Analysing Financial Distress in Malaysian Islamic Banks: Exploring Integrative Predictive Methods

Against the background of global financial crisis, some argue in favour of the ‘resilience’ of Islamic finance, while others suggest that Islamic financial institutions are not more prone to distress and crisis than their conventional counterparts. However, there have been a number of cases of Islamic finance and banking distress in recent years, including instances in Malaysia. These cases, hence, motivated this study in terms of emphasising the importance of employing financial distress prediction models for analysing Islamic banks. This study aims at empirically exploring, examining and analysing the financial distress of the Malaysian Islamic banks. In doing so, the effectiveness of the existing early warning statistical insolvency prediction models that have been used in previous studies, and a particular model adapted by Islamic banks in Malaysia were critically evaluated. This study, hence, employed a number of models to predict the financial distress faced by Islamic banks in Malaysia. In addition, an attempt was made at the modification of the existing early warning insolvency prediction models in evaluating and analysing the financial distress of Malaysian Islamic banks. This research is constructed within four empirical chapters by employing three prediction models in assessing the financial distress of Islamic banks. The first empirical chapter analyses the secondary data collected from a sample of Islamic banks, based on selected ratios developed in the literature, whereby a comprehensive description of these selected financial ratios in terms of descriptive statistical analysis for the selected Islamic banks in Malaysia is provided. The second empirical chapter investigates the performance of the ‘emerging market Z-score’, introduced by Altman in predicting the performance of Islamic banks and conventional banks in Malaysia. The study aimed to introduce the EM Z-score as a valuable analytical tool in monitoring the deterioration of the performance of banks as well as looking at the impact of the global financial crisis on the performance of Islamic and conventional banks. This chapter examines thirteen Islamic banks and ten conventional banks during the period of 2005-2010. The results show that the EM Z-score for all banks is well above the cut-off point of 2.6, although for Islamic banks the EM Z-score showed a declining trend whilst for conventional banks it showed an increasing trend. This empirical evidence is important for the banks since it provides a warning signal to the banks’ management as well as the related parties involved in the planning, controlling and decision making process. The third empirical chapter presents the newly constructed integrated predictive model designed to evaluate and analyse the financial distress of Islamic banks in Malaysia, which can be used as an alternative model for regulators in monitoring the performance of Islamic banks that are experiencing any serious financial problems. This paper develops a preliminary model for the prediction of the performance level of Islamic financial institutions for the period of December 2005 to September 2010 by using quarterly data for ten selected Islamic banks in Malaysia. For this, factor analysis and three parametric models (discriminant analysis, logit analysis and probit analysis) are used. The results depict that the first few quarters before the benchmark quarter are the most important period for making a correct prediction and crucial decisions on the survival of Islamic banks. Thus, the results demonstrate the predictive ability of the integrated model to differentiate between the healthy and non-healthy Islamic banks, therefore reducing the expected cost of bank failure. The fourth empirical chapter conducts further exploration in predicting the financial distress position of Islamic banks by introducing new variables such as the funding structure, deposit composition, and macroeconomic variables. Using the same sample and data set for Islamic banks as in the previous chapter, this study shows the relationship between the banks’ funding profiles and other alternative variables, and the Islamic banks’ performance in Malaysia. For this, the logit model is used. Based on the results of all models, this study recommended two final models, which showed an excellent fit for predicting the Islamic banks’ performance. The results indicate that none of the macroeconomic variables included were significant, thus suggesting that the performance of Islamic banks in Malaysia was not affected by the economic conditions throughout the study period. This can perhaps be attributed to efficient regulation and supervision by the relevant authorities in the country

Social sukuk: a new mechanism to fund social services / Saadiah Mohamad … [et al.]

While the premise of Islamic finance embraces the principles of maqasid al-shariah and risk sharing with claims to social justice and welfare, the direct impact of the modern Islamic finance industry and its contribution to the social sector has been limited. This paper examines the claim among critics that there is an inherent weakness of the present day Islamic banking and finance in terms of its underdeveloped social sector and argues for the need for new models that will enhance a proliferation of shariah compliant financial products for solutions in the social sector. The paper examines the emergence in Social finance of social bonds as new financing tools targeting on social needs and problems that otherwise would not be tackled. This paper discusses the benefits of structuring such a shariah compliant product and makes recommendations for structuring this new asset class referred to in this paper as social sukuk

Perception of Prosocial Behavior in Accountability of Village Fund Management in Indonesia: the Moderating Role of Internal Control and Leadership

