Finance

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https://hdl.handle.net/20.500.11888/15847

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AGENCY COST OF FREE CASH FLOW, FIRM PERFORMANCE AND MODERATING ROLE OF FINANCIAL LEVERAGE AND DIVIDEND POLICY: THE CASE OF PALESTINE CORPORATIONS
(2022-09-22) Mahmoud Yousef Mahmoud
Background: Free Cash Flow (FCF) is considered one of the main sources of agency problems between management and shareholders. These problems result from separating management from owners and using this money in a way that does not serve the shareholders’ interests. This leads to harming the performance of the company. Therefore, the owners strive to control these behaviors by controlling the financial policies, thus reducing FCF in the hands of the managers. Objectives: This study sought to find out the effect of overinvestment, as a proxy for the agency problem of FCF, on the company’s performance and the moderating role that both debt and dividend policies play in reducing the negative impact of overinvestment on the financial performance of companies in Occupied Palestine. Methodology: The study participants were 31 non-financial companies listed on the Palestine Stock Exchange (PSE) from 2010 to 2019.The accounting data was collected manually from the financial reports (balance sheets and income statements) of the companies while the market data was collected from the PSE website. This study adopted overinvestment as a proxy for the agency cost of FCF; it was measured through the investment demand function. This study also used the Ordinary Least Squares (OLS) method to test these relationships. Results: This study has found that overinvestment negatively affected the performance of companies in Occupied Palestine. It was measured by five accounting metrics: EBIT, EBT, ROA, ROE, and EPS. It has also found that debt could mitigate the negative impact of overinvestment on financial performance, which is consistent with Jensen's 1986 FCF theory. However, the study has not found evidence about the role of dividend policy in reducing the negative impact of overinvestment on the performance of companies in in the country. The combination of debt and dividend policies has not proven/yielded any significant effect. Recommendations: Based on the study findings, the researcher recommends using debt as an effective tool to reduce agency problems for FCF in Occupied Palestine companies. He also suggests administering the study to the financial sectors and companies in neighboring countries to generalize the findings more reliably. Keywords: Free cash flow; agency problem of FCF; dividend policy; debt policy; firm performance; Occupied Palestine.
DETERMINANTS OF BANK NET INTEREST MARGIN: EVIDENCE FROM MENA COUNTRIES
(2023-03-26) Ajyad Mojeed Ahmad Bahlaq
The net interest margin in the dual banking system is not well documented. While previous studies tested the determinants of each bank type (Islamic and conventional banks) separately or using a dummy representing the Islamic bank. The study is concerned with the differences between Islamic and conventional banks. The study examines the factors driving net interest margins in the Middle East and North Africa using Islamic banksas a moderating variable. Also, uncover the effect of interest rate risk, its interaction with credit risk, and institutional variables that are first to investigate in the region. This study uses panel of 511 banks in twenty countries for the period (2006 - 2018). Net interest margin is the dependent variable while the size of operation, risk aversion, credit risk, liquidity risk, specialization in lending, inflation, gross domestic product, interest rate risk, the interaction between interest risk and credit risk, control of corruption, rule of law, and regulatory quality are the independent variables while Islamic banks is the moderating variable. For analyzing the data pooled models, fixed effect models, random effect models, and generalized method of moments were used. This study conclude the negative effect of the size of operation, credit risk, the interaction between interest risk and credit risk, liquidity risk, regulatory quality, and rule of law on the net interest margin while a positive effect of inflation, gross domestic product, interest rate risk, specialization in lending, and Islamic bank. In addition, it is concluded that liquidity risk affect the net interest margin of Islamic bank more than conventional banks. It is recommended banks that focus on diversifying their operations and encourage Islamic banks to adopt new risk management instruments, in addition to enhancement of the governance frameworks such as contract enforcement. Keywords: Dual banking; Islamic bank; MENA region; Net interest margin.
UNSYSTEMATIC RISK IMPACT ON BANKING STABILITY: ISLAMIC VS. CONVENTIONAL BANKS IN PALESTINE AND JORDAN
(2023-03-16) Safaa Khalil Salah
