Review of Pacific Basin Financial Markets and Policies

The objective of this paper is to assess the effect of mergers and acquisitions on shareholder wealth when subsequent related significant events are anticipated. We identify a particular merger and acquisition between telecommunication companies in Korea and examine whether it conveys good or bad news to stock market participants. We hypothesize and find that mergers and acquisitions are interpreted as good news by the marketplace when they are expected to be accompanied by a subsequent related significant event, in our case granting of a government license for the IMT-2000 mobile service.

This paper examines the stock price behavior around the ex-split dates both before and after the decimalization on the New York Stock Exchange (NYSE). We find that the abnormal ex-split day returns decrease and the abnormal trading volume increases in the 1/16th and decimal pricing eras, relative to the 1/8th pricing era. These findings are consistent with the microstructure-based explanations for the ex-day price movements. Our study also supports the hypothesis that short-term traders perform arbitrage activities during the ex-split dates when transaction costs become lower after the tick size is reduced.

By analyzing the behavior and performance of trader types in the Taiwan futures market, we find that the foreign investors, futures dealers and security dealers are positive feedback traders, whereas individuals are contrarians. Evidence shows that the foreign investors and security dealers earn significant profits. We conclude that they are information-based traders. Instead, the individuals and futures traders perform poorly. However, weak evidence reveals that futures dealers are behavioral-based traders. As it is also reported, the cumulative performance demonstrates that foreign investors are the clear winners and individuals are the clear losers in the Taiwan futures market.

In recent years, the formation of strategic alliances has become an increasingly common trend among developing countries around the world. In spite of this, the numerous attempts to comprehensively review the research on the correlation between these strategic alliances and stock prices over the years have, by and large, limited their discussion to how the stock price of a corporation responds to its announcement that it is forming a strategic alliance. Only a few studies have, however, discussed the announcement's indirect impact on the stock prices of investing companies that have entered into such strategic alliances. It is for this reason that we conduct an event study and develop an empirical model to measure that indirect impact on the stock prices of investing companies engaging in strategic alliances with Taiwan's high-tech industry from 1998 to 2002, while also discussing the market's different responses in their stock prices according to various industrial types that have been used to classify these investing companies.

Share repurchases were deregulated in Taiwan in 2000. The regulatory provisions and the government's stated aim of market stabilization provide a setting in which share repurchases are exclusively motivated by undervaluation. This study investigates if deregulation of share repurchases is an effective method of market stabilization by investigating the intra-industry effects of repurchase deregulation in Taiwan. We find that repurchasing firms and their corresponding rivals both experience strong value creation upon the repurchase announcements. The evidence suggests that the intra-industry effect of share repurchases is negatively associated with rivals' firm size, and positively associated with the announcing firm's abnormal return, the size of share repurchases and the similarity of business operation between rivals and repurchasing firms. These findings hold even after taking into account other effects that could influence the valuation of the rival firms.

We employ a sample of 3,177 events from Hong Kong industrial firms during the 1993–1999 period to examine insider trading activities around earnings and dividends announcements. By controlling for earnings management, special dividends, and other firm level financial indicators, we find that the presence of insider trading, its trading direction, and its trading intensity are related to the signals of these simultaneous earnings and dividends announcements. Various tests show that our findings are robust regardless of the proxies used for measuring insider trading activities, earnings, and dividend changes.

Though maturity matching is a common practice in real finance, no academic study has been conducted yet on cross-sectional variations in the degree of maturity matching. This study derives hypotheses on the maturity matching and empirically tests them. We show that firms with a higher degree of maturity matching are more likely to stabilize equity values: they have lower stock return volatilities. We also show evidence supporting the existence of an optimal level of maturity matching. Though financially strong firms generally employ a higher degree of maturity matching, the relationship between financial strength and maturity matching is not monotonic.