Rafiqul Bhuyan

Understanding the risky nature of the airline industry has received attention in the tourism literature from separate angles. Although the systematic risk of the airline industry has been examined before, idiosyncratic risk has largely been ignored. This study fills this gap in the tourism literature by investigating the effect of passengers’ air travel on systematic and idiosyncratic risks of the U.S. airline industry. Using historical air travel data and utilizing both OLS and fixed-effect models, this paper documents negative relationships between the occupancy of airline seats and idiosyncratic risks for 21 U.S. airline companies. This negative effect of occupancy is more pronounced if air travel distances are shorter, companies have lower leverage ratios, and companies are smaller in size. Policy implications for both airline managers and investors are provided.

In this paper, we examine both short-term and long-term reactions of stock prices after restatement of earnings by the public companies. We analyze a sample of companies that have restated earnings. In order to accomplish our objective, we utilize the standard event study methodology. Our results indicate that the market usually perceives restatement of earnings negatively. This is evident from the fact that both upward and downward restatements show a negative impact on the stock price. In general, the impact of the restatement announcements is significant for all the prediction intervals. However, the short-term reaction is more pronounced compared to long-term reaction. The negative impact is much higher for those reasons that are directly related to the earnings management than those that do not involve any active earnings management.

We develop a price predictor for the underlying stock on the option maturity day using the distribution of open interest over the available put and call strike prices. This predictor, along with the contemporaneous stock price when the open interest is observed, is used in a regression model for the stock ...

Using a standard partial adjustment model and US firms, we study the relationship between managers’ failure to achieve target labor productivity and their tendency to manage earnings. To overcome the endogeneity problem, we employ an instrumental variable technique based on negative investment growth and find that managers, experiencing a labor productivity gap, tend to manage earnings by manipulating discretionary accruals and real operating activities. Additional analysis suggests that elements of personal value maximization biases drive the estimated effect of the labor productivity gap. Our results are robust considering variation and alternative measures of statistical sensitivity. The positive association between the labor productivity gap and earnings management is also consistent with the opportunistic financial reporting hypothesis and impression management theory.

PurposeStudent approaches to studying were explored in business courses with samples in China, Kuwait and the USA. Information on approaches to studying is critical as delivery and content of educational practices are increasingly adapted to different world regions.Design/methodology/approachThe Revised Approaches to Studying Inventory (RASI) was administered to address the extent to which students focused studying on deep learning of concepts, surface learning/memorization of material or strategic maximization of grades.FindingsResults suggested (1) acceptable reliability for the RASI scales, (2) higher mean scores on deep, surface and strategic approaches for the Kuwait versus the China or USA samples, and (3) an interaction effect between country sample and strategic studying on the dependent variable of reported grade point average.Originality/valueThe research focuses on student initiative in the educational process. Also, comparative evidence from the Middle Eastern context is...

In this paper, we have investigated the volatility transmission in the financial markets of G-8 countries by using the VAR-EGARCH techniques. From the empirical analyses, it is fairly clear that volatility transmissions are present between the G-8 countries during the period of 1995 to 2007. Our analyses indicate that the volatilities of some of the G-8 countries are due to the volatility from other markets. Of the countries whose volatilities are significantly affected by the volatility of other

In this paper, we use daily closing data on CBOE options of 30 stocks during February through July of 1999 to investigate whether options open interest contains information that can be used for trading purposes. Individual stock price at option maturity is first predicted based on the distribution of options open interest. Several stock only and stock plus options directional trading strategies are then considered after comparing the predicted stock price at maturity and the actual stock price at the trade initiation date. In our sample, these trading strategies generate better returns compared to the S&P 500, the buy and hold strategy involving the sample stocks and the Merton et al (1978) style covered call strategy. Our empirical evidence thus indicates that non-price measures of activity in the derivatives market such as the open interest contain information about the future level of the underlying asset. This lends support to prior works (such as Copeland and Galai (1983), and ...

