Equity Capital Raising and Determinants of its Price Behaviour in Malaysia

Capital investment is an important economic activity that contributes to economic growth. Aggressive capital formation leading to high economic growth can be the result of either public expenditure policies for welfare betterment or private initiatives, which enable the market mechanism to operate effectively and efficiently. In Malaysia, the private sector plays an active role in economic development, so its ability to raise external funding must not be en cumbered by restrictive policies that increases costs of financing. Thus, the first objective of this study is to search for a link between the amount of capital rises by the private sector and changes in macroeconomic factors. Time constraints limit the study to external capital funding in the form of equity only, both seasoned and unseasoned ones. Apart from relating the volume of equity raised to a certain macro economic variable,the research is extended to identifying factors in explaining the price behaviour of rights is sue announcements and listing of IPOs. This study is based on findings in the U.S. that volume and price behaviour of equity issues (particularly seasoned equity) are influenced by movement of the business cycle as measured by the National Bureau of Economic Research (NBER). Since similar index is not available in Malaysia, a proxy closely related to variations in the business cycle was used. This proxy is the term premium, which is the excess of the average 20-year Malaysian Government Securities (MGS) yield over the3-month Treasury bill (TB) yield. Evidence of a significant association between term premiums and movements of the business cycle in the U.S. is the basis, which led to the adoption of this variable in the study. The research design used in this study is the event study methodology to measure price behaviour of rights issues and IPOs, and the ordinary least square regression method to determine the variables explaining the price behaviour. The market-adjusted return was used to derive abnormal returns of rights issues

The Size and Determinants of Indirect Financial Distress Costs

the aim of this paper is to provide a quantitative estimate of the indirect financial distress costs. This paper focuses on the Malaysian trading and services sector and concentrates only on measuring the financial distress costs in terms of changes in operating performance and changes in capital values. This study will contribute to the existing literature by providing an alternative proxy for indirect financial distress costs and perhaps of the first paper to provide the quantitative estimate of the costs for Malaysia’s financially distressed firms. Findings from our study suggest that indirect costs exist, and are found to be between 3.1% to 21.39%. It also suggests those three variables; Tobin’s q, size and expected earnings growth are statistically significant at 0.01, 0.1 and 0.05 significance level

Building ISO 9000 based quality management systems in education : the case of the Faculty of Business Management, UiTM Shah Alam / Norhana Salamudin, Noraini Ismail and Hazman Shah Abdullah

This study examines a managerial innovation involving developing, implementing and accrediting a quality management system based on the ISO 9000 international standard. There is moderate correlation between interest in managerial innovation and perceived value. Implementation strategy/approach shows a relatively high correlation with perceived value. Staff reaction to innovation is connected to their interest and perceived value towards personal and institutional development, and growth. The multiple regression analysis shows that the model explains /5% to 19% ofthe variance in innovation acceptance with interest being the only significant variable. The moderating role of implementation prior to the exercise was examined via the hierarchical regression analysis. The results indicate that implementation strategy interacts with the interest variable enhancing the explanatory power to 24%. The resulting Rl change adds weight to the claim that the implementation strategy plays a critical role in generating acceptance ofthe innovation introduced A more inclusive and participative strategy is likely to generate greater interest and engagement and induce greater acceptance ofthe innovation. Thus, any implementation strategy that does not incorporate involvement, consultation and consensus building among members will deepen existing chasm between managers and the managed Nowhere is this chasm more visible than in the academia

DETERMINANTS OF FIRM AFFILIATION TO PYRAMID STRUCTURE: A SURVEY FROM MALAYSIAN PUBLIC LISTED FIRMS

ABSTRAC

Sukuk structure with embedded options as a risk mitigation tool / Roslina Mohamad Shafi, Nur Afizah Muhamad Ariffin and Norhana Salamudin

