Profitability of Contrarian Strategies: Evidence From the Stock Exchange of Mauritius

The aim of this paper is to assess the profitability of contrarian strategies on the Stock exchange of Mauritius. Using data from 2001 till 2009 for all 40 listed companies on the official market, the study shows little support in favour of the contrarian effect. In particular, the losers portfolio seems to outperform the winners portfolio in one out of nine strategies. However, when considering the market return, negative excess returns are noted for all portfolios across all strategies, providing strong support for a passive portfolio management strategy and weak support for overreaction hypothesis. In addition, the Size, Price, Earnings to Price (E/P) and Book to Market (B/M) Effect has been tested. The results suggest that the average market return is greater than size-based portfolios and price-based portfolios. However, when accounting for the E/P and the B/M effect, there seems to be a strategy which can beat the market. Nevertheless, most strategies for E/P and B/M portfolios indicate insignificant excess returns. In general, the results of this paper are undoubtedly in sharp contrast with most popular studies in developed markets. However, it is observed that investors on the SEM may not possess similar characteristics to those of well-advanced markets. In particular, according to Harvey (1995), emerging market countries are sometimes relatively isolated from capital markets of other countries

The underpricing of IPOs on the stock exchange of Mauritius

This paper investigates the underpricing of IPOs on the Stock Exchange of Mauritius (SEM). Taking into account the whole population of firms which went public since the inception of the SEM until 2010, the results show an average degree of underpricing within the range 10 to 20%. Using a regression approach, we demonstrate that the aftermarket risk level and auditor's reputation both have a significant positive impact on initial returns. We propose the use of the Z-score as a composite measure of a firm's ex ante financial strength, and find that it has a significant negative effect on the degree of short-run underpricing

Hot and cold IPO markets : the case of the stock exchange of Mauritius

The aim of this study is to assess the characteristics of the hot and cold IPO markets on the Stock Exchange of Mauritius (SEM). The results show that the hot issues exhibit, on average, a greater degree of underpricing than the cold issues, although the hot issue phenomenon is not a significant driving force in explaining this short-run underpricing. The results are consistent with the predictions of the changing risk composition hypothesis in suggesting that firms going public during hot markets are on average relatively more risky. The findings also support the time adverse selection hypothesis in that the firms’ quality dispersion is statistically different between hot and cold markets. Finally, the study concludes that firms which go public during hot markets do not underperform those going public in cold markets over the longer term

Exploring the Quality Of Corporate Governance Disclosure under An ‘Apply And Explain’ Regime

This study explores the quality of corporate governance disclosure under an ‘apply and explain’ regime in the context of an emerging economy (Mauritius), following a transition from the traditional ‘comply or explain’ approach within the national code of corporate governance. The research relies on a content analysis of corporate governance disclosure of 86 annual reports of companies listed on the Stock Exchange of Mauritius (SEM) for the financial periods 2018-2019 and 2019-2020 and One-way ANOVA tests and draws on the typology of corporate governance explanations developed by Shrives and Brennan (2015), focusing on specificity, location and comprehensiveness dimensions. We draw on legitimacy theory and the concepts of substantive and symbolic disclosures to guide our interpretation of the findings. From a specificity point of view, the disclosure index revealed significant variations, the highest score being four times the lowest score. With regards to location and comprehensiveness, only around half of companies are making optimum use of a corporate governance report and providing explanations by principles. We also illustrated how some firms provided symbolic disclosures. Overall, there are disparities in the application of the code by companies, reflected in a blend of substantive and symbolic disclosures to maintain their legitimacy. Our study examines ‘apply and explain’ disclosure in a developing country in contrast to the ’comply or explain’ approach studied so far in the literature. Merely professing a ‘well intended’ shift to the ‘apply and explain’ approach does not necessarily need to improvements in the quality of corporate governance disclosures. Companies, governance professionals and regulatory bodies could formulate disclosure guidance to better underpin the implications of the ‘apply and explain’ approach

Hot and Cold IPO Markets: The case of the Stock Exchange of Mauritius

ABSTRACT The aim of this study is to assess the characteristics of the hot and cold IPO markets on the Stock Exchange of Mauritius. The results show that the hot issues exhibit, on average, a greater degree of underpricing than the cold issues, although the hot issue phenomenon is not a significant driving force in explaining this short-run underpricing. The results are consistent with the predictions of the changing risk composition hypothesis in suggesting that firms going public during hot markets are on average relatively more risky. The findings also support the time adverse selection hypothesis in that the firms' quality dispersion is statistically different between hot and cold markets. Finally, the study concludes that firms which go public during hot markets do not underperform those going public in cold markets over the longer term

