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Capital Markets Review Vol. 26, No. 1, pp. 01-18 (2018)

Political Uncertainty and the Greek Stock Market over the Period 2011-2015

Gerasimos G. Rompotis1
1International Certified and Registered Auditors, Greece

Abstract: In this article, we examine the possible effects of the successive elections in Greece over the period 2011-2015 on the pricing behaviour of four basic stock indices of Athens Exchange. Our analysis reveals that, with the exception of the pre-election period before the elections of the 6th of May 2012, returns over the pre-election periods are positive. During the rest of the periods assessed returns are negative with the exception of the period 18th June 2012 to 31 December 2014 over which returns are positive. On the other hand, the variance in the Greek market is relatively low during the pre-election periods compared to the volatility during the periods before the announcement of an election process or after carrying out the elections. In addition, volatility surged during the interval which followed the announcement of the referendum of the 5th of July 2015 on 28 June 2015 till the announcement of the elections of the 20th of September 2015 on 28th August 2015.

Capital Markets Review Vol. 26, No. 1, pp. 19-35 (2018)

Interaction Effects of Country-Level Governance Quality and Debt on Stock Returns in Developing Nations

Bolaji Tunde Matemilola1, Bany-Ariffin A. N.1 & Annuar Md. Nassir1
1Department of Accounting and Finance, Universiti Putra Malaysia, Malaysia.

Abstract: This study examines the moderating effects of country-level governance quality on the relationship between debt and stock returns, using 3,891 firms from 23 developing countries covering the period from 2006 to 2014. Applying the panel generalized method of moments to control for endogeneity, the findings reveal that country-level governance quality has positive moderating effects on the relationship between book debt and stock returns. Robustness check using market debt show that country-level governance quality has positive moderating effects on the relationship between market debt and stock returns. Additional analysis controls for the financial crisis years and the results are broadly similar, except that the coefficients of some variables change. The results suggest that strong governance quality lowers financial risk which encourage firms to raise debt capital needed to maximize stockholders’ returns.

 

Capital Markets Review Vol. 26, No. 1, pp. 36-55 (2018)

The Role of Country-Level Differences in Influencing ASEAN Firms’ Cross-Border Mergers and Acquisitions (CBMAs) Success

Nurhazrina Mat Rahim1 & Ruhani Hj. Ali2
1Faculty of Accountancy, Universiti Teknologi MARA, Malaysia.
2Graduate School of Business, Universiti Sains Malaysia, Malaysia.

Abstract: The preference of using CBMAs as an external growth strategy spurs the interest to examining whether or not the CBMA transaction creates value that leads to a CBMA success. The decreasing trend of completed CBMA and non-value creation indicated that CBMA is a riskier transaction compared to the domestic M&As, which might be due to the risks related to cross-border transactions. Thus, this study explores the effect of the cultural distance, geographic distance, and the level of economic development in the ASEAN CBMA success. A total of 348 CBMA transactions involving the ASEAN bidder and 246 CBMA transactions involving the ASEAN target, announced and completed during the year 2002 to 2013, were analysed. Consistent with the social identity theory, a large cultural distance (power distance dimension) between the target and bidding country could adversely affect the CBMA success of ASEAN firms. Meanwhile, the geographic distance has no significant effect on the ASEAN CBMA success. The different level of economic development between the target and bidder also has a negative effect on the ASEAN CBMA success, contradicting the resource-based view theory.

 

Capital Markets Review Vol. 26, No. 1, 56-72 (2018)

The Relative Importance of Cash Flow News and Discount Rate News at Driving Stock Price Change

Mohsen Jafarian1, Fauzias Mat Nor2  & Izani Ibrahim3

1Graduate School of Business, Universiti Kebangsaan Malaysia, Malaysia.
2Faculty of Business, Universiti Sains Islam Malaysia, Malaysia.
3College of Business, Prince Sultan University, Saudi Arabia.

Abstract: Which component is the main driver of stock price movement? Using vector-auto-regression-based (VAR) decomposition method, the literature finds that stock price movements are almost entirely derived by discount rate variation (DR) at the aggregate-level. Recently, extracting variations by the VAR system has been criticized. Employing implied cost of capital (ICC) approach with a sample of 809 companies over the period of 2000 to 2015, new findings demonstrate that cash flow variations (CF) are significant at aggregate-level, as well as portfolio-level. This study also finds that CF variation rises when the horizon extends from one-year ahead to five-year ahead. Running return decomposition at the portfolio-level shows that there are significant rising CF variations from small/large growth portfolios to small/large value portfolios. The results also show that DR demonstrates a good tracking power of the actual return for the period before 2005, but CF dominates at tracking after this period. Current research contributes to the literature by providing a fundamental explanation for the value premium.

 

Updated on 7 October 2018