AIUB Journal of Business and Economics

Volume: 13, Issue: 1

Publication Date: 30th November, 2016

ISSN 1683-8742 (Print)                                                 ISSN (online): 2706-7076

 

Cost of Capital Estimation in Practice: An Explorative Study on Bangladeshi Companies

Shakila Yasmin, Syeda Mahrufa Bashar

Abstract

This study investigates cost of capital estimation practices of companies in Bangladesh. CEO/CFO background and company size effect on practices in cost of capital estimation have also been explored. Structured questionnaire survey was conducted on 50 companies from different industries in Bangladesh selected on the basis of access to information. Frequency distribution and cross-tab analysis were done. Results reveal that majority of the companies estimate cost of capital. Unlike past studies where use of CAPM is prevalent, this study reveal historical average return as the most commonly method of estimating cost of equity. Most recent lending rate from banks is the commonly used proxy of cost of debt. Majority companies adjust cost of debt for tax. Use of WACC is prevalent but most companies use book value debt and equity in WACC. Majority companies adjust cost of capital for inflation, exchange rate and interest rate risk whereas only few adjusts for term structure risk and risk of financial distress. CEO/CFO tenure demonstrates strong association with the use of market value debt in WACC.

Pp: 1-18

The Relationship between CEO Compensation and Firm Performance in the Banking Sector of Bangladesh

Md. Yousuf Harun, Md. Kaysher Hamid

Abstract

To study the pay-performance relationship, 24 commercial banks listed with DSE have been selected for 2004-15. Total annual compensation paid to CEO represents the CEO compensation (CEOCOM) and return on assets (ROA), net interest margin (NIM), capital adequacy ratio (CAR), loan-deposit ratio (LDR), classified loan ratio (CLR), and price per share (PPS) are used as the performance indicators. CEOCOM has shown an increasing trend over the years with average YOY growth of 12.92% and CAGR of 12.73%. A strong positive correlation of CAR and a strong negative correlation of PPS are observed with CEOCOM. Besides, ROA, NIM, and LDR have a weak positive and CLR have a weak negative correlation with CEOCOM. Regression result shows a strong correlation and high explanatory power of the independent variables against CEOCOM. The model is also found statistically significant and free of multicollinearity. In addition, ROA, CLR, and PPS have shown negative and NIM, CAR and LDR have illustrated positive coefficients with CEOCOM. Except LDR (significant at 86.1%), all the variables are significant at 95% confidence level. Therefore, this research concludes a significant relationship between CEO compensation and firm performance.

Key Words: Banking sector, Remuneration, Financial Performance. Pp: 19-43


Exploring the Smartphone Application Development Sector of Bangladesh

T. M. Jakaria Khan, Sutapa Bhattacharjee

Abstract

As the Smartphone becomes popular throughout the whole world, the demand for Smartphone applications is growing. Bangladesh, a new entrant, has got the potential to do well in this sector. By serving this growing and hugely demanding industry Smartphone application development sector of Bangladesh can play a major role in the export of Bangladesh. Having the necessary resources and the entrepreneurs to address the rising demand for Smartphone applications, what Bangladesh needs is integration of these. This study aimed at identifying the factors that are hampering that fine tuning, and came up with some recommendations regarding the prospective advancement of this sector. This study mostly relied on Qualitative methods such as FGD and KII. It was revealed that adequate workforce is the most important factor for the growth of this sector, and we need more skilled workers in this industry.

Key Words: Smart Phone, Application, Challenges, Development Sector, Apps, IT Service. pp: 45-59

 


Audit Committee Effectiveness & Earnings Quality: Review of Literature & Future Research Direction

Md. Mohiuddin, Farzana Afrin

Abstract

This research study identifies and documents effect of Sarbanes-Oxley Act (SOX) on audit committee effectiveness in an organizational context, and how the theories can be applied to real businesses all in a Post SOX environment. Within 15 years after the SOX passed, there has been changes in the dynamics of organizational behavior as a consequence of the act. As documented in previous researches, the corporate governance effects and broader organizational changes can have very interesting unintentional effect. The accounting financial expertise requirement supported by SOX is alleged to induce risky companies make audit committee weaker rather than stronger. Researchers contradict each other. I discuss here the effects of an increase in audit committee financial expertise, the interactions among audit committee status, audit expertise, and firm characteristics. Recommendations are given in two streams. One stream of recommendation is for firms to choose a right structure of audit committee. Another set of recommendation contributes specific variables taken from other recent stream of financial accounting research that the future corporate governance researches may consider to bring audit literature to date. This research calls for the need to see the audit committee structure in newly listed firms (new/successive cohorts) versus listed firms in earlier decades (old cohorts)

