International Journal of Empirical Finance

Analysis of the Relationship between Profitability and Dividend Policy of Banks on the Ghana Stock Exchange

John Kwaku Mensah Mawutor — 2015-12-25

The relationship between dividends and earnings has long been a controversy to analyst and investors. In view of this phenomenon, dividend policy still remains an unresolved issue in contemporary corporate governance. This quantitative study, investigates the relationship between profitability and dividend policy of banks listed on the Ghana Stock Exchange (GSE). Using a correlation analysis to test the relationship between profitability and dividend policy, the (expected) result is that profitability and dividend policy are significantly related. Thus, when the banks make profits they tend to pay out dividends. However, the study also shows through a regression model that banks listed on the Ghana stock exchange employ a dividend policy that is not solely influenced by profitability. There are also other factors, which account for the dividend policy that banks adopt. These other factors include liquidity, growth, other investments, control, legal requirements, shareholders desires, size of the firm and other management decisions

Affected of Human Resource Value on Balance Sheet Adjusted

Abdullah Ibrahim Nazal — 2015-12-26

This study is one of few studies which try to find the affection of human resources value on balance sheet and tried to adjust it in order to increase disclosure. It found that human resources employed contracts mean to own workers benefits and managing benefits. It can be compared with value of machines, investing projects and intangible assets. Human resources can be assets as investing also it can be finance tool as liabilities and equities. It affects on balance sheet adjusted in order to give finance analyst information about human resource weak points or strength points. Adjusted will help finance analyst to understand current case and expect future case in order to give acceptable report.

Appraising the Credit Policy in the Private Sector Investment in the Nigerian Economy

Anochie Uzoma C. — 2015-12-27

The objectives of this study is appraising of credit policy in the private sector investment in Nigeria economic growth. Findings reveal the significant and positive impacts of domestic credit to private sector property right and investment freedom on private sector performance in the country. The study recommends that the government of Nigeria should provide a favourable business environment for the private sector to thrive. The paper investigates the relationship between financial sector development and economic growth in Nigeria for a period of 1990-2011. Function monetary policy measures were used to empirically determine the long run relationship of private investment and economic growth in Nigeria. This implies that the monetary policy in Nigeria has positively affected the growth of the private investment in the Nigeria economy. The paper also examined the impact of government expenditure on private sector investment and also how the financing of budget deficit have not only affected the performance of private investment but also how it crowds out private investment in Nigeria. Secondary data information from CBN bulletin were used. The paper recommends that government should direct its fiscal policy that would favour the private sector investment by discouraging high government expenditure and maintain low fiscal deficit. Also to avoid crowding out effects, and also recommended that deficit be financed through the capital market.

The Governance Framework for Banks in the UK

Asem Tahtamouni — 2015-12-28

This paper discusses the regulatory and corporate governance framework for banks in the United Kingdom (UK). Prior to the 2008 Global Financial Crisis (GFC), there was a ‘tripartite’ regulatory system involved in the regulation and management of the financial system in the UK. This system failed during the GFC to take proactive steps to mitigate or avoid risks that threatened the stability of the UK financial system. It was clear that the GFC existing regulatory systems and Codes of Corporate Governance did not protect against bank failure. As a result, the UK government restructured the UK financial regulation system. The new UK regulatory system under the Bank of England has been adopted with the establishment of the Financial Policy Committee (FPC), the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA). The new provisions set in place legislative measures to ensure that there is a free flow of information between the two new regulatory bodies with PRA having broad responsibility for macro measures and the FCA for micro management of financial products and consumers’ rights. In recognition of the special risks of bank failure, the legislation also establishes a separate Bank of England committee, the FPC to make recommendations relating to the stability of banks.

Financial Dualism, the Informal Sector and Economic Growth: An Econometric Investigation of the Nigerian Evidence

Ebele P. Ifionu — 2015-12-29

This study empirically examined the impact of the informal financial sector on economic growth in Nigeria from 1981-2013. The stationarity of the variables in the model were first tested via the Augmented Dickey-Fuller (ADF) and Phillip Perron (PP) unit root tests and results indicate that all variables were integrated in the order of I (1). Having confirmed the stationarity of the variables (GDPPC, DFIND, INSEC, RINTR, and TSAV),the analyses was pushed further to determine the long-run equilibrium relationship between the variables in the model by using the trace statistics test and the maximum eigenvalue test of the Johansen multivariate cointegration test after the order of linear deterministic trend. The informal financial sector impacts negatively on gross domestic product per-capita in Nigeria. Other variables that impact negatively on GDP are real interest rate, degree of financial depth while total savings has a positive but insignificant relationship. A major policy recommendation which drawn from the above findings is that the linkage between the formal and informal sectors in Nigeria should be strengthened towards full elimination of dualistic market. Deposit money banks and the monetary authority should evolve policies aimed at reaching the unbanked informal sector agents, especially the rural households and the urban informal production units. This will deepen the financial sector and assist in mobilizing the much needed savings that will engender investment and growth in the economy.

Model's Ability to Predict Bankruptcy Before it Happens

Mashhour Hathloul Maharmah — 2015-12-30

This study aimed to demonstrate the ability of Altman Model's (z-score) in predicting and detecting financial difficulties that could lead to liquidation of commercial banks. In order to achieve the objectives of the study Altman (z-score) model is applied as comparative study for a local Jordanian commercial banks (Philadelphia Investment Bank) which was actually liquidated in 2001, in comparing with (Arab Jordanian Investment Bank) which was not liquidate. The period of this study stretch for five years prior to the incident filter, to find out how successful the predictive capacity of the model to give early warning on the probability of failure in the bank for each of those years. The results of the study found that Altman (z-score) model was able (up to 100%), to predict the failure of Philadelphia Investment Bank, especially at the first four years prior to liquidation, where the value of Z within less than (1.81). As for the fifth year it has signed in the medium category (gray area), where the value (Z) greater than (1.81), and less than (2.99), at this point the ability of the model show difficult to assess the situation of the Bank in that year, despite the near financial failure prediction for the fifth year. For Arab Jordanian Investment bank the Altman (z-score) model was able (up to 100%), to predict that the bank is safe from failure, where the value of Z within more than (2.99). The study found a statistically significant relationship between the coefficient of Z and its ability to predict real liquidation of Banks.