Template-Type: ReDIF-Article 1.0 Author-Name: Yi-Chein Chiang Author-Name: Sheng-Wei Chen Title: THE RELATIONSHIP BETWEEN INTERNATIONALIZATION AND CAPITAL STRUCTURES OF TAIWAN FIRMS Abstract: Using a sample of Taiwan firms over the period of 2001 to 2005, this study investigates the relationship between internationalization and a firm’s capital structure, measured by the leverage ratio. Univariate tests show that multinational corporations (MNCs) are significantly less leveraged than domestic corporations (DCs). In addition, MNCs have lower business risks, lower exchange rate risks and higher agency costs, and are more profitable than DCs. The results of multivariate regressions show that some threshold of internationalization exists. The degree of internationalization is negatively associated with a firm’s leverage ratio only before this threshold, and there will be a positive relationship beyond this threshold. Classification-JEL: F23, G24, G32 Keywords: Journal: The International Journal of Business and Finance Research Pages: 1-12 Volume:2 Issue: 1 Year: 2008 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v2n1-2008/IJBFR-V2N1-2008-1.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:2:y:2008:i:1:p:1-12 Template-Type: ReDIF-Article 1.0 Author-Name: E.M. Ekanayake Author-Name: Robin Rance Author-Name: Mihalis Halkides Title: EFFECTS OF FEDERAL FUNDS TARGET RATE CHANGES ON STOCK PRICES Abstract: It is well-known that financial markets respond quickly to the announcements of changes in the Federal Funds target rate. This paper examines the stock price reaction of individual stocks listed under the Dow Jones Industrial Average () to Federal Funds target rate change announcements using daily stock returns over the period 1996-2007. We measure such reactions using an event-study methodology to analyze the impact of changes in the Federal Funds target rate on individual stock returns using several event windows. We group the 30 individual stocks into 8 sectors and analyze the reaction of each sector to changes in the Federal Funds target rate. Results indicate that, on average, the impact of a Federal Funds target rate decrease on stocks is positive while the reaction of a Federal Funds target rate increase is negative. Classification-JEL: G14 Keywords: Journal: The International Journal of Business and Finance Research Pages: 13-29 Volume:2 Issue: 1 Year: 2008 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v2n1-2008/IJBFR-V2N1-2008-2.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:2:y:2008:i:1:p:13-29 Template-Type: ReDIF-Article 1.0 Author-Name: Christos Floros Title: LONG MEMORY IN EXCHANGE RATES: INTERNATIONAL EVIDENCE Abstract: In this paper we test for the presence of fractional integration, or long memory, in the daily returns of exchange rates using ARFIMA(p,d,q) models. We consider 34 exchange rates against the US dollar (USD) covering the period April 1991 to April 2006. The results suggest that 17 exchange rates show strong evidence of long memory. This indicates that shocks to the exchange rates persist over a long period of time (this is stronger in emerging market economies). This also indicates that these markets are not stable, and hence they offer an opportunity to investors and traders to add some risk to their strategies. The lack of long memory in the daily returns of exchange rates supports the efficient market hypothesis (EMH). These findings are helpful to traders dealing with long dated assets. Classification-JEL: C22, C52, G14 Keywords: Journal: The International Journal of Business and Finance Research Pages: 31-39 Volume:2 Issue: 1 Year: 2008 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v2n1-2008/IJBFR-V2N1-2008-3.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:2:y:2008:i:1:p:31-39 Template-Type: ReDIF-Article 1.0 Author-Name: Xianliang Tian Author-Name: Ming Zhou Title: BANKING SYSTEM EFFICIENCY AND CHINESE REGIONAL ECONOMIC GROWTH: AN EMPIRICAL ANALYSIS BASED ON BANKS’ MICRO-EFFICIENCY Abstract: Based on the cost efficiency of individual banks, this paper constructs an indicator to clarify Chinese regional banking system’s credit allocation efficiency in accordance with the panel data of the provinces and central-government-administered cities of China. When applying this variable into the growth equation and estimating the regression, the results demonstrate a strong positive relationship between the regional banking systems’ efficiency and regional growth rate. This paper presupposes that the indicator of the banking system’s efficiency bears a direct relationship with the banking system’s capability of identifying promising entrepreneurs and optimizing credit allocation. Thus, it could be concluded that the banking system can exert their influences on the process of economic growth not only through capital accumulation effects but also through credit allocation effects. Classification-JEL: G11, G14, G15 Keywords: Journal: The International Journal of Business and Finance Research Pages: 41-51 Volume:2 Issue: 1 Year: 2008 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v2n1-2008/IJBFR-V2N1-2008-4.