Kabir M. Hassan

Determinants of Corporate Social Responsibility Disclosure: The Case of Islamic Banks

Islamic banks offer distinct financial services and as such have grown significantly in Bahrain, Bangladesh, Jordan, Kuwait, Malaysia, Qatar, Turkey and U.A.E over the past two decades. They are unique in the sense that they are accountable to fulfil a social and ethical role inherent in their character as an ‘Islamic’ institution. They also have a duty to discharge their accountability through disclosing corporate social responsibility (CSR) information consistent with the principles of Islam. However, recent anecdotal evidence finds that Islamic banks may not be fulfilling their social role in accordance with the prescriptions of Islam because they disclose less CSR information than expected. It has been suggested that disclosure may also be driven by the extant economic incentives. Hence, the exact nature of the CSR disclosure process by Islamic banks remains unclear due to a paucity of a priori research and statistical analysis of extant data. In light of that, this study develops an a priori model linking CSR disclosure to socio-political influences and corporate governance factors. Then resultant hypotheses are tested using regression analyses on a sample of 47 Islamic banks’ annual reports from 14 countries.

Efficiency Analysis of Microfinance Institutions in Developing Countries

This paper investigates technical and scales efficiencies of microfinance institutions (MFI) in three regions: Latin America countries, Middle East and North Africa (MENA) countries, and South Asia countries, and compares efficiencies across regions and across type of MFIs. We find that technical efficiency is higher for formal MFIs (banks and credit unions) than non-formal MFIs (nonprofit organizations and non-financial institutions). Furthermore, South Asian MFIs have higher technical efficiency than Latin American and MENA MFIs. The source of inefficiency is pure technical rather than scale, suggesting that MFIs are either wasting resources or are not producing enough outputs (making enough loans, raising funds, and getting more borrowers).

Efficiency Determinants and Dynamic Efficiency Changes in Latin American Banking Industries

This paper investigates the dynamic and the determinants of banking industry efficiency in Latin America. Allocative, technical, pure technical and scale efficiencies are calculated and analyzed in each country. We find that Latin American bank managers have been using resources efficiently, but they are not choosing an optimal input/output. Additionally, we find that traditional banking performance measures are positively correlated with efficiencies while variables that measure banking and financial structure development and macroeconomics present mixed results.

A macroeconomic model of the Bangladesh economy and its policy implications

This paper develops a macroeconometric model for the Bangladesh economy using nine key macroeconomic variables employing annual data from 1974 to 2000. The methodology employed in this paper uses unit root and Johansens cointegration tests followed by vector error correction model and variance decomposition to examine the dynamic relationships among macroeconomic variables. Our results show that within the context of Bangladesh, monetary policy is more important than fiscal policy. As significant amount of development expenditure for Bangladesh comes from foreign donation, it is also argued that this aid must be channeled to productive activities so that it contributes to economic growth. The domestic export base has also to be widened and diversified.

Rational Speculative Bubbles: An Empirical Investigation of the Middle East and North African Stock Markets

Despite recent extreme fluctuations of the Middle East and North African (MENA) stock markets, we do not find strong evidence of rational speculative bubbles in the perspective of both domestic and U.S.-based investors. Fractional integration tests built on ARFIMA models do not support the possibility of bubbles in the MENA stock markets. Similarly, duration dependence tests based on nonparametric Nelson-Aalen hazard functions not only reject the existence of bubbles but also support equality of hazard functions between domestic and U.S.-based investors without regard to the rapid financial liberalization and integration in the MENA stock markets.

Determinants of Credit Default Swaps in International Markets

This paper reexamines the determinants of credit default swaps (CDS) spreads in the U.S., Europe, and Asia-Pacific markets with a new data set using linear regressions. These determinants are categorized into two groups: firm level and macroeconomic variables. We also include two non-traditional moment risk variables in the analysis as we suspect that these measures may capture the effects of possible extreme downside risk, or extreme negative scenarios, in the underlying credit valuation process. Our findings from the U.S. and abroad confirm the existing evidence on the significant relationship between theoretical determinants of default risk and actual market pricing of CDS. Also, we provide additional evidence on the importance of the interaction between macroeconomic and firm-specific variables, which is common throughout the world.

