Asian Economic and Financial Review

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Online ISSN: 2222-6737
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No.2

Economic Growth of Selected South Asian Countries: Does Institution Matter?


Pages: 356-370
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Economic Growth of Selected South Asian Countries: Does Institution Matter?

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DOI: 10.18488/journal.aefr/2015.5.2/102.2.356.370


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Jayanti Bhattacharjee --- Sushil Kr. Haldar
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Jayanti Bhattacharjee --- Sushil Kr. Haldar (2015). Economic Growth of Selected South Asian Countries: Does Institution Matter?. Asian Economic and Financial Review, 5(2): 356-370. DOI: 10.18488/journal.aefr/2015.5.2/102.2.356.370
In this paper we estimate the proximate determinants of economic growth in four major economies of South Asia with special emphasis on the role of institutions in conjunction with stock of physical capital, human capital and openness (measured as trade as percentage of GDP) as major predictor variables. World Governance indicators are available since 1996; therefore, we run a panel regression using the fixed-effect method of estimation for the period of 1996-2010. We also employ a dynamic panel using System- Generalized Method of Moments (SGMM) to counter the possible endogeneity among the variables and also the weak instrumental problem of earlier Arellano and Bond (1991) dynamic panel model. The two institutional measures, namely, voice and accountability and government effectiveness have appeared to be significant predictors of growth of selected South Asian countries. Our results also support the conventional growth predictors like physical and human capital but the effect of openness on growth surprisingly appears to be negative and significant in the period under study.
Contribution/ Originality
This paper contributes to the existing literature by investigating the influence of various measures of institution along with the standard explanatory variables (which include physical capital stock, human capital stock and openness) affecting economic growth of  four major South Asian countries. 
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Economic Sanctions, Speculative Attacks and Currency Crisis


Pages: 340-355
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Economic Sanctions, Speculative Attacks and Currency Crisis

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DOI: 10.18488/journal.aefr/2015.5.2/102.2.340.355


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Farshid Pourshahabi --- Nazar Dahmardeh 
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Farshid Pourshahabi --- Nazar Dahmardeh  (2015). Economic Sanctions, Speculative Attacks and Currency Crisis. Asian Economic and Financial Review, 5(2): 340-355. DOI: 10.18488/journal.aefr/2015.5.2/102.2.340.355
In this study, the effects of economic sanctions and speculative attacks on creating currency crisis have been investigated in Iranian economy during recent years. Economic sanctions can lead to currency crisis through trade barriers and restrictions on financial transactions and also speculative attacks can stimulate currency crises. According to the important of this issue, new model of currency crisis introduced based on Neo-Keynesian framework in Iranian economy. Also, the stock of foreign assets that held domestically is estimated using money demand equation with ratchet mirrors. Iranian holdings of US dollar assets estimated using DOLS approach. MRS-GARCH is used to capture dynamics of speculative attacks and Beta-Skew-t-EGARCH model is used to generate economic uncertainty variable using exchange rate, interest rate, inflation and economic growth variables. The results of model estimation based on CCR approach indicate that economic sanctions and speculative attacks have positive and significant effect on currency crisis.
Contribution/ Originality
This study introduced a new model of currency crisis based on Neo-Keynesian framework and tries to explain the effects of economic sanctions and speculative attacks on currency crisis in Iranian case study.
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Escaping the Dutch Disease: The Role of Public Investment in Niger


Pages: 333-339
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Escaping the Dutch Disease: The Role of Public Investment in Niger

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DOI: 10.18488/journal.aefr/2015.5.2/102.2.333.339


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Issoufou Soumaila 
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Issoufou Soumaila  (2015). Escaping the Dutch Disease: The Role of Public Investment in Niger. Asian Economic and Financial Review, 5(2): 333-339. DOI: 10.18488/journal.aefr/2015.5.2/102.2.333.339
This paper describes the use of a recursive dynamic computable general equilibrium model to the analysis of two investment strategies of natural resources revenue in Niger. Potential impact of education and infrastructure investment on some selected macroeconomic and welfare variables are simulated.  The results show that the economy performs better with a low risk of Dutch Disease when the windfall is invested either in education or in infrastructure. Superior results are obtained when the windfall is simultaneously invested in education and infrastructure, which implies a complementary effect between the two investment strategies.
Contribution/ Originality
This study contributes in the existing literature by using a dynamic computable general equilibrium to investigate the role of two public investments strategies in lowering the risk of Dutch Disease in Niger. 
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Determinants of the AUD/USD Exchange Rate and Policy Implications


