Template-Type: ReDIF-Article 1.0 Author-Name: Fujen Daniel Hsiao Author-Name: Lei Han Title: EXCHANGE RATE EFFECTS ON A SMALL OPEN ECONOMY: EVIDENCE FROM TAIWANESE FIRMS Abstract: Previous empirical research discovered only mild, if any, sensitivity of firm value to exchange rate fluctuation. Chen et al. (2004) provided some insights by focusing on a small and open economy and found evidence that New Zealand that exchange rate movement affects firm value. This study reexamines firm value sensitivity to exchange rate fluctuation by focusing on individual firms as well as on three industry Taiwan sectors, high-tech, service, and manufacturing industries. By using the two-factor model with residual regression, we find consistent results that volatility of exchange rates affects the value of Taiwanese firms. The results hold regardless of the exchange rate exposure to US dollar, Japanese Yen, or Euro. In addition, the positive association between exchange rate exposure and firm value is significant and consistent for all firm samples and three industry-specific samples. Classification-JEL: F31 Keywords: Foreign exchange exposure, Residual regression, Exchange rate fluctuations, Firm value Journal: The International Journal of Business and Finance Research Pages: 1-12 Volume:6 Issue: 3 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n3-2012/IJBFR-V6N3-2012-1.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:3:p:1-12 Template-Type: ReDIF-Article 1.0 Author-Name: E. M. Ekanayake Author-Name: Ranjini L. Thaver Author-Name: Daniel Plante Title: THE EFFECTS OF EXCHANGE RATE VOLATILITY ON SOUTH AFRICA’S TRADE WITH THE EUROPEAN UNION Abstract: In this paper we analyze the effects of the real exchange rate volatility on South Africa’s trade flows with the European Union over the period 1980 to 2009. Our study uses quarterly trade flows on South Africa’s exports and imports and utilizes the bounds testing approach to cointegration, and error-correction model. Our results reveal that imports depend positively on the levels of domestic economic activity and foreign exchange reserves but negatively on relative prices and exchange rate volatility. In addition, exports depend positively on the levels of foreign economic activity but negatively on relative prices and exchange rate volatility. Furthermore, the exchange volatility exerts mixed effects in the short-run and in the long-run. Classification-JEL: F14, F31 Keywords: South Africa, imports, exports, exchange rate volatility, panel cointegration Journal: The International Journal of Business and Finance Research Pages: 13-26 Volume:6 Issue: 3 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n3-2012/IJBFR-V6N3-2012-2.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:3:p:13-26 Template-Type: ReDIF-Article 1.0 Author-Name: Vijay Kumar Vishwakarma Author-Name: Ohannes George Paskelian Title: BUBBLE IN THE INDIAN REAL ESTATE MARKETS: IDENTIFICATION USING REGIME-SWITCHING METHODOLOGY Abstract: India has a growing economy that can support high-income levels and in turn sustain higher real estate prices. The high prices of Indian real estate seem to be in harmony with its fast growing economy. However, there are concerns about speculative bubble behavior in the Indian real estate market. In this paper, we utilize a sophisticated regime-switching speculative bubble model developed by van Norden and Schaller (1993) along with other traditional econometric methods to test for the presence of bubbles in the Indian real estate market. Our results provide evidence that India real estate bubble was not affected by the 2007-2008 global economic slowdown. The Indian Real Estate market grew from the end of 2008 through early 2011. Classification-JEL: C22, C41, L85, R33 Keywords: Indian Real Estate, Rational speculative bubbles, Regime-switching tests, duration dependence tests, REITs Journal: The International Journal of Business and Finance Research Pages: 27-40 Volume:6 Issue: 3 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n3-2012/IJBFR-V6N3-2012-3.