Benjamin Liu

The impact of securitisation and structural changes of the Australian mortgage markets on bank pricing behaviour

This paper investigates the impact of securitisation and structural changes of the Australian mortgage market on bank pricing behaviour. Since the mid-1990s, securitisation has dramatically increased and, thus, intensified competition between banks and mortgage corporations (new entrants). To respond to the competition, banks largely reduced their mortgage interest rates. However, there is no study on what caused their price reductions. We present a simple model to explain the potential factors that may affect bank behaviour. This is the first examination of the issue from both the perspectives of cost effects and market structural changes by testing four major bank data. It finds that lender yield spreads are significantly related to bank market share, existing and new loan concentration indexes and securitisation, respectively. The findings further indicate that declined concentration and increased competition have significantly caused lender spread changes. The findings are consistent with both the securitisation literature (e.g., Gorton and Pennacchi, 1995; Kolari et al., 1998; Ambrose et al., 2004) and price concentration studies (e.g., Berger and Hannan, 1989).

What determines stock liquidity in Australia

ABSTRACT Using an index of corporate governance quality (CGQ), we provide the first robust evidence of the determinants of stock liquidity in Australia. We assume that CGQ affects stock liquidity because effective governance decreases information asymmetries between insiders (e.g. managers) and outsiders (e.g. investors), as well as among outsiders, by improving information transparency of a firm. Consistent with agency theory, this study, using 435 large capitalization firms over the period from 2001 to 2008, finds a significant positive relationship between CGQ and stock liquidity, suggesting that better governed firms have a higher level of stock liquidity. These findings are robust to alternative proxies of CGQ, stock liquidity and endogeneity bias.

Saudi Arabian IPOs and privatized firms profitability

A sample of 21 privatized and IPO Saudi firms has been examined in this paper. Consistent with the relative literature on privatization and IPOs, we have documented two contrasting outcomes. First, we found that Saudi State Owned Enterprises SOEs and the private joint stock companies are showing a large improvement after-IPO as compared to the pre-IPO financial performance. On the contrary, we found a financial performance deterioration among the family owned businesses or the limited liability type of firms after the IPO compared to the pre-IPO level as measured by the return on assets (ROA) and return on sales (ROS).

Saudi Arabian IPOs productivity and efficiency

Purpose - The main objective of the paper is to examine the performance of Saudi Arabian firms’ performance as they make the transition from private ownership into public ownership.Design/ Methodology/ Approach - A sample of 13 Saudi IPOs performance is investigated. We use a data envelopment analysis DEA method to construct the Malmquist productivity and efficiency indices.Findings - We have found that Saudi IPOs exhibit a significant decline in the productivity after the IPO as compared to the pre-IPO level.Originality/ Value - The paper is the first to provide assessment for the clustering IPOs that occurred in the Kingdom of Saudi Arabia in recent years.

Stock Returns and Consumption Factors in the Australian Market: Cross-Sectional Tests

We test conditional consumption capital asset pricing models (CCAPMs) in the Australian equity market. The conditional variables used are Lettau and Ludvigson’s (2001a, b) consumption–wealth ratio, Campbell and Cochrane’s (1999) surplus consumption ratio and Santos and Veronesi’s (2006) labour income to consumption ratio. We examine the cross-sectional implications of these variables using the Fama–French 25 size and book-to-market portfolios and Australian industry portfolios. The Fama–MacBeth (1973) cross-sectional regressions on the 25 size/book-to-market portfolios show that the conditional models perform better than the unconditional models. However, these conditional models cannot outperform the Fama–French three-factor model. The conditional CCAPM, with the labour income to consumption ratio as a scaling factor, can match more closely the performance of the Fama–French three-factor model. We also find that consumption growth is non-contemporaneously related to portfolio returns.

IPO underpricing in supply and demand framework: evidence from a market of retailers

ABSTRACT How do supply, demand and allocation of shares on the underpricing of initial public offerings (IPOs) affect the shape and steepness of supply and demand curves? Theoretical studies posit that subscribers ‘flip’ in IPOs immediately on the listing day to capture instantaneous profits. Consistent with this hypothesis, we find that both curves of the market listing day of IPOs are significantly negatively sloped with the supply curve being much steeper and above the demand curve. The excess demand that occurs during the subscription period becomes excess supply once the shares start to float on the listing day. Overall, we establish a strong empirical link between the underpricing puzzle and the aftermarket interaction of IPOs.

The impact of the GST on mortgage yield spreads of Australian banks

Australia has experienced significant rises in mortgage costs and sharp declines in housing affordability in the past decade, which corresponds with the introduction of the Goods and Services Tax (GST) in the nation in July 2000. To what extent the GST has impacted mortgage costs is our research question. Using the mortgage loan data of all banks operating in Australia, this study investigates and measures the changes of mortgage yield spreads in the pre- and post-GST periods. Results show the bank lenders significantly increased their mortgage charges in the post-GST periods and the rise in mortgage charges was not a one-off impact. The findings have important financial, economic and policy implications.

The impact of the GST on mortgage pricing of Australian credit unions: An empirical analysis

Purpose - – The purpose of this paper is to investigate the impact of the Goods and Services Tax (GST) on mortgage pricing and to measure the GST shifting ratio of Australian credit unions. Design/methodology/approach - – Using the proprietary data from 79 credit unions in Australia, we perform multivariate regression analysis on the effect of the GST on mortgage effective yield spreads and interest margins, respectively. We also introduce a model that is used to measure the GST shifting ratio. Findings - – We document that the introduction of the GST in July 2000 led to the substantial rise in mortgage costs charged by credit unions in the post-GST periods. Overall, the GST alone contributed to the increase of effective yield spreads and interest margin by 65.3 and 70.1 basis points, respectively. As measured by the GST-shifting ratio, credit unions passed more than twice of the GST rate. This suggests GST over-shifting, and it is generally consistent with tax over-shifting literature. Originality/value - – This is the first time the GST shifting ratio has been robustly measured with the use of multivariate models on mortgage costs.