Pub Date : 2009-01-03DOI: 10.32890/IJBF2009.6.2.8388
Salina Kassim, M. Majid
This study attempts to determine the importance of the banking sector in the monetary transmission process in a developing economy. The study analyzes the Malaysian data focusing on three sample periods: the entire sample period (1989:01-2006:12); the pre-crisis period (1989:01-1996:12); and the post-crisis period (1999:01-2006:12). To achieve this objective, the study relies on two tests: fi rst, the auto-regressive distributed lag (ARDL) model for the long-run relationship among the variables and second, the impulse response functions and variance decomposition analysis for the short-run relationship among the variables. The fi nding shows that both bank deposits and loans play crucial roles in the monetary transmission process in the economy, suggesting evidence for the money endogeneity theory of post-Keynesian economists. In particular, bank deposits and loans are shown to provide an important link from monetary policy to output. This underscores the importance of ensuring the soundness of banking system as a pre-requisite to economic stability in the absence of such market based tools as market-based actions on exchange rate or interest rates as monetary stabilisation tools.
{"title":"The role of bank loans and deposits in the monetary transmission mechanism in Malaysia","authors":"Salina Kassim, M. Majid","doi":"10.32890/IJBF2009.6.2.8388","DOIUrl":"https://doi.org/10.32890/IJBF2009.6.2.8388","url":null,"abstract":"This study attempts to determine the importance of the banking sector in the monetary transmission process in a developing economy. The study analyzes the Malaysian data focusing on three sample periods: the entire sample period \u0000(1989:01-2006:12); the pre-crisis period (1989:01-1996:12); and the post-crisis period (1999:01-2006:12). To achieve this objective, the study relies on two tests: fi rst, the auto-regressive distributed lag (ARDL) model for the long-run relationship among the variables and second, the impulse response functions and variance decomposition analysis for the short-run relationship among the variables. The fi nding shows that both bank deposits and loans play crucial roles in the monetary transmission process in the economy, suggesting evidence for the money endogeneity theory of post-Keynesian economists. In particular, bank deposits and loans are shown to provide an important link from monetary policy to output. This underscores the importance of ensuring the soundness of \u0000banking system as a pre-requisite to economic stability in the absence of such market based tools as market-based actions on exchange rate or interest rates as monetary stabilisation tools.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"86 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-01-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115684519","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2008-12-31DOI: 10.32890/ijbf2008.5.2.8366
Tareque Nasser, B. Gup
The Enron and WorldCom debacles raised questions about the state of corporate governance in the United States.Insider trading is one aspect of corporate governance highlighted in these cases. In this paper, we explore insider trading of large Chapter 11 bankruptcy filing firms during the twelve-year period of 1995-2006. We find that insiders in these firms, on average, do not use private information for gain or loss avoidance.
{"title":"INSIDER TRADING AND LARGE CHAPTER 11 BANKRUPTCIES IN USA","authors":"Tareque Nasser, B. Gup","doi":"10.32890/ijbf2008.5.2.8366","DOIUrl":"https://doi.org/10.32890/ijbf2008.5.2.8366","url":null,"abstract":"The Enron and WorldCom debacles raised questions about the state of corporate governance in the United States.Insider trading is one aspect of corporate governance highlighted in these cases. In this paper, we explore insider trading of large Chapter 11 bankruptcy filing firms during the twelve-year period of 1995-2006. We find that insiders in these firms, on average, do not use private information for gain or loss avoidance.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129268764","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2008-08-18DOI: 10.32890/IJBF2008.5.2.8369
Brooks Marshall, Timothy B. Michael, David M. Maloney, Faramarz Damanpour
In its valuation of firms with defined benefit plans, the stock market combines changes in the valuation of pension assets with changes in the valuation of the net core assets. Unfortunately, aggregating the two disparate asset classes in valuation discards information about both classes. This work shows that by extracting the pension component of returns, two types of insights result: first, an enhanced understanding of the underlying risk and return of the firm’s net core assets; and, second, an enhanced perspective of the potential benefit from incorporating pension asset allocation into overall risk management.
