Market Segmentation and Stock Prices: Evidence from an Emerging Market

We examine the relationship between stock prices and market segmentation induced by ownership restrictions in Mexico. The focus is on multiple classes of equity that differentiate between foreign and domestic traders, and between domestic individuals and institutions. Significant stock price premia are documented for shares not restricted to a particular investor group. We analyze the theoretical and empirical determinants of premia across firms and over time. In addition to economy-wide factors, segmentation reflects the relative scarcity of unrestricted shares. The results provide additional support for Stulz and Wasserfallen's (1995) hypothesis that firms discriminate between investor groups with different demand elasticities.     

The Effectiveness of Regulation Fair Disclosure: Evidence from an Emerging Market

The effect of corporate disclosure in emerging markets is not clearly predictable because of the prevalent information leakage prior to disclosure. We empirically examine the effectiveness of Regulation Fair Disclosure (Reg FD) in reducing information asymmetry among equity traders in an emerging market. Specifically, we test whether fair disclosure activity is negatively related to the probability of informed trading (PIN). Multivariate tests on a sample of listed companies in Korea subject to Reg FD reveal the following: (1) more frequent disclosure under Reg FD is related to lower information asymmetry, and (2) this relation differs across the types of disclosure, with the effect of qualitative disclosures on the PIN being weaker than that of quantitative disclosures. Evidence also indicates that the negative association between fair disclosure activities and information asymmetry is more (less) pronounced for firms with poorer (better) information environments where selective information leakage is more (less) likely. The results are robust to sensitivity tests. Our findings have implications for disclosure regulations in emerging markets, given that the existing literature casts doubt on the effectiveness of corporate disclosure in such markets.     

The International Transmission of Bank Liquidity Shocks: Evidence from an Emerging Market

I exploit the 1998 Russian default as a negative liquidity shock to international banks and analyze its transmission to Peru. I find that after the shock international banks reduce bank‐to‐bank lending to Peruvian banks and Peruvian banks reduce lending to Peruvian firms. The effect is strongest for domestically owned banks that borrow internationally, intermediate for foreign‐owned banks, and weakest for locally funded banks. I control for credit demand by examining firms that borrow from several banks. These results suggest that international banks transmit liquidity shocks across countries and that negative liquidity shocks reduce bank lending in affected countries.     

The Cross-Section of Expected Stock Returns: New Evidence from an Emerging Market

Over 300 factors have been found to explain the cross-section of expected stock returns. Empirical studies also show that findings from multifactor asset-pricing models have not been consistent in an emerging market. Using DuPont analysis and a residual income valuation model for 284 nonfinancial companies on Ho Chi Minh Stock Exchange during the period 2008–2014, findings suggest that the return on equity and its change are informative for stock returns in Vietnam. In addition, the level of capital turnover, financial cost ratio (FCR), and changes in capital and in the FCR contain incremental explanatory power for stock returns.     

Trading Better Versus Making More: Evidence from an Emerging Market

Using transaction data from Egypt, we examined the controversy over which investor—domestic or foreign—has superior trading performance in emerging markets. We account for informational and behavioral differences across investors by classifying them by origin and type and comparing their performance in trade execution versus profitability. Domestic institutions execute trades at the best prices with the greatest advantage against foreign institutions. This advantage is reduced when foreign institutions focus on large firms and trades. Profitability analysis revealed, however, that domestic investors accrue significant losses against foreign investors, suggesting that trading better does not necessarily translate into making more money.     

Market Efficiency, Thin Trading and Non-linear Behaviour: Evidence from an Emerging Market

Emerging markets efficiency has been widely investigated, with mixed results. However such evidence is only reliable if the methodology adopted accounts for the institutional features of the market. Unlike previous studies this paper corrects for thin trading and incorporates possible non-linear behaviour and regulatory changes. Using Istanbul Stock Exchange data we show that in its early years the exchange was characterised by non-linear behaviour and inefficient pricing. However, regulatory changes encouraged participation, improved information quality and led to prices impounding information more rapidly, suggesting markets become efficient with high trading volume, reliable information and an appropriate institutional framework.     

