Palestine Exchange Research Articles

ANALYSIS OF THE FACTORS AFFECTING THE FINANCIAL PERFORMANCE OF INSURANCE COMPANIES LISTED ON THE PALESTINE STOCK EXCHANGE

The objective of this study was to investigate the factors affecting the financial performance of insurance companies in Palestine. The entire study population was targeted at 7 insurance companies listed on the Palestine Exchange for the period between 2010 and 2019. The researchers used multiple linear regression analysis to create two models that represent the financial performance; the study adopted two models for measuring financial performance, the first model measuring financial performance by return on assets, and the other measuring financial performance by return on equity. The results showed a positive and statistically significant impact on the solvency margin, the state's legal system, the size of the board of directors, and the size of the company on the return on assets. There is a negative, statistically significant impact on each of the claims loss ratios, the dependence on the four major auditing firms, and the ownership of board members on the return on assets. The reliability of reinsurance and the audit committee did not show a statistically significant effect on the return on assets. The results showed a positive, statistically significant impact of the solvency margin and company size on the return on equity. The results indicate a negative, statistically significant impact of both the claims loss ratio and the Audit Committee on the return on equity. Reinsurance dependent, dependence on the four major auditing companies, the state's legal system, the size of the board of directors, and the ownership of board members have no significant effect on the return on equity. The study recommends that insurance companies in Palestine should comply with the required margin of money, which was set by the Palestinian Capital Market Authority at 150%.

The Impact of Exchange Rate Fluctuations on the Market’s Index at Emerging Market: Evidence from Palestine

In this study, the researcher investigates the influences of exchange rate and stock market index in Palestine exchange. Least Square Testing approach has been used on daily data ranging from January 2012 to December 2021. The researcher investigates the impact in the long term from 2012 to 2021 and in the short term in one year, 2021. Findings of the study suggest that USD exchange rate negatively affects the stock index of Palestine exchange in both the long and short term.

Voluntary disclosure-cost of equity nexus and the moderating role of corporate governance: evidence from an extremely politically unstable context

Purpose Higher degree of and commitment to voluntary disclosure (VD) and corporate governance (CG) helps contain information asymmetry, leading to lower cost of equity (Ke). This study provides evidence on the nexus among VD, CG, and Ke from a context characterized by extreme political instability. Design/methodology/approach This study uses all non-bank companies listed with the Palestine Exchange during 2009–2018. The level of VD was estimated by using a checklist of 35 items modified for the context of Palestine. A second checklist with 19 items was used to measure the commitment of the Palestinian companies with CG requirements. Five proxies for Ke were tested: three ex-ante Capital Asset Pricing Model-like proxies and two ex-post realized return proxies. Findings The findings state that the VD negatively impacted Ke. Interaction effect of CG and VD helps reduce the Ke. As such, for firms with better CG, the increase in VD decreases the Ke more than their standalone effect. For control variables, leverage, size and growth of firms exhibited positive impacts on Ke, whereas quality of auditors found a negative connection. Practical implications Managers in similar context, like Palestine, may prefer flexibility of smaller size and adopt conservative growth strategies to cope with adverse events. Firms adopt CG and VD as complementary forces to tackle instability and market expectation. Originality/value Studies connecting VD-CG-Ke nexus from similar context are rare. Results of this study forward that emphasis on disclosure and governance practices will help boost the confidence of the investors, reduce the Ke and create an incentive for more investment.