In this paper, we survey a wide range of theoretical and empirical papers on derivatives markets to address the information contents of trading activities in derivatives markets. Both theoretical and empirical research on options market and futures market indicate that the presence of alternative markets may be a factor for informed traders ’ presence in one of or in both markets to trade on their information. One group of researchers support the hypothesis that information reflects in derivatives market first and underlying stock market lags in information transmission. Another group of researchers support the hypothesis that information reflects in stock markets first and trading activities in derivatives markets are not significant. Since researchers are not in agreement in this issue, it raises a potential for further research on different activities of derivatives market.

We examine the Asia banking acquisitions for the acquiring bank using an event-study methodology. Acquisition announcements are generally associated with a gain in value for the acquirer in the long term. The market reaction of China, Hong Kong and Taiwan are similar to the announcement of bank M&A events. They all have large cumulative abnormal returns after the announcements in the short time or long time period. Singapore is another case. It only reacts 5 to 10 days before the announcement, and there is no reaction after that. The results of Malaysia and Indonesia are different from other four countries. There is insignificant positive or negative performance of cumulative abnormal return to the announcement in Malaysia. But there is significant negative abnormal return from t-30 to t-20 before the announcement in Indonesia on average. Moreover, we also find that cross-border banking acquisitions announcements during 2002 to 2010 in Asia markets are found to be associated with ne...

This study investigates whether performance indicators and size have any impact on executive compensation of commercial banks listed in the Dhaka Stock Exchange (DSE) Limited, Bangladesh. Several statistical models are deployed to test the influence of organization performance & size on the compensation of the executives. The results of this study show that there exists significant relationship between the executive compensation with organization performance and size. However, the outcome(s) of this study provides a general outlook to reduce the agency problem between the investors and managers of the banks listed at Dhaka Stock Exchange Limited, Bangladesh.

This paper investigates the volatility transmission in the financial markets of G-8 countries by using the VAREGARCH techniques. From the empirical analyses, it shows that volatility transmissions are present between the G-8 countries during the period from 1995 to 2007. The analyses indicate that the volatilities of some of the G-8 countries are due to the volatility from other markets. Of the countries whose volatilities are significantly affected by the volatility of other markets are: Canada, France, Italy, the UK and the USA. Among these five countries, Canada, the UK and the USA seem to be very highly inter-related. The countries that are very dominant in terms of transmitting volatility are: Russia and the USA. Interestingly, Japanese markets do not seem to have any significant effect on other G-8 markets. However, there have been significant volatility transmissions from the financial markets of Canada, Russia and the UK to the Japan markets. The paper contributes to the lit...

The objective of the study is to explore various micro and macro variables that affect stock returns of the Dhaka Stock Exchange surrounding the global financial crisis. We collect a sample of 30 listed banks covering the period of 9 years (2009 – 2017) for our study. The results indicate that debt to asset ratio (D/A), market capitalization (MKT CAP), interest rate, and foreign exchange rate (ForEx Rate) have positive and significant relationships with stock returns. On the other hand, inflation and leverage have negative and significant influence on stock returns among the eight micro variables and four macroeconomic variables that were used in our analyses.

The impact of failure of financial institutions is beyond just the failure of a public corporation. The failure of financial institutions in the USA, is a clear evidence that the greater macro impact is beyond just the failure of few financial institutions. It can bring down the entire economy and can have global devastating impact. By realizing the grave systemic risk of the failure, US government is forced to intervene and bail out many institutions for greater macroeconomic reasons. It raises the view that perhaps the current regulating policies and methods are lacking efficiency in predicting the possibility of failure beforehand and hence are not effective in preventing that to happen. This research applies several existing methods of institutional failure and test the signaling ability of each method in predicting the bankruptcy beforehand. The authors apply Moody’s financial ratios, Standard and Poor’s financial ratio, Vaziri’s financial ratio, Altman’s Z score and then apply...

