RSS 1.0Master of Science in Finance
Recent Submissions
-
Risk management in Islamic financial institutions:the case of Islamic Development BankThis research explores how Shariah compliancy is impacting risk management techniques by studying the case of the Islamic Development Bank. The research identifies the type of financial instruments and products that are used by Islamic financial institution, the major risks it faces in its operation and the risk management techniques it uses for each of those risks. A comparative analysis is then carried out to compare case of Islamic development bank with a conventional financial institution of similar kind that is the World Bank. The results of the analysis revealed that there is a consistency in fin , ancial products and services of Islamic and conventional financial institutions and the risks they usually face are also similar but because of the underlying Shariah principles which structures the Islamic financial transactions in a modified way considering the ethical perspective behind it, so the risk mitigation techniques are accordingly taking a different shape that is free from any unlawful deal or transaction in financial product, resulting in a fair shariah compliant risk management. Hence there is a difference observed between the risk management techniques used by conventional and Islamic financial institutions. In addition to the difference in risk management techniques of common risks, Islamic Fl has a unique Shariah compliant or Shariah reputational risk that is due to consideration of Shariah (Spirituality) and Islamic development bank also addresses this risk. However, as Islamic Development Bank is a non-profit organization, it faces less Shariah-risk than for-profit institutions and IDB is committed to Shariah rulings and adopts only Islamic modes of finance. Therefore the impact of Shariah risk is less than in case of for-profit organizations.
-
The three step filtering models in assessing and comparing the performance of Islamic and conventional banks in KSAIslamic banks are considered as an alternative for conventional banks in the banking industry, their performance would be different from each other. This difference is important for investors in making their investment or hedging decisions. The purpose of this study is to investigate and assess the performance of the Islamic and conventional banks in the Kingdom of Saudi Arabia during the post-Financial US Crisis period. Using a series of ratios called by us “CAPLERS”, which is an extension of CAMELS (implemented in the literature), we examine the performance of Saudi Islamic banks versus the conventional ones. To perform such a comparison, we use seven-year annual data from 2010 through 2016 and 12 banks where 4 are Islamic and 8 conventional. The empirical framework involves three sequential steps. The first step consists in filtering the ratios based on their correlation with each other. The second specifies the ratios, which contributes to the performance with respect to Tobin Q method. The third step consists of implementing Logit regression model to figure out the performance of Islamic banks compared to conventional ones. Our results show that Saudi Islamic banks exhibit higher performance than conventional ones in terms Efficiency, Capital Adequacy, Asset quality and liquidity.
-
Financial Performance-Efficiency Nexus in The Healthcare Sector in The GCC RegionThe health care corporates play a vital role in maintaining the health and sustainability of the entire health system. This study aims to analyze the efficiency of the financial performance and financial characteristics of public listed companies in the healthcare sector in the GCC region during the period 2011–2021 using data envelopment analysis and financial performance indicators. Among the many reasons behind choosing this nonparametric method is that it identifies the sources of inefficiency and specifies the directions and magnitudes of improvements required. Three input-oriented models – CCR under constant and BCC under variable returns-to-scale assumption – are employed for evaluating three types of efficiency: technical, pure technical, and scale efficiency. Two hypotheses are examined and empirically confirmed: first, there is significant firm variability in financial performance, and second, investments are the primary source of inefficiency among the observed indicators. The results have additionally revealed that the mentioned differences are less pronounced in the case of pure technical efficiency, implying that the overall inefficiency of healthcare companies in the sector in the GCC region can be generally attributed to scale efficiency. Finally, narrow, deep subsidiaries level (Hospitals and Pharmaceutical firms) and analyze the financial performance ratios, including the efficiency of different ratios of selling general