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1 JIFE , Volume 9 , Number 2, 2009
JIFE , Volume 9 , Number 2, 2009 ISSN: 1555 - 6336 ABSTRACTS 1. A CR I T I CAL I N VE S T I GAT I ON OF THE FUNCT I ON OF GOLD RES E RVES A T TH E L E B AN E S E C E N T RA L BAN K (BD L ) E li e Mena s s a , Uni v er s i t y o f B alam an d , Le ba n on AB S TRACT The ac a de m ic and prof es sio n al pr e ss cites vari o us m otives for holding gold b y central ba n ks, in particular, for r e as o ns of por t folio diversif i c ation, econ om ic sec u rity, phys i cal s e curi t y , un e xp e c ted n e e d s, confid e nc e , inc o m e and insur a nce, and as a store of value. This stu d y s h ows that there are str o ng indicatio n s that s e veral of these m otiv e s do n ot hold f o r the Leb a n e se c a se, in p art i c u lar the i nves t m ent/return a nd securi t y /confide n ce persp e c tives, due to legal co n s tra i nts a nd the ch a r ac teristics of the Leba n ese public d e bt. Mor e over, the pap e r pro p os e s differ e nt inves tm ent portfoli o s as alternat i v e us es of the BD L ’ s gold holdin g s, b a s e d on sc e n a rios p re p ar e d by the IMF F ina n ce Dep a rt m ent in 2008. It s ho ws t h at investing part of the go l d ho l d i ngs i n a b a l anced p ortfo l io of 60% equity a n d 4 0% treas ur y bonds a nd gilts (US a n d UK: even ex p osur e ) would yie l d co n s i d er a ble returns that cou l d be us e d to red u ce the publ i c d e bts over ti m e. Further rese a rch is n eed e d to inv e stigate the ac cept a ble l e v e ls of the different typ e s of r i sks a n d the risk - ret u rn trad e - off l e vel that m ust be t a rget e d by the B DL. Mor e over, r e al ann u al inter e st rates (inste a d of average r e al annual re t urn p e r decade) on tr ea s ury bills, treasury bo nd s and equiti e s cou l d be used by fut u re studies to assess the perfor m ance of the prop o s e d portfolios w h ich c o uld pr o v ide a detail e d view of the ye a rly var i ation. From a differ e nt p ersp e ctive, b y u s ing the stan d ard d e viation of the av e r a ge r e al ret u rn perf o r m ance of tre a sury b on d s a n d e q uity, future s t udi e s can ac co u nt for the worst/b e s t scen a ri o s d u ring a part i cu l ar p e riod of ti m e. Ke y word s : Central Banks, Gold Holdings, IMF, Public Debt 2. FINANCIAL DISTRESS RISK AND STOCK RETURNS: EVIDENCE FROM THE MALAYSIAN STOCK MARKET Fazilah Samad, University of Malaya, Kuala Lumpur, Malaysia Mohd Azhar Mohd Yusof, University of Malaya, Kuala Lumpur, Malaysia Roselee Shah Shaharudin, University of Malaya, Kuala Lumpur, Malaysia AB STR ACT Usi n g Z - S c o r e b ankruptcy p r edic t i o n mod e l a s the proxy o f dis t r e ss ri s k a n d t h e s u bs e q u e nt r e a lis e d st oc k r e t u r n s o f t h e di s t r e ss - l i s t e d c om p a n i e s a s a p r o x y o f s y s te m a tic ris k , w e f ou n d t ha t di s t r e ss ri s k and s i ze and book - to - m a rket e q ui t y e ff e ct are n o t sig n ifica n t e n o u g h t o ex p lain the expected stock r e t u r n s. W e also found t h at the t h e o r e tic a l e xp e c t a t i o n of t h e size a n d b o o k - t o - m a r ket e quity e f f e c t o n di s t r e ss r

2 i s k al s o d o e s n o t h o
i s k al s o d o e s n o t h o ld in the c a se o f t h e Ma l a ysi a n d istr e ss li s t ed - f i r m s. Howe v e r, si m i l a r t o the fin d i ngs of Griffin and L emmon ( 20 0 2 ), we found a s i g n ifica n t inv e r s e r e l ations h ip b e t w een dis t r e ss risk and b o ok - t o - market e q ui t y w h ich s h ow that M a l a ysi a n d istress liste d - c o m p a n i e s with h i gher proba b ility of distr e ss risk d i s p lay lower bo o k - to - m a r k et v a lue of equity r a t i o. Th u s it is i n conc l usive t o d e duce t h at distr e s s r i s k i s a sy s t e m atic r i sk in r el a t i on to t h e Mal a ysi a n sto c k m a r ket. Ke y w o rds : D istress e d c o m pa n i e s, s t ock r e t u rn, ba n k