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Article
Publication date: 6 July 2021

Yacine Hammami and Sabrine Kharrat

The purpose of the paper is to show that order flows determine exchange rate dynamics because they carry information about nonfundamental factors besides macroeconomic…

160

Abstract

Purpose

The purpose of the paper is to show that order flows determine exchange rate dynamics because they carry information about nonfundamental factors besides macroeconomic fundamentals.

Design/methodology/approach

To understand the role of nonfundamental factors in driving order flows, this study uses two approaches. Initially, Evans and Rime (2016) VAR framework is followed to study the incremental information transmitted by order flow compared to macroeconomic variables. Then, the study uses the settings in which Rime et al. (2010) conduct their empirical work, which gives the researcher more latitude in specifying the identity of the factors that drive order flows.

Findings

The findings evidence that order flows explain the dynamics of the TND/USD exchange rate. The results highlight that order flows convey information about technical strategies, the currency systematic factors and political risk. This study also documents the presence of a Ramadan effect in exchange rates and order flows.

Originality/value

This study makes four contributions to the literature. First, it complements the literature on the FX microstructure of emerging markets. The study investigates the information content carried by order flows, while the previous literature has focused solely on examining the explanatory power of order flows to explain exchange rates in emerging countries. The second contribution is that the study demonstrates formally that order flows determine exchange rates because they transmit information about nonfundamental factors. Third, this study is the first to examine whether order flows convey information about technical analysis. Four, the study relates order flow to nontraditional factors that are relevant to the Tunisian FX market.

Details

Managerial Finance, vol. 47 no. 12
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 14 May 2018

Abdelmonem Oueslati and Yacine Hammami

This paper aims to investigate the performance of various return forecasting variables and methods in Saudi Arabia and Malaysia. The authors document that market excess returns in…

500

Abstract

Purpose

This paper aims to investigate the performance of various return forecasting variables and methods in Saudi Arabia and Malaysia. The authors document that market excess returns in Saudi Arabia are predicted by changes in oil prices, the dividend yield and inflation, whereas the equity premium in Malaysia is predicted only by the US market excess returns. In both countries, the authors find that the diffusion index is the best forecasting method and stock return predictability is stronger in expansions than in recessions. To interpret the findings, the authors perform two tests. The empirical results suggest irrational pricing in Malaysia and rationally time-varying expected returns in Saudi Arabia.

Design/methodology/approach

The authors apply the state-of-the-art in-sample and out-of-sample forecasting techniques to predict stock returns in Saudi Arabia and Malaysia.

Findings

The Saudi equity premium is predicted by oil prices, dividend yield and inflation. The Malaysian equity premium is predicted by the US market excess returns. In both countries, the authors find that the diffusion index is the best forecasting method. In both countries, predictability is stronger in expansions than in recessions. The tests suggest irrational pricing in Malaysia and rationality in Saudi Arabia.

Practical implications

The empirical results have some practical implications. The fact that stock returns are predictable in Saudi Arabia makes it possible for policymakers to better evaluate future business conditions, and thus to take appropriate decisions regarding economic and monetary policy. In Malaysia, the results of this study have interesting implications for portfolio management. The fact that the Malaysian market seems to be inefficient suggests the presence of strong opportunities for sophisticated investors, such as hedge and mutual funds.

Originality/value

First, there are no papers that have studied the return predictability in Saudi Arabia in spite of its importance as an emerging market. Second, the methods that combine all predictive variables such as the diffusion index or the kitchen sink methods have not been implemented in emerging markets. Third, this paper is the first study to deal with time-varying short-horizon predictability in emerging countries.

Details

Review of Accounting and Finance, vol. 17 no. 2
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 14 May 2019

Youssef Riahi and Yacine Hammami

The purpose of this paper is to investigate two research questions: do accounting reports provide information that helps bondholders assess credit risk of financial institutions…

333

Abstract

Purpose

The purpose of this paper is to investigate two research questions: do accounting reports provide information that helps bondholders assess credit risk of financial institutions? What are the relevant accounting variables related to financial institutions’ credit spreads?

Design/methodology/approach

The authors estimate all models of credit spread by specifying fixed effects with year dummies.