management expenses, ROIC, ROA, ROE, ROS, total capital growth rate, and growth rates. These results indicate that profitability, growth, and return on invested capital of Hospitals firms are reflected in financial performance in considering superiority in efficiency and growth in pharmaceuticals firms. Also, the results indicate that healthcare companies do not spend or invest in Research and Development (R and D) for technological innovation. This result can reflect the expectation that healthcare companies' profitability, growth, and leverage will be more influenced by future cash flow. The implications of the research results are aimed at further research and testing the efficiency of the entire health care sector and providing policymakers quantitative guidance for policy formulation, with new insights when considering further study and testing the efficiency and financial performance with different assumptions
-
Modeling Prices of Islamic Commodity SwaptionDespite the critical role SMEs paly in economic growth and job creation, SMEs access to bank credit is still challenging due to lack of financial transparency of most Saudi SMEs. The difficulties facing SMEs financing can be estimated through credit risk assessment. Good risk assessment can set a strong format of risk pricing to charge suitable loan premiums and make sound decision about issuing loans. There are scientific statistical methods to assess credit risk of enterprises. This study employs the internal factors most affecting a company?s performance to construct logistic regression model using panel data of over 60 Saudi firms (with revenues less than 200 SAR) to assess the credit risk of Saudi SMEs. The data sample includes all Saudi SMEs listed in Saudi main market, Tadawul. Based on the empirical results, the study determines the default predictors (variables) of Saudi SMEs. The developed model suggests that acid-test ratios are most affecting credit default of Saudi SMEs. Lastly, the paper puts recommendations and suggests several future studies.
-
Shariah-compliant Five-factor Pricing ModelThe development of Islamic finance necessitates the availability of shariah-compliant asset pricing models that capture the relevant sources of systematic risk for which investors must be compensated. This study extends Fama and French (2015) five-factor model by replacing risk-free rate with return on AAA Sukuk and the market portfolio factor with Shariah-compliant market portfolio. The model was tested using ten-year monthly data from 2007 to 2016 on non-financing firms listed on Saudi Stock exchange. The model inputs were returns on mimicking portfolios that proxy for the relevant underlying sources of risk that affect cross-section of returns. Excluding market portfolio factor, the independents portfolios were obtained from double sort of the listed firms on size and each of book-to-market value, profitability, and investment; the dependent portfolios were created from the double sort of firms on size and book- to-market value. For estimation, generalized method of moments was applied. The test results indicate that all factors in the model explain returns on small size portfolios, while in case of on big size; high BM only investment factor was found significant in explaining the returns. The model of this study is expected to provide investors with a robust tool in investigating the sources of systematic risk and make investment decisions based on their risk-return preferences.
-
Shari‘ah harmonization in financial reporting standardizationThe concept by Shariah harmonization in financial reporting standard Would be advantageous for Saudi Arabian banking system. This study aims at analyzing the perception of stakeholders in Saudi Arabian banks. The study Also examines the perception of insiders and outsiders of the banks about Islamic financial reporting standards by answering the statements on the factors : Shariah harmonization efforts for Islamic bank in financial reporting standard , Shariah harmonization as an important criterion to have single financial reporting standard, and choice between Shariah harmonization of practice de facto over harmonization of rules de jure. The data for the study was collected through administration of close –end questionnaire ( survey) and the responses of 110 respondents was used in data analyzing using ANOVA. The results of the study reveal that these is no significant difference in the perception of insiders and outsiders about all the factors included in this study .However , the respondents recognize the need for a framework for Islamic financial standards and for a unified fatwa for the banks .In addition, they disagree with the adoptions of IFRS by the Islamic banks. The finding of this study can be used by policy makers and banks managers to reshape the banking system according to the aspirations of the stakeholders .
