Noryati Ahmad

Information transmission between Islamic stock indices in South East Asia

Purpose - The purpose of this paper is to investigate the transmission of information (at return and volatility level) as well as the correlation between Kuala Lumpur Syariah and Jakarta Islamic Indices. Design/methodology/approach - The daily return from July 4, 2000 to December 29, 2006 was employed in the bivariate VAR GJR-GARCH model. Findings - The results indicate significant unidirectional return and volatility transmissions from Kuala Lumpur Syariah and the Jakarta Islamic Indices. There is no evidence of asymmetric effects in volatility for both markets. However, volatility is highly persistent and mean-reverting in each market. The findings also revealed that there is low correlation between the two Islamic stock markets investigated. Research limitations/implications - The data used in this study are limited to the Islamic stock markets located in South East Asia, concentrating more on the post-economic crisis period analysis. Further research may be conducted using a different time period and frequency of data while utilizing more Islamic indices. In addition, future research may look at and compare the market interdependence of Islamic stock markets in different economic conditions such as the pre-economic crisis period, during an economic crisis period or post-economic crisis period. Practical implications - Market participants such as investors and market analysts should include the Malaysian Islamic stock market in forecasting market price movement and the volatility of the Indonesian Islamic stock market. In addition, both the Kuala Lumpur Syariah and Jakarta Islamic Indices offer potential for diversification to investors who wish to create an Islamic portfolio investment. From the regulator point of view, this study highlighted the fact that the Jakarta Stock Exchange should consider the Malaysian Islamic stock market in setting its policy to control the volatility of the Indonesian Islamic stock market because the source of volatility in Indonesian market is not only from the market itself, but also from the Malaysian market. On the other hand, in controlling the volatility of the Islamic Malaysian market, Bursa Malaysia should only implement a policy related to the Malaysian market because the source of volatility only comes from the local markets. Finally, the policy makers in both markets do not need to implement long-range measures to reduce the impact of volatility persistence in these markets. Originality/value - This is the first paper to investigate information transmission and market interdependence between the Islamic stock markets in South East Asia.

An analysis of the growth and rise of smaller Islamic banks in last decade

Purpose - The purpose of this paper is to analyse the factors responsible for the rise and growth of smaller Islamic banks in the last decade. Design/methodology/approach - javax.xml.bind.JAXBElement@72d51e31 Findings - The results of this paper show higher Originality/value - Islamic banking represents a radical departure from conventional banking, and from the viewpoint of corporate governance; it embodies a number of interesting features since equity participation, risk and profit-and-loss sharing arrangements form the basis of Islamic financing. Using econometric techniques, this paper provides valuable insights as to the stability of Islamic banks and the factors responsible for the growth of smaller such institutions that has been witnessed in the last decade.

Identifying the determinants of Malaysian corporate Sukuk rating

Purpose This study aims to identify the determinants of Malaysian corporate Sukuk rating and attempts to find out which determinant has the most significant impact. Design/methodology/approach The framework tries to establish a relationship between firm’s size, profitability, Sukuk guarantee status and types of Sukuk with Sukuk rating from the perspective of Agency Theory and Information Asymmetry Theory. The data consist of 43 Sukuk issuances from 2006 to 2015. Multinomial Logistic Regression Model is then used to find out the significant determinants of Sukuk rating. Findings The study found that only three variables significantly impact Sukuk rating. The results show that a guaranteed Sukuk Ijarah or a guaranteed Sukuk Musyarakah that is issued by a highly profitable firm has a higher likelihood of getting rating AAA or rating AA as compared to getting rating A. A type of Sukuk, particularly Sukuk Murabahah, is the most significant variable influencing Sukuk rating. However, firm size is not a significant determinant of Sukuk rating in the context of this study. Research limitations implications The first limitation of the study is the relatively small sample size. Second, the study only tested four independent variables. Practical implications Several implications are derived from the results of the study. First, new firms that are planning to issue Sukuk should consistently maintain a high level of profit and consider issuing debt-based Sukuk to ensure that the issued Sukuk have higher rating. To increase the likelihood of getting higher rating, they should also consider providing a third-party guarantor. As for existing Sukuk issuers that are in lower rating category, they should increase their profitability to be upgraded to higher rating category. Second, risk-adverse investors should invest in highly profitable, guaranteed and debt-based Sukuk, as these Sukuk are likely to be in higher rating category and provide guarantee in terms of capital payments during liquidation or bankruptcy. Third, to reduce information asymmetry, policymakers should make it compulsory for all Sukuk issuers to have their Sukuk rated annually and make it mandatory for all rating agencies in Malaysia to publish their Sukuk rating methodologies. Originality/value This paper helps to expand the limited existing literature about the determinants of Sukuk rating, particularly for the Malaysian corporate Sukuk.

