Initial Public Offering (Ipo) Returns And Post-Listing Liquidity Effect Of Ownership Structure And Divergence Of Investors Opinion In The Malaysian Market

Prior studies on the relationship between Initial Public Offering (IPO) returns and liquidity are mostly for the developed markets. The disperse ownership in the corporations and more well informed investors support their findings. On the other hand, the nature and behaviour of emerging stock markets such as Malaysia differ from the developed markets. The concentrated ownership partly due to government ownership, the behaviour of market participants and market policies could provide different views on the relation between liquidity and return. Given the difference in the environment, it is the objective of this study to reduce the existing gap by examining this relationship from the emerging market perspective. Using 299 samples of stocks listed on Bursa Malaysia from 1998 to 2008, the nature of relationship between (PO returns and liquidity is examined. Additionally, the effects of firm's ownership structure, government ownership and the divergence in investor's opinion on the return and liquidity relationship are examined

Economic forces and Islamic stock market: Empirical evidences from Malaysia

Manuscript type: Research paper Research aims: This study aims to investigate the impact of macroeconomic forces on the Malaysian Islamic stock market. Design/ Methodology/ Approach: The study employs Auto Regressive Distributed Lag (ARDL) bound testing approach and Vector Error Correction Model (VECM) in an attempt to investigate the impact of macroeconomic forces on the Malaysian Islamic stock market. Various domestic economic factors including money supply, industrial activities, inflation, Islamic interbank rate and international issues (e.g., real effective exchange rate and Federal funds rate), are taken into consideration in the analysis. Research findings: Based on the ARDL approach, this study finds that all macroeconomic factors, with the exception of Islamic interbank rate are significantly related to Islamic stock price in the long term. However, the findings from VECM method confirm the significant causal flow from all macroeconomic forces into Islamic stock prices in the longer term. Nevertheless, in the short term, only Islamic stock prices have immediate replies in response to the industrial activities, inflation, real effective exchange rate and Federal funds rate data. Theoretical contributions/ Originality: While there is vast literature on the Islamic stock market, the effect of macroeconomic forces on the Islamic stock price has not been well-researched. This study fills in the gap by investigating the relationship between macroeconomic variables and Islamic stock price. Practitioner/ Policy implications: The findings demonstrate that investors and policymakers should take into account the fluctuations in the macroeconomic variables since they have high information content regarding the future movements of Islamic stock price. The foreign factors, in particular, depict stronger influence on the Islamic stock market than the domestic factors. Research limitations/ Implications: Cheaper currency would accelerate export sector and recovery of the U.S. economy might put Islamic stock market at disadvantage because there is possibility that international investors will switch back their investment

Are Muslims practising moderation in their financial decisions?

Statistics and a survey of the literature revealed the existence of a massive problem in the financial prudence of Malaysians, including Muslims. One glaringly prominent aspect is the absence of a spiritual/religious interventionist approach in exploring the lack of consumer awareness that led to the present situation. Instead of attempting to solve the problem through brute economic policies, a wasatiyyah-oriented approach is warranted for informing consumers of their religious obligation to avoid profligate spending and adopt moderation in financial matters. Hence, the objective of this study is to examine the practice of moderation (the concept of wasatiyyah) among Muslims consumers in their financial decision-making. Primary data were collected through a self-administrated survey on a selected group of Muslim consumers. A relevant statistical software was employed to perform exploratory-factor analysis (EFA) through principal-component analysis (PCA), confirmatory factor analysis (CFA), and structural equation modelling (SEM) on the collected data. The findings demonstrated that moderation (wasatiyyah) partially mediates the relationship between materialism and financial decisions. Consequently, Muslim consumers who practice moderation while making their financial decisions are more conscious of their credit management and thus spend according to their means

Impact of Inclusion into and Exclusion from the Shariah Index on a Stock Price and Trading Volume: An Event Study Approach

Does the inclusion or exclusion from the Shariah index have any effect on the performance of a stock? This study aims to examine the impact of stock inclusion (or exclusion) on the stock prices and trading volume of the firms. Based on the case of selected stocks in Bursa Malaysia, our sample consists of 107 additions and 95 deletions from the FTSE Bursa Malaysia Emas Shariah Index (FBMESI) in the period of June 2007-June 2014. Event study methodology is used to estimate the abnormal returns and abnormal volumes in the days surrounding the announcement and change dates. The study finds the included stock shows significant and permanent excess returns and abnormal volumes. On the other hand, deleted stocks earn temporary significant negative returns and below normal volumes after the announcement and change dates.  Keywords: Shariah screening methodology, Shariah compliant stocks, Shariah index, stock price, stock trading JEL Classifications: G12, G14, G1

