JUL-DEC 2018

Jul - Dec 2018 Volume 34 Issue 02

1. INTERNATIONAL DIVERSIFICATION AND MULTINATIONAL FIRMS’ RISK: DO LOCATIONS OF INVESTMENTS MATTER?

Authors: AGUS HARJITO, A.N. BANY-ARIFFIN, B. T. MATEMILOLA 2 and MOHAMAD ASHARI

Abstract

Revisiting diversification theory, this article examined the impact of investmentlocations on the relationship between multinational firms’ diversification exercise and risk using data on foreign investment activities from 107 listed companies on theMalaysia stock exchange. The study found that diversification exercise is negatively related to risk for firms investing in non-Asian regions. On the contrary, diversification exercise is positively related to risk for firms investing in the Asian region. The results indicated that firms investing in the Asian region do not obtain benefits from diversification because of the increased risk from positively correlated economies within the Asian region. Conversely, non-Asian regions are obtaining benefit from diversification through negatively correlated economies when investing in non-Asian regions.

Keywords: Developing Nations MNCs, Diversification Theory, Entropy, Risk, International Diversification, Multinational

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2. PSYCHOLOGICAL CLIMATE, EMPLOYEE ENGAGEMENT AND AFFECTIVE ORGANISATIONAL COMMITMENT: THE OIL AND GAS EMPLOYEES’ PERSPECTIVE

Authors: ANG MAGDALENE CHOOI1, THURASAMY RAMAYAH and DAUD DORIS

Abstract

Recent years may have seen a growing number of empirical research on the antecedents and outcomes of employee engagement. However, previous studies have tended to examine the topic in industries other than the oil and gas industry. From the social exchange theory perspective, this study investigated the process by which oil and gas employees’ perceptions of psychological climate are related to their engagement and affective organisational commitment. Data were obtained from a total of 242 oil and gas employees in East Malaysia via a self[1]administered questionnaire. The partial least squares method was employed to test the proposed model. The data provided empirical support for all the hypothesised relationships. Implications of the findings and suggestions for future research are discussed. JEL Classification: J30, M540

Keywords: Affective organisational commitment; Employee engagement; Malaysia; oil and gas; psychological climate

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3. DOES BUSYNESS OF DIRECTORS MATTER IN REPUTABLE FIRMS?

Authors: CHAR-LEE, LOK and CHEE-WOOI, HOOY

Abstract

This paper investigates how the degree of busyness and reputation of firm affect the relationship between multiple directorships and corporate performance in Malaysia. Using a sample of listed entities excluding financial sector in the main market of Bursa Malaysia in 2009 till 2015, this paper finds many public companies have board members who hold multiple directorships; the companies that embrace multiple directorships perform better financially than companies without multiple directorships. However, it is detrimental if majority of these board members hold higher than two directorships. Nonetheless, the reputational effect of firm will alleviate the negative effect of busyness. The empirical results are also valuable to regulators in judging the relevant number of appointments for individual directors.

Keywords: Busyness, Corporate Performance, Firm Reputation, Multiple Directorships

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4. DOES COUNTERFEIT PRODUCT QUALITY LEAD TO INVOLVEMENT AND PURCHASE INTENTIONS? THE MODERATING EFFECTS OF BRAND IMAGE AND SOCIAL INTERACTION

Authors: NIK MOHD HAZRUL NIK HASHIM , NAJEEB ULLAH SHAH and NOR ASIAH OMAR

Abstract

This study sets out to examine the effect of counterfeit product quality on consumer product involvement and purchase intention of counterfeits. Additionally, the authors investigate the moderating role of brand image and social interaction and assess their influence on counterfeitquality purchase intentions. A self-administered questionnaire was designed, and data were collected via mall intercepts among consumers who have exposure to counterfeit products. Hierarchical regression model was used to test the proposed hypotheses. The results from regression analysisrevealed that the quality of counterfeits not only impacts purchase intentions but also proceeds as a determinant of consumer involvement with imitative products.The results also show that brand image of genuine products negatively moderates the counterfeit product quality−involvement relationship. Social interaction positively moderates the relationship between counterfeit quality and purchase intentions, nonetheless has a negative moderating effect on the link between product involvement and purchase intentions. Implications for research and practice are discussed.

