Omneya H. Abdelsalam

Introducing international accounting standards to an emerging capital market: relative familiarity and language effect in Egypt

The purpose of this study is to assess the effect of relative familiarity and language accessibility on the International Accounting Standards (IASs) disclosures when IASs are first introduced in an emerging capital market. The study focuses on the annual reports of listed non-financial companies in Egypt when IASs were first introduced. The method used applies a disclosure index measurement to a sample of listed company annual reports and evaluates relative compliance with IASs in relation to corporate characteristics. The results show that for relatively less familiar requirements of IASs, the extent of compliance is related to the type of audit firm used and to the presence of a specific statement of compliance with IASs. A lower degree of compliance with less familiar IASs disclosure is observed consistently across a range of company characteristics. Consideration of agency theory and capital need theory would lead to prior expectation of a distinction in disclosure practices between different categories of companies. The results were, therefore, counterintuitive to expectations where the regulations were unfamiliar or not available in the native language, indicating that new variables have to be considered and additional theoretical explanations have to be found in future disclosure studies on emerging capital markets.

The impact of board independence and ownership structure on the timeliness of corporate internet reporting of Irish listed companies

Purpose - This study seeks to provide valuable new insight into the timeliness of corporate internet reporting (TCIR) by a sample of Irish-listed companies. Design/methodology/approach - The authors apply an updated version of Abdelsalam Findings - It is found that Irish-listed companies, on average, satisfy only 46 per cent of the timeliness criteria assessed by the timeliness index. After controlling for size, audit fees and firm performance, evidence that TCIR is positively associated with board of directors independence and chief executive officer (CEO) ownership is provided. Furthermore, it is found that large companies are faster in posting their annual reports to their web sites. The findings suggest that board composition and ownership structure influence a firms TCIR behaviour, presumably in response to the information asymmetry between management and investors and the resulting agency costs. Practical implications - The findings highlight the need for improvement in TCIR by Irish-listed companies in many areas, especially in regard to the regular updates of information provided on their web sites. Originality/value - This study represents one of the first comprehensive examinations of the important dimension of the TCIR in Irish-listed companies.

Measuring Accounting Disclosure in a Period of Complex Changes: The Case of Egypt

Significant changes in accounting disclosure are observed in periods of economic change such as those relating to emerging capital markets and programs of privatization. Measurement of the level of accounting disclosure should ideally be designed to capture the complexity of change in order to give insight and explanation to match the causes and consequences of change. This paper shows the added interpretive value in subdividing the disclosure checklist to reflect the requirements of national accounting regulations, the location of disclosure items in the annual report, and limitations on the availability of regulations in official translation to the local language. Defining targeted disclosure categories leads to significance testing of specific aspects of changes in accounting disclosure in the Egyptian capital market in the 1990s. Strong correlation of disclosure with the presence of majority government ownership of the company and the relative activity of share trading supports the applicability of political costs and capital need theories, respectively. The relation between International Accounting Standards (IASs) disclosure and the type of audit firm points to additional theoretical explanations, including relative familiarity with the legislation and compliance features identifiable with the emerging capital market. The approach described in this paper has the potential for enhancing understanding of the complexity of accounting change in other emerging capital markets and developing economies.

The exchange rate exposure of UK non‐financial companies

Purpose - The purpose of this paper is to investigate the exchange rate exposure of UK non-financial companies from January 1981 to December 2001. Design/methodology/approach - The study employs different exchange rate measures and adopts an equally weighted exchange rate. The analyses are conducted at the firm level. All analyses are conducted by regressing the firms exchange rate exposure coefficients on its size, foreign activity variables and financial hedging proxies over the whole sample period. Findings - The findings show that a higher percentage of UK non-financial companies are exposed to exchange rate changes than those reported in previous studies. Generally, the results provide a stronger support for the suggested equally weighted rate as an economic variable, which affects firms’ stock returns. The results also show a high proportion of positive exposure coefficients among firms with significant exchange rate exposure, indicating a higher proportion of firms benefiting from an appreciation of the pound. Finally, the results also indicate evidence that firms’ foreign operations and hedging variables affect their sensitivity to exchange rate exposure. Practical implications - This study provides important implications for public policymakers who wish to understand links between policies that affect exchange rates and relative wealth effects. Originality/value - The empirical results of this study should help investors to examine how common stock returns react to exchange rate fluctuations when making financial decisions, and prove useful for financial managers when measuring exposure to foreign exchange rate changes.

Exchange rate exposure: do size and foreign operations matter?

