The Dynamic and Dependence of Takaful and Conventional Stock Return Behaviours: Evidence from the Insurance Industry in Saudi Arabia

This paper investigates the dynamics of volatility in the stock market using competing univariate GARCH specifications. Moreover, it provides a study of the pairwise correlation pattern of stock returns for a wide range of Saudi Arabian insurance business lines by using a dynamic DCC-GARCH model. Our results show that volatility responds asymmetrically to shocks with a persistence of variance in the stock return data, supporting the presence of irrational behaviour as well as the effectiveness of a cross-market diversification strategy. Finally, we reach a point at which, between every two-business line stock returns, there is a dynamic conditional correlation.     

Low Cost Microcomputer Software for Multi-Attribute Decision Analysis

Total product quality is multidimensional and includes customer acceptance as well as the usual quantitative elements for conformance, performance and reliability. Also included are broad ranges of operational expectations that are specific to the particular product. Thus to assess overall quality requires analysis of a multi-attribute vector of quality measures, some of which are subjective but cannot be ignored in making quality-related decisions. Warranty costs reflect the overall effect of these elements and can serve as an overall measure for making economic decisions. In this paper, we will summarize warranty cost models and describe two warranty planning problems that are important in engineering economic decision making.     

Audit committee quality indices,reporting quality and firm value

We investigate the relation between audit committee (AC) quality indices, financial reporting, internal control quality and firm value using a US dataset for the period 2002–12. The indices are developed by linking firm value with principal component analysis (PCA) factors based on a broad set of 82 AC variables, some of which influence the quality of the AC, but are not addressed in prior literature. Significant AC factors include ‘overlapping directors’, ‘busyness’ and ‘foreign director’, and we use these factors to develop ‘high’ and ‘low’ AC quality indices. We show that low AC quality firms are more likely to manage earnings, be external auditor dependent with respect to non‐audit tax services, and switch to a lower quality auditor. Low AC quality firms are also more likely to have internal control concerns disclosed by predecessor auditors, including accounting issues, financial restatements, audit opinion concerns and deficiencies that undermine internal control effectiveness. Further, they are more likely to receive an audit report containing additional explanatory notes. Conversely, high AC quality firms are significantly less likely to have these concerns. Our findings highlight the value of using AC quality indices in delivering greater oversight of the financial reporting process.     

Excess control,agency costs and the probability of going private in France

The current study investigates the determinants of going private (GP) in France. It contrasts a sample of 161 firms that went private between 1997 and 2009 with a propensity-score-matched sample of firms that remained public during the same period. The results indicate that, unlike for firms that remain public, the largest controlling shareholders (LCSs) of GP firms control their firms using an incommensurately small fraction of ultimate cash flow rights. This is consistent with the view that agency problems between large and minority shareholders make public firms less attractive to investors, which reduces the benefits of staying public and encourages the LCSs to take their firms private or accept takeover offers. Additional results show that GP firms have more undervalued stock prices and higher free cash flows than non-GP firms. Expected interest tax shields, low growth opportunities, and pre-GP takeover interest do not seem to affect the probability of GP.     

A note on reliability properties of k-record statistics

LetY _k,n denote the nth (upper) k-record value of an infinite sequence of independent, identically distributed random variables with common continuous distribution function F. We show that if the nth k-record valueY _k,n has an increasing failure rate (IFR), thenY _l,n (l<k) andY _k+1,n+1(n≤k+1) also have IFR distributions. On the other hand, ifY _k,n has a decreasing failure rate (DFR), thenY _l,n (1>k) has also a DFR distribution. We also present some results concerning log convexity and log concavity ofY _k,n .     

On the Reputation of Islamic Banks: a Panel Data Qualitative Econometrics Analysis

This study investigates the issue of reputation for Islamic banks. Bank reputation can either be modelled using a direct approach based on Game Theory (Chemmanur and Fulghieri in J Financ 49:57–79, 1994) or through an indirect approach that investigates linkages between conventional and Islamic banks. Adopting the indirect test approach, we propose a binary measure of Islamic Banks (IBs) reputation by testing their dynamic interactions with regard to conventional banks. Interestingly, we propose different qualitative econometric specifications to capture the drivers of IBs’ reputation. Using panel data for 10 major conventional banks and 10 Islamic banks over the period April 2006 – February 2013 (about 17,800 observations), we show that reputation probability can significantly increase in line with Islamic banking performance, while excess risk taken by Islamic bankers will decrease it. Further, we show that an environment with high global financial risk -induced for example by an increase in conventional product risk- has a negative effect on IBs’ reputation.     

Exploring efficiency differentials between Saudi higher education institutions

There have been considerable public debates surrounding the efficiency of Saudi higher education institutions, specifically after Vision 2030. We explore the efficiency of institutions of higher learning in Saudi Arabia. Panel data from 61 higher education institutions are employed for the academic years 2008–2014 to estimate efficiency scores. Also, second stage regression analysis was employed to identify the main determinants of efficiency scores. We conclude that despite exponential growth in government funding for the higher education sector, technical efficiencies remained almost stagnant over the study period along with a persistence of inefficiencies. Second stage regression results confirm that institution ownership itself does not have a significant effect on efficiency scores. However, being a university and acquiring more than 20 years of experience have a positive impact on efficiency scores. An increase in both lower secondary completion rates and percentage of female students in secondary general education increases efficiencies, whereas higher employment to population ratio and increasing female academic staff ratio in tertiary education reduces institutional efficiencies.     

On the relationship between energy returns and trading volume: a multifractal analysis

Forecasting and modelling commodities price movements and the activity of energy markets are of real interest to investors and policymakers, especially during turbulent times. This study investigates the volume–returns relationship for two major energy markets (oil and gas) during the recent global financial crisis. Unlike previous studies, we examine this relationship by applying an original fractal approach to intraday data, which has the advantage of accounting for further non-normality, nonstationarity, and fat-tailedness properties. Our study provides two interesting findings. First, we find a significant multifractal relationship between returns and volume in both markets and across all timescales, suggesting nonlinearity in the cross-correlation between returns and volume and rejecting the efficiency assumption. Second, the measure of multifractality in this relationship shows that the magnitude of the fluctuations during bearish and bullish trends affects the volume–return relationship differently, and that the oil market exhibits higher volatility than does the gas market.     

Asymmetric impacts of insurance premiums on the non-oil GDP: some new empirical evidence

ABSTRACT

In this paper, we study the influence of insurance premium on the non-oil gross domestic product in Saudi Arabia. We implement the nonlinear autoregressive distributed lags. The results show that the relationships between insurance premiums and non-oil gross domestic product manifest a nonlinear behaviour. In other words, insurance premiums via positive and negative shocks lead to an increase of growth in the non-oil sector in the long term, whereas the lagged level shocks negatively affect the non-oil GDP in the short run. In addition, the examination of the multiplier effect suggests that positive cumulative changes in insurance premiums and inflation can effect much larger changes in non-oil GDP, while shocks in government spending have a symmetric effect on non-oil GDP growth.