Annuar Nassir

Economic influence on rights issue announcement behavior in Malaysia

Abstract The negative announcement period return for seasoned equity issues in several developed share markets has been explained as an adverse selection effect to information asymmetry between managers and investors during the expansionary phases of share market cycles. This paper reports a significant positive announcement period return in an emerging share market. The average return during periods of favourable economic conditions is higher than return during unfavourable periods. The term premiums, which decline (rise) during favourable (unfavourable) economic conditions, are correlated with announcement period returns. These findings support the good news hypothesis that the return is positive because investors expect the funds from issues to be used in profitable investment projects in a high growth emerging economy.

Some Basic Properties of Financial Ratios: Evidence from an Emerging Capital Market

This study investigates the distributional characteristics and appropriate remedial actions of selected financial ratios from failed and non-failed Malaysian listed firms. A total of 66 listed firms with 330 observations and 65 variables were examined for the period from 1980 to 1996. The samples were divided into three sectors named mixed industry, combination of industrial and property and industrial sectors. Normality test was carried out to the data using Kolgomorov-Smirnov test adjusted to Lilliefors test. The finding shows that in all instances, only one variable (i.e., current asset percent) conformed to normal distribution. However, when specific sector was tested, some improvement on normality was observed after trimming outliers and data transformations. Remedial actions were carried out using three-transformation techniques namely natural log, square root and square. The natural log transformation outperforms the other techniques and the square transformation was the least effective. The findings suggest that outlier trimming improves the normality of variable after the data transformation, and this technique is more effective on the specific industry compared to the mixed industry sector.

Forecasting Financial Problems in Emerging Capital Markets

The advent of the Asian Financial Crisis (AFC) in the Southeast Asia in 1997 is an appealing case for research work in assessing corporate financial distress. From international perspective, AFC is a product of contagion effect that spread from Thailand and consequently to the other Asian countries. Domestically, the AFC has resulted a sudden economic slump and corporate failures in these economies. This paper examines the corporate failure before the 1997 Asian Financial Crisis in three emerging capital markets namely Malaysia, Singapore and Thailand, and develops, tests, and analyses a model for classifying and predicting financial distress. A failure classification model based on multiple discriminant analysis was utilised to classify listed corporations from these countries for the 1980 to 1996 period. The model is tested on a sample of 33 Malaysian, 17 Singaporean and 52 Thailand failed firms and similar number of non-failed firms in the respective countries as a control sample. The failure prediction model developed successfully discriminates between failed and non-failed listed firms at the rate of 86%, 82% and 71% of Malaysian, Singaporean and Thailand firms respectively. Further validation of findings show that the predictive accuracy was significantly better than chance.

PREDICTION OF CORPORATE FINANCIAL DISTRESS OF PN4 COMPANIES IN MALAYSIA: A LOGISTIC MODEL APPROACH

The Malaysian economy suffered serious consequences from the 1997 Asian financial crisis. As a consequence, many listed companies became financially distressed due to mounting debts, huge accumulated losses, and poor cash flows. Under the provisions of Practice Note 4/2001 (PN4), issued by the Bursa Malaysia on February 15, 2001, 91 public listed companies, after fulfilling the criteria of PN4, were classified as financially distressed companies. Financial distress precedes bankruptcy; however, not all financially distressed companies will end up in bankruptcy. The main purpose of this paper is to use financial variables to predict potential financially distressed firms using the logistic regression model. Then the predictive ability of the prediction model was analyzed and the findings are encouraging and consistent for the sample analyzed and the period of study.

Does country governance foster revenue efficiency of Islamic and conventional banks in GCC countries

Purpose – The purpose of this paper is to provide new empirical evidence on the impact of country governance on the revenue efficiency of Islamic and conventional banks. The empirical analysis is confined to Islamic and conventional banks operating in the Gulf Cooperation Council (GCC) countries banking sectors during the period of 2007-2011. Design/methodology/approach – The analysis comprises two main stages. In the first stage, the authors employ the data envelopment analysis (DEA) method to compute the revenue efficiency of Islamic and conventional banks. The authors then used the multivariate panel regression analysis with the ordinary least square and generalized method of moments as an estimation method to investigate the potential determinants and the effect of country governance on the revenue efficiency. Findings – The empirical findings indicate that greater voice and accountability, government effectiveness, and rule of law enhance the revenue efficiency of both Islamic and conventional banks....

