Description:
Traditional growth literature advocated the role of fiscal policy in establishing economic growth (Mckinnon, 1973; Schumpeter, 1911; Shaw, 1973; Solow, 1956; Zagler and Durnecker, 2003), but it did not consider the role of the stock market and the financial intermediation as the potential determinants of growth. Among those few economic theories explaining the stock market and taxation as joint determinants of the economic growth are the Levine’s (1991) endogenous growth models (EGM), which suggests that economic growth is strongly influenced by the stock market and tax policy, and the Laffer - Khaldun curve, which demonstrates that reduced tax rates on investment income would stimulate economic growth which in turn generate more tax revenue and possibly even compensate for tax incentives given on investment. We investigate ten Developing Asia nations over the period 1990 to 2008. To study differences among the countries, the study sub-divides Developing Asia into East Asia Pacific (China, Thailand, Malaysia, Indonesia, Taiwan, Philippines) and South Asia (Bangladesh, India, Pakistan, Sri Lanka). Our motivation to choose these particular countries has been influenced by the rapid expansion of the stock markets and the rise in economic growth over the entire sample period. We employ panel unit root tests, Pedroni cointegration tests and panel Granger causality tests to estimate both short and long run causal relationships between stock market, tax revenue and economic growth. Data used included logged values of GDP to proxy economic growth, total tax revenue and stock market capitalization taken as a percentage of GDP to proxy tax revenue and stock market respectively. Findings provide evidence in support of Laffer-Khaldun curve and the Levine’s (1991) EGM: stock market and tax revenue do have an impact on economic growth even though the impact might be somewhat small or in some cases even negative. This can be due to country- specific characteristics that make a successful transition from stock market and tax revenue to economic growth more difficult (i.e., corruption, difficulties in obtaining credit at the personal level, inflation). In the short run results demonstrate the existence of causal linkages (varying directions) for the countries in East Asia Pacific and South Asia. In the long run, for all the examined sub-samples the direction of relationship runs from i) economic growth and tax revenue to stock market; and ii) economic growth and stock market to tax revenue. For policy implementation, these results indicate that in order to promote economic growth, governments of ten Developing Asia should improve the channels between the stock market, taxation policy and economic growth by developing stock market liquidity and by identifying growth-oriented tax reform strategies.
Description:
Purpose: The purpose of this paper is to empirically investigate the impact of two monitoring mechanisms: family ownership (FO) and financial reporting quality (FRQ) on investment efficiency (IE) over the period of 2007–2014 for listed firms on the Pakistan Stock Exchange. Design/methodology/approach: The authors employ two-dimensional pooled OLS cluster at the firm and year level, two-stage least square regression and feasible generalized lease square regression regression methods. Findings: The findings suggest that higher FRQ and FO are associated with higher IE. Further, the authors report that higher FRQ and FO mitigate over- and under-investment. The impact of FRQ on IE is stronger (weaker) for family-controlled businesses. The results for these particular estimates are robust for alternative estimation techniques and measures of FRQ and FO. Originality/value: The study draws on both agency and behavioral agency theories and therefore contributes to the literature in the following ways. First, the authors examine a relationship between FRQ and IE. Second, the authors test the impact of FO on IE. Third, the authors test the moderating impact of FO on the relationship between FRQ and the IE of family and non-family firms in relatively less regulated emerging market.
Description:
National Natural Science Foundation of China [grant number 719010481] Liaoning Provincial Federation Social Science Circles of China [grant number 2019lsljdwtkt-008] Ministry of Education Project of Humanities and Social Sciences in China [grant number 18YJC790171]
Description:
Using public, private and subsidiary acquisitions, we examine whether abnormal returns to bidders depend on the organisational form of the target acquired. The evidence supports two main hypotheses: (i) bidders on private and subsidiary targets earn higher abnormal returns than bidders on public entities and (ii) bidders on private targets earn higher abnormal returns when the method of payment is stock. Acquisitions of unlisted public targets, privately negotiated acquisitions of private targets and acquisitions of subsidiaries from listed parents for cash are associated with higher abnormal returns. •Wealth effect of acquisition announcements depends on target's organisational form.•Acquirers of private and subsidiary targets earn higher abnormal returns.•Bid and firm characteristics systematically influence the market reaction.•Influence of break fees on excess return differs across target categories.•Acquisitions of private targets during GFC are rewarded by the capital market.
Description:
The design of consistent classifiers to forecast credit-granting choices is critical for many financial decision-making practices. Although a number of artificial and statistical techniques have been developed to predict customer insolvency, how to provide an inclusive appraisal of prediction models and recommend adequate classifiers is still an imperative and understudied area in credit default prediction (CDP) modeling. Previous evidence demonstrates that the ranking of classifiers varies for different criteria with measures under different circumstances. In this study, we address this methodological flaw by proposing the simultaneous application of support vector machine and probabilistic neural network (PNN)-based CDP algorithms, together with frequently used high-performance models. We fill the gap by introducing a set of multidimensional evaluation measures combined with some novel metrics that are helpful in discovering unseen features of the model’s performance. For effectiveness and feasibility purposes, six real-world credit data sets have been applied. Our empirical study shows that the PNN model is more robust than its rivals, and traditional performance evaluations are more or less consistent with their original counterparts. With these contributions, therefore, our investigations offer several advantages to practitioners of financial risk management.
