(1) DYNAMIC CAPITAL STRUCTURE: EVIDENCE FROM THE SMALL DEVELOPING COUNTRY OF JORDAN
Author: Aktham Maghyereh
College of Economics & Administrative Sciences, PO Box, 150459, The Hashemite University, Zarqa, Jordan.
This paper examines the determinants of the target capital structure of Jordanian manufacturing firms and the adjustment process towards this target. The study extends the empirical work on capital structure in two ways. First, it uses a dynamic model which sheds light on the dynamic nature of the capital structure adjustment process by firms. Second, the study employs a panel data analysis and GMM estimation techniques that control for unobserved firm-specific effects and the endogeneity problem. The findings of the paper suggest that Jordanian firms have target leverage ratios and they adjust to them relatively fast. Consistent with the predictions of capital structure theories, and the findings of the empirical literature, the results of this paper suggest that size, tangibility, profitability, growth opportunity, and earnings volatility exert significant effects on the capital structure choice of Jordanian firms.
(2) THE TRANSMISSION MECHANISM OF MONETARY POLICY IN MALAYSIA: THROUGH BANK LOANS OR DEPOSITS?
Author: Noor Azlan Ghazali and Aisyah Abdul Rahman
School of Business Management, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, 43600 UKM, Bangi, Selangor, Malaysia
We investigate the link between banking activities and macroeconomic performance in Malaysia with respect to the money and credit channel by studying the causal influence of banks’ assets and liabilities. The Granger causality analyses that we performed support the importance of the credit channel within the Malaysian economy. Significant causations are traced running from changes in loans issued by banks to economic variables. Limited evidence is found for the deposits. Parallel to the working of the credit channel, a one-way causation pattern from deposits to loans is identified. Thus, the Central Bank’s policies with respect to the availability of reservable deposits are transmitted to the economy via bank lending activities, supporting the credit channel explanations.