Stock Index Futures Prices and the Asian Financial Crisis

This study reports new findings on the behavior of index futures (FKLI: code name of Kuala Lumpur Index Futures contract) prices and also records the effect of a major financial crisis on the prices. Since the inception of trading in 1995, the FKLI has been selling at a discount, which gradually increased till early 1997; further, at the onset of the financial crisis in July 1997, FKLI prices were at a high premium relative to its theoretical values. This significant mispricing of the contract declined after the initial overreaction to the crisis. Herding behavior during crisis, liquidity constraint and imposition of trading restrictions are some plausible explanations for the mispricing. This study also investigates whether trades by foreign investors had any impact when compared with prices by domestic investors. We find that foreign investors had a negative influence on permanent price changes while the domestic investors had a positive effect. Copyright (c) International Review of Finance Ltd. 2007.

Impact of Asian Financial Crisis on Malaysian Corporate Real Estate Disposals

Abstract This study examines the stock price reactions to the announcements of corporate real estate disposals by listed non-property companies in Malaysia and whether disposals under different economic conditions lead to different price reactions. The results show that the cumulative abnormal returns associated with the property disposals differ significantly in different economic conditions. Price reaction for property disposals before the Asian financial crisis is consistent with the normal investor expectations of increasing shareholder value. However, property disposals during and after the crisis have negative wealth effects. Cross-sectional regressions show that the Asian financial crisis and the relative size of the disposal are significant factors affecting the abnormal returns. The findings extend the literature on corporate real estate disposal by concluding that price reactions are conditional on economic conditions at the time of announcements on property disposals.

Attributes of an Effective Audit Committee: Evidence from an Emerging Capital Market

Audit committee has been in existence for many decades. The establishment of audit committee aimed to mitigate corporate fraudulent or creative accounting practices through internal control initiated by independent and effectively functioning non-executive members of audit committee. An effectively functioning audit committee helps to improve corporate governance practice of firms. This study identifies the attributes of an effective audit committee from audit committee chairmans perspective. The study utilized questionnaire survey approach, where a total of 200 questionnaires were distributed to chairman of audit committee of companies that listed on the Main and Second Board of the Kuala Lumpur Stock Exchange. Seventy-two useable questionnaires were returned (or 36% response rate). Using factor analysis; the respondents rated highly the effectiveness attributes, which explained 72% of the variance in all of the variables. Three factors were extracted: overall features (54% variance), model to others (10% variance) and review and analysis of standards (8% variance). In general, the respondents believed that an effective audit committee should have the following attributes: sophisticated accounting knowledge, review of financial statements, traditional role in accounting and auditing to ensure auditor independence and good management, and internal control.

Examining and validating a bankruptcy prediction models in Malaysia

The purpose of this paper is to propose and validate the combined model for bankruptcy prediction for the Malaysian firms. This combined model is adopted from previous studies by combining Ohlson logit model, Springate-Canadian model and macroeconomic factors. The proposed combined model is developed by using the financial and macroeconomic constructs. The result indicates that logistic regression performs well and it is used to validate the model. Our results also show that, the capacity of the proposed model to predict correctly is 100% for both samples (distress and non-distress firms). Finally, the results of this study could also be applicable to business and investors decision making contexts other than the bankruptcy prediction model.

Performance of Malaysian Islamic Unit Trusts Based on Consistency of Ranking

In this study, the performance of Malaysian Islamic unit trust is investigated based on consistency of ranking and can be considered as an alternative approach in evaluating portfolio performance. The Sign Test is employed to investigate consistency of ranking. The results of this study indicate that only four unit trusts namely Public Islamic Equity and CIMB Islamic Sukuk (both for short term investment) and Public Islamic Balance and CIMB Islamic Balance (both for medium term investment) exhibit non-random behavior in ranking which implies that the two unit trusts exhibit consistency and predictability in ranking. All other unit trusts show that the consistency in ranking is random and unpredictable consistent with the efficient market hypothesis.