Pub Date : 2003-03-17DOI: 10.32890/IJBF2003.1.1.8326
Philip English, William T. Moore
We examine common stock price reactions to offshore capital expenditures undertaken by U. S. multinational firms. Arguments based on optionality and expropriability lead to predicted price reactions conditioned on the degree of ambiguity in property rights enforcement in the host country. Our findings based on 159 foreign investment decisions reveal a significant influence of property rights ambiguity on the valuation effect. For investment in countries where property rights are enforced as reliably as in the U.S., firms experience and average increase in equity value of $41.83 million, or $1.614 per dollar invested.
{"title":"Equity valuation effects of foreign capital expenditures : the role of property rights","authors":"Philip English, William T. Moore","doi":"10.32890/IJBF2003.1.1.8326","DOIUrl":"https://doi.org/10.32890/IJBF2003.1.1.8326","url":null,"abstract":"We examine common stock price reactions to offshore capital expenditures undertaken by U. S. multinational firms. Arguments based on optionality and expropriability lead to predicted price reactions conditioned on the degree of ambiguity in property rights enforcement in the host country. Our findings based on 159 foreign investment decisions reveal a significant influence of property rights ambiguity on the valuation effect. For investment in countries where property rights are enforced as reliably as in the U.S., firms experience and average increase in equity value of $41.83 million, or $1.614 per dollar invested.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"96 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-03-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115711408","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 : 1900-01-01DOI: 10.32890/ijbf2011.8.2.8424
George K. Zestos Dr., A. Geary, Kevin Cooksey
This study investigates the effectiveness of monetary and fiscal policies in the US by employing cointegration and a quatrovariate Vector Error Correction Model together with Granger causality tests. Two models are estimated: (i) nominal national income, the ten-year government bond yield, and two policy variables, the federal government deficit and the federal funds rate; (ii) real national income, and the other same three variables. Monetary and fiscal policies are jointly ineffective in influencing nominal national income. However, monetary and fiscal policies are jointly effective in influencing real national income. In contrast to the first model, only monetary policy was found to be reactive to changes in real national income and the long-term interest rate. The asymmetric responses of the two policies to changes in real economic activity are attributed to the fact that monetary policy is much more efficient in promptly responding to changes in economic conditions than fiscal policy.
{"title":"US Monetary-Fiscal Policy Mix Evidence from a Quatrovariate VECM","authors":"George K. Zestos Dr., A. Geary, Kevin Cooksey","doi":"10.32890/ijbf2011.8.2.8424","DOIUrl":"https://doi.org/10.32890/ijbf2011.8.2.8424","url":null,"abstract":"This study investigates the effectiveness of monetary and fiscal policies in the US by employing cointegration and a quatrovariate Vector Error Correction Model together with Granger causality tests. Two models are estimated: (i) nominal national income, the ten-year government bond yield, and two policy variables, the federal government deficit and the federal funds rate; (ii) real national income, and the other same three variables. Monetary and fiscal policies are jointly ineffective in influencing nominal national income. However, monetary and fiscal policies are jointly effective in influencing real national income. In contrast to the first model, only monetary policy was found to be reactive to changes in real national income and the long-term interest rate. The asymmetric responses of the two policies to changes in real economic activity are attributed to the fact that monetary policy is much more efficient in promptly responding to changes in economic conditions than fiscal policy.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123301861","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 : 1900-01-01DOI: 10.32890/ijbf2012.9.2.8453
L. Liu, T. Bogomolov
Traditionally, arbitrage refers to simultaneously buying and selling the same financial assets by taking advantage of a price difference in two or more markets. However, the strict sense of arbitrage is hardly obtained after consideration the issues concerning transaction costs and time value of money. By using the identical assets such as Chinese ADRs and their underlying securities traded in different markets in Hong Kong in HK dollar and in New York in US dollar and by constructing a very simple arbitrage trading strategy, this study demonstrates that arbitrage profits are still available with monthly return ranging from 0.5 per cent to 3.8 per cent after considering transaction costs and non-overlap trading time issues. This is a new study to verify this behaviour of an emerging market's ADRs traded in two financial market locations, so adding evidence of inefficiency in trading of China-listed stocks in foreign locations.
