A survey of the determinants of financial development

The positive effects of financial development on economic growth have encouraged researchers to study the determinants of financial development. Based on the theoretical and empirical studies undertaken, institutions, openness of trade and financial markets, legal tradition, and political economy are identified as factors promoting the financial system. Of these, political economy factors, which can have both direct and indirect effects through other determinants, could be considered the most influential factors in financial development. Variations in the political economy of countries could well explain variations in their financial development. Although all studies show the significant effects of these determinants on financial development, further research is needed to assess the impact of each determinant and the policies that could best promote financial development.     

A Hierarchical Model of Perceived Value of Group-Oriented Travel Experiences to Major Events and its Influences on Satisfaction and Future Group-Travel Intentions

This study seeks a deeper understanding of the forms of value that travel consumers derive from a group-travel experience to a major event. We focus on specific group-travel value dimensions of social, hedonic, monetary, functional – major event, functional – event-destination tourism infrastructure, epistemic, and convenience. A sample of 389 consumers is used to substantiate our framework. We also empirically examine this model with satisfaction and future group-travel intentions – with satisfaction found to fully mediate the relationship between the perceived value of the group-travel experience and future group-travel intentions. This framework can serve to advance further theory development in this domain.     

An integrative framework for customer switching behavior

Due to increased intensity of competition, retention of customers has become a major concern in many service industries. Although researchers have investigated customer switching intention and its influential factors, the complex structural mechanisms that reduce the likelihood of switching intention in the field of financial services, especially in the banking context, have remained understudied. This paper addresses the role of customer satisfaction, customer loyalty, customer trust, and customer perceived value within a new conceptual model for customer switching intention in the banking services. In particular, the paper contributes to examine the potential moderating effect of switching barriers on the relationship between customer loyalty and switching intention as well as the relationship between satisfaction and switching intention of customers in the banking services. Data are collected through a questionnaire survey, and partial least squares-structural equation modeling is used for data analysis. Empirical results confirm the proposed model and hypotheses and show that switching barriers strengthen the impact of both customer loyalty and satisfaction on switching intention. The findings of this research offer a unified view of the structural relationships that contribute to reduced switching intention and provide more in-depth insights into the role of switching barriers in the banking context.     

Stable Tariffs and Retaliations*

A two‐country, two‐commodity model of trade is considered to reformulate the tariff retaliations. It is known that tariff retaliations lead to a Nash‐equilibrium, a non‐free‐trade outcome. However, the negotiation process underlying the Nash equilibrium does not capture the notion of retaliation properly. We use the “contingent threat situation” to reformulate tariff retaliations. In this context, we show that the free trade is a stable outcome. More surprisingly, this interesting result is also valid for the “Johnson case,” where one country is better off under the tariff‐ridden Nash equilibrium compared to free trade.     

Permissibility and use of options for hedging purposes in Islamic Finance

The debate concerning permissibility and use of options in Islamic finance is ongoing, and the issue is far from settled. Current analyses on this issue appear to focus on taking of unnecessary risks ( gharar), the perceived lack of a physical asset in an options contract, and the possibility of exploitation of the ignorant. To the extent that these factors are involved, options are not permitted under Islamic teachings (the Shariah). In this article, we investigate whether options may be permitted for hedging purposes in Islamic finance. We use equity options as an example in our analysis. After providing a brief overview of options markets, we review the existing literature and critically examine other work such as the religious decrees (fatwas). We also provide two examples, one each of call and put options, to illustrate the managerial issue of use of options for hedging purposes. Our analysis shows that options may be permitted for hedging purposes in Islamic finance as long as the underlying economic activities are themselves permissible (halal) from an Islamic point of view. The analysis also indicates that one of the key issues is related to unnecessary risk taking. The avoidance or reduction of such risks in hedging situations is largely dependent on the settlement and clearing function of the exchanges trading options, which effectively provides a guarantee of delivery. Mutual consent for entering into or canceling contracts and the issue of intangible assets also play a role in determining if options are permissible under the Shariah. We conclude the article by urging experts of Islamic jurisprudence to understand the theory and mechanics of options and use group ijitihad (consensus opinion of Islamic scholars) in conjunction with academics and experts in financial markets and instruments on this vital issue in contemporary finance for the benefit of the Islamic world as well as those trading with the Islamic world. © 2006 Wiley Periodicals, Inc.     