Purpose: This paper will talk about how the village's money is handled and how to help other people. During this investigation, topics like accountability and leadership in managing village finances, as well as internal control, will be broken down and looked at in depth. An investigation was done in the Indonesian villages out in the countryside.   Theoretical framework: the paper discusses hypotheses related to prosocial behavior which has an impact on accountability in village government in Indonesia with a moderating effect on internal control and leadership.   Design/methodology/approach: Random selection was used to select Indonesian village officials who took part in this study. There are a total of 689 village officials who participated as respondents to this study.   Findings: The results of this study show that prosocial behavior and accountability can be controlled by leadership traits and internal control mechanisms. According to what the researchers found, these factors need to be used to change the other types of responsibility variables. Internal control has a strong and negative effect on both helping others and being accountable for how village money is spent. On the other hand, leadership has a strong and positive effect on both of these criteria. Internal control also has a big and important effect on who is responsible for how village money is spent. Strong leadership can make a big difference in both of these areas.   Research, Practical & Social implications: The implication is, by looking at the prosocial behavior that occurs within village officials, the government is expected to compile implementing regulations and policies as technical guidelines as a reference for improving internal control and also leadership so as to further increase accountability.   Originality/value: This study is among the first to test empirically the full moderating effect of leadership and internal control on the relationship between prosocial behavior and accountability in managing village funds in Indonesia

The dimensions of corporate entrepreneurship and the performance of established organization

Recently, the issues of corporate entrepreneurship have evoked interest not only from academics, but also from business practitioners and policy makers. This interest stems from the recognition of the advantage that can be gained from corporate entrepreneurship activities. This paper analyses the effect of corporate entrepreneurship (intrapreneurship) dimensions on the financial performance of intrapreneurship companies of established Malaysian state government-linked corporation namely, Jcorp Group, a Johor state government-linked corporation. In this paper, there are four dimensions of corporate entrepreneurship being studied; (1) pro-activeness, (2) risk-taking, (3) innovations and (4) self-renewal. In addition, this paper also explores the moderating effects of resource availability, supportive organizat ional structure, and rewards on the relationsh ip between corporate entrepreneurship dimensions and company performance. The findings of this study show that pro-activeness has a positive and significant impact on financial performance of the company, and resource availability, supportive organizational structure and rewards do moderate the relationship between pro-activeness and financial performance. In contrast, we also found that risk-taking does not have a direct effect on financial performance of the company. However, resource availability, supportive organizational structure and rewards are shown to moderate the relationship between risk-taking and financial performa nce. Meanwhile, for innovation and self-renewal, we found that both are negatively related to financial performance. Further analysis shows that although all moderating factors were positively related with these two corporate entrepreneurship dimensions, but they are not significant

Factors affecting village fund management accountability in Indonesia: The moderating role of prosocial behaviour

AbstractPrevious research separately investigated the relationship between competence of the village official, organizational commitment, leadership, internal control, external pressure, and accountability with village official research objects and only looked at how village officials carried out their functions as members of the organization, namely the village, so they had not fully described how attitudes and tendencies individual social behavior of village officials on the imp Thus, this study tries to fill a gap in research by looking at the link between village officials’ accountability and competence, organizational commitment, leadership, internal control, external pressure, and prosocial behavior in a comprehensive research model with prosocial behavior as a moderator. This study was undertaken in all Indonesian communities to assess local finance management accountability. Random sampling was used to acquire survey data. 689 Indonesian village officials were studied. PLS-SEM analyzed data. This study found that village officials’ competency, leadership, internal control, and external pressure affect village fund management accountability. Organizational commitment and internal control do not promote local fund management accountability in Indonesia. Village finance management accountability and prosocial conduct regulate and improve leadership. Official leadership, internal control, and prosocial behavior promote village money management accountability. This work advances agency theory, stewardship theory, role theory, quality theory and financial accounting and public sector accounting, particularly in village governance

Can China’s Digital Inclusive Finance Alleviate Rural Poverty? An Empirical Analysis from the Perspective of Regional Economic Development and an Income Gap

Digital inclusive finance (DIF) plays an active role in preventing poverty-stricken groups from returning to poverty and reducing poverty. This paper empirically tests the impact of DIF on rural poverty alleviation using panel data from 30 Chinese provinces from 2011 to 2020 as a sample. It employs multiple linear regression, mediation effect models, and threshold effect models. The results show that: (1) DIF and its three sub-indicators (coverage breadth, depth of use, and digitalization degree) have significant poverty reduction effects, and the findings hold even when endogeneity is taken into account; (2) a study of regional heterogeneity found that DIF and its sub-indices, coverage and depth of use in the eastern region, have the greatest effect on the poverty alleviation of rural residents, and the effects in the central and western regions have the least effect; (3) the mediation effect test found that DIF could indirectly promote poverty alleviation in rural areas by promoting regional economic growth and narrowing the urban-rural income gap. The Sobel test shows that the mediating effect of regional economic growth is greater than the mediating effect of the urban-rural income gap; (4) it is found through the threshold effect test that regional economic growth has a double threshold effect on rural poverty alleviation, and as the threshold value continues to increase, the poverty reduction effect increases in turn. Therefore, this paper puts forward policy suggestions for the aspects of accelerating the development of DIF in rural areas, implementing regionally differentiated poverty reduction strategies according to local conditions, promoting regional economic growth, and narrowing the urban-rural income gap