{"title":"The Law of One Price and Arbitrage on China's Dual-listings","authors":"L. Liu, T. Bogomolov","doi":"10.32890/ijbf2012.9.2.8453","DOIUrl":"https://doi.org/10.32890/ijbf2012.9.2.8453","url":null,"abstract":"Traditionally, arbitrage refers to simultaneously buying and selling the same financial assets by taking advantage of a price difference in two or more markets. However, the strict sense of arbitrage is hardly obtained after consideration the issues concerning transaction costs and time value of money. By using the identical assets such as Chinese ADRs and their underlying securities traded in different markets in Hong Kong in HK dollar and in New York in US dollar and by constructing a very simple arbitrage trading strategy, this study demonstrates that arbitrage profits are still available with monthly return ranging from 0.5 per cent to 3.8 per cent after considering transaction costs and non-overlap trading time issues. This is a new study to verify this behaviour of an emerging market's ADRs traded in two financial market locations, so adding evidence of inefficiency in trading of China-listed stocks in foreign locations.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"19 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123699734","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 : 1900-01-01DOI: 10.32890/ijbf2011.8.1.8420
Gordon V. Karels, Edward R. Lawrence, Jin Yu
In this paper we study the cross border mergers and acquisition between the US. and Indian fi rms. Our empirical work suggests that US fi rms realize signifi cant losses on the announcement of acquisitions of Indian targets while Indian targets realize signifi cant gains on the announcement of mergers with US acquirers. Publicly-traded Indian fi rms realize insignifi cant returns on their announcement of acquisitions of publicly-traded US fi rms but realize signifi cant positive returns on announcements of acquisitions of privately-held US fi rms and subsidiary fi rm targets. Publicly-traded US targets realize insignifi cant gains when US acquired by Indian fi rms.
{"title":"CROSS-BORDER MERGERS AND ACQUISITIONS BETWEEN INDUSTRIALIZED AND DEVELOPING COUNTRIES: US AND INDIAN MERGER ACTIVITY","authors":"Gordon V. Karels, Edward R. Lawrence, Jin Yu","doi":"10.32890/ijbf2011.8.1.8420","DOIUrl":"https://doi.org/10.32890/ijbf2011.8.1.8420","url":null,"abstract":"In this paper we study the cross border mergers and acquisition between the US. and Indian fi rms. Our empirical work suggests that US fi rms realize signifi cant losses on the announcement of acquisitions of Indian targets while Indian targets realize signifi cant gains on the announcement of mergers with US acquirers. Publicly-traded Indian fi rms realize insignifi cant returns on their announcement of acquisitions of publicly-traded US fi rms but realize signifi cant positive returns on announcements of acquisitions of privately-held US fi rms and subsidiary fi rm targets. Publicly-traded US targets realize insignifi cant gains when US acquired by Indian fi rms.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128777559","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 : 1900-01-01DOI: 10.32890/ijbf2011.8.2.8423
C. Griffin
This study examines central bank independence in developing countries of Latin America and Asia as well as selected developed countries. Many countries around the world, both developed and developing, have accepted the idea of central bank independence over the last several decades, so central banks have autonomy. A majority of studies has examined primarily the impact of central bank independence on inflation as promoting the theoretical benefits of a more stable and prosperous macroeconomic environment. However, there is only now sufficient data to empirically determine whether these claims are true. This research attempts to answer why developing economies with an informal sector resort to inflationary measures to finance their activities; how does a government induce an agent to choose the formal economy. In the trade-off between inflation and reserve requirements, the optimal policy is maximum inflation and minimum reserve requirements as increasing the steady-state utility of an optimizing agent. Also agents prefer the informal economy if policy relies on a maximum reserve requirement.
