Sukuk and bond dynamics in relation to exchange rate

PurposeThis study aims to contribute by expanding the existing literature on Sukuk return and volatility and exploring the implications of the Sukuk-exchange rate interactions.Design/methodology/approachThis study examines the dynamic interactions of Sukuk with exchange rate in 15 countries, employing the Wavelet approach that considers both time and investment horizons.FindingsThe results reveal significant evolving coherence of Sukuk return and volatility with the underlying exchange rate. The relationship is more potent than what this study witnesses in their counterpart bond market. For Sukuk returns, the coherence is negative, whereas it is positive for volatility. Notably, the coherence is strong in the medium to long term and intensifies during extreme economic episodes, especially during the COVID-19 pandemic. These findings are further validated by comparing firm-level matched data for Sukuk and conventional bond.Originality/valueTo the best of the authors' knowledge, this is the first study that reports the dynamic relationship of Sukuk return and volatility with the underlying exchange rate in 15 countries. Collectively, this study unites valuable insights for faith-based active Islamic investors and cross-border portfolio managers.

The authentic Bee-Coin: A tokenized financial instrument for revenue-generating projects with social or environmental impact

This paper proposes an innovative financial instrument to fund projects that combine profit-making with significant social or environmental goals, specially in emerging or low-income economies. The proposal is based on improvements to the typical impact bond model with the aim of better aligning the parties' incentives, and also making it more transparent, traceable and compatible with revenue-generating projects. It is applied to a pilot project to fund the establishment of a robust supply chain of green propolis in Minas Gerais, Brazil. Propolis is a natural product with benefits for human health, which has been consumed by humans for decades and raised substantial global interest after the Covid-19 pandemic. This project addresses some industry issues (in temis of product quality and supply stability) and aims to provide biodiversity recovery, subsistence farming and resocialization through work. A financial model with stochastic variables is simulated, incorporating a reward system based on the impact outcomes. The results confirm that the instrument improves risk-return trade-off and advocate for its use in projects with sustainability objectives.

Impact of IFRS 9 in Light of Uncertainty Caused by Corona Pandemic

This study aimed to highlight the impact of the application of the International Financial Instrumentation Standard (IFRS 9) in light of the uncertainty caused by the Corona pandemic. The results of the study concluded that IFRS 9 contributes to determining the expected credit losses that need to be recognized under the Corona pandemic in Palestinian banks listed in the Palestine Stock Exchange and that Palestinian banks listed in the Palestine Stock Exchange are working to prove the expected credit losses of financial instruments when credit risk increases in accordance with the requirements of the International Accounting Standard (IFRS 9). The researchers recommended that Palestinian banks listed in the Palestine Stock Exchange should further disclose financial instruments and estimate their financial impact in accordance with the requirements of the International Accounting Standard (IFRS 9) in case of uncertainty as a result of the Corona pandemic. © 2022 DAR Publishers/The University of Jordan.

Social Reporting by Islamic Banks: The Role of Sharia Supervisory Board and the Effect on Firm Performance

This study aims to explore social reporting by Islamic banks (IB) (referred to as Islamic social reporting, ISR, hereafter) through two streams, i.e., its determinants and consequences on firm performance. Using annual report data from 90 samples of the world’s IB from 2016–2020, this study focuses on the sharia governance implementation through the role of the Sharia Supervisory Board (SSB). The SSB was measured by individual characteristics and IG-Score, representing a combination of dichotomous characteristics of the SSB, which have not been encountered in previous studies. Firm performance as a consequence of disclosure was determined by a more comprehensive approach based on accounting and the stock market. The study’s findings demonstrate the SSB’s beneficial influence on ISR, suggesting that the presence of an SSB can promote ISR practices. Social reporting has been found to have a negative impact on ROA, but it has a positive impact on MTBV and Tobin’s Q. The data suggest that while voluntary reporting practices may cause a short-term decline in profitability, they can have a positive impact on an enterprise’s long-term value.