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:2:y:2008:i:1:p:41-51 Template-Type: ReDIF-Article 1.0 Author-Name: Mohd Fahmi Ghazali Author-Name: Wahi Ismail Author-Name: Mohd Rushdan Yasoa Author-Name: Nelson Lajuni Title: BIVARIATE CAUSALITY BETWEEN EXCHANGE RATES AND STOCK PRICES IN MALAYSIA Abstract: The main purpose of this paper is to examine the relationship between stock prices and exchange rates in Malaysia. This research considers high-frequency data of USD-MYR exchange rates and Kuala Lumpur Composite Index (KLSE) from July 22, 2005 to March 23, 2007, which is the period when the MYR was unpegged. The Johansen cointegration method suggests that there is no long-run equilibrium relationship between these two financial variables. Both Engle Granger and Toda-Yamamoto causality tests find that there is uni-directional causality running from stock prices to exchange rates. Classification-JEL: D4, D46 G14, G15 Keywords: Journal: The International Journal of Business and Finance Research Pages: 53-59 Volume:2 Issue: 1 Year: 2008 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v2n1-2008/IJBFR-V2N1-2008-5.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:2:y:2008:i:1:p:53-59 Template-Type: ReDIF-Article 1.0 Author-Name: Chyi-Lun Chiou Title: INVESTMENT UNCERTAINTY AND STOCK RETURNS Abstract: This paper theoretically investigates the effect of uncertainty about future investment on expected stock returns. Based on a real options framework, we incorporate the learning-by-doing effect to analyze the irreversible investment problem. In our investment decision framework, the timing of expansion is endogenous and results from a value-maximizing decision. In addition, there are two important implications of our framework. First, we show that an increase in the relative valuation ratio, as measured by the book-to-market ratio, raises average stock returns. This positive relationship helps to explain the value premium. Second, we investigate how uncertainty about investment affects expected stock returns. Based on the closed-form solution in our framework, we suggest that less uncertainty about investment induces lower expected stock returns. Classification-JEL: D81; G31 Keywords: Journal: The International Journal of Business and Finance Research Pages: 61-71 Volume:2 Issue: 1 Year: 2008 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v2n1-2008/IJBFR-V2N1-2008-6.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:2:y:2008:i:1:p:61-71 Template-Type: ReDIF-Article 1.0 Author-Name: Yin-Ching Jan Author-Name: Su-Ling Chiu Title: LONG-RUN INVESTMENT DECISION IN THE TAIWAN EXCHANGE MARKET Abstract: Whether an investor should hold more risky assets in the long run is an issue of allocation. However, the comparison of performance between different investment horizons is not an allocation issue, but rather at timing issue. Therefore, we employ Markovian moving block bootstrap to examine the performance differences between risky portfolios and diversified portfolios over different investment horizons. The results show that Sharpe ratio estimates for all of the stock portfolios increase first and then decrease as the investment horizon lengthens. Second, the size effect only holds in the short run, but not in the long run. Third, the performances of some examined portfolios outperform that of the market portfolio in the long run, indicating an investor may be better off holding some risky assets over longer investment horizon. Fourth, balanced- and bond-fund portfolios outperform the market portfolio when the investment horizons are over 15 years, suggesting that investors can benefit from investing into these types of mutual funds in the long run. Classification-JEL: G11 Keywords: Journal: The International Journal of Business and Finance Research Pages: 73-85 Volume:2 Issue: 1 Year: 2008 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v2n1-2008/IJBFR-V2N1-2008-7.