Template-Type: ReDIF-Article 1.0 Author-Name: Hongtao Guo Author-Name: Miranda S. Lam Author-Name: Guojun Wu Author-Name: Zhijie Xiao Title: Risk Analysis Using Regression Quantiles: Evidence from International Equity Markets Abstract: In this paper we study risk management based on the quantile regression. Unlike the traditional VaR estimation methods, the quantile regression approach allows for a general treatment on the error distribution and is robust to distributions with heavy tails. We estimate the VaRs of five international equity indexes based on AR-ARCH model via quantile regressions. The empirical application show that the quantile regression based method is well suited to handle negative skewness and heavy tails in stock return time series. Classification-JEL: G110, G150, C18 Keywords: Value at Risk, International Equities, Quantile Regression, Risk Analysis Journal: The International Journal of Business and Finance Research Pages: 1-15 Volume: 7 Issue: 2 Year: 2013 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v7n2-2013/IJBFR-V7N2-2013-1.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:7:y:2013:i:2:p:1-15 Template-Type: ReDIF-Article 1.0 Author-Name: Cheng-Yi Chien Title: Pre-close Transparency and Price Efficiency at Market Closing: Evidence from the Taiwan Stock Exchange Abstract: This paper examines the impact of increased pre-close transparency on the effectiveness of stock closing call. On January 1, 2003, the Taiwan Stock Exchange increases pre-close transparency by disclosing the best five bid and ask prices and related unexecuted orders before market closing. At the same time, the Taiwan Stock Exchange does not disseminate any information about the limit-order book during the five-minute closing call period. This institutional change presents an opportunity to analyze how an increase in pre-close transparency affects informed trading and price efficiency near market closing. Empirical results show that an increase in pre-close transparency enhances the price efficiency of stock closing call, implying that informed traders will increase their trading during stock closing call following pre-close transparency increases. Classification-JEL: G14, G15, G18 Keywords: Transparency, Closing Call, Price Efficiency, Taiwan Stock Exchange Journal: The International Journal of Business and Finance Research Pages: 17-26 Volume: 7 Issue: 2 Year: 2013 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v7n2-2013/IJBFR-V7N2-2013-2.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:7:y:2013:i:2:p:17-26 Template-Type: ReDIF-Article 1.0 Author-Name: Dan Lin Author-Name: Hsien-Chang Kuo Author-Name: Lei-Huey Wang Title: Chief Executive Compensation: An Empirical Study of Fat Cat CEOs Abstract: This paper empirically tests the determinants of executive pay. In order to gain more understanding of the fat cat problem that have been subject to hot debate, we also examine a sample firms that suffer from the fat cat problem, defined as firms with poor performance while their Chief Executive Offers (CEOs) receive high compensation. Based on a sample of 903 US firms between 2007 and 2010, we find that there is a substitution effect between CEO compensation and the level of CEO ownership and that larger firms give higher pay to their CEOs. When the sample is limited to fat cat companies only, we find that tenure and firm size are significantly positively associated with CEO compensation. The firm size, leverage ratio and investment opportunities are found to be significantly associated with the CEO total compensation when the sample is limited to fat cat companies in the financial services industries. Overall, firm size appears to be the most important determinant of CEO compensation and that there is a general lack of linkage between pay and performance. The evidence thus calls for public attention for reexamining the effectiveness of current pay system. Classification-JEL: G34, M52 Keywords: Executive Compensation, Fat Cat, Pay-Performance Relationship Journal: The International Journal of Business and Finance Research Pages: 27-42 Volume: 7 Issue: 2 Year: 2013 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v7n2-2013/IJBFR-V7N2-2013-3.