Challenges of Contemporary Economics

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Volume 13 (2019) Volume 12 (2018) Volume 11 (2017) Volume 10 (2016) Volume 9 (2015) Volume 8 (2014) Volume 7 (2013) Volume 6 (2012) Volume 5 (2011) Volume 4 (2010) Volume 3 (2009) Volume 2 (2008) Volume 1 (2007)

Volume 13 Issue 3 (2019)

Editorial letter original article

pp. 223-224 | First published in 30 September 2019 | DOI:

Abstract

Editorial letter



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An Investigation of the Moderating Effect of Liquidity on the Relationship between Debt and Financial Performance of REITs in Malaysia: An Optimal Liquidity Estimation original article

pp. 225-238 | First published in 30 September 2019 | DOI:10.5709/ce.1897-9254.309

Zalina Zainudin, Mazhar Hallak Kantakji, Omer Bin Thabet, Nur Syairah Ani, Nursyuhadah Abdul Rahman

Abstract

Numerous studies on Real Estate Investment Trusts (REITs) have claimed that the high dividend payout requirement has constrained the ability of REITs to use internal earnings and that they have to rely on debt financing to support their funding requirements. However, there is also some empirical evidence showing that the use of debt by REITs has adverse effects on the financial performance of REITs. To reconcile the empirical evidence that is obtained from the REITs literature, this study aims to empirically examine how and to what extent the effects of debt on financial performance are contingent on other factors. In this regard, liquidity is hypothesized to moderate the relationship between debt and financial performance and this study will simultaneously estimate the optimal liquidity level that could optimize the financial performance of REITs. The sample for the study consists of all MREITs for the time period from 2005-2016. The study applies the continuous sequential breakpoint threshold regression model specifications of WarpPLS 5.0 (Bai & Perron, 2003; Kock, 2015; Hansen, 2001; Perron, 2006) to analyze the moderating effects of liquidity and the optimal liquidity level on the debt-financial performance relationship, respectively. The findings reveal that the correlation between financial performance and debt is conditioned by liquidity while preserving a certain level of liquidity is negatively related to the debt and financial performance relationship. Thus, an appropriate level of liquidity needs to be maintained to attain the optimal level of liquidity and to optimize financial performance. It is found that each MREITs needs a liquidity level of more than 5.78% of its total net assets to optimize its financial performance. The findings offer a useful guide for MREITs to manage their optimal liquidity level.

Keywords: Debt, Financial Performance, Liquidity, Optimal, REITs

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Dynamic Panel Model of Dividend Policies: Malaysian Perspective original article

pp. 239-252 | First published in 30 September 2019 | DOI:10.5709/ce.1897-9254.310

Nor Anis Shafai, Annuar Md. Nassir, Fakarudin Kamarudin, Norhuda Abdul Rahim, Nor Hayati Ahmad

Abstract

The aim of this paper is to identify the key determinants of the dividend policies for Malaysian listed firms. The sample in this study incorporates the top 100 listed firms on Bursa Malaysia (Bursa) over a ten-year period from 2007 to 2016. The dynamic panel data set was constructed using the sample firms. The results indicate that dividend policies are positively significantly related to profitability and firm size in Malaysia. Thus, this suggests that Malaysian listed firms determine their future dividends based on past dividend payments. Meanwhile, dividend policies are negatively and significantly associated with leverage and business risk. Therefore, this study used the generalized method of moments (GMM) to reveal unique findings and the findings should inspire analysts, policy makers, institutional investors and investors to examine the dividend policy puzzle, especially for developing countries.

