Open Access Original Research Article

Credit Rating: A New Quotation Approach

Hassan El-Ibrami, Ahmed Naciri

Journal of Economics, Management and Trade, Page 1-8
DOI: 10.9734/BJEMT/2015/14369

Credit rating agencies rate companies and states by assigning them scores depending on their level of solvency. These scores are inversely proportional to default risk and then proportional to quotes which are proportional to bonds value. Consequently, scores are calculated depending on companies and states bankruptcy risk. In our paper, we assess company solvency using numerical symbols and an accelerating risk model. Although the Big31 rating agencies use uniformly distributed risk to rate corporate bonds, we think that the distribution should vary uniformly. Our theoretical model is based on a homogeneously risk varying path with a fluctuating speed but a constant acceleration of risk. We measure this acceleration and calculate risk intervals by using a linear regression where asset volatility represents the dependent variable, and a set of 20 company categories representing the independent variable.
Comparative statics are used to illustrate our analysis. We obtain a very significant coefficient for the exogenous variable, representing homogeneous risk intervals. We use 20 classes of risk to be consistent with the “US equivalent rating”, as the Big3 rating agencies do, which allows us to determine risk classes and rate companies according to the numerical scale obtained.
We compare our numerical scale to the equivalent rating tables used by Moody’s, Fitch Ratings and S&P. According to our findings, companies with a risk level under 16 are considered to be solvent, while those with a 17-to-20-risk level are considered to be in trouble. Indeed, the length of risk intervals and the risk acceleration should vary depending on industry sector and population size. Our model is useful for both public and private companies.

Open Access Original Research Article

The Pivotal Roles of Network Status in International Strategies Alliance and Assets Creation of Emerging Economies

Mengling Peng, Xiaobao Peng, Wei Song, Xuehe Zhang

Journal of Economics, Management and Trade, Page 9-21
DOI: 10.9734/BJEMT/2015/13731

The motivation of enterprises from emerging economies lies in their selection of international strategic alliance partners, while also considering market location, international expansion and technological exchanges. Based on the case study of Chinese Huawei Company, social network theory is adopted in this study to explore the influence of network status and creative assets on how these enterprises select their partners. These enterprises must select the central position in the network and then consider closer structural holes and rich creative assets as their strategic alliance partners.

 

Open Access Original Research Article

Zimbabwe Stock Exchange (“ZSE”)’s Exposure to Global Crude Oil Price Volatility

Washington Chiwanza, Walter Gachira, Dingilizwe Jacob Nkomo, Runesu Chikore

Journal of Economics, Management and Trade, Page 22-37
DOI: 10.9734/BJEMT/2015/12544

The major aim of this paper is to investigate Zimbabwe’s Stock Exchange indices’ exposure to global oil price volatility for the period 2009-2012.To determine the relationship between volatility of crude oil returns and volatility of stock returns of the ZSE indices using econometric GARCH models. Also to investigate the correlation of the global oil price in the form of Brent Crude oil prices index and Western Texas Intermediate (WTI) oil prices index with ZSE Industrial Index and the ZSE Mining index between 2009 and 2012. A GARCH approach is employed to analyse data from ZSE and Chicago Mercantile Exchange, OPEC and Datastream® Data. Daily data for crude oil prices and Zimbabwe stock exchange indices were collected for the period 2009-2012 and analysed. The variables of the Zimbabwe stock exchange are ZSE Industrial Index; and ZSE Mining index. Variables on Crude oil prices comprised of Western Texas Intermediate (“WTI”) spot prices index; and Brent Crude oil spot prices index. Returns of stock on all the four indices were calculated. It was assumed that returns on stocks would mirror stock price movements. Volatility of returns on ZSE industrial index was very low with standard deviations ranging between -.01 to +.01. Volatility of returns on the ZSE Mining index was significant relative to the industrial index with standard between-0.1 to -0.1. Volatility of stock returns on Brent Crude spot price index was very high with standard deviations ranging between -0.6 to +0.6, while stock returns on Western Texas Intermediate (“WTI”) spot prices index displayed high volatility, standard deviations ranged from -0.1 to +0.1. Standard deviation indicates the level of dispersion from the the mean. GARCH coefficients indicated that the mean of stock returns as represented by   were generally negative for the two domestic stock indices while the means of global oil stock returns were positive. Parameters  and  of the four indices were statistically significant. The   coefficients of all the indices were highly significant ranging between 0.6300 to 0.9300 indicating that volatility was persistent in the period under investigation and that volatility was to a large extend driven by the prices and values of the previous time period (past performance).There was a positive correlation between industrial index and Brent crude with a correlation coefficient of  0.505 as well as a positive correlation between the ZSE Industrial index and the WTI oil price index with a coefficient of 0.520. There was a negative correlation coefficient of -0.332 between the Mining index and the global Brent crude oil prices as well as a negative correlation coefficient of -0.201 between Mining index and WTI Crude. The results of the study confirmed the hypothesis that the ZSE stock markets are indeed exposed to significant exogenous risks emanating from rising global crude oil price movements. There are however, moderating factors as the standard deviations on ZSE stock returns are much lower compared to standard deviations of stock returns on the global oil indices. Also the correlation coefficients are on the low side. Increases in crude oil prices have the potential to subdue any favourable factors to share price increases.