Pages: 326-332
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Determinants of the AUD/USD Exchange Rate and Policy Implications

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DOI: 10.18488/journal.aefr/2015.5.2/102.2.326.332


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Yu Hsing 
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Yu Hsing  (2015). Determinants of the AUD/USD Exchange Rate and Policy Implications. Asian Economic and Financial Review, 5(2): 326-332. DOI: 10.18488/journal.aefr/2015.5.2/102.2.326.332
This paper examines short-run determinants of the Australian dollar/U.S. dollar (AUD/USD) exchange rate based on a simultaneous-equation model. Applying the EGARCH method, the paper finds that the AUD/USD exchange rate is positively associated with the 10-year U.S. real government bond yield, U.S. real GDP, the U.S. real stock price and the expected exchange rate and negatively influenced by the Australian real government bond yield, Australian real GDP, and the real Australian stock price.
Contribution/ Originality
This study’s primary contribution is to apply demand and supply analysis in determining the AUD/USD exchange rate. Among other findings, a higher Australian interest rate would cause the Australian dollar to appreciate whereas a higher U.S. interest rate would lead to a stronger U.S. dollar.
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Suggestion of Islamic Insurance Company Model


Pages: 320-325
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Suggestion of Islamic Insurance Company Model

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DOI: 10.18488/journal.aefr/2015.5.2/102.2.320.325


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Abdullah Ibrahim Nazal 
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Abdullah Ibrahim Nazal  (2015). Suggestion of Islamic Insurance Company Model. Asian Economic and Financial Review, 5(2): 320-325. DOI: 10.18488/journal.aefr/2015.5.2/102.2.320.325
This study is one of very few studies which have investigated Islamic Insurance Companies as solution. It explained its operations also comparing with Traditional Insurance Companies and theoretical Islamic insurance models. As result to this study Islamic Insurance companies are profit organization. It helps Islamic banks but it costs customer to face expect risk. Islamic Insurance companies have many ways to get profits and consider all customers installments grants. Its operation gap comes from explanation of Islamic rule which considers part of customers savings in insurance company to buy compensation is the grant not all savings. This can be shown in theoretical models of establish insurance companies. Searcher recommended suggestion to direct Islamic insurance companies operations by Islamic insurance theoretical models. It reduces customer insurance costs and makes facing risk available to all citizens. Models can be developed to cover all types of insurance but as it collects savings, it can?t be sold to another company because cash buy cash in local currency is forbidden interest.
Contribution/ Originality

  1. Ahmad, M.S., 2012. Islamic takaful insurance from jurisprudent to applications. Jordan: The Insurance Company. pp: 29-30.
  2. Eid, A. and W. Alseefo, 2009. Risk management and insurance. Amman, Jordan: Yazori Company. pp: 148-159.
  3. George Rejda, E., 2008. Principles of risk management and insurance. 10th Edn., USA: Addison-Wesly Educational Publishers.
  4. Mehdi, S., 2010. The evaluation of islamic insurance – takaful: A literature survey. Insurance Markets and Companies Analysis and Actuarial Computations, 1(2): 102, 105,106.
  5. Mohammed, K., 2008. Islamic finance. UK: GMB Publishing. pp: 129 & 131.
  6. Nico, P. and C. Peiter, 2010. Takaful: An islamic insurance instrument. Journal of Development and Agriculture Economics, 2(10): 333.
  7. The Islamic Insurance Company, 2007. Twelfth Annual Report, Amman, Jordan. pp: 14-15.

