Flexible inflation targeting and financial stability: Is it enough to stabilize inflation and output?

We investigate empirically whether a central bank can promote financial stability by stabilizing inflation and output, and whether additional stabilization of asset prices and credit growth would enhance financial stability in particular. We employ an econometric model of the Norwegian economy to investigate the performance of simple interest rate rules that allow a response to asset prices and credit growth, in addition to inflation and output. We find that output stabilization tends to improve financial stability. Additional stabilization of house prices, equity prices and/or credit growth enhances stability in both inflation and output, but has mixed effects on financial stability. In general, financial stability as measured by e.g., asset price volatility improves, while financial stability measured by indicators that depend directly on interest rates deteriorates, mainly because of higher interest rate volatility owing to a more active monetary policy.     

Political Connections and Related Party Transactions: Evidence from Indonesia

This paper examines whether politically connected firms use related party transactions as a tunneling mechanism in Indonesia. We further investigate whether the presence of tunneling compels managers to manage earnings to conceal such expropriation of resources. Our study is motivated by conflicting evidence in the extant literature about the role of political connections and related party transactions. Using data from Indonesia, we document that politically connected firms use related party loans to tunnel resources, and that this effect is more pronounced for firms with government connections. We further document that politically connected firms manage earnings to conceal their tunneling activities. By documenting the role of related party transactions as a specific channel through which connected firms expropriate resources, we enrich the political connection and related party transactions literature.     

Does the law of one price hold in international financial markets? Evidence from tick data

This paper investigates the validity of the law of one price (LOP) in international financial markets by examining the frequency, size and duration of inter-market price differentials for borrowing and lending services (‘one-way arbitrage’). Using a unique data set for three major capital and foreign exchange markets that covers a period of more than seven months at tick frequency, we find that the LOP holds on average, but numerous economically significant violations of the LOP arise. The duration of these violations is high enough to make it worthwhile searching for one-way arbitrage opportunities in order to minimize borrowing costs and/or maximize earnings on given funds. We also document that such opportunities decline with the pace of the market and increase with market volatility.     

Modeling the time-varying volatility of the paper–bill spread

The spread between the rates on commercial paper and Treasury bills has received considerable attention in the literature for its role as an indicator of real economic activity. In this paper we empirically examine what happens when the volatility of the spread changes over time. We estimate a nonlinear model that enables us to discern the asymmetric impact of negative and positive shocks to the spread. We find that a positive shock has a larger impact on the volatility of the spread than does a negative shock.     

Normative Self-Interest or Moral Hypocrisy?: The Importance of Context

We re-examine the construct of Moral Hypocrisy from the perspective of normative self-interest. Arguing that some degree of self-interest is culturally acceptable and indeed expected, we postulate that a pattern of behavior is more indicative of moral hypocrisy than a single action. Contrary to previous findings, our results indicate that a significant majority of subjects (N = 136) exhibited fair behavior, and that ideals of caring and fairness, when measured in context of the scenario, were predictive of those behaviors. Moreover, measures of Individualism/Collectivism appear more predictive of self-interested behavior than out-of-context responses to moral ideals. Implications for research and practice are discussed. George W. Watson received his Ph.D. from Virginia Tech, his M.B.A. from California State at Fullerton, an M.S. in Systems Management from the Naval Postgraduate School in Monterey, an a B.A. in Business Administration from the University of Washington, Seattle. His teaching focus is on corporate social responsibility and ethics. Dr.Watson’s current research interests include moral psychology,ethical decision making, and ideology. He has published in Business Ethics Quarterly, Business and Society, and the Journal of Business Ethics. Farooq Sheikh received his BS in Physics from Indiana University of Pennsylvania, and his Ph.D. from Smeal College of Business, Penn State University. He is currently Assistant Professor of Operations Management, School of Business at the State University of New York at Geneseo. Dr. Sheik’s research interests include rational and behavioral models in business operations, bounded-rational behavioral models in population games, social norms, game theory and cross-disciplinary research involving behavioral models.     

