Financial Economics

Chin Chun How · Wong Hock Tsen ·Jurnal Ekonomi Malaysia ·2019

This study investigated the presence of abnormal returns surrounding stock split announcements and the determinants of cumulative abnormal return and the split factor. This study utilized the fnancial data of 45 corporations that had exercised stock splits on Bursa Malaysia from the years 2011 to 2015. The dependent variables were cumulative abnormal return for 40 days, cumulative abnormal return for 60 days, and the split factor. The independent variables, dividends per share and earnings per share, represent the signalling hypothesis for the stocks in Malaysia, while the bid-ask spread and the trading volume represent the liquidity hypothesis and the market capitalization, respectively. The signifcance of abnormal returns surrounding stock split announcements was tested using standardized t-statistics. The determinants of cumulative abnormal return and the split factor were determined based on Ordinary LeastSquares (OLS) multivariate regression and Stepwise Least-Squares. The empirical results show that there was a statistically signifcant positive abnormal return on day 1 [+1] after the stock split announcements. Dividend per share was found to have a statistically signifcant relationship with the cumulative abnormal return; thus supporting the signalling hypothesis. Bid-ask spread and trading volume were the main determinants of cumulative abnormal return, supporting the liquidity hypothesis under a different estimation window. Bid-ask spread was the only important determinant for the split factor. The results of this study could help investors and policymakers to design policies to improve the overall market effciency in Malaysia, particularly to increase the effectiveness of information disclosure regarding Malaysian stocks.

Ali Albada · Nurhuda Nizar ·International Journal of Economics and Management ·2022 ·JEL: G1, G4

COVID-19 is a highly contagious viral infection that has changed the world, with many human lives being lost. This study aimed to analyse investors' sentiment and stock market behaviour in Malaysia during the COVID-19 pandemic. Stock market performance was measured through the FTSE BURSA 100 Index (T100) from January 29, 2020, until March 31, 2021, by employing principal component analysis (PCA) to construct the investors' Sentiment Index (SMI). The results indicated that the sudden outbreak of COVID-19 and its rapid spread significantly impacted investors' psychology, which disrupted investors' investment decisions. Furthermore, rapid increases in confirmed COVID-19 cases and deaths increased the uncertainty and unpredictability of the country's economic situation. As a result, the Malaysian financial market showed a steep downward trend during the COVID-19 pandemic.

Izaan Jamil · Mori Kogid · Thien Sang Lim · Jaratin Lily ·Economies ·2022

This paper investigates the impact of soybean and crude oil futures on palm oil indexes by utilising monthly data from three palm oil indexes listed in Bursa Malaysia, i.e., the Asian palm index, Malaysian palm index, and Plantation index, spanning from January 2010 to June 2020. The impacts were analysed using the Autoregressive Distributed Lag (ARDL) bounds test approach and causality test. The statistical findings revealed that the Asian palm index has a long-run relationship with crude oil futures and crude palm oil, and a short-run relationship with soybean futures, crude oil futures, and crude palm oil. On the other hand, the Malaysian palm index has a short-run relationship with soybean futures and crude palm oil, whereas the Plantation index has a short-run relationship with crude oil futures, crude palm oil, and exchange rate. For the long-run strategy, this study recommends close monitoring of crude oil futures. Meanwhile, the short-run strategy requires close monitoring of the crude oil and soybean futures. Eventually, the empirical findings proposed that interested parties such as fund managers, investors, and traders should pay attention to crude oil and soybean futures to mitigate risk and diversify their portfolios with greater emphasis on crude oil futures.

Nurazilah Zaina · Fakarudin Kamarudin · Law Siong Hook · Mohammed Hariri Bakri · Fadzlan Sufian · Annuar Md Nassir ·Malaysian Journal of Economic Studies ·2020 ·JEL: G01, G21, G28

This study delivers new empirical evidence on the impact of banking regulations on the levels of social and financial efficiency of microfinance institutions (MFIs) between the years 2012 to 2018. The sample consisted of data from 172 MFIs from ASEAN-5 countries. As the first stage of the analysis, data envelopment analysis (DEA) was employed to determine a score of the level of social and financial efficiency for the sampled MFIs. Meanwhile, panel regression analysis and the Generalized Method of Moments (GMM) estimator were used to examine the impact of banking regulations on the level of social and financial efficiency of the sampled MFIs. The findings showed that the sampled MFIs achieved a lower level of social efficiency while attaining a higher level of financial efficiency. The lower level of social efficiency indicated that the sampled MFIs had lost their focus on poverty reduction, while at the same time, switching their focus toward financial sustainability. The empirical findings also showed a significant impact of bank regulation and bank supervision on the levels of social and financial efficiency. Overall, bank regulation negatively influenced the level of social efficiency and bank supervision impacted the level of financial efficiency of the sampled MFIs positively. The findings from this study provide new insights for bank regulators and policymakers to construct regulatory frameworks that are relevant to the operation of MFIs.