Cross Shareholding and Initiative Effects


Pages: 305-319
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Cross Shareholding and Initiative Effects

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DOI: 10.18488/journal.aefr/2015.5.2/102.2.305.319


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Yasuhiro Arikawa --- Atsushi Kato 
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Yasuhiro Arikawa --- Atsushi Kato  (2015). Cross Shareholding and Initiative Effects. Asian Economic and Financial Review, 5(2): 305-319. DOI: 10.18488/journal.aefr/2015.5.2/102.2.305.319
Cross shareholding can make takeovers more difficult but may be beneficial for shareholders if the manager?s private benefits align with shareholders? benefits. Cross shareholding is more likely to take place as the congruence of interests between managers and shareholders increases, the manager?s private benefits become greater, the manager?s reservation utility is lower, and the shareholders? share of the takeover becomes smaller. Due to the lack of monitoring, corporate value tends to be smaller with cross shareholding.
Contribution/ Originality
This paper’s primary contribution is to clarify the conditions under which cross shareholding is likely to occur and it is beneficial for shareholders.
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The Impact of Macroeconomic Factors on the Herding Behaviour of Investors


Pages: 295-304
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The Impact of Macroeconomic Factors on the Herding Behaviour of Investors

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DOI: 10.18488/journal.aefr/2015.5.2/102.2.295.304


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Yen-Hsien Lee --- Ting-Huei Liao --- Chih-Ming Hsu
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Yen-Hsien Lee --- Ting-Huei Liao --- Chih-Ming Hsu (2015). The Impact of Macroeconomic Factors on the Herding Behaviour of Investors. Asian Economic and Financial Review, 5(2): 295-304. DOI: 10.18488/journal.aefr/2015.5.2/102.2.295.304
This study uses the linear model based on the notion of cross-sectional standard deviation (CSSD) by Christie and Huang (1995) and nonlinear model based on cross-sectional absolute deviation (CSAD) proposed by Chang et al. (2000) to provide evidence for the existence of herding behaviour by investors in Taiwan during the period January 4, 2000 to December 28, 2012. We examine whether returns, volume, volatility, S&P500, volatility index (VX) and financial crisis influence the cross-sectional dispersion of the stock market. Macroeconomics is an important factor for the stock market; thus, this paper further examines how exchange rate and interest rate affect herding effect. We investigate asymmetric herding behaviour under different market conditions. Finally, this paper uses quantile regression to estimate the herding effect. First, we find evidence of herding behaviour based on the CSAD model. Second, the cross-sectional return dispersion in Taiwan exhibits a positive (negative) relationship with the US market and financial crisis (interest rate). Third, we find asymmetric herding behaviour under different conditions for market returns, trading volume, VX and interest rate. Fourth, Taiwan?s investors consistently exhibit herding behaviour in different quantiles during different market conditions.
Contribution/ Originality
This study provides in-depth insights into herding behaviour. The cross-sectional return dispersion exhibits different relationships with macroeconomic factors. The asymmetric herding behaviour under different conditions for market returns, trading volume, VX and interest rate. The investor exhibits asymmetric herding behaviour at various market conditions in different quantile levels.
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Does Institutional Quality Strengthen The Positive Influence of Offshore R&D Strategy on the Firm Productivity?


Pages: 279-294
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Does Institutional Quality Strengthen The Positive Influence of Offshore R&D Strategy on the Firm Productivity?

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Wen-Bin Chuang --- Hui-lin Lin --- Chien-Wei Wu 
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Wen-Bin Chuang --- Hui-lin Lin --- Chien-Wei Wu  (2015). Does Institutional Quality Strengthen The Positive Influence of Offshore R&D Strategy on the Firm Productivity?. Asian Economic and Financial Review, 5(2): 279-294. DOI: 10.18488/journal.aefr/2015.5.2/102.2.279.294
The purpose of this study is to examine whether the host country?s institutional quality has a significant moderating effect on the relationship between the offshore R&D strategy in the local environment and firm productivity. In addition, due to the firm?s operating mode in the host country being distinguished as either exploitation-oriented or exploration-oriented, we further examine whether the moderating effects of institutional quality is influenced by the different types of operating mode in the host country. This analysis takes advantage of a longitudinal dataset of Taiwan-based firms and their most prominent subsidiary as well as the institutional quality indices developed by the World Economic Forum (WEF) over the 2006-2009 period. The empirical results show that there are different moderating role of institutional quality between the exploitation-oriented and exploration-oriented mode in terms of the relationship between offshore R&D and firm productivity, which indicates that the institutional quality in the host countries does not necessarily strengthen the positive influence of the offshore R&D strategy on firm productivity as do the extant studies in the previous literature. 
Contribution/ Originality
This paper’s primary contribution is finding that institutional quality in the host country play a significant moderating role when Taiwan-based firms develop offshore R&D to enhance performance. Moreover, we also find that the moderating role is influenced by the different kind of operational mode.
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Does Banking Sector Reform Buy Efficiency Of Banking Sector Operations? - Evidence from Recent Nigerias Banking Sector Reforms


