Essays in finance

Mohd Rasid, Mohamed Eskandar Shah (2012) Essays in finance. PhD thesis, University of Nottingham.

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This thesis which compromise of three essays focuses on the theme of valuation, value premium anomaly, financing behaviour and emerging markets. The first essay studies the value growth puzzle in the context of conflict of interest between taxable and institutional investors. We model this conflict in a rational expectations framework and demonstrate how the differences in firm's characteristics (in terms of value versus growth) and the risk profile of the investors can explain the shape of CAPM's frontier in the overall economy without involving the beta parameter. We also explicate that the changes in taxable and non-taxable investors profile in a dynamic environment rationalize the value growth premium as illustrated by Malkiel (2003). Finally, our approach shed light on the issues raised by Shiller (1979,1981) and LeRoy and Porter (1981) that stock [bond] prices are too volatile to be rationalized by the discounted value of their expected dividends [coupon payments].

The second essay studies value anomaly in the context of four major emerging economies (i.e. Brazil, Turkey, China and India denoted by the acronym BTIC) with vast economic potential and Malaysia, a small emerging economy with top heavy, closely held, state-owned institutional setting. We attribute the anomaly to the investment pattern of glamour firms. Our empirical analysis illustrates that these firms have a tendency to hoard cash, delaying the undertaking of their growth options, especially in poor economic environments. This mitigates their business risk, but lowers their market valuation, driving down their returns. Our hypothesis also reconciles the diverging views stemming from both the neoclassical and behavioural perspectives.

This third essay examines the target capital structure of Malaysian firms and their adjustment process in the pre- and post- Asian financial crisis. We utilize an unbalanced panel data set comprising of 184 firms and employ the Generalized Method of Moments (GMM) to study the relationship between a firm's characteristics and its capital structure targeting behaviour in the context of political patronage. Our results support the amalgamation of the well-known Pecking Order and Static Trade-off theories. It also illustrates that the financial crisis had a significant impact on the financial policy of Malaysian firms.

Item Type: Thesis (University of Nottingham only) (PhD)
Supervisors: Ebrahim, M.S.
Girma, S.
Keywords: Value, business enterprises Malaysia
Subjects: H Social sciences > HB Economic theory
Faculties/Schools: UK Campuses > Faculty of Social Sciences, Law and Education > Nottingham University Business School
Item ID: 13971
Depositing User: EP, Services
Date Deposited: 07 Feb 2014 12:56
Last Modified: 12 Oct 2017 17:01

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