r u p t cy ris k , s y s t e m a t ic r is k JIFE , Volume 9 , Number 2, 2009 ISSN: 1555 - 6336 3. ASIAN CRIS I S AND T HE EXPENDITUR E : EARN I NGS RELATI O N SHIP A. Can Inci, Bryant Univ e r s i ty, Rhode Isl a nd, USA ABS TR ACT In this paper the Asian crisis is exa m ined at the fi r m level. The objective is to provi d e insi g ht to the recent fina n c i al cr i s is w h ich started n ea r the end of 2008 and h a s sp a nn e d the US eco nom y and m ost of m ajor eco n o m ies aro u nd the world. Specif i c al l y , the capital ex p endit u re – profitability (earn i n g s) relationship is exa m ined in the fir m s of eleven Southe a stern Asian c o untries be fo re, d uring, a n d after the Asian cr i s is. Earni n gs lead to an i n cr e ase i n expe n diture in Asi a n countri e s b ef o re, d u ring, a nd after t h e cr i s is. T his m eans that the profits of c om pani e s are used f o r inv e st m ent purposes, r e gardless of the legal system of the country, or the lev e l of financial m arket d e ve l op m ent. Howev e r, the relatio n sh i p from expendit u re to profitab i lity e x h i bits very diff e rent ch a r a c ter i stics. Asian co u ntri e s g o verned by civil law se e m to have fir m s gen e r a ting profits f ollowi n g ex p endit u re. On the other hand, there is no e v id e nce which sug g ests that ex p enditure lea d s to positive profits in co mm on law c o untri es . This conc l usi o n is m u ch m ore pro n ou n c e d pos t - A s i a n cr i s is. C o rp o ra t e gov e rn a n c e sys t e m s in civil law co u n t ries h a ve respo n ded f a ster to the Asian cris i s than those in co mm on law countri e s . This is not entire l y s u r p risi n g given the fact that s t r u ctural cor p orate gover n a n c e ch a ng e s in co mm on law co u ntri e s m ust be i m plemented at numero u s fina n c i al policy i n stitutions of the co u nt r y. Ke y word s : A s ian Cr i s is, Capital E x penditure, Profitability 4. ASSESSING THE EFFICIENCY OF M I CROF I NANCE INSTITUTIONS USING DA T A ENVELO P MENT A N AL YSIS K omla n S ed z ro , Uni v er si t y o f Q ue b e c, Mon tr e al , Ca na d a Mar i a m K ei t a , I s lami c De v el o p m en t B an k, O ug ad o u g o u , B ur k in a F a s o ABS TR ACT We a pp l y Da t a Enve l op m ent Analysis to eva l uate the relative effici e ncy of Microf i na n ce Institutions within the W e st Afri c an E c ono m ic and Monet a ry U n ion (WAE M U). Our obj e c tiv

3 e i s to veri f y if these ins
e i s to veri f y if these institut i ons wh i c h m ust contin u ous l y try to str i ke a co m pro m ise betw e en t h e i r s o cial role and fi n a n c ial profitability do o perate e fficiently. We fi n d t h at MFI within t h e WAE M U are a c tual l y c h ar a c ter i z e d b y i n cre a sing retur n s t o scale. O u r r e sults also s h ow that the effic i ency l evel is very s im ilar within t he sa m e co u ntry, b ut differs from one country to anoth e r. Pol i tical e n viro nm ent is co n s i der e d a s a possib l e explanati o n of the between countri e s effic i ency differ en c e s . Ke y w o rd s : Da t a E n v el o pm e n t A na l y s is ; E f f i c i en c y Co m p ar i s on s ; Mi c r o f inan c e I n st i t u t ions 5. A ST U DY OF RUSSI A N EQUITY OFF E RING S : H O W IMPOR TA NT IS THE U ND E R W RIT E R? Susan R. H u me, The Col l ege of N e w Jersey, USA Raj n e e sh S h arma, Saint Jos e ph ’ s Uni v ersity, USA ABS TR ACT We examine stock issu a nce for Russia, the re - e m erging develop e d market that has be e n import a nt during the years 2005 - 20 0 7. Usi n g Blo o mberg data, we do not fi n d su p port that the Russ i a equity markets are influ e nc e d by the u nderwriter. We find that retur n s are positive on the first day of trading for both initial p ublic offeri ng s (IPOs) and seasoned equity offeri n gs (SEOs), a nd they a re p ositive for S E Os a nd nega t ive for IPOs duri n g t h e month after t he first day. The SEOs re t ur n s in the m onth after the first JIFE , Volume 9 , Number 2, 2009 ISSN: 1555 - 6336 day are i nflue n ced by the pr e s t i ge of the un derwrit e r wi t h low e r retu r ns for f i r m s with m o re pr estigi o us und e rwriter. There is very little evidence to s u p p ort that shor t - term retur n s follow the traditional m o dels exp e ct e d for the underwriter. We also find the number of institutional buyers to be positively re la ted to the init i al pl a c em e nt price a n d i n stitutional o w n ership to be a s ignifi c ant fa c tor for IPO return s . Ke y word s : IPO, SEO, Ru ss i a 6. DETERMINANTS OF DIVIDEND PAYOUT POLICY: EVIDENCE FROM BAHRAINI FIRMS O m ar I. H . J u h mani, Uni v ersity of B a hra i n , Ba h r ain A B S T R A CT The pr i m ary o b j e c t ive o f this pap e r is to ide n t ify the d e t e rmin a n t s of divide n d p a yout p o li c y of Ba h raini co mp a n i e s li s ted in B a hr a in S t o c k E xc h ange, to a c h ie v e t h a t goal a s a m p le o f 35 Ba h r ai n i c o m p anies wi t h d a ta o f 20 0 6 a nd 2 007 was t e s t e d . D e sc ri p t i v e a n d s t a t i s t i c a l t es t s w e r e u s e d t o a n a l yze t h e d a ta o f t h e s t u d y, a m u l t i p l e r e gr e ssi o n m o del u s ed to e xa m ine t h e r e l atio ns h ip b et w een the fo u r i nd e p e n d e nt v ari a b l e s : p r o f i t a bility; p r e v i o u s y e a r d i v ide n d s ; f i nanci a l l e v e r a g e and s i ze o f firm on the c a s h d ivi d e nd c h a n g e in B a h r aini c o mpani e s ( d e p e ndent v a r i a b le). The re s u lts r ev e al t h at p r o f i t a b ility h a v e t h e gr e a

4 t e s t effe c t o n t h e c u r
t e s t effe c t o n t h e c u rr e nt year c a s h d i v i d e nds c h an g e , foll o w e d b y p r e v io u s y e ar d i v ide n d s a n d s i z e o f Ba h ra i n i co m p a n ies li s t e d in B a h r a i n Sto c k E xc h a n g e , w h e re a s t h e r e w a s n o r e l a ti o n s h i p b e t w een c a s h d i v ide n d ch ange a n d fi n a n c ial le v erage. K e y w ord s : D i v idend P a y o u t P o licy, D i v idend C h a n ge, D e t e r m in a n t s , Ba h r a i n Sto c k E xc h a n g e 7. LIQUIDITY RI SK IN THE RO M AN I AN CR E DIT U NION Adrian M o r a r, Babes - Boly a i University, Cluj - N a p o c a, Rom a nia ABS TR ACT Liquidi t y i s n ec e ssary to the b a nk i n stitutions f o r co m pe n sati n g the await e d o r n ot await e d b alance sh e ets fluctuati o ns and for p rov i ding the n e c e ssary asse t s to develop m ent. The l i quidity re p r e s en t s t h e cap a city of a ba n k i nstit ut ion to cope e fficiently with de p osit withdrawals and oth e r payable d eb t s and c o v e r i ng the e x tra financi n g necess a ry, f o r cr e dits and inv e st m ent p ortfolio. A ba nk disp o s e s of an ad e qu a te liquidi t y potential wh e n it ’ s able to obtain the n ec e ssary f un ds ( b y ra i s i n g the d e bts, bond i ng, assets selli ng ) i mm ediately and at a re a s o n able p ric e . The price of the liquidity dep e n d s on the m arket co n ditio n s and o n the m arket p e rc e ption of the risk l evel of the d e btor institution. Key w o rd s : Liquidi t y , Bank de p osi t s, Extre m e liquid i ty JIFE , Volume 9 , Number 2, 2009 ISSN: 1555 - 6336 8. DIRE C TION OF INTERE S T RATE M O VEMENTS A ND I N TERE S T RATE T R E NDS OF M E XICAN TREA S URY SECURITIES Á n ge l S am ani e go - A l c á n t ar , I ns t i t u t o T ecnol ó gi c o de E st udio s S upe r io r e s d e O cc id e n t e a t G u a da l a j a r a, México C a rlo s Om a r T re j o - P e c h , Uni ve r s i d ad P ana m eri c ana a t G ua d ala j a r a , M é xi c o S amue l M on g r u t - M o n t al v a n , I ns t i t u t o T e c nol ó gi c o y de E st udio s Su pe ri o re s d e Mon t e r r ey , Qu e r é t a r o, México ABS TR ACT This e m piric a l stu d y f o c u s e s o n the sh o r t - end of t h e M ex i can y i eld curve. C o ns i s t ent with the fixe d - i n c om e literature we sh o w that three f a ct o r s (l e v el, st e e p ness, a