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Published Articles for Year 2005
Multinational Finance Journal, 2005, vol. 9, no. 1 & 2, pp. 43-71
Steven Pilloff , Hood College, U.S.A.    Corresponding Author

Abstract:
In their competitive analysis of proposed bank mergers, the Board of Governors of the Federal Reserve System, the U.S. Department of Justice, and other U.S. banking agencies accept branch divestitures as an antitrust remedy in local markets where there is substantial overlap between the acquirer and target. The results of this study, which examines the performance of 751 branches that were divested between June 1989 and June 1999 in conjunction with a merger in the U.S. that raised possible competition issues, are consistent with the policy of accepting branch divestitures as an antitrust remedy being successful. Divested branches operate for lengths of time that are comparable to all branches, and even though they experience substantial deposit runoff around the time of the merger, divested branches subsequently exhibit deposit growth rates that are comparable to those of other similar branches

Keywords : divestiture; bank merger; antitrust policy and remedy; competition
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Multinational Finance Journal, 2005, vol. 9, no. 1 & 2, pp. 1-22
Milind Sathye , University of Canberra, Australia    Corresponding Author

Abstract:
This study investigates the efficiency of large commercial banks in Asia and the Pacific region. In particular, the overall technical efficiency, pure technical efficiency and scale efficiency has been estimated, the factors (including, the environmental factors) that influence efficiency of banks in the region have been explained and the mean efficiency of large banks in different countries of the region has been compared. The study found that when the national frontier was expanded to regional frontier, the efficiency scores declined, the environmental variables had significant influence on efficiency scores and developed countries showed pure technical efficiency score significantly higher than the less developed countries. Hence, going by the global advantage hypothesis a surge in mergers and acquisitions of banks in this region is predicted

Keywords : bank efficiency; data envelopment analysis; Asia-Pacific
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Multinational Finance Journal, 2005, vol. 9, no. 1 & 2, pp. 23-42
Fatma Cebenoyan , Hunter College-CUNY, U.S.A.    Corresponding Author
A. Sinan Cebenoyan , Hofstra University, U.S.A.
Elizabeth S. Cooperman , University of Colorado at Denver, U.S.A.

Abstract:
This paper uses a two-step methodology to examine the relationship between managerial cost inefficiency and the takeover of U.S. thrifts during a period of market liberalization and widespread takeover activity, 1994 to 2000. In the first stage using stochastic cost frontiers, controllable managerial cost inefficiency scores are estimated for all stock firms operating each year in 1994 to 2000. In a second stage, these scores are used to examine correlates of takeovers, focusing on cost inefficiency. For takeovers by banks, a significant negative relationship between cost inefficiency and takeover is found, suggesting an exit of more cost efficient firms from the thrift industry during this period. However, takeovers by thrifts are associated with other characteristics

Keywords : depository institutions; thrifts; takeovers and cost inefficiency
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Multinational Finance Journal, 2005, vol. 9, no. 1/2, pp. 72-98
Sebouh Aintablian , Lebanese American University, Lebanon    Corresponding Author
Gordon S. Roberts , York University, Canada

Abstract:
This study examines a sample of mergers of Canadian Financial Institutions during the 1990’s to determine whether in-pillar, cross-pillar and foreign mergers are value-enhancing, and to determine possible sources of synergies behind those mergers. It develops testable hypotheses for Canadian FI mergers by synthesizing prior U.S. tests in the context of Canadian institutional arrangements. The overall results support the generality of findings of prior U.S. studies that the average abnormal return for both the acquiring and target firms is positive and statistically significant. This result suggests that acquisitions in the financial industry are, in Canada as elsewhere, driven by value-maximizing motivations. The study also shows that acquiring institutions’ shareholders benefit more when the acquisition is of a similar type (in-pillar) and domestic.

Keywords : Bank merger announcements; Canada
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Multinational Finance Journal, 2005, vol.9, no.1/2, pp. 99-128
Syed M. Harun , Texas A&M University-Kingsville, USA    Corresponding Author
M. Kabir Hassan , University of New Orleans, USA
Tarek S. Zaher , Indiana State University, USA

Abstract:
The objective of the paper is to investigate whether the stock price reactions of commercial banks to monetary policy actions are dependent on the state of the economy. The results indicate that monetary policy actions have asymmetric effects on the returns of commercial banks across different monetary policy and business environments. The asymmetric effects can primarily be attributed to the asymmetric effects of monetary policy on discount rates across different monetary and business environments. We also observe that the impact of monetary policy on the returns of commercial banks is affected by bank-specific characteristics. Bank size, leverage and profitability play an important role in explaining the cross-sectional variation in bank returns as a result of monetary policy changes. We find that cross-sectional bank-specific characteristics affect the bank returns asymmetrically as a result of monetary policy changes across different business conditions. The results suggest that th

Keywords : Monetary policy; commercial bank; business condition.
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Multinational Finance Journal, 2005, vol. 9, no. 3/4, pp. 131-160
Darren Butterworth , Charles River Associates, London, U.K.    Corresponding Author
Phil Holmes , University of Durham, Durham, U.K.

Abstract:
This paper provides the first investigation of the hedging effectiveness of the FTSE 100 and FTSE Mid 250 stock index futures contracts using hedge ratios generated within an extended mean Gini framework. This framework provides a robust alternative to the standard minimum variance approach, by distinguishing between different classes of risk aversion and producing hedge ratios that are consistent with the rules of stochastic dominance. The results show that the appropriate hedge ratio