Review of Pacific Basin Financial Markets and Policies

This paper analyses takeover effects on the Thai stock market in terms of their impact on the bidding firms' shareholders. We apply a comprehensive analysis of shareholder wealth effects using multiple methods. Our results conform with prior studies: see Jensen and Ruback (1983), Agrawal and Jaffe (1999), Bruner (2002) and Campa and Hernando (2004). Thai takeovers result in significant negative abnormal returns over the sixteen months after the takeover. The abnormal returns, variously defined, vary from -4% to -6%, and -0.20% (monthly) for the bidding firm's shareholders. Thai takeovers do not appear to add to bidding firms' shareholder wealth.

Market commentators have suggested that New Zealand's lax private placement and disclosure regulation allows private placement purchasers to immediately sell discounted shares without disclosing these transactions to the market. However, New Zealand firms with the deepest discounts tend to have higher risks, lower returns and higher costs associated with evaluating firm value. Therefore, the possibility that deep discounts may simply represent adequate compensation for the extra risk and cost private placement purchasers incur cannot be ruled out. In this respect private placement purchasers in New Zealand take on the role and risks associated with investment banker and underwriter.

In this study we used Japanese firm-level data in order to explore the productive impact of organizational capital by isolating the effect of other intangibles like R&D, brand, human and social capital. Fixed-effect and random-effect panel methodology are proposed to assess specific-organizational capital at firm level. Our results suggest that in monetary terms the value of firm-specific organizational capital stock is significant when compared to traditional assets. Findings suggest that firms building up higher stocks of organizational capital not only increase their productivity but also their value.

This paper examines the volatility–volume relationship in Taiwan stock market, using volume data categorized by type of trader. We consider before and after our event period of lifting the investment restrictions for foreign investors. We partition trading volume into expected and unexpected volume and find that the unexpected volume shocks for individual investors are more important than the expected volume shocks in explaining volatility before lifting the investment restrictions for the foreign investors. We find that the positive volatility–volume relationship is driven by the individual investors even during the period of the lifting of investment restrictions for foreign investors. However, with respect to institutional investors, before the removal of investment restrictions for foreign investors, the unexpected volume of trading of the domestic dealers exhibit positive volatility–volume relationship. Further, after the removal of investment restrictions, the unexpected volume of the foreign investors has a positive volatility–volume relationship.

The cross-sectional relationship between expected returns and amortized spreads is studied in an overlapping-generations economy with an average investor. The commonality in liquidity is directly incorporated into the asset-pricing relation. In a static equilibrium, the amortized spread of an asset is related to its expected return through four channels; namely: the equilibrium zero-beta rate, the market risk premium, a level effect, and an incremental sensitivity effect. Although both are present over the entire period, their relative importance shifts from a significant level to a significant sensitivity effect from the earlier to most recent sub-period in the Canadian stock market.

This study examines how well the pricing model of Hsu and Wang (2004) explains the behavior of stock index futures prices for the developed markets (such as the S&P 500 index futures market) and the emerging markets (such as the Taiwan Futures Exchange (TAIFEX) Taiwan stock index futures market). It also compares the pricing performance of three alternative pricing models of stock index futures: the cost of carry model, the Hemler and Longstaff (1991) model, and the Hsu–Wang model. Overall, the Hsu–Wang model provides significantly better pricing performance than that of the cost of carry model in emerging markets with high degrees of imperfection. Moreover, this study also observes that the Hemler and Longstaff (1991) model performs better than the cost of carry model in estimating prices of the TAIFEX futures, suggesting that the incorporation of stochastic market volatility is beneficial to predict the TAIFEX futures prices.

Chiao and Lin (2004) argue that the strategies following the investment pace of security investment trust companies (SITCs) are more profitable than the market and those following foreign investors (FIs) and security dealers (SDs) in the Taiwan stock market. We reexamine their results under various market events and economic states. Employing the close-to-close returns, our results are mostly consistent with Chiao and Lin (2004) except that, during the period of economic recovery, following FIs is more profitable. However, employing the open-to-close returns and considering transaction costs, none of the strategies are profitable.