International Cross-Listing and Order Flow Migration: Evidence from an Emerging Market

Policymakers in emerging markets are increasingly concerned about the consequences for the domestic equity market when companies list stock abroad. We show that the effects of cross-listing depend on the quality of intermarket information linkages. We investigate these issues with unique data from the Mexican equity market. The impact of cross-listing is complex—balancing the costs of order flow migration against the benefits of increased intermarket competition. These effects are exacerbated by equity investment barriers that induce segmentation of the domestic equity market. Consequently, the benefits and costs of cross-listing are not evenly spread over all classes of shareholders.     

Political Risk and Foreigners' Trading: Evidence from an Emerging Stock Market

This paper analyzes the impact of political risk on foreign investors' trading in emerging stock markets, market-wide and for industry portfolios, using quantified political risk ratings reported in the International Country Risk Guide and foreign flows data compiled by the Istanbul Stock Exchange. We also track the differential effect of political risk upgrades and downgrades. Political risk is shown to affect stock returns, net foreign flows, and macroeconomic variables. Foreigners' reaction to upgrades (downgrades) is slow (immediate) and smaller in magnitude. Foreigners' reaction to political risk varies with industry's sensitivity to market risk, except for the tourism sector, where their response is particularly salient. Local investors appear to provide liquidity to foreigners, who respond to information.     

Stock Market Volatility in an Emerging Market: Further Evidence from the Athens Stock Exchange

We investigate the time series properties of the daily and weekly returns from the Athens Stock Exchange (ASE) index for the years 1987 to 1997. We investigate whether important time-series characteristics have changed significantly over time. The Greek market has recently undergone major changes including complete capital flow liberalization, the implementation of computerized trading, as well as significant increases in market volume and capitalization; we thus contrast the 1987–90 and 1991–97 periods. Our findings suggest the dynamics of the ASE composite index returns have changed as the market has developed.     

Governance Mechanisms and Ownership in an Emerging Market: The Case of Turkish Banks

This study investigates the relations of board structure, ownership concentration, and ownership type with the performance of banks operating in Turkey from an agency theory and resource-dependency perspective. We use financial ratios and established measures of board characteristics and ownership structure. Our results indicate that board size and duality do not significantly influence the returns on assets of Turkish banks. On the other hand, the tenure of board members is negatively related to performance. Our analysis of board composition reveals a curvilinear relationship with banks' performance, implying that boards composed of a majority of either insiders or outsiders enjoy high performance. Also, ownership concentration and ownership type do not influence firm performance. The results of the financial variables are robust in all models.     

The Relationship Between Energy Commodity Prices and Electricity and Market Index Performances: Evidence from an Emerging Market

We investigate the effect of energy commodity price movements on market and electricity index returns in Turkey for the periods before, during, and after the year 2008. Although the Turkish economy is highly reliant on oil, we find that oil price does not lead either electricity or market indexes. This might be attributable to sluggish integration of financial markets in Turkey compared to developed markets. Natural gas price leads electricity index in the pre-2008 period. Its significance is reduced following the decline in natural gas usage in electricity production. This suggests that commodity dependence may be driving the link between commodity and asset prices in related sectors.     

新兴金融市场银行业的发展

在主要的新兴金融市场上,银行业无论从资本数量、资产质量还是从收益率角度讲都呈现出明显的整体复苏趋势。绝大多数国家的本国银行都扩大了贷款规模。亚洲银行业整体走强,拉丁美洲银行体系保持相对的稳定性,欧洲新兴市场的银行业以其充足的资金做后盾,继续保持良好的业绩,中东和非洲银行业的长期结构性问题依然存在。但一些国家已经着手处     

Local Effects of Foreign Ownership in an Emerging Financial Market: Evidence from Qualified Foreign Institutional Investors in Taiwan

We examine the local effects of equity ownership by investors who are classified as qualified foreign institutional investors in Taiwan. Our empirical analyses reveal a pronounced foreign ownership effect, whereby stocks with high foreign ownership outperform stocks with low foreign ownership. The valuation effect is present even after controlling for firm export, size, or transparency levels. We pursue a performance-based explanation for this effect and find that foreign ownership is strongly and positively associated with firm R&D expenditures and contemporaneous and subsequent firm performance. Our evidence is consistent with foreign investors who enjoy a long-run information advantage over domestic investors.     