{"title":"Effectiveness of Central Bank Independence via its Internal Characteristics","authors":"C. Griffin","doi":"10.32890/ijbf2011.8.2.8423","DOIUrl":"https://doi.org/10.32890/ijbf2011.8.2.8423","url":null,"abstract":"This study examines central bank independence in developing countries of Latin America and Asia as well as selected developed countries. Many countries around the world, both developed and developing, have accepted the idea of central bank independence over the last several decades, so central banks have autonomy. A majority of studies has examined primarily the impact of central bank independence on inflation as promoting the theoretical benefits of a more stable and prosperous macroeconomic environment. However, there is only now sufficient data to empirically determine whether these claims are true. This research attempts to answer why developing economies with an informal sector resort to inflationary measures to finance their activities; how does a government induce an agent to choose the formal economy. In the trade-off between inflation and reserve requirements, the optimal policy is maximum inflation and minimum reserve requirements as increasing the steady-state utility of an optimizing agent. Also agents prefer the informal economy if policy relies on a maximum reserve requirement.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128485648","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 : 1900-01-01DOI: 10.32890/ijbf2010.7.2.8414
D. Ghosh, Dipasri Ghosh
World economy came on a tailspin because of market meltdown and the propagation of contagion triggered by recession, starting mostly from the US economy. This work highlights the grim developments in thenancial sectors and the real sectors world-wide, and then an attempt is made to highlight the propagation mechanism of infective contagion. Theoretical structures of such interconnected are showcased through various analytical vehicles. The indices of sensitivities and dispersions are measured in mathematical terms, and in that sense a new analytical framework is presented. However, empirical evaluations of the propagation mechanism remain unnished because of the dearth of data
{"title":"Market meltdown and the propagation mechanism of contagion","authors":"D. Ghosh, Dipasri Ghosh","doi":"10.32890/ijbf2010.7.2.8414","DOIUrl":"https://doi.org/10.32890/ijbf2010.7.2.8414","url":null,"abstract":"World economy came on a tailspin because of market meltdown and the propagation of contagion triggered by recession, starting mostly from the US economy. This work highlights the grim developments in thenancial sectors and the real sectors world-wide, and then an attempt is made to highlight the propagation mechanism of infective contagion. Theoretical structures of such interconnected are showcased through various analytical vehicles. The indices of sensitivities and dispersions are measured in mathematical terms, and in that sense a new analytical framework is presented. However, empirical evaluations of the propagation mechanism remain unnished because of the dearth of data","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"40 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116356248","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 : 1900-01-01DOI: 10.32890/ijbf2011.8.3.8429
Vighneswara Swamy, B. Tulasimala
This study, while validating the increasing role for financial intermediaries in economic development, analyzes the importance of reducing the transaction costs for financial deepening and, consequently, economic growth.It shows that higher borrowing transaction costs for the poor in particular will retard the long-term growth of rural financial markets.Further, the empirical analysis based on our primary (survey) data indicates that the microfinance models of lending offer considerably lower costs of borrowing than those in regular models of direct lending by banks.The study suggests that microfinance model of lending can provide cost-efficient avenue for speedy financial development and, subsequently, economic growth.
{"title":"Financial Intermediaries and Economic Development: Evidence on Transaction Costs of Borrowing by the Poor","authors":"Vighneswara Swamy, B. Tulasimala","doi":"10.32890/ijbf2011.8.3.8429","DOIUrl":"https://doi.org/10.32890/ijbf2011.8.3.8429","url":null,"abstract":"This study, while validating the increasing role for financial intermediaries in economic development, analyzes the importance of reducing the transaction costs for financial deepening and, consequently, economic growth.It shows that higher borrowing transaction costs for the poor in particular will retard the long-term growth of rural financial markets.Further, the empirical analysis based on our primary (survey) data indicates that the microfinance models of lending offer considerably lower costs of borrowing than those in regular models of direct lending by banks.The study suggests that microfinance model of lending can provide cost-efficient avenue for speedy financial development and, subsequently, economic growth.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127947413","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 : 1900-01-01DOI: 10.32890/ijbf2008.5.2.8371
T. Chotigeat
During the 1990’s, two simultaneous phenomena had converged, greatly changing the financial services industry in Thailand. At the national level, Thai banks had to restructure in response to the financial reforms implemented as a result of the financial crisis of 1997. At the global level, large multinational banks were taking advantage of worldwide, financial deregulation and rapid technological advances by offering a full range of financial products and services in order to fiercely compete, both domestically and globally. Using quarterly financial time-series data of domestic and foreign banks in Thailand from 1997 to 2003, this paper seeks to analyze the cause of their efficiency. The findings indicate that both the efficiency ratio and loan loss provisions influenced the negative performance of domestic banks, while only loan loss provisions had negatively influenced the performance of foreign banks.
