Impact of IPO lockup expirations and its determinants: Malaysian evidence

This dissertation examines the impact of lockup expiration and its determinants in Malaysia using 292 IPOs during the period 2003-2012. Impact of lockup on abnormal returns, impact of lockup on abnormal trading volume, impact of regulatory changes on abnormal returns, and determinants of share price behavior as a proxy of abnormal returns at lockup expiration are the four study objectives. The research hypotheses are tested using event study method and multiple regressions. Results show the existence of significant negative abnormal returns surrounding the date of lockup expirations, hence contradicting evidence of the efficient market hypothesis. Further, this study also finds the existence of abnormal trading volumes. Both of these results are in line with those of the US studies. Meanwhile, there are two lockup regimes involved in this study arising from regulatory change that takes effect on 1 May 2003 and 3 August 2009, referred to as Regime #I and Regime #2, respectively. However, the results show that the change in lockup regulation does not have an impact on the abnormal returns at lockup expiration. Furthermore, the variables identified in the regression analysis are lockup regime, fractions of insiders buying and selling before and after expiration, company size and age, offer price, underwriter, auditor, and technology company. Results show that company size, fraction of insider selling and buying after lockup expiration are the significant factors in relations to abnormal returns which is driven by Regime #l. Implications of the study to SC are improving the present regulation by imposing the minimum requirement and allowing for longer lockup period to be determined between underwriter and IPO issuer, to Bursa Malaysia in posting the upcoming lockup expiration dates on their website to alert investors, and to research houses by starting coverage on earnings forecast and providing recommendations surrounding lockup expiration

The relationship between corruption and credit risk in commercial banks of Pakistan

This study investigates the relationship between corruption and nonperforming loans in Pakistan using a sample of 18 commercial banks for period 2000-2017 where panel regression models of OLS estimator, fixed effect and random effect are employed. The results show a significant negative relationship between control of corruption and credit risk as measured by non-performing loans indicating that tighter control of corruption would lower the non-performing loans. Furthermore, bank size shows a positive impact signifying that larger banks tend to take more excessive risks. In contrast, return on assets and capitalization negatively impacted on the non-performing loans demonstrating that those banks which generate higher earnings and have higher capital portion could reduce the level of non-performing loans. In addition, macroeconomic variables of GDP and inflation rate indicate significant relationship with non-performing loans since good economic situation can increase borrower creditworthiness which leads to lower default payments. Furthermore, both Hausman and Lagrangian Multiplier tests show that the random effect is preferred over fixed effect and OLS, respectively. The findings provide insights to policy makers in making strategic decisions regarding non-performing loans with regards to corruption as well as bank-based and macroeconomic indicator

Systematic review of literature on effect of liquidity on bank

This study carries out a systematic review on related empirical literature on the role of liquidity on banks’ performance as well as risk-taking. The review of existing literature revealed that bank’s liquidity has significant influence on banking outcomes such as banks performance, banks risk-taking behaviour, moral hazard, and other financial risks. However, we find that empirical evidence on all these is majorly skewed toward developed market. Therefore, we recommend that further studies in this area to provide additional insight for understanding of the impact of liquidity on the performance as well as the risk-taking behaviour and moral hazard. Thus, policy makers, banking regulators shareholder and other stakeholders will be properly guided on the potential impact of banks’ liquidity and their performance and risk-taking behaviour

IPO Lockup Expiration and Share Price Effect in Malaysian Market

This paper examines the effect of IPO lockup expiration on share prices for the period of 21 days surrounding the event date. The sample consists of 292 IPOs listed on Bursa Malaysia between May 2003 and December 2012.Lockup in Malaysia is mandatory as opposed to voluntary where it is negotiated between firms and underwriters. Using the market model event study method, the result shows a significant negative abnormal return at the expiration of the lockup period. Thus, the study provides evidence that contradicts the semi-strong form of the Efficient Market Hypothesis (EMH). According to EMH, the expiration of the lockup period which is public knowledge should not be accompanied with a significant abnormal return. In addition, there is insignificant difference in cumulative abnormal returns at the expiration of lockup period between the Main Market and the ACE Market for the first stage lockup expir

