DLSU Business & Economics Review Vol 27 No.2
FROM THE EDITOR:
Tereso S. Tullao, Jr.
Associate Editor
Mariel Monica R. Sauler.
Guest Editor
RESEARCH ARTICLES:
Long-Run Linkages of ASEAN+3 Floating Currencies
Cesar C. Rufino
De La Salle University, Manila, Philippines
[email protected]
Year: 2018, Volume 28 No. 1
Pages: 1-33
Abstract:
The extent with which currencies of the expanded ASEAN grouping commonly known as the ASEAN+3 have attained long-run currency linkages—an important requisite for an eventual monetary integration—is the main focus of this study. High-frequency interbank call rates (nominal exchange rate vis-à-vis the US dollar) data on seven floating currencies of the region with sufficient historical time series covering the period of 1998 to 2012 (weekly: January 7, 1998, to December 26, 2012—average of bid and ask rates on Wednesdays) constitute the primary database of the study. The goal is to establish through cutting-edge econometric procedures three crucial outcomes: the bilateral dependence of the various currency pairs, informational efficiency in the markets of participating currencies, and the long-run bilateral and multilateral linkages of the currencies. When these outcomes are adequately established, the state of current knowledge on the readiness of the region for currency union and eventual monetary integration is expected to be enhanced. The overall result of the study is quite encouraging to supporters of currency union as all of the three outcomes are adequately established empirically. There is a high level of the currencies’ bilateral dependence, both in their level values and in their returns; all markets of the participating currencies exhibit informational efficiency, and there exist a number of significant long-run equilibrium relationships linking the floating currencies of the region.
ASEAN Bond Market Integration: What Drives Cross-Border Bond Investment in ASEAN?
Angelo Taningco
Security Bank, philippines
[email protected]
Year: January 2018
Volume: 27 No. 2
Pages: 15-22
Abstract:
Bond market integration in the Association of Southeast Asian Nations (ASEAN) appears to be relatively low or weak especially in terms of intraregional bond investment despite the robust growth in bond market size in recent years and policy initiatives in support of developing bond markets in the region. This paper aims to contribute to the literature on ASEAN financial integration by providing empirical evidence and policy insights on what can help boost intra-ASEAN bond investment. Using panel regression following a gravity model framework and spanning five major ASEAN member countries—Indonesia, Malaysia, the Philippines, Singapore, and Thailand—over the 2001–2014 period, this study finds that the bond market size of the origin country, having a common language between origin and destination countries, and financial openness in both origin and destination countries are positively significant with respect to intra-ASEAN bond investment. These findings highlight the importance of narrowing information or transaction costs in order to promote freer flow of capital within ASEAN bond markets and thereby attain regional financial integration.
Strategic Position of Bond Markets in ASEAN-5: Challenges and Directions for Development
Sorasart Sukcharoensin
National Institute of Development Administration, Bangkok, Thailand
[email protected]
Year: January 2018
Volume: 27 No. 2
Pages: 23-34
Abstract:
This study compares and analyzes the strategic position of bond markets in ASEAN-5 countries using the Strategic Position and Action Evaluation matrix approach as a diagnostic tool. The results reveal that the bond markets in Malaysia, Singapore, and Thailand are in an aggressive posture, whereas the bond market in the Philippines is in the conservative position and the Indonesian bond market is the one in a defensive posture. The current strategic position of each bond market, together with scores in each dimension, helps identify key prospects and challenges that could considerably affect strategic development of bond markets in the region.
Is a Regional Credit Rating Agency for the ASEAN Feasible?
Tereso S. Tullao, Jr., Christopher James R. Cabuay, Daniel S. Hofileña
De La Salle University , Manila, Philippines
[email protected]
Year: January 2018
Volume: 27 No. 2
Pages: 35-50
Abstract:
In the spirit of deepening the bond markets of the ASEAN+3 region, as well as addressing the inadequacies put forth by the underrating of bonds by global credit rating agencies (GCRAs) and their lack of recognition of domestic CRAs’ (DCRAs) ratings, we look into the feasibility of a regional CRA (RCRA). Establishing an RCRA is faced with hurdles related to institutional and reputational constraints, mechanisms of information exchange, compatibility of financial reports, operational limitations, governance structure, and regulatory frameworks. In this light, we provide a brief discussion on potential alternatives such as the credit ratings initiative of the National University of Singapore (NUS), mutual recognition agreements, recognition of DCRAs’ ratings, removing the sovereign cap, regional GCRA ratings, cooperation between DCRAs and GCRAs, and the harmonization among DCRAs.
Ownership Structure and Stock Return Asymmetries in ASEAN-5 Stock Markets: A Firm-Level Analysis
Sorasart Sukcharoensin and Pariyada Sukcharoensin
National Institute of Development Administration, Bangkok, Thailand
[email protected]
Year: January 2018
Volume: 27 No. 2
Pages: 51-60
Abstract:
This paper explores the relationship between ownership structure and the skewness in the stock return distribution among ASEAN-5 equity markets, including Indonesia, Malaysia, the Philippines, Singapore, and Thailand during 2007–2015. This study adds to the existing literatures that ownership structure can explain skewness of the stock returns. The empirical results reveal that stock returns in ASEAN-5 markets present asymmetric distribution. Further, by employing firm-level data, the results show that ownership structure, cumulative daily stock returns, firm size, and market-to-book ratio significantly affect future skewness of the stock returns.
