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Article
Publication date: 23 July 2021

Liya A, Qian Qin, Hafiz Waqas Kamran, Anusara Sawangchai, Worakamol Wisetsri and Mohsin Raza

This study purposes to measure the influencing relations between macroeconomic indicators and the prices of gold. Further study measures several factors with the gold price in the…

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Abstract

Purpose

This study purposes to measure the influencing relations between macroeconomic indicators and the prices of gold. Further study measures several factors with the gold price in the context of the United States.

Design/methodology/approach

The secondary data are collected to measure relationship and fluctuation of gold prices the data collected from the website world development indicators (WDI) for the period of 31 years 1990–2019. This paper uses different econometric analysis such as analytical unit root test for stationary of data, descriptive statistical analysis for description of data, correlation coefficient test for measuring the inter correlation, and ordinary least square regression analysis for determine the impact of dependent and independents variables. In this research paper, gross domestic product (GDP), inflation rate (IR), unemployment rate (UR), real interest rate (RIR), gross national product (GNP), standard trade value (STV) are included in macroeconomic indicators and consider as independent. The gold prices are considered as dependent variable.

Findings

This study's overall results show an important and optimistic association between GDP, IR and STV with the gold price. Moreover, the RIR shows negative and does not show significant relation with the gold prices.

Originality/value

Since several economic crises were included during the data selection studied in this research paper, data error may be present, resulting in the instability of the overall data. However, the study still hopes to find the guiding role of these macro gold price factors in the price of gold from the limited data set. The basic scope of research is that research is limited in the United States.

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Article
Publication date: 9 March 2020

Sayed Hashem Al-Hunnayan

This study aims to find the determinants of the capital structure of Islamic banks in the Gulf Cooperation Council countries (GCC). The uniqueness of the case of Islamic banks…

1686

Abstract

Purpose

This study aims to find the determinants of the capital structure of Islamic banks in the Gulf Cooperation Council countries (GCC). The uniqueness of the case of Islamic banks stems from the fact that they are not only subject to the supervision of financial regulatory bodies that organize the banking sector (e.g. central banks) but also subject to the guidelines of Shari’ah law governing their financial transactions, products and contracts. Such characteristics are expected to have an impact on the capital structure decisions of Islamic banks compared to their conventional counterparts.

Design/methodology/approach

To achieve the research purpose, an empirical model was constructed to describe the relationship between leverage and the independent variables. The empirical model was tested through multivariate regression analysis using a panel data approach of 12 Islamic banks in the GCC for the period 2005-2014. Three types of regression analysis were used as follows: ordinary least squares (OLS), fixed-effect and random-effect regressions on panel data.

Findings

The research findings show that the leverage of Islamic banks in the GCC is positively related to size of the firm (SIZE) and growth opportunity (GROWTH); and it is negatively related to profitability of the firm (ROA), tangibility of the firm’s assets (TANG) and financial market development (MRKT). The results indicate that larger Islamic banks tend to be relatively more diversified with higher credit ratings, which lower their cost of funding and relatively increase its profitability and the bank’s customer/depositor base. The results also show that higher profitability ratios indicate relatively more internal funds to cover future investments, which leads to less reliance on external funds in the form of debt and/or equity. However, the higher the growth opportunities of Islamic banks, the faster the depletion rate of internal funding, and the more external debt financing is acquired to cover the expansion plans. In addition, the results show that in developed financial markets, savers tend to purchase less traditional depository products, and they prefer to invest directly in the financial markets to avoid higher commissions. The results are in line with the pecking order theory, which states that Islamic banks in the GCC tend to prefer sources of funds that have the least transaction cost and reveal minimal information to competitors. Hence, bank management resort to internally generated funds by its operations rather than acquiring external funds. Furthermore, the results are weakly explained by the agency theory, which states that as the firm assets become more tangible, the required monitoring cost is reduced; and hence, shareholders will have less tendency to raise more debt for the purpose of sharing the monitoring cost with debt holders.

Research limitations/implications

This research study contributes to the theory of capital structure in re-validating the findings of a previous theoretical and empirical study on capital structure in the GCC and abroad. It helps understand the capital structure of Islamic banks in comparison with financial and non-financial firms. Future research is recommended in several areas. In terms of the methodology, it is recommended to conduct the research topic surveying management and financial executives of Islamic banks in the GCC; this will validate the results using a triangular approach supported by the findings of this paper. It is also recommended to apply the research methodology in other parts of the world where Islamic banking exists. Finally, as studies on the capital structure of financial institutions and other regulated sectors are rare, it is recommended to intensify research effort in these sectors to strengthen our knowledge of capital structure.

Practical implications

From a practical perspective, this research bridges the gap between theory and practice in many aspects. The findings can serve Islamic bank executives as guidelines to understand the market and competitive reaction in response to capital structure decisions. On the other hand, research analysts and equity holders can use the findings in their debt and equity research valuations, assessment of the size of dividends and profit distributions, and to make more informed decisions to buy/sell financial securities. Furthermore, the findings help regulatory bodies to issue informed regulations in relation to capital adequacy ratios, reserve requirements, provisions and payout decisions to achieve policy intended purpose. In addition, organizations that are responsible for setting accounting and audit standards for Islamic banks will learn more about the industry practice; and hence, be able to pass practical standards. Moreover, the findings realize the recommendations of international financial regulatory bodies, such as the International Monetary Fund (IMF), the World Bank (WB) and other concerned organizations that emphasize the importance of further understanding of financial institution practices, to enable more effective formulation of risk management techniques, which may prevent future financial crisis.

Originality/value

This paper was amongst the few research studies conducted on determinants of capital structure in the GCC and specifically on the Islamic banking sector.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 4
Type: Research Article
ISSN: 1759-0817

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