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Optimization of Mudaraba Sharia bank finance through agency theory perspective

Author(s): Djafar Jasmin,M. Moeljadi,. Djumahir,Atim Djazuli / Language(s): English Issue: 4/2018

This study aims to analyze the implementation of mudaraba financing at Sharia banks, to consider the relationship between a principal and an agent in mudaraba financing at Sharia banks, and to explore efforts to optimize the implementation of mudaraba financing at Sharia banks.This research was conducted at the Bank Muamalat Ternate Branch. The study used a qualitative method of single case study approach. The analysis used is an interactive model developed by Miles and Huberman. Research result exhibits the following:1) The implementation of mudaraba financing was not in accordance with sharia implementation requirement, because there is still a gap in the income sharing system that causes the contract of mudharabah financing cannot be continued.2) A principal has more information than an agent, because the agent has limited information especially in terms of that about cooperation instrument (mudharabah financing), while the principal is way more about data on that cooperation instrument.3) Optimizing the implementation of mudaraba financing is needed by improving mudaraba financing governance. It is conducted by assigning consultants in mudaraba financing. The consultant has an active role and formally is directly involved in the mudharabah financing, but its characteristic only gives consideration and advice to shahibul maad and mudharabah as the key player in the mudharabah financing.

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The influence of corporate governance on the intellectual capital disclosure: a study on Indonesian private banks

Author(s): Joy Elly Tulung,Ivonne Stanley Saerang,Stevanus Pandia / Language(s): English Issue: 4/2018

The release of bank’s intellectual capital is one of the important elements of bank’s annual reports. Although it is not presented adequately in the annual reports, voluntary disclosure of bank’s intellectual capital relatively represents the response to the needs of greater information for the users. This research aims to see the influence of corporate governance on the intellectual capital disclosure based on a case study on private banks in Indonesia. The variables to be examined in the research include the Composition of Independent Commissioners as well as The Competence of Audit Committee and Risk Oversight Committee. The samples were taken using purposive sampling, considering particular criteria. As many as 62 banks are selected to be taken as research samples. The data were analyzed using multiple linear regression analysis method. The result of a partial test shows that the Composition of Independent Commissioners has a positive and significant influence on the intellectual capital disclosure; the Competence of Audit Committee has a positive and significant influence on the intellectual capital disclosure; and the Competence of Risk Oversight committee does not influence the intellectual capital disclosure. Meanwhile, the result of a simultaneous test shows that the Composition of Independent Commissioners, the Competence of Audit Committee, and the Competence of Risk Oversight Committee significantly influence the intellectual capital disclosure.

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The role of the Sharia Supervisory Board and corporate governance mechanisms in enhancing Islamic performance – evidence from Indonesia

Author(s): Ahmad Nurkhin,Abdul Rohman,Ahmad Rofiq,Hasan Mukhibad / Language(s): English Issue: 4/2018

This research aims to examine the correlation between the Sharia Supervisory Board (SSB) and corporate governance in terms of the performance of Islamic banks’ Profit-and-Loss Sharing (PLS) ratio, zakah performance and non-halal income ratio, and to analyze the relationship between risk and income for both PLS and murabahah financing and the PLS financing ratio. Non-halal income is a bank’s income that is not in accordance with Sharia law. The object of this research was a sample of eleven commercial Islamic banks in Indonesia. The data are collected from each bank’s annual report and corporate governance statement, for 2009–2016. This study uses the multiple regression analysis method. The results show that:The size and educational background of the SSB has a significant and positive effect on the zakah performance (Islamic tax), and has a negative effect on the ratio of non-halal income. The size and educational background of the SSB has no impact on the PLS financing ratio.Corporate governance has a significant and positive influence on the PLS financing ratio and zakah performance but has no influence on the non-halal income ratio.The mudharaba risk and PLS revenue have a positive impact on the PLS financing ratio.PLS financing risk and murabahah income have a negative impact on PLS financing ratio.

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Optimal control of continuous life insurance model

Author(s): Viktor Oliynyk,Fedir Zhuravka,Tetiana Bolgar,Olha Yevtushenko / Language(s): English Issue: 4/2017

The problems of mixed life insurance and insurance in the case of death are considered in the article. The actuarial present value of life insurance is found by solving a system of differential equations. The cases of both constant effective interest rates and variables, depending on the time interval, are examined. The authors used the Pontryagin maximum principle method as the most efficient one, in order to solve the problem of optimal control of the mixed life insurance value. The variable effective interest rate is considered as the control parameter. Some numerical results were given.