Using cross-sectional panel data over eleven years (2009–2019), or 1001 firm-year observations, this study examines the relationship between capital structure and firm performance of service sector firms from Australian stock market. Unlike other studies, in this study directional causalities of all performance measures were used to identify the cause of firm performance. The study finds that long-term debt dominates debt choices of Australian service sector companies. Although the finding is to some extent similar to trends in debt financed operations observed in companies in developed and developing countries, the finding is unexpected because the sectoral and institutional borrowing rules and regulations in Australia are different from those in other parts of the world.

We examine the impact of efficient working capital management on market value and profitability. Using secondary data on selected firms from Dhaka Stock Exchange we explore the effects of various working capital components (i.e. cash conversion cycle (CCC), current ratio (CR), current asset to total asset ratio (CATAR), current liabilities to total asset ratio (CLTAR), debt to asset ratio (DTAR), siz,e and growth) to the firm’s performance by looking firm’s value i.e. Tobin’s Q (TQ) and profitability i.e. return on asset (ROA) and return on invested capital (ROIC). Our results show that, for both food and overall manufacturing sectors, there is a significant association between working capital variables and firm’s value & return on assets, but an insignificant association with return on invested capital.

In this research, we evaluate the US investors' trading pattern and choice of market timing in the presence of implementation shortfall. Results show that when investors decide to trade, implementation shortfall is being ignored. It is observed that stock performance on Wednesday is positive in the presence of positive and significant implementation shortfall i.e., traders do not seem to manage implementation shortfall during trading on Wednesday. It is also observed that investors seem to ignore the implementation shortfall in April. This behavior seems to persist in other types of market times such as turn-of-the-month, week-of-the-month, and quarter-of-the-year effects on implementation shortfall. We conclude that investors behave aggressively to buy stocks during certain days and times of the year ignoring implementation shortfall.

PurposeWe investigate the relationship between chief executive officer (CEO) compensation and a firm's financial performance in the insurance industry to determine CEO pay policies that are more effective in promoting specific financial corporate goals.Design/methodology/approachConsidering different components of executive pay, we investigate the latter’s relationship with the corporate performance of the insurance industry using the generalized method of moments (GMM) model developed for dynamic panel estimation. Our data encompasses the periods before and after the 2008 financial crisis.FindingsWe observe that after the crisis the insurance industry experienced a major change in executives’ compensation packages. While CEOs’ compensation was primarily based on bonuses pre-crisis, the average size of the bonus was reduced to one-third of the level, stock awards and nonequity incentives were doubled and option awards increased almost 70 percent in the post-crisis period. It is ...

Abstract This paper investigates whether financial reforms promote entrepreneurship. Using a panel of 41 developed and developing countries from around the world, we find that financial sector reforms are positively associated with early-stage entrepreneurial activity. In a variety of robustness checks, including a falsification test, we fail to find the evidence that this relationship is driven due to the omission of unobserved, country-specific factors. Investigating the relationship between reforms in different dimensions of the financial sector and entrepreneurship, we find reforms in directed credit, credit controls, banking supervision, and international capital flows dimensions to be significantly associated with early-stage entrepreneurial activity.

Chasing performance is a constant battle among fund managers and other investors. Stock picking ability is not the only means to perform that chase well. Trading wisely by managing transaction costs, which comprise all visible, invisible, and implied or hidden costs, is also a significant factor. In his seminal paper, Perold (1988) was the first to point out that fixed charges are not the only costs of trading. Instead, they are rather a small portion of the total transaction costs that include other costs known as “implementation shortfall.” In this short article, the authors extend the existing literature by highlighting various aspects of the execution and opportunity costs that can give traders a much clearer understanding of implementation shortfall and help them to use this guidance in trading wisely.