-
Macroeconomic Impact of Islamic Bank Financing in Saudi ArabiaIslamic banking is a fast growing segment of the financial system in Saudi Arabia and has effects on the economic performance of a great importance to the economic growth. This study is to assist bridging an existing research gap of exploring how the Islamic banking helps the macroeconomic growth of K.S.A. The study mainly to employe the statistical analysis to investigate the macroeconomic impact of Islamic bank financing (IBF) in the Saudi economy from the year of 2001 to 2017 by looking into independent variables of the IBF and the total financing against the macroeconomic factors: gross domestic product, gross fixed capital formation, inflation, international trade, and unemployment. The analyzed data are obtained from Bankscope websites, Bloomberg and International Monetary Fund (IMF) databases. The main results from the Vector Auto Regression (VAR) model in the E-views show both of the TF and IBF have an impact on GFCF, but not on the inflation. The IBF effects on the unemployment, the international trade, and with no significant effect on the GDP growth. Although, the TF data of the growth equation show an influence on GDP growth and international trade.
-
Pattern of Volatility Transmission with Regime Switching: CASE OF GCCThis paper examines volatility transmission patterns with seven stock markets of countries of the Gulf Cooperation Council (GCC), (Saudi Arabia, Kuwait, Bahrain, Oman, Qatar, Dubai and Abu-Dhabi), and these markets with the two global markets (S&P 500 index, and Oil-WTI prices), using the Multi-Chain Markov Switching (MCMS) model. This method is able to distinguish and differentiate between well diverse transmission patterns including volatility spillover, interdependence, and independence, given changes from high to low volatility regimes and vice-versa. The results display that there are different transmission patterns between the GCC and the global factors, and there is strong relationship between some of the GCC markets and the global equity markets rather than the oil markets. These patterns of volatility transmission are also highly sensitive to the regimes of the selected markets which are characterized by turmoil or tranquility. For the first global market (Oil-WTI), the results show a strong interdependence between Oil and S&p500, Kuwait, Abu-Dhabi, Dubai and Saudi Arabia markets. Furthermore, there is spillover from Oil-WTI to Abu-Dhabi, Dubai and Saudi Arabia markets. And the significant result display that there is independence between Dubai and Bahrain, and Kuwait and Dubai markets. For the second global market (the U.S. S&P 500 index), the results show strong interdependence with WTI, Dubai, Qatar and Oman. There is also spillover from the S&P 500 index to Kuwait, Abu Dhabi, Dubai and Bahrain. More remarkable result that we find spillover from Qatar to the S&P 500 index. Finally, we display results in terms of inference on the regimes of high and low volatility, allowing for the interpretation of the financial shocks and the dates in which they are transmitted from one market to another.
-
Are Islamic equity indices more volatile than their conventional counterparts? Evidence from GCC S&P index familyThis study compares the volatility of S&P GCC Composite Shariah index with conventional benchmarks from Gulf Cooperation Council (GCC) countries. The main goal is to provide evidence from a new index family whether investors who invest in Islamic equity are sacrificing performance or not. Orthogonal Generalized Autoregressive Conditional Heteroskedasticity (OGARCH) (1,1), (1,2), (2,1) and (2,2) framework is employed on daily returns data for the period of April 2007 to March 2018. The results show that S&P GCC Composite Shariah Index has similar risk profile as its conventional counterpart the S&P GCC Composite Index and that investors who wish to invest in Islamic securities are not significantly worse off than those who choose non-Islamic securities and will not sacrifice financial performance
-
Istijrar Contracts – An Untapped Gem in Hedging Price Risk in Commodity AccumulatorsDerivatives continue to play an integral role in hedging several types of risk in conventional as well as Islamic finance. While there has been, and continues to be, a lack of consensus from Islamic scholars regarding the complete permissibility of the usage of derivatives in risk management, efforts have been made in order to develop and innovate Shariah-compliant equivalentsto conventional contracts in order to ensure that Islamic Financial Institutions (IFIs) and Shariah-compliant clients have prudent risk management tools to minimize their risk exposure on several fronts. This study proposes a Shariah-compliant Istijrar Accumulator model to hedge against price and commodity risk by using Murabaha-based Istijrar contracts as a way to set a price mechanism for the supply of commodities during a long time period. A binomial option pricing model, Cox, Ross & Rubenstein (1976), is used to determine the intrinsic value of the contract, adjusted for the Ribawi factor (interest factor) by replacing risk free rate with the AAA sukuk return. The proposed Shariah-compliant model is also compared with the conventional KODA structures model as a test for fairness between each party involved in the contract. The results of the model show that the proposed Islamic Istijrar Accumulator limits the downside risk that is observed in the conventional commodity accumulators (dubbed as ‘I’ll kill you later” contracts). Risk is shared rather than transferred between both counterparties in the Istijrar accumulator model which confirms that the payoffs to each party is fair and therefore, a better alternative as an accumulator structure than the conventional model.