Determinants of Cross Border Merger and Acquisition in Advanced Emerging Market Acquiring Firms

Abstract Cross border merger and acquisition (CBMA) deals worth over US

Assessing the stock market volatility for different sectors in Malaysia by using standard deviation and EWMA methods

2 billion every year but failure rate is between 70 to 90 percent. Many researchers have tried to explain those abysmal statistics but the outcomes are equivocal. This research aims to examine the determinants of CBMA that affect the shareholder value creation of advanced emerging market acquiring firms. Event study and regression analysis are applied for the study period 2000-2011. The result shows six determinants have a positive relationship with the shareholder value creation and are statistically significant for the advanced emerging market scenario.

Forecasting the value of credit scoring

Nowadays, the study on volatility concept especially in stock market has gained so much attention from a group of people engaged in financial and economic sectors. The applications of volatility concept in financial economics can be seen in valuation of option pricing, estimation of financial derivatives, hedging the investment risk and etc. There are various ways to measure the volatility value. However for this study, two methods are used; the simple standard deviation and Exponentially Weighted Moving Average (EWMA). The focus of this study is to measure the volatility on three different sectors of business in Malaysia, called primary, secondary and tertiary by using both methods. The daily and annual volatilities of different business sector based on stock prices for the period of 1 January 2014 to December 2014 have been calculated in this study. Result shows that different patterns of the closing stock prices and return give different volatility values when calculating using simple method and EWMA m...

Bank Fragility and Its Determinants: Evidence From Malaysian Commercial Banks

Nowadays, credit scoring system plays an important role in banking sector. This process is important in assessing the creditworthiness of customers requesting credit from banks or other financial institutions. Usually, the credit scoring is used when customers send the application for credit facilities. Based on the score from credit scoring, bank will be able to segregate the “good” clients from “bad” clients. However, in most cases the score is useful at that specific time only and cannot be used to forecast the credit worthiness of the same applicant after that. Hence, bank will not know if “good” clients will always be good all the time or “bad” clients may become “good” clients after certain time. To fill up the gap, this study proposes an equation to forecast the credit scoring of the potential borrowers at a certain time by using the historical score related to the assumption. The Mean Absolute Percentage Error (MAPE) is used to measure the accuracy of the forecast scoring. Result shows the forecas...

Assessing of Malaysian Firms’ Cross-Border Merger and Acquisition Efficiency

When are banks considered fragile and what triggers them to be fragile? This paper attempts to answer those questions by measuring bank fragility and identifying probable factors determining bank fragility of Malaysian commercial banking sector during the period of 1996–2011. This paper constructs the banking sector fragility index (BSFI) to measure fragility of commercial bank during the period studied. The index is then used to identify the determinants of commercial bank fragility. Results of BSFI show that the commercial banking sectors are in fragile condition from 1996 until 2000 and in a highly fragile stage between 1996 and 1998 since the BSFI are less than −0.50. In addition, findings based on the logistic regression analysis infer that the likelihood of Malaysian commercial banks to be fragile is significantly determined by total loans to total assets and interbank rate.

Short-Run Performance of Malaysian Acquiring Firms in Cross-Border Mergers and Acquisitions

The study of mergers and acquisitions is commonly done by many academic researchers in the area of corporate finance and covers a wide range of issues. This paper focuses on assessing Malaysian firms’ cross-border merger and acquisition (CBMA) efficiency due to the fact that Malaysian firms have been reported to be aggressively involved in CBMA deals as early as the 1990s. This research aims to assess the true efficiency of Malaysian acquiring firms listed on Bursa Malaysia by using data envelopment analysis (DEA) for the study period 2000–2011. The annual financial data of the firms involved in CBMA and the employment of DEA coupled with the statistical tool will help to evaluate the effectiveness of the firms. It is expected that there is a significant correlation between the chosen input and output factors to the actual DEA score.

Conceptual Paper of the Trading Strategy: Dogs of the Dow Theory (DoD)

It is reported that Malaysian firms’ aggressive involvement in cross-border merger and acquisition (CBMA) deals started in the early 1990s. This research aims to examine the short-run performance of Malaysian acquiring firms listed on Bursa Malaysia by using abnormal return (AR) and cumulative abnormal return (CAR) for event window (−90,+90), (−60,+60) and (−30,+30). CAR is the proxy for shareholders value creation to measure the short-run performance. Event study method and regression analysis are applied for the study period 2000–2011. The result shows that both firm-specific determinants and macroeconomic variables contribute to the shareholder value creation and are statistically significant for the Malaysian acquiring firms in cross-border mergers and acquisitions. However, only six determinants are parallel with the hypothesized statements.