The Impact of Financial Derivatives on the Enterprise Value of Chinese Listed Companies: Moderating Effects of Managerial Characteristics

Corporate managers are the central figures of corporate activity who can control the strategic direction of companies. The company’s use of financial derivatives can avoid risks and has an important impact on the value of the company. This study examines A-share listed firms in Shanghai over the period 2011–2020, uses an OLS panel and a moderating effects model, and investigates the impact of financial derivatives on firm value from the perspective of managers’ characteristics. We find that financial derivatives can significantly increase the enterprise value of Chinese listed companies, while exchange rate derivatives have a stronger impact on enterprise value. We also find that the higher the proportion of managers who hold shares and have a financial background, the better the effect of firms using financial derivatives. These research results are of great significance to the application of financial derivatives and provide companies with risk management decisions after COVID-19

Factors Affecting Accountability Village Fund Management

The purpose of this study is to investigate whether or not the accountability of village fund management is affected by factors such as prosocial behaviour, the competency of apparatus, internal control, and external pressure. All of the village fund managers that work for the 13 different village governments located in the Gunungkidul Regency of the Special Region of Yogyakarta make up the sample for this study. Purposive sampling was utilized as the method of choice for data collection in this investigation. According to PERMENDAGRI No. 20 of 2018, the sample for this study consists of 87 people who are authorities in their respective villages and are involved in the management of village money. Quantitative data are used in this investigation for the data type. The research relied on primary data collected through the use of the questionnaire method as its primary source of information. Descriptive statistics, data quality tests, and hypothesis testing are the methods of data analysis that were utilized throughout the course of this study

The Effect of Enterprise Risk Management (ERM) Implementation on SMEs Performance in Malaysia

This study aims to identify the effect of Enterprise Risk Management (ERM) implementation on SMEs performance in Malaysia. SME performance is used as a dependent variable, whereas eight (8) elements of ERM are based on the Committee of Sponsoring Organisations of the Treadway Commission (COSO) framework as the independent variables. Primary data were administered through questionnaires among 312 respondents from the main contributing sectors of SMEs; agriculture, construction, mining and quarrying, services and manufacturing across all states in Malaysia. This study employed six (6) analyses, including descriptive statistics, normality, reliability, correlation, multiple regression analysis and hypothesis testing. Results from correlation analysis indicated that the independent variables represented eight (8) elements of ERM, illustrating a positive, strong correlation with the dependent variable. Multiple regression analysis showed that ERM has a positive effect on SME performance. However, only three (3) of the ERM elements, namely event identification, risk assessment, and risk response, significantly affect SME performance. The information was gathered from a questionnaire of 312 respondents and there are only 177 respondents think that their company implemented ERM, whereas the remaining 135 do not think their company implements ERM. An ERM implementation in SMEs is expected to be able to find solutions to minimise the risks that SMEs may or may not face. Effective risk management can enable SME owners, managers and employees to achieve business objectives. As a result, risk management enhances the value of the business, increases profitability, and improves the overall performance of SMEs

Impacts of Political Risk and Macroeconomics Factors Towards Foreign Direct Investment in Developing Countries

This study examines the relationship between macroeconomic factors and foreign direct investment (FDI) inflows in developing countries. The data from the World Bank covers 21 years, from 2000 to 2020 was analyzed using the panel regression approach with E-Views. Panel regression analysis, including model selections and diagnostics, is used for inferential analysis. The main contribution of this study is the influence of political factors on FDI inflows. Political stability and corruption control are technically the most important conditions for FDI inflows in developing countries and were introduced in this study. This study found a positive relationship between GDP growth rate, imports, inflation, and corruption index with FDI inflow, confirmed by previous studies. The study also implies that the exchange rate, exports, and political stability have a negative relationship with the level of FDI in developing countries. In addition, the study found that GDP growth rate, imports, and exports significantly impact FDI inflows in developing countries, while the other variables are not significant. In other words, this result shows that macroeconomic and political factors such as import, export, exchange rate, corruption control, and political stability impact FDI inflows. Moreover, this paper provides policy recommendations to support developing countries' economies by attracting FDI and increasing its inflow