The Influence of Accounting Measurement on the Stock Price: Emerging Market Evidence

The study examines the effect of accounting measurements that includes: earning per share, current ratio, debt to equity ratio, and cash flow ratio on the stock price of manufacturing companies listed in Palestine exchange. According to the information availability; the researcher selected 10 companies out of 13 to be examined. The period from 2015 to 2020 is covered by the study. Panel data is used to apply the least square regression model. The study revealed that there is no significant effect of EPS, Current ratio, Debit to Equity, Cash flow Ratio on the stock prices of manufacturing sector companies listed in the Palestine Exchange from 2015 to2020. Keywords: stock prices, earning per share, current ratio, debt to equity ratio, cash flow ratio DOI: 10.7176/RJFA/13-4-05 Publication date: February 28 th 2022

Ownership structure and agency costs: Evidence of emerging economy

The core objective of this study is to investigate the effect of ownership structure components on agency costs for 26 firms listed on the Palestine Exchange (PEX) between 2010 and 2019. The fixed-effects model was used to analyze cross-sectional data over time (panel data), and the multiple linear regression analysis was used to test the study hypotheses. The study found a positive, statistically significant effect of both board ownership and ownership concentration on agency costs, this indicates that whenever the ownership of board members in the firms listed on the PEX increases, leads to an increase in agency costs in these firms, reducing the performance of the firm, motivating management to seek to secure its interest and not to maximize the value of the firm. Similarly, whenever ownership increases in the hands of a few investors in the firms listed on the PEX, this leads to an increase in agency costs in these firms, and this relationship may be due to the majority’s ability to exploit the company’s capabilities for their goals and interests. Another main result of the study was a negative, statistically significant effect of institutional ownership on agency costs in the firms listed on the PEX.

The Impact of the Disclosure of Integrated Business Reports on the Financial Performance of Shareholding Companies Listed in the Palestine Exchange

The Impact of the Disclosure of Integrated Business Reports on the Financial Performance of Shareholding Companies Listed in the Palestine Exchange

Information technology governance and bank performance: evidence from Palestine

ABSTRACT This study aims to assess the impact of IT governance on banks’ financial performance in the context of Palestine while controlling for bank-specific and governance variables. The sample consists of six local banks listed on the Palestine Exchange over the period 2008–2019. While IT governance is proxied by the presence of IT experience within board of directors and within executive management, performance is provided by two accounting measures, namely Return on Assets (ROA) and Return on Equity (ROE). Using a path analysis and a General Linear Model (GLM), results show that there is a positive impact of IT governance on both performance measures, only when measured by IT executives. Our results highlight the importance of IT governance and confirm the need to develop and improve the corporate governance codes in Palestine to strengthen IT governance.

The COVID-19 Beta Effect, An Empirical Study in Palestine

This study attempts to investigate the impact of COVID-19 pandemic on systematic risks measured by beta in Palestine Exchange during the period from January, 2018, to March, 2021, using Wilcoxon statistical test tool. The study consists of 12 Palestinian public companies listed in the PEX, The 12 companies' betas were estimated before and after the occurrence of pandemic, 20 March 2020, The results show that there is no significant difference between the systematic risk (β) of companies before and after COVID-19 Keywords: COVID-19,Beta, Palestine Exchange, Systematic Risk DOI: 10.7176/RJFA/12-22-04 Publication date: November 30th 2021

The Relationship between environmental Financial accounting practices and Financial performance of industrial listed companies in Palestine Stock Exchange

The research aimed to investigate the applicability of environmental financial accounting practices in the industrial listed companies in Palestine Exchange and to examine the relationship between the disclosure level of environmental financial accounting practices on the company’s financial performance. The research adopted the descriptive-analytical approach, and the analysis method involved a content analysis of the annual financial reports data which were collected from Industrial listed firms on the Palestine Stock Exchange for the period from 2015 to 2019, including the firms disclosed and not disclose EFAP. Ordinary least square (OLS), fixed effect model (FEM), and random effect model (REM) were employed for processing the data. The results reveal that there is a relationship between the EFAP and financial performance. In addition, there is a difference in financial performance between the group of firms disclosed and not disclosed EFAP. Based on the findings, some recommendations are given for motivating EFAP in the listed firms for improving financial performance.