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:7:y:2013:i:2:p:27-42 Template-Type: ReDIF-Article 1.0 Author-Name: Qianwei Ying Author-Name: Danglun Luo Author-Name: Lifan Wu Title: Bank Credit Lines and Overinvestment: Evidence from China Abstract: The paper investigates the relationship between bank credit lines and firms’ overinvestment for Chinese listed companies from 2001 to 2008. We find significant impacts of bank credit lines on firm overinvestment activities. Further, we find that overinvestment is mainly made by State-owned firms, and not privately-owned firms. State-owned firms have easier access to bank credit lines with cheaper cost than private-owned firms, and therefore are more likely to overinvest. The results suggest that concentration of credit lines among State-owned firms likely leads to low resource allocation efficiency. Classification-JEL: G21, G31, G38 Keywords: Credit Lines, Overinvestment, State-owned Firms Journal: The International Journal of Business and Finance Research Pages: 43-52 Volume: 7 Issue: 2 Year: 2013 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v7n2-2013/IJBFR-V7N2-2013-4.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:7:y:2013:i:2:p:43-52 Template-Type: ReDIF-Article 1.0 Author-Name: Sanjay Sehgal Author-Name: Sakshi Jain Author-Name: Pr Laurence the Porteu de la Morandiere Title: Long-term Prior Return Patterns in Stock Returns: Evidence from Emerging Markets Abstract: In this paper, we identify long-term prior return patterns in stock returns for Brazil, Russia, India, China, South Korea, and South Africa (BRICKS) markets from January 1993 to February 2008. While Brazil, Russia and South Africa report momentum behavior, India, China and South Korea exhibit contrarian patterns for long-term prior return (24-60 months) as well as company characteristic(s) and prior return based portfolios. The CAPM is a poor descriptor of asset pricing as it doesn’t explain abnormal returns on these trading strategies for India and South Korea. It works well for other markets only for 24 and 36 months portfolio formation windows. The Fama-French (FF) model is able to explain most of the abnormal returns except 24-12-12 strategy for China and South Africa and 36-12-12 strategy for India. We find long-term prior return patterns in sector returns and that our augmented FF model, which contains a prior return sector factor, does a better job than the FF model. The research contributes to asset pricing and behavioral finance literature for emerging markets. Our findings shall be useful for global portfolio managers who analyze emerging markets, to combine them with mature markets for achieving risk diversification benefits. Classification-JEL: C51, C52, G12, G14, G15 Keywords: CAPM, Momentum, Contrarian, Fama French Model, Behavioral Finance Journal: The International Journal of Business and Finance Research Pages: 53-78 Volume: 7 Issue: 2 Year: 2013 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v7n2-2013/IJBFR-V7N2-2013-5.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:7:y:2013:i:2:p:53-78 Template-Type: ReDIF-Article 1.0 Author-Name: Paulo Alves Title: The Fama French Model or the Capital Asset Pricing Model: International Evidence Abstract: This research paper attempts to evaluate the benefits of using the Fama and French Model by comparing them with those resulting from the use of the Capital Asset Pricing Model. Local, International, and European Monetary Union functional forms were considered, in an attempt to raise the following questions, Does the calculation method to determine size and financial distress premium have any significance for the financial analyst? Do the foreign risk premiums of the Fama and French Model have any importance for the financial analyst? Firstly, models based on European Monetary Union factors produce the worst results, independently of any Capital Asset Pricing Model or Fama and French Model consideration. Secondly, independently of the model, the expected return of big and low book-to-market stocks is more reliable. This is particularly observable for big firms, as it does not occur for low book-to-market firms using Fama and French Models. Finally, the Fama and French Model is notoriously preferable in comparison with the Capital Asset Pricing Model for small and high-book to market firms: in this case, the introduction of international factors increases the reliability of expected returns. Classification-JEL: G12, G15 Keywords: CAPM, FFM, Local Factors, International Factors Journal: The International Journal of Business and Finance Research Pages: 79-89 Volume: 7 Issue: 2 Year: 2013 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v7n2-2013/IJBFR-V7N2-2013-6.