Integration Analysis of the Malaysian Stock Market

This study employs the cointergration and causality techniques in examining the intergration as well as the short-term and long term dynamic causal linkages between the five major sector' price indices listed in the main board of he Malaysan stock market and intergration elationship among the stock market of Malaysia major trading partners. This study is also aims to investigate the contagion and interdependent relationship between the five major sector' price indices in Malaysia and also between major trading partners before and after the financial crisis in July 1997. The results in this study show that the integration relationship between the sectors in Malaysia is more pronounce that between the Malaysiann stock market and its major trading partners. The results also suggest that the Malaysian stock market is robust to the influence of the price movement of its major trading partners and the speed adjustment prcesses in both sectors and stock markets is relatively fast. In addition, the Malaysian stock market providec better opportunity for diversification for the international investors in diversifying their overall risk. Besides that, investors in the Malaysian stock market can used the price movement in the properties sector in predicting the price movement in other sectors in the Malaysian stock market since the properties sector is found to be a good predictor of other sectors' prices in the Malaysian stock market. The impact of globalisation and the increase in the equity investment by one country to another is shown to increase the lead lag relationship between the stock markets. Thus, the investors should take into the consideration of the equity investment of one country to another before diversiifying their investment. The results of variance decomposition suggest thet there are no contagion effect between the major sectors in Malaysia and between the Malaysian stock market and its major trading partners before and after the financial crisis in July 1997 as the degree of cointegration and the number of stock markets being cointegrated decrease after the financial crisis

Bank Efficiency in Selected Developing Countries

The efficiency of the banking system is essential especially in the developing countries because the banking system serves as the nerve for overall financial development in terms of economic growth at the macro level (Andersen and Trap,2003; Khan and Senhadji, 2000; Levine, 2002). This is because an efficient banking system will help to boost national income and wealth. Consequently, it would be able to encourage depositors to make more deposits and as a result encourages monetary advancement.This study aimed to investigate the existence of cost efficiency and profit efficiency among the banking sector in selected developing countries in the Asia, Middle East, and the African region from 2000 to 2005. A comparison between the cost and profit efficiency from the selected developing countries in the three regions was done in this study. In addition, this study also aims to identify the determinant of the bank efficiency level from both micro-level and macro-level perspectives.The parametric approach and non-parametric approach were employed in this study. From the estimation results from parametric approach, commercial banks in the selected developing countries are cost efficient. This result is consistent with most of the literatures. Next, the estimation results of the cost and profit efficiency indicate that commercial banks in the Middle Eastern and North African region are the most cost efficient followed by commercial banks in the Asian region. The DEA results reported a relatively low cost efficiency scores as compared to the stochastic frontier models. A further decomposition of cost efficiency into technical and allocative efficiency indicates that the commercial banks’ cost inefficiency are actually due to technical inefficiency.It is also found that the bank-specific factors did influence the efficiency level of the commercial banks in the three regions under analysis. The efficiency scores of the commercial banks in terms of cost and profit efficiency across regions are found to have negative relationship with the equity to total assets ratio. On the other hand, the return on assets is found to be positively related to profit efficiency of the commercial banks over the regions. The positive relationship between loans to total assets ratios and profit efficiency indicates specialization in lending activities enable commercial banks to be more efficient. Cost efficiency of the commercial banks in the Asian region is found to positively related to real GDP per capita, banking institutions’ credit to the private sector, and market concentration and negatively related to trade openness. On the other hand, broad money to GDP ratio is positively related to profit efficiency of the commercial banks in the Asian region. However, credit extended to the private sector seems to be negatively related with profit efficiency level of the commercial banks in the region. This might be due to the reasons that most of the credit extended to the private sectors were channelled to the priority sectors and Small and Medium Industries with a lower rate of interest charged. Bank efficiency in the Middle Eastern and North African regions seems to be more prone towards the factors of openness such as trade openness and financial development. Whereas the main macroeconomics variables are found to exert strong influences over the bank efficiency in commercial banks in the African region