Rahmat Heru Setianto · Rani Septiani Sipayung · W.N.W. Azman-Saini ·Entrepreneurial Business and Economics Review ·2022

The objective of the article is to empirically investigates the role played by financial development in determining the relationship between working capital financing and firms’ performance. Employing data of publicly listed manufacturing firms in five ASEAN countries, namely, Indonesia, Malaysia, Philippines, Singapore, and Thailand spanning from 2009-2018 resulted in 6,183 firm years observation. This study conducts an analysis using the two-steps generalized method of moments (GMM) estimator. The inverted U-shape effect of working capital financing on firm profitability is confirmed, indicating a trade off in utilizing short-term debt to finance working capital requirements. Moreover, new evidence was shown that firms which operate in more financially developed regions have the opportunity to utilise a greater percentage of short-term debt without destroying their profitability.

Gani Ibrahim Musa · Zakaria Bahari · Azreen Hamiza Abdul Aziz ·Jurnal Ekonomi Malaysia ·2020

The primary purpose of the financial sector of an economy is financial intermediation. Financial intermediation activities of channelling funds from surplus to the deficit units in the economy including through capital market affect the economic growth of a country. The role of Islamic capital market in the process of affecting the growth of an economy is another dimension in finance-growth nexus. This study empirically examines the impact of Islamic capital market on Malaysian economy. It employs the ARDL bounds test approach for cointegration. The results revealed that in the long-run, Islamic capital market contributes to the Malaysian economy by way of capital formation and the efficiency of the capital served as channels of transmitting growth. However, in the short run, only Islamic capital market measure of Islamic stock market turnover contributes to the economy with productivity of capital as the only channel of transmitting growth. Moreover, there is evidence of causality between the Islamic capital market turnover and the Malaysian economy. The findings imply that the Islamic capital market effectively channelled and pooled funds to productive investment activities. It further proves the notion that in general, Islamic finance is more inclined towards real sector growth as compared to conventional counterpart due to the emphasis on equity-based financing as opposed to debt-based financing.

Neshaleni S. Paramanantham · Irene Wei Kiong Ting · Qian Long Kweh ·Institutions and Economies ·2018 ·JEL: G31; G32; G34

This study examines the impact of ownership concentration on debt structure. Based on marketcapitalisation, we obtained financial and governance data from Top 100 public listed companies in Malaysia for the period 2011-2015. Ordinary least squares and fixed-effect panel models were employed for examining data. The regression results showed that ownership held by the top five shareholders significantly and negatively affected long term debt and total debt ratios. The results remain qualitatively similar in both estimations using the ordinary least squares and fixed-effect panel models. In summary,this study offers some insights into how concentrated ownership influence corporate debt structure.

Lian Kee Phua · Char-Lee Lok · Yong Xia Chua · Tan-Chin Lim ·Malaysian Journal of Economic Studies ·2021 ·JEL: G32, M41

In the face of crises such as Covid-19, businesses become devastated by greater risk exposure, particularly in currency exchange, supply chain disruption, and fluctuation in commodity prices that cause volatile earnings trends. Higher earnings volatility is frequently associated with greater risk. Consequently, firms could be inspired to engage in earnings management or derivative use as attempts to mitigate earnings volatility. Using a sample of 169 of the largest non-financial firms with 507 firm-years observations from an emerging market, the researchers examined the relationship among derivative use, earnings volatility, and earnings management. The results of a panel regression analysis showed that derivative use by Malaysian public listed companies was positively connected with earnings volatility, inferring that the use of derivatives did not mitigate earnings volatility as intended. This study also found that both earnings volatility and derivative use have a positive relationship with earnings management. This implies that firms engage in earnings management to curb earnings volatility under circumstances where derivative use is associated with higher earnings volatility. Evidence derived from this study contributes to extant literature on financial risk management involving financial instruments, an area that is very much understudied in the contexts of emerging markets.