-
Pricing urbun call optionDerivatives are very unique instruments and the value according to underlying assets. Derivatives have many forms the one we interested on in this study is Options contract that gives rights to buyer or seller to exercise their rights based on the price movement of an underlying assets. Nevertheless, an option is not acceptable according to many scholars due to its speculative nature and premium fee charge and not because of its promise. This Thesis is an application to pricing Urbun Call Options based on Urbun or deposits as a replacement to premium fee charged in conventional options by implement the conventional framework of pricing of currency option (Garman and Kohlhagen 1983) to price Urbun Call Option from an Islamic perspective. The need of the concept of hedging in Islamic finance we provide a reconsideration of currency options for the benefits of maslahah, and would enrich the Islamic economics literature.
-
The impact of FDI on economic growth, inflation and unemployment in Saudi ArabiaThis research examines the role of foreign direct investment (FDI) to influence the macro economy of Saudi Arabia. This research considers gross domestic product (GDP), inflation and unemployment as the selected macroeconomic variables to evaluate the role of foreign direct investment while including other independent variables like gross fixed capital formation (GFCF), real effective exchange rate and exports. This research covers the sample period from 1992 -2017, using autoregressive distributed lag (ARDL) model which is appropriate when selected macroeconomic series are not of similar order of integration. This research also employs ARDL bound test and related error correction model to further validate the analysis. All the estimated parameters from ARDL, F bound test and error correction term confirm the positive and statistically significant long run impact of foreign direct investment on GDP. This study also finds positive and statistically significant impact of exports and real effective exchange rate on GDP in Saudi Arabia. This research provides an important insight for policy makers to facilitate more foreign direct investment in Saudi Arabia along with large exports volume. This research is an important contribution to the existing literature pertaining to the role of FDI to influence macro economy of Saudi Arabia, especially in the context of Vision 2030 which aims to facilitate foreign direct investment in the country.
-
The Impact of pandemic and Economic Regularity on the GCC Financial MarketThis research investigates the Impact of COVID-19 on the GCC index, exchange, and oil return. It compares it with the outcomes of structural changes in the GCC economy: corporate tax and the Goods and Services Tax (VAT) implementation. Event study (constant return Model) and standard Vector Auto-regression show the Impact of COVID-19 on these three variables compared to that of corporate tax and the VAT. Using daily index return, oil price, and exchange. Saudi Arabia's data is from Oct 21, 1998, to Feb 10, 2022. United Arab Emirates data is from Aug 29, 2005, to Feb 10, 2022. Kuwait data from Dec 1, 2022. Qatar data is from Dec 31, 2001, to Feb 10, 2022. Oman data is from Dec 22, 2000, to Feb 10, 2022. Bahrain data is from Jun 1, 2014, to Feb 10, 2022. Corporate tax has a short-term impact on the index return of UAE and Oman, and it has a short-term effect on the oil return of UAE and Qatar. While in the long term, the impact affects the oil return of SA and UAE. VAT has a short-term impact on the index return of SA and Oman, and it has a short-term effect on the oil return of Bahrain. Although, in the long term, the impact is just affected the oil return of Bahrain.COVID-19 has a short-term impact on the index return of SA, and it has a short-term effect on the exchange return of SA, UAE, Kuwait, Qatar, and Oman. Although, COVID-19 has no long-term impact on GCC Variables. In addition, VAT and corporate tax have more Impact than COVID-19 on the long-term GCC oil return. Moreover, VAT, corporate tax, and COVID-19 have no impact on the long-term index return and exchange return. This study provides new insight into the financial market during external events which may have a direct or indirect effect. In addition, it gives a brief picture of the impact of new economic policies and pandemics on the GCC, the GCC index, exchange, and oil return by using Event Study (constant return Model) for short-term estimation and standard Vector Auto-regression for long term estimation.
