International Journal of Business, Economics and Management

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No. 2

Research on the Construction and Application of Chinese Enterprises Overseas Port Investment Confidence Index Based on D-S Evidence Theory

Pages: 134-153
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DOI: 10.18488/journal.62.2021.82.134.153

Bingji Chen , Zilong Jia , Yang Liu

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Bingji Chen , Zilong Jia , Yang Liu (2021). Research on the Construction and Application of Chinese Enterprises Overseas Port Investment Confidence Index Based on D-S Evidence Theory. International Journal of Business, Economics and Management, 8(2): 134-153. DOI: 10.18488/journal.62.2021.82.134.153
After the "One Belt, One Road" strategy was proposed, China's overseas port investment has developed rapidly. In order to help Chinese port companies reduce their investment risks, this article provides help and suggestions for Chinese companies’ overseas port investments by establishing a port investment confidence index system. This article has established a port investment confidence index system, covering four aspects: economic scale, external links, internal vitality and institutional quality. Then, through DS evidence theory, using the subjective weights obtained from the questionnaire survey and the objective weights calculated from the data obtained from each database query to evaluate some countries along the “Belt and Road” route to prove the rationality and operability of the indicator system designed in this article And provide advice and assistance for Chinese companies’ overseas port investment. Based on the subjective weights obtained in this article, Chinese companies are more inclined to invest in economies with better internal economic development and a sound institutional environment. By comparing the objective weights of income, this paper finds that when companies invest in economies with a higher degree of development, they pay more attention to the impact of the business environment of the economy when they invest in economies with a higher degree of development. Low-level economies will give priority to the profitability and development prospects of ports when investing.
Contribution/ Originality
This article has established a port investment confidence index system, covering four aspects: economic scale, external links, internal vitality and institutional quality.

Explaining Electricity Tariffs in Kenya

Pages: 119-133
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Explaining Electricity Tariffs in Kenya

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DOI: 10.18488/journal.62.2021.82.119.133

Grace Njeru , John Gathiaka , Peter Kimuyu

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Grace Njeru , John Gathiaka , Peter Kimuyu (2021). Explaining Electricity Tariffs in Kenya. International Journal of Business, Economics and Management, 8(2): 119-133. DOI: 10.18488/journal.62.2021.82.119.133
Kenya has been struggling with increasing electricity tariffs. Several regulatory reforms introduced in the sector have not succeeded in lowering the electricity tariffs necessitating the need to investigate the push factors of tariffs. This study explained electricity tariffs by exploring the drivers of Kenya Power and Lighting Company (KPLC) tariffs and the scale of operation of KPLC. Using cost time series data from KPLC for the period 1986 to 2016 and Autoregressive distributed lag model (ARDL) an average cost function for KPLC was estimated. The results indicated average tariffs of electricity increased with price of labour and system losses and decreased with output and system load factor. KPLC was found to be enjoying economies of scale and density. Transmission and distribution of power should therefore be retained as a natural monopoly. The Government of Kenya should continue reforming power supply to reduce the system losses and price of labour. Incentives aimed at increasing the system load factor such as special tariffs should be introduced.
Contribution/ Originality
This study contributes to the existing literature by estimating the drivers of KPLC tariffs and scale of operation. The findings will be useful in determining revenue requirements, setting efficiency targets and in future yardstick regulation for transmission and distribution utilities.

Innovation Efforts in the Face of Institutional Obstacles in Latin America

Pages: 100-118
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Innovation Efforts in the Face of Institutional Obstacles in Latin America

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DOI: 10.18488/journal.62.2021.82.100.118

Priscila Rezende da Costa , Vitor da Silva Bittencourt , Christian Daniel Falaster , Luisa Margarida Cagica Carvalho , Angelica Pigola

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Priscila Rezende da Costa , Vitor da Silva Bittencourt , Christian Daniel Falaster , Luisa Margarida Cagica Carvalho , Angelica Pigola (2021). Innovation Efforts in the Face of Institutional Obstacles in Latin America. International Journal of Business, Economics and Management, 8(2): 100-118. DOI: 10.18488/journal.62.2021.82.100.118
Among scholars, politicians and practitioners, innovation has become a priority. However, a consensus and convergence have yet to be reached in the literature regarding the factors that determine innovation efforts at the firm level regarding developing countries. Thus, the general aim was to gauge to what extent rapid internationalization and relational triggers enable a potential for innovation efforts in companies from Latin American countries faced with the perception of the gravity of institutional obstacles. In methodological terms, a database of the World Bank (Environment Surveys) was used, with 14,064 companies from 20 Latin American countries, with responses to question related to their innovation efforts. Unprecedented contributions were collected, as this was the first time that the perception of the gravity of institutional obstacles was jointly and empirically evaluated, together with evidence of rapid internationalization and the use of relational triggers, to explain innovation efforts, considering many firms from Latin American companies. This work also provides some clues about the potentializing effect of rapid internationalization in the relationship between institutional obstacles and innovation efforts. The main results allow a better understanding about inter- and intra-group analyses, demonstrating in which groups of Latin American company’s innovation efforts are more significant and distinctive, and therefore require pro-market and pro-internationalization public policies.
Contribution/ Originality
The paper's primary contribution is finding that what extent rapid internationalization and relational triggers potentialize the innovation efforts of Latin American companies regarding the perception of the gravity of institutional obstacles.

