Audit and Accounting Review

Exploring Asymmetric Linkages and Volatility Transmission between Stock Market and Foreign Exchange (FOREX)

2023-08-18T07:08:55+00:00

This study examines the direction and nature of volatility transmission between the stock market and the foreign exchange market (FOREX) of Pakistan. For this purpose, daily data is gathered to conduct the analysis for both markets. Stock market returns are measured by using the KSE-100 index and the daily Pakistan Rupee-PKR to the United States Dollar-USD exchange rate is used for the foreign exchange market. Noticeably, both the variables are stationary at their first difference. Normality is examined through Skewness and Kurtosis, Autocorrelation through Correlogram Q-statistics, and the ARCH effect through the ARCH-LM test. Volatility transmission between the two markets is examined by using bivariate diagonal BEKK-GARCH and bivariate E-GARCH models. The results of the study indicate that bi-directional volatility transmission exists between the stock market and the foreign exchange market (FOREX) of Pakistan. Results from the E-GARCH model further indicate that the nature of volatility transmission between these two markets is asymmetric, which means bad news of one market has a greater impact on the volatility of another market than the good news. Hence, the results of this study also indicate that past variances of the stock market and foreign exchange market has a significant effect on their own current volatility.

Future and Current Research Directions of FinTech: A Bibliometric Analysis

2023-08-18T07:09:41+00:00

The current study aims to perform a bibliometric analysis of Fintech. For this purpose, 1,135 articles indexed on Scopus from 2002-2021 were reviewed that focused on Fintech and the banking sector. The study identified and searched "Fintech" OR “FinTech” OR Financial Technology” OR “financial technology” keyword within the title indexed on Scopus. In the second step, MS Excel and VOS viewer were used to provide visualization network and descriptive analysis of co-citation, bibliographic coupling, citation, co-occurrence of keywords and co-authorship analysis. The study found that 2021 was the leading year with 389 articles, which accounted for 34.3% of total publications, in which China was identified as the most productive country having 142 publications, accounting for 12.5% of total the publications. The current study's findings can help the future researchers and practitioners in the banking sector to take informed decisions regarding Fintech research, which can equally contribute to the advancement of the present knowledge and understanding of Fintech in the banking industry.

Examining the relationship between Managerial Ability and Credit Ratings: A Case Study of USA Oil and Gas Sectors

2023-08-18T07:17:20+00:00

The current study aims to investigate the association between a firm’s managerial ability and its issued credit rating. For this purpose, Twelve (12) companies in the USA oil and gas sectors have been selected based on their different work streams. A two-stage derived model of data envelopment analysis and the Tobit model is used for the measurement of firm’s managerial ability in this paper. For data envelopment analysis, cost of goods sold, fixed assets, general and administration expenses and intangible assets are used as input variable and operating revenue is used as output variable. To retain residual as firm’s managerial ability, Tobit model is estimated by using firm size, stock returns, leverage, operating cash flows and firm age as variables. The value of correlation test between credit ratings and firm’s managerial ability is 0.163, which indicates that there is positive linear relationship. Moreover, it is identified that an associated managerial ability is increased by 100%, credit rating also increased by 16.3%. The relationship between managerial ability and credit rating is significant and positive for USA oil and gas sectors from the period of 2006-2020. While regression analysis for all oil and gas companies of the USA indicated that 2.7% changes in credit rating occurred due to managerial ability. Therefore, this study suggests to enhance the managerial ability of firms, which leads to higher credit rating and consequently less cost of debt for their debt instruments.

Impact of Partnership Based and Non-Partnership Based Shariah Complaint Products on the Financial Performance of Islamic Banks

2023-08-18T07:04:47+00:00

The present study evaluates the impact of Shariah compliance on profitability. By applying the fixed effect model, this study examines the impact of investment in partnership-based and non-partnership-based modes of financing on the financial performance of Islamic banks. Unbalanced panel data has been extracted from the financial reports (2008-2021) of all full-fledged Islamic banks operating in Pakistan. Shariah compliance is measured using two self- constructed proxies following experts’ survey; whereas financial performance is calculated as “net income to average total assets”. The study finds that investment in partnership-based modes of financing had a positive association with financial performance. However, the study fails to find any association between investments in non-partnership based modes of financing and financial performance of Islamic banks. Moreover, the study recommends that Islamic banks should increase their investment in partnership based mode of financings as it will increase their profitability and improve their public image of being ‘Islamic’.

Cash Flows, Earnings, and Dividend Payout Nexus in Pakistan: A Case Study of KSE-100 Index

2023-08-18T07:06:00+00:00

The nexus between cash flows, earnings, and dividend payout in Pakistan holds paramount importance for investors. It enables them to assess the financial health and stability of companies listed on the Karachi Stock Exchange-100 (KSE-100) Index, make informed investment decisions, and manage risks effectively. Therefore, the current study discusses the importance of dividends in corporate finance and the factors that affect the dividend payouts, particularly in the context of Pakistani listed companies in the Pakistan Stock Exchange (PSX). The contradictory nature of dividends has made it a fundamental issue of corporate finance, which has been studied in relation to a firm’s investment and financing decisions as prime variables. This study has found that earnings per share and free cash flow affect the level of dividends in the surveyed companies, with earnings per share having a positive but insignificant impact on the dividend per share. Profitability has a positive effect on dividend payout; however, there is no significant effect of earnings per share on the dividend. The findings enhance the current body of literature by providing insights into the determinants of dividend payout among the Pakistani listed companies. Furthermore, these findings are valuable for investors decision-makers, and policy makers, which make informed investment decisions. The study also identified problems for management and investors and other researchers who are conducting different studies to assess firm behaviour regarding payout decisions with possible solutions and future implications.