Nur Amirah Borhan and Noryati Ahmad
This study aims to identify the determinants of Malaysian corporate Sukuk rating and attempts to find out which determinant has the most significant impact.
Abstract
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.
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Fahmi Abdul Rahim, Noryati Ahmad and Ismail Ahmad
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…
Abstract
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.
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Omar Masood, Ghulam Shabbir Khan Niazi and Noryati Ahmad
The purpose of this paper is to analyse the factors responsible for the rise and growth of smaller Islamic banks in the last decade.
Abstract
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
Z‐score analysis is used to test the stability of both smaller and larger Islamic banks. The pooled ordinary least square (OLS) regression technique is also employed to examine the factors.
Findings
The results of this paper show higher z‐scores for smaller Islamic banks indicating that the latter have tended to be more stable than larger Islamic banks over the last decade. Z‐scores tend to increase with bank size for large Islamic banks, but decrease with size for the small Islamic banks. The OLS regression results confirm that larger banks have greater income diversity than do the smaller banks.
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.
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Enrico Battisti, Luigi Bollani, Nicola Miglietta and Antonio Salvi
This paper aims to investigate the impact of leverage on the cost of capital and market value in the Indonesia Stock Exchange (IDX), where there are Sharīʿah and non-Sharīʿah…
Abstract
Purpose
This paper aims to investigate the impact of leverage on the cost of capital and market value in the Indonesia Stock Exchange (IDX), where there are Sharīʿah and non-Sharīʿah compliant firms.
Design/methodology/approach
This study uses a mixed methods sequential exploratory design and is based on an empirical analysis undertaken with a sample of firms listed on the IDX. In particular, a qualitative analysis was conducted to identify the Sharīʿah-compliant firms and the qualitative study was designed to compare some financial elements in Sharīʿah and non-Sharīʿah compliant listed companies. The correlations among the main elements observed are considered and a principal component analysis describes the framework.
Findings
First, the results of the analysis show that for the Sharīʿah-compliant companies, identified as those that apply Islamic principles, the lower level of leverage that it is typical of these type of firms implies a higher cost of capital [cost of equity and weighted average cost of capital (WACC)] than non-Sharīʿah ones. Secondly, for the Sharīʿah-compliant companies, the lower level of leverage entails a higher market value measured by the multiples method (price/earning and enterprise value/operating profit) than for non-Sharīʿah ones.
Originality/value
This paper sheds new light on how leverage can affect the cost of capital and market value in the case of Sharīʿah and non-Sharīʿah compliant listed companies in the IDX. In particular, this research highlights the fact that Sharīʿah-compliant firms, despite having a higher WACC, create more market value compared to non-Sharīʿah compliant ones.
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Sarika Jain and Shreekumar K. Nair
Extant literature reveals that the personality variable, core self-evaluation (CSE) which represents an employee’s self-assessment of himself has rarely been researched with…
Abstract
Purpose
Extant literature reveals that the personality variable, core self-evaluation (CSE) which represents an employee’s self-assessment of himself has rarely been researched with respect to sales employees. The purpose of this paper is to identify the role of personality variable, core self-evaluation (CSE), in the relationship between demands and work – family enrichment. In this study, CSE has been treated as a moderating variable in the relationship between demands and work-family enrichment. This paper also aims to validate the CSE scale developed by Jugde et al. (2003) in Indian context.
Design/methodology/approach
Data were collected through structured questionnaires from 330 sales employees belonging to firms from some of the major sectors of Indian industry namely, Manufacturing, IT, FMCG, Pharmaceuticals and Financial Services. The study first validated the CSE scale in the Indian context using exploratory factor analysis (EFA) and confirmatory factor analysis (CFA). Further, moderated regression analysis (MRA) was used to test the model.
Findings
The present research supported the 12-item CSE scale in the Indian context. Also, results of MRA suggested that, irrespective of higher work demands, sales employees having higher CSE experience higher levels of work to family enrichment (WFE). In addition, higher CSE employees tend to experience higher levels of FWE at the family front.
Research limitations/implications
In an emerging economy such as India wherein sales professionals are facing a lot of work demands, organizations should invest in their frontline employees to be able to deliver value for money to the customers and thereby gain competitive advantage. With this realization, managers should acquire and retain frontline employees with positive core self-evaluation. Therefore, organizations should select and try to retain candidates with positive core self-evaluations.
Practical implications
Corporates should focus on nurturing sales employees’ positive CSE to make sure that their employees can contentedly adjust to various challenging work situations. In addition practices like job transitions, empowerment, enrichment and rewarding employees for their desired performance might be some of the interventions which positively impact core self-evaluations.
