Review of Pacific Basin Financial Markets and Policies

This paper documents the economic and financial recovery of East Asia based on its real GDP, export, currency value and stock performance since the 1997 financial crisis. A macroeconomic model is used to estimate the chain effect of international trade on Asian recovery. It is found that the U.S. economy had a significant impact on the recovery of this region through close international trade relationship. Two major factors appear to explain the recent rapid recovery: (1) strong U.S. economic growth and currency value, and (2) the current account surplus and net inflow in foreign direct investment of crisis-hit countries.

The present paper introduces a conceptual framework, followed by implementation of a structured company-wide questionnaire to examine empirically the issue of acculturation in business merger. Employees working at the acquiring firm grouped either as employees working at the headquarter or as employees working at the existing branches, when compared with their counterparts working at the newly established branch (formerly, the acquired firm), differ along various organizational cultural constructs which in turn lead to statistically significant differences in employees' working attitudes. Based on the above empirical findings, the authors therefore conclude that acculturation in business merger deserves serious attention.

Securities and Exchange Commission Rule 10(b)-5 makes it unlawful for companies to make misleading statements about their prospects or to omit the disclosure of negative information. Our examination of 290 Rule 10(b)-5 lawsuits filed in the 1996–1998 period yielded two important results. First, stocks of the defendant companies, in the aggregate, experience significant declines around the time of the first filing of lawsuits. Second, not all cases have the same merit, for among the reasons that prompted the filing of class-action litigation, only four groups — those that involve accounting irregularities, fraud, making overly optimistic statements, and failure to disclose negative news — result in the most significant filing-date stock declines.

Chinese listed companies issue Class A, B and H shares to Chinese, foreign and Hong Kong investors, respectively. Entitled to exactly the same rights and obligations, the three classes of shares are, however, traded at significantly different prices. The valuation differential is attributable to the different responses to the country-specific risk related to the emerging Chinese stock market by the three categories of investors. The country risk of China can be decomposed into political risk, exchange rate risk, interest rate risk and market risk. Empirical tests provide strong evidence to support the decomposition model. Compared with Chinese investors of A-shares, foreign investors would require a higher rate of return for B-shares to adjust for the political risk of China, reflecting a differential in the risk premium required on the world capital market. In comparison, the Hong Kong investors, who have greater tolerance of the political risk involved in H-shares as a result of the increasing integration between the Hong Kong and Chinese markets under "one country and two systems", are willing to pay a higher price for H-shares relative to B-shares.

After the stock market crash of October 19, 1987, interest in nonlinear dynamics and chaotic dynamics have increased in the field of financial analysis. The extent that the daily return data from the Shanghai Stock Exchange Index and the Shenzhen Stock Exchange Index exhibit non-random, nonlinear and chaotic characteristics are investigated by employing various tests from chaos theory. The Hurst exponent in R/S analysis rejects the hypothesis that the index return series are random, independent and identically distributed. The BDS test provides evidence for nonlinearity. The estimated correlation dimensions provide evidence for deterministic chaotic behaviors.