The Effects of Corporate Social Responsibility on Real and Accrual‐based Earnings Management: Evidence from China

This study examines the relationship between Chinese firms’ corporate social responsibility (CSR) and their earnings management (EM) practices. As China rapidly emerges as one of the largest exporters as well as importers, an understanding of Chinese CSR practices is increasingly important not only to Chinese authorities and firms, but also to international stakeholders. However, Chinese CSR has been largely underestimated in previous studies, and this CSR–EM relationship has never been sufficiently examined with regard to Chinese firms. In addition, this study measures the level of EM using two different methods: accrual‐based EM (AEM) and real activity‐based EM (REM). In general, REM is regarded as more costly but less detectable, while AEM is regarded as less costly but more detectable, owing to the fact that AEM is subject to greater scrutiny from auditors and regulators. The results show that Chinese firms’ enhanced CSR generally decreases their EM practices. On the contrary, state‐controlled firms and firms operating in more institutionally developed regions are more likely to engage in REM, while increasing their CSR activities. These findings provide new evidence that managers in Chinese firms tend to opportunistically adopt CSR practices according to the firm's institutional environment.     

中国房地产市场调整对银行的风险传导

美国"次贷危机"引发全球金融"海啸"的事实让人们对房地产市场调整所带来的金融风险心有余悸,也引发了对于中国房地产市场调整是否会给银行业带来巨大冲击甚至危及银行改革成果的思考.     

The Value Relevance of International Financial Reporting Standards: Empirical Evidence in an Emerging Market

This study examines the value relevance of accounting information under International Financial Reporting Standards (IFRS) in the Abu Dhabi Stock Exchange (ADX, henceforth). Based on models developed by Easton and Harris (1991), and Ohlson (1995) and using monthly market data from 2000 to 2006, this paper investigates the value relevance of accounting information of firms traded on the ADX. Our overall results show that earnings scaled by beginning of period price are positively and significantly related to cumulative returns and that earnings per share and book value per share are positively and significantly related to price per share. We also find that value relevance of accounting information has changed since the market inception in 2000. The results documented herein extend the literature on value relevance accounting information in an emerging market that requires the use of IFRS. The study therefore contributes to the debate over the mandatory adoption of IFRS and the value relevance of accounting information reported under IFRS.     

International Price Discovery for Emerging Market Stocks: Evidence from Indian GDRs

Given the rapid increase of the number of emerging market stocks being dually listed abroad, it is important to understand the role of the foreign markets in the price discovery process. We examine this issue by studying the role of the London Global Depositary Receipts (GDR) market for Indian stocks. We find that the London and the Mumbai prices are cointegrated despite arbitrage restrictions imposed by Indian government regulations. Each market contributes almost equally to price discovery, a result in contrast to the small contribution of offshore markets to price discovery of stocks based in developed economies. The GDR market's contribution to price discovery increases with the foreign ownership of the firm and GDR issue size. We also find evidence of significant volatility spillovers from the London market to the Indian market. The overall results suggest that offshore trading in emerging market stocks play a beneficial role by aiding domestic price discovery.     

Random Walks and Market Efficiency Tests: Evidence from Emerging Equity Markets

We use the multiple variance-ratio test of Chow and Denning (1993) to examine the stochastic properties of local currency- and US dollar-based equity returns in 15 emerging capital markets. The technique is based on the Studentized Maximum Modulus distribution and provides a multiple statistical comparison of variance-ratios, with control of the joint-test's size. We find that the random walk model is consistent with the dynamics of returns in most of the emerging markets analyzed, which contrasts many random walk test results documented with the use of single variance-ratio techniques. Further, a runs test suggests that most of the emerging markets are weak-form efficient. Overall, our results suggest that investors are unlikely to make systematic nonzero profit by using past information in many of the examined markets, thus, investors should predicate their investment strategies on the assumption of random walks. Additionally, our results suggest exchange rate matters in returns' dynamics determination for some of the emerging equity markets we analyzed.     

The Intraday Price of Money: Evidence from the e‐MID Interbank Market

We provide empirical evidence, based on tick‐by‐tick data for the e‐MID euro area interbank market covering 2003 and 2004, that the overnight interest rate shows a clear downward pattern throughout the operating day. Thus, a positive hourly interest rate (half basis point) implicitly emerges from the intraday term structure of the overnight rate. Such a pattern was not detected in the mid‐1990s: we explain this evolution as an outcome of the recent trend toward real‐time settlement. The estimated intraday interest rate is lower than in the United States: this is due to the different cost of central bank daylight credit.