{"title":"EFFICIENCY OF DOMESTIC AND FOREIGN BANKS IN THAILAND SINCE THE ASIAN FINANCIAL CRISIS","authors":"T. Chotigeat","doi":"10.32890/ijbf2008.5.2.8371","DOIUrl":"https://doi.org/10.32890/ijbf2008.5.2.8371","url":null,"abstract":"During the 1990’s, two simultaneous phenomena had converged, greatly changing the financial services industry in Thailand. At the national level, Thai banks had to restructure in response to the financial reforms implemented as a result of the financial crisis of 1997. At the global level, large multinational banks were taking advantage of worldwide, financial deregulation and rapid technological advances by offering a full range of financial products and services in order to fiercely compete, both domestically and globally. Using quarterly financial time-series data of domestic and foreign banks in Thailand from 1997 to 2003, this paper seeks to analyze the cause of their efficiency. The findings indicate that both the efficiency ratio and loan loss provisions influenced the negative performance of domestic banks, while only loan loss provisions had negatively influenced the performance of foreign banks.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114925603","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 : 1900-01-01DOI: 10.32890/ijbf2003.1.2.8338
M. Ariff, Lina Suranto
This paper attempts to fill a void in the finance literature by reporting the reliability of theoretical valuation models against the market values of banking corporations. The dividend, operating cash flows and the free cash flow valuation approaches are operationalised to estimate fair values of banks. These values are then compared with market values. This results, using the Theil’s U-coefficient, show that the operating cash flow approach provides estimates that are better than the naive model estimates. The other two approaches produced results no better than the naive model. A probable reason for the poor performance of the free cash flow approach is suggested. Outsider’s estimation of investment values needed for free cash flow calculation is likely to introduce serious errors irrespective of the theoretical bases of models widely used in the industry.
{"title":"Outsider estimation of the fair value of bank stocks: Computational and conceptual issues","authors":"M. Ariff, Lina Suranto","doi":"10.32890/ijbf2003.1.2.8338","DOIUrl":"https://doi.org/10.32890/ijbf2003.1.2.8338","url":null,"abstract":"This paper attempts to fill a void in the finance literature by reporting the reliability of theoretical valuation models against the market values of banking corporations. The dividend, operating cash flows and the free cash flow valuation approaches are operationalised to estimate fair values of banks. These values are then compared with market values. This results, using the Theil’s U-coefficient, show that the operating cash flow approach provides estimates that are better than the naive model estimates. The other two approaches produced results no better than the naive model. A probable reason for the poor performance of the free cash flow approach is suggested. Outsider’s estimation of investment values needed for free cash flow calculation is likely to introduce serious errors irrespective of the theoretical bases of models widely used in the industry.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"62 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116339984","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 : 1900-01-01DOI: 10.32890/ijbf2003.1.2.8335
A. Parhizgari, A. Aburachis
There is considerable concern whether the decline in stock market returns will eventually exert negative changes in the productivity data. This paper examines the long run, or the equilibrium, relationship between productivity and stock returns for the 1951-2002 period. It introduces the notion of equilibrium as represented by the co-movements of economic variables in the long run. This notion is viewed to be broader than the economic theory definition of equilibrium that usually means market clearance. Acknowledging that structural changes in economic time series are hard to detect, an alternative approach employing pair-wise and multifactor cointegration along with VAR modeling is employed. Within this framework, the relationships among productivity, stock prices (returns), investment, and corporate cash flows are pair-wise and jointly investigated. The results indicate that productivity and stock prices share a common trend; so do the stock prices and corporate net cash flows. The long-run common trend between investment and stock prices on the other hand is not so clear. The implications of these results for investors and policy-makers are discussed.
{"title":"Productivity and Stock Returns: 1951 - 2002","authors":"A. Parhizgari, A. Aburachis","doi":"10.32890/ijbf2003.1.2.8335","DOIUrl":"https://doi.org/10.32890/ijbf2003.1.2.8335","url":null,"abstract":"There is considerable concern whether the decline in stock market returns will eventually exert negative changes in the productivity data. This paper examines the long run, or the equilibrium, relationship between productivity and stock returns for the 1951-2002 period. It introduces the notion of equilibrium as represented by the co-movements of economic variables in the long run. This notion is viewed to be broader than the economic theory definition of equilibrium that usually means market clearance. Acknowledging that structural changes in economic time series are hard to detect, an alternative approach employing pair-wise and multifactor cointegration along with VAR modeling is employed. Within this framework, the relationships among productivity, stock prices (returns), investment, and corporate cash flows are pair-wise and jointly investigated. The results indicate that productivity and stock prices share a common trend; so do the stock prices and corporate net cash flows. The long-run common trend between investment and stock prices on the other hand is not so clear. The implications of these results for investors and policy-makers are discussed.","PeriodicalId":170943,"journal":{"name":"The International Journal of Banking and Finance","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129732465","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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