The Efficiency of Trading Halts; Evidence from Bursa Malaysia

This paper undertakes a comprehensive evaluation of the efficacy of firm-specific trading halts in the Malaysian context. The paper examines a total of 291 trading halts that occurred over the five year period 2000 to 2004. In addition to examining the three variables commonly impacted by trading halts, stock price reaction, volatility of returns and trading volume, we also examine four additional parameters that could have material impact. These are (i) the type of halt whether voluntary or mandatory, (ii) type of news released, (iii) duration of halt and (iv) frequency. Based on our overall sample, trading halts result in a positive price reaction, increased volume and volatility. We find evidence of information leakage, significant difference between voluntary and mandatory halts and the type of news released during halt to have a huge impact. The duration of halt has isolated impact and is largely inconsequential. The frequency of halts does not seem to matter. While these results broadly conform with previous studies of trading halts in other markets, our refined analysis by subcategory showed some interesting differences. The two key differences were the significantly positive price reaction for the sample of mandatory halts and the lower volatility for voluntary halts. We attribute the positive price reaction of mandatory halts to the peculiarity of regulation and the resulting survivor bias. We argue that the lower volatility for voluntary halts particularly for those in the good news category, imply that these stocks are being repriced. With the exception of some subsets, our overall results appear to be strongly supportive of The Price Efficiency hypothesis of trading halts which argues that trading halts help disseminate information and enhance the price discovery process

The effect of ownership structure on initial return and post-listing liquidity: evidence from Bursa Malaysia

In IPO market, the theory of liquidity as proposed by Booth and Chua (1996) suggest that higher initial return drives the broadness of shareholder base and thus may enhance post-listing liquidity of an initial public offering (IPO) stocks. Based on that hypothesis, this paper examines the sample of 299 Bursa Malaysia IPOs for years 1998-2008 and finds that market adjusted initial return has significant positive predictive power on broadness of initial shareholder base. Market adjusted initial return is positively correlated with the breadth of shareholders and negatively correlated with the proportion of five largest and non-block institutional shareholders. IPO companies with sizeable number of shareholders tend to have higher post-listing liquidity whereas the proportion of block-holders and five largest shareholders adversely affect the secondary market liquidity. These results provide evidence to Booth and Chua’s hypothesis. Initial return also has a direct positive effect on post-listing liquidity. The positive relationship between initial return and post-listing liquidity is stronger for IPO stock with substantial ownership by government. Concentrated ownership structure in IPO with government ownership has negative effect on their trading turnover but greater liquidity is achieved through lower transaction cost

Liquidity, initial public offering (ipo) long-term return and government ownership: Evidence from bursa malaysia ipo stocks

Prior studies testing the relationship between initial public offering (IPO) returns and liquidity are mostly for the developed markets. The disperse ownership in the corporation and more well informed investors in the developed markets support their findings. On the other hand, the nature and behaviour of emerging stock markets such as Malaysia differ from the developed markets. The concentrated ownership in the corporations partly due to government ownership to a certain extent could provide different views on the relationship between liquidity and return. Using 283 samples of IPO stocks listed on Main Board and Second Board of Bursa Malaysia from 1998 to 2008, the study examines the relationship between liquidity and IPO long-term return and the moderating effect of government shareholdings on the relationship between the two variables. The results showed one proxy of liquidity that is average monthly turnover as able to explain the market-adjusted long-term return of IPO stocks when equally weighted returns are calculated. Further, the government shareholdings in the IPO stocks positively moderate the relation between liquidity and long-term return

Measuring efficient risk management of life insurance companies in Thailand using Data Envelopment Analysis (DEA)