{"title":"HOW DEFINED, BENEFIT PENSION ASSETS AFFECT THE RETURNS AND VOLATILITY OF THE SPONSOR'S STOCK","authors":"Brooks Marshall, Timothy B. Michael, David M. Maloney, Faramarz Damanpour","doi":"10.32890/IJBF2008.5.2.8369","DOIUrl":"https://doi.org/10.32890/IJBF2008.5.2.8369","url":null,"abstract":"In its valuation of firms with defined benefit plans, the stock market combines changes in the valuation of pension assets with changes in the valuation of the net core assets. Unfortunately, aggregating the two disparate asset classes in valuation discards information about both classes. This work shows that by extracting the pension component of returns, two types of insights result: first, an enhanced understanding of the underlying risk and return of the firm’s net core assets; and, second, an enhanced perspective of the potential benefit from incorporating pension asset allocation into overall risk management.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-08-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125396889","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2008-08-18DOI: 10.32890/IJBF2008.5.2.8373
F. Sufian
This paper investigates the performance of Malaysian non-bank financial institutions during the period of 2000-2004. Several efficiency estimates of individual NBFIs are evaluated using the non-parametric Data Envelopment Analysis (DEA) method. The findings suggest that during the period of study, scale inefficiency outweighs pure technical inefficiency in the Malaysian NBFI sector. We find that the merchant banks have exhibited a higher, technical efficiency compared to their peers. The empirical findings suggest that scale efficiency tends to be more sensitive to the exclusion of risk factors, implying that potential economies of scale may be overestimated when risk factors are excluded.
{"title":"THE EFFICIENCY OF NON-BANK FINANCIAL INTERMEDIARIES: EMPIRICAL EVIDENCE FROM MALAYSIA","authors":"F. Sufian","doi":"10.32890/IJBF2008.5.2.8373","DOIUrl":"https://doi.org/10.32890/IJBF2008.5.2.8373","url":null,"abstract":"This paper investigates the performance of Malaysian non-bank financial institutions during the period of 2000-2004. Several efficiency estimates of individual NBFIs are evaluated using the non-parametric Data Envelopment Analysis (DEA) method. The findings suggest that during the period of study, scale inefficiency outweighs pure technical inefficiency in the Malaysian NBFI sector. We find that the merchant banks have exhibited a higher, technical efficiency compared to their peers. The empirical findings suggest that scale efficiency tends to be more sensitive to the exclusion of risk factors, implying that potential economies of scale may be overestimated when risk factors are excluded.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-08-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130310863","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2008-03-04DOI: 10.32890/IJBF2008.5.1.8362
N. Ahmad, M. Ariff
This paper presents fresh findings about key determinants of credit risk of commercial banks in emerging economy banking systems compared with developed economies. Australia, France, Japan and the US represent developed economies; emerging economies are India, Korea, Malaysia, Mexico and Thailand. Credit risk theories and empirical literature suggest eight credit risk determinants. We find anywhere from two to four factors are alone significantly correlated with credit risk of any one banking system. Regulatory capital is significant for banking systems that offer multi products; management quality is critical in the cases of loan-dominant banks in emerging economies. Contrary to theory or studies, we find leverage is not correlated with credit risk in our test period. Data transformations and statistical corrections ensured these results are reliable: Model robustness was tested using AIC. The model developed here could be applied to test more emerging economy banking systems to generalize our findings to other economies.
{"title":"Multi-country study of bank credit risk determinants","authors":"N. Ahmad, M. Ariff","doi":"10.32890/IJBF2008.5.1.8362","DOIUrl":"https://doi.org/10.32890/IJBF2008.5.1.8362","url":null,"abstract":"This paper presents fresh findings about key determinants of credit risk of commercial banks in emerging economy banking systems compared with developed economies. Australia, France, Japan and the US represent developed economies; emerging economies are India, Korea, Malaysia, Mexico and Thailand. Credit risk theories and empirical literature suggest eight credit risk determinants. We find anywhere from two to four factors are alone significantly correlated with credit risk of any one banking system. Regulatory capital is significant for banking systems that offer multi products; management quality is critical in the cases of loan-dominant banks in emerging economies. Contrary to theory or studies, we find leverage is not correlated with credit risk in our test period. Data transformations and statistical corrections ensured these results are reliable: Model robustness was tested using AIC. The model developed here could be applied to test more emerging economy banking systems to generalize our findings to other economies.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-03-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127928065","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2008-03-04DOI: 10.32890/IJBF2008.5.1.8360
Chung-Sin Yoon, Mohamed Ariff
Spin-off as a form of financial restructuring has been examined in the US and the UK but not in other markets. This is a first study outside those markets. The evidence from a sample of 85 spin-off cases in Malaysia reveals that both the parent and the spin-off company stocks gain significant positive abnormal returns: parent firms earn smaller value while the spin-off firm gains substantially, much greater than is documented in other markets. Examining the factors correlated with the size of the spin-off effect, we find the abnormal returns are positively correlated with market capitalization and negatively correlated with age. The larger is the company or the newer is the company the greater is the magnitude of the positive abnormal returns.