Impact of efficiency indicators and its related aspects on the market return: An applied study on Palestine Stock Exchange

The study deals with the efficiency of the Palestine Stock Exchange (PSE) indicators that explain the market return. The data published in the Palestine Exchange and the Palestinian Monetary Authority during 2010–2018 have been analyzed. The multiple regression method has been employed to determine the correlation between efficiency indicators and market return. However, the findings, on the one hand, determined that there was no statistically significant effect of efficiency indicators measured by the stock turnover rate and the market capital ratio. On the other hand, they demonstrated the impact of market concentration on market return, which shows a widespread weakness in the efficiency indicators. Therefore, PSE does not enjoy the required levels of efficiency even at the weak level. The study explored the absence of liquidity indicators required for market depth, speed of market response, and market concentration. Thus, the stock prices at the PSE become randomly moving, volatile, and unstable. Consequently, the outcomes of the aforementioned findings recommended the necessity to take the essential measures that activate the elements of market efficiency to reflect the available returns according to the scientific method. The paper also recommends that there should be incentives that motivate and encourage institutions to raise their capital and put their securities into the stock exchange to enhance their role in achieving economic development. However, it should be mentioned that the increasing number of companies leads to an increase in investments as it contributes to the expansion of the market. AcknowledgmentSpecial thanks to Palestine Technical University for their continued and valuable support.

Strategic Corporate Social Responsibility and Value Creation: Empirical Study in Palestine

This study empirically evaluates the potential relation between strategic Corporate Social Responsibility (CSR) dimensions and strategic value creation and establishes an order of importance of these dimensions according to Palestinian public shareholding corporates listed on Palestine Exchange. This is a quantitative research that analyzes corporates’ responses on a descriptive and correlational questionnaire designed specifically for the research purpose.Cross-sectional analysis revealed important correlations between the strategic value and CSR dimensions across various sectors, such as a strong positive correlation with Proactivity in the Banking sector, a moderate negative correlation with Voluntarism in the Industrial sector, a strong positive correlation with Visibility in the Investment and Services sectors and no correlation in the Insurance sector. The order of preference with respect to dimensions also varied among sectors: the most important dimensions for the Banking, Industrial, Investment, Services and Insurance sectors were Visibility, Centrality, Voluntarism, Centrality and Proactivity; Respectively.

A diagnostic for earnings management using changes in asset tuırnover and profit margin: evidence from Palestine Exchange

Purpose - This paper aims to evaluate whether the earnings management diagnostic using changes in asset turnover and profit margin as proposed by Jansen et al., (2012) is informative in identifying earnings management Methodology - Two tests were employed: firstly, the association between the diagnostic and discretionary accruals using Kothari et al., (2005) model, was tested by using Pearson correlation and contingency tables. Secondly, by using future profitability reversals as an indicator of earnings management, the investigation of whether the diagnostic has incremental information in identifying earnings management as compared to Kothari et al., (2005) model was performed using multivariate regression analysis. Data was collected for the period from 2006 to 2017 and comprises a total of (3,108) firm-year observations from the Palestinian stock exchange. Findings- The results indicate that the diagnostic proposed by Jansen et al., (2012) is a useful indicator for earnings management, as well as this diagnostic, provides higher information content in identifying earnings management than the discretionary accruals model i.e. Kothari et al., (2005) model. Conclusion- This study contributes to the limited earnings management literature in emerging economies generally, and in the Palestinian context particularly. The results of the study benefit financial statement users to have diagnostics for earnings management that are informative.

Impact of Intellectual Capital on Corporate Performance

The main objective of current study is to investigate the relationship between intellectual capital and corporate financial performance of 34 from 48 companies listed on Palestine Exchange (PEX) over the period of 2012-2018. Pulic’s method “Value Added Intellectual Coefficient (VAIC)” is utilized to measure the Intellectual Capital (IC), and three of traditional accounting tools involving; return on equity (ROE), return on assets (ROA), and earning per share (EPS) ratios is used as a proxy of firm financial performance. The findings of Panel data model show that human capital efficiency (HCE) is consider as the most effective element of intellectual capital in the issue of value creation than structural capital and capital employed. Moreover, VAIC shows a good relationship with financial performance represented by return on assets (ROA). In conclusion, Palestinian listed companies are still weakly used its intellectual capital' potentials in create value.