Keywords: Brand image; Consumer behavior; Counterfeiting; Product involvement;Social interaction

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5. DEVELOPMENT OF GOOD SME GOVERNANCE IN INDONESIA: ANEMPIRICAL STUDY OF SURABAYA

Authors: SRI LESTARI KURNIAWATI, LINDA PURNAMA SARI and TITIS PUSPITANINGRUM DEWI KARTIKA

Abstract

Small and Medium-sized Enterprises (SMEs) play an important role in economic development in Indonesia. They are, however, facing a dynamic and complex marketsituation and stiff competition in the era of the ASEAN Economic Community(AEC). Therefore, in order to survive and grow in this challenging situation, SMEs need effective application of good governance in the running of their business.Moreover, the implementation of good governance will be able to improve performance and maintain the viability of SMEs in the face of free trade. In response to this phenomenon, this study aims to examine the effect of the principles of good governance (transparency, accountability, responsibility, independence and fairness) on the performance of SMEs in Surabaya, which is measured by growth in sales turnover, in profit, and in the number of customers. The samples used were the owners and managers of SMEs in Surabaya and analysis was conducted by a validityand reliability test, and a statistical test with PLS (Partial Least Squares). The results show that the principles of good governance, consisting of transparency, accountability, responsibility, independence and fairness, have a significant effect on the performance of SMEs in Surabaya.

Keywords: Governance, business performance, Small and Medium-sized Enterprises(SMEs), Partial Least Squares (PLS)

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6. ADDRESSING ENDOGENEITY PROBLEM IN ESTIMATING ECONOMIC RETURNS TOSCHOOLING IN MALAYSIA

Authors: NORLIN KHALID, RAHMAH ISMAIL, WYE CHUNG KHAIN, SUHAILI ALMA’AMUN and HAKIMAH NUR AHMAD HAMIDI

Abstract

The Ordinary Least Square coefficient of years of schooling in standard Mincer’s (1974) equation may not reflect the effect of education on wages if it is correlated with ability of individual that alsocorrelated with wages. Furthermore, productivity and skills between gender also may contribute differently on wages. Hence, this paper aims to estimate the economic returns to schooling on wages for Malaysia by using data gathered from the field survey of 1263 respondents in 2015. The contribution of this paper is twofold. First, we construct an ability index of individual during schooling and workplace to tackle the problem of omitted ability variable bias in OLS estimation. Then we compare this outcome with instrumental variable method by using family background as the instrument for education, taking into account the endogeneity problem. Second, we also investigate if the overall effect of education on wages reponds differently between genders by comparing both OLS and IV estimations. Our results indicate that family background is proven to be the best instrument for education, taking into account the endogeneity problem. Then, the IV rate of return for overall sample and split sample are higher than OLS. In regard of genders, the OLS suggests higher rate ofreturn of men while IV estimates higher rate of return of women. These results have particularly important policy implications, concerning the government wage policies to achieve fair income between genders and thus contribute to the further development of Malaysian labor market efficiency.

Keywords: Education, Instrumental Variable Approach,Wages, Workers Ability

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7. THE NEXUS BETWEEN RESIDENTIAL PROPERTY PRICES, BANK LENDING, CONSTRUCTION OUTPUT AND INTEREST RATE: POLICY LESSONS FROM MALAYSIA

Authors: LIM, JIA-HUI and LAU, WEE-YEAP

Abstract

Using the aggregate and disaggregate dataset of various types of housing loan, this study examinesthe dynamic relationship between residential property prices, housing loan, construction output, andinterest rate. Focusing on the aggregate data, it is noted that housing loan, construction output, andinterest rate have significant and positive elasticities towards house prices in both short and long- term. The aggregate loan model indicates that about nine quarters or two years are required for fulladjustment of house prices after experiencing a shock. Across the loan categories, first, the empirical analysis indicates that there is still a strong demand and potential opportunities for affordable properties. Second, homebuyers who purchase high-end properties will still borrow. Third, there is a significant and positive impact of interest rate on house prices in both short- and long-run, however, albeit a low percentage. The results of the error correction model imply the house prices for low-end housing loans take a longer period (8 to 10 percent quarterly) to return toequilibrium following a shock, compared to house prices for high-end housing loans (11 to 15 percent quarterly). The policymakers should review the housing policies by focusing more on lowand the medium housing which is more affordable for the population.

Keywords: House prices, Aggregate loan, Disaggregate Loan, Housing loan, Construction output.

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Accountancy Business and the Public Interest

Accountancy Business and the Public Interest

Jul - Dec 2018 Volume 34 Issue 02