Review of Pacific Basin Financial Markets and Policies

Many studies show that value stock strategies outperform growth stock strategies in U.S. markets and in international markets. However, the evidence is not clear as growth stocks have had higher returns in a few countries. Because the behavior of stock markets vary between different geographic regions, it is possible that the performance of these strategies may differ in the Pacific Rim region. We examine the performance of value stocks and growth stocks, defined on the basis of market price to book value per share, over the 10-year period 1986-1996, for six Pacific Rim countries. Based on over 11,900 annual stock returns, value stocks generally outperformed growth stocks over the 10-year period, and in the various Pacific Rim country stock markets. In addition, smaller cap stocks outperformed large cap stocks. Regardless of cap size, however, value stocks, on the whole, outperformed growth stocks. When growth stocks occasionally outperformed value stocks, the margin of difference tended to be small.

This paper extends ISO certification research by investigating whether a stock value is influenced by the announcement of its ISO registration with respect to the firm size, industry, and ISO standard series on the Taiwan Stock Exchange. The results show that receiving ISO registration influences abnormal returns. The market reacts favorably to both small and large firms but has no reaction to medium firms in terms of a firm's capital. We also observe significant positive market reaction for Plastics and Textiles. A beneficial implication is that investors may benefit more from their investment endeavors if they can properly examine the specific effects.

The average abnormal return of Taiwanese family-controlled grouping (1.60 percent) is significantly higher than that of individually listed companies (0.03 percent) in December. Within the same family-controlled grouping, the average abnormal return in December is also higher than that of the rest of the months (-0.13 percent) in the sampling periods 1992 through 1997. We cautiously set five joint criteria to define the anomaly in December that pertains only to the family-controlled grouping. The empirical results supported our argument by which the ornamenting motive of the family-controlled grouping is to account for the anomaly. For illustration, we further identify company size, losses from currency translation and bad debt, cash flow, and the gain from selling long-term investment which can effectively contrast the willingness and capability of family-controlled grouping to engage in the year-end earning management.

We employ vector autoregression and cointegration estimation to examine the impact of net capital inflows on real exchange rates, output and real interest rates in several East Asian and Latin American economies during the 1990s. We find that increases in net capital inflows leads to appreciations of the real exchange rates in all the countries but have no impact on real output except for Thailand.

In this paper two studies about the impact of cultural differences on corporate marriages are discussed. Very often it is hypothesized that culture has a large impact on joint ventures and mergers, however, few studies come up with empirical evidence. To explore such culture's consequences two studies were conducted, where different research approaches were used. In the first study into Japanese and American joint ventures in Indonesia, an etic research approach was chosen. Leadership styles and stress were examined in particular, as effects of differences in national cultures. On most of the concepts we measured, Japanese managers seem to fit better in an Indonesian context than American managers do. In the second study into Japanese-Dutch and American-Dutch mergers, an emic research approach is used. Two American-Dutch mergers and one Japanese-Dutch merger are currently the subject of research. The focus of the second study is on the acculturation process of the two merging entities. Based on the preliminary results and an extensive literature review, it is concluded that Japanese-Dutch companies are more difficult to combine than American-Dutch companies, although culture clashes also occur in American-Dutch combinations.

This paper investigates the Managerial Discretion Hypothesis in the context of the Indian corporate sector. The hypothesis postulates that if the interests of the managers and the other stakeholders of the firm are not perfectly aligned, then the managers tend to issue equity which might be contrary to the latter's interest. We have examined a sample of 216 manufacturing firms, which have opted for external finance during the year 1994–1995. Our findings reveal that for many firms, particularly those with poor investment opportunities, managers issue equity even when they are not expected to do so. This paper, as a policy recommendation, highlights the importance of creating appropriate institutions prior to pursuing financial liberalization in developing countries like India.

This article examines the patterns of dynamic linkages among national stock prices of Australia and four Asian NIC stock markets namely, Taiwan, South Korea, Singapore and Hong Kong. By employing recently developed time-series techniques results seem to consistently suggest the relatively leading role of the Hong Kong market in driving fluctuations in the Australian and other NIC stock markets. In other words, given the generality of the techniques employed, Hong Kong showed up consistently as the initial receptor of exogenous shocks to the (long-term) equilibrium relationship whereas the Australian and the other NIC markets, particularly the Singaporean and Taiwanese markets had to bear most of the brunt of the burden of short-run adjustment to re-establish the long term equilibrium. Furthermore, given the dominance of the Hong Kong market in the region, the study also brings to light the substantial contribution of the Australian market in explaining the fluctuations to the other three markets, particularly Singapore and Taiwan. Finally, in comparison to all other NIC markets, Taiwan and Singapore appear as the most endogenous, with the former providing significant evidence of its short-term vulnerability to shocks from the more established market such as Australia.