Keywords: Dynamic panel, key determinants, lagged dividend, developing countries, dividend policy

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The Effectiveness of the Bank Lending Channel: The Role of Banks' Market Power and Business Model original article

pp. 253-268 | First published in 30 September 2019 | DOI:10.5709/ce.1897-9254.311

Omar Alaeddin, Moutaz Abojeib, Wajahat Azmi, Mhd Osama Alchaar, Kinan Salim

Abstract

This paper examines the effectiveness of the bank lending channel in a dual banking system in Malaysia, where both conventional and Islamic banks operate alongside each other. It also investigates the impact of bank competition on lending channels in financial systems. Using panel data from both Islamic and conventional banks in Malaysia, our findings indicate the ineffectiveness of the bank lending channel. Further, the empirical results suggest that the impact of monetary policy on bank lending does not depend on bank competition. In other words, the effectiveness of the lending transmission channel does not depend on the market power of the individual banks. Furthermore, the effectiveness of the lending channel appears to be independent of whether the bank is Islamic or conventional. This result is probably explained by the fact that the vast majority of Islamic banks in Malaysia are subsidiaries of conventional banks. Policymakers therefore do not need to differentiate between conventional and Islamic banks in regard to the effectiveness of the bank lending channel.

Keywords: Bank competition, Bank lending channel, Dual banking system, Islamic banking, Monetary policy

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The Impact of Emotional Intelligence on Work Performance: Perceptions and Reflections from Academics in Malaysian Higher EducationObitat endiaest que original article

pp. 269-282 | First published in 30 September 2019 | DOI:10.5709/ce.1897-9254.312

Ratneswary Rasiah, Jason J Turner, Yew Foo HO

Abstract

Using the ‘emotional competence framework’ developed by Goleman (1998), this research aims to clarify the role that identified antecedents of emotional intelligence play on academics’ work performance. Specifically, the research will examine the relationships between self-management, self-awareness, relationship management and social awareness and work performance in higher education. The research comes as a response to the existing literature, which predominantly examines university work performance and employability from a student perspective. This perspective is usually in the context of university-led initiatives and the ability of these initiatives to engender the employability skills students require for a job and the more generic discussion surrounding how prepared graduates feel for a disruptive employment market. Examining academics’ perspectives gives some initial insight into the skill sets that academics feel they are developing in the university environment and the role that these skills play in academic performance and ultimately in their contribution to the knowledge economy. In an increasingly competitive market where workers have to compete against each other as well as the technological alternatives to human capital, namely, automation, machine learning and artificial intelligence (AI), academic and practitioner assessments of an individual’s work-readiness has gathered momentum. A gap in the literature is apparent in the perspectives of individuals who are teaching those employability skills, specifically, whether these individuals feel that those skills that are less easily automatable are being appropriately developed in their skill set. Using a survey with 103 academics from a university in Malaysia, the research addresses an identified gap in the literature around emotional intelligence and the labor market. The research also informs the wider literature on work performance and advances research in the area of employability in the context of the 4th industrial revolution.

Keywords: Human Capital, Higher Education, Emotional Intelligence, 4th Industrial Revolution

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A Conceptual Model of Customer Satisfaction: Moderating Effects of Price Sensitivity and Quality Seekers in the Airline Industry original article

pp. 283-292 | First published in 30 September 2019 | DOI:10.5709/ce.1897-9254.313

Harith Yas Khudhair, Ahmad Jusoha, Abbas Mardania, Khalil Md Nora, Dalia Streimikieneb

Abstract

Passenger satisfaction and loyalty are crucial for success in the airline industry. To achieve customer satisfaction and loyalty, it is important that airlines provide high-quality services. This paper examines different elements of service quality in the airline industry, including the moderating effects of price sensitivity and quality seekers on the level of passenger satisfaction. The moderating effect of price sensitivity on passenger satisfaction has received less consideration in the existing literature. Service quality has been divided into three main categories: preflight, in-flight, and postflight services. This paper provides a conceptual framework for assessing the moderating effects of price sensitivity and service quality on passenger satisfaction. The study was conducted by performing a literature review of existing studies of the topic and related issues. Information was obtained from journal articles. The literature was reviewed for accuracy, relevancy, and other validating elements. The findings reveal that the service quality of all three categories has a positive effect on passenger satisfaction. The results indicate that passenger satisfaction consequentially translates to passenger loyalty (Elkington, 2004). The findings indicate that price sensitivity and quality seekers have a significant impact on the relationship between service quality and the level of passenger satisfaction. High price sensitivity reduces the positive effects of service quality on passenger satisfaction. Low price sensitivity increases the positive effects of service quality on passenger satisfaction. Existing literature agrees that customer satisfaction is subjective and varies across consumers. Therefore, analyzing the correlation between service quality and satisfaction has been a complex task (Briliana, 2018).