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The impact of political instability, macroeconomic and bank-specific factors on the profitability of Islamic banks: an empirical evidence

Author(s): Ali T. Yahya,Asif Akhtar,Mosab I. Tabash / Language(s): English Issue: 4/2017

This study investigates the impact of political instability, macroeconomic and bank-specific factors on the profitability of Islamic banks in the context of Yemen. The study used two common measures of profitability, namely, Return on Assets (ROA) and Return on Equity (ROE) as dependent variables. Seven key independent (internal and external) variables are also used. There are five fully-fledged Islamic banks (IBs) working in Yemen. The study selected only three out of five IBs due to the availability of data for the period ranging from 2010 to 2014. The descriptive and multiple regression analyses were done. The results of the study indicate that operating efficiency and financial risk have negative and significant relationships with ROA and ROE. The findings also show that capital adequacy has a negative and insignificant relationship with ROA and ROE. Furthermore, the study reveals that assets size (LogA), assets management, liquidity and deposits have a significant and positive impact on banks’ profitability. GDP, Inflation rate (IR) and Political instability have positive and significant impact on Yemeni banks’ profitability. Based on the best knowledge of the authors, this study is considered one of the first and pioneering studies that determine the factors affecting the profitability of Islamic banks of Yemen. Therefore, the study gives good insights for the policy makers, regulators and interested parties for enhancing the profitability of Islamic banks in Yemen.

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An investigation of the financial monitoring policies for microfinance institutions in Ghana

Author(s): Kwami Hope Quao,Lawrence Mpele Lekhanya,Nirmala Dorasamy / Language(s): English Issue: 4/2017

The need to regulate microfinance institutions (MFIs) was advocated and researched yet lacks purposeful in-depth exploring studies of the formulation process of financial monitoring policies, their implementation and accompanying challenges. Consequently, this study contributes by reviewing the specific financial policies for microfinance in Ghana and assesses factors mitigating effective implementation of such policies. It also introduces implementation theory into the MF research arena, thus shifting MF research focus. The study revealed that policies formulated for MFIs in Ghana and elsewhere are skewed and policy implementation, monitoring and supervision found to be less effective. The results further identified inadequate support structures and large unlicensed profit-oriented informal microfinance operations in Ghana as major obstacles to efficient implementation of microfinance policies. This paper therefore recommends the creation of a semi-autonomous institution, the National Microfinance Oversight Authority, to license, regulate and supervise the informal microfinance institutions in Ghana.

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RISK MANAGEMENT IN BANKING SECTOR: EMPIRICAL DATA FROM COMMERCIAL BANKS IN KOSOVO

Author(s): Isuf Qabrati / Language(s): English Issue: 1/2019

Financial institutions are an important source of financial system functioning of a country and include banks, pension funds, insurance companies, microfinance institutions, and so on. While the risk of financial institutions presents their ability to lose, consequently the change of the actual cash flow from the planned one. Among the major risks facing financial institutions are credit risk, market risk, operational risk and liquidity risk. The purpose of this paper is to investigate the risk management in financial institutions by making a survey with the banking sector, which accounts for most of the financial activities. For this reason, eight financial indicators are used to calculate the financial performance of the eight commercial banks involved in the research, which operate in Kosovo, taking into account the last two years of their operation. From the data derived from these indicators, using the One-Way ANOVA analysis, differences between banks were investigated according to their performance. As a result, it has been found that there are significant differences between banks according to liquidity risk, credit risk, equity risk and profitability risk. In addition, a linear regression model was also performed, which shows that the change in the return on equity (ROE) depends almost entirely on the change in the other seven indicators included.

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Cu privire la esenţa şi clasificarea capitalului

Author(s): Igor Balan,Valeriu Erhan / Language(s): Romanian Issue: 1-2/2018

Determining the capital requirement is a procedure for sizing it for a determined period of time in order to efficiently carry out the activity of the entity. An overvaluation of the requirement generates additional costs in interest, commissions, penalties, but also a slower circuit with negative influence on the final result. Underestimating the loss is due to loss of business due to lack of capital, as well as additional costs of emergency supplies. Based on this, the authors in this article emphasized the study of the capital essence as an economic category, the review of the different approaches and classifications exhibited in the works of the scholars from the country and abroad in order to establish correctly and reasonably the mechanism and the necessity to finance entities.