The long-run performance of IPOs: the case of the Stock Exchange of Mauritius

This study examines the long-run performance of initial public offerings on the Stock Exchange of Mauritius (SEM). The results show that the 3-year equally weighted cumulative adjusted returns average −16.5%. The magnitude of this underperformance is consistent with most reported studies in different developed and emerging markets. Based on multivariate regression models, firms with small issues and higher ex ante financial strength seem on average to experience greater long-run underperformance, supporting the divergence of opinion and overreaction hypotheses. On the other hand, Mauritian firms do not on average time their offerings to lower cost of capital and as such, there seems to be limited support for the windows of opportunity hypothesis

Seasonality, returns and volatility on the Stock Exchange of Mauritius

This article investigates the effects of any seasonality on stock market returns and volatility on the Stock Exchange of Mauritius. A standard GARCH model was used on daily SEMDEX returns from 1998 to 2006. The results obtained indicate that the return series are leptokurtic, indicating a higher peak and a thicker tail than a normal distribution. Also, the mean returns on Fridays seem to be the highest while average returns on Mondays turn out to be insignificant. Finally, significant effects of weekdays were found on the conditional variance on the stock returns.

IFRS and the Evolution of Value Relevance : Evidence from an African Developing Country

This study aims to assess the evolution of the value relevance of book value, earnings and its components in Mauritius, an African developing country, focusing on value relevance changes after IFRS adoption and subsequent local reforms. The study relies on a dataset of 567 firm-year observations (2001-2018) and the Ohlson (1995) valuation model to investigate value relevance after (i) IFRS adoption, (ii) the implementation of institutional reforms, and (iii) enforcement reforms. First, we find support for a rise in the combined value relevance of earnings and book value, albeit that book value significantly contributes to changes over time. The findings highlight the combined importance of IFRS adoption with institutional and enforcement reforms to improve value relevance. Second, we do not find evidence of a shift in value relevance between earnings and book value. Third, the cash flow model reveals a higher level of significance relative to the earnings model. We extend the value relevance literature in the context of African developing countries. Our study’s findings underpin the need for a reinforcing of relevant institutional and enforcement frameworks to ensure the benefits of IFRS adoption materialise. It also offers a contribution of how developing countries’ experience IFRS post-adoption while adding to the dearth of studies analysing IFRS enforcement practices

Strategy processes, practices and learning in organisations in Mauritius

Strategy matters! It is hard to think of an organisation without a strategy, and one without is pointless. Any organisation, whatever its size and shape, needs strategy to survive, compete and prosper successfully in any given context. Strategy, however, is not a given. It requires a process of thought, choice, decisive action and management, and is prone to change whenever applied. Hence the subject matter of strategic management. In theory, strategy (or strategic management) concerns the vision or long-term objectives of the organisation and the general means for realizing them; it is different from short-term objectives and routine operations. Strategy is about understanding, shaping and managing a business for its competitive success. In these times of global economic crisis the need for smart strategic thinking is heightened more than ever as companies, the world over, are struggling their way out of troubled economic waters. Success now demands strategic management of high quality. Mauritius is facing an ever growing challenge to meet the demands of international competitiveness at all levels. Are our firms and managers adequately equipped to envision the state of their industry and the kinds of competition they will be facing down the line? This study starts to understand this question by investigating the nature of strategy processes, practices and learning in organisations based in Mauritius. Using a mixed methodology of survey and in-depth interviews, it infers that organisations in Mauritius are limited in their approaches to understand, practice and learn the principles and tools of strategic management. Those organisations which do try to practice a strategic approach are either overwhelmed by operational thinking and micro management, or are unclear about several key aspects of the strategy process, and therefore do not seem to benefit. The majority of respondents, however, do recognise the added value of strategic management in enabling their competitive success. Indepth study of some successful enterprises in Mauritius reveals that the basis of their successes overtime has been the astute application of strategic management principles. This study opens some very important practical and academic avenues for further thinking, application and research on strategic management in Mauritius. It is important to realise that the lasting competitiveness of Mauritian organisations will be a product of the strategic choices they make now; these choices are themselves the outcomes of rigorous analyses and meticulous evaluations of competing options under some very dynamic and uncertain set of assumptions. Nothing therefore can be left to chance. Success depends on applying some smart strategic thinking

Factors affecting Leverage: An empirical analysis of Mauritius companies

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