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The International Journal of Banking and Finance (IJBF) Vol. 5 No.2 2008

Insider Trading and Large Chapter 11 Bankruptcies in Usa
Tareque Nasser and Benton E. Gup
The University of Alabama
 
Abstract Ɩ Full Text
The Enron and WorldCom debacles raised questions about the state of corporate governance in the United States. Insider trading is one aspect of corporate governance highlighted in these cases. In this paper, we explore insider trading of large Chapter 11 bankruptcy filing firms during the twelve-year period of 1995-2006. We find that insiders in these firms, on average, do not use private information for gain or loss avoidance.
 
Keywords: Insider trading, Bankruptcy, and Corporate governance
JEL classification: G32, G34
 

 
The Dynamics of Credit Quality and Implications for The Pricing of Small Business Loans
Adrian M. Cowan and Charles D. Cowan
St. Mary’s University, San Antonio and The University
of Alabama, Birmingham
 
Abstract Ɩ Full Text
We analyze the implications of the dynamics of credit scores for small businesses; strategies for banks to maximize revenues; and Basel II minimum capital requirements on loan pricing for loans to small firms that do not have access to capital markets. Relating dynamic changes in the competitive environment to pricing decisions also provides a contribution to the literature. A theoretical model is developed to investigate the differences between relationship and transactional lending to small businesses in the context of these factors in the banking industry. The model demonstrates that in highly competitive markets, each type of lender occupies overlapping spaces, and can be simultaneously attractive to different types of borrowers if banks take advantage of their knowledge of the dynamics.
 
Keywords: Credit scoring, Loan pricing, Small business lending, Basel II
JEL Classification: G21, D81, L14
 

 
The Information Conveyed by Debt and Equity Announcements in Australia
Oraluck Arsiraphongphisit
Deakin University, Australia
 
Abstract Ɩ Full Text
This paper aims to report the findings associated with the effects of share prices around the disclosure dates of four different debt-and-equity fund-raising events over a 12-year period from 1991 to 2003 in Australia. By applying the well-known event study approach, along with the data-trimming procedures, a new idea is to remove all known confounding events and make corrections for thin-trading bias. The observed statistically significant price effects are consistent with theories: a positive price effect is observed for straight-debt and private placements whereas negative price effects occur when convertible debt and rights issues are announced. The results pertaining to the private placement effect is reported for the first time on this market. These findings are consistent with leverage, agency, and asymmetric information theories. It is believed that this study contributes new evidence on private placements and other events adding to existing literature surrounding the matter at hand.
 
Keywords: Equity private placement, Equity rights issue, Straight debt, Convertible debt, Cumulative abnormal returns
JEL Classification: D92, G32
 

 
How Defined, Benefit Pension Assets Affect the Returns and Volatility of the Sponsor’s
Stock
* Brooks Marshall, Timothy B. Michael,
David M. Maloney and *Faramarz Damanpour
* James Madison University, University of Virginia
and University of Houston
 
Abstract Ɩ Full Text
In its valuation of firms with defined benefit plans, the stock market combines changes in the valuation of pension assets with changes in the valuation of the net core assets. Unfortunately, aggregating the two disparate asset classes in valuation discards information about both classes. This work shows that by extracting the pension component of returns, two types of insights result: first, an enhanced understanding of the underlying risk and return of the firm’s net core assets; and, second, an enhanced perspective of the potential benefit from incorporating pension asset allocation into overall risk management.
 
Keywords: Pension, Risk management, Valuation, Assets
JEL Classification: J32, M52
 

 
A Note on ‘What Drives Share Prices in the Middle East?’
Panos Priftakis and M. Ishaq Bhatti
La Trobe University, Australia
 
Abstract Ɩ Full Text
There are several hypotheses suggesting that some properties of oil prices make it interesting to focus on the predictive ability of oil prices for stock returns. This paper reviews some models recently used in the literature and selects the most suitable one for measuring the relationships and/or linkages of oil prices to the stock markets of the selected five oil producing countries in the Middle East. In particular, the paper uses two methodologies to test for the presence of a cointegrating relationship between the two variables and an unobserved components model to find a relationship between the two variables. The results rejects convincingly that there is no linkage between the prices of oil and the stock market prices in these oil-based economies.
 
Keywords: Oil prices, Stock market, Econometrics, Unobserved-components model, Cointegration
JEL Classification: G15
 

 
Efficiency of Domestic and Foreign Banks in Thailand Since the Asian Financial Crisis
Tosporn Chotigeat
Nicholls State University, United States
 
Abstract Ɩ Full Text
During the 1990’s, two simultaneous phenomena had converged, greatly changing the financial services industry in Thailand. At the national level, Thai banks had to restructure in response to the financial reforms implemented as a result of the financial crisis of 1997. At the global level, large multinational banks were taking advantage of worldwide, financial deregulation and rapid technological advances by offering a full range of financial products and services in order to fiercely compete, both domestically and globally. Using quarterly financial time-series data of domestic and foreign banks in Thailand from 1997 to 2003, this paper seeks to analyze the cause of their efficiency. The findings indicate that both the efficiency ratio and loan loss provisions influenced the negative performance of domestic banks, while only loan loss provisions had negatively influenced the performance of foreign banks.
 
Keywords: Efficiency, Domestic/foreign banks, Loan loss provision, ROE, Financial crisis
JEL Classification: C32, E44, F23, G15
 

 
The Efficiency of Trading Halts: Emerging Market Evidence
Obiyathulla I. Bacha, Mohamed Eskandarn S. A.
Rashid and Roslily Ramlee
Internacional Islamic University Malaysia
 
Abstract Ɩ Full Text
This paper reports new findings on the price effect from trading halts - both voluntary and mandatory - over 2000-04 in an emerging share market, Malaysia. Based on our overall sample, trading halts lead to positive price reaction, increased volume, and increased volatility. We found evidence of information leakage resulting in a significant difference between voluntary and mandatory halts as well as the type of news released during halts to warrant such an impact. The duration of the halt has an isolated impact and is largely inconsequential. The frequency of halts does not seem to matter.
 
Keywords: Trading Halts, Price, Efficiency, and Malaysia
JEL classification: G14
 

 
The Efficiency of Non-Bank Financial Intermediaries: Empirical Evidence from Malaysia
Fadzlan Sufian
The University of Malaysia and CIMB Bank Berhad
 
Abstract Ɩ Full Text
This paper investigates the performance of Malaysian non-bank financial institutions during the period of 2000-2004. Several efficiency estimates of individual NBFIs are evaluated using the non-parametric Data Envelopment Analysis (DEA) method. The findings suggest that during the period of study, scale inefficiency outweighs pure technical inefficiency in the Malaysian NBFI sector. We find that the merchant banks have exhibited a higher, technical efficiency compared to their peers. The empirical findings suggest that scale efficiency tends to be more sensitive to the exclusion of risk factors, implying that potential economies of scale may be overestimated when risk factors are excluded.
 
Keywords: Non-Bank financial intermediaries, Data Envelopment Analysis (DEA), Risk
JEL Classification: G21, G28

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