Kuala Lumpur – Three INCEIF papers received 3 out of the 6 best paper awards at the recently concluded 16th Malaysia Finance Association (MFA) Conference. The papers are part of 3 INCEIF PhD students’ theses.
The MFA Best Paper Award went to a paper on “Testing Sukuk and Conventional Bond Offers based on Corporate Financing Theories using Partial Adjustment Models: Evidence from Malaysian Listed Firms”. Mohamed Hisham Hanifa co-authored the paper with his PhD supervisors, INCEIF Professor of Finance and Econometrics Prof Mansur Masih and INCEIF Head of Graduate Studies Prof Obiyathulla Ismath Bacha. The award came with a M1,000 cash prize from MFA and the paper will be published in the Capital Market Review journal.
The paper analyses the sukuk and conventional bond offers by Malaysian listed firms from the perspective of corporate financing theories. Several insights emerge from the analysis. First, while the issuance of sukuk and conventional bonds is consistent with the trade-off theory, the issuers’ target debt ratio when sukuk or conventional bond is used is driven by different firms’ specific factors. Second, likewise, the same results also hold for the exchange-based sukuk and straight bond. And finally, for the partnership-based sukuk and convertible bond, their issuance seems to be in line with the pecking order theory but with the preference given to the partnership-based sukuk under the condition of high information asymmetry cost. The paper insightfully concludes the analysis: “sukuk offers bring “unique” benefits to the issuers that may not be available if conventional bonds are used.
The paper on “Combining Momentum, Value and Quality for the Islamic Equity Portfolio: Multi-Style Rotation Strategies using Augmented Back Litterman Factor Model”, won the Pacific-Basin Finance Journal Paper Award which carries with it a US$1,000 cash prize. Ginanjar Dewandaru co-authored the paper with supervisors Dr Rumi Masih (Managing Director, BNY Mellon Investment Management in New York), Prof Obiyathulla Ismath Bacha and Prof Mansur Masih.
The paper, which will be published in a special issue of the Pacific-Basin Finance Journal, applies multi-style rotation strategies by combining momentum, value and quality for the Islamic equity portfolio. The paper constructs active portfolios using the augmented Black Litterman factor model to avoid the factor alignment problem, with the factor views predicted using MS-VAR, MIDAS, and Bayesian Model Averaging. The paper highlights the promising strategy for Islamic equity investors to outperform the market.
Hassan Daher’s paper on “Islamic Banks’ Capital Buffers: Unique Risk Exposure and the Disciplining Effects of Charter Values” won the PhD Colloquium Best Paper Award. With the win, he received RM1,000 as well as an opportunity to submit and publish the paper in the Asian Journal of Business and Accounting. Hassan’s paper tackles the aftermath of the recent financial crisis, the inherent linkages between banks’ capital buffers where risk take centre stage as policy makers promoted a more resilient global banking system. The growing recognition of Islamic banking as a viable alternative-banking model warrants the need to investigate the overall susceptibilities of Islamic banks’ capital buffers to unique risks emanating from their operating environments.
The paper examines this issue over the period 2005-2012 in 18 countries where Islamic and conventional commercial banks coexist. The search for alternative forms of prudential regulation over and above risk based capital guidelines has also shifted the attention of policy makers towards investigating the disciplining effects of banks’ charter values on capital buffers. The paper tests this issue for Islamic banks, and whether the relationship varies as a function of the size of the charter as implied by theory. This study is expected to expose shortcomings in capital adequacy guidelines and raises distinct policy implications with regards to the regulation and supervision of Islamic banks in countries where both bank types co-exist.
The MFA Conference is an annual international gathering that brings together academics and researchers from all over the world to exchange and share their knowledge, experience and research findings in the areas of Finance, Banking, Islamic Finance, Accounting and Economics.
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