The market reaction to convertible bond issues and the determinants of bookrunner selection

This thesis was previously held under moratorium from 10 February 2020 until 10 February 2022.This thesis examines three major aspects of international convertible bond offerings, particularly the market reaction and its determinants, the determinants of bookrunner selection in underwriting market and the outcomes of bookrunner selection. These issues are important for a corporate firm to design the best features of convertible bond underwriting contracts to enhance shareholders’ wealth and mitigate asymmetric information. These are relevant to the underwriters to understand whether informational advantage gained via reputation and geographic proximity could equip them if more competitive advantage in delivering better underwriting services. Furthermore, financial regulators are benefited from this study to better understand the underwriting market in convertible bond offerings. My research focuses on an overall sample size of 11,350 convertible bond offerings worldwide issued between 1984 and 2015. I analyse the market reaction for different countries, industrial classifications and stated purpose of proceeds following the announcements of convertible bond offerings. I regress the stock price reactions against firm-specific, issue-specific, market-specific, country-specific and investor protection-specific factors. I examine the determinants of domestic, regional and reputable bookrunner selection by regressing them on firm-specific, issue-specific and market-specific. I also examine whether bookrunners with economies of scale advantage are more likely to gain underwriting contracts in convertible bonds. The bookrunner performance is analysed based on the stock price reactions, underwriting fees and offering yields-at-issue. I further explore to investigate the outcome of bookrunner selection across different regions. The findings of this study have important implications for various strands of academic literature. I contribute to reveal that the stock prices of convertible bond issuers react differently to different countries, industrial classifications and stated purpose of proceeds. My results from regression analysis show that the different market reactions are significantly associated by firm-specific, issue-specific, market specific, country-specific and legal system factors. I also contribute to identify the underwriting preferences by corporate treasurers in hiring domestic, regional and reputable bookrunners. This helps underwriters to effectively gain underwriting contracts. This study contributes to two dominant literature on geographic proximate and reputable bookrunner selections in international convertible bond offerings. My findings provides important policy suggestions for issuers and investors to make a better evaluation on the outcomes of both geographical proximate and reputable bookrunners simultaneously in international convertible bond offerings.This thesis examines three major aspects of international convertible bond offerings, particularly the market reaction and its determinants, the determinants of bookrunner selection in underwriting market and the outcomes of bookrunner selection. These issues are important for a corporate firm to design the best features of convertible bond underwriting contracts to enhance shareholders’ wealth and mitigate asymmetric information. These are relevant to the underwriters to understand whether informational advantage gained via reputation and geographic proximity could equip them if more competitive advantage in delivering better underwriting services. Furthermore, financial regulators are benefited from this study to better understand the underwriting market in convertible bond offerings. My research focuses on an overall sample size of 11,350 convertible bond offerings worldwide issued between 1984 and 2015. I analyse the market reaction for different countries, industrial classifications and stated purpose of proceeds following the announcements of convertible bond offerings. I regress the stock price reactions against firm-specific, issue-specific, market-specific, country-specific and investor protection-specific factors. I examine the determinants of domestic, regional and reputable bookrunner selection by regressing them on firm-specific, issue-specific and market-specific. I also examine whether bookrunners with economies of scale advantage are more likely to gain underwriting contracts in convertible bonds. The bookrunner performance is analysed based on the stock price reactions, underwriting fees and offering yields-at-issue. I further explore to investigate the outcome of bookrunner selection across different regions. The findings of this study have important implications for various strands of academic literature. I contribute to reveal that the stock prices of convertible bond issuers react differently to different countries, industrial classifications and stated purpose of proceeds. My results from regression analysis show that the different market reactions are significantly associated by firm-specific, issue-specific, market specific, country-specific and legal system factors. I also contribute to identify the underwriting preferences by corporate treasurers in hiring domestic, regional and reputable bookrunners. This helps underwriters to effectively gain underwriting contracts. This study contributes to two dominant literature on geographic proximate and reputable bookrunner selections in international convertible bond offerings. My findings provides important policy suggestions for issuers and investors to make a better evaluation on the outcomes of both geographical proximate and reputable bookrunners simultaneously in international convertible bond offerings

Real interest rate parity: evidence from East Asian economies relative to China

This study examines the real interest rate parity (RIP) hypothesis in the case of East Asian economies by taking China as foreign counterpart. Results obtained from panel unit root tests are in line with previous findings that are supportive of the hypothesis. The estimated half-life of the RIP deviations is 3.21 quarters, indicating RIP holds strongly in this region with respect to China. This implies that the choices and effectiveness of the monetary and fiscal policies in the East Asian economies will be very much influenced by the external factors originating from China, in additional to Japan and US as identified in other studies. Furthermore, judging from the another finding of this study that East Asian economies is more integrated with Japan than China, China has yet to further liberalize its financial system before it can overtake Japan as leading financial centre or as anchor country for common currency area in this region.Real interest rate parity;East Asia; panel unit root test