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:3:p:27-40 Template-Type: ReDIF-Article 1.0 Author-Name: Deqing Diane Li Author-Name: YingChou Lin Author-Name: John Jin Title: INTERNATIONAL VOLATILITY TRANSMISSION OF REIT RETURNS Abstract: This study examines whether volatility of REIT returns can transmit across national borders. Two competing hypotheses are proposed. The first is the Transportable Risk Hypothesis which suggests geographic risk can be transmitted overseas if the general equity and real estate securities markets are integrated internationally. The second is the Non-Transportable Risk Hypothesis which argues that geographic risk factors are country-specific and therefore not transmittable across national borders. Using GARCH and EGARCH econometric models, international spillovers of volatility of REIT returns are found among United States, United Kingdom, and Japan. The finding has major implications for formulating international portfolio strategies as it improves forecasting ability. The finding also implies that better international portfolio diversification can be achieved with real estate securities from countries that have a lower degree of integration between the real estate sector and the general stock market. Classification-JEL: C51; G11; G15 Keywords: REIT volatility, multivariate GARCH, volatility spillovers,international portfolio diversification Journal: The International Journal of Business and Finance Research Pages: 41-51 Volume:6 Issue: 3 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n3-2012/IJBFR-V6N3-2012-4.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:3:p:41-51 Template-Type: ReDIF-Article 1.0 Author-Name: Yoti Lee Author-Name: Sheng-Chu Su Author-Name: Wen-Cheng Lin Title: CAPITAL STRUCTURE TIMING IN MARKETS WITH DIFFERENT CHARACTERISTICS Abstract: Considerable empirical evidence suggests that firm’s time equity issues to market movements and that this behavior impacts capital structures. Based on a survey of investigations of this phenomenon, this study observes capital structures in different financial markets and identifies different situations related to the effect of timing on leverage. This study also explains optimal leverage with a simplified dynamic adjusted model. Firms facing financial constraints in debt financing may increase equity issues resulting in considerable leverage variance. On the other hand, firms with fewer financial constraints can time the market when issuing equity. This study takes regional samples from the United Kingdom and Japan, to summarize circumstances involving partial financial constraints and no financial constraints. The market timing effects tests in the United Kingdom are insignificant but the results for Japan are significant. This phenomenon improves understanding of the market timing model under different circumstances. Classification-JEL: G30; G31 Keywords: Market Timing, Capital Structure. Journal: The International Journal of Business and Finance Research Pages: 53-66 Volume:6 Issue: 3 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n3-2012/IJBFR-V6N3-2012-5.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:3:p:53-66 Template-Type: ReDIF-Article 1.0 Author-Name: Ramit Mehta Author-Name: Dirk Schiereck Title: THE CONSOLIDATION OF THE GLOBAL BREWING INDUSTRY AND WEALTH EFFECTS FROM MERGERS AND ACQUISITIONS Abstract: The brewing industry has recently experienced increased merger activity. This paper analyzes the shortterm wealth effects of horizontal mergers and acquisitions on acquirers in the brewing industry. Based on a sample of 69 takeover announcements between 1998 and 2010, significant positive announcement returns were identified. In addition, the study finds significant positive returns for domestic transactions as well as cross-border deals involving targets in emerging markets. Other identified drivers of shortterm success include transaction size, acquirer size and the target’s public status. Furthermore, significant negative rival effects are identified across leading brewing groups, when missing a potential M&A opportunity. Classification-JEL: G14, G34, Q14 Keywords: Mergers and Acquisitions, Brewing Industry, Announcement Returns, Acquirers, Industry Rivals, Event Study Journal: The International Journal of Business and Finance Research Pages: 67-87 Volume:6 Issue: 3 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n3-2012/IJBFR-V6N3-2012-6.