Wilson H.S. Tong

China share issue privatization: the extent of its success

Abstract We evaluate the performance changes of 634 state-owned enterprises (SOEs) listed on Chinas two exchanges upon share issuing privatisation (SIP) in the period 1994–1998. We find that SIP is effective in improving SOEs’ earnings ability, real sales, and workers’ productivity but is not successful in improving profit returns and leverage after privatisation. We also find state ownership having negative impacts on firm performance and legal-person ownership having positive impacts on firm performance after SIP, which suggests that legal persons behave differently from the state government. Surprisingly, foreign ownership does not show uniformly strong, positive impacts on firm performance.

Profitability of Momentum Strategies in the International Equity Markets

This paper examines the profitability of momentum strategies implemented on international stock market indices. Our results indicate statiscally significant evidence of momentum profits. The momentum profits arise mainly from time-series predictability in stock market indices—very little profit comes from predictability in the currency markets. We also find higher profits for momentum portfolios implemented on markets with higher volume in the previous period, indicating that return continuation is stronger following an increase in trading volume. This result confirms the informational role of volume and its applicability in technical analysis.

Determinants of foreign direct investment across China

Abstract We analyze the spatial and temporal variation in foreign direct investment (FDI) among Chinas 30 provinces from 1986 to 1998. Motivated by Naughton (Brooklings Pap Econo Activ 2 (1996) 273), we distinguish our study from similar studies by examining changes in importance of FDI determinants through time. We do find supporting evidence. This is due to the shift in the nature of FDI in China. We also find that the cumulative FDI relative to cumulative domestic investment has a negative impact on the new FDI. Provincial officials have to improve the investment environment. Otherwise, multinational corporations may choose to invest in provinces with fewer FDI competitors. Our analysis is robust across different specifications. However, it explains the FDI distribution in the coastal provinces better than it does for Central and Western provinces.

How Does Government Ownership Affect Firm Performance? Evidence from China's Privatization Experience

The effect of government ownership on firm performance remains a controversial issue, especially in a transitional economy like China. Government ownership is typically viewed as adversely affecting firm performance. This study of that of Mainland Chinas privatization experience indicates the opposite. No matter whether it is in the form of state ownership or legal person ownership, government ownership has a positive impact on partially privatized state-owned enterprises. However, this relationship is nonlinear and shows an inverted U-shape. Given the situation of highly indebted, non-performing state-owned enterprises, we argue that too much government control is indeed bad for enterprises. But too little government ownership may not be good either. It might mean a lack of the governments political support and business connections, which are valuable and necessary to vitalize performance. Copyright Blackwell Publishers Ltd 2002.

The Effect of Market Segmentation on Stock Prices: The China Syndrome

Abstract China has an A-share market that is open only to local investors and a B-share market that is open only to foreign investors. Contrary to what has been observed in other markets with a similar segmented structure, the China B shares trade at a discount relative to the A shares. We show that the phenomenon can still be explained by basic economic principles. Specifically, the existence of the H-share and the “red-chip” markets in Hong Kong provide good substitutes for the B-share market. We find that when more H shares and red chips are listed in Hong Kong, the B-share discount becomes larger. This is consistent with the model of differential demand elasticity proposed by Stulz and Wasserfallen (Stulz, R., Wasserfallen, W., 1995. Review of Financial Studies 8, 1019–1057).

An examination of dynamic hedging

Abstract I compare GARCH-modeled dynamic hedging strategies with traditional OLS-modeled strategies to determine which perform better. I find that dynamic hedging reduces risk more than static hedging, but only slightly. This is consistent with some previous findings that more complex hedging methods may not improve the performance much. Briys and Solniks (1992) static comparison of the macroeconomic and asset-specific components of the hedge ratio is extended to a dynamic setting to examine how the relative importance of these two components evolves through time. Cointegrating relationship between the spot and forward rates in the macroeconomic component is also considered but its effect is minimal. The asset-specific component has effect in the out-of-sample period, especially under dynamic strategies and under short-term hedging horizons.

Malaysia Privatization: A Comprehensive Study

As the first comprehensive study on privatization in Malaysia, this paper compares financial and operating performance of a sample of 24 firms before and after privatization. The 24 firms were privatized via public listing on the Malaysian exchange -. Measures that improve following privatization include profitability, output level, and dividend payout; leverage declines. We also observe increased linkages between ownership and corporate governance with such performance changes. By and large, our results are similar to the results of the directly comparable multi-country studies of Megginson, Nash, and van Randenborgh (1994), Boubakri and Cosset (1998), and D’Souza and Megginson (1999).

An analysis of the January effect of united states, Taiwan and South Korean stock returns

By using the ARCH approach of testing the time-varying risk premium, this paper examines the presence of the January effect in the Taiwanese and South Korean stock markets. Implications on the Tax-Loss-Selling hypothesis and the Liquidity Constraint hypothesis are also discussed.

Interdaily Volatility in a Continuous Order‐Driven Market

Since Amihud and Mendelson (1987) documented a higher open-to-open return volatility compared to close-to-close return volatility in the US market, there have been various explanations offered, such as call auction opening, a long halt of trade, and specialist systems. No consensus has been reached so far. As an order-driven dealership market, the Hong Kong stock market provides another dimension for examination. If halt of trade is the major cause of the open-to-open volatility in the Hong Kong market, this volatility should also be higher. This is not observed. Positive autocorrelation of the open-to-open return series also suggests that there is no temporary price deviation at market opening. We view these as consistent with the specialist argument put forth by Stoll and Whaley (1990). Copyright Blackwell Publishers Ltd 1999.

Target Information Asymmetry and Acquisition Price

This study investigates the effects of target information asymmetry in a takeover transaction. We find that a target with more information asymmetry receives a larger bid premium from the acquirer. We examine the response of the acquirer’s investors to the bid to clarify whether the larger bid premium is an overpayment by the acquirer. We observe that the acquirer’s investors respond more positively to the acquisition of an opaque target, indicating that the market recognizes the acquirer’s valuation of the opaque target and agrees with the offer price. Our results indicate that corporate takeovers help to resolve asymmetric information in the capital market.