Key words: Audit Committee, SOX, Financial Expertise, Status.pp: 61-86


Gender Earning Gap and Higher Educational Attainment: Trends in Canada

Rozalina Omar

Abstract

The paper focuses on the relationship between the ongoing gender-earning gap and the increasing rate of higher educational attainment by women in Canada. The increasing rate of educational attainment allows women to enter several male-dominated professions, but in many cases women are not getting the expected returns compared to their male counterparts. Data shows that despite decades of anti-discrimination legislation and equal rights provisions in most peer countries, there is still a significant income gap between men and women in Canada which puts the increasing number of participation of women in tertiary education into a question. In this respect, the paper also includes some basic literature review to find out the reasons behind the gender pay gap. Overall, this paper concludes the necessity of narrowing gender-earning gap in order to achieve fair distribution of wealth.

Key Words: Gender Earning Gap, Higher Educational Attainment, Anti-discrimination Legislation, Labor Market in Canada.pp : 87-100


Structure and Current Practices of Supply Chain in Bangladesh RMG Sector: A Study on Narayanganj BSCIC

Farjana Jasmine, Rumana Afrin†


Abstract

In general Supply Chain Management is very multidimensional. In the RMG sector the Supply Chain Management is even more complex due to features of global Supply Chain. This script aims toward assess the concept of Supply Chain Management concerning Bangladesh Ready Made Garment Industry. In the global supply chain, the structure and practices of supply chain consists of tariffs, nontariff obstructions, switch over rates and differences in product necessities, consumer savors and business observes. Along with all those, borders also present some obstacles in transportation services, which are very common for RMG sector in Bangladesh. The overall manufacturing cost can be reduced and profit can be increased by carefully using the available information and integration of supply chain. This is the right time to consider and reorganize for the Decision Makers and the Planners of Bangladesh about the SCM issue to implement in Bangladesh Garment Industry with the inspiration and dedication to uphold in the Global Garment Market with the highly competitiveness, efficiency, and productivity.

Key Words: RMG sector, Bangladesh, Supply Chain. Pp: 101-115


Challenges and Strategies to Improve Potato Competitiveness along with Potato Value Chain in Bangladesh

M.F.  Hossain, Md. Shamimur Rahman

Abstract

Potato (disambiguation), Solanum tuberosum, is a tuberous crop grown throughout the world. It is the world's fourth-largest food crop, following maizewheat, and rice. Potato is the leading vegetable in Bangladesh. The potential to strategize the ways of enhancing its competitiveness in the value chain remains locked and unexploited due to a host of constraining factors along its value chain, which must be addressed. This paper identifies the underlying constraints and proposes strategic interventions to enhance Potato competitiveness along the value chain in Bangladesh. Secondary data has been obtained from Ministry of Agriculture, Bangladesh Agricultural Research Institute (BARI), Department of Agriculture Extension (DAE), Bangladesh Agriculture Development Corporation (BADC), Bangladesh Firm Seeds Trade Federation of Bureau and Bangladesh Bureau of Statistics. The data were analyzed using statistically. Underlying constraints such as production inefficiencies, market inaccessibility, and inadequate processing facilities and consumers’ exploitation through inflated pricing were identified to affect potato value chain performance. Strategic interventions like the adoption of tissue culture technology, rapid multiplication method, top shoot cutting, appropriate irrigation systems and business model aggregator were identified to enhance potato value chain competitiveness. Government was therefore recommended to partner with all stakeholders in order to enhance performance in potato value chain.