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:3:p:67-87 Template-Type: ReDIF-Article 1.0 Author-Name: Terrance Jalbert Author-Name: Jonathan Stewart Author-Name: Mercedes Jalbert Title: WHEN DO COSTA RICA NATIONAL BANKS RESPOND TO RESERVE REQUIREMENT CHANGES? Abstract: The process of changing reserve requirements in Costa Rica is a three step process. First the central bank makes the decision to change reserve requirements. Several days to several weeks later, the change is announced in the official newspaper. The actual reserve requirement change takes place from several weeks to several months later. Previous studies have limited their analysis to an examination of the decision and the announcement dates. The research shows that Costa Rica national banks do not respond to reserve requirement change announcements or reserve requirement change decisions. In this paper we examine the extent to which Costa Rica national banks respond to reserve requirement changes on the effective day of the reserve requirement change. We find evidence that Costa Rica national banks change their interest rate spreads on the effective day. Classification-JEL: E42, E58 Keywords: Reserve Requirements, Banking, Costa Rica, Interest Rates Journal: The International Journal of Business and Finance Research Pages: 89-101 Volume:6 Issue: 3 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n3-2012/IJBFR-V6N3-2012-7.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:3:p:89-101 Template-Type: ReDIF-Article 1.0 Author-Name: Yi-Fang Yang Author-Name: Lee-Wen Yang Author-Name: Yahn-Shir Chen Title: MARKET COMPETITION AND MERGERS IN PROFESSIONAL SERVICE FIRMS Abstract: This study examines competition level and merger in Taiwanese audit industry over a long time interval of 1992-2008. Total public accounting firms are divided into four sub-samples in terms of market segment, including big, large, medium, and small firms. Next, based on prior studies and service attribute, this study establishes four practice sub-markets: auditing, tax, consultation, and accounting. Empirical results indicate that big firms have the highest competition level but the other three sub-samples show no significant differences in competition level. Next, the auditing, tax, and accounting sub-markets become more concentrated over time but consultation sub-market does not change significantly. Big firms exhibit the highest competition level in the four sub-markets and four sub-markets but achieve the best in three financial performance measures, net profit per partner, profit ratio, and productivity per employee. Post-merger firms financially outperform pre-merger firms for Taiwanese two big firms’ mergers occurred in 1999 and 2003. Classification-JEL: M42 Keywords: Market Competition, Herfindahl-Hirschman Index, Operating Performance, Public Accounting Firms Journal: The International Journal of Business and Finance Research Pages: 103-122 Volume:6 Issue: 3 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n3-2012/IJBFR-V6N3-2012-8.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:3:p:103-122 Template-Type: ReDIF-Article 1.0 Author-Name: Md Hamid Uddin Author-Name: Mahendra Raj Title: AFTERMARKET RISK AND UNDERPRICING OF INITIAL PUBLIC OFFERS IN THE ARABIAN GULF COUNTRIES: AN EMPIRICAL ANALYSIS Abstract: The recent evidence has shown that IPO uncertainty continues in aftermarket until a normal market is established. Evidence also indicates that aftermarket risk measured by stock’s beta is related to the degree of underpricing in the US market. This may imply that additional underpricing may be required to compensate for aftermarket risk, assuming that the aftermarket risk is important for the investors who want to buy primary shares from the public offers and/or aftermarket trading. Therefore, we examine the relationship between aftermarket risk and underpricing by using data from six Arabian Gulf countries, an economic region where all personal incomes including capital gains are tax-free. The evidence based on 147 samples depicts that IPO firm’s aftermarket risk measured by stock’s beta has significant relationship with the degree of underpricing. Thereby, it is confirmed that the relationship between aftermarket risk and underpricing also exists in the Arabian Gulf countries, an important economic region outside the US. Paper concludes that that underwriters and/or issuers may need to forecast the expected aftermarket risk while determining the offer price. Classification-JEL: G30, G32 Keywords: IPO Underpricing, Aftermarket Risk, and Arabian Gulf Markets Journal: The International Journal of Business and Finance Research Pages: 123-138 Volume:6 Issue: 3 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n3-2012/IJBFR-V6N3-2012-9.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:3:p:123-138