Pages: 264-278
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Does Banking Sector Reform Buy Efficiency Of Banking Sector Operations? - Evidence from Recent Nigerias Banking Sector Reforms

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Martina Chinazom Okorie --- David Onyinyechi Agu 
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Martina Chinazom Okorie --- David Onyinyechi Agu  (2015). Does Banking Sector Reform Buy Efficiency Of Banking Sector Operations? - Evidence from Recent Nigerias Banking Sector Reforms. Asian Economic and Financial Review, 5(2): 264-278. DOI: 10.18488/journal.aefr/2015.5.2/102.2.264.278
There is a growing concern associated with the recent banking sector reform on whether it achieved its purpose of making banks efficient or not. Several studies have had several opinions with respect to the real impacts of banking sector reforms on banking sector efficiency. Consequently, this study examines the impact of Nigerian banking sector reforms on Nigerian banks? performance and efficiency in two time periods ? pre -consolidation period and post-consolidation period. To evaluate this, the researchers adopt a non-parametric (Data Envelopment Analysis) approach, and the factors that determine efficiency are examined.  The findings of this study reveal varying levels of efficiency in both periods. Although some banks still remained inefficient, there was a general improvement in efficiency in the post-consolidation period. This improvement was not entirely attributed to the consolidation policy as two immediate years after the consolidation exercise still recorded poor levels of efficiency among many banks. Further investigation reveals some effects of the recent financial crisis on the overall efficiency of Nigerian banking sector.
Contribution/ Originality
This study contributes to existing literature on banking sector efficiency by adopting the data envelopment analytical method. Taking a deeper look into Nigerian banks, this study finds out that some level improvement in banking sector efficiency was recorded as a result of the recent banking sector reforms in Nigeria.
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Predictive Power of Financial Ratios With Regard To the Turkish Banking Industry: An Empirical Study on the Stock Market Index


Pages: 249-263
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Mehmet Islamoglu 
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Mehmet Islamoglu  (2015). Predictive Power of Financial Ratios With Regard To the Turkish Banking Industry: An Empirical Study on the Stock Market Index. Asian Economic and Financial Review, 5(2): 249-263. DOI: 10.18488/journal.aefr/2015.5.2/102.2.249.263
In this study, it is examined whether changes in the stock market index can be explained by the change in financial ratios. Financial statements of 11 conventional and 2 participation banks for a total of 13 banks (representing the essential part of the Turkish Banking Sector and constituting the BIST XBANK Stock Index) announced on a quarterly basis from 2002 to 2013 were extracted from the Public Disclosure Platform website. The contemporaneous financial statements were merged and by using this data, consolidated financial ratios were obtained. Based on empirical evidence, while an increase in debt-to- equity ratio affects the BIST XBANK Index negatively, shareholders? equity to total assets ratio has a positive impact on the growth of the Index. In addition, it is verified that shareholders? equity to total assets ratio and provisions/non-performing loans ratio  have a causal relationship with the BIST XBANK Index.
Contribution/ Originality
This study is one of very few studies which have investigated the relationship between the consolidated financial ratios generated from the consolidated financial statements of the publicly traded banks and the Stock Index to which they are involved. The empirical findings verified statistically significant relationship between the financial ratios (except for liquidity and profitability) and the Stock Index, although the banks involved in the analysis have different characteristics in terms of scope, size etc.
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Impact of Government Spending on Private Consumption Using ARDL Approach