The impact of failure of financial institutions is beyond just the failure of a public corporation. The failure of financial institutions in the USA, is a clear evidence that the greater macro impact is beyond just the failure of few financial institutions. It can bring down the entire economy and can have global devastating impact. By realizing the grave systemic risk of the failure, US government is forced to intervene and bail out many institutions for greater macro-economic reasons. It raises the view that perhaps the current regulating policies and methods are lacking efficiency in predicting the possibility of failure ahead of time and hence not effective in preventing that to happen. In this research we apply several existing methods of institutional failure and test the signaling ability of each method in predicting the bankruptcy well ahead of time. We apply Moody’s financial ratios, Standard and Poor’s financial ratio, vaziri’s financial ratio, Altman’s Z score and then ap...

Implementation shortfall, originally proposed by Perold and later expanded by Wagner and Edwards and Kissell, can adversely affect portfolio performance if it is not properly managed through implementation strategy as a result of price impact, timing cost, and inability to complete total transactions. The authors further classify implementation shortfall to give traders a better understanding of opportunity cost and a method to control any or all of these costs while executing trades. They suggest that after thorough back testing, market price trend analysis, and pretrade analysis, setting price limits efficiently will ensure that the first trading–related and residual trading–related opportunity cost will be as low as possible for the trader, thus lowering overall implementation shortfall.

This paper investigates the information transmission and spillover effects between the US stock market and the emerging stock markets of Brazil, Russia, India, China, and South Africa (BRICS) for the period 1999 to 2012. The paper uses a variant of the aggregate shock model under the GARCH framework and investigates the effects of both return and volatility spillover from the US market to the BRICS markets and among the BRICS markets. The chronological order of trading among the six markets (US and five BRICS markets) is utilized in analyzing the transmission of information between the US and BRICS equity markets. The results suggest that the US stock market has a significant mean return and volatility spillover effects on the BRICS stock markets. In addition, the Chinese stock market exerts a significant mean spillover effects on both the Indian and the US stock markets, and the mean spillover effects from the Indian market to the Chinese market are equally strong. Further, overnight returns in the BRICS stock markets are significantly influenced by their own latest daytime returns. The results contribute to the extant spillover literature in demonstrating that the mean and volatility spillover effects exist not only from the US market to the well-developed equity markets of Europe and East Asia as shown in previous studies, but they also exist from the US market to the emerging equity markets of BRICS economies.

INTRODUCTION Financial services are perhaps the most significant economic sector in modern societies. In the more advanced service economies, the financial sector is a major source of employment. Given the important role of financial institutions in the economy, any research that helps explain what drives their performance would be beneficial. During the 1990s, due to the stellar performance in the banking industry, most banks had no difficulty in meeting their capital requirements (Bomfim and English, 1999). From 1992 to 1998, the share of the banking industry assets at "well-capitalized" banks rose from around 70% to more than 95%. During this period banks grow their net loan at a rate that exceeds the overall banking industry and actually benefited from using their offering proceeds to enlarge their loan portfolio. During this period, what drives the overall improvements is the focus of our research. The focus attention in this research would be on the banking institutions that went public during this time and try to bring some plausible explanations for the overall improved subsequent performance of these institutions. The research focuses on the post-IPO performance of depository institutions within an agency framework and also on the ownership-performance issue surrounding the IPO. Four theories are evaluated to shed light on the post-IPO operating performance of depository institutions: agency cost theory, windows-of-opportunity theory, window-dressing theory, and loan-growth-fixation theory. Each of the four IPO performance theories-the agency cost theory, the windows of opportunity theory, the window-dressing theory, and the loan-growth-fixation theory-results from the inherent conflict of interest between the original owners and the new shareholders. This conflict is exacerbated by asymmetric information. Given that current evidence is inconclusive as to which theory can best explain post-IPO performance, the purpose of this paper is to determine how relevant each of these explanations are in explaining the post-issue performance within the banking industry. The first research question examines whether banks choose to go public during a period of peak operating performance. Gibson, Safieddine, and Sonti (2004) document that institutions increase their investment in SEO firms significantly more than in a matched sample of non issuers and seasoned equity issuers who experience greatest increase in institutional investors around the offer date outperform their benchmark portfolios in the year following the issue. To address this first question, five operating ratios are calculated for the year prior to going public (year -1), the year of the IPO (year 0), and for the three years following (years +1, +2, +3). If banks go public during a period of unsustainable profitability, each operating performance ratio should decline relative to pre-IPO levels. A subsequent decline in operating performance would support the windows-of-opportunity theory. The second research question examines the relationship between bank ownership by insiders, institutional and large block shareholders and post-IPO operating performance. The important question is: do high levels of ownership by these investors result in superior operating performance relative to the entire industry? The third empirical question investigates whether banks manage their earnings by under-reporting loan loss provisions prior to going public. The final research question examines whether IPO banks use their newly raised capital to over-emphasize loan growth at the expense of greater loan default risk and lower subsequent earnings. The following section discusses pertinent issues and provides a brief review of the literature. The next section explains the four hypotheses that are tested. Subsequent sections discuss the study group, variables, and methodology used in the study, as well as the results and conclusions RELEVANT ISSUES AND LITERATURE REVIEW Since the introduction of Jensen and Meckling's (1976) agency cost theory of financial structure, the relationship between ownership and performance continues to be a vexing, and largely, unresolved issue despite the volume of theoretical and empirical literature. …