Financial Statement Comparability and Idiosyncratic Return Volatility

This study examines the association between financial statement comparability and idiosyncratic return volatility (IRV). A greater degree of comparability lowers information acquisition costs, reduces the uncertainties associated with performance evaluation, and increases the overall quantity and quality of information available to corporate outsiders, which, in turn, helps investors to understand and evaluate the cash flow and performance of firms more accurately. Therefore, we hypothesize a negative association between financial statement comparability and IRV. Using a large US sample from 1981 to 2013, we show that financial statement comparability is associated with lower level of IRV significantly. We also find this association to be more pronounced in a poor information environment. This study contributes to the emerging research that stresses the benefits of financial statement comparability.     

Conceptualization of the real economy and Islamic finance: Transformation beyond the asset‐link rhetoric

A key factor behind the chronic crises in modern economies is the growing dominance of financialization and the resulting disconnect between the real economy and the financial sector, to which conventional financial industry is a key contributor. In contrast, Islamic finance claims to be real‐economy‐oriented, as all transactions must be asset‐linked (asset‐backed or asset‐based). However, is Islamic Finance based on proper conceptualization of the real economy? What is the real economy and its dynamics? How Islamic finance is interfaced with the real economy? In this article, the claimed real‐economy‐orientation is examined by presenting a conceptualization of the real economy and then evaluating the related discourse accordingly. The analysis presented, especially for noneconomists, exposes a serious gap between the claims about Islamic finance and the real economy it is supposed to advance. Appropriate conceptualization of the real economy can help the industry to be relevant and effective for broader socioeconomic transformation.     

Green banking disclosure,firm value and the moderating role of a contextual factor: Evidence from a distinctive regulatory setting

The idea that green banking disclosure leads to increased firm value has been rightly considered as over-simplistic. This paper builds on key prior insights by investigating whether combining green disclosure with other contextual factor, such as non-performing loans, provides additional insight into the complex green disclosure–firm value relationship in a regulatory setting where green law has recently been enacted for the banking industry. We present an analysis of seven years of data sourced from listed banks in Bangladesh (2008–2014), with data analysed using multiple regression. Our findings indicate that, while green disclosure has a positive effect on the overall firm value of banks, this positive effect is negatively moderated by banks' non-performing loans. This research contributes to the knowledge by showing that green disclosure alone is insufficient for creating market value for banks. Additional contextual matters need attention to understand the impact of green disclosure in contributing to increased market value for banks.     

Understanding the institutional challenges and impacts of higher education reforms in Indonesia

ABSTRACT

This paper contributes to the academic literature on policy-making at the global level by empirically showing the nature and institutional challenges of higher education reforms under NPM principles. The authors explain the key strategies adopted by Indonesia’s government and the problems it faced in reforming its higher education system. The overall result was negative. The Indonesian reforms will not bring about meaningful outcomes unless the existing institutions, and the environment in which they operate, are also reformed.     

Green supply chain management – food for thought?

ABSTRACT

This paper investigates the impact of green supply chain management (GSCM) practices on the performance of UK food retail small and medium-sized enterprises (SMEs). A quantitative approach using a non-probability sampling of 84 participants was employed. Based on the literature review, five hypotheses were developed and tested using the partial least square-structural equation modeling (SEM-Smart PLS 2.03) approach. The reviewed literature revealed that key internal drivers (ID) and external pressures (EP) stimulate organizations to initiate GSCM practices in UK food retail SMEs. Though empirical findings strongly supported the statement that ID influence GSCM practices, they did not show a significant relationship between EP and GSCM practices. Literature also suggests that practicing GSCM can help improve the efficiency, brand image (BI) and profitability, and thus improve the overall firm performance which is also empirically proved. This study helps enrich existing theories on SCM and organizational performance. As to practical impact, this study should facilitate SMEs in GSCM practices and thus help green the economy. While the findings of this study have limited generalisability as the data were collected from UK SMEs only and the sample size was comparatively small, this research establishes a foundation for further study in this domain.