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Published Articles for Year 1998
Multinational Finance Journal, 1998, vol. 2, no. 4, pp. 295-310
Christopher Korth , Western Michigan University, USA    Corresponding Author
Zane Swanson , Emporia State University, USA
Robert Singer , Quincy University, USA

Abstract:
Most of the Eastern European countries are burdened by heavy foreign debts. Securitization could be helpful in solving the vexing problem of servicing the debt of Eastern European countries and improving their financial situation. Three formats for securitizing the loans are broadly available. While all three formats could be used to enhance significantly the marketability of existing Eastern European debts, create a more favorable lending climate for new syndicated loans, and accelerate the development of large, integrated secondary markets, the analysis indicates that the mortgage-backed bond provides the best alternative

Keywords : securitization; Eastern Europe; loans and financial Intermediaries
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Multinational Finance Journal, 1998, vol. 2, no. 1, pp. 1-36
Richard Chung , Concordia University, Canada    Corresponding Author
Lawrence Kryzanowski , Concordia University, Canada

Abstract:
This article examines the stock market effects of changes in the composition of the TSE300 index over the period 1990-94. The test methodology adjusts for thin trading, pre- and post-revision abnormal performance and sample selection criterion effects. The models used to characterize returns include factors such as illiquidity and large trade activity. The positive and transitory median changes in traded volumes become insignificant when market-adjusted volumes are examined. No permanent effects on trade and analyst price behavior are identified. Traditional market-adjusted abnormal return inferences are not robust. The announcement window abnormal returns are smaller for annual versus non-annual index additions. This suggests that a longer advance notice period more than compensates for a larger number of simultaneous index revisions. The findings support the price pressure and liquidity hypotheses. Temporary changes in liquidity costs temporarily move stock prices from their equilibrium values, and announcement window abnormal returns are essentially reversed in subsequent periods.

Keywords : index revision; abnormal returns; liquidity; event study
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Multinational Finance Journal, 1998, vol. 2, no. 1, pp. 37-61
Jang-Ting Guo , University of California–Riverside, U.S.A.    Corresponding Author
Rong-Chang Wu , Shin Chien University, Taiwan

Abstract:
This article adopts a nonparametric approach to examine the exchange-rate exposure of Taiwanese firms between December 1979 and January 1995. The evidence indicates that financial liberalization that took place in July 1987 has introduced an important structural break to firms' foreign exchange exposure. In the pre-liberalization period, no industry shows significant exposure to changes in the exchange rate. By contrast, in the post-liberalization period, exchange-rate movements exert significant contemporaneous and lagged impacts on the value of firms, particularly those with high involvement in international trade

Keywords : financial liberalization; foreign exchange exposure effect; nonparametric econometrics
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Multinational Finance Journal, 1998, vol. 2, no. 1, pp. 62-83
Jay Dahya , University of Wales College of Cardiff, U.K.    Corresponding Author
Ronan Powell , Queen's University of Belfast, Northern Ireland

Abstract:
This article investigates the impact that successful hostile and friendly takeovers have on the rates of top management change for U.K. target firms. The results shows that hostile takeovers are associated with a greater degree of both top executive and top team forced departure rates compared to that of friendly takeovers. Furthermore, prior to takeover, hostile targets have lower abnormal returns, lower profitability, higher debt, lower managerial ownership and a high ownership stake held by external block holders relative to friendly targets. The results give further support to the disciplining role of the hostile takeover

Keywords : managerial control; hostile takeover; top management turnover; friendly takeover; ownership structure
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Multinational Finance Journal, 1998, vol. 2, no. 2, pp.
Hans R. Stoll , Vanderbilt University, U.S.A.    Corresponding Author

Abstract:
A new approach and a new mind-set are needed for the regulation of financial markets. Under our existing trajectory, regulation will become inefficient, unwieldy, and too costly as it attempts to deal with an ever–more complex financial system. Regulators ought to focus on what needs to be regulated, not simply on expanding regulatory oversight. Implicit in this mind-set is the idea that not everything must be regulated. A focused approach to regulation would separate what is regulated from what is not. Examples of how regulation can be more narrowly focused are given for banking, for securities markets, and for futures markets