A Generalized Entropy Approach to Portfolio Selection under a Hidden Markov Model

This paper develops a dynamic portfolio selection model incorporating economic uncertainty for business cycles. It is assumed that the financial market at each point in time is defined by a hidden Markov model, which is characterized by the overall equity market returns and volatility. The risk associated with investment decisions is measured by the exponential Rényi entropy criterion, which summarizes the uncertainty in portfolio returns. Assuming asset returns are projected by a regime-switching regression model on the two market risk factors, we develop an entropy-based dynamic portfolio selection model constrained with the wealth surplus being greater than or equal to the shortfall over a target and the probability of shortfall being less than or equal to a specified level. In the empirical analysis, we use the select sector ETFs to test the asset pricing model and examine the portfolio performance. Weekly financial data from 31 December 1998 to 30 December 2018 is employed for the estimation of the hidden Markov model including the asset return parameters, while the out-of-sample period from 3 January 2019 to 30 April 2022 is used for portfolio performance testing. It is found that, under both the empirical Sharpe and return to entropy ratios, the dynamic portfolio under the proposed strategy is much improved in contrast with mean variance models.

The Link between Asset Value and Fear Sentiment during Covid-19 Pandemic

This article explores the role of global financial instruments as hedging or safe-haven assets in the Covid-19 pandemic crisis, which has weakened the global economy, by linking it to the investor's fear sentiment perspective. Correspondingly, it analyses the effects of shocks in the VIX index, which represents the global investor's fear sentiment, on shocks in some investment assets during the ongoing pandemic. Eight major financial instruments from different asset classes are tested along with the VIX index to achieve this goal. The analysis covers a 156-week time series and assays the variables from symmetric and intertemporal perspectives. The findings show that the most robust asset is the American Dollar fiat currency, followed partly by the Euro and gold. BTC also has been safe for a short time.Alternate :Bu makale, küresel ekonomiyi zayıflatan Covid-19 pandemi krizinde riskten korunma veya güvenli liman varlıkları olarak küresel finansal araçların rolünü yatırımcının korku hissiyatı perspektifiyle ilişkilendirerek araştırmaktadır. Buna bağlı olarak, küresel yatırımcının korku hissiyatını temsil eden VIX endeksindeki şokların, devam eden pandemi sırasında bazı yatırım varlıklarındaki şoklar üzerindeki etkilerini analiz etmektedir. Bu amaca ulaşmak için farklı varlık sınıflarından sekiz ana finansal araç, VIX endeksi ile birlikte test edilmektedir. Analiz, 156 haftalık bir zaman serisini kapsamakta ve değişkenleri simetrik ve zamanlar arası perspektiflerden tahlil etmektedir. Bulgular, en sağlam varlığın Amerikan Doları itibari para birimi olduğunu, ardından kısmen Euro ve altının geldiğini göstermektedir. BTC'nin ise kısa süreliğine sağlam durduğu söylenebilir.

Sustainable Financing and Financial Risk Management of Financial Institutions—Case Study on Chinese Banks

This study examines the relationship between sustainable financing and financial risk management of Chinese financial institutions, using data from Chinese banks. Financial risk management is a comprehensive measure of operating performance, asset quality and capital adequacy ratio. The structural vector auto-regression model determines the relationship between two variables. The positive shock of sustainable financing business negatively impacts the financial risk management of banks. In contrast, positive shock of banks’ financial risk management positively affects sustainable financing. Further subdivision of the sample revealed that sustainable financing does not always negatively impact the financial risk management of large state-owned banks. However, the positive shock of financial risk management reduces urban banks’ green credit proportions. The results are consistent whenever compared between the empirical outcome of the entire sample and the sample consisting of national joint stock bank accounts. This comparison helps eliminate the possibility of a biased outcome as a major portion of the sample is from a national joint-stock bank account. Apart from data limitations, the results of the sub-sample test are influenced due to the difference in deposit and loan interest rates, as well as different ownership structures of banks.