The relevance of valuation models: insights from Palestine exchange

Purpose This paper aims to investigate the relevance of two groups of valuations models as follows: the accounting models based on the residual income (RIM) and the standard market model, on equity price, return and volatility relevance. Design/methodology/approach The models are tested on companies traded on Palestine exchange from 2009 to 2018, using panel regression analysis. Two-price and two-return models derived from RIM to compare with the market model and four volatility models. Findings The standard RIM outperformed other models in equity price modeling. The dividend discount model (DDM) outperformed the rest of the models in terms of return estimation. However, the authors find that the market model can explain equity variance better than RIM and DDM models. Practical implications For investors, market beta does not necessarily capture all relevant factors of value and traditional financial statements are still important in providing relevant information and different models are used for different values perspectives (price, return and volatility). Originality/value Previous studies focus on comparing the price and return relevance of accounting-based models (RIM and cash flow models). Three aspects differentiate this paper and contribute to its originality, namely, the uniqueness of the context, incorporating the market model into the picture along with the accounting-based models and adding Volatility dimensions of relevance.

The Impact of Ramadan month on market stock returns anomalies: an empirical investigation of Palestine Exchange (PEX)

The main purpose of the current study is to examine the impact of Ramadan month on stock returns at the Palestine Exchange (PEX). The study sample consists of all Palestinian public shareholding companies listed in the PEX. The comparison period used in this study consists of 30 days before Ramadan month, 30 days after Ramadan month, and Ramadan month (30 days). This gives a total of 90 days in a year for ten years (2006–2016). The GJR-GARCH technique is used. The results of the study show that Ramadan month has a remarkable effect on the stock returns of the companies in the PEX. The results indicate a significant impact on earnings per share (EPS) in the PEX. Furthermore, there is a positive relationship between the stock returns and the market value in Ramadan month. The profits are increased in the industrial and investment companies due to the high demands in Ramadan month. Therefore, the companies should work to keep a steady performance in the whole year. Besides, the capacity of industrial and investment companies should be increased to meet the high demand in Ramadan month. This study will help Palestinian investors to effectively time their trading. This study is considered one of the pioneering studies that discuss the impact of Ramadan month on the stock returns in the context of Palestine Stock Exchange.

Audit committee versus other governance mechanisms and the effect of investment opportunities: evidence from Palestine

Purpose This paper aims to explore how the presence of an audit committee is associated with other corporate governance mechanisms, i.e. board structure, ownership structure and quality of external audit. The present study evaluated whether the presence of the audit committee complements or substitutes other governance mechanisms in Palestinian companies. Moreover, the effect of investment opportunities on the relationship between the formation of the audit committee and the quality of the auditor was addressed. Design/methodology/approach The association between the formation of the audit committee and other governance variables was modelled as a binary logistic model. The sample comprising 44 firms listed on Palestine exchange for the period between 2013 and 2017, amounting to 220 firm-year observations. Findings Based on the investigation, the results have indicated that board independence, the distinction between the chairman and chief executive officer function, ownership concentration and audit quality enhance the chance of audit committee formation, implying complementary effect. Contrastingly, board size and board ownership serve as a substitute to audit committee formation. It has also been found that investment opportunities act as an effective moderating factor that strengthens the relationship between audit quality and the formation of the audit committee. Originality/value The study provides valuable insight into the interaction between multiple corporate governance mechanisms within the economy of Palestine where the external uncertainty is high and investment opportunities are constrained by the decisions of the occupying authority. The findings may help regulators and policymakers in Palestine alongside those of other countries with similar environmental features to revise and update their corporate governance codes to ensure that the best control can be achieved, subsequently attracting more foreign and domestic investments.