-
Predicting Financial Distress of the Corporate Sector in GCC RegionA corporation is deemed to have financial troubles if it is likely to be financially distressed. The capacity to foresee uncontrolled phenomena helps decisions by enhancing knowledge of the upcoming circumstance. As a result, anticipating bankruptcy is critical to avoid it, especially at an early stage. Experts have developed models that can assist in determining whether a corporation is financially sound or in a financial crisis. This study used financial statements to determine which factors influence the financial hardship of the business sector in the GCC region. As the data show, certain criteria were more important than others, although this differed by country. However, one key component was shown to be shared by the countries, and that is leverage. To summarize, the following criteria are reliable predictors of financial difficulty in the GCC region: Asset Turnover, Cash Ratio, ROA, Leverage, Liquidity, Magin, Net Income, and EQ Offer.
-
The Impact of Fintech, Green Finance, and Financial Inclusion on Energy Efficiency and Sustainability in GCC CountriesDue to the rapid emergence of financial factors as well as the sustainable development goals of energy efficiency, this research focuses on finding if financial factors can have a major impact on energy effciency.The growing concern of environmental problems that are directly related to energy production and consumption include climate change. The methods the GCC countries are moving to use to reduce the consumption of energy, is through financial factors. The GCC is also seeking to lessen the reliance on oil dependency. This aligns with the sustainable development goals of the UN (united Nation), which is the global organization that the GCC is part of. This research will study if financial factors can influence energy efficiency. The method used to test the relationship is the Multiple linear regression model. Specifically, this method was chosen as there are seven independent variables and one dependent variable. A statistical software, EViews, was used to conduct different tests such as a unit root and Panel regression analysis. Tests were performed to see if the dependent variable, Energy intensity can be influenced by different variables of financial factors. The fixed effect model and Histograms were used to represent the level of distribution of the skewness and kurtosis as well as the impact of each variable. The results concluded that while it might be possible to have an influence, these financial factors showed a low effect on the size of impact.
-
Factors Affecting Female Entrepreneurship in Saudi ArabiaSmall to medium sized female enterprises are important for the global economy because they generate new jobs and the reduction of the female unemployment rate in the community. This may lead to an economic growth. The purpose of this study is to find the factors that affect the female entrepreneurship in Saudi Arabia which is measured by two measurements the number of newly registered companies in addition to the total female entrepreneurial activity and how these measurements are affected by factors such as the Women Business and the Law Index Score (scale 1-100) in Saudi Arabia, the start-up procedures to register a business for a female, the total female population and the cost of business start-up in percentage of the gross national income for a female. The study data for Saudi Arabian market was gathered from the databases of the World Bank Organization and the Global Entrepreneurial Monitor. The type of sample gathered is time series starting from 2006 – 2019 with total frequency of 14 observations. The study has developed two ARDL models of which one equation determines the factors that affect the number of newly registered companies and the second equation examines the factors that have an impact on the total female entrepreneurial activity. This research finds that the level of woman business activity and the law index score have positive impact on female entrepreneurship.