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:7:y:2013:i:2:p:79-89 Template-Type: ReDIF-Article 1.0 Author-Name: Eloisa Perez-de Toledo Author-Name: Evandro Bocatto Title: Quality of Governance and the Market Value of Cash: Evidence from Spain Abstract: We examine the value shareholders attribute to one euro of extra cash held by Spanish firms and how corporate governance impacts this value by comparing the value of cash for companies with good and poor governance. The results show that one euro of extra cash is valued at a considerable premium at companies with good governance. Moreover, the presence of future growth opportunities intensifies this effect. Our results also suggest that the conflict between shareholders and debt holders is more severe in Spain than in the U.S. as investors apply a stronger discount for leverage when valuing Spanish firms. Classification-JEL: G11, G34 Keywords: Corporate Governance, Cash Holdings, Firm Value, Future Growth Opportunities, Leverage Journal: The International Journal of Business and Finance Research Pages: 91-104 Volume: 7 Issue: 2 Year: 2013 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v7n2-2013/IJBFR-V7N2-2013-7.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:7:y:2013:i:2:p:91-104 Template-Type: ReDIF-Article 1.0 Author-Name: Salami Doyin Author-Name: Kelikume Ikechukwu Title: Is Inflation Always and Everywhere a Monetary Phenomenon? The Case of Nigeria Abstract: In response to shocks, emanating from the global financial crisis of 2007-2008 the Central Bank of Nigeria has continuously used tight monetary policy instrument to check volatility in the general price level. The success of using monetary policy tool to influence the movement of key macroeconomic aggregates in Nigeria rests solely on the question of whether inflation is driven purely by changes in monetary aggregates. Using quarterly time series data for Nigeria over the period 1970 to 2011, we test the quantity theory relationship between money and price movement to establish if inflation is always and everywhere a monetary phenomenon. Using the autoregressive distributed lag (ARDL) modeling approach we obtained a robust estimate for Nigeria. The result of the study shows that inflation is not always and everywhere a monetary phenomenon in the case of Nigeria raising serious doubt on the continuous use of monetary policy tool to achieve price stability in Nigeria. Classification-JEL: C22, E52, E63, G28 Keywords: Money Supply, Monetary Policy, Policy Regulation, Time Series Model Journal: The International Journal of Business and Finance Research Pages: 105-114 Volume: 7 Issue: 2 Year: 2013 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v7n2-2013/IJBFR-V7N2-2013-8.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:7:y:2013:i:2:p:105-114 Template-Type: ReDIF-Article 1.0 Author-Name: Hussein A. Hassan Al-Tamimi Author-Name: Neila Jellali Title: The Effects of Ownership Structure and Competition on Risk-Taking Behavior: Evidence from UAE Conventional and Islamic Banks Abstract: The objective of this study is to examine the effect of ownership structure and competition on risk-taking behaviour of UAE banks during the period 1998–2010. The study covers 15 national banks, including eleven conventional banks and four are Islamic banks. The proportion of ownership by government, private sector and institutional ownership measures ownership structure. Concentration is used as a measure of competition. Three control variables are also included in the analysis economic condition, bank size and profitability. The main findings of this study are that UAE conventional banks are riskier than Islamic banks; concentration of UAE conventional national banks is negatively associated with bank risk-taking, but this inverse relationship is not confirmed in the case of Islamic banks; and the private ownership of UAE national banks is negatively associated with bank risk-taking. Finally, the results indicate that there is a significant difference between UAE conventional banks and Islamic banks regarding risk-taking behaviour. Classification-JEL: G20, G21 Keywords: Ownership Structure, Competition, Risk-taking, UAE Conventional National Banks, UAE Islamic Banks Journal: The International Journal of Business and Finance Research Pages: 115-124 Volume: 7 Issue: 2 Year: 2013 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v7n2-2013/IJBFR-V7N2-2013-9.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:7:y:2013:i:2:p:115-124