Mahendra Raj and Michael Forsyth
Prior studies have reported mixed findings regarding bidder shareholder returns. There are many theories regarding the motivation towards the initiation of a takeover. This study…
Abstract
Prior studies have reported mixed findings regarding bidder shareholder returns. There are many theories regarding the motivation towards the initiation of a takeover. This study intends to analyze four major merger motivations separately and examine the impact each has on bidder returns. We find the market reacts according to the nature of the takeover and the underlying motive behind the bid.
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This paper attempts to examine a number of issues regarding the returns on the Hang Seng Index Futures traded in Hong Kong. The daily returns are separated into close‐to‐close…
Abstract
This paper attempts to examine a number of issues regarding the returns on the Hang Seng Index Futures traded in Hong Kong. The daily returns are separated into close‐to‐close, close‐to‐open, and open‐to‐close periods and the three returns examined for autocorrelation, GARCH and seasonal effects. The study reveals that the CLCL returns are autocorrelated and that most of the returns exhibit GARCH effects. With regard to seasonal effects the results are mixed.
David Lal, Peter A. Strachan and Mahendra Raj
The global telecommunications marketplace has witnessed considerable and unprecedented changes in the past twenty‐five years, so much so, that comparative recognition of most…
Abstract
The global telecommunications marketplace has witnessed considerable and unprecedented changes in the past twenty‐five years, so much so, that comparative recognition of most telecommunications fixed‐link network operators is impossible. Consequently, industry structures, market specific structures and the internal operation of incumbent firms have been transformed by visionary strategic directional changes. Demonstrably, the impact of national strategic intentions have identified clear shifts away from predominantly monopolistic – high bureaucratic, labour‐intensive and government‐run service providers, towards distinct deregulated markets – supporting increasingly competitive, innovative and market‐led organisations. With this in mind, this study considers the nature of organisational strategic evolution and its associated consequences on the UK incumbent BT, since UK telecommunications privatisation. A case study approach waqs adopted, with face‐to‐face interviews being carried‐out with senior executives, using semi‐structured questionnaire checklists. Content analysis was applied to the data set and results alluded to the nature of both strategic evolution and the emerging strategic focus occurring within the firm. Against the is backdrop, BT was seen to evolve from a dormant, fat, inward‐looking and inefficient organisation, towards a more dynamic, forward thinking, creative and global organisation. A conceptual model partraying the impact of strategic change on transforming the business focus of BT is developed.
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Mahendra Raj and Damini Kumari
This paper attempts to investigate the presence of seasonal effects in the Indian stock market.
Abstract
Purpose
This paper attempts to investigate the presence of seasonal effects in the Indian stock market.
Design/methodology/approach
The paper tests the efficiency of the Indian stock market through a number of hypotheses. Week day effects, day‐of‐the‐week, weekend, January and April effects are examined by applying a variety of statistical techniques.
Findings
The results are interesting and contradict some of the findings found elsewhere. The negative Monday effect and the positive January effects are not found in India. Instead the Monday returns are positive while Tuesday returns are negative.
Research limitations/implications
The seasonal effects in the Indian market have been examined by the two major indices, the Bombay Stock Exchange Index and the National Stock Exchange Index. However, it must be remembered that the Indian economy became deregulated from 1991 and this may have had an impact on the markets.
Practical implications
This study indicates that the Indian stock market does not exhibit the usual seasonal anomalies such as Monday and January effect. The absence of Monday effect could be due to the settlement period in Indian market. That the tax year ends in March and December has no special significance may explain the non‐existence of January
Originality/value
Most of the studies on anomalies have dealt with the developed markets. The Indian market has its unique Badla financing, settlement period duration and trading regulations. The presence/absence of the anomalies may provide support to some of the hypotheses used to explain them.
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SHANTARAM P. HEGDE and SANJAY B. VARSHNEY
We argue that uninformed subscribers to an initial public offering (IPO) of common stocks are exposed to greater ex ante risk of trading against informed traders in the secondary…
Abstract
We argue that uninformed subscribers to an initial public offering (IPO) of common stocks are exposed to greater ex ante risk of trading against informed traders in the secondary market because the advent of public trading conveys hitherto private information and thereby mitigates adverse selection. The going‐public firm underprices the new issue to compensate uninformed subscribers for this added secondary market adverse selection risk. We test this market liquidity‐based explanation by investigating the ex‐post consequences of ownership structure choice on the initial pricing and the secondary market liquidity of a sample of initial public offerings on the New York Stock Exchange (NYSE). Consistent with our argument, we find that initial underpricing varies directly with the ex post trading costs in the secondary market. Further, initial underpricing is related positively to the concentration of institutional shareholdings and negatively to the proportional equity ownership retained by the founding shareholders. Finally, the secondary market illiquidity of new issues is positively related to institutional ownership concentration and negatively to ownership retention and underwriter reputation. Thus, the evidence based on our NYSE sample supports the view that the entrepreneurs' choice of ownership structure affects both the initial pricing and the subsequent market liquidity of new issues.
FAYEZ A. ELAYAN, JAMMY S.C. LAU and THOMAS O. MEYER
Incentive‐based executive compensation is regarded as a mechanism for alleviating agency problems between executives and shareholders. Seventy‐three New Zealand (NZ) listed…
Abstract
Incentive‐based executive compensation is regarded as a mechanism for alleviating agency problems between executives and shareholders. Seventy‐three New Zealand (NZ) listed companies are used to examine the relationship between executive incentive compensation schemes (ICS) and firm performance. The results suggest that neither compensation level nor adoption of an ICS are significantly related to returns to shareholders or ROA. However, there is a statistically significant relationship between Tobin's q and both CEO compensation and executive share ownership. Further, the evidence suggests the recent compensation disclosure requirements in NZ are not yet stringent enough to allow adequate analysis of the link between ICSs and corporate performance.
Although there are theoretical costs and benefits to corporate diversification, there is ample empirical evidence that the stock market views the costs to outweigh the benefits…
Abstract
Although there are theoretical costs and benefits to corporate diversification, there is ample empirical evidence that the stock market views the costs to outweigh the benefits (Lang and Stulz (1994), Berger and Ofek (1995), Servaes (1996), etc.) These studies are cross‐sectional studies which compare diversified firms to specialized firms and examine valuation multiples. The studies find that diversified firms have lower valuation multiples than specialized firms. This is called the diversification discount. In this paper, a sample of U.S. firms which are specialized and then become diversified are examined. We do not find evidence of a long‐term reduction in firm value associated with diversification.
ERCAN TIRTIROĞLU and DOĞAN TIRTIROĞLU
In an efficient market, where the participants form their expectations rationally, all potential changes induced by a predictable event are incorporated into the asset prices…
Abstract
In an efficient market, where the participants form their expectations rationally, all potential changes induced by a predictable event are incorporated into the asset prices before the uncertainty relating to the outcome of the event is resolved. This paper develops a methodology to test whether temporal prices of fixed income assets reflect market efficiency. The methodology developed employs the Fisher information measure, which is couched within the framework of a moving variance process. We empirically demonstrate the methodology for U.S. Treasury's first exercise, in three decades, of its option to call (on October 09, 1991) one of its outstanding callable bonds. Empirical results indicate a delayed market reaction.