Template-Type: ReDIF-Article 1.0 Author-Name: Nilanjan Basu Author-Name: Xing Wang Title: EVIDENCE ON THE RELATION BETWEEN INVENTORY CHANGES, EARNINGS AND FIRM VALUE Abstract: Prior studies contend that an unexpected increase in inventory reflects a firm’s difficulty in generating sales and results in negative earnings growth and stock returns. Using a sample with over 85,000 observations for the period of 1950-2005, we confirm the negative relation between inventory changes and firm performance but find that the relation is sensitive to the choice of sample period. Moreover, this relation is somewhat attenuated for firms in the wholesale and retail industry as well as for firms that normally carry low levels of inventory. Our findings suggest that the macroeconomic and industry-specific environments are important moderators of the relation between inventory changes and firm performance. Classification-JEL: G34 Keywords: Inventory; Working capital management Journal: The International Journal of Business and Finance Research Pages: 1-14 Volume:5 Issue: 3 Year: 2011 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v5n3-2011/IJBFR-V5N3-2011-1.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:5:y:2011:i:3:p:1-14 Template-Type: ReDIF-Article 1.0 Author-Name: Hsiang-Tsai Chiang Author-Name: Mei-Chih Lin Title: EXAMINING BOARD COMPOSITION AND FIRM PERFORMANCE Abstract: This paper investigates the relationship between key factors of board composition and firm performance. We find that listed companies in Taiwan are suffered from the divergence between stock-control rights and earnings distribution rights, and the divergence of rights is negatively associated with firm performance, as predicted. Besides, consistent with the viewpoint of Agency Theory that the controlling interests of CEO may induce them to enhance company performance, we find that, CEO internalization is significantly positively associated with firm performance. In addition, the results of the influence of board structure document that, the more outside independent directors of a company, the better performance the company has. Our findings provide strong support for the notion that corporate ownership structure and board compositions are key factors in determining the corporate governance efficiency and play important roles in enhancing firm performance. Classification-JEL: G34, L25 Keywords: Board leadership structure, CEO duality, Independent directors, firm performance Journal: The International Journal of Business and Finance Research Pages: 115-27 Volume:5 Issue: 3 Year: 2011 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v5n3-2011/IJBFR-V5N3-2011-2.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:5:y:2011:i:3:p:15-27 Template-Type: ReDIF-Article 1.0 Author-Name: Erie Febrian Author-Name: Aldrin Herwany Title: DEPOSITOR SENSITIVITY TO RISK OF ISLAMIC AND CONVENTIONAL BANKS: EVIDENCE FROM INDONESIA Abstract: Islamic banks operate without involving interest, and therefore are believed to be less risky during financial crises than conventional banks. This advantage may not be significant if the government either partially or fully guarantees bank deposits. In the presence of deposit insurance the public can be indifferent to risk of both Islamic and conventional banks. However, insufficient studies have examined the issue of deposit insurance impact on depositor behavior and market discipline. This research conducts empirical tests on whether the risk of Islamic and conventional banks influence depositors in Indonesia, during two periods using cross-sectional analysis. This research also investigates the behavior of Indonesian depositors towards risk of both bank types during the US crisis through panel data analysis. Data from all insured domestic banks in Indonesia, from January 2002 to December 2009 are examined. Classification-JEL: G21 Keywords: Bank Risk, Deposit Insurance, Market Discipline, Islamic Bank Journal: The International Journal of Business and Finance Research Pages: 29-44 Volume:5 Issue: 3 Year: 2011 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v5n3-2011/IJBFR-V5N3-2011-3.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:5:y:2011:i:3:p:29-44 Template-Type: ReDIF-Article 1.0 Author-Name: Önder Kaymaz Author-Name: Özgür Kaymaz Title: USING DEPOSIT INTEREST RATES IN SETTING LOAN INTEREST RATES: EVIDENCE FROM TURKEY Abstract: Bank credit margins are set by two dynamics: loan interest rates and deposit interest rates. The latter is the leading funding cost for the commercial banks. Sampling the period running from the last financial quarter of 2002 to the last financial quarter of 2009, we consider all the listed commercial banks operating in Turkey. We obtain strong evidence of one-way causality between loan interest rates and deposit interest rates. In setting their loan interest rates, banks use deposit interest rates of the preceding period. The reverse is not true. Concurring with the literature, this causation implies that deposit interest rates explain the changes in the margin. Classification-JEL: G21, M41. Keywords: Causality; Bank; Funding cost; Deposit interest rate; Loan interest rate; Size; Margin; Istanbul Stock Exchange. Journal: The International Journal of Business and Finance Research Pages: 45-53 Volume:5 Issue: 3 Year: 2011 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v5n3-2011/IJBFR-V5N3-2011-4.