 

Open Access Original Research Article

Direct Foreign Investment in Kurdistan Region of Middle-East: Non-Oil Sector Analysis

Angus Okechukwu Unegbu, Augustine Okanlawon

Journal of Economics, Management and Trade, Page 38-49
DOI: 10.9734/BJEMT/2015/14001

Kurdistan Region is a tourist hub. This research analyzes other Non-Oil Sectors that have huge attractions of Foreign Direct Investments into the Kurdistan Region from 2005 to 2013. Comparative analysis was carried out between Iraq and the Region, and among influential Sectors of the Economy. T-test and ANOVA are statistical tools employed in testing the research hypotheses. The research identify that there exist significant Foreign Direct Investment inflows across the governorates in the region and among influential sectors of the Economy. The research also highlighted areas of high level of investment needs, sectors that have been crowded out and business opportunities in the region that requires huge Foreign Direct Investments. It is recommended that the Regional Kurdistan Government should embark on fiscal Cashless policies in order to stimulate further spill-off effects of attracting enormous Non-Oil Sectors of Foreign Direct Investments into the region.

 

Open Access Original Research Article

The Feasibility of Technology-based Business Model for SMEs in Taiwan Tourism Industry

Yueh- Hua Lee, Kunshan Wu

Journal of Economics, Management and Trade, Page 50-60
DOI: 10.9734/BJEMT/2015/13793

Aims: This study analyzes the feasibility of tourism business model created by an integrated telecom operator in Taiwan. This research analyze its model design logic at a strategic level and design elements of content at an operational level, hoping to help this case company analyzing their current design to make them fit for the future trend to capture the opportunities in travel market.

Study Design: Case study.

Place and Duration of Study: The study was conducted in Taiwan, between May 2013 and April 2014.

Methodology: In-depth interviews were adopted for this study. To obtain more comprehensive and accurate information, the interviewees included the top-level managers and executives.

Results: This study use Business Model Canvas, which consists of nine basic building blocks, to analyze the feasibility of tourism business platform built by the case Company. The case company utilizes ICT technology and cooperates with domestic six major tourism industries to integrate public and private sector resources to offer free abundant digital tourism information to travelers. Results indicate that the design logic is to associate with opportunity identification and enactment focus in streaming data integration to incorporate firm level strategic thinking, which takes into consideration the alignment of the organization’s resources (Fixed Line, Internet Access, Mobile, MOD, and Cloud) and provides six main services for travelers. It expects SMEs will spending in mobile ad and cloud service. This study also found the case company is significant weak in platform marketing to attract platform participants, both travel services providers and consumers. It needs to leverage social media to harness the platform effect for future rapid growth.

Conclusion: Traditional relevant players in the travel market, from travel suppliers to travel intermediaries up to travel agents, have to adapt their business models to these fundamental changes in the travel industry.

 

Open Access Original Research Article

Exchange Rate Volatility and Growth Dynamics: Evidence from Selected Sub-Saharan African Countries

Kevin Odulukwe Onwuka, Kenneth O. Obi

Journal of Economics, Management and Trade, Page 61-77
DOI: 10.9734/BJEMT/2015/12308

The objective of this paper is to examine the relationship between the volatility of real exchange rate of own country and the G-3 countries (United States of America, Japan, and Germany/ or Euro zone) and the economic growth in developing countries. We draw a sample of African economies namely Nigeria, Kenya, Ghana, Malawi, Zambia and Mali and utilize quarterly data from the period 1980 -2013 which is divided into two periods - 1980- 2001 and 2002 – 2013. We apply the residual based cointegration test of Kao and Johansen –Fisher combined cointegration test to detect the long run relationships among the variables. Finally, we employ the Fully Modified Ordinary Least Squares of Philips and Hansen to estimate the long run coefficients of the model. The main results are: the long run relationships among the variables are strongly stable in the period 1980 – 2001 but ambiguous in the period 2002 –2013.  The financial system is underdeveloped and it negatively affects the economic growth in the selected African Countries. The own country’s real exchange rate volatility tends to depress the economic growth in both periods. The G-3 countries’ real exchange rate volatilities have mix results. While the Yen/Dollar and the Deutsche mark/Dollar improve economic growth, the Yen/Deutsche does not have any appreciable effect on economic growth in the developing African countries in the period 1980 - 2001. However, the period 2002 – 2013, the G-3 countries’ real exchange rate volatility tends to depress the economic growth in the developing African countries. These findings suggest that greater stability in international exchange rate system and lower G-3 currency volatility are desirable to promote higher growth in developing countries and which might reduce the possibility of occurrence of exchange rate crises. 

 

Open Access Original Research Article

Strategic Isssues and Performance of Employees in Urban Council: Focus Nyamarambe Town Council Gucha South District, Kisii County – Kenya

Martin Onsiro Ronald, Josephine Kerubo Ondari, Evelyn Bonareri Bosire

Journal of Economics, Management and Trade, Page 78-85
DOI: 10.9734/BJEMT/2015/12954

The purpose of the study was to assess the strategic issues affecting the performance of urban employees of Nyamarambe Town Council (NTC). The Urban Councils have a critical role to play in the socio-economic development of Kenya. They are responsible for the implementation of policies and programmes, which aim at improving the well being of local residents. The specific objectives thus, were, to determine and assess the strategic issues affecting employees’ performance at Nyamarambe Town Council of Gucha South District, Kisii County in Kenya. To achieve the objectives, qualitative and quantitative approaches were used whereby the survey design was used. Data was collected using questionnaires which were analyzed using descriptive statistics (tables, percentages, frequency distribution and weighted mean) to assess the impact of various variables on performance. The findings of the study showed that training, motivation, are the key strategic issues that affect employees at NTC, where majority of the employees were not satisfied with the performance of the council and the strategic issues identified were found to have a significant influence on the performance of the council. Consequently, the study recommended, that NTC should introduce access scheme of service, introduce other motivational elements other than salary and rewards.