Review of Pacific Basin Financial Markets and Policies

We employ the concept of Granger causality to investigate the root-leaf relationship between the manufacturing and financial services industry in Taiwan's economy. Our empirical results show that manufacturing led finance for the last half century, which is consistent with the pattern of other emerging economies. However, the liberalization of the financial services industry in the 1980s changed the relationship from "manufacturing leads, finance follows" to a feedback system. Accordingly, the financial services industry should play a more important role than previously for Taiwan to maintain its economic growth.

The availability of a two-year high-frequency transaction data of the Japanese Government Bond (JGB) futures provides us with an opportunity to uncovering volatility persistence in high-frequency returns and testing the mixed-distribution-hypothesis (MDH) in this market. Both time-domain and frequency domain methods show that the degrees of volatility persistence are very similar across various frequencies, which supports the MDH. The result also shows that the method of filtering out the intraday pattern annihilates the complex interaction of the intraday periodicity and the volatility persistent process, and effectively uncovers volatility persistence phenomenon in the high-frequency data.

This study examines the impact of increasing pre-trade transparency using intraday data from the Taiwanese stock market, which has recently experienced gradually increasing transparency. The analytical results indicate the disclosed quotes are more informative than the accompanied depths, and the orders of institutional traders are more informative than those of individual traders. Additionally, the best quotes of unexecuted orders for individual traders always contain more information than the average quotes from Steps 2 to 5, whereas this does not apply for institutional investors. The feature is more obvious for the sub-samples with high and medium turnover rate, but not for the sub-samples with low turnover rate.

The purpose of this study is to examine the impacts of alternative flotation methods on price performance of seasoned equity offerings, and to compare the competing hypotheses supported by asymmetric information theory and agency theory. Based on 385 sample issues which were listed in Taiwan Stock Exchange from 1996 to 2006, we find that the bookbuilding flotation method demonstrates significant positive abnormal returns for issuing firms, whereas the fixed-price method exhibits negative results. The empirical findings support the agency theory in the sense that the bookbuilding procedure offers a mechanism to strengthen the external monitoring provided by blockholders, which can subsequently reduce the agency cost and thus increase the share price. Further cross sectional analysis confirms this argument. The result of the study implies that the governments should take effective actions to help regulate agency problems in emerging markets such as Taiwan.

This study examines the perception of non-accounting business major students about the managerial accounting course. The knowledge of these perceptions will help determine whether educators need to be concerned about inspiring certain groups of students to be more aggressive in learning the material. We found that all non-accounting majors, regardless of their major field of study think the managerial accounting course is interesting and has real-world application. The finance and management major students think that the course is related to their field of study and it should be made a required course, but not the MIS and marketing major students. The higher the academic skills and the more the work experience, the greater is the student's perception that managerial accounting should be a required course and has real-world application. Based on the results, we suggest that development of teaching materials aimed at reinforcing the importance of managerial accounting topics to all business majors, particularly MIS and marketing majors may overcome some barriers to learning the subject. This research also has implications for Pacific Basin business schools as our findings indicate that Pacific Basin business schools that do not require non-accounting majors to take managerial accounting course should make it a required course for all undergraduate non-accounting majors.

Empirical studies on the influence of tick-size reduction towards market liquidity have focused almost exclusively on quote-driven markets in developed nations, and generally their findings are based on time periods of less than one year. This work investigates the influence of tick-size reduction and the relaxations of binding-constraint probability on market liquidity in the Taiwanese stock market, an emerging order-driven market, starting on March 1, 2005. The empirical results show that the spread, depth, market liquidity, and binding-constraint probability all decrease following the tick-size reduction, especially for low-priced stocks. These results can be attributed to relaxation of binding constraints. Additionally, stocks that are frequently traded, have larger market capitalization, or have restrictive binding constraints, experience considerable declines in spread, depth, and market liquidity following tick-size reduction. Trading activity plays an important role in explaining changes in spread, depth, market liquidity, and binding constraints. Thus, tick-size reduction in the Taiwanese Stock Market can increase market efficiency and reduce the investors' trading costs.

This paper presents the first comprehensive study of the performance and market timing ability of the equity funds that comprise the Hong Kong Mandatory Provident Funds (MPF) scheme. In general, our results suggest that US equity funds consistently underperform relative to the market, while the other fund groups consistently outperform the market. The stock-selection ability of MPF constituent equity funds in times of changing economic condition is also investigated. The evidence is consistent with previous studies, which suggest that the conditional models decrease the individual fund traditional alpha measure. The market timing models of Treynor–Mazuy and Henriksson–Merton provide evidence of superior market timing ability.