Some Non-Linear Problems in Accounting and Finance: Can we Apply Regression?

Pages: 81-99
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DOI: 10.18488/journal.62.2021.82.81.99

John Ogwang

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John Ogwang (2021). Some Non-Linear Problems in Accounting and Finance: Can we Apply Regression?. International Journal of Business, Economics and Management, 8(2): 81-99. DOI: 10.18488/journal.62.2021.82.81.99
Recent studies have indicated that many decision problems in accounting and finance can be better modeled by non-linear models in practice. However, existing literatures have also shown that managers and decision makers are not very conversant with non-linear models as compared to linear models because of the simplicity of linear models. In this paper, attempts are made to transform some non-linear models in accounting and finance which conform to exponential and power functions to their equivalent linear forms. The resulting equivalent linear models are subjected to regression analysis. The paper documents interesting practical non-linear problems in accounting and finance where it is possible to apply regression, and provides technical interpretations of coefficients of resulting regression equations. Some non-linear problems which have been documented in this analysis include; depreciation of non-current assets, the learning curve model, life cycle costing, compounding, discounting and exponential growth bias. Although logarithmic transformation of non- linear functions is not a novel idea in literature of accounting and finance, there is no evidence in literature that scholars have proposed particular cases in finance and accounting where these linear transformations and their resulting regression equations would yield meaningful results that can enhance management decision making. This paper fills this gap by documenting practical non-linear problems in finance and accounting where linearization and subsequent application of regression analysis generates useful results for management decision making purposes.
Contribution/ Originality
In the literature of accounting and finance specifically; firstly, this paper originates new formulae for some non-linear problems. Secondly, it’s among very few papers which examined regression of non-linear problems. Thirdly, this is the first paper to document practical cases where regression of log transformed variables generates useful results.

Brexit Calling! Aftermath in the Pharmaceutical Industry

Pages: 70-80
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Brexit Calling! Aftermath in the Pharmaceutical Industry

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DOI: 10.18488/journal.62.2021.82.70.80

Haritini Tsangari , Ioanna Mantara

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Haritini Tsangari , Ioanna Mantara (2021). Brexit Calling! Aftermath in the Pharmaceutical Industry. International Journal of Business, Economics and Management, 8(2): 70-80. DOI: 10.18488/journal.62.2021.82.70.80
This paper aims to examine the impact of the Brexit referendum on the financial performance of the pharmaceutical industry in the United Kingdom. We analyze daily data for the period 1/2000-10/2019, for the two largest British pharmaceutical firms, GlaxoSmithKline and AstraZeneca, as well as two European competitors, the Swiss Novartis and the German Bayer. We perform returns and volatility analysis, financial ratio analysis and regression analysis. Our empirical results are heterogeneous among firms, pinpointing strengths and weaknesses of the pharmaceutical firms. The Brexit decision has had a significant, positive effect on the stock returns of the two British firms, a negative effect for Bayer and no effect for Novartis, while lagged returns are significant only for the European firms. At least in the short-run, both British firms have gained considerably from the depreciation of the sterling and should aim to expand their overseas network and avoid prospective trade barriers and regulatory issues.
Contribution/ Originality
This study contributes to the existing literature by examining the effect of the Brexit decision on a highly profitable sector, looking at the consequences from many different perspectives, employing various statistical techniques and focusing not only on the pharmaceutical companies in the United Kingdom, but their competitors as well.

The Euribor and EONIA Reform: Achieving Regulatory Compliance while Protecting Financial Stability

Pages: 50-69
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DOI: 10.18488/journal.62.2021.82.50.69

Randy Priem , Ward Van Rie

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Randy Priem , Ward Van Rie (2021). The Euribor and EONIA Reform: Achieving Regulatory Compliance while Protecting Financial Stability. International Journal of Business, Economics and Management, 8(2): 50-69. DOI: 10.18488/journal.62.2021.82.50.69
Based on an extensive review of the academic and legal literature combined with a screening of news articles and policy papers, this article is the first to describe in great detail the events leading up to the EURIBOR reform and the efforts to make EURIBOR compliant with the European Benchmark Regulation. It documents the development of the hybrid EURIBOR methodology to ensure the benchmark to be anchored to transactions as much as possible thereby reducing manipulative behavior. The article further explains the actions undertaken by the administration and the EU RFR Working Group to transition from EONIA towards €STER and the reasoning behind the choice to recalibrate EONIA into €STER plus a spread. Although EURIBOR is considered BMR-compliant since 2 July 2019 and EONIA can continue to be used until 3 January 2022, this article explains why market participants should not be disincentivized to already take actions to provide for fallback rates to EURIBOR in their legal documentation, and to move away from EONIA. This study addresses various fallback methodologies.
Contribution/ Originality
This study is the first to provide a holistic overview of the reforms of the EURIBOR and the EONIA, as well as the on-going work to transition away from EONIA towards the Euro short-term rate (€STER). The study documents the efforts made by the administrator, the panel banks as well as by the FSMA to reform EURIBOR and to keep it operational, at least in the medium term. It explains the choice of the EU RFR Working Group and the administrator to recalibrate EONIA into €ster + a spread of 8.5 basis points.