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This paper attempts to expand the empirical evidence on the equity returns by examining the cross-sectional data on of the emerging stock markets of Bangladesh. Using data compiled by the Bangladesh Bank on forty joint stock companies listed on the Dhaka and Chittagong Stock Exchange for the period of 1992 to 2002, we provide evidence that the factors that drive cross-sectional-differences in expected stock returns are significantly different from those of many other emerging markets. Although cross sectional returns explain little by companies' size and the market-to-book value ratio individually, but in aggregate these two factors play a significant role. Our statistical results also show the importance of time variation in the volatility of stock prices of the emerging stock market of Bangladesh.

In this paper, we survey a wide range of theoretical and empirical papers on derivatives markets to address the information contents of trading activities in derivatives markets. Both theoretical and empirical research on options market and futures market indicate that the presence of alternative markets may be a factor for informed traders' presence in one of or in both markets to trade on their information. One group of researchers support the hypothesis that information reflects in derivatives market first and underlying stock market lags in information transmission. Another group of researchers support the hypothesis that information reflects in stock markets first and trading activities in derivatives markets are not significant. Since researchers are not in agreement in this issue, it raises a potential for further research on different activities of derivatives market.

Historically, little evidence has been found to suggest that real estate investments exhibit superior returns. Further, it appears that real estate mutual fund managers do not possess the ability to consistently beat benchmark averages. However, there have been mixed results for REITs indicating they might be characterized by inefficiencies that could be exploited by informed fund managers. In this analysis, we examine whether mutual fund managers who have concentrated in real estate assets have statistically outperformed other categories of equity mutual funds as well as the S&P 500 and various NAREIT Indexes.

A long-standing debate has revolved around the question of whether information travels first to the stock market or to the stock options market. Using an open interest-based predictor calculated from CBOE S&P 500 LEAPS options, we find evidence of strong predictive power from the options market on the underlying S&P 500 index. This evidence is supported by out-of-sample tests of a simple trading strategy using the open interest-based predictor as a trading indicator. The authors illustrate the practical application of this strategy for an active manager using exchange-traded funds with a variety of leverage and shorting constraints. The trading indicator is also shown to be useful for a semi-active manager employing enhanced indexing techniques.

... Ahmed, Syed Horner, James Rafiq, Rafiqul Bhuyan Abstract. The last two decades of the twentieth century witnessed a series of financial reforms in emerging economics of Asia, Africa and Latin America. The seminal works of RI McKinnon and ES Shaw, which attribute the slow ...