Kian-Tek Lee · Chee-Wooi Hooy ·Malaysian Journal of Economic Studies ·2018

This paper examines the mitigation effect of the ultimate ownership identity on the diversification discount under the emerging market's institutional setting. Using a sample of non-financial listed firms in Malaysia from 2002 to 2013, the study reveals that government ultimate ownership is able to mitigate the diversification discount better than family ultimate ownership by 5 to 43 percent, whereas family ultimate ownership is better than foreign ultimate ownership in mitigating the diversification discount by 30 to 118 percent. Our study also finds that a high degree of ownership concentration gives rise to the diversification discount.

Kelvin Lee Yong Ming · Mohamad Jais ·Jurnal Ekonomi Malaysia ·2021 ·JEL: G17, G23, I20

The COVID-19 outbreak significantly impacted the Malaysian stock market. To some extent, the Movement Control Order (MCO) implemented in the country affected the financial performance of listed companies. In consequence investors were quite uncertain of future movements of the stock market. Effective analysis techniques are thus required to study the market movements. Investors shall rely on signals emitted by technical indicators for their investment decisions making. The aim of this study is to examine the performance of the MA rules in Malaysian stock market during the different stages of the MCO. The sample used comprised 30 largest market capitalization stocks listed in the stock market. The period of study spanned 2 January 2020 to 30 August 2020. More than 50% of the buy signals emitted by (5,60,0.01) were found linked with positive returns in the next trading day during the MCO and CMCO subperiod respectively. Conversely, 41.28% and 34.78% of the sell signals emitted by (5,50,0.01) during the respective MCO and CMCO sub-period were linked with negative returns. Among all the MA rules, (5,60,0.01) generated the highest average return of 0.88% during the MCO and CMCO sub-period. Importantly, MA rules, (5,60,0.01) also generated positive returns during the out-of-sample period. The findings of this study shall contribute to the existing literature related to technical analysis. Besides that, the findings will benefit investors the most, inducing them to generate returns or avoid losses during the critical COVID-19 pandemic period. Investors are recommended to take the signals emitted by MA rules as alternative reference for their investments. Lastly, the relevant organizations should conduct more seminars to inform and enhance analytical skill of their clients, particularly retail investors.

Han Hwa Goh · Lee Lee Chong · Ming Ming Lai ·Malaysian Journal of Economic Studies ·2018

This paper examines the nonlinear effects of investor sentiment on asset pricing in Bursa Malaysia. The Fama and French three-factor model is re-augmented within a time-varying Markov regime-switching framework to investigate the three risk premiums, conditioned by four different proxies for investor sentiment (i.e. market wide indicators). The study finds evidence that the stock returns movement of Bursa Malaysia exhibits a nonlinear two regimes pattern. Besides, changes in the investor sentiment to some extent function as a mediator in the regime switching dynamics between bear and bull market cycles in Malaysian stock returns. It is also found that an increase in positive sentiment of investors leads to a higher transition probability of regime switching during bear markets. In addition, the three risk premiums are time variant, contingent upon the fluctuation of the proxies for investor sentiment within discrete regimes. The study finds that in general, the market premium falls when the stock market switches from bull to bear markets. On the contrary, both the size and value premiums increase when the stock market moves from bull to bear markets.

Nik Hadiyan Nik Azman · Mohd Zaidi Md Zabri · Ema Izati Zull Kepili ·Jurnal Ekonomi Malaysia ·2021 ·JEL: A1, G0, G5, I3, O1, R2

Islamic microfinance is expanding and penetrating its potential market over the globe. Access to credit or financing, especially during the COVID-19 pandemic, is vital for micro-entrepreneurs in climbing the socio-economic ladder that will contemporaneously increase their household income. In Malaysia, most of the MEs can hardly access financing from formal financial institutions due to poor credit rating, having zero to little collateral, income instability, small loan amounts, and high transaction costs. Alternatively, MEs approach Islamic microfinance institutions for their financing solution. Therefore, this study intends to investigate how far the utilization of Islamic microfinancing by MEs could enhance their quality of life. One hundred seven (107) usable questionnaires were analysed via the Structural Equation Modelling (SEM) AMOS using IBM® SPSS and found that both investment and expansion factors played key roles in affecting the financial wellbeing of the micro-entrepreneurs. The results lend credence to the positive effect of Islamic microfinance products may have on MEs and indirectly support the long-term economic development for MEs. This study deliver implication to various angles. In practical part, it opens the eyes of micro-entrepreneurs to opt for the right path (expansion and investment) to achieve financial wellbeing. Government (regulators) can enhance the ability of Islamic microfinancing as a tool towards financial wellbeing and in theoretical part, this study deepens the scope of Schumpeter’s theory by inculcate this theory with Islamic finance scope of study.