Review of ownership structures and banking efficiency: Implication to ASEAN-5

Ownership structure is known as the distribution of equity with relation to votes, capital and the identity of equity owners (Holderness et al., 1999). Ownership structure served as an important element in corporate governance by influencing the type of incentives managers receives from the firm. This paper reviews recent studies on the effect of ownership structure on banking efficiency in the developing countries with the focus on ASEAN countries. Review of previous studies clearly indicates that types of ownerships did exert some influences towards the performance of the banks in terms of efficiency. Even though publicly-owned banks operated in an economically inefficiency environment, it is undeniable that the existence of publicly-owned banks are needed especially in economically less stable countries. This is because the government-owned banks or the state-owned banks can act as a catalyst to ensure the development of certain priority sectors that are believed to contribute to the long run economic growth of the countries. Besides that, the existence of state-owned banks and government-ownership is crucial for the countries to have a balance social and economic objective. In addition, countries need to encourage the entry for foreign participants into the banking sectors to improve the quality and availability of the financial services towards the domestic financial market (Levine, 1996). The entry will encourage domestic banks to compete more efficiently in terms of costs and profits in order to survive in this environment. The spillover effects in terms of technology brought by the foreign participant will enable the creation of a more modern banking environment in the host countries. Not only that, with a balance combination of state-, privately-, and foreign-owned banks, it is believed that the banking industry in the developing countries will be able to survive in the competitive environment while helping the government effectively implement the macroeconomics policies in the long run

Bank Risk Taking Behaviour In Malaysia: Role Of Board And Ownership Structure

This paper examines the role of board structure and ownership concentration on bank risktaking of public listed commercial banks in Malaysia from 2001 to 2012. The study focuses on the bank-risk taking behaviour after the major bank consolidation in Malaysia in year 2000. Using two-market model to estimate the risk of the commercial banks in Malaysia, the results suggest that higher ownership concentration and larger board size resulted in higher bank risk-taking of the listed commercial banks in Malaysia. Given that the board structure is an important element of bank risk-taking, regulators should continue to enhance the monitoring of banks (where board size is large and ownership concentration is high) to control the banks’ potential for excessive risk takin

Efficiency of foreign banks: Evidence from selected (Association of Southeast Asian Nations) ASEAN countries

This study examined foreign banks efficiency in selected ASEAN countries (Indonesia, Malaysia, the Philippines, and Thailand) for the period of 2001 to 2008 by using the parametric stochastic frontier analysis (SFA) approach.The results indicate that foreign banks originating from developed countries are more cost and profit efficient as compared to foreign banks from developing countries.The results also show that foreign banks in Malaysia are the most cost and profit efficient while foreign banks in Indonesia are the least.The result is consistent with the difference in index of economic freedom over the years between the countries studied.Hence, to attract foreign banks into the ASEAN countries, authorities should liberalize their banking sector.Less restrictive banking sector will allow healthy competition between foreign and local banks in the developing countries resulting in higher overall banking industry efficiency

Gender Diversity And Firms’ Financial Performance In Malaysia

This study aims to investigate the relationship between gender diversity in a frm’s board of directors and fnancial performance of frms listed on Bursa Malaysia for the period between 2009 and 2013. Using unbalanced panel data analysis, we tested whether gender diversity in the boardroom may influence the frm’s performance, as measured by Tobin’s Q. We employed four different proxies for gender diversity (the dummy variable for women, the percentage of women on the board, the Blau index, and the Shannon index) to provide a more comprehensive measure of gender diversity. This study suggests that a higher degree of female representation on the board increases a frm’s fnancial performance. Positive discrimination favouring female boardroom appointment is therefore likely to persist as a feature of the corporate governance landscape in Malaysia

The lead-lag relationship between stock index futures and spot market in Malaysia: A cointegration and error correction model approach

The difference in trading mechanisms in the stock index futures and spot markets in Malaysia is argued to contribute to the lead-lag relationship between the two.Hence, the aim of this paper is to analyze the lead-lag relationship between spot and futures markets of the Malaysian Kuala Lumpur Composite Index (KLCI) by employing the cointegration and error-correction approach. Results of the study suggest that cash market and futures market are cointegrated.The results of the Error-correction model (ECM) suggest that futures price lead spot price and the change in futures price is relatively more efficient as compared to spot price.The results also indicate that spot price do lead futures price but the lead-lag relationship is relatively weak as compared to the impact of futures price on spot price.Thus, investors are able to use futures price as a good indicator in predicting spot price.The causal relationship suggests that policy makers should take into consideration the impact of futures market towards cash market when developing a policy for the futures marke

Value-added tax, country governance and economic efficiency

Country governance and economic efficiency plays a prominent role in the government administration and the economic health of a nation in the modern economy. This includes ensuring the effective implementation of fiscal and monetary policies for the society well-being. This book focuses on the role of country governance in the implementation of Value-Added Tax (VAT) in approximately 80 percent countries in the world. Using global economic data, the finding reveals that robust country governance mitigates the regressive effect of VAT on economic efficiency. Thus, this book reaffirms the assertion that the responsibilities of the government to ensure the implementation of any tax system