Pages: 239-248
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Impact of Government Spending on Private Consumption Using ARDL Approach

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DOI: 10.18488/journal.aefr/2015.5.2/102.2.239.248


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Khalid Khan --- Chen FEI --- Muhammad Abdul Kamal --- Badar Nadeem Ashraf 
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Khalid Khan --- Chen FEI --- Muhammad Abdul Kamal --- Badar Nadeem Ashraf  (2015). Impact of Government Spending on Private Consumption Using ARDL Approach. Asian Economic and Financial Review, 5(2): 239-248. DOI: 10.18488/journal.aefr/2015.5.2/102.2.239.248
This study investigates the impact of government spending on private consumption a case study of China. We used Autoregressive Distributed Lag (ARDL) approach to estimate the long and short run effects of the model using annual data from 1985 to 2013. The results of the study revealed that government spending have positive impact on private consumption. Therefore, government spending is a very good instrument to boost economy and encourage aggregate demand in China during recession. The negative and significant Error Correction Term (ECT) suggests that Chinese economy will adjust relatively quickly in response to an external shock to the overall development.
Contribution/ Originality
This study investigates the impact of government spending on private consumption a case study of China. We used Autoregressive Distributed Lag (ARDL) approach to estimate the long and short run effects of the model using annual data from 1985 to 2013. The results of the study revealed that government spending have positive impact on private consumption. Therefore, government spending is a very good instrument to boost economy and encourage aggregate demand in China during recession. The negative and significant Error Correction Term (ECT) suggests that Chinese economy will adjust relatively quickly in response to an external shock to the overall development.
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The Accessibility Determinants of Internet Financial Reporting of Manufacture Company Listed in Indonesia Stock Exchange


Pages: 229-238
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The Accessibility Determinants of Internet Financial Reporting of Manufacture Company Listed in Indonesia Stock Exchange

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DOI: 10.18488/journal.aefr/2015.5.2/102.2.229.238


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Ade Kemala Jaya --- Verawaty 
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Ade Kemala Jaya --- Verawaty  (2015). The Accessibility Determinants of Internet Financial Reporting of Manufacture Company Listed in Indonesia Stock Exchange. Asian Economic and Financial Review, 5(2): 229-238. DOI: 10.18488/journal.aefr/2015.5.2/102.2.229.238
This research is aimed to examine an association between the accessibility of IFR in the company website using Accessibility Index Value and the determinant variables named as company size, profitability, liquidity, and leverage which explain the choice to provide IFR in the company website. The population is the manufacture companies listed in Indonesia Stock Exchange. The sample is selected in certain parts of the population with the criteria. They are first, a company listed on the Indonesia Stock Exchange, second, the company’s website is active and not in a condition under maintenance, third, it must have a company?s financial statements in 2013, forth, and the availability of other data for the observed variables. The results of this research concluded that only profitability has positive association with the accessibility of the financial statements. This results discussion will expand the theories and models that have been developed from voluntary reporting through traditional media towards IFR. 
Contribution/ Originality

  1. Almilia, L.S., 2009. Analisa komparasi indeks internet financial reporting pada website perusahaan go publik di Indonesia. Paper Presented at Seminar Nasional Aplikasi Teknologi Informasi 2009.
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  7. Laswad, F., R. Fisher and P. Oyelere, 2005. Determinants of voluntary internet financial reporting by local government authorities. Journal of Accounting and Public Policy, 24(2005): 101-121.
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  13. Verawaty, 2012. The availability of IFR (Internet Financial Reporting) through E-government as public transparency, participation, and accountability means in Indonesia. Proceedings of The 13th Malaysia-Indonesia Conference on Economics. Management and Accounting (MICEMA). Palembang, Indonesia. pp: 562-579.
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Assessment of the Effects of Firms Characteristics on Earnings Management of Listed Firms in Nigeria


Pages: 218-228
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Assessment of the Effects of Firms Characteristics on Earnings Management of Listed Firms in Nigeria

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DOI: 10.18488/journal.aefr/2015.5.2/102.2.218.228


