Izani Ibrahim

Factors Affecting Speed of Adjustment to Target Leverage: Malaysia Evidence

This study focuses on the dynamic aspect of capital structure which is a relatively new area in the finance literature. By employing panel data, 790 of non-financial listed firms in Malaysia are examined for the period 2000–2009. Conducted using the dynamic Partial Adjustment Model and estimated based on the Generalized Method of Moment, this study investigates the existence of target capital structure, speed of adjustment and factors affecting speed of adjustment. There are evidences of target capital structure and firms do adjust to be at their target from time to time with a considerably rapid speed of adjustment, in line with dynamic trade-off theory. Firms in Malaysia are found to be under-adjusted, being below the required adjustment to be at the target within a year. Study on factors affecting speed of adjustment is a new contribution to the literature as no work has been done regarding this issue in Malaysia. This study also analyzes firm-specific factors affecting speed of adjustment. There is strong evidence on the negative relationship between the speed of adjustment and distance from target leverage suggesting fast adjustment if not being far from target. Firm size and profitability significantly influence speed of adjustment for firms in Malaysia.

Export externalities and economic growth

Feder formulated the first model with an explicit mechanism connecting international trade and economic growth. We present new econometric estimates of this unique model for 30 developing countries studied by Feder. We replicate Feders 1964 – 73 cross-section estimates for 1974 – 83 and 1984 – 93 and find that the export variables lose significance and that the model has less explanatory power overall. We also try to improve on time-series estimates by Ram and find that the coefficient of Feders total factor productivity differential in favour of the export sector was positive and significant for 18 of the 30 countries. The export externality coefficient proved to be positive and significant in 13 countries although significant multicollinearity occurs in the regressions for eight of the 13. Comparisons of the results among countries suggest that the impact of exports on growth depends on population size, trade orientation, and the importance of manufacturing.

Optimized drawdown risk in evaluating the performance of Malaysian mutual funds

Purpose – This paper aims to evaluate the risk‐adjusted performance of Malaysian mutual funds using optimized drawdown risk measures (ODRMs) based on modern portfolio theory, and to represent the results in a manner which is easily understood by average investors and portfolio managers.Design/methodology/approach – This study evaluates the performance of 70 Malaysian mutual funds using risk‐adjusted returns during 2000‐2011. The ODRM is primarily calculated by 70 linear programming models, consequently seven new optimized risk‐adjusted performance measures including Sharpe, Treynor, M‐squared, Jensens alpha, information ratio (IR), MSR, and FPI are proposed to evaluate these funds.Findings – The results of this study have several implications. First, the ODRM can be an alternative risk measure to optimize the selection of mutual funds. Second, it proposes new seven optimized performance measures of Sharpe, Treynor, M‐square, Jensens alpha, IR, MSR, and FPI. These measures help fund managers to evaluate ...

Mean-drawdown risk behavior: drawdown risk and capital asset pricing

We develop an alternative approach based on mean-drawdown risk behavior versus the mean-variance behavior. We develop two risk measures as the maximum draw down risk and average drawdown risk to estimate two new betas and then propose two CAPM -like models. The data includes a comprehensive universe of more than 11,000 US equity-based mutual funds from first month of 2000 to third month of 2011.The evidence clearly shows superiority of the maximum and average drawdown betas and their pricing models, the maximum drawdown CAPM and the average drawdown CAPM , over the traditional beta and CAPM , respectively.

Capital Structure of Southeast Asian Firms

The relationship between capital structure and firm value has been widely studied and analysed theoretically and empirically by researchers past and present. This is because a firm’s financing behaviour will consequently affect the value of the firm. In tackling the issue of capital structure, two main questions have to be addressed: how firms choose their capital structure to finance their operation, and how the choice of capital structure financing affects the value of the firm.