Keywords: Service quality; Customer satisfaction; Customer loyalty; Price sensitivity; Quality seekers; Airline.

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Value of Excess Cash Holdings of Financially Unconstrained Companies original article

pp. 293-304 | First published in 30 September 2019 | DOI:10.5709/ce.1897-9254.314

Ernie Hendrawaty

Abstract

This study provides an investigation into the link between financial constraints and cash holdings from the perspective of a developing country. It is based on the view that managers acting as agents are managing firms on behalf of shareholders, which is leading to agency conflicts and hence giving rise to the Free Cash Flow hypothesis. In addition, the management of cash looks at liquidity as well as the resources of a firm in order to invest in future growth. The current study thus provides a comparison of the value of excess cash holdings by examining the impact of financial constraints. The analysis is based on a single dimension, as well as multiple criteria dimensions, where the findings indicate that excess cash holding is less valuable for unconstrained companies. This suggests that agency problems are the main motives behind excess cash holdings for these companies. Furthermore, the findings indicate that the values are large for constrained firms providing insights into the need for managers of these companies to evaluate cash management strategies in order to enhance corporate value. Furthermore, it provides useful insight for regulators as well as shareholders in terms of the importance of governing and regulating capital markets in the context of a developing country despite having significantly lower balances relative to developed markets.

Keywords: Cash holdings, financial constraints, firm value

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An Empirical Analysis on the Application of Financial Derivatives as a Hedging Strategy among Malaysian Firms original article

pp. 305-316 | First published in 30 September 2019 | DOI:10.5709/ce.1897-9254.315

Jaafar Pyeman, Shahsuzan Zakaria, Nor Asyiqeen Mohd Idris

Abstract

Financial derivatives play an important role in helping companies manage the risk involved in interest rates, currency exchange rates, and equity markets. This study investigates the factors that influence derivative usage in Malaysian firms, as not much research has been conducted on the Malaysian market. Objectively, this study aims to determine the application of derivatives in Malaysian corporations by using a sample of 58 nonfinancial firms over the period 2011 to 2016. Relying on secondary data and focusing on a quantitative approach, the regression results conclude that the leverage, capital expenditure ratio and profitability factors are significant in the use of financial derivatives among Malaysian financial firms. This study provides some insights for policymakers to understand how derivatives can be used as off-balance-sheet risk management tools for Malaysian financial firms, thus minimizing these firms’ risk exposure.

Keywords: Derivatives, Hedging, Developing country, Risk management

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Determinants of Brand Equity: Communication of Corporate Social Responsibility (CSR) versus CSR itself and Company Credibility original article

pp. 317-334 | First published in 30 September 2019 | DOI:10.5709/ce.1897-9254.316

Mahrinasari MS

Abstract

This research aims to develop the model of corporate social responsibility (CSR) image in building brand equity as empirical support for the model proposed by Chahal and Sharma (2006) and Hoeffler and Keller (2002). Data from 564 individual potential consumers were collected using on-line and off-line surveys and were analyzed by implementing the two-step approach of structural equation modeling (SEM). The main finding is that CSR communication has a greater role in creating brand equity than CSR dimensions and company credibility. A new and important finding is that CSR image acts as a mediating variable. These results imply that CSR communication is a strategic tool to eliminate stakeholders’ skepticism toward CSR activity, consequently building strong brand equity value. Some practical implications and avenues for future research are also explained.