-
Determinants of Commercial Bank Lending Evidence in GCCBanking is one of the highly sensitive industries as its most of the revenue is generated from loans. The current study aims to investigate the impact of interest rates, capital sufficiency, asset quality, and liquidity on the lending behavior of commercial leading banks of Gulf Cooperation Council (GCC). For this purpose, the investigator aimed to use a quantitative research method so that only accurate, authentic, and fully updated data can be obtained from the selected population. This research would provide assistance to regulators for the development of credit risk management standards for various credit related problems like economic sector funding, lending restrictions and risk weighted assets, etc. which can put an impact on the asset quality. Moreover, the researcher collected plenty of data from secondary sources to analyze the impact more effectively with good arguments. Furthermore, all the obtained data were further analysed by using a regression model and statistical analysis methods to evaluate the effectiveness, efficiency, and reliability of all the obtained data from various sources. The results of the conducted research suggested that there is a strong impact of various numbers of determinants of commercial banks of GCC on the lending behaviours like interest rates, capital sufficiency, asset quality, and liquidity. The current research study also indicated that the banks of GCC are needed to stay more vigilant in the use of multiple factors while following the lending trends to increase their revenues and profits.
-
Impact of COVID-19 on Global Financial Stock MarketsThe aim of this study is to empirically investigate the impact of COVID-19 on global financial stock markets. The main objectives are to examine the impact of COVID-19 on global stock market indices, along with the impact oil price change on the global stock market indices, and the impact of exchange rate changes on global stock market indices. This research specifies a model where stock market indices are expressed as a function of exchange rates, oil price shocks, and COVID-19 cases; and was tested using Autoregressive Distributed Lag (ARDL). The daily closing price of two major global stock indices, exchange rates, oil price, and COVID-19 patients’ rate are obtained from January 2017 until March 2021. Findings reveal that the negative impact of pandemic on global stock markets has shown a significant effect two days after increments in the number of COVID-19 cases. Our findings contribute to the economic impact of the COVID-19 pandemic research by empirically demonstrating that the pandemic has a restrictive effect on stock market performance.
-
Modeling the Credit Risk of SMEs : Evidence from Saudi MarkeDespite the critical role SMEs paly in economic growth and job creation, SMEs access to bank credit is still challenging due to lack of financial transparency of most Saudi SMEs. The difficulties facing SMEs financing can be estimated through credit risk assessment. Good risk assessment can set a strong format of risk pricing to charge suitable loan premiums and make sound decision about issuing loans. There are scientific statistical methods to assess credit risk of enterprises. This study employs the internal factors most affecting a company?s performance to construct logistic regression model using panel data of over 60 Saudi firms (with revenues less than 200 SAR) to assess the credit risk of Saudi SMEs. The data sample includes all Saudi SMEs listed in Saudi main market, Tadawul. Based on the empirical results, the study determines the default predictors (variables) of Saudi SMEs. The developed model suggests that acid-test ratios are most affecting credit default of Saudi SMEs. Lastly, the paper puts recommendations and suggests several future studies.
-
An Empirical assessment of the economic role of small-to-medium enterprises in emerging economiesThis research aims to empirically investigates the impact of small to medium enterprises on the economic growth on sample of emerging economies. For this purpose, ten emerging economies is selected as a sample size which are Argentina, India, Turkey, South Africa, Saudi Arabia, Russia, Poland, Pakistan, Nigeria, and Mexico for the sample period 2006 – 2018. This research selects economic variables such as gross domestic product, unemployment rate, and inflation rate as dependent variables and foreign direct investment, production of natural resources, government expenditure, money supply, volume of trade and number of registered small to medium enterprises in each country as independent variables. Current research seeks to analyze the role of SMEs impact on economic growth of the emerging economies while using generalized method of moments (GMM) approach for the selected panel of emerging economies. This research finds positive and statistically significant impact of SMEs on the economic growth and employment generation for the selected sample of emerging economies although these effects are inflationary. The significance of this research is to highlight the importance of the strategic role of SMEs to boost economic growth and to develop entrepreneurial capabilities in the emerging economies. However, this research is constrained by the limited availability of the data.
