Corporate Social Responsibility,Firm Value and Corporate Governance Code Revisions: The Asian Evidence*

The present study examines the relationship between corporate social responsibility (CSR) and firm value, and the effects of corporate governance code revisions on the relationship. We examine this relationship for: (i) a high‐income country, Japan; (ii) middle‐income countries China, Malaysia and Thailand; and (iii) low‐income countries India and Indonesia. We use the Heckman two‐stage sample selection bias approach for the empirical analysis. We find that Japanese stakeholder CSR and environmental CSR have a smaller positive effect on firm value compared to the middle‐income countries, but we do not find any statistically significant association for the low‐income countries. In addition, we find that only Japanese corporate governance code revisions significantly contribute to the positive relationship between CSR and firm value, which concurs with the new recommendations documented in the revised codes of corporate governance. The present study reveals that foreign major shareholders matter to the value creation of CSR in Japan and the middle‐income countries of China, Malaysia and Thailand.     

A STOCHASTIC SETTING TO BANK FINANCIAL PERFORMANCE FOR REFINING EFFICIENCY ESTIMATES

This study contributes to develop a framework to measure the financial performance of banks in a stochastic setting. The framework comprises several steps, the first of which is the development of a financial performance measurement model to evaluate a bank's financial performance using a set of factors from the CAMEL (Capital adequacy, Assets, Management Capability, Earning and Liquidity) system. Second, the stochastic setting of the efficiency measurement is handled using the data collection budget allocation approach, whereby Monte Carlo simulations are used to analyse additional generated data and a genetic algorithm is used to refine the accuracy of the efficiency estimates. The results show that the accuracy of the model is greatly improved using the proposed approach. In contrast to the conventional deterministic model, the proposed framework is more useful to managers in determining the bank's future financial operations to improve the overall financial soundness of the bank. Copyright © 2014 John Wiley & Sons, Ltd.     

Exchange-Rate Volatility,Exchange-Rate Regime,and Trade in OIC Countries

The authors examine the impact of exchange rate volatility on trade in the Organization of the Islamic Conference (OIC) countries from 1995 to 2008 using panel estimations to distinguish differences between disaggregate trade, and examine its threshold effects. Results reveal that exchange rate volatility generally has significant negative effect on export and import with lag. However, exports of OIC with flexible exchange rate regime have significant positive exposure to exchange rate volatility. The authors also document a threshold effect for countries with trade value constitutes more than 30% of the real gross domestic product, and the exchange rate volatility becomes significant positive for export but significant negative for import with lag.     

Exposure to the world and trading-bloc risks: A multivariate capital asset pricing model

This paper employs a capital asset pricing model that incorporates both world and trading-bloc factors to show that the recent trend of trade regionalism has led to segmentation of world stock markets. The model is developed within a multivariate GARCH framework. The conditional time-varying betas are derived to examine the dynamics of risk exposures to the world and trading-bloc factors. The results show risk exposure behaviour that is not revealed using static risk estimates.     

The value impact of international and industrial diversifications on public‐listed firms in Malaysia

This study examines the relationship between firm value and both international and industrial diversification involvements for a sample of 267 listed firms in Malaysia over 2001–2009. We find no evidence that international diversification has any significant impact on the firm value but industry diversification locally slightly increases firm value, even after controlling for the degree of ownership concentration. Our research further indicates that without any diversification involvement, family ownership presents lower value than foreign and government ownerships; and with industrial diversification family ownership presents significant higher value than foreign and government ownerships.     

Weather, investor irrationality and day-of-the-week anomaly: case of Indonesia

Finance is based on rational behavior assumption. Thus, the existence of day-of-weekend anomaly in the market can be the anti thesis of the assumption. Much research suggested the role of psychology as the explanation of this anomaly. However, it is rare to find a research investigating the relationship between psychology and day-of-week anomaly (DOWA). As one of the psychology factors is weather-induced mood, this research aims to investigate the relationship between weather cycle and DOWA. This paper used Indonesia average temperature level from 1999 up to 2009 for determining the proxy of moods; and found temperature level does not explain the market returns movements. Temperature level influences the DOWA implying the moods of investor establish the irrational behavior of the market. This result can be used as the explanation of irrationality behavior of investor on Monday. Further research is needed in term of investigating the relationship between psychology factors (need for cognition, heuristic bias, information ignorance, and other factors) and investor behavior.     

Risk Sensitivity of Bank Stocks in Malaysia: Empirical Evidence Across the Asian Financial Crisis

The present study examines the sensitivity of commercial banks' stock excess returns to their volatility and financial risk factors, measured by interest rates and exchange rates, across the recent Asian financial crisis. In general, we found that there were no significant differences among Malaysian commercial banks in their risk exposure prior to and during the Asian financial crisis. The introduction of selective capital controls, a fixed exchange rate regime and a forced banking consolidation program, however, had increased the risk exposure of both large and small domestic banks. The effects of these risk factors were significantly detected in both large and small banks.     

Call Warrant Listing and the Behavior of its Underlying Spot Market: Some Evidence from Bursa Malaysia

This study investigates the call warrant listing impact on its underlying stock based on Malaysian stock market. The study indicates that call warrant listing has no significant impact on the return, volatility, and bid-ask spread of its underlying stock. However, its trading volume tends to be higher in the post event period. The results suggest that (1) the diversion of trade from spot to warrant market is nonexistent, (2) call warrant does not expand the opportunity set for investors, (3) it is fair to use historical data in volatility estimation for the purpose of asset pricing based on Malaysian context.