Malaysian Journal of Economic Studies

CEO Power, Board Tenure Diversity and Tax Avoidance: Empirical Evidence from Malaysia

Guat Khim Hooy, Lian Kee Phua — Mon, 25 Dec 2023 00:00:00 +0800

This study aims to assess the relationship between CEO power and tax avoidance and the moderating effects of board tenure diversity on this connection. Based on firms listed on the Main Market of Bursa Malaysia from 2009 to 2019, the study finds that CEOs with more dimensions of power are more likely to engage in tax avoidance activities. Further tests reveal that this positive association is strengthened by board tenure diversity, suggesting that a more diverse board tenure increases CEO competence in tax avoidance.

Does Foreign Aid Promote Foreign Direct Investment in Post-conflict Cambodia?

Ly Slesman — Mon, 25 Dec 2023 00:00:00 +0800

Post-conflict Cambodia has experienced a significant increase in foreign aid and foreign direct investment (FDI) inflows since the early 1990s. This paper investigates whether (aggregate, donor-specific, and sectoral-based disaggregate) foreign aid has any short- and long-run crowding-in effects on FDI inflows using autoregressive distributed lag (ARDL) bound test for cointegration over the 1992–2018 post-conflict period. Robust findings reveal that aggregate development aid and ‘donor-specific’ aid from Australia and United Nations Development Programme (UNDP) crowding-in FDI in the long run. Donor-specific aid from the EU, the US, Japan and France, and sectoralbased ‘governance aid’ and ‘other aid’ either have non-robust positive or no significant long-run effects on FDI. In the short run, however, only EU-aid and other-aid have crowding-in effects on FDI. Foreign development aid can catalyse FDI inflows in postconflict Cambodia, especially in the long run.

Does Financial Literacy Improve Financial Inclusion in Developing Countries? A Nonlinearity and Quantile Regression Analysis

Abd Rahim Md Jamil, Siong Hook Law, Mohamad Fazli Sabri, Mohamad Khair Afham — Mon, 25 Dec 2023 00:00:00 +0800

This study investigated the nexus between financial literacy and financial inclusion using the cross-section threshold regression model and the quantile regression technique. The sample covered 73 developing countries categorised as lower-middleincome or upper-middle-income economies. The main results of the threshold model revealed that financial literacy had no inverted U-shaped effect on financial inclusion in the sample of developing countries. This situation indicated that financial literacy had a linear or monotone relationship with financial inclusion. The quantile regression model was used to compare the findings in this investigation. The empirical result indicated that the financial literacy variable had a limited impact on the conditional distribution of financial inclusion. However, the coefficient values were much larger at high than low quantiles. This study’s results are necessary for policymakers and financial institutions to implement financial literacy programs targeted at specific behaviours and underserved populations in developing countries.

Earnings Management and Bank Liquidity Creation in an Emerging Market

Japan Huynh — Mon, 25 Dec 2023 00:00:00 +0800

This paper empirically examines the impact of bank earnings opacity on liquidity creation. Using a sample of commercial banks in Vietnam from 2007 to 2019, we find that more opaque banks tend to reduce liquidity creation growth. We further offer sharp evidence that the impact of earnings management on bank liquidity creation depends on bank-specific characteristics. More precisely, the negative impact of bank earnings management on banks’ core function is stronger for banks that are more poorly capitalised, less liquid, smaller and less profitable. With these findings, our work display implications on the supply-side effect (i.e., the limited access to funding of financially weak banks).

Factors Associated with Participation of Vietnamese Informal Workers in Voluntary Social Insurance Scheme

Thi-Thu Do, Thanh-Long Giang — Mon, 25 Dec 2023 00:00:00 +0800

This study estimated impacts of demographic and employment factors on the voluntary social insurance participation of Vietnamese informal workers by using data from the Labour Force Survey and Heckman’s two-step probit selection model for four groups of informal workers. The results showed that age, the highest education level, number of school-age children in household, number of household members participating in the social insurance system, job position and income level of informal workers had significant impacts on their decision to participate in the scheme. Moreover, these impacts were different for informal workers when considering their job positions. Based on the findings, this study recommended various policies considering the aforementioned characteristics of informal workers.

Minimum Wage and Employment of Malaysian Low-skilled Workers

Kek Jing Wen, Lai Wei Sieng — Mon, 25 Dec 2023 00:00:00 +0800

The current study is inspired by inconclusive empirical findings on the impacts of minimum wage on employment. The majority of past studies have concluded that an increase in the minimum wage negatively impacts employment, despite certain scholars discovering either an insignificant or a positive impact. Hence, this study aims to investigate the impact of the Malaysian minimum wage on the employment opportunities of low-skilled workers. The data are collected annually from 1995 to 2020. An autoregressive distributed lag (ARDL) model is employed to examine the impact of the Malaysian minimum wage on the employment of low-skilled workers. The bounds test method and error correction model (ECM) are subsequently utilised to determine both short- and long-term effects. As a result, the employment of low-skilled labour is found to be positively impacted by the minimum wage, with this impact being statistically significant in both the short and long terms. However, when the interaction variables are included, the effect on the employment of low-skilled workers is negative and insignificant. Furthermore, neither increasing labour productivity nor technological advancement significantly altered the impact of the minimum wage on employment.

Soil Properties and the Technical Efficiency of Paddy Production in Malaysia: An Application of Stochastic Frontier Analysis

Mohd Khairul Hafifi Maidin, Roslina Kamaruddin, Shri Dewi Applanaidu — Mon, 25 Dec 2023 00:00:00 +0800

This study investigates the impact of soil properties on technical efficiency in paddy production, focusing on Malaysia’s two main paddy granaries: KADA and IADA BLS. These granaries play a significant role in Malaysia’s paddy production. The research employed three different models, with productivity as the dependent variable. In models 1 and 2, standard physical inputs were used as independent variables. Model 3, however, augmented the inputs with the addition of soil property variables. The empirical results revealed significant impacts from fertiliser, pesticide and land inputs, with the exception of land in model 1, where its coefficient was not statistically significant. Additionally, soil pH and the calcium+magnesium/potassium ratio emerged as crucial factors affecting paddy productivity. Importantly, incorporating soil property variables into the analysis resulted in a relatively lower technical inefficiency estimate. These insights are invaluable for policy formulation, highlighting key inputs that can optimise paddy production. The study’s findings regarding soil properties are particularly relevant for refining strategies in national paddy development programs, emphasising the importance of sustainable soil management. Looking ahead, the study advocates for comprehensive technical efficiency estimations that account for all forms of heterogeneity, including weather conditions, to ensure more accurate and insightful assessments.