Long-run validity of purchasing power parity and rank tests for cointegration for Central Asian Countries

This study finds that Purchasing Power Parity holds in the long-run for Azerbaijan, Kazakhstan and Kyrgyzstan, based on Breitung’s (2001) rank tests for cointegration. Results from further analysis indicates that nominal exchange rates and relative prices are nonlinearly interrelated. Trade barriers, transportation costs and government intervention in the pricing system in these countries may have resulted in the establishment of the above-mentioned nonlinear relationship.Purchasing power parity; Cointegration; Nonlinear; Rank tests; Central Asia.

Real interest rates equalization: The case of Malaysia and Singapore

This study provides some evidences showing high degree of financial integration from both evidences of common shocks and real interest parity in the context of two small and open economies, that is, Malaysia and Singapore. Few key policy implications may be suggested from the findings in this study. First, foreign investors who invest in these two countries may need to look for sources of diversification to protect their wealth against the occurrence of contagion effect due to the strong trade and finance relationship between these two countries. Second, the banks and businesses that set rules for interest rates on deposits and loans should be kept consistently with commercial banking practices and key developments in the financial sectors for the betterment of both Malaysia and Singapore economies. Third and most importantly, as two financial markets are highly linked, the monetary and fiscal authorities of both countries should work hand-in-hand to avoid any potential macroeconomic instability in this region.Real Interest Rate Parity; Malaysia; Singapore

Fisher hypothesis: East Asian evidence from panel unit root tests

This study provides evidence supportive of Fisher hypothesis in East Asian economies using panel unit root tests, which allow for cross-country variations in the estimation. Among others, one important implication is that monetary policy will be more effective in influencing long-term interest rates and long-run macroeconomic stability in these East Asian economies under regional collaboration.Fisher hypothesis; panel unit root; univariate unit root; East Asian

Does Fisher hypothesis hold for the East Asian Economies? an application of panel unit root tests

This study provides evidence supportive of Fisher hypothesis in East Asian economies using panel unit root tests, which allow for the consideration of cross-country interdependence of real interest rates in the estimation. One important implication of our finding is that monetary policy will be more effective in influencing long-term interest rates and long-run macroeconomic stability in these East Asian economies with regional collaboration.Fisher Hypothesis; macroeconomics; East Asia; panel unit root; interest rates

Real interest rate parity: evidence from East Asian economies relative to China

This study examines the real interest rate parity (RIP) hypothesis in the case of East Asian economies by taking China as foreign counterpart. Results obtained from panel unit root tests are in line with previous findings that are supportive of the hypothesis. The estimated half-life of the RIP deviations is 3.21 quarters, indicating RIP holds strongly in this region with respect to China. This implies that the choices and effectiveness of the monetary and fiscal policies in the East Asian economies will be very much influenced by the external factors originating from China, in additional to Japan and US as identified in other studies. Furthermore, judging from the another finding of this study that East Asian economies is more integrated with Japan than China, China has yet to further liberalize its financial system before it can overtake Japan as leading financial centre or as anchor country for common currency area in this region

Real interest rate parity: evidence from East Asian economies relative to China

This study examines the real interest rate parity (RIP) hypothesis in the case of East Asian economies by taking China as foreign counterpart. Results obtained from panel unit root tests are in line with previous findings that are supportive of the hypothesis. The estimated half-life of the RIP deviations is 3.21 quarters, indicating RIP holds strongly in this region with respect to China. This implies that the choices and effectiveness of the monetary and fiscal policies in the East Asian economies will be very much influenced by the external factors originating from China, in additional to Japan and US as identified in other studies. Furthermore, judging from the another finding of this study that East Asian economies is more integrated with Japan than China, China has yet to further liberalize its financial system before it can overtake Japan as leading financial centre or as anchor country for common currency area in this region

Does Monetary Policy Work Effectively In 10 European Countries? New Evidence From Fisher Effect

This study examines the Fisher effect for 10 European Union countries over a period from January 1987 to December 2012. A battery of panel unit root tests shows that the monthly real interest rates in these countries are mean reverting. The series-specific panel SURADF test of Breuer et al. (2002) reveals that 9 country series reject the unit root null hypothesis, except for 1 country series. These results have one extremely important policy implication is that monetary collaboration within 10 European counties is the key determinant to achieve the long-run macroeconomic stability. Policy makers in European Central Bank need to closely monitor the monetary stability particularly in Luxembourg towards establishing a strong European monetary union