376 research outputs found

    Herd behaviour in Malaysian capital market: An empirical analysis

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    This study examines the existence of herd behavior among foreign investors in the Malaysian capital market. In methodology, the study analyzes the herd behavior by estimating vector error correction (VECM) model of FPI inflows as well as FPI outflows from/to major investors such as the United States, United Kingdom, Singapore and Hong Kong using quarterly data covering the period of Q1:1991 to Q3:2007. Additionally, we adopt an innovation accounting by simulating variance decompositions (VDC) and impulse response functions (IRF) for further inferences. The findings support the belief that there is a strong herd instinct prevailing among foreign investors in the Malaysian capital market

    Herd behaviour in Malaysian capital market: An empirical analysis

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    This study examines the existence of herd behavior among foreign investors in the Malaysian capital market. In methodology, the study analyzes the herd behavior by estimating vector error correction (VECM) model of FPI inflows as well as FPI outflows from/to major investors such as the United States, United Kingdom, Singapore and Hong Kong using quarterly data covering the period of Q1:1991 to Q3:2007. Additionally, we adopt an innovation accounting by simulating variance decompositions (VDC) and impulse response functions (IRF) for further inferences. The findings support the belief that there is a strong herd instinct prevailing among foreign investors in the Malaysian capital market.Foreign portfolio investment; herd behavior; VECM; Impulse Response Function; Variance Decomposition

    Handling Default Risks in Microfinance: The Case of Bangladesh

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    Despite the current enthusiasms in applying the concept of microfinance as a poverty alleviation tool in many countries, the risk management aspects of microfinancing should not be overlooked. This paper highlights several incidences of default risks in microfinance and subsequently, provides a comprehensive exploratory study on the various ways to handle the default risks in microfinance. While there are social and religious objectives embedded in extending microfinancing, fact is that the financiers are business entities having the objectives of maximizing returns and minimizing losses. In this regard, this paper contributes towards a more effective recovery process, so that more people can benefit from the microfinancing facilities. Several suggestions are highlighted to maximize the benefits of microfinance to both the creditors and borrowers with the objective of realizing a win-win situation for both parties.Microfinance, default risks, recovery process, Bangladesh

    Foreign Portfolio Investment and Economic Growth in Malaysia

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    This study examines the relationship between foreign portfolio investment (FPI) and Malaysia’s economic performance. In particular, the study analyses the relationship between FPI and real gross domestic product (GDP) using the widely adopted Granger causality test and the more recent Toda and Yamamoto’s (1995) non-causality test to establish the direction of causation between the two variables. Similar method is also applied on the relationship between volatility of FPI and real GDP. Additionally, the study uses an innovation accounting by simulating variance decompositions and impulse response functions for further inferences. Using quarterly data covering the period from 1991 to 2006, the study finds evidence that economic growth causes changes in the FPI and its volatility and not vice versa.. The findings suggest that economic performance is the major pull factor in attracting FPI into the country. Thus, it must be ensured that the Malaysian economy remains on a healthy and sustainable growth path so as to maintain investor confidence in the economy.Foreign Portfolio Investment, Economic Growth, Granger Causality, Toda-Yamamoto Non-causality, Variance Decomposition

    SOCIO-DEMOGRAPHIC DETERMINANTS OF CREDIT RATIONING AT BAITUL MAAL WA TAMWIL IN INDONESIA

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    This study seeks to identify credit rationing socio-demographic determinants to Islamic microfinance to achieve welfare improving goals in three Bottom of the Economic Pyramid (BOP) regions: Yogyakarta, East Lombok and Makassar, South Sulawesi, Indonesia. Another primary focus of this study is to highlight the suggested solutions from Islamic microfinance practitioners to overcome the challenges in the practice of credit rationing assessment. 2,650 borrowers at the BOP in 26 Islamic Microfinance Institutions (MFIs) in Indonesia were selected based on cluster sampling and purposive sampling methods. A questionnaire is adapted from several previous studies. Multinomial logistics regression is used in this paper. Results show that the determinant of credit rationing based on socio-demographic factors, reflecting certain socio-demographic factors that include age, gender, account balance, dependents, salary, monthly income, formal education, access to financing facility in the previous year, distance, and years of saving, has significant influence on the probability of getting financing. Thus, in order to reduce the credit-rationing problem, the major implications from this study are that Baitul Maal wa Tamwil (BMT) should enhance the participation of women, using monthly income rather than salary determinants, provide credit plus financing and realize a one village one BMT program. The solutionswould enhance the participation of BOP borrowers at BMT

    Institutional and macroeconomic determinants of financial development in the OIC countries