Effects of COVID-19 on Football Stock Market's Return and Uncertainty

The cancellation of mass gatherings was one of the earliest measures implemented to combat the spread of COVID-19. One of the sectors affected by this situation was sports organizations. The study aimed to analyze the impact of COVID-19 on the returns and volatility of football club stocks using mean and variance estimates. In line with this aim, the Stoxx Football Index was used to estimate the stocks of football clubs, and a dummy variable was used to estimate the effect of COVID-19. According to the analyses, it was found that COVID-19 had a negative and statistically significant impact on football index revenue. On the other hand, the results of the second moment analysis, the EGARCH-X model, suggested an increase in the Stoxx Football Index conditional variance (volatility) due to COVID-19.

Expected Credit Loss Under IFRS-9 and Impact of COVID-19

Implementation of new impairment model of IFRS-9 needs to estimate Expected Credit Loss (ECL) for valuation of financial instruments. The whole process of estimating credit risk and calculating of impairment requires in developing of the internal IFRS-9 model and methodology. According to IFRS-9, reporting value of the financial instruments must be presented on the balance sheet only after considering the ECL. Under the general approach, ECL considers the forward looking scenario, along with the past and present records, which entails macro economic factors. The recent Corona Virus Disease-19 (COVID-19) pandemic has significantly affected the economy at the macro level in general and the individual business entities at the micro level in particular. Thus post impact of COVID-19 on ECL is unavoidable. The paper attempts to explore how in accounting the ECL deals with the impact of COVID-19 in respect of valuation of the financial instruments at the date of reporting and disclosure of a business entity. The study incorporates qualitative as well as quantitative analysis. The novelty of the study infers some major findings. The study suggests that the COVID-19 outbreak has a significant impact on the calculation of 'Expected Credit Loss' (ECL).

Analysis of Optimal Portfolio Allocation Using Sharpe Ratio Before and During Covid-19 Pandemic: A Case Study of PT Jasa Raharja

The limitation of community activities has resulted in a decrease in the number of people's trips using public transportation such as tourism buses, so that the mandatory contribution from public transport passengers has also decreased. Jasa Raharja has experienced a decline in the value of returns that consist of time deposit, bond, mutual fund, stock, direct investment, and ETF over the last few years, return in 2018 is 13.32%, return in 2019 is 12.29%, and return in 2020 is 11.65%. The return on the portfolio from financial assets consisting of stocks, bonds, mutual funds, and time deposits also decreased where the return in 2018 was 6.91%, in 2019, it was 6.69%, and in 2020 it was 6.11%. [...]to increase the portfolio return, portfolio changes are made using financial assets consisting of stocks, bonds, mutual funds, and time deposits. Jiwasraya can be a lesson for other insurance companies to apply the principle of prudence in allocating funds to financial instruments. 2.THEORETICAL FOUNDATION 2.1Markowitz Theory Markowitz theory, also known as the Modern Portfolio Theory, is a theory used by analysts in the investment sector to determine the most appropriate amount of allocation in an investment portfolio that takes into account the expected rate of return and the level of risk to the owners of capital.

Analysis of diversification benefits for cryptocurrency portfolios before and during the COVID-19 pandemic

Purpose>This study aims to investigate the diversification benefits attached to the crypto portfolios when combined with stocks, Forex instruments and commodity assets.Design/methodology/approach>Markowitz diversification techniques have been used to analyze the risk-return tradeoffs of the individual portfolios. Daily prices on cryptocurrencies and the selected asset classes, cover the period before and during the pandemic COVID-19. The portfolio risk of the portfolios was calculated by identical techniques and analyzed with equal criteria.Findings>The results with 270 trails indicate that stocks on average reduce the portfolio risk of crypto portfolios by 36% followed by fiat currency with 30.9% and commodities by 20.8%. Average daily returns stand in line with the standard portfolio theories where riskier portfolios offer higher returns and the other way around.Originality/value>The authors contribute to the current literature by investigating the portfolio risk attached to the crypto portfolios when stocks, commodities and Forex instruments were added separately. To this end, results inform not only retail investors but also portfolio managers on the asset classes that generate better optimization for crypto portfolios.