The financial soundness of the Palestinian banking sector: an empirical analysis using the CAMEL system

The purpose of this article is to evaluate the financial soundness of commercial banks listed on the Palestine Exchange using the CAMEL rating system. A content analysis, composite rating, and a one sample t-test are applied to a sample of six local banks operating in Palestine. Secondary data were obtained from the financial statements of the banks for the period of 2007–2017 in order to conduct the research and evaluate their financial performance. The empirical test has shown that Palestinian banks adhere to the Basel Committee standards in terms of capital adequacy and that they display stability in terms of profitability and liquidity. However, the paper concludes that the operational efficiency of the banks being evaluated is “fairly managed”. Finally, the findings indicate significant differences amongst Palestinian banks in terms of performance, assessed using the CAMEL rating system. This paper suggests that the listed Palestinian banks should focus on long-term investments rather than short-term ones, and monitor their risk management practices to increase their profits and move towards sustainability and growth.

The effects of tax avoidance on corporate value

Taxes considered a significant cost to the corporations and shareholders, and it generally expected that shareholders prefer tax avoidance. However, the purpose of this paper is to shed light on the effects tax avoidance on firm value. Based on a sample of 34 Palestinian listed firms from 2011 to 2018, the authors use OLS regression. The results shows that firms tend to take advantages from cash flow saved from aggressive tax practices. On Palestinian context, our results are interesting. Palestine is very unique environment , since investors rights are weakly shielded , furthermore , Palestine stock exchange market is not developed enough , this arguments leash firms to benefit from tax savings , while investors didn’t need to transfer profits to other lower tax countries , since tax rate in Palestine considered low comparing with other countries negative relationship with tax avoidance. This study has spotlight on tax avoidance on unique environment in Palestine and thus extend literature that focused on developed countries. Simultaneously , considered as basis in Palestine and other Arab countries for future research in this area. Although the last implications of this study, it still has limitations, one is limited sample scope, as Palestine exchange market has few listed firms, as small country with precarious political situations. However, The study is the first that focused on the relationship between four forms of ownership structure and tax avoidance in unique environment as Palestine with very distinguished political and economic situations. Keywords Tax avoidance, Firm value, Effective tax rate , ROA DOI: 10.7176/RJFA/11-4-13 Publication date: February 29 th 2020

Depressing Earnings Management in Palestinian Corporations: The Role of Audit Quality, Audit Committee, and Accounting Conservatism

The influence of audit quality, the existence of an audit committee, and accounting conservatism in depressing earnings management (EM) were examined in this study while controlling for board characteristics, financial leverage, and client's company size. A regression model on a sample of 184 firm-year observations of 34 companies listed on Palestine Exchange (PEX) between 2011 and 2016 was employed. Based on the results, the independent variables demonstrated negative association to discretionary accruals, measured by four modified versions of Jones model, as a proxy for EM; in other words, the variables were effective in depressing EM and consequently, in enhancing the financial statement quality. A similar negative association was also demonstrated by board size and chief executive officer (CEO) duality. Meanwhile, financial leverage and EM showed a robust positive association suggesting that Palestinian corporations employed EM mainly to influence creditors' decisions. Policy makers should consider the results presented in this study to improve regulations related to reporting and governance.

Corporate Governance and Earnings Management: Evidence from Listed Firms at Palestine Exchange

The agency problem gives an incentive to present corporate governance codes that help reduce the conflict of interest between company owners and managers. This study used corporate governance indicators to assess the relationship between CG and earnings management. Managers use earnings management to overstate or understate the figures to serve their own interests. Data were collected for the 33 sampled companies in this study from the annual reports of the listed companies at the Palestine stock exchange. The modified cross-sectional Jones model was used to define the value of earnings management. The independent variables (CG indicators) were board independence, board size, ownership concentration, CEO duality, and audit quality. In addition, to control variables to account for differences in size and performance of the firm, these variables are company size, return on asset and leverage. By using the regression model, a significant correlation between EM and size for the year 2015 and between EM and ownership concentration, size and return on assets for the year 2016 were found. The overall regression result showed that the model fits with the variable used. The R-squared (coefficient of determination) values showed that approximately 65% and 73% of the variability of earnings management was accounted for by the variables in the model.