The main objective of this study is to verify the relationship between credit risk and liquidity risk on the stability of banks for a data set of 35 Conventional Banks (CB) and Islamic Banks (IB) belonging to Palestine and Jordan - with the following distribution (11) conventional banks and (3) Islamic banks in Palestine, and (17) conventional banks and (4) Islamic banks in Jordan was observed during 2008-2019,By performing a panel smooth threshold regression model, where this model was used because it takes into account the linear and non-linear relationships. The Z-score (ROA) was used as a dependent variable, non-performing loans from loans, and the ratio of liquid assets from assets, a proxy for credit risk, and liquidity risks, respectively, refer to transition variables, in addition to a set of control variables associated with the characteristics of bank and the macroeconomics. The results show that the relationship between the bank's stability and credit risk, and the bank's stability and liquidity risk is non-linear, and is characterized by the presence of two optimal thresholds equal to 11.41% for credit risk and 20.15% for liquidity risk. The results showed that credit risks do not affect the stability of banks, while liquidity risks negatively affect stability. With regard to the control variables that are bank-specific, the results show that both size and capital adequacy have a significant positive effect on stability, and after the threshold, it becomes negative in both equations. In terms of macroeconomic variables, it was found that political stability has a strong effect on the stability of banks. It was also found that the type of bank affects stability, as conventional banks are more stable than Islamic banks in Palestine and Jordan. Therefore, to ensure the stability of banks, the study recommends that banks choose the appropriate restructuring to ease their small size and enhance capital. Keywords: credit risk, liquidity risk, stability, PSTR model, Islamic bank, conventional bank.
DOMESTIC VERSUS FOREIGN BANKS PROFITABILITY: EVIDENCE FROM PALESTINE AND JORDAN
(2023-06-05) Haya Fawzi Abu-ALrub
This study compares the profitability of Palestinian and Jordanian foreign and domestic banks from 2008 to 2019. In this study, the researcher used specific bank data to determine the difference between domestic and foreign banks operating in Palestine and Jordan. The data was collected from the individual banks' financial statements. Moreover, the researcher used a set of control variables that include macroeconomic data for the two countries, which the researcher collected from the World Bank database. The sample consists of 7 local and 7 foreign Palestinian banks and another 16 local and 8 foreign Jordanian banks. For the analysis, the researcher applied the panel data model. Return on assets, return on equity, and net interest margin are used to approximate banks' profitability. Our results are important to investors, creditors, decision-makers, regulators, and boards of directors as they are interested in the performance of the banking institutions. The researcher measured the profitability of banks using three distinct dependent variables: return on assets (ROA), return on equity (ROE), and net interest margin (NIM). The independent variables include bank specific factors and control variables. Bank specific factors include profitability, liquidity and risk. Control variables include macroeconomic indicators such as growth in gross domestic product (GDP), and inflation. After analyzing the 35 local and foreign banks in Palestine and Jordan from 2008 to 2019, and assessing their profitability with return on assets, return on equity, and net interest margin, the results showed higher liquidity and profitability for foreign banks. In addition, the bank specific internal factors significantly affected the banks’ profitability measured by return on assets (ROA) and return on equity (ROE), except for Assets Quality Ratio (AQ) and liquidity (LIQ) for local and foreign banks. Furthermore, liquidity (LIQ) had a significant impact only on Net Interest Margin (NIM), as it explained 3.9% of its variability. Keyword: bank profitability, domestic banks, foreign banks, internal & external factors.
تأثير الشمول المالي على النمو الاقتصادي والفقر والاستقرار المالي في فلسطين دراسة قياسية للفترة ما بين (2010 – 2020)
(An Najah National University, 2022-03-22) صالح عبد المعطي عمرية, مصطفى
هدفت الدراسة الى التعرف على تأثير الشمول المالي على النمو الاقتصادي والفقر والاستقرار المالي في فلسطين دراسة قياسية للفترة ما بين (2010 – 2020) والوقوف على حجم تأثير الشمول المالي على عدد من المؤشرات الاقتصادية الهامة مثل النمو الاقتصادي، ونصيب الفرد من الناتج الإجمالي، ونسب الفقر بالنسبة لعدد السكان، والاستقرار المالي المقاس بإجمالي القروض المتعثرة، حيث تمت مراجعة الادبيات والدراسات السابقة لتحديد الإطار النظري لهذه الدراسة. ولغرض تحقيق اهداف الدراسة تم استخدام المنهج الوصفي التحليلي، حيث تم إجراء اختبار طريقة العامة للحظات (GMM) بالطريقة العامة، حيث تم جمع البيانات عن طريق البيانات المالية والتقارير السنوية للبيانات التي تصدرها البنوك بشكل سنوي في الفترة ما بين 2010 – 2020. واظهرت نتائج الدراسة: أنه يوجد أثر معنوي سلبي للشمول المالي من خلال عدد الحسابات المصرفية وأجمالي الودائع ونسبة التضخم على النمو الاقتصادي، كما تبين وجود إثر معنوي سلبي لمتغير التسهيلات المصرفية على نسبة الفقر، كما وجد أثر معنوي سلبي على متغير الودائع عند مستوى على مستوى الاستقرار المالي، وتبين انه يوجد أثر إيجابي معنوي للشمول المالي لمتغير نسبة التضخم على نسبة الفقر الى عدد السكان، يوجد إثر معنوي إيجابي للتسهيلات المصرفية على الاستقرار المالي. وبناء على نتائج الدراسة ظهرت مجموعة من التوصيات من اهمها: ضرورة العمل على توزيع التخصص بين البنوك في توزيع القروض، ويجب على الجهات الحكومية المصرفية مراقبة الحسابات المصرفية قدر الإمكان كونها تؤثر سلباً على النمو الاقتصادي من خلال وضع قوانين أكثر تشددا في حال امتلاك نفس الفرد أكثر من حساب مصرفي، هذا ويجب على سلطة النقد اتخاذ إجراءات حازمة تجاه تنظيم القروض الاستهلاكية، وضرورة توسيع المنتجات المالية لأولئك الذين يعانون من نقص الخدمات.

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