The life insurance industry plays significant functions by establishing security to all members of the society, assuring financial stability to the nation, stimulating long-term savings, and contributing funds to the investment sector. Notably the stability or solvency of the insurance industry in any nation provides a telling indication of the position of the financial system in that country. With adequate efficiency in risk management practices, life insurance companies not only can improve their overall efficiency, but also can contribute to the economic growth of the country. Therefore, insurance companies are generally encouraged to improve their financial risk management practices in order to reduce their exposure to risk, maintain a certain financial risk profile, and finally satisfy their stakeholders’ interest. With regards to the insurance industry in Thailand, there are two main issues that require serious attention. Firstly, the deregulation and liberalization of the Thai insurance industry that has removed entry barriers to foreign firms combined with the restructuring of the business environment have intensified the competition in the Thai insurance industry. This also has resulted in the increased volatility of risk profile. Such alteration to the risk profile will influence the economic values of insurance firms if they have limited capacity to manage risk. To address this issue, the insurance companies need to enhance their competitive strength through proper and prudent risk management tools and mechanics. Secondly, the diverse objectives of the stakeholders motivate the insurers to implement an efficient integrated risk management strategy to balance the risk and return tradeoff. Consequently, this study aims to assess and measure the efficiency of Thai insurance companies’ risk management practices and strategies and provide information about their strengths and weaknesses relative to the best practice of industry. DEA-RAM model is used to measure the efficiency score of risk management practices of each sample company. Based on 23 life insurance companies in Thailand, the results show that the life insurance risk management efficiency score in Thailand is relatively high although generally it can be considered as inefficient in its risk management practices. It implies that there is room for improvement where more output for solvency and profitability can be generated from the use of the inputs that are inherent in the operation of insurance companies. In addition, the standard deviations indicate an increasing trend, which implies that on average the life insurers in Thailand could not enhance their efficiency of risk management practices during the observed period

Raising fund for waqf land development via Islamic Real Estate Investment Trust (iREIT)

This paper attempts to explore the possibility of using Islamic REITs (iREITs) as one of the potential financing method for waqf land development. This paper identifies several ways on how iREITs issuance can be use to tap money from the generous Muslim donors and the investors for the development. The funds raised by the issuance of iREITs not only meant to finance the initial stage of waqf land development but are also expected to generate continuous cash inflows to the State Religious council. The paper aims to focus on the sustainability of the funds that can be used to finance the development of waqf land

Pembangunan dan pembiayaan hartanah wakaf : kekuatan dan kelemahan kaedah semasa dalam konteks Malaysia

Wakaf merupakan kaedah yang dapat memberi manafaat yang berterusan dalam jangka masa panjang. Walau bagaimanapun untuk mengaplikasikan kaedah pembangunan dan pembiayaan hartanah wakaf sedia ada terdapat beberapa faktor yang perlu diperhalusi. Kekuatan serta kelemahan sesuatu model pembangunan perlu diperinci supaya dapat membantu mutawalli sebelum melaksanakan sesuatu projek pembangunan wakaf. Objektif utama kajian ini adalah untuk meneliti beberapa kaedah semasa pembangunan hartanah dan pembiayaan wakaf dengan mengenalpasti kekuatan, kelemahan, peluang serta kekangan yang terdapat dalam model tersebut dari konteks Malaysia. Penggunaan beberapa medium kewangan oleh mutawalli dalam mentadbir dan membangunkan hartanah wakaf sedia ada dikaji secara emprikal Setiap kelebihan dan kekurangan kaedah pembiayaan dikenal pasti untuk penambahbaikan bagi projek projek wakaf yang bakal dilaksanakan pada masa akan datang. Kajian ini mengkhusus kepada beberapa contoh pembangunan hartanah yang telah berjaya dilaksanakan oleh mutawalli iaitu di Malaysia, Singapura dan Arab Saudi. Diantaranya membangunkan beberapa tanah wakaf di Malaysia seperti seperti Wakaf Setee Aishah dan Wakaf Ahmad Dawjee Dadabhoey dengan beberapa inovasi terhadap kaedah pembiayaan untuk hartanah wakaf. Selain itu kajian ini juga mengupas mengenai penggunaan beberapa kaedah pembiayaan menggunakan pembiayaan pasaran modal Islam seperti Sukuk Musyarakah untuk pembangunan tanah wakaf di jalan Bencolleen, Singapura dan Sukuk Intifa' bagi pembangunan menara Zam-Zam di Mekah, Arab Saudi. Berdasarkan pengalaman negara luar seperti Singapura kajian ini mendapati membangunkan hartanah waqf untuk rumah kediaman mengundang banyak masalah dalam jangka masa panjang. Selain itu kajian ini mendapati didalam kaedah pembiayaan sedia ada di Malaysia, ianya mengambil masa yang agak lama untuk mutawalli mendapatkan balik hak mengawal selia dan memaksimumkan manafaat dari hartanah wakaf yang dibangunkan. Walaubagaimanapun kejayaan projek-projek pembangunan wakaf ini tetap dibanggakan kerana kesungguhan mutawalli dalam mentadbir hartanah wakaf ini telah mengoptimumkan manafaat hartanah tersebut. Diharap kajian ini dapat memberi dimensi berbeza yang perlu dipertimbangkan bagi mengoptimumkan manafaat dan kesan jangka panjang