Keywords : bank regulation; financial regulation; offshore offerings; Security and Exchange Commission
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Multinational Finance Journal, 1998, vol. 2, no. 2, pp. 101-132
Kodjovi G. Assoe , Ecole des Hautes Etudes Commerciales, Canada    Corresponding Author

Abstract:
Many emerging markets have experienced significant changes in government policies and capital market reforms. These changes may lead to changes in their return-generating processes. Based on Markov-switching models, this paper investigates whether there is more than one regime in the return-generating processes of nine emerging markets and the specific characteristics of each regime. The results show very strong evidence of regime-switching behavior in emerging stock market returns. The two regimes through which emerging markets evolve are different whether one takes the domestic investors' perspective or that of foreign investors. For foreign investors, changes in volatility seem to be the main characteristic of emerging market regimes. The implications of these findings for the stability of emerging stock markets are discussed

Keywords : emerging markets; regime-switching; international investment
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Multinational Finance Journal, 1998, vol. 2, no. 2, pp. 133-149
Shmuel Hauser , Ben Gurion Univ. of the Negeve and Israel Securities Authority, Israel    Corresponding Author
Azriel Levy , Bank of Israel and the Hebrew University, Israel

Abstract:
The increasing popularity of non-dealer security markets that offer automated, computer-based, continuous trading reflects the conventional wisdom that such markets are more efficient for all issues, large and small. This article uses a recent testing methodology to estimate the relative efficiency of discrete versus continuous trading regimes in the price discovery of thinly traded stocks. The empirical tests use over 9,000 transactions of dually listed stocks traded discretely on the Tel Aviv Stock Stock Exchange and continuously in the Over-The-Counter market in the U.S. It is shown that stock prices over-react to the arrival of new information and noise trading in both markets, but more so under continuous trading in the OTC market. It is also shown that continuous trading generates larger pricing errors and related return volatility.

Keywords : continuous trading; discrete trading; pricing efficiency; Tel Aviv Stock Exchange; trading mechanism
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Multinational Finance Journal, 1998, vol. 2, no. 3, pp. 189-223
Antonis Demos , Athens University of Economics and Business, Greece    Corresponding Author
Sofia Parissi , Athens University of Economics and Business, Greece

Abstract:
This article applies a conditionally heteroskedastic asset pricing model to describe the time variation in the first and second moments of asset returns in an interdependent way in the emerging capital market of Greece. Depending on the observability of the factors and under the chosen parameterization it is possible to derive tests to address economically important questions that the models impose on the risk-return relationship. We apply the derived tests on the nine sectorial portfolios and the value weighted index of the Athens Stock Exchange, over the period 1985-1997. The evidence from the unconditional and conditional CAPM, with the Value Weighted Index as a benchmark portfolio, suggests the inefficiency of the Index. On the other hand, the dynamic latent factor model, considered here, describes sectorial returns in a much better way. However, there is still a shadow of doubt on the hypothesis that the price of risk is common across assets.

Keywords : n/a
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Multinational Finance Journal, 1998, vol. 2, no. 2, pp. 151-165
Larry J. Prather , East Tennessee State University, U.S.A.    Corresponding Author
Jae Hoon Min , Seowon University, Korea

Abstract:
This article examines announcement effects of 240 international joint ventures undertaken by firms to ascertain their impact on shareholders' wealth. The positive-multinational-network hypothesis suggests that the market reaction should be related to the option value of the venture. To test the positive-multinational-network hypothesis, first the market reaction between ventures into developed and less-developed countries are contrasted. Then, the reaction between ventures that form the basis for initial operations in a country and subsequent operations are contrasted. Results indicate that venture-specific characteristics influence announcement effects and that the positive-multinational-network hypothesis is supported

Keywords : event studies; information and market efficiency; investment policy; joint ventures
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Multinational Finance Journal, 1998, vol. 2, no. 3, pp. 167-187
Kenneth Wieand , University of South Florida, U.S.A.    Corresponding Author
Jeff Donaldson , Northern Kentucky University, U.S.A.
Socorro Quintero , Oklahoma City University, U.S.A.

