Market reaction to the merger announcements of US banks: A non-parametric X-efficiency framework

This paper investigates the short-term market reaction of nine profit-efficiency, pre-classified merger deals of US banks over the time period from 1992 to 2003. The findings show that mergers combining low efficiency acquirers and targets create significant market returns following the merger event, while mergers combining the least efficient acquirers with moderately efficient targets diminish the acquirer's wealth more than any other type of merger. Furthermore, findings show that acquirers generally lose about 2.5% of their wealth upon the merger announcement while targets experience, on average, significant market returns of 15.5% following the merger announcement.The findings of the cross sectional analysis show that the CARs of acquirers are positively related to their technical efficiency and geographic diversification, while targets' CARs are negatively related to both target size and revenue efficiency.     

The performance of newly privatized firms in selected MENA countries: The role of ownership structure, governance and liberalization policies

The paper analyzes 95 newly privatized firms (NPFs) in four Middle Eastern and North African countries (Egypt, Morocco, Tunisia, and Turkey). We find that these firms experienced significant increases in profitability and operating efficiency, and significant declines in employment and leverage. We also document strong performance improvements for firms that did remain state-owned, that were not sold to foreigners, and that came from Egypt. Job losses are higher in Egypt and in firms where the state is no longer in control. Also, the results indicate that revenue firms and NPFs in Morocco display significantly less leverage than control firms and those from other countries. We find that profitability changes are negatively related to state control and positively related to foreign ownership. Trade openness, change in real GDP over the privatization window, index of investor protection, and foreign ownership are important determinants of the changes in sales efficiency and output. These findings suggest that NPFs become more productive in environments where property rights are better protected and enforced and that foreign investors influence firms' productivity through their monitoring role.     

Stock markets, banks, and economic growth: Empirical evidence from the MENA region

Over the last four decades, a wide theoretical debate is concerned with the fundamental relationship between financial development and economic growth. Recent studies shed some light on the simultaneous effect of banks and financial system development on growth rather than a separate impact. The empirical study is conducted using an unbalanced panel data from 11 MENA region countries. Econometric issues will be based on estimation of a dynamic panel model with GMM estimators. Thus, peculiarities of MENA region countries will be detected. The empirical results reinforce the idea of no significant relationship between banking and stock market development, and growth. The association between bank development and economic growth is even negative after controlling for stock market development. This lack of relationship must be linked to underdeveloped financial systems in the MENA region that hamper economic growth. Then, more needs to be done to reinforce the institutional environment and improve the functioning of the banking sector in the MENA region. Based on these results, other regions at the same stage of financial development such as Africa, Eastern Europe or Latin America should improve the functioning of their financial system in order to prevent their economies from the negative impact of a shaky financial market.     

Is Exchange Rate Pass-Through in Pork Meat Export Prices Constrained by the Supply of Live Hogs?

The impact of lags in the production and marketing of agricultural products on the degree of exchange rate pass-through in export prices is investigated. The predictions of the theoretical model are tested by investigating Canadian pork export prices in the United States and Japan. The empirical methodology accounts for unit root and cointegration using the dynamic seemingly unrelated regression framework and a minimum distance estimator. Predetermined hog supplies have a statistically significant impact on export prices of two out of three Canadian provinces. The degree of misspecification involved with standard pass-through models that do not account for production lags is also illustrated.     

The impact of capital requirements on banks’ cost of intermediation and performance: The case of Egypt

In 1991, the Central Bank of Egypt increased the minimum capital requirements for the banking industry vis-à-vis risk-weighted assets to 8%, along the lines proposed by the Basel Committee on Banking Supervision. In this paper, we investigate the effects of capital regulations on cost of intermediation and profitability. Higher capital adequacy increases the interest of shareholders in managing banks’ portfolios. The result is a higher cost of intermediation and profitability. A number of factors have increased the cost of intermediation in the post-capital regulation period: higher capital-to-assets ratios, an increase in management efficiency, an improvement of liquidity and a reduction in inflation. The reduction in output growth countered these effects. A number of factors contributed positively to banks’ profitability in the post-regulation period: higher capital requirements, the reduction in implicit cost, and the increase in management efficiency. The reduction in economic activity had opposite effects on banks’ profitability. Overall, the results support the Central Bank's efforts to enforce capital regulations to improve the performance of the banking sector in Egypt.     

Asset Pricing and Cost of Equity in the Tunisian Banking Sector: Panel Data Evidence

In spite of popularity and theoretical simplicity of the one-factor Capital Asset Pricing Model (CAPM) used in the valuation of financial assets, researchers are more concerned with the important extension proposed by Fama and French (1993) , that is, the Three-Factor Pricing Model (TFPM). Alongside beta, average stock returns could be explained by some size and book-to-market supplementary effects. With these two complementary models, estimation of the cost of equity is carried out for the Tunisian banking sector. In order to account for inter-individual heterogeneity, estimation of parameters is conducted according to random coefficient specifications within the context of panel data analysis.     

The Short– and Long–run Performance of New Listings in Tunisia

This study examines abnormal stock market returns of new listings on the Tunisian Stock Exchange. Substantial positive abnormal returns are found on the first listing day and this finding is similar to that obtained in other countries. Subsequent performance is poor and investors who bought shares at the close of trading on the first day would have lost about 22% against the Tunis Stock Exchange index over a three–year period. The possible causes of this are investigated. Among the factors found in the literature that possibly affect the level of long–term performance, only the state of the IPO market, the initial return, the delay in reaching the ‘first market price’ and the size of the firms have significant coefficients. This result is supportive of the traditional fad’s interpretation of long–term underperformance.     

Political uncertainty and stock market returns: evidence from the 1995 Quebec referendum

Abstract.  In this study, we investigate the short run effect of the 30 October 1995 Quebec referendum on the common stock returns of Quebec firms. Our results show that the uncertainty surrounding the referendum outcome had an impact on stock returns of Quebec firms. We also find that the effect of the referendum varied with the political risk exposure of Quebec firms, that is, the structure of assets and principally the degree of foreign involvement. JEL classification: G14, G15