Keywords: CSR Image, Brand Equity, Company Credibility, and CSR Communication

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10 

Information Quality and Management Support as Key Factors in the Applications of Continuous Auditing and Continuous Monitoring: An Empirical Study in the Government Sector of Indonesia original article

pp. 335-350 | First published in 30 September 2019 | DOI:10.5709/ce.1897-9254.317

Slamet Soedarsono, Sri Mulyani, Hiro Tugiman, Didik Suhardi

Abstract

The objective of this research was to verify the effects of information quality and management support as critical contributors to the successful application of continuous auditing and continuous monitoring in the government sector. This study utilized survey research that was conducted in the Line Ministries (LMs) in Indonesia. The research data was collected through questionnaires, face-to-face interviews, and focus group discussions. The structural equation modeling (SEM) approach was used for data analysis with the assistance of Lisrel 8.8 statistical software. The result shows that there is a strong influence of information technology and management support on the applications of continuous auditing and continuous monitoring. Another finding is that an improved application of continuous monitoring results in an improved application of continuous auditing in the Line Ministries in Indonesia.

Keywords: Management Support, Information Quality, Continuous Auditing, Continuous Monitoring, Structural Equation Modeling

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11 

Stock Market Trends and Oil Prices: Evidence from a Developing Country original article

pp. 351-362 | First published in 30 September 2019 | DOI:10.5709/ce.1897-9254.318

Anggraini Dewi, Phonwattana Somsathid, Sudawan Somjai, Erlane K. Ghani, Zulfikar Bagus Pambuko

Abstract

This study examines the influence of oil prices, business size, and return on equity investment, market liquidity, systematic risk and portfolio investment on the Indonesian stock market. The main dependent variables of this stock market study are the four dimensions of stock market efficiency, stock market return, stock market valuation and stock market volatility. Data were gathered over the 2008-2016 period with annual observations for 30 firms currently listed in Indonesian financial markets. A two-fold regression analysis is applied. First, the impacts of explanatory variables on stock market indicators and oil prices is examined through a separate regression technique. Next, the lagged values of oil prices are added to the model to reflect their empirical influence on stock market measures. The study findings indicate that oil prices significantly affect all the performance indicators of the Indonesian stock market. Market liquidity also has a significant impact on the stock market. When the lagged predictors of stock market efficiency, stock market valuation, and stock market volatility were added, they were found to be significantly associated with the first lag of oil prices. These findings provide important justification of the literature on financial markets and their behavior when oil prices change. However, the study is limited with respect to other economic variables whose effects on the stock market is not observed. Future studies can address this constraint by taking the GDP, inflation, interest rates, and interaction of regional financial markets as core determinants of the local stock market in Indonesia.

Keywords: Stock market efficiency, oil price volatility, Indonesia, financial market, GDP

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12 

Financial Development, Market Freedom, Political Stability, Economic Growth and CO2 Emissions: An Unexplored Nexus in ASEAN Countries original article

pp. 363-374 | First published in 30 September 2019 | DOI:10.5709/ce.1897-9254.319

Muhammad Haseeb, Samanan Wattanapongphasuk, Kittisak Jermsittiparsert

Abstract

The prime objective of the current study is to explore the nexus among financial development, market freedom, political stability, economic growth and CO2 emissions in ASEAN countries. The present study has attempted to examine the asymmetric association among financial development, CO2 emissions, and economic growth. The data for the variables are obtained from the World Bank. The CO2 emission is measured in kilotons. The Johansen cointegration technique has been used for analyzing the long-term association. The results of the political freedom model indicate that in countries where there will be political stability, their CO2 emission will be low. A number of research papers have investigated the relationship between the environment and political freedom. A positive relationship has been found by most of the studies; however, these studies have not taken CO2 emissions into account. The probability of making agreements at international conferences is directly linked with the political freedom to lower the level of global pollutants. This study proves that the implementation of such agreements has started recently and a significant impact of political freedom on emissions cannot yet be finalized with the limited data available. Financial development appears to have a significant relationship with carbon emission. This study will be helpful for policymakers and researchers in understanding the issues related to financial development, market freedom, political stability, and economic growth and CO2 emissions in ASEAN countries.

Keywords: Financial development, Market freedom, Political stability, CO2 emission, ASEAN countries

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