Depositor Discipline and Bank Risk-Taking Behavior: Evidence from the South-East Asian Financial Crises

This paper examines whether the risk-taking behavior of commercial banks in five countries of South-East Asia changed after the Asian Crises of 1997. The paper utilizes the framework created by Gruben et al (1997, 1998, and 2003). It also examines the connection between the risk-taking behavior and depositor discipline of these banks after the Asian Crises of 1997. Based on bank level data from the Bank Scope, 2005 CD, he paper presents evidence that the state of depositor discipline is very weak in the selected countries even after the Asian Crises. Evidence also shows that the risk taking behavior of commercial banks did not change much before and after the Asian Crises of 1997, and that perfect competition prevailed both before and after the Crises in the banking sector. Finally, evidence also shows that the there is no connection between risk-taking behavior and depositor discipline.

Monetary Policy Responses to the 2008 Financial Crisis: Quantitative Easing Evidence in the United Kingdom

This paper analyzes responses to monetary policy tools during the United Kingdom’s Quantitative Easing regime from March 06, 2009 to June 02, 2010 on a set of target variables: market index, foreign exchange index, investment grade and non-investment grade bond yield, and spots and forwards of different maturities for OIS, LIBOR and Nominal Government Yield. Results suggest that conventional monetary policy tools other than a zero-bound official bank rate may still be effective. Inclusion of one unconventional tool, the increase in government gilt holdings, has significant impact on most of the target variables.

What Does the U.S. REIT Market Have in Store for Nonconventional Investors? The Case of Shariah Compliance

The authors model the behavior of a hypothetical investor who is interested in U.S. securities but is also interested in compliance with Islamic investment guidelines. They apply financial restrictions to a 1990–2010 sample of Shariah-recommended REITs. In cumulative performance tests, they find evidence of outperformance associated with compliance during the entire study period and during the early 2000s recession and the late 2000s financial crisis. In risk-adjusted tests with a univariate model, the authors also find consistent evidence of outperformance during the entire study period and in times of economic turbulence. Using multivariate models, they find that compliant portfolios do just as well as noncompliant portfolios. They conclude that financial compliance might be rewarding for Shariah-abiding investors who are interested in the U.S. REIT sector. In separate tests, the authors show that leverage and REIT performance are independent. Yet, they show anecdotal evidence that outperformance of compliant portfolios may imply efficiency of an underlying conservative, but not necessarily religious, strategy that avoids the excessive use of debt, interest, and cash.

An Analysis of Financial Preparation for Retirement

In this study, we analyze financial preparation for retirement. Specifically, probit analysis was conducted using data from the Survey of Consumer Finances to compare and contrast variables affecting retirement preparation between men and women aged thirty to thirty-nine. We specifically analyze two dependent variables: whether or not an individual is eligible for a retirement plan and whether or not an individual is contributing to a retirement plan.The findings indicate that good health and work history have significant positive effects on retirement plan eligibility whereas age and education levels have significant negative effects. Regarding retirement plan contributions, the findings indicate significant positive effects regarding income and womenhood. Therefore, the findings generally support the hypothesis of income as a predictor of retirement plan preparation for women in their thirties. In addition, the findings indicate that women who are divorced, separated, or living with a partner are more likely to contribute to their pension plans through work. Education is significant and positive as a predictor for the decision to contribute to a pension plan for women in their thirties, thus supporting our hypothesis of a significant positive relationship between education and pension plan contributions. Conversely, the findings regarding work history (length of employment and number of weeks worked per year) and the decision to contribute to a pension plan were significant and negative for women in their thirties. This result could be due to a general unconcerned attitude regarding retirement preparation in this age group since actual retirement for most is at least thirty years away. Finally, household size was insignificant as a predictor of both pension plan eligibility and the decision to contribute. Therefore, the findings do not support the hypothesis of household size as a predictor of retirement plan preparation. Thus, it appears that if individuals in large households have less discretionary income to spend on certain items, contributions to a retirement plan does not seem to be influenced by family size.