Nurul Hizetie Mohamed Nor · Anuar Nawawi · Ahmad Saiful Azlin Puteh Salin ·Pertanika Journal of Social Science and Humanities ·2018

The purpose of this study is to examine the relationship between audit characteristics and firm investment efficiency level. Audit characteristics have been characterized using audit committee (AC) independence and external auditor choice. Top 200 Malaysian listed companies based on market capitalization were selected as a sample. Binomial logistic regression analysis was employed to test the hypotheses for 3 years, that is, 2009, 2010, and 2011. The statistical results show no relationship between AC independence and investment inefficiency, while auditor choice was shown to be positively significant only in 1 year of the study, but was not significant in the other 2 years of study. The results provide further confirmation of the role of corporate governance in enhancing the investment performance of the company. This study provides an indicator to shareholders and investors that a company with strong governance structure will likely make better investment decision. Managers under strong governance are prevented from taking an aggressive investment risk approach that may result in overinvestment. In addition, the company will carefully plan to have an adequate capital so that a good opportunity investment will not being passed due to insufficient financing that will result underinvestment. This study is original, as it focuses on the direct relationship between corporate governance mechanism and firm investment efficiency level that is scarce in the literature, with a special focus on emerging markets in the process of developing their best governance practices.

Catherine S F Ho · Nur Hazimah Amran · Irfan Syarafuddin B Ab Aziz · Wahida Ahmad ·International Journal of Economics and Management ·2021 ·JEL: G11, G12, G15, G23

Financial crises and the geopolitical issues around the world have caused much volatility in returns and market uncertainty. This trend of higher uncertainty in risk and return causes vast changes in stock and investment values, which caused investors scrabbling to maintain the value of their wealth. It is therefore vital that investors understand and compare investment alternatives in order to maximize return. The purpose of this research is to analyze the performance of Islamic and conventional mutual funds and provide a comparison of fund performances to enable investors to make informed decisions. Mutual fund data from 2013 to 2017 for Saudi Arabia and Malaysia, the two largest Islamic fund markets are compiled and risk-adjusted performance statistics applied to arrive at measurement of performances. Although fund performance comparison is a wellresearched area, this study contributes to the literature in terms of a comprehensive investigation of various types of Islamic funds with an in-depth evaluation of different investment time horizons. Empirical evidence on risk-adjusted performance comparison indicates that Malaysian conventional equity, mixed asset and money market funds for all 1, 3 and 5-year horizons outperform their Islamic counterparts. Similarly, Saudi Arabian equity and mixed asset funds also outperform their Islamic counterparts for all time horizons. On the contrary, the Saudi Islamic money market funds outperform their conventional partners. Cross country comparison confirms that Malaysian funds achieve superior performance except for money market funds which underperform their Saudi counterparts. In summary, current evidence concludes that, depending on the investment horizon and risk appetite, investors are better off investing in the appropriate fund.

J.S. Keshminder · Gurmit Kaur Bariam Singh · Zainora AB. Wahid · Mohammad Syafiq Abdullah ·Malaysian Journal of Consumer and Family Economics ·2019

Green Sukuk serves as an alternative form of finance which is equipped with both climate mitigation and Shariah compliance features compared to conventional finance. Acknowledging the superiority of green Sukuk to raise funds to mitigate climate change, the World Bank took the lead to promote it globally by making Malaysia the premier green Sukuk hub. This study seeks to assess the development of green Sukuk from the aspect of issuance and Shariah principle used in Malaysia since its inception in 2014. The study reveals that the development in the green Sukuk market is slow but is robust in moving from the energy industry to the building industry, while Shariah contracts used are based on the issuers' underlying assets. The study concludes that the green Sukuk market is still small and liquidity constraint makes it difficult for investors to gain access. For the government to increase green Sukuk issuance, information about the performance, challenges, risks, and opportunities in the realm of green Sukuk must be made available to both issuers and investors.