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Facilităţile fiscale ca instrument de stumulare a investiţiilor

Author(s): Aliona Balan / Language(s): Romanian Issue: 1-2/2018

In the present article we make reference to the role of tax incentives in stimulating investment. There are a number of factors that influence the investment process, including tax concessions, as one of the most common measures of support by the state of investment activity. In this paper it is presented an analysis of the existing tax incentives in the Republic of Moldova aimed at stimulating investment activity, have been identified the types of tax breaks that have the greatest impact on investment incentives, as well as proposed some recommendations on the granting of tax incentives and customs in order to stimulate investment activity in the Republic of Moldova.

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Examination of the effects of non-measurable explanatory variables on the value of real estate in the process of mass valuation of land

Author(s): Anna Gdakowicz,Ewa Putek-Szeląg,Wojciech Kuźmiński / Language(s): English Issue: 3/2019

The paper proposes a solution to the problem of how to introduce non-measurable features (attributes) of a property that significantly affect its value to the process of its valuation. The authors adopt two measures enabling them to study the influence of order features on the value of property, the Spearman rank coefficients and standardized βk coefficients, and proceed to check their efficiency, applying an algorithm of mass property valuation (SAMWN) to the sample of 567 plots of land in Szczecin designated for housing purposes. The results thus obtained are then compared with the valuations of these plots of land performed by property appraisers. The study demonstrates that lower valuation errors are obtained when using standardized βk coefficients than the Spearman rank coefficients.

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GOLD PRICE AND BITCOIN EXCHANGE RATE: IS THERE A CORRELATION?

Author(s): Nikolay Patonov / Language(s): English Issue: 1/2020

The purpose of this paper is to study the empirical relation between Gold price and Bitcoin exchange rate. Both the rates have been expressed in US dollars. The empirical analysis has been run via quantitative techniques – correlation analysis and Granger causality test. These procedures have been applied on data with monthly frequency for the period March 2013 – November 2019. The output suggests existence of a weak positive correlation.

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ORIGIN AND DEFINITION OF REGTECH

Author(s): Miroslav Nedelchev / Language(s): English Issue: 1/2020

The aim of the paper is to lift the veil of new banking regulation framework. By a bibliometric analysis, we draw conclusions for definition and description of modern regulation techniques. The costs and benefits of RegTech are derived. The results of the article conclude existence of umbrella of definitions for RegTech. Competent authorities and international organisations introduced the core definitions. Banking regulation is adapting to the New reality through RegTech.

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TESTING METHODS AND MODELS TO FORECAST CRYPTOCURRENCIES EXCHANGE RATE

Author(s): Stefan Simeonov,Teodor Todorov,Daniel Nikolaev / Language(s): English Issue: 1/2020

The course of cryptocurrencies forms by various factors which makes it difficult to apply fundamental methods for their forecasting. For these reasons technical analysis and various statistical models are used for short-term forex and financial market forecasting. In this study we test three models: the classical autoregression model (AR), the Box-Jenkins ARIMA, and the predictively modified model Frequency Analysis of the Volatility and Trend with movable calculation (FAVT-M). The five cryptocurrencies with the largest market capitalization as of July 10, 2019 are subject to test forecasting. The AR and ARIMA results report compromise confidence within the first 5 - 6 days, after which they show significant deviations from the actual course achieved. FAVT-M generates immediate signals for the reversal of the short-term trend, but at this stage they are not clear enough for its reliable independent application in forecasting cryptocurrencies.

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APPLICATION OF BLOCKCHAIN AND ARTIFICIAL INTELLIGENCE IN BANK RISK MANAGEMENT

Author(s): Plamen Dzhaparov / Language(s): English Issue: 1/2020

The transformation from analogue to digital risk management is becoming a prerequisite in the implementation of the incresingly digital bank institutions’ strategies. Among the key steps in this direction is the optimal use of blockchain technology’s potential and artificial intelligence. Huge hopes are set on blockchain in view of two key risks facing today’s banks: the danger of using the bank system for money laundering and financing terrorism, and cyberattack threat. Artificial intelligence, in turn, creates conditions for processing large arrays of unstructured data risk, more precise identification of potential problems in the future, full automation of manual processes in risk function, credit scoring automation, developing adequate market risk assessment models, etc.

