An empirical investigation of failing companies and their determinants using the hazard model in an emerging capital market

The purpose of this study is to highlight the predictors of financial distress during the period 1990 to 2000. Previous studies highlight the inadequacies of the MDA and the log it models and suggest that a hazard model gives a more accurate result due to its consideration of time varying co-variates. By applying the hazard model, we find that leverage, profit, cash flow, liquidity, size and growth play a significant role in explaining financial distress with 83% accuracy rate. This rate did not change much when the model is applied to the hold-out sample. We also find that multicollinearity problem is not a threat in our analysis

Does price react to fixed price tender offer share buyback announcement?

This paper investigates stock market reactions to share buyback announcements, specifically with the fixed price tender offer mechanism. An event study methodology was used to examine stock price reaction of 30 observations involving 21 listed companies surrounding the announcement dates. Two models, namely market adjusted return (MAR) and the single index market models (SIMM) were utilised to compute abnormal returns.Eventhough most literature in the western market found positive abnormal returns, this study reveals that investors gain zero abnormal returns out of these announcements. The post announcement result shows a zero abnormal return which implies that the Malaysian stock market is semi-strongly efficient due to this announcement. Finally, evidence also shows that none of the implications forwarded in the theories could be supported in this study

Detecting financial distress

This paper examines two types of statistical tests, which are multiple discriminant analysis (MDA) and the logit model to detect financially distressed companies. Comparison between the two statistical tests is implemented to identiy factors that could differentiate financially distressed companies from the healthy company. Among the fifteen explanators, M D A shows that the current ratios, net income to total asset, and sales to current asset, are the indicators of financially distressed companies. Other than net income to total asset, the logit model provides two different ratios which are shareholders’filnd to total liabilities, and cash flow from financing to total liabilities, to identi@ financially distressed companies. It zuasfound that the logit model could accurately predict 91.5% of the estimation sample and 90% of the holdout sample whereas the discriminant model shows an overall accuracy rate of 84.5% and 80% for the estimatiorl and the holdout sample respectively

The performance of Malaysian unit trusts investing in domestic versus international markets

This paper investigates the relationship between unit trusts invested domestically and those invested overseas. The performance of unit trusts investing overseas is compared to unit trusts that are invested locally to determine whether they outperform the local funds. The Kuala Lumpur Composite Index (KLCI) is used as the local funds’ benchmark. The Morgan Stanley Capital international All Country (MSCI AC) Asia Pacific and MSCI World Free are utilised as the international funds’ benchmarks. With a total of 26 local funds and 23 internationally invested funds, it is found that the risk-adjusted performance of internationally diversified funds is not significantly different from the performance of well-diversified domestic funds

The effect of dividend announcements on stock returns for companies listed on the main board of the Kuala Lumpur Stock Exchange

Stock market reactions to the announcements of final dividend increases, decreases and no changes are empirically analyzed in an emerging market environment. A standard event study methodology is adopted to examine the price reactions of 120 listed companies surrounding sixty days of the announcement dates. Although prior studies in developed countries postulate that dividend decreases are associated with negative abnormal returns, such a reaction was not found in the Malaysian capital market. The evidence nevertheless shows that dividend increases lead to positive abnormal returns, supporting the Information Content Hypothesis, Jensen k Free Cash Flow Hypothesis and Agency Cost Theory. As for the no change dividend announcements, no clear pattern of cumulative average abnormal returns could be observed

Does Price React to Fixed Price Tender Offer Share Buyback Announcement?

This paper investigates stock market reactions to share buyback announcements, specifically with the fixed price tender offer mechanism. An event study methodology was used to examine stock price reaction of 30 observations involving 21 listed companies surrounding the announcement dates. Two models, namely market adjusted return (MAR) and the single index market models (SIMM) were utilised to compute abnormal returns. Eventhough most literature in the western market found positive abnormal returns, this study reveals that investors gain zero abnormal returns out of these announcements. The post announcement result shows a zero abnormal return which implies that the Malaysian stock market is semi-strongly efficient due to this announcement. Finally, evidence also shows that none of the implications forwarded in the theories could be supported in this study.

A comparative analysis of fixed income unit trust funds versus equity unit trust funds in Malaysia

This study examines the performance of fixed income and equity unit trust funds from 2006 to 2012. A total of 31 fixed income and 57 equity funds are evaluated by using the Treynor ratio, Sharpe ratio and Jensen alpha. Results indicate that fixed income funds outperform the market and the Maybank 12-month fixed deposit rate. Their total risk is higher than the fixed deposit rate but lower than the market whereas the systematic risk is lower than both benchmarks. All equity funds outperform the market although their total risk and systematic risk are lower than the latter. Growth funds have a higher total risk than the market and they have outperformed the market. However, only a few value funds could outperform the market. Jensen alpha shows only a few fixed income and equity funds have a significant positive alpha implying that some of the fund managers are either good in market timing or in selecting unit trust funds. There is a significant difference in the performance of equity and fixed income funds and between growth and value funds versus f ixed income funds. Results of this study could help investors and fund managers to make informed decisions to improve portfolio performance

The effect corporate bond issuance to the equity market and its determinants

The study aims to investigate the signaling effect of bond issuance in Malaysia and to determine the company characteristics that influence the effect. Findings of the study reveal positive cumulative average abnormal returns following bond issuance indicating that the market treat bond offers as favourable corporate news.On the other hand, the cross-sectional analysis found insignificant relation between company profitability, growth opportunities, asset tangibility, size and managerial ownership with cumulative abnormal returns of bond issuers. The results confirm the signaling effect of bond issuance but further reveal that the effect is not affected by company characteristics

Implication of catering theory of dividend: Evidence from financial firms listed on the Nigerian Stock Exchange

The increasing number of non-payers of dividend on the Nigerian Stock Exchange stimulates the interest to reexamine the determinants of payouts decisions in the market.This necessitates seeking alternative explanation for the dividend behavior of firms beyond the traditional determinants that have been established overtime.This paper examines the implication of the catering theory of dividend on the Nigerian Stock Exchange.Based on a sample of 386 firm-year observations drawn from 49 financial firms listed on the exchange, the study investigates the role of dividend premium (proxy for catering theory) and other firm level characteristics on dividend payout of the sampled firms. Panel data analysis was conducted using both fixed effect and random effect estimates. Based on the random effect estimates which is preferred by the Hausman test conducted, findings of the study shows that dividend premium have significant positive effect on dividend payout.Thus, indicating support for the catering theory of dividend.However, result indicates further that the theory is not supported during crisis. Findings also revealed that firm level characteristics which include size, profitability, cash flow, and past dividend are significant in explaining dividend payout of the sampled firms

Are we doing fine? A case Of Malaysian Airline System Berhad

Amir, an independent financial consultant, just came out from a meeting with the major shareholders. In the meeting on 7th January 2013, the shareholders raised a concern relating to their investment in the Malaysian Airline System Berhad (MAS). After two business turnaround plans, they wondered whether it was worth to continue holding their investment in MAS because it seemed that the business turnaround plans worked only in the short rather than long run. Moreover, information from the 2006 to 2012 annual reports did not suggest a healthier performance of MAS. They did not understand if the losses were caused by operating, financial or both leverages. Furthermore, the profit and loss statements showed a downward trend which raised concern on the sustainability of MAS in the long run. Although MAS had its own team to look at this matter, the major shareholders would like to have an independent assessment by an individual not related to MAS. Hence, Amir was consulted to provide a report on the liquidity, leverage and profitability analysis, as well as the business turnaround plans of MAS from the period 2006 to 2012. The analysis must be presented in the next meeting, which is scheduled on 14th January, 2013