IPO Lockup Expiry, Market Reaction and Regulatory Change in Malaysian Market

This paper examines the market reaction and regulatory change at the expiration of 292 Malaysian initial public offerings (IPOs) during the period of 2003-2012 involving two lockup regimes. IPO lockup in Malaysia is mandatory as opposed to voluntary where it is negotiated between IPO firm and its underwriter. Using the market model and market adjusted return model of event study method, the result shows a significant negative abnormal return at the expiration of the lockup period. Hence, the study provides evidence of contradicting the semistrong form of the Efficient Market Hypothesis (EMH). According to EMH, the expiration of the lockup period which is public knowledge should not be accompanied with a significant abnormal return. Furthermore, the study also shows the existence of higher abnormal trading volume at lockup expiry. The change in lockup regime however, does not have an impact in reducing the negative abnormal returns at lockup expir

Lockup expiration and share price effect in Malaysian IPOs

This paper examines the effect of IPO lockup expiration on share prices for the period of 21 days surrounding the event date. The sample consists of 292 IPOs listed on Bursa Malaysia between May 2003 and December 2012. Lockup in Malaysia is mandatory as opposed to voluntary where it is negotiated between firms and underwriters. Using the market model event study method, the result indicates a significant negative abnormal return at the expiration of the lockup period. Thus, the study provides evidence that contradicts the semi-strong form of the Efficient Market Hypothesis (EMH). According to EMH, the expiration of the lockup period which is public knowledge should not be accompanied with a significant abnormal retur

Does ESG certification add firm value?

This paper examines the impact of environmental, social and governance (ESG) certification on Malaysian firms. The analysis shows that ESG certification lowers a firm's cost of capital, while Tobin's Q increases significantly. These findings, while consistent with existing studies in developed economies, demonstrate the value enhancement from corporate social responsibility disclosure by firms in emerging and developing nations. Overall, the study confirms the benefits to stakeholders from firms pursuing an ESG agenda

White paper: how Malaysian banks can elevate B40 and MSME lending

The B40 (Bottom 40% of Household Income) and MSME (Micro Small Medium Enterprise) are a critical component of the Malaysian economy and financial system. They are supported by a complex financial market ecosystem. MSMEs tend to lack financial market and technological sophistication and demand for external financing is driven by mature firms typically older than 5 years. Younger firms rely on personal savings and informal financing networks. There are opportunities in the domestic market for lenders to overcome known supply-side impediments.Malaysia’s situation is not unique. Internationally, while shifting demand and supply side impediments affect MSME access to finance, credit supply side factors dominate. Since most MSMEs are family owned firms, agency considerations may also underpin the preference for external financing by informal or private lenders. However, in the post Global Finance Crisis setting, supply-side impediments have provided the funding opportunity for alternative non-bank financial intermediaries. In the European Union, which has the benefit of a single currency, the alternative finance market is growing. Importantly, participation is characterized by younger and more financial literate and technology savvy borrowers.In Malaysia, well known demand and supply-side impediments along with poor technical infrastructure and financial literacy, especially in remote and agriculturally based areas, limit what is easily achieved in terms of expanding the B40 and MSME loan portfolio. Option-like risk management products could also be made available to reduce earnings volatility and improve credit quality, especially for MSMEs, although these will need to be designed (in the case of Malaysia) to be shariah compliant. Demand side improvements could focus on improving the bank-customer relationship with engagement at the early business stage, while supply side improvements could focus on alternate methods of credit scoring and more granular loan segmentation, especially for urban-based B40 borrowers. Nonetheless, there is still scope for innovative financing solutions for loan book growth using (a) partnerships with digital data providers and Fintech operations; (b) underwriting lending services directly by government; and (c) indirectly through the reevaluation of current regulatory capital requirements that further support B40 and MSME lending. Also, a more activist banking agenda including community outreach could form the centerpiece of any new lending strategy to support a financially inclusive society

The Effect of Share Price and Regulatory Change at Lockup Expiration in Malaysian IPOS

This paper examines the effect of IPO lockup expiration on share prices surrounding the event date involving two lockup regimes. The sample consists of 292 IPOs listed on Bursa Malaysia between May 1,2003 and December 31,2012. Lockup in Malaysia is mandatory where it is regulated by the Securities Commissions compared to voluntary lockup where it is negotiated between IPO firms and their underwriters. Using the market model event study method, the result shows a significant negative abnormal return at the expiration of the lockup period. Thus, the study provides evidence that contradicts the semi-strong form of the Efficient Market Hypothesis (EMH). According to EMH, the expiration of the lockup period which is piblic knowledge should not be accompanied with a significant abnormal return. In addition, the evidence also shows that the change in lockup regulation does not have an impact in reducing the negative abnormal returns at the expiration of the first stage lockup period