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Parametric, Non-Parametric and Multivariate Analysis of Capital Structure During the Financial Crises in Jordanian Banks - Pages 399-416

Ahmad Y. Khasawneh

DOI: https://doi.org/10.6000/1929-7092.2019.08.34

Published: 06 August 2019

Abstract: Motivations: This research seeks to analyze the determinants of capital structure of the banking sector in Jordan taking into consideration bank business model (Islamic versus Commercial bank). The research also sheds light on the financial crises of 2007/2008 and its impact on the financing decision in the banking sector.

Novelty: Although the topic of capital structure’s determinants is well studied in non-financial firms, very few studies considered the financial firms, namely banks. Since the nature of operations and capital components for banks are totally different this research comes to fill the gap in the banking literature.

Methodology and Methods: The study uses multivariate regression techniques of panel data besides the parametric and non-parametric analysis. Three measurements of capital structure are considered: leverage ratio, long term debt ratio and short-term debt ratio, the explanatory variables are included in two sets, bank specific characteristics and economic characteristics.

Data and Empirical Analysis: Balanced panel data set was formed for 27 Jordanian banks during the period of 2003-2015. Empirically, the findings suggest a variation of capital structure determinants based on the variable of measurement. However, the analysis confirms that bank’s profitability and bank’s risk are major components of the capital structure decision regardless of its measurement variable. In addition to these two variables, liquidity, growth and taxes are important variable in the short-term debt financing, and retained earnings is important to the long-term financing. Empirically proven that Jordanian banks' capital structure decision is affected by the global financial crisis 2007/2008 and by bank type. Jordanian banks might differ in size, but this doesn't affect their policies toward the capital structure. The empirical results are consistent with the pecking order theory that profitable firms prefer to use more of their internal sources of funds rather than debt financing.

Policy Implications: Due to the importance of the capital structure decision for banks and non-banks firms and based on our finding, the policy makers in Jordan and may in other similar countries should pay attention to capital requirement regulations as the determinants of leverage among banks are different based on the business model whether commercial or Islamic.

Keywords: Banks Leverage, Financial Crises, Jordanian Banks, Islamic Versus Commercial banks, Parametric Analysis, Non – Parametric Analysis.

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Digital Economy in the Context of Phylogenesis of Innovation and Market Development - Pages 417-423

P.V. Stroev, D.V. Firsov and S.B. Reshetnikov

DOI: https://doi.org/10.6000/1929-7092.2019.08.35

Published: 06 August 2019

Abstract: Understanding the phylogenetic origin of a concept of innovation stands as the main precipice in establishing a sustainable concept of innovation. And as a scientific direction in studying emergence, distribution and commercialization of innovations. Primary Novelty of present article is expressed through analysis of neoindustrialization as a process of transition to a new economic paradigm through renewal of industrial infrastructure and its form of organization in a Technetronic phase of development. Comparative, comprehensive and factor analysis stands as the main methodology for the present article. Primary data consists of government and commercial statistics. The empirical analysis shows the importance of the vertically integrated structures in the course of new cluster development as well as their weight and importance in the development of the modern digital economy.

Results of a research of Economist Intelligence Unit in 82 countries of the world say that such countries as Mexico or China, quickly improve the skills in the field of innovations. The research allowed being elicited one remarkable fact: the countries with the average level of economic welfare have additional benefits that introduction of domestic innovative developments stimulates also faster development of foreign experience.

Keywords: Digital economy, clusters, innovation, E-governance, E-health, E-education, E-business.

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Real Exchange Rate Fundamentals: A Synthesis of the Literature - Pages 424-436

Oluremi Davies Ogun

DOI: https://doi.org/10.6000/1929-7092.2019.08.36

Published: 06 August 2019

Abstract: A general review of approaches to equilibrium real exchange rate was undertaken. The review covered most of the theoretical, methodological and empirical literatures that had been developed in the attempt to overcoming the measurement problems associated with the concept. The distinct approaches reviewed in the paper included, exchange rate equations with nominal and real disturbances, the purchasing power parity doctrine, productivity approach, macroeconomic balance, varieties of exchange rate equation models, and, behavioral equilibrium exchange rate approach. Although the models were generally theory-based and reasonably well motivated, a comprehensive evaluation of the appropriateness of some of the theoretically identified fundamentals might be a most desired status credibility check.

Keywords: International finance, open economy macroeconomics, economic growth of open economies.

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Ratings of The Investment Projects of Arbitrary Durations: New Methodology - Pages 437-448

P.N. Brusov, T.V. Filatova, N.P. Orekhova, V.L. Kulik and I. Weil

DOI: https://doi.org/10.6000/1929-7092.2019.08.37

Published: 06 August 2019

Abstract: In this paper we develop for the first time a new approach to ratings of the investment projects of arbitrary durations, which could be applied to investments of any area of economy and in particular to energy projects.The ratings of such energy projects, as "Turkish stream", "Nord stream-2", energy projects relating to clean, renewable and sustainable energy, as well as relating to pricing carbon emissions (McAleer et al., 2018a,b,c; 2019) could be done using developed here new rating methodologies. In our previous papers the new approach to the ratings of the long–term investment projects has been developed (Filatova et al., 2018). The important features of that consideration are as following: 1) The incorporation of rating parameters (financial "ratios"), used in project rating and playing a major role in it, into modern long–term investment models, 2) The adequate use of discounting of financial flows virtually not used in existing project rating methodologies. Here, for the first time, we incorporate the rating parameters (financial "ratios"), used in project rating, into modern investment models, describing the investment projects of arbitrary durations. This was much more difficult task then in case of the long–term investment projects, considered by us in previous papers. We work within investment models, created by authors. One of them describes the effectiveness of investment project from perspective of equity capital owners, while other model describes the effectiveness of investment project from perspective of equity capital and debt capital owners. New approach allows use the powerful instruments of modern theory of capital cost and capital structure (BFO theory) (Brusov et al., 2015, 2018) and modern investment models, created by the authors and well tested in the real economy to evaluate investment project performance, including energy projects.

In our calculations we use Excel technique in two aspects: 1) we calculate WACC at different values of equity costs k0, different values of debt costs kd and different values of leverage level L=D/S, using the famous BFO formula; 2) we calculate the dependences of NPV on coverage ratios as well as leverage ratios at different values of equity costs k0, different values of debt costs kd and different values of leverage level L.

Keywords: Arbitrary duration investment projects, rating, rating methodology, discounting of financial flows, Brusov–Filatova–Orekhova theory, coverage ratios, leverage ratios.

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