n d c u rvat u r e ) exp l ain sh oc ks on the s h ort - e nd of t h e Mex i c a n y i eld c u rve. F urth e r, usi n g pri n cipal co m pon e nt a nalys i s , we p rov i de i ) a t h re e - fact o r mo del to f o r e c a st the dir e ct i on (up or down) of T r e as u ry bil l s in t er e st rates m ove m ents a n d ii) a t o ol to detect, a p ri o ri, chan g e of trends on Tre a s u ry bil l s interest rat e s. The thre e - fact o r m odel succe e ds 84 % of the ti m es on for e c a sting the d i recti o n of Tr e as u ry bil l s in t er e st rat e s m ove m en t s. Ke y w o rd s : Mex i can T re a sury S e curiti e s , Princ i pal Co m ponent A n alysis, F i xe d - Inco m e Se c u ritie s , Intere s t Rate Foreca s t, Me x ico 9. THE LOAN LOSS RESERVE, COMMERC I AL LENDING AND THE

5 PREDICT I ON OF RETURN ON ASSETS IN
PREDICT I ON OF RETURN ON ASSETS IN SMALL U.S. BANKS FROM 1988 - 2008 Lei W e n, Buena Vista Uni v ersity, Storm Lake, Iowa, USA ABS TR ACT This study i n vestigat e s the determin ant s of return on assets (R O A) in small U.S. banks. This pa p er us es the data from 1988 to 2008 to sh o w that the ratio of loan loss res e rve to total loans is positively rel a ted to ROA and the ratio o f nonperf o rm i ng com m erc i al loans to total co m mercial lo a ns is n e gatively ass o ciated with ROA in small U.S. banks. T h e results de mo nstrate that these 2 loan - q uality - re l ated ratios may be good pr e dic t ors of the overall fina n c i al perf o rma n ce mea s ured b y ROA in s m all U.S. banks. Ke y words : Return on A s sets, S m all B a nks, Co mm ercial L e nding 10. STATISTIC A N ALYSIS OF B A NK I NG RISKS R a d u P op , Va s il e G oldi s Uni v e r s i t y , A rad , Ro m an i a ABS TR ACT In the m arket econo m y t h e b a nki n g system has to establ i s h i t s strate g y c o ncerni n g with the last d e velop m ents in the w o rld fina n cial cri s is. Tha t ’ s why, in this paper I try to establ i s h the roots wh i c h e v ery credit i n stitut i on has t o follow in th i s co m pl e x pr oc es s, in ord e r to pr ev ent the ba n ckruptcy. Key w ord s : return on e qui t y , credit risk, liquidity, fina n cial r e s o urc e s JIFE , Volume 9 , Number 2, 2009 ISSN: 1555 - 6336 11. A DYNAMIC CONDITIONAL CORRELATION ANALYSIS FOR EMERGING MARKET INTEGRATION AND PORTFOLIO CORRELATION Xi a oming L i, M a ssey U n ivers i t y , Al b any C a mpus, N e w Zea l a n d Lip i ng Zo u , Mass e y U n iversit y , A l bany Campus, N e w Z e a l and A B S T R A CT This res e a r ch e m p iri c a lly inv e s t ig a t es t h e m a rket integ r a t i o n i mpa ct on t h e c o r r elation b e tw e e n th e l o c a l m a r k e t p o r t f o lio a n d t h e r eg i o n a l m a rk e t p o r t f o li o , f o r s e v e n A si a n emergi n g m a r k e t s. U s ing the D y namic C ondition a l Cor r e lation (DC C ) model, the u n c o n d iti o n al c o r r e lation in D C C m o del is allowed to d e p e n d o n the tim e - v a r y i n g lev e ls of t h e l o c a l m a r ket i n t e g rati o n a n d the r e g i onal m a rket integr a t ion. O u r r e s u l t s s u ggest th a t the correl a t ion bet w e e n t h e l o cal emerg i n g market p or t folio a nd the r e g i onal mar k e t p o r t f o lio is t i m e - v ar yi ng a n d d y n a mi c , a nd b o t h the loc a l mar k et integ r a t ion and the r e g i onal m a r k et integ r a tion ha v e h a d i m p a c t s o n the c o rr e lation. Furt h e r a n al y s is is c a r r i e d to e x pl a i n th e s e i m p a c t s , u s i n g we a lth - co n s t r a i n t ( W C ) t h eory a n d por t folio - reba l an c i n g ( P R) t h eor y . Our r e sul t s s u g g e s t t h at im p a c t s fr o m t h e lo c a l mar k et i n tegration a n d the r e g i o n a l m a r k e t integ r a t ion a r e o f WC n a t u r e for s o me c o u n t r i e s, a n d of PR n a t u r e s for o t he r s. K e y w ord s : market i n t e g ratio n , p o r t f o lio c o r r e lation, DCC, we a lt h - c o n str a in, po r t f o lio r e balanci