Originality/value
This study contributes to work – family literature by addressing the role of CSE in achieving WFE and FWE among sales employees in Indian context.
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Irfan Ullah and Muhammad Arshad Khan
The purpose of this paper is to examine the determinants of foreign direct investment (FDI) by focusing on institutional and economic factors among South Asian Association for…
Abstract
Purpose
The purpose of this paper is to examine the determinants of foreign direct investment (FDI) by focusing on institutional and economic factors among South Asian Association for Regional Cooperation (SAARC), Association of South East Asian Nations (ASEAN) as well as Central Asian countries over the period 2002-2014.
Design/methodology/approach
The generalized method of moments technique is employed for analyzing the impact of institutional quality on FDI inflow by controlling for the effect of market size, domestic investment and labor force.
Findings
The authors found large variations in terms of the impact of institutional and economic variables in regards to FDI in the SAARC, Central Asian and ASEAN regions. The results reveal that real GDP, domestic investment and economic freedom index have a positive and significant effect on FDI inflows in the SAARC region, while governance index and labor force have a negative impact on FDI inflows. In Central Asia, the real GDP, domestic investment and governance index are positively associated with FDI inflows, whereas the effect of economic freedom index on FDI is negative as well as insignificant. Apart from the GDP, other variables such as labor force, domestic investment, governance and economic freedom indices influence FDI positively in the ASEAN region. It is worth mentioning here that domestic investment produces positive effect on FDI inflows in all the regions. On the whole, the authors may conclude that institutional factors play an important role in attracting FDI inflows in the ASEAN region as compared to Central Asian and SAARC regions.
Originality/value
A limited research work is available that could help in identifying the role of institutional and economic factors simultaneously in attracting FDI in the SAARC, Central Asian and ASEAN regions.
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Hanisah Ali, Saiful Anuar Karsani, Rashidi Othman and Jamilah Syafawati Yaacob
The purpose of the present study is to understand the role of auxin and cytokinin in stimulating the production of pigmented callus in Orthosiphon stamineus and to gain…
Abstract
Purpose
The purpose of the present study is to understand the role of auxin and cytokinin in stimulating the production of pigmented callus in Orthosiphon stamineus and to gain correlation between the callus colours with their antioxidant capacity and bioactive constituents.
Design/methodology/approach
In this study, plant tissue culture was used to induce production of callus of various colours from leaf explants of O. stamineus, via manipulation of plant hormones (0-2.0 mg L−1 indole-3-acetic acid [IAA] and Kinetin [Kin]). The coloured callus was subjected to solvent extraction and used for quantification of its carotenoid, chlorophyll, anthocyanin and phenolic contents. The 2,2-diphenyl-1-picrylhydrazyl (DPPH) scavenging activity of the extracts was also evaluated, before and after four weeks of storage at −20°C.
Findings
The highest mean (per cent) explants that produced roots (93.33 ± 0.05 per cent) were observed when the cultures were supplemented with 2.0 mg L−1 IAA. The colour of the callus changed with time, from green to cream to brown after two and four months of culture, respectively. Optimum production of green callus was achieved with addition of 2.0 mg L−1 Kin plus 1.0-2.0 mg L−1 IAA to the media, while cream callus in 0.5 mg L−1 Kin plus 2.0 mg L−1 IAA and brown callus in 0.5 mg L−1 Kin plus 1.5 mg L−1 IAA. Green callus was found to contain the highest amount of chlorophylls, carotenoid and anthocyanin, while cream callus contained the highest amount of phenolic compounds. The amount of pigments and secondary metabolites in the callus extracts decreased after four weeks of storage, except anthocyanin. The antioxidant potential of the extracts also increased after storage.
Research limitations/implications
The major compounds identified in the methanolic extracts of O. stamineus-coloured callus are chlorophylls, carotenoids, flavonoids and phenolic acids. Future research work should include improvements in the extraction and identification methods which may lead to detection of other compounds that could attribute to the antioxidant capacity, to complement the findings of the current study.
Practical implications
This analysis provides valuable information on the application of IAA and Kinetin (Kin) to manipulate the content of major pigments with medicinal benefits in O. stamineus by using the plant tissue culture system.
Originality/value
A comparative study on antioxidant capacity and bioactive constituents of pigmented callus from O. stamineus leaves is original. To the best of the authors’ knowledge, this is the first attempt of comparative evaluation on antioxidant potential of O. stamineus-coloured callus produced using IAA and Kin.