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:2:y:2008:i:1:p:73-85 Template-Type: ReDIF-Article 1.0 Author-Name: Md Hamid Uddin Author-Name: Diaeldin Osman Title: EFFECT OF DIVIDEND ANNOUNCEMENT ON SHAREHOLDERS’ VALUE: EVIDENCE FROM SAUDI ARABIAN STOCK EXCHANGE Abstract: Literature suggests that dividend has no impact on shareholders value in the absence of taxes and market imperfections. Hence, companies invest excess funds in positive net present value projects instead of paying out as dividends. Literature also suggests that market valuation of stocks depends on the expected future dividends. If company pays out all earnings, funds for future investment will decrease and dividend may not increase in the future. Moreover, when dividend is taxable, paying more cash would increase the shareholders tax liability. Despite, companies often pay cash dividends to the shareholders possibly to signal any information about the future earnings prospects. Our empirical results based on 178 announcements of dividends between 2001 and 2005 in Saudi Arabia, a non-tax economy, showed that investors lost 2.20 percent of market value after the dividend announcement, although the lost value is recovered from the cash dividend received, and they earned 7 percent of net cash return after recovering the loss of market value. Sub-sample analyses showed that announcement of dividend increase may not signal any good information, while the announcements of dividend decrease and dividend initiation (first-time dividend) may contain information, although the information signal of the dividend initiation is somewhat weaker. Classification-JEL: G14, G15, G35 Keywords: Journal: The International Journal of Business and Finance Research Pages: 87-101 Volume:2 Issue: 1 Year: 2008 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v2n1-2008/IJBFR-V2N1-2008-8.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:2:y:2008:i:1:p:87-101 Template-Type: ReDIF-Article 1.0 Author-Name: Chen-Hui Wu Author-Name: Chin-Shun Wu Author-Name: Victor W. Liu Title: THE RELEASE TIMING OF ANNUAL REPORTS AND BOARD CHARACTERISTICS Abstract: This paper posits that the release timing of an annual report has no systematic relation with earnings news in Taiwan. Since the board of directors has the ultimate responsibility for the implementation of corporate governance, we argue that board characteristics are important determinants for the timeliness of a firm’s annual report. The empirical results show no behavioral evidence of good news early and bad news late. Although the magnitude of board size has no significant impact, a board with ultimate owners and a board with independent directors have a positive influence on the reporting lag. Other firm characteristics and technological changes are also found to be related with the reporting lag. Classification-JEL: G34, M41 Keywords: Journal: The International Journal of Business and Finance Research Pages: 103-118 Volume:2 Issue: 1 Year: 2008 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v2n1-2008/IJBFR-V2N1-2008-9.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:2:y:2008:i:1:p:103-118 Template-Type: ReDIF-Article 1.0 Author-Name: Halil Kiymaz Author-Name: Roberto Marchesini Author-Name: Robert F. Hodgin Title: MARKET VALUATION RESPONSES TO GOODWILL ANNOUNCEMENTS: AN EARLY DIRECT TEST OF FASB 142 Abstract: This study provides evidence from an early direct test of the Financial Accounting Standards Board (FASB) 142 policy statement regarding investor market reaction to corporate goodwill impairment announcements. Under new rules, the amortization of goodwill is replaced with a two-step procedure to determine if goodwill is impaired. We draw a sample of 188 firms announcing impairment tests during the period of 2001-2003 to investigate market reactions. The findings for overall sample indicate that firms with impairment test announcements experience statistically significant negative abnormal returns. The findings further show that the abnormal returns are negative for NYSE and AMEX+NASDAQ listed stocks. When we analyze the industry affiliation of firms and abnormal returns based on the primary SIC of firms, we find varying market reactions to goodwill announcements among industries. The findings are consistent with an information efficiency view of the market and one other related study of similar design, conducted before the effective date of FASB 142. Classification-JEL: G14, M41 Keywords: Journal: The International Journal of Business and Finance Research Pages: 119-127 Volume:2 Issue: 1 Year: 2008 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v2n1-2008/IJBFR-V2N1-2008-10.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:2:y:2008:i:1:p:119-127