Findings

The authors’ document that financial institutions’ cash flows and loan loss provisions (LLP) are significantly correlated with bond spreads. The authors observe that an increase in nondiscretionary LLP predicts an increase in credit spreads, as the former reflects a higher default risk. Bondholders also react negatively to an increase in discretionary LLP, viewed as evidence that a financial institution is engaged in opportunistic earnings or tax management. Finally, the authors demonstrate that the relationship between accounting data and credit spreads is stronger for high-yield bonds than for low-yield bond.

Research limitations/implications

This study has certain limitations due to the sample size and data frequency.

Practical implications

First, this paper provides strong evidence to all market participants that financial accounting reports are useful in forecasting credit risk in emerging markets. Second, the paper highlights the importance of disclosure policies and accounting transparency of financial institutions in emerging markets. Third, the results are also of practical interest to standard setters and financial regulators. The latter should consider monitoring accruals, especially the discretionary component of LLP, to mitigate the effects of accounting manipulations and managers’ opportunism.

Originality/value

First, the previous literature does not focus on financial institutions despite their key role in the economy. Second, the paper is the first to study the credit relevance of accounting information in emerging markets (Tunisia).

Details

Journal of Applied Accounting Research, vol. 20 no. 1
Type: Research Article
ISSN: 0967-5426

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Article
Publication date: 25 January 2019

Youssef Mohamed Riahi

The purpose of this paper is to investigate the impact of discretionary loan loss provisions (DLLPs) and non-performing loans (NPLs) on the liquidity risk of both Islamic banks…

1303

Abstract

Purpose

The purpose of this paper is to investigate the impact of discretionary loan loss provisions (DLLPs) and non-performing loans (NPLs) on the liquidity risk of both Islamic banks (IBs) and conventional banks (CBs) before and after the global crisis that hit nations belonging to the Gulf Cooperation Council (GCC).

Design/methodology/approach

This empirical study uses balanced panel data on 16 IBs and 58 CBs operating in the six Gulf Cooperation states covering 2000–2014. The data were obtained from the Bankscope database and the banks’ annual reports.

Findings

The results indicate that NPLs affect liquidity risk differently across the banks – specifically, there is a significant difference in the funding and managing of liquidity between the two bank types. The authors find that the influence of DLLPs does not vary across the banks in the overall analysis and before the crisis. This finding provides insights into the unique nature of banking risks in dual banking systems. The authors also find that after the crisis, the discretionary LLPs affected liquidity risk differently across the banks.

Practical implications

This study has several practical implications. First, the findings suggest that the Islamic Financial Services Board and other IBs regulators should reassess several regulations, principles and products in order to reduce their credit and liquidity risks. Second, the study emphasizes the need for banks to perform a careful assessment of the effects of their LLP policies. Finally, the findings are also relevant to bankers, as they provide empirical evidence on the effect of loan growth on bank liquidity, suggesting that bankers should improve their loan management.

Originality/value

First, this is the first study to examine discretionary LLPs, NPLs and liquidity risk in IBs; it is also the first comparative study between Islamic and CBs. Second, the study provides evidence on how the global crisis impacted the banking sector and identifies some of the main determinants of liquidity risk for both Islamic and CBs operating in GCC countries.

Details

Managerial Finance, vol. 45 no. 2
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 16 January 2024

Mohammed Almansour

This research examines the relationship between the green version of intellectual capital (IC) (measured through green versions of human, structural and relational capitals (GHC…

549

Abstract

Purpose

This research examines the relationship between the green version of intellectual capital (IC) (measured through green versions of human, structural and relational capitals (GHC, GSC and GRC)), co-creational capital (CC), green innovation (GI), technological innovation (TI) (measured through artificial intelligence) and start-up competitive advantage (SCA).

Design/methodology/approach

An online questionnaire collected data from 275 participants. To test the hypotheses, the data were analyzed using SmartPLS.

Findings

The results confirmed the positive influence of GSC and CC on TI and GI, GRC with GI and that of GI and TI with SCA. The results also reveal that IC can influence innovation and describe how innovation can drive the competitive advantage (CA) of start-ups.

Research limitations/implications

This self-report study examines the associations by collecting data at one point in time, which results in methodological limitations regarding the generalization of the results. The second limitation is that the findings are limited to start-ups.

Originality/value

This research work examined a model that combined three components of green IC, customer capital, two forms of innovation and CA. These associations have not been previously examined yet can provide useful insight into what drives green and TIs and how they further influence competitiveness. This study provides unique inferences that improve the value of the literature on IC and innovation, using start-ups as context.

Details

European Journal of Innovation Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1460-1060

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