Inflation and Public Debt Dynamics in ASEAN
Athakrit Thepmongkol and Yuthana Sethapramote
National Institute of Development Administration, Thailand
[email protected]
Year: January 2018
Volume: 27 No. 2
Pages: 61-74
Abstract:
This paper studies how inflation affects the debt dynamics focusing on six ASEAN countries: Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. Using projection data, we perform simulations of debt dynamics under various inflation policies. It results that Vietnam has the highest ability of inflating debt, while the Philippines is lastly ranked. Moreover, the optimal inflation rate for each member country and also the common policy rate for ASEAN integration are calculated under additional debt management motive. We found that if the ASEAN happened to use the common inflation policy rate, Malaysia and the Philippines would not be much affected as their individual optimal rates are close to the common rate, while Indonesia and Singapore would suffer from withstanding the common inflation rate far from their own optimal levels.
Regime-Switching Business Cycle Synchronization in the ASEAN
Yuthana Sethapramote and Athakrit Thepmongkol
National Institute of Development Administration, Bangkok, Thailand
[email protected]
Year: January 2018
Volume: 25 No. 2
Pages: 75-87
Abstract:
This paper investigates patterns of business cycle synchronization and analyzes the underlying common factors in six ASEAN countries, that is, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. Two important findings result. First, according to resulting regime probabilities calculated from the Markov-switching model, Singapore is not synchronized with other ASEAN members, while Indonesia, Malaysia, and the Philippines are highly correlated. Second, according to the principal component analysis, we find that the world’s import value growth, the output growth of China, and the capital flow of Singapore are most likely to account for 88% of variation in probabilities of the ASEAN being in the contraction regime.
Compliance Theory: A Case Study Approach in Understanding Organizational Commitment
Nelson J. Celis
De La Salle University, Manila, Philippines
[email protected]
Year: January 2018
Volume: 27 No. 2
Pages: 88-118
Abstract:
The Electronic Commerce (e-Commerce) Act of 2000 or Republic Act (RA) No. 8792 mandates all government agencies to transact business and perform government functions using electronic documents within two years from the date of its effectivity in June 2000. Unfortunately, only a handful of government agencies were ready to implement the said law in the year 2002 despite the availability of applicable information technology (IT) resources and appropriated budget. After 17 years, there is considerable improvement in the compliance with the said law, though there are still non-compliances of government offices that could not manage to be at par with leading compliant government offices. To understand the compliance behavior of an agency vis-a-vis the e-Commerce Act, I proceed in three steps. First, I adopted socio-economic theory on regulatory compliance Next, I use process pattern matching as a qualitative approach to examine the compliance variables by comparing the case-based empirical patterns with the operational framework. And third, I statistically test the hypotheses that organizational commitment and the organizational maturity on the use of IT impact the level of compliance. I do this by using case study method by combining the qualitative and quantitative analyses of the compliance behavior of the Bureau of Internal Revenue and the Commission on Elections Thus, this paper contributes to the theorization of regulatory
compliance in understanding organizational commitment with electronic commerce and related laws involving the use of IT in the Philippine context with detailed elucidation of the variables influencing it.
Determinants of Earnings Management Choice among Publicly Listed Industrial Firms in the Philippines
Cynthia P. Cudia and Aeson Luiz C. Dela Cruz
De La Salle University, Manila, Philippines
[email protected]
Year: January 2018
Volume: 27 No. 2
Pages: 119-129
Abstract:
Earnings management involves the use of acceptable accounting rules and procedures as well as circumventing business activities to achieve desired ends. In the literature, earnings management through discretionary accruals has always been associated with an opportunistic motive to mislead various stakeholders about a business’ financial performance to the advantage of owners and managers. However, the literature presented two possible motives behind earnings management, namely: an opportunistic, a self-serving perspective which mirrors the agency problem; and an efficient motive which utilizes earnings management as a signalling mechanism to send signals about the firm to its stakeholders. In this paper, we investigate the type of earnings management employed by industrial firms in the Philippine Stock Exchange (PSE). Evidence was found that managers use earnings management in an efficient perspective to signal private information to stakeholders. In addition, the study examined firm-specific characteristics in terms of profitability, leverage, cash flows from operations, and firm size. Furthermore, this study also examined corporate governance variables such as the number of independent board of directors, the presence of CEO duality, board size, and audit quality. We also examined the effect of these variables on a firm’s tendency to engage in earnings management using discretionary accruals. Results revealed that among the firm specific characteristics, leverage and cash flow from operations are both significantly and positively related to a firm’s level of discretionary accruals, while profitability was found to be negatively related. However, we found that corporate governance variables such as board size, board independence, CEO duality, and audit quality were all insignificant predictors of a firm’s earnings management activities.