Abstract:
This article investigates the relationships between the U.S. and Japanese stock market indices and the prices of modern and impressionist paintings sold at auction in New York by Christies and Sotheby. An art price index is constructed to adjust for heterogeneity of individual paintings. Time series properties of the art price index are examined in relation with the S&P500 and Topix stock market indices. The art-price index is heteroskedastic and autocorrelated. When the log-returns to art are compared to log-price returns to the S&P500 and TOPIX stock indices, a single common long-term stochastic trend in the three indices is found. In the short run, log-changes of art prices are related to current and lagged log-changes of the TOPIX index, only

Keywords : art prices; cointegration; GARCH model; hedonic price equation; S&P500 stock index; and TOPIX stock index
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Multinational Finance Journal, 1998, vol. 2, no. 3, pp. 225-244
Seung-Doo Choi , Korea Telecom, Korea    Corresponding Author
Sang-Koo Nam , Korea University, Korea

Abstract:
This article compares the initial returns of privatization initial public offerings (IPOs) to those of privately-owned enterprises and investigates the determinants of short-run performance of privatization IPOs, using a sample of 185 privatization IPOs from 30 countries, over the period from 1981 to 1997. The evidence indicates that there is a general tendency for privatizations to be underpriced to a greater degree than the initial public offerings of privately-owned enterprises. In addition to comparing privatization IPOs to the private IPOs, the cross-sectional determinants of privatization initial returns are analyzed. The empirical results strongly support the theoretical models of Perotti (1995) and Biais and Perotti (1997). The degree of underpricing at the initial public offering is positively related to the stake sold at initial public offerings and to the degree of uncertainty in ex ante value of newly-privatized firms

Keywords : initial public offerings; initial return; policy uncertainty; privatization
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Multinational Finance Journal, 1998, vol. 2, no. 4, pp. 245-267
Eva K. Jermakowicz , University of Southern Indiana, USA    Corresponding Author
Sylwia Gornik-Tomaszewski , Baldwin-Wallace College, USA

Abstract:
This article investigates the association between stock returns and the annual earnings, derived from the new accounting and reporting standards, of firms listed on the Warsaw Stock Exchange between 1995 and 1997. Following a brief history of the Warsaw Stock Exchange, two major issues affecting the effectiveness of the Polish securities market are discussed. These are the transition process from public to private enterprise ownership, and the development of accounting and reporting standards compatible with the capital market requirements and the European Union regulation. The empirical results indicate significant association between stock returns and the annual earnings. Results are compared with those for more developed capital markets.

Keywords : accounting and reporting standards Poland; earnings and returns; privatization; Warsaw Stock Exchange
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Multinational Finance Journal, 1998, vol. 2, no. 4, pp. 269-293
Emeka T. Nwaeze , Rutgers University, U.S.A    Corresponding Author

Abstract:
This article focuses on regulation and variation in rate structures to investigate asymmetric return responses to positive and negative abnormal earnings. The abnormal earnings (AE) metric is measured as the difference between the actual profit rate and the maximum allowed profit rate, scaled by the beginning-period price. The analysis is motivated by the anticipated asymmetry in the information contents of positive and negative AE induced by existing rate structures which permit utilities to recover below normal profits but allow them to retain abnormal profits. Accordingly, negative AE is expected to be largely transitory and price-irrelevant whereas positive AE is expected to persist and be price-relevant. The results reveal significant asymmetry in return responses to positive and negative AEs. Specifically, the magnitude of return responses is larger for positive than for negative AEs. The results further show variations in the magnitudes of price responses across regulatory structures.

Keywords : abnormal earnings; asymmetric return responses; egulatory structure
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