Implementing CECL During the Pandemic: Unexpected Consequences Revealed: Certified Public Accountant

The much-anticipated and -deliberated changes to the accounting for financial instruments ushered in by ASU-2016-13, Financial Instruments-Credit Losses, happened to take effect during an unprecedented economic crisis brought about by the COVID-19 pandemic. This coincidence provides insight into management's decision making in a crisis and a test of whether the guidance meets the needs and expectations of users. The authors' analysis of selected CECL disclosures from last year concludes that management's judgment often influences and even overrides the results generated by CECL modeling;although conservatism may have been warranted under extraordinary circumstances, users might justifiably wonder whether such judgment is consistent with the goals of the standard.

The Role of Non-Bank Financials in the Formation of Long-Term Resources for Economic Growth in Russia

The development of the activities of non-bank financial institutions that accumulate the resources of the national savings system on a long-term basis is seen as a factor in increasing investment in the Russian economy and its growth rates. When carrying out the study, we used general scientific methods, methods of structural, weigh, and dynamic analysis, and comparisons of performance indicators of non-bank financial institutions. Problems in the activities of organizations in the non-banking sector of the Russian financial market are predetermined by the parameters and trends in the development of the socio-economic situation in Russia, including insufficient efficiency of regulatory practices. The positive dynamics of the development of non-bank financial intermediaries is qualified as unstable;it is not supported by the solution of the structural and institutional problems of the Russian economy. In view of this, an increase in their role in the redistribution process is associated both with decisions of a more general order and with the improvement of the regulatory and supervisory practices implemented by the Bank of Russia. The solution to the identified problems in the development of the non-banking segment of the financial market should be aimed at turning it into an effective mechanism for capital formation to ensure economic growth.

Support Mechanisms for Canada's Cultural and Creative Sectors during COVID-19

The cultural and creative industries enhance the quality of life for Canadians and visitors to Canada. However, definitions of the sector vary, presenting challenges for researchers and policymakers. Government data shows that the pandemic job and revenue loss were disproportionate in the arts. The Canadian government created a range of financial tools (grants and subsidies) to support the sector during the Pandemic. This paper analyzes these financial instruments created in response to the Pandemic. This paper offers a case study on how government can support the economic and social success of the creative and cultural sector (CCS) in Canada and avoid the risk of the cultural ecosystem collapsing. In addition, the key findings may be helpful in other industries and markets when exploring ways to support the cultural and creative sectors, which are vital components of domestic and tourism activity.

Assessment of the Competitiveness of Islamic Fintech Implementation: A Composite Indicator for Cross-Country Analysis

Islamic fintech is growing fast, especially in the Organisation of Islamic Cooperation (OOIC) member countries. In recent years, it has become one of the driving forces for the Islamic financial industry. Though the pandemic negatively affected global financial business, including conventional and Islamic segments, Islamic fintech has continued its steady development. i-Fintech increases access to Islamic financial services and financial inclusion in general to provide ESG-rich investment opportunities. The rise of Islamic fintech can help countries become financial hubs and promote sustainable development goals. This paper is aimed at designing an original composite indicator of the competitiveness of Islamic fintech adoption in order to perform a comprehensive assessment of the competitive advantages that are being used across various countries. The research methodology includes data for 65 countries where Islamic fintech companies are represented. We analysed 31 variables describing the development of Islamic financial technologies in each country and combined them into five categories included in the composite indicator. Key factors that determine the development of Islamic financial technologies in different countries around the globe are singled out. The economies with the highest scores are analysed to define their strengths and weaknesses. The practices of the leading countries that address identified vulnerabilities are described.