Description:
•Wealth effect of Chinese PE announcements can be seen on application, approval, and completion.•No significant price response on announcements of withdrawal or rejection of applications.•Market discount, proceeds from private placements, and private-institutional buying systematically influence market reaction.•Influence of announcement effect differs across changes in ownership of investor categories.•Results are consistent with the information and ownership structure hypotheses. In response to the China Securities Regulatory Commission's regulation of private equity placements (PEP) in 2006, this study investigates the impact of the announcements of PEP applications, withdrawals, rejections, approvals, and completions on the returns of the firms that issue private equity (PE) and the factors that influence market reactions to these announcements. The results show that issuing firms experience stock price responses only to the announcements of PE applications, approvals, and completions. The announcement effect is positively related to the market discount, proceeds from private placements, and private institutional buying and ownership changes; and negatively related to government or government institutional buying and changes in the ownership of management buyers.
Description:
This paper tests both the short and long term relationship between the real GDP, the equity amounts outstanding, the corporate bond amounts outstanding and bank credit to the private sector for five emerging markets. In particular, the finance-growth nexus is analysed with data collected from China, Indonesia, the Philippines, South Korea and Thailand between 1994 and 2009 using panel VECM analysis. The cointegration technique is then used to examine the long run behavior based on the assumption that all the variables involved have the same degree of integration and the error correction model (ECM) and the Wald test are employed to determine the direction of causality. The empirical results suggest the existence of a stable relationship in the direction from economic growth to financial market development that is consistent with the information asymmetry arguments for emerging markets. The findings have implications for financial and economic policy makers and enable these stakeholders to determine which sectors should be encouraged to achieve overall economic growth and development. The results are also useful to investors as they show the level of the intensity of information asymmetry on which these relationships might vary in both the short and long run.
Description:
This article assesses the opportunities and challenges for different categories of FinTechs in the SAARC and ASEAN regions. We consider the global financial inclusion data released by the World Bank and map the responses to gain insights into the opportunities and challenges for FinTechs in the respective regions. We develop a new index, termed the FinTech Opportunity Index (FOI), to conceptualise the opportunities and barriers based on individual savings, borrowings, purchasing behaviour, and payment preferences. We note that FinTech services have potential opportunities for expansion in the ASEAN regions but less so in the SAARC regions. The need for different types of FinTech services varies between regions. Services such as crowdfunding, neobanks, and InsurTech have potential in the ASEAN regions, especially with the positive attitude towards entrepreneurship and asset investments. In the SAARC regions, InsurTechs linked to health care has potential along with LendTechs and neobanks. We further note that males, and the young are more likely adopters of FinTechs in both regions. The analysis suggests the need for innovative promotions and education to motivate the more sceptical, especially women and the elderly population, to adopt FinTech services.
Description:
This article assesses the opportunities and challenges for different categories of FinTechs in the SAARC and ASEAN regions. We consider the global financial inclusion data released by the World Bank and map the responses to gain insights into the opportunities and challenges for FinTechs in the respective regions. We develop a new index, termed the FinTech Opportunity Index (FOI), to conceptualise the opportunities and barriers based on individual savings, borrowings, purchasing behaviour, and payment preferences. We note that FinTech services have potential opportunities for expansion in the ASEAN regions but less so in the SAARC regions. The need for different types of FinTech services varies between regions. Services such as crowdfunding, neobanks, and InsurTech have potential in the ASEAN regions, especially with the positive attitude towards entrepreneurship and asset investments. In the SAARC regions, InsurTechs linked to health care has potential along with LendTechs and neobanks. We further note that males, and the young are more likely adopters of FinTechs in both regions. The analysis suggests the need for innovative promotions and education to motivate the more sceptical, especially women and the elderly population, to adopt FinTech services.
Description:
We present large sample evidence on return performances of ustralian acquirers who bid for public and private targets in cross‐border acquisitions. While placing a particular emphasis on the method of payment and the shareholder protection offered by the target country, we analyse the impact of various bid, firm and foreign‐acquisition‐specific characteristics on bidding firms' abnormal returns. We find that ustralian investors perceive cross‐border acquisitions as value‐creating exercises regardless of the organisational form of the target acquired. However, bidders for private targets earn higher return when the method of payment is stock and the targets are located in high investor protection countries. We further find that the abnormal returns are conditional to the relative size of the target, bid frequency, target country destination and the preacquisition financial performance of bidding firms.
Description:
This paper empirically tests Levine's [1] endogenous growth model, which suggests that stock market and tax policy jointly affect economic growth. Following Levine [1], tax or impeding financial market activities have the potential to lower per capita growth rate. Using monthly data from 1980 to 2008, the relationship between tax revenue, stock market as proxies by direct tax revenue and KLCI respectively and economic growth in Malaysia is modeled using the Granger causality and VECM framework. Results support Levine's theory and reveal that over the sample period both tax revenue and stock market affect pattern of economic growth in Malaysia. These findings indicate that strong growth can be achieved through booming of stock market activities and the high revenue collection. Fiscal policy authorities in Malaysia will find these results useful.