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:5:y:2011:i:3:p:45-53 Template-Type: ReDIF-Article 1.0 Author-Name: Domenico Piatti Title: THE IMPACT OF IAS AND BASEL II REGULATIONS ON NET INTEREST MARGIN: EVIDENCE FROM ITALY Abstract: The paper examines the impact of the costs of complying with IAS and Basel II regulations on the net interest margin and operating costs of Italian banks using bank level data for the period 2001-2007. More specifically, the paper intends to ascertain whether: a) IAS and Basel II compliance costs have increased operating costs and have been incorporated in a larger spread; b) there is the presence of scale diseconomies related to compliance costs for Italian mutual banks. An empirical analysis demonstrates that compliance costs have indeed affected operating costs and net interest margin although mutual banks do not face a higher average cost of complying with IAS and Basel II regulation, thanks to the presence of the mutual bank network which enables them to exploit economies of scale. Moreover, empirical findings show that mergers among banks can increase the impact of regulatory costs on net interest margin. These findings remain unchanged even if they are checked for individual bank characteristics represented by labor productivity, size, credit quality, loans, net fee income margin and equity. High net interest margin and operating costs tend to be associated with banks with low productivity that concentrate on traditional lending business, with high credit risk and relatively high equity. Classification-JEL: D18; G21; G28; G33; G38 Keywords: Net interest margin; compliance costs, Italian mutual banks, business processes Journal: The International Journal of Business and Finance Research Pages: 55-72 Volume:5 Issue: 3 Year: 2011 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v5n3-2011/IJBFR-V5N3-2011-5.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:5:y:2011:i:3:p:55-72 Template-Type: ReDIF-Article 1.0 Author-Name: E. M. Ekanayake Author-Name: Ranjini Thaver Title: THE IMPACT OF DOLLAR-RAND VOLATILITY ON U.S. EXPORTS TO SOUTH AFRICA Abstract:This study investigates the effects of exchange rate volatility on the top ten categories of exports by the United States to South Africa over a 20-year period from January 1990 to December 2009. The paper uses several measures of volatility to generate a measure of exchange rate volatility, which is then tested in a model of U.S. exports to South Africa. We employ sectoral trade data at the 2-digit HS level to evaluate these effects on the top ten individual commodities traded. Utilizing bounds testing cointegration, we estimate the short- and long-run impact of exchange-rate volatility on the US exports to South Africa. Our results suggest that while the effects of exchange rate volatility on exports is mixed in the short-run, in the long-run, exchange rate volatility exerts a negative effect on the U.S. exports to South Africa. Classification-JEL: F14, F31 Keywords: exchange rates, volatility, exports, ARDL bounds testing, South Africa. Journal: The International Journal of Business and Finance Research Pages: 73-85 Volume:5 Issue: 3 Year: 2011 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v5n3-2011/IJBFR-V5N3-2011-6.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:5:y:2011:i:3:p:73-85 Template-Type: ReDIF-Article 1.0 Author-Name: Kohta Takehara Author-Name: Masashi Toda Author-Name: Akihiko Takahashi Title: APPLICATION OF A HIGH-ORDER ASYMPTOTIC EXPANSION SCHEME TO LONG-TERM CURRENCY OPTIONS Abstract: Recently academic researchers and practitioners have use the asymptotic expansion method to examine a variety of financial issues under high-dimensional stochastic environments. This methodology is mathematically justified by Watanabe theory (Watanabe, 1987), and Malliavin calculus (Yoshida, 1992a,b) and essentially based on the framework initiated by Kunitomo and Takahashi (2003) and Takahashi (1995, 1999) in a financial context. In practical applications, it is desirable to investigate the accuracy and stability of the method especially with expansion to higher orders in situations where the underlying processes are highly volatile. After Takahashi (1995,1999) and Takahashi and Takehara (2007) provided explicit formulas for the expansion to the third order, Takahashi, Takehara and Toda (2009) develop general computation schemes and formulas for an arbitrary-order expansion under general diffusion-type stochastic environments. In this paper, we describe these techniques in a simple setting to illustrate thier key ideas. To demonstrate their effectiveness the techniques are applied to pricing long-term currency options. Classification-JEL: C63, G13 Keywords: Asymptotic Expansion, Malliavin Calculus, Stochastic Volatility, Libor Market Model, Currency Options Journal: The International Journal of Business and Finance Research Pages: 87-99 Volume:5 Issue: 3 Year: 2011 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v5n3-2011/IJBFR-V5N3-2011-7.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:5:y:2011:i:3:p:87-99 Template-Type: ReDIF-Article 1.0 Author-Name: Melita Charitou Title: THE ROLE OF LONG RETURNS IN SECURITY VALUATION: INTERNATIONAL EMPIRICAL EVIDENCE Abstract: This study examines empirically the role of financial information in explaining long return windows in three major capital markets, UK, USA and France. We hypothesize that the relationship between financial information and security returns improves the longer the return window, and that this robustness depends on the country under investigation. The dataset consists of more than 40,000 USA, UK and French firm-year observations over a nine year period. Multivariate statistical regression analysis is undertaken to test the major research hypotheses. Results indicate that the importance of earnings and cash flows in all three countries over a longer period of time (more than a year and up to five years) is more robust, and that investors perceive earnings and cash flows differently. Interestingly, the importance of earnings and cash flows from one to five years , as measured by the R2, increases the highest in the USA (almost quadruples), whereas increases the least in France. These results are not that surprising in that in Anglo-Saxon countries such as the USA and the UK the increase is greater than in a code law country such as France. This is due to the fact that in the shorter run there is a greater manipulation of financial information in Anglo-Saxon countries than in more conservative countries such as France. Classification-JEL: G14, G15, G30 Keywords: Capital markets, earnings, international, empirical. Journal: The International Journal of Business and Finance Research Pages: 101-110 Volume:5 Issue: 3 Year: 2011 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v5n3-2011/IJBFR-V5N3-2011-8.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:5:y:2011:i:3:p:101-110