Predictors of Humanistic Sustainability HRM Practices
Ana Liza Asis-Castro and Divina M. Edralin
De La Salle University, Manila, Philippines
[email protected]; [email protected]
Year: January 2018
Volume: 27 No. 2
Pages: 130-146
Abstract:
We determined and compared the degree of implementation of humanistic sustainability human resource management (HRM) practices. We analyzed which among the firm demographics, such as the number of years of operation, size, and type of ownership, is its significant predictor. Based on the Motivations of Humanistic “Sustain Ability” framework where the HRM practices were rooted, we used the descriptive, correlational, and causal research designs to analyze the 137 samples responses of various companies who participated in the survey. Our results showed that Philippine companies were moderately implementing humanistic sustainability HRM practices. It also indicated that those that were registered as corporations and large in size were implementing humanistic sustainability HRM practices to a greater degree. Our findings also revealed that the humanistic sustainability HRM practices were significantly correlated with company demographics such as size and type of ownership. Finally, our regression analysis indicated that the significant predictor of humanistic sustainability HRM practices was the size of the firm followed by the number of years of their operation.
Corporate Social Responsibility Disclosure in Vietnam: A Longitudinal Study
Kelly Anh Vu and Thanita Buranatrakul
Mahidol University International College, Thailand
[email protected]; [email protected]
Year: January 2018
Volume: 27 No. 2
Pages: 147-165
Abstract:
This paper aims to investigate the level of corporate social disclosure practices in emerging market. The purpose of this paper is also to identify the important factors that drive corporate social responsibility disclosure practices in Vietnam. Based on a sample of firms listed on Vietnamese Stock Exchange from 2009 to 2013, a sample of 600 observations was analyzed using CSR disclosure index of which is classified into four dimensions (human resource, community involvement, environment, and products/services). Significant relationships are found between board independence, CEO duality, size, and profit with the level of CSR disclosure of firms in Vietnam. The proportion of state ownership and foreign ownership in Vietnam still influences the prospects of greater information disclosure on human resource dimensions. This study is among the first to examine corporate social responsibility reporting in a growing emerging market such as Vietnam.
Testing the Assumptions of Slippery Slope Framework on Tax Compliance: Evidence from Nigerian SMEs
Augustine Ayuba
Kaduna State University, Kaduna, Nigeria
[email protected]; [email protected]
Natrah Saad and Zaimah Zainol Ariffin
Universiti Utara Malaysia, Malaysiav
Year: January 2018
Volume: 27 No. 2
Pages: 166-178
Abstract:
This paper integrates the assumptions of the Slippery Slope Framework in explaining the tax compliance of small and medium enterprises. This study tests these assumptions in relation to SMEs taxpayers to further reestablish the applicability of the framework with different kinds of taxpayers. Partial Least Squares Structural Equation Modeling (PLS – SEM) further supported the framework in analyzing the data of this study. The findings reveal that perceived corruption along with perceived service orientation strongly interact each other in expounding the paradox surrounding tax compliance.
Analysis of Food Demand Elasticity of Rice for the Poor in Aceh, Indonesia: An Almost Ideal Demand System Approach
Suriani, Diana Sapha A.H, Cut Zakia Rizki, and M. Shabri Abd. Majid
Syiah Kuala University, Banda Aceh, Indonesia
[email protected]
Year: January 2018
Volume: 27 No. 2
Pages: 179-189
Abstract:
The purpose of this study is to empirically explore the effect of rice for the poor (Raskin) or subsidized rice consumption on the food demands elasticity of poor households. The study utilizes the primary data collected in 2015 based on the purposive sampling method for establishing the homogeneity characteristics of Raskin beneficiary’s households. An Almost Ideal Demand System approach is adopted to measure the proportion of food commodities expenditure of the poor and the demand elasticity as well as their responses to the income elasticity. Additionally, the correlation analysis is utilized to investigate the relationship between the selected socioeconomic variables and expenditure of the poor households. Apart from the Raskin, five other food commodities were also investigated, comprising rice, meat, fish, milk, and eggs. The study found that the highest proportion of the expenditures of the poor households was spent for the rice, while the lowest one was spent for milk. The highest coefficients of price and income elasticity were documented for Raskin, while the lowest ones were for the milk. The poor households were highly dependent on the Raskin although it has a lower quality, implying the Raskin as the superior good. Finally, the study found that the proportion of expenditures for each food commodity by the poor related significantly to the number of dependents, income, and their aggregate expenditure. These findings showed that the Raskin has ensured the fulfillment of the rice as one of primary needs of the poor in Aceh, Indonesia.
Crude Oil Price Futures and Stock Markets Returns: What Do Their Correlations Tell Us?
Arlan Brucal
London School of Economics, London, England
[email protected]
Year: January 2018
Volume: 27 No. 2
Pages:190-195
Abstract:
With the increasing recognition that oil price shocks are just symptoms of more fundamental shocks happening in the global crude oil market, it has become imperative to know what drives oil price changes at a particular time period. This note illustrates how we can use the correlations between stock prices and crude oil futures prices in assessing whether the current oil price movement is driven by supply- or demand-related shocks. This note also offers potential implications of crude oil price shocks on ASEAN economies.