Financial liberalization and firms’ capital structure adjustments evidence from Southeast Asia and South America

This paper investigates the impact of financial liberalization on the adjustment of debt ratios in 12 emerging markets using firm-level data from 1991 to 2004. The results support the central hypothesis of this paper that adjustment costs are important in explaining firms’ adjustment toward their debt ratio targets. Our results show that deviations from targets are halved within 1.09 years in South America and 1.19 years in Southeast Asia, suggesting speed of adjustment is relatively faster in South American countries than Southeast Asian countries. Furthermore, our results show that after full liberalization those countries where rule of law and creditors rights were properly enforced, firms had higher adjustment speed compared to those countries where such enforcement was not present.The estimated adjustment coefficients imply that on average firms’ adjustment speeds have increased in all South American countries over the period of financial liberalization. On the contrary, firms’ adjustment speeds did not increase in Southeast Asian countries, reflecting the uneven effect of liberalization on the firms’ financing behaviour in Asian countries. There was a significant reduction in time (in years) taken to half the gap between actual debt ratios and targets only in Pakistan and South Korea. This finding supports the idea of uncertain impact of financial liberalization programs on the domestic financial markets in those emerging markets which started opening up their market and integrating with the rest of the world latter than others. These findings have significant implications for the sequence of banking sector liberalization in the emerging markets.     

Determinants of Demand for Delivery Services in Sudan: An Empirical Investigation with Reference to Khartoum State, 2004*

Abstract: Using multinomial logistic methods, we examined the determinants of the delivery care seeking behavior of women in Khartoum State of Sudan, as well as the impact of changes in the attributes of public delivery services on the market shares of delivery services. Time distance and transportation cost have significant negative effects, while the random ‘quality’ coefficient is positive but not significantly different from zero. Further, the likelihood of choosing home over public delivery services increases with order of birth. The positive effects of women's education and household income are most important for those who prefer private over home delivery whereas the use of modern antenatal services is decisive in choosing modern over home delivery. Also, shifts in demand toward public delivery services resulting from improvements in quality and qualifications of medical staff might be undermined by the reduction in demand emanating from a rise in the order of delivery, time distance and transportation cost to public delivery institutions. The income effects are more pronounced, particularly for the share of private delivery services. Educated women tend to shift from home to modern delivery services.     

The role of institutional investors in the inventory and cash management practices of firms in Asia

This paper examines the role of a particular class of institutional investors, domestic and foreign banks, in corporate decisions that have liquidity implications such as inventory and cash management. Using a sample of 256 non-financial listed firms in six Asian countries over the period of 2002–2005, this paper shows that foreign banks improve inventory and cash management practices, due to their superior monitoring of the managers. The disproportionate numbers of the institutional investors across industrial sectors in these Asian countries seem to suggest that some industrial sectors have stable demand of their products, such as in consumer goods sector, which is an attraction, for these institutional investors. Furthermore, the paper finds that forward-looking government policies are crucial to entry of these institutional investors in the developing countries. The research findings have implications for board structure and corporate governance standards.     

Preparing for climate change: recognising its early impacts through the perceptions of dive tourists and dive operators in the Egyptian Red Sea

Climate change has the potential to permanently alter the attraction of many destinations and substantially impact the benefits derived from tourism. These impacts can be reduced if vulnerability to climate change is understood and operators take steps to adapt. Some of the more immediate and manageable impacts are likely to result from changes in tourist perceptions and attitudes towards climate change. We test for early impacts in the Red Sea region and for the awareness of tourism operators. We interviewed 150 tourists and 35 operators. Our data suggest that changes in tourist awareness are already apparent; yet, operators ascribe only a moderate level of environmental and climate awareness to them. This ‘perception gap’ increases the vulnerability of dive operators.     

Methods for estimating optimal Dickson and Waters modification dividend barrier

In applications of collective risk theory, complete information for the distribution of individual claims amount is often unknown, but reliable estimates of its first few moments may be available. Dickson and Waters [Dickson, D.C.M. and Waters, H.R., (2004) Some optimal dividends problems, Astin Bulletin, 34, 49–74.] pointed out that shareholders should be liable to cover the deficit at ruin. Thus, they considered b the level of the barrier that maximizes the expectation of the difference between the discounted dividends until ruin and the discounted deficit at ruin. For such a situation, this paper develops methods for estimating the Dickson–Waters modification for the optimal dividend barrier b with the expectation of discounted penalty at ruin. In particular, two De Vylder approximations are explained, and the diffusion approximation for the expectation of discounted penalty at ruin is examined. For several claim amount distributions, the approximate values are compared numerically with exact values.     

Time-varying Cost of Equity Capital in Southeast Asian Countries

This paper investigates variation in the cost of equity capital for the Southeast Asian countries using firm-level data over the period of 1990–2004. It is found that decreases in the firm-level cost of equity capital have been associated with stock market liberalization and securities market development. The results of the present study suggest that earlier empirical evidence regarding the decrease in the cost of equity capital using country-level data cannot be generalized to different types of firms. There has been significant time variation in the cost of equity capital within countries and across firms.     

Stock market reactions to US Consumer Product Safety Commission enforcement actions

This study examines stock market reaction to violations of product safety regulations and firm product responsibilities in the post-enforcement period. Our event study results show that market reaction was negative to failures by firms to report product defects in a timely way. Our results also show that the stock market reaction varies depending on the type of violations, and whether there are single or multiple violations. Firms spend more on research and development and advertising in the post-enforcement period, in addition to investing in their compliance programmes which have a significant positive impact on product responsibility stewardship. Our empirical results show that the stock market reacts negatively to recall volume and refund remediation strategy. The stock market reaction is negative to social media communication about product recalls initiated by manufacturers. However, this negative effect appears to be counteracted by the positive corporate social responsibility (CSR) reputation effect of the manufacturers. Our findings imply that US manufacturing firms dealing with product recalls must be sensitive to how consumers and investors interpret the communication.