Mohd Azlan Shah Zaidi ◽  
Norlin Khalid

This article examines the role of bank-level characteristics in determining the nature of interest rate pass-through from monetary policy rates to commercial banks’ lending rates in Pakistan. Several bank-level factors, namely market size, liquidity, capitalisation, profitability, and competition level, were used in analysing the pass-through mechanism. This study utilised a dynamic heterogeneous panel technique, namely the Pooled Mean Group (PMG) estimation for the sample of 12 private commercial banks, over the time span 2003:Q2 to 2015:Q4. Banks of smaller size, large capital, and higher liquidity were significantly affecting the interest rate pass-through procedure. Thus, to improve monetary policy’s transmission mechanism, Pakistan’s central bank should limit bank capitalisation and draw out excess liquidity from the banking sector.


Author(s):  
Syajarul Imna Mohd Amin ◽  
Aisyah Abdul-Rahman ◽  
Nurhafiza Abdul Kader Malim

The recurring crises have evidenced poor liquidity risk management and ineffective regulation in banking. Consequently, banking regulations have undergone continuous reforms to bolster stability in the banking system. Nonetheless, theoretical and empirical evidence provide conflicting results that warrant comprehensive research, particularly for emerging Islamic banking. This study examines the role of banking regulation on the liquidity risk of 245 conventional banks and 68 Islamic banks from selected 14 Organization of the Islamic Cooperation (OIC) from 2000 to 2017 utilising the dynamic panel GMM (generalized method of moments) technique. We measure liquidity risk using the Net Stable Funding Ratio (NSFR) and the total financing-to-total deposits and short-term funding (LDEP). Meanwhile, the regulatory measures are asset restriction (AR), private monitoring (PM), supervisory power (SP) and capital requirements (CR). The findings suggest that regulation has a limited impact on bank liquidity risk. The CR supports the value creation of regulation through the reduction in banks’ liquidity risks, while PM and SP are agency costs of regulation that lead to higher liquidity risks. The impact of CR is lower on liquidity risk in Islamic banking than conventional ones, probably due to limited Islamic liquidity risk management facilities. Thus, regulators should strengthen Islamic liquidity risk instruments and markets to facilitate Islamic banking growth.


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