{"title":"Corporate spin-offs, their price reactions and determinants in Malaysia","authors":"Chung-Sin Yoon, Mohamed Ariff","doi":"10.32890/IJBF2008.5.1.8360","DOIUrl":"https://doi.org/10.32890/IJBF2008.5.1.8360","url":null,"abstract":"Spin-off as a form of financial restructuring has been examined in the US and the UK but not in other markets. This is a first study outside those markets. The evidence from a sample of 85 spin-off cases in Malaysia reveals that both the parent and the spin-off company stocks gain significant positive abnormal returns: parent firms earn smaller value while the spin-off firm gains substantially, much greater than is documented in other markets. Examining the factors correlated with the size of the spin-off effect, we find the abnormal returns are positively correlated with market capitalization and negatively correlated with age. The larger is the company or the newer is the company the greater is the magnitude of the positive abnormal returns.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"107 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-03-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132442531","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2006-05-01DOI: 10.32890/IJBF2008.5.1.8358
P. Ngo
We define regulatory risk as any regulatory action that leads to an increase in the cost of capital for the regulated firm. In a general equilibrium setting the paper considers the impact of globally harmonising capital adequacy requirements on the cost of bank equity capital. The results show that uniform increases in capital requirements lead to an increase in the cost of capital. However when regulatory standards differ across countries, financial integration leads to positive spillovers which reduces the cost of capital mark up for a given increase in bank capital. Accordingly, regulatory risk may be greater under a regulatory agreement such as the Basel Accord which imposes international uniformity in capital ratios.
{"title":"International prudential regulation, regulatory risk and cost of bank capital","authors":"P. Ngo","doi":"10.32890/IJBF2008.5.1.8358","DOIUrl":"https://doi.org/10.32890/IJBF2008.5.1.8358","url":null,"abstract":"We define regulatory risk as any regulatory action that leads to an increase in the cost of capital for the regulated firm. In a general equilibrium setting the paper considers the impact of globally harmonising capital adequacy requirements on the cost of bank equity capital. The results show that uniform increases in capital requirements lead to an increase in the cost of capital. However when regulatory standards differ across countries, financial integration leads to positive spillovers which reduces the cost of capital mark up for a given increase in bank capital. Accordingly, regulatory risk may be greater under a regulatory agreement such as the Basel Accord which imposes international uniformity in capital ratios.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"19 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132900993","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2004-06-02DOI: 10.32890/IJBF2004.2.1.8346
Youngna Choi, Yeomin Yoon
Compensating balance are deposits the borrowing firm keeps with the lending bank in non-interest bearing accounts on loans.It is well known that, when there is no compensating balance imposed, the effective cost of debt remains the same in the two different payment methods, full amortization method and bullet loan (bond) method.It has been experimentally shown that when a compensating balance is imposed, however, the respective effective costs of debt under the two payment methods become different and that the true cost of a fully-amortized loan is always greater than that of a bullet loan. This paper provides a mathematical proof than this is always true.It concludes that, whenever a bank imposes a compensating balance, the borrowing firm should prefer a bullet loan to a fully-amortized one if it wishes to avoid an ambush posed by such a compensating balance.