Sukuk market has grown tremendously and has gained attention from many countries.Various innovation has been designed to ensure the marketability of such instruments. However, these innovations have generated various shariah and financial issues and controversies. Among others, is the issue of the sukuk risk whereby the risk structure needs to be disclosed and conformed with shariah values. Even though sukuk is recognized as one of the Islamic financial products, it does not necessarily mean that it is free from the elements of risk. Even Islam has acknowledged the concept of risk as al ghurm bi al ghunm (entitlement to return is related to the liability of risk) in the application of muamalah (transaction, trade). Consequently, the aim of this paper is to suggest the application of sukuk with embedded options as to mitigate the risk faced by sukuk holders. Previous research has suggested the use of embedded options as a way to mitigate the risk. This paper will cover and discuss the issues pertaining to sukuk structures, the shariah values and the risk mitigation technique. A proposed sukuk structure and the mathematical model for finding the value of the real asset will also be covered in this paper. This study concludes with limitations of the study and recommendation for future research

The analysis of risk models for Malaysia’s non-financial sectors

The research highlights three Value-at-Risk (VaR) representations that are integrated with GARCH-based models to estimate the Malaysian stock exchange market risk. The methodology covers the quantifications of expected maximum losses at 95% level of confidence for six non-financial sectors namely the construction, consumer product, industrial product, plantation, property and trade and services from the year of 1993 until 2006. Further analyses are conducted using Kupiec, Christoffersen and Lopez backtests. The results in particular based on Lopez’s Quadratic Loss Function test proved that when the basic VaR is integrated with GARCH model under the assumption of t-distribution, the model is found to be at the most accurate level. Thus consideration on non-normal behaviour of the market is important to determine financial risk quantifications

Prediction of financial distress companies in the mixed sector in Malaysia: a revisit using PN4 data

This study revisited the prediction of financial distress companies in the mixed sector in Malaysia. This is achieved by using PN4 companies as the dependent variable and financial ratios as the independent variables. Logit Analysis was used because the dependent variable is binary or dichotomous in nature. It shows the probability of a company being financially distressed and it provides the coefficient value (positive or negative) of the independent variables (s) that are used as predictors. The results show that debt ratio and working capital ratio were significant in predicting financial distress companies in the mixed sector in Malaysia. The findings from the internal validation reveal that the prediction model provided a more than 50% chance that the model is accurate. However, the findings from the external validation indicate that the model might not be able to be used outside the estimation time period because the overall percentage accuracy was only slightly higher than 50% for five years before distress. This study not only provides the prediction model of financial distress companies in the mixed sector in Malaysia but it also validates the findings internally and externally. Internal and external validations were seldom conducted in previous studies due to lack of data

Prediction of financial distress companies in the consumer products sector in Malaysia

This study attempts to predict financial distress companies in the consumer products sector in Malaysia using financial distress companies as the dependent variable and financial ratios as the independent variables. Logit Analysis was used as the analysis procedure because financial ratios do not have to be normal if it is used. It is also suitable when the dependent variable is binary in nature. Furthermore, it can also provide the probability of a company being financially distress. In addition, it can also provide us with the sign of the independent variable(s). This study found that the independent variables that can be used to predict financial distress companies in the consumer products sector in Malaysia were debt ratio, total assets turnover ratio and working capital ratio. The findings from the internal validation showed that the prediction model provided a more than 50% chance that the model is accurate for five years before distress. Furthermore, the findings from the external validation showed that the model might be able to be used outside the estimation time period because the overall percentage accuracy were higher than 50% for five years before distress

Diversification strategy and performance of Malaysian firms / Wan Mohd Nazri Wan Daud, Norhana Salamudin and Ismail Ahmad

Business diversification has drawn the attention of strategic management and finance scholars. This preliminary study examines factors that influence firm performance using multiple measures of performance namely accounting and market measurements. The study used OLS data analysis for a sample of 70 Malaysian firms from various industries during the period 2001 to 2005. The evidence produces some factors that explain performance measurement but results are still ambiguous