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    The role of a well-developed and functioning financial system to the growth process of nations is strongly recognized in both the academia and policy cycles. Consequently, the question arose that if financial development is so important to economic growth, then, what determines it is equally worthy of attention. This study is inspired by this concern and the fact that financial development in the OIC member countries is low relative to other developing countries. The study investigated the institutional and macroeconomic determinants of financial development in 50 OIC member countries over the period 2003 to 2011. Due to the potentials of country specific effects and endogeneity of explanatory variables, a dynamic panel approach that is system-GMM was employed. The results revealed that overall level of income positively influences financial development, and exchange rate encourages financial depth and lending activities. Financial openness is found to only promote financial depth, while institutional quality only promotes lending activities. On the other hand, inflation stimulates bank private credit and reduces the depth of the financial sector. This mixed results implied that, policy makers in the OIC countries, shall adopt a hybrid of economic and financial policies as well as implement political, legal and governance reforms in order to strike a balance between the needs of both the suppliers and users of funds, enhance financial development and hence promote economic growth

    Enhancing the MSME Islamic Financial Inclusion in Indonesia: An Institutional Theory Perspective

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    The concept of financial inclusion is a complex problem, and it was constructed by several aspects ranging from socio-cultural, psychological, economic, geographical and political issues. Financial inclusion under the conceptualisation of institutional theory highlights the role of institutions in active markets, government, communities and societies in explaining the financial exclusion phenomenon, emphasising its vital position as the component in influencing the realisation of financial inclusion. By implementing this theory, the main objective of this study is to examine and identify the roles of involved institutions as a critical determining factor to attain Islamic financial inclusion for the Micro, Small, and Medium-sized Enterprise (MSME) sector in Indonesia by incorporating the notion of “Institutional Isomorphism” in their operation. This study suggests that by integrating the institutional pressure in the institutional environment of the three involving sectors, namely: The public sector, Islamic financial services providers and the MSMEs industry, this system will intensify the chance of the MSMEs sector in embracing Islamic financial inclusion, improve their productivity, and contribution to Indonesia’s sustainable economy

    Why does Waqf Literacy Matter?

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    Many studies have highlighted a low literacy level of waqf among Muslims all over the world. In Indonesia, an effort to measure the level of waqf literacy using an index was initiated by the Indonesian Waqf Board in 2020. The result has proven that there is a low level of waqf literacy in Indonesia. This study aims to explore the reasons behind the low level of waqf literacy and understand the importance of waqf literacy. Based on a literature survey, the following aspects need to be clearly explained and elaborated to effectively improve waqf literacy among the public. First, the unique characteristics of waqf compared to other Islamic alms; second, waqf literacy is positively related to waqf collection; third, the utilization of waqf can be further enhanced when the literacy is higher; and fourth, disputes and conflicts about waqf ownership are frequently due to lack of waqf literacy. In summary, this study is expected to increase the interest and attention of all stakeholders toward enhancing waqf literacy. Waqf authorities and waqf institutions are encouraged to intensify education and socialization about waqf, while researchers are expected to study more on waqf literacy. To further develop the waqf sector, it is necessary to have a road map to increase waqf literacy. Originality/Value: The study aims to explore the reasons behind the importance of waqf literacy in Indonesia. Identifying these reasons in the Indonesian context could pave the way for tailored interventions and policies to improve waqf literacy, which may have implications for similar contexts elsewhere

    Foreign Portfolio Investment Inflows and Economic PErformance in Malaysia: A Disaggregated Analysis

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    Based on disaggregated data, this study empirically examines the importance of foreign portfolio investment (FPI) to the Malaysian economic performance. The study adopts the vector error correction model to analyze the relationships between FPI inflows from major investing countries, namely the United States, the United Kingdom, Singapore and Hong Kong and Malaysia’s real GDP using quarterly data covering the period from Q1:1991 to Q3:2007. For further inferences, this study adopts an innovation accounting by simulating variance decompositions and impulse response functions. This study finds that there is a significant positive association between Malaysia’s GDP and U.K.’s FPI inflow, particularly in the long run

    Banks, stock market and economic growth in developing countries: a re-assessment using panel cointegration approach

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    This study employs the panel co-integration and Fully Modified Ordinary Least Squares (FMOLS) techniques to empirically investigate the impact of financial development on economic growth in 20 developing countries. Based on data covering the period from 1989 to 2010, the results show that the contribution of intermediated funds to the growth process is relatively more significant than that of the stock market. Banks and stock markets are found to be substitute rather than compliment in financing economic activities in these countries, suggesting the availability of alternative financing for the economy. Generally, financial development is found to be important contributors to the growth process. However, overall financial depth represented by the ratio of broad money to GDP is found to be more significant than both banks and stock market in financing real GDP, suggesting that self-finance still dominates as mode of financing in developing countrie
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