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THE RELIANCE OF EXTERNAL AUDITORS ON THE WORK PERFORMED BY INTERNAL AUDITORS AND ITS IMPACT ON AUDIT ON BANKS: A CASE OF THE FIRST ABU DHABI BANK, UAE

Author(s): Madher Hamdallah / Language(s): English Issue: 1/2020

The primary purpose of this research is to study the impact of external audit’s reliance on the work performed by an internal audit and its impact on The First Abu Dhabi Bank in UAE, as the case study. Despite the major advances made in the profession of Internal Auditing Function (IAF) and the many benefits of relying on the work performed by these professionals, the collaboration between the profession and external auditing is still a less popular practice in developing countries; as the UAE; many organizations have not picked up. It is important to investigate the reasons that led to this situation. Also, among the few instances where there is reliance on the work of Internal Auditing Function, it is vital to investigate the attribute of the Internal Auditing Function work that guarantees reliance. Lastly, the study aimed to understand the different areas where external audit and internal audit collaborate. By using descriptive and ANOVA analysis, the results derived that external auditors do not actually depend on the internal auditors’ inputs; however they rely on the work performed by the in-house auditors. Regarding organizational attributes of internal audit function depends on the audit process and that an audit committee comprised of external member inaugurated. However the audit area reliance on work performed by Internal Audit Function focused mainly on the internal control mechanisms, audit stockholders’ equity, and audit of fixed assets.

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CYBERCRIME AND MONEY LAUNDERING IN 21ST CENTURY

Author(s): Aleksandra Stankovska,Elizabeta Stamevska / Language(s): English Issue: 1/2020

This paper focuses on cybercrime and money laundering. Proceeds of these activities may be used to fund further criminal activities and to undermine the integrity of financial systems worldwide. Money laundering is the biggest method followed by the cyber criminals to hide their black money which they get themselves courtesy to financial frauds they involve into. Money laundering is the process of making large amounts of money generated by a criminal activity, such as drug trafficking or terrorist funding, appear to have come from a legitimate source. The money from the criminal activity is considered dirty, and the process "launders" it to make it look clean.Unlike the "traditional" money laundering methods, which rely on the banking system, cyber-laundering depends on the use of various types of transactions and financial services providers, ranging from wire transfers, cash deposits/withdrawals and e-money transactions to "money mules" and remittance services.

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The impact of corporate governance on cost of capital: an application on the firms in the manufacturing industry in Borsa Istanbul

Author(s): Berna DOĞAN,Melek Acar / Language(s): English Issue: 1/2020

Corporate governance has become an important issue in the aftermath of international financial crises, corruption and corporate scandals since the 1980s. Corporate governance is a broad term and it defines the methods, structure and the processes of a company. In this context, the term corporate governance plays a significant role in ensuring that the firm moves optimally in the right direction. In this study, the effect of corporate governance practices on the cost of capital is investigated empirically in 76 manufacturing industry companies listed on Borsa Istanbul (BIST) between 2008 and 2017. In this context, the system Generalized Method of Moments (GMM) estimator developed by Arellano-Bover (1995), one of the dynamic panel estimation methods, was used. The results showed that the increase in the number of members of the board of directors and the ratio of women in the board of directors, which are the corporate governance mechanisms, have an increasing effect on the cost of capital. We also found that the variables of CEO duality and institutional ownership did not affect the cost of capital.

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Европейските банки след суверенната дългова криза: Стабилност, регулации и предизвикателства

Author(s): Iskra Christova-Balkanska / Language(s): Bulgarian Issue: 3/2020

The peculiarities of the impact of the global financial crisis on the state and behaviour of European banks in the post-crisis period are revealed. The changes in the structure of the bank balances and how the priorities in their activity change under the influence of the difficult economic environment after the crisis are analysed. In the context of changes in globalisation, the European banks face a number of challenges in relation to the need to introduce financial innovations and the competition between the major international banks and the FinTech companies.

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The European banks after the sovereign debt crisis: Sustainability, regulations and challenges

Author(s): Iskra Christova-Balkanska / Language(s): English Issue: 3/2020

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Evidence of effective financial crisis management from South Korea: An example for other regions

Author(s): Saysi Sayaseng / Language(s): English Issue: 1/2020

Evidence from the global financial crisis (2007–2008) and the Asian financial crisis (1997) have taught policymakers valuable lessons. The contagious effects of these crises have proven unavoidable and have led to negative economic development. However, South Korea, unlike other countries, has recovered remarkably from both episodes of financial turmoil and proved their ability to maintain positive growth throughout the two periods. This study investigates the correlation between the evolution of South Korean banking and corporate sector before, during and after these crises. A VAR model was employed to test the effectiveness of the South Korean government's policies, in response to the financial crisis from 1997 to 2017, using macroeconomic variables as proxies for newly introduced policies, and non-performing loans for controlled risks. The empirical results indicate impulse response functions which suggest that changes in macroeconomic variables as a representation for the policies resulted in a reduction of non-performing loans. This implies successful risk reduction and an overall economic recovery.

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