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Uwalomwa Uwuigbe --- Uwuigbe, Olubukunola Ranti --- Okorie Bernard 
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Uwalomwa Uwuigbe --- Uwuigbe, Olubukunola Ranti --- Okorie Bernard  (2015). Assessment of the Effects of Firms Characteristics on Earnings Management of Listed Firms in Nigeria. Asian Economic and Financial Review, 5(2): 218-228. DOI: 10.18488/journal.aefr/2015.5.2/102.2.218.228
This study assessed the effects of firms? characteristics on earnings management of listed companies in Nigeria. To achieve the objectives of this study, a total of 20 listed firms in the Nigerian stock exchange market were selected and analyzed for the study using the judgmental sampling technique. The corporate annual reports for the period 2006-2010 were used for the study. In testing the research hypothesis, the study adopted the use of both descriptive statistics and econometric analysis using the pooled ordinary least square regression for the listed sampled firms. Findings from the study revealed that while firm size and firms? corporate strategy have a significant positive impact on earnings management (proxied by discretionary accruals); on the other hand, the relationship between firms? financial leverage and discretionary accruals of the sampled firms in Nigeria was not significant. Thus, the study concludes that large firms tend to have higher motivations and more prospects to engage in the manipulation earnings and exaggerate earnings due to the intricacy of their operations and the complexity for users to identify overstatement.
Contribution/ Originality
This study contributes to existing literature by providing a more robust model (framework) that analysis the effects of firm size, firm leverage and corporate strategy on firms’ earnings management in Nigeria. 
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Privatization of Vietnamese Firms and Its Effects on Firm Performance


Pages: 202-217
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Privatization of Vietnamese Firms and Its Effects on Firm Performance

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DOI: 10.18488/journal.aefr/2015.5.2/102.2.202.217


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Ngo My Tran --- Walter Nonneman --- Ann Jorissen
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Ngo My Tran --- Walter Nonneman --- Ann Jorissen (2015). Privatization of Vietnamese Firms and Its Effects on Firm Performance. Asian Economic and Financial Review, 5(2): 202-217. DOI: 10.18488/journal.aefr/2015.5.2/102.2.202.217
The paper analyzes the effects of privatization on the performance of firms switching their ownership from state-owned to private-owned ownership. By using difference-in-difference with control variables and propensity score matching techniques, this study overcomes some shortcomings in previous studies on the effect of privatization on performance in transition economies such as no control of selection bias and the inadequateness to single out the privatization effect from the concurrent effects of other economic factors. We find that a shift from state or collective ownership to private ownership can consistently enhance the performance of switchers in terms of profitability. This suggests that privatization is an efficient way to improve the financial performance of Vietnamese state-owned enterprises.
Contribution/ Originality
This study contributes in existing literature by overcoming methodological shortcomings of previous studies on the effect of privatization on performance in transition economies such as no control for selection biases due to non-random drawn characteristics of privatized sample and an inadequate control for concurrent effects of other economic factors.
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Bank Concentration and Enterprise Borrowing Cost Risk: Evidence from Asian Markets


Pages: 194-201
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Bank Concentration and Enterprise Borrowing Cost Risk: Evidence from Asian Markets

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DOI: 10.18488/journal.aefr/2015.5.2/102.2.194.201


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Ching-Chung Lin --- Shou-Lin Yang --- Huai-I Lee
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Ching-Chung Lin --- Shou-Lin Yang --- Huai-I Lee (2015). Bank Concentration and Enterprise Borrowing Cost Risk: Evidence from Asian Markets. Asian Economic and Financial Review, 5(2): 194-201. DOI: 10.18488/journal.aefr/2015.5.2/102.2.194.201
Based on data from nine Asian markets, this study investigates the relationship between bank concentration and the borrowing cost risk of firms. Over the study period, the concentration of banks increased in the developed countries and decreased in developing countries. After the 2007?2008 financial crisis, the borrowing cost risk increased in both the developed and developing economies. The empirical evidences show that bank concentration is positively related to the borrowing cost risk for developed economies only.
Contribution/ Originality
This paper’s primary contribution is finding that, because of the liberalization of financial markets, competition among the banks in developing countries became stronger and bank concentration decreased. However, lower bank concentration did not result in a lower enterprise borrowing cost risk. 
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