Purpose - The purpose of this paper is to examine the effect of firm size and foreign operations on the exchange rate exposure of UK non-financial companies from January 1981 to December 2001. Design/methodology/approach - The impact of the unexpected changes in exchange rates on firms’ stock returns is examined. In addition, the movements in bilateral, equally weighted (EQW) and trade-weighted and exchange rate indices are considered. The sample is classified according to firm size and the extent of firms’ foreign operations. In addition, structural changes on the relationship between exchange rate changes and individual firms’ stock returns are examined over three sub-periods: before joining the exchange rate mechanism (pre-ERM), during joining the ERM (in-ERM), and after departure from the ERM (post-ERM). Findings - The findings indicate that a higher percentage of UK firms are exposed to contemporaneous exchange rate changes than those reported in previous studies. UK firms’ stock returns are more affected by changes in the EQW, and US

Religiosity and Bank Asset Securitization

European currency unit exchange rate, and respond less significantly to the basket of 20 countries’ currencies relative to the UK pound exchange rate. It is found that exchange rate exposure has a more significant impact on stock returns of the large firms compared with the small and medium-sized companies. The evidence is consistent across all specifications using different exchange rate. The results provide evidence that the proportion of significant foreign exchange rate exposure is higher for firms which generate a higher percentage of revenues from abroad. The sensitivities of firms’ stock returns to exchange rate fluctuations are most evident in the pre-ERM and post-ERM periods. Practical implications - This study provides important implications for public policymakers, financial managers and investors on how common stock returns of various sectors react to exchange rate fluctuations. Originality/value - The empirical evidence supports the view that UK firms’ stock returns are affected by foreign exchange rate exposure.

Political Connection and Bank In(Efficiency)

The global financial turmoil of 2007–2008 underlines the importance of understanding asset securitization, a process that allows banks to shed credit risk, fund their credit growth, and arbitrage capital requirements. Examining this ethically questionable activity has become crucial given its perceived long-term social impact. This paper examines the factors that motivate banks’ decisions to enter into asset securitization. In particular, we examine the influence of both organizational and geographic religiosity as important ethical parameters of economic choices on banks’ decisions to securitize their assets. We employ propensity scores using a unique database on asset securitization of banks in 22 countries during the period of 2003–2012. We find that both types of religiosity indicators are significantly associated with banks’ decisions to securitize. Banks located in countries with high religious importance scores show a lower likelihood to securitize. We also find that religiously adhered banks are likely to embark on a constrained model of securitization, which involves a high level of monitoring. In addition, our analysis suggests that religiously adhered banks are less likely to engage in asset securitization to reduce credit risk by shifting it to new investors. This conclusion is supported by their lower credit risk in the years before securitization. Alternatively, our results suggest that these banks embark on asset securitization to improve their financial and regulatory performance. Our study emphasizes the importance of considering religiosity as an important institutional factor and a monitoring mechanism in future global banking studies. Findings in this study are of importance to researchers, to local and international regulators, and to different stakeholders in the international banking sector.

Asset Securitization and Bank Risk: Do Religiosity or Ownership Structure Matter?

Does political connection affect bank efficiency during both financial and political crises? This study addresses this question by adopting a two-stage approach that uses a quantile regression analysis of a unique dataset of listed banks in the Middle East and North Africa region. Our results show that political connection is a driving force behind bank inefficiency in the region. We find that the least efficient banks have the most significant association with political connections, thus supporting the bailout theory. We also find that political connections influenced the efficiency of banks during the 2008-9 global financial crisis but not during the 2011-13 regional political crisis. Our results provide new evidence on the applicability of established political connection theories in developing countries during political regime turmoil. We therefore recommend that global banking regulators and market participants scrutinize the political connections of banks more thoroughly.

Asset Securitization and Risk: Does Bank Type Matter?

We test the impact of religiosity and ownership structure on the risk profile of banks, which issued securitisation. We employ GMM estimation using unique database on asset securitization of 672 commercial banks (4889 year-observations) in 22 countries (from 2003-2012), which have dual banking system. We find that banks with higher securitisation activity have consistently shown a riskier profile by being significantly less adequately capitalised and offering higher ratio of net loans to total assets. Controlling for bank type (Islamic and conventional banks), we find that although Islamic banks, in general, show a conservative approach towards risk by keeping higher reserves and more liquidity, banks involved in new issuance of asset securitization as still exposed to a higher risk profile . Controlling for a country religiosity shows different risk profile of banks in countries with different religiosity thresholds. Controlling for different types of bank ownership highlights an additional exposure to credit risk in addition to capital adequacy and liquidity risks. Our results emphasize the importance of identifying the impact of bank type and the religiosity / culture factors in global banking studies. Our results are of importance to both local and international regulators as well as different stakeholders in banks.

Corporate governance and the timeliness of corporate internet reporting by U.K. listed companies

This study is among the first attempts to tests for the relative differences between Islamic and conventional asset securitizations on bases of bank’s capitalization and risk (credit risk and liquidity risk) during two evidential crises, financial crisis (2007-2009) and the political crisis (2011-2012). We employ GMM estimation for uniquely constructed data for global asset securitization of commercial banks in 22 countries in the years 2003 to 2012, data of 672 global banks (4889 year-observations). We find that on average, securitized banks are less capitalized but more liquid than non-securitized banks. Islamic banks (IBs) involved in securitization hold higher quality loan portfolios and are more prudent but less liquid than securitizing conventional banks (CBs). We find no relative differences between the two sectors with respect to capitalization. Results are robust during the financial crisis. Additional tests, distinguishes between retained and non-retained interests for asset securitizations to test whether the level of control of the securitizing assets affect banks’ risk and capital adequacy. We find that non-retain interests by banks over securitization indicate significantly high prudence by banks however; this is associated with lower liquidity Our results are of importance to both local and international regulators as well as different stakeholders in banks. The bank type does not matters but the relative size of retained interests to the total issuance is that matters because it shows that there is impact on credit risk. Constrained model of IBs do not improve their liquidity though but helped with loan portfolio.