Using accounting ratios to distinguish between Islamic and conventional banks in the GCC region

This study determines whether it is possible to distinguish between conventional and Islamic banks in the Gulf Cooperation Council (GCC) region on the basis of financial characteristics alone. Islamic banks operate under different principles, such as risk sharing and the prohibition of interest, yet both types of banks face similar competitive conditions. The combination of effects makes it unclear whether financial ratios will differ significantly between the two categories of banks. We input 26 financial ratios into logit, neural network, and k-means nearest neighbor classification models to determine whether researchers or regulators could use these ratios to distinguish between the two types of banks. Although the means of several ratios are similar between the two categories of banks, non-linear classification techniques (k-means nearest neighbors and neural networks) are able to correctly distinguish Islamic from conventional banks in out-of-sample tests at about a 92% success rate.     

Corporate governance and disclosures on the transition to International Financial Reporting Standards

For reporting periods ending on or after 30 June 2004, Australian companies were required to disclose the expected impact of applying Australian equivalents of International Financial Reporting Standards effective from 1 January 2005. The objective of this paper is to examine the association between the level of disclosure and corporate governance quality. Using a sample of listed companies with 30 June balance dates, we find that the quantity of disclosure was positively related to some aspects of superior corporate governance, such as the frequency of board and audit committee meetings and the choice of auditor.     

Impact of financial and multinational operations on manager perceptions of dividends

We survey managers of firms listed on the Toronto Stock Exchange about their views on dividends. We find the perceptions of factors that influence dividend policy differ between managers of financial and non-financial firms. Industry classification also affects how managers view statements about the dividend pattern, dividend setting process, dividend policy and firm value, residual dividend theory, and explanations for paying dividends. However, we find weak, if any, multinational operations effect on manager perception of dividends. We conclude that researchers investigating dividends should partition the data by industry type and perhaps other firm characteristics to better understand the dividend puzzle.     

The day-of-the-week effect and conditional volatility: Sensitivity of error distributional assumptions

We test for reliable evidence of the day-of-the-week effect on both the mean and volatility for the S&P/TSX Canadian return index. Unlike previous studies, we permit several specifications for the error distribution — GARCH normal, Student's t, generalized error distribution, and double exponential distribution. Unlike other studies, we find that the day-of-the-week effect in both mean and conditional volatility is sensitive to the particular specification of the underlying distributions. We also find that using a regression analysis assuming a Student's t distribution is a better way to investigate this effect. Our evidence demonstrates the apparent fragility of previous empirical studies on calendar anomalies. Thus, our results serve as a warning that with financial data, the error distributional assumptions are critical to correctly identifying empirical regularities in the data.     

NAFTA Chapter 11: “Tantamount to Expropriation”: Tantamount to Explosive

This paper provides an alternative methodology for testing the degree of international capital mobility through the analysis of a causality direction between the exchange rate and the interest rate for Sweden. The change of exchange rate regime in Sweden in 1992 is used here to illustrate how the alternative exchange rate regimes, fixed and floating, affect the degree of international capital flows. On the basis of new Granger non-causality testing procedures developed by Toda and Yamamoto (1995), the results exhibit that Granger-causality is unidirectional, running from interest rate to exchange rate under the floating exchange rate regime. The implication of this result is that the hypothesis of high capital mobility is supported only under the floating exchange rate regime.     

Bankers at the gate: Microfinance and the high cost of borrowed logics

In this paper we examine how the interaction between influences of commercial banking and poverty alleviation shaped the evolution of modern microfinance. Using institutional theory as a lens, we observe that the commercial banking logic increasingly displaced the microfinance field's foundational poverty alleviation and development principles over time. We argue that this process of displacement can occur inadvertently as organizations that embody multiple logics draw disproportionately on only one of those logics when developing legitimating accounts of their activity to stakeholders. Furthermore, we introduce the concept of permeability – the extent to which the elements of a logic are ambiguous and loosely coupled – to explain why some logics may be more or less open to the influence of other logics. We conclude by discussing implications for entrepreneurship and poverty alleviation more generally.     

CONTROLLING BANKERS' BONUSES: EFFICIENT REGULATION OR POLITICS OF ENVY?

The positive relationship between bank CEO compensation and risk-taking is a well-established empirical fact. The global banking crisis has resulted in a chorus of demands to control bankers' bonuses and thereby curtail their risk-taking activities in the hope that the world can avoid a repeat in the future. However, the positive relationship is not a causative one. In this paper we argue that an implicit too-big-to-fail policy provides the incentive for banks to take excessive risks and design compensation packages to deliver high returns. A credible no-bailout policy will have a better chance of curbing excess risk-taking than controlling bankers' compensation.     

Jobs and Exposure to International Trade within the Service Sector in Sweden

To establish in which service industries there is international trade (or it may potentially exist), we calculate locational Ginis for different industries. The basic idea is that from this measure of regional concentration of different activities within a country we can identify industries where there appears to be regional trade, and hence also a potential for international trade. Based on our method, we find that: (i) the number of employed in tradable service appears to be at least as large as in the manufacturing sector, (ii) tradable service is much more skill intensive than manufacturing, and (iii) lately, the employment in tradable service has increased substantially. We argue that the last mentioned result is consistent with the substantial growth of skilled labour in Sweden since the mid‐1990s (Rybczynski effect) and factors leading to increased relative demand for skilled labour. Particularly, increased competition from and offshoring to low‐wage countries seem recently to have had a considerable impact on the creation of skilled jobs and the displacement of less skilled jobs in the tradable sector in Sweden. Furthermore, we apply a similar method as for industries to identify tradable occupations. Using our classification of tradable industries and tradable occupations in a Mincer type wage equation, we find that workers in such industries and occupations receive a wage premia of 12–13 per cent.     

A Comparison of Ethics of Investment Professionals: North America Versus Pacific Rim Nations

This study examines the ethical attitudes and practices of securities analysts and portfolio managers from four Pacific Rim countries – Hong Kong, Japan, Singapore and Thailand – and compares the findings to a similar study of North American investment professionals to identify significant differences. The findings show that many differences exist due to cultural differences and differences in the regulatory environment between the Pacific Rim countries studied and North America.     

Understanding farmers' decision making processes and improving managerial assistance

Few studies have been made of how farmers make decisions. Most research and teaching has focused on the decision event, not the whole process. Current knowledge of the decision making process is reviewed and described as a set of eight functions or elements: values and goals, problem detection, problem definition, observation, analysis, development of intention, implementation, and responsibility bearing. The relevancy of this view of farmers' decision making behavior is tested through a series of case studies. Based on these observations, the conceptual model of the decision process is revised to include four phases and four subprocesses. The four phases are problem detection, problem definition, analysis and choice, and implementation. The four subprocesses are searching and paying attention, planning, evaluating and choosing, and checking the choice. In addition, we note that farmers prefer the ability to continually update their evaluation and plans, a qualitative vs. quantitative analysis, a “quick and simple” vs. detailed and elaborate analysis, small tests and incremental implementation, and feed forward and compensation vs. post-implementation evaluation. Implications of this fuller view of the decision making process for management assistance are discussed.