{"title":"Compensating balance: A comment","authors":"Youngna Choi, Yeomin Yoon","doi":"10.32890/IJBF2004.2.1.8346","DOIUrl":"https://doi.org/10.32890/IJBF2004.2.1.8346","url":null,"abstract":"Compensating balance are deposits the borrowing firm keeps with the lending bank in non-interest bearing accounts on loans.It is well known that, when there is no compensating balance imposed, the effective cost of debt remains the same in the two different payment methods, full amortization method and bullet loan (bond) method.It has been experimentally shown that when a compensating balance is imposed, however, the respective effective costs of debt under the two payment methods become different and that the true cost of a fully-amortized loan is always greater than that of a bullet loan. This paper provides a mathematical proof than this is always true.It concludes that, whenever a bank imposes a compensating balance, the borrowing firm should prefer a bullet loan to a fully-amortized one if it wishes to avoid an ambush posed by such a compensating balance.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"35 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-06-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121073665","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2004-06-02DOI: 10.32890/IJBF2004.2.1.8345
Alejandra Cabello, E. Ortiz, Robert R. Johnson
This paper tests if the efficient market version of Purchasing Power Parity (EMPPP) holds for the Mexican case for the 1970-2002 period in an environment of changing exchange rate regimes.Two regression analyses which extend PPP to a dynamic intertemporal model, based on market efficiency, are used, and in addition two unit root tests are applied. In general, the obtained empirical evidence does not support the EMPPP.Results suggest an inefficient market resulting from weak exchange rate policies and weak adoptions of several exchange rate regimes without proper inflation targeting and the application of strong and disciplined macroeconomic policies and structural changes.
{"title":"Market Efficiency and Long Run Purchasing Power Parity Disequilibria of the Mexican Peso Under Changing Exchange Rate Regimes","authors":"Alejandra Cabello, E. Ortiz, Robert R. Johnson","doi":"10.32890/IJBF2004.2.1.8345","DOIUrl":"https://doi.org/10.32890/IJBF2004.2.1.8345","url":null,"abstract":"This paper tests if the efficient market version of Purchasing Power Parity (EMPPP) holds for the Mexican case for the 1970-2002 period in an environment of changing exchange rate regimes.Two regression analyses which extend PPP to a dynamic intertemporal model, based on market efficiency, are used, and in addition two unit root tests are applied. In general, the obtained empirical evidence does not support the EMPPP.Results suggest an inefficient market resulting from weak exchange rate policies and weak adoptions of several exchange rate regimes without proper inflation targeting and the application of strong and disciplined macroeconomic policies and structural changes.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"26 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-06-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133466015","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2004-06-02DOI: 10.32890/IJBF2004.2.1.8341
N. Abdullah, Rosemaliza Abdul Rashid, Yusnidah Ibrahim
Supports on the free cash flow and agency cost theory from dividend annoucement studies have been heavily discussed in the western literature, but they have not been given much attention in the Asian countries, particularly Malaysia.This paper focuses on examining the relationship of the stock market reactions due to dividend announcements and ten company-specific variables identified from the literature as potential determinants.The results from cross-sectional and stepwise regressions both showed that none of the determining variables could explain the variation in cumulative abnormal returns (CARs) for the increasing dividend announcements. For decreasing dividend announcements, both regressions identified the degree of anticipation to be significant and inversely related to CARs.In addition, the indigenous population ownership, which is a unique characteristic of the Malaysian equity market is also found to be significant in influencing the effect of decreasing dividend announcements. The findings provide no support for the free cash flow and agency cost theory.
{"title":"Information content of dividend changes in an emerging market","authors":"N. Abdullah, Rosemaliza Abdul Rashid, Yusnidah Ibrahim","doi":"10.32890/IJBF2004.2.1.8341","DOIUrl":"https://doi.org/10.32890/IJBF2004.2.1.8341","url":null,"abstract":"Supports on the free cash flow and agency cost theory from dividend annoucement studies have been heavily discussed in the western literature, but they have not been given much attention in the Asian countries, particularly Malaysia.This paper focuses on examining the relationship of the stock market reactions due to dividend announcements and ten company-specific variables identified from the literature as potential determinants.The results from cross-sectional and stepwise regressions both showed that none of the determining variables could explain the variation in cumulative abnormal returns (CARs) for the increasing dividend announcements. For decreasing dividend announcements, both regressions identified the degree of anticipation to be significant and inversely related to CARs.In addition, the indigenous population ownership, which is a unique characteristic of the Malaysian equity market is also found to be significant in influencing the effect of decreasing dividend announcements. The findings provide no support for the free cash flow and agency cost theory.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-06-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115683481","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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