Merton Model and Capital Measurement in Commercial Banks: A Case Study of Selected Emerging Countries in Southeast Asia

Following the implementation of Basel III criteria concerning the supervision of banks capital, this paper attempts to examine the competence of Merton-type probability of default as an indicator for measuring optimal capital in commercial banks of five Southeast Asian emerging economies. The estimated default risk changes are consistent with the changes in market value of banks’ asset in countries studied. Using a forward-looking approach, the banks required capital has been measured to reach a hypothetical level of probability of default as an accepted level by policy makers. Empirical results show that the banks had to increase their current capital in order to reduce the risk of bankruptcy in crisis times. The findings of this study refer evidently to the efficiency of Merton-type default risk to estimate the adequate capital and to use in micro and macro-prudential studies or stress tests on commercial banks.     

Institutional Ownership Type and Earnings Quality: Evidence from Iran

Institutional ownership is an important factor in corporate governance. Institutional investors play important roles in firms because of their substantial shareholdings and their capability to monitor managers. However, the question is whether they are capable of monitoring the managers. The literature has provided different evidence for the monitoring role of institutional investors. This study attempts to provide insights into the monitoring roles of institutional investors by examining the relationship between institutional ownership and earnings quality on the Tehran Stock Exchange. Institutional investors are classified into two groups, namely active institutional investors and passive institutional investors, based on their monitoring power in Iran. A multidimensional method is used to measure the various aspects of earnings quality, such as earnings response coefficient, predictive value of earnings, discretionary accruals, conservatism, and real earnings management. The results show that institutional ownership has a positive effect on earnings quality. Similar to total institutional ownership, active institutional ownership has positive effects on proxies of earnings quality. Nonetheless, passive institutional ownership does not have any power to affect earnings quality. Moreover, lead-lag tests of the direction of causality suggest that institutional ownership leads to more earnings quality and not the reverse.     

Sanctions and the shadow economy: empirical evidence from Iranian provinces

Using Iranian province level data from 2001 to 2013, this study finds that the international sanctions of 2012/2013 had a significantly stronger negative impact on the growth rate of the shadow economy than they did on the official GDP growth rate. Thus, the international sanctions on Iran have damaged the informal economy even more than the formal economy.     

Cost-effectiveness of alemtuzumab and natalizumab for relapsing-remitting multiple sclerosis treatment in Iran: decision analysis based on an indirect comparison

Background: Alemtuzumab and natalizumab are approved as second-line therapies for relapsing-remitting multiple sclerosis (RRMS) patients in Iran who have shown an inadequate response to other disease-modifying therapy (DMT). In the absence of head-to-head trials, evaluations based on decision analytic modeling may be a suitable alternative to compare alemtuzumab and natalizumab in RRMS.

Purpose: To evaluate the cost-effectiveness of alemtuzumab compared with natalizumab in RRMS in Iran, based on an indirect comparison of clinical trial data.

Methods: A cost-utility analysis was conducted using a cohort-based Markov model to analyze cost-utility in a cohort of 1,000 RRMS patients treated with alemtuzumab or natalizumab who had failed at least one previous DMT. Costs were measured in 2018?US Dollars, and were estimated from both the societal and National Healthcare Service (NHS) perspective over a 20-year time horizon in Iran. One-way deterministic sensitivity analyses were carried out to investigate the impact of individual variables on model results.

Results: Alemtuzumab dominated natalizumab in both NHS and societal perspective analyses. From the NHS perspective, the total discounted costs per patient were estimated at $147,417 and $150,579 for alemtuzumab and natalizumab, respectively, over 20 years. The discounted quality-adjusted life years were estimated to be 7.07 and 6.05, respectively. Results were similar for the societal perspective analysis. Results were most sensitive to acquisition costs and the time horizon, while no sensitivity was observed for Expanded Disability Status Scale (EDSS) health-states utility, relapse relative risk, adverse event or EDSS-related costs, and laboratory/monitoring costs.

Conclusion: Alemtuzumab was dominant in the treatment of RRMS compared with natalizumab due to lower total cost, greater efficacy and slowing of disease progression, and lower rate of relapses over a 20-year time horizon in Iran. Comparative head-to-head trials and long-term follow-up are needed to confirm these results.