Mergers and Acquisitions: A pre-post analysis for the Indian financial services sector

This paper examines the Mergers & Acquisitions scenario of the Indian Financial Services Sector. The data for eighty cases of M&A in the period from March 1993- Feb 2010 is collected for a set of ten financial parameters representing the various characteristics of a firm. All the cases have been analyzed individually and collectively to determine the overall effects of M&A in the industry. The results of the study indicate that PAT and PBDITA have been positively affected after the merger but the liquidity condition represented by Current Ratio has deteriorated. Also Cost Efficiency and Interest Coverage have improved and deteriorated in equal number of cases. Interest Coverage remains an important factor in determining the return on shareholders’ funds both before and after the merger but Profit Margin also becomes important after the merger. And looking at the diversification effects of merger, in two out of the three cases there has been a reduction in total and systematic risk.Mergers & Acquisitions,Financial Services Sector,liquidity

The economic impact of credit default swap on credit markets

This study conducts a comprehensive analysis of the economic benefits and costs of credit default swap (CDS) in credit markets since its inception. Consistent with its role of insuring credit risk, the introduction of CDS reduces illiquidity and liquidity risk more for speculative grade bonds with high credit risk than investment grade ones. More importantly, CDS significantly improves the price convergence between investment grade bonds and CDS spreads through a popular trading strategy—CDS-bond basis arbitrage in normal period. In the recent crisis, however, CDS fails to reduce the prolonged price divergence between the two markets plausibly due to the lack of arbitrage. Overall, the economic impact of CDS is dependent on the prevailing trading strategies in the credit markets

The transmission of foreign financial crises to South Africa: a firm-level study

The process of financial integration has increased the exposure of South African financial markets to foreign financial crises. This paper contributes to the understanding of crisis transmission by evaluating several hypotheses that claim to explain how financial crises are transmitted to South African financial markets. The study proceeds from a firm-level perspective, which it argues overcomes the potential loss of information when using aggregate economic data. Consequently, the different transmission hypotheses are evaluated for the East Asian, Russian and Argentinean crises using firm-level daily stock return data from the JSE Securities Exchange. A multivariate regression model, supplemented by sensitivity tests, forms the core of the empirical methodology.financial contagion; crisis; South Africa; financial linkages

Tariff-jumping FDI and Domestic Firms' Profits

Studies of the welfare implications of trade policy often do not take account of the potential for tariff-jumping FDI to mitigate positive gains to domestic producers. We use event study methodology to examine the market effects for U.S. domestic firms that petitioned for antidumping (AD) relief, as well as the effect of announcements of FDI by their foreign rivals in the U.S. market on these U.S. petitioning firms. On average, affirmative U.S. AD decisions are associated with 3% abnormal gains to a petitioning firm when there is no tariff-jumping FDI, but no abnormal gains if there is tariff-jumping FDI. The evidence for this mitigating effect is strongest when announcements of the intended tariff-jumping FDI have already occurred before an AD decision takes place, which happened in a fair number of cases. We also find evidence that the announcements of plant expansions (and, to some extent, new plants) have significantly larger negative effects on U.S. domestic firms' profits than other types of FDI, including acquisitions and joint ventures.

The Impact of Warrant Introduction Australian Experience

The impact that derivative trading has on the underlying security is essential to our understanding of security market behaviour, and important in the fields of market efficiency and pricing of such derivatives. This paper examines the impact that the introduction of exchange traded derivative warrants has on the underlying securities’ price, volume and volatility in the Australian market. The major findings of significant negative abnormal returns, reduction in skewness, no change in beta and small changes in variance are consistent with recent research findings in the US, UK and Hong Kong. However findings of derivative warrant listing resulting in decreased trading volume in contrast with most prior research in the field.Derivatives, Warrants, Market Efficiency, Event Study.

The Discreet Trader

This paper examines insider trading, specifically trades by corporate insiders around quarterly earnings announcements. Announcements were broken up into three categories: earnings above analyst expectations, earnings below expectations, and earnings in line with expectations. Trade data was collected from the thirty companies of the Dow Jones Industrial Average from 2012-’13. The trades were sorted by purchases and sales by date and analyzed with the earnings report of which the trades were made. Only trades in the interval from twenty days before the announcement date to twenty days after the announcement date were considered. The prediction was that corporate insiders would leverage their inside knowledge to delay trading until after the earnings announcement. They would benefit financially by trading after the announcement and draw less attention from the SEC, as they delayed trading until the announcement became public information. However, knowing how the market would react would allow them to make a meditated decision. For an announcement that was below analyst expectations, corporate insiders should buy stock after the market reaction causes the price to drop. Our findings were that corporate insiders did in fact wait until the announcement day and overall were net buyers. The study will give better insights into how corporate insiders trade and how restrictions can be made to stop this insider trading activity

Enhancing the efficiency of securities markets in East Asia

The authors explore the relative efficiency of stock markets across countries using newly available data on transactions costs and the quality of the informational environment of stock markets. These new measures are constructed from firm-level stock returns in a panel of 60 countries for the period 2000-04. The authors then develop a framework to understand the linkages between efficiency, liquidity, and their determinants. To give empirical content to the framework, they study the determinants of transactions costs and the quality of the informational environment. They find that some institutional arrangements-such as the availability of stock lending and short selling-and the openness of markets are associated with lower transactions costs. The authors also find that, although disclosure rules for directors and officers of listed firms are essential, the ability of shareholders to seek redress is more conducive to a better informational environment in stock markets. This in turn serves as the basis for the policy framework and recommendations for the East Asian region. In particular, the region needs to continue to strengthen the implementation and enforcement of corporate governance, to further enhance the market and institutional infrastructure, and focus on policy measures to foster a larger and more diversified investor base to continue to see gains in the efficiency of stock markets.Markets and Market Access,Economic Theory&Research,Financial Intermediation,Access to Markets,Financial Crisis Management&Restructuring

Market Reaction On Changes In Corporate's Name On The Indonesia Stock Exchange

The market reaction on changes in corporate's name on the Indonesia Stock Exchange. This study tried to investigate empirically market reaction over the announcement of corporate name changes of companies on the Indonesia Stock Exchange. The market reaction is measured by using abnormal return with a single index model approach. The database of corporate name change announcements on the Indonesia Stock Exchange has obtained from an annual fact book report. The sample of this study consists of the companies that make a name change from 2005 to 2017. Hypothesis test uses one sample t-test. This research's result proves that there was a positive and significant market reaction to the corporate name change announcement. Moreover, This research’s result shows that there was a positive and significant reaction on the corporate name change announcement which is included on major change while at the corporate name change announcement which included on minor change there was no significant market reaction