Key Words: Agriculture, potato, value chain, constraints, competitiveness, supply chain management.pp: 117-140


An Analysis on Starbucks’ International Business Entry Strategies in China

Partha Prasad Chowdhury

Abstract

Marketing literature suggests that selection of an appropriate strategy is very much important to gain sustainable competitive advantage to be successful in the international business; however, literature detailing with international business entry strategies is scarce. This study is the outcome of an in-depth analysis of Starbucks entry strategies in China. The entry strategies of Starbucks in China followed the gradual incremental involvement of resource commitment. Considering all key influential factors like firm specific; industry specific; country specific; cultural; environmental factors, Starbucks started to follow high/majority equity joint ventures and wholly owned subsidiaries as a preferred entry mode to hold more control in the growing coffee market of a country with emerging economy but high cultural differences. Starbucks used the standardized product (coffee) and tuned promotional activities as per the requirement of the target market segments in China in order to position Starbucks’ coffee-cafĂ© to the similar customer groups not only as a seller of high quality coffee but also as a provider of comfortable and relaxed atmosphere by providing customer a third place away from work or home to relax and socialize.

Key words: Entry modes, Starbucks, Chinese marketplace, Coffee Retailer, Global Standardization Strategy, Localization Strategy. pp: 141-162


Analyzing the Online Marketplaces of Bangladesh

Md. Iftekharul Amin, Sadia Farjana and Syeda Mahrufa Bashar

Abstract

The online marketplaces have not built up as a structured industry in Bangladesh. But there remains demand for such facilitated marketplaces in this era of busy schedules and severe traffic clogging in the roads. Hence online marketplaces have gained popularity and prosperity here despite their unstructured business frame and poor, inconsistent service. This study focuses on analyzing the Online Marketplaces of Bangladesh elaborately. The online marketplaces in Bangladesh consist of both local and multinational organizations, but there hardly exists proper customer service or rules/guidelines for service offering. A few marketplaces have sustained as trustworthy, dependable hubs for online shoppers, but most of these have mushroomed just capitalizing the easy set-up procedure of online marketplaces. Though online marketplace concept got introduced in Bangladesh in 2005, there has not been much development in the qualitative area for such marketplaces.

Keywords: Online Marketplace, Cash on Delivery (CoD), Transaction security, Online Advertisement, Success Parameters, Constraints. Pp: 163- 178

 


Higher Education Sustainability Initiatives [HESI]: A Case Study on the American International University – Bangladesh [AIUB] and the Local Perspective

Carmen Z. Lamagna, Shama Islam

Abstract

“Sustainability” has been one of the most monopolizing ‘buzz word’ in recent times, that has gone global. The very concept has evolved over time, gradually realizing its significance from various industries, different households, to the entire governance and infrastructure of nations across borders. It has diversified its meaning, however, donning on multiple facets of ‘sustainability’. More and more individuals and entities, whether it be consumers or corporations, have started thinking on issues related to health, society, and the environment as a whole. This trend seems to go a long way, especially when it comes to organizations and institutions, spanning through a wide range of genres.

It has grown in its importance. It no longer holds just ethicalor moral values, but this even adds to the cost of doing business, the impact of each person as a global citizen, and not to mention, the future of our planet that hangs in the boughs as we know it. Given the socio-economic and political scenario, the South Asian region is only beginning to catch up to the idea of how such actions effectthe lives of its people. Traditionally, generations have been involved in ‘serving the community’ through the ‘volunteering’, ‘charitable donations’, ‘social welfare & development’ etc. for decades, but the scales and scope were limited in their reach and, with the lack of proper guidance and literacy, the efforts and approaches were incohesive and incoherent to have any real impression or influence on the local level. In time, if the population can be educated in masses, and not just encourage but rather enabled to contribute towards the global landscape of sustainability, perhaps we can power through climate change, not just in the South Asian region but internationally in the global landscape.

Education for all has always been an integral part of the sustainable development agenda. There is growing international recognition of Education for Sustainable Development (ESD) as an integral element of quality education and a key enabler for sustainable development. Over two years ago, an unprecedented number of higher education institutions (HEI) from all corners of the globe assembled on a single platform to collaboratively champion education, research and actions for sustainable development in the Higher Education Sustainability Initiative (HESI) of the United Nations Conference on Sustainable Development (Rio+20), held in Rio de Janeiro, Brazil, in July 2012. Although education is a dedicated sustainable development goal 4 - "Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all" – with a set of associated targets, it is also a key driver for achieving many of the other sustainable development goals. Established as an unprompted initiative for sustainable development,HESI for Rio+20 aims to get institutions of higher education to commit to teach sustainable development concepts, encourage.Contributions from higher education institutions part of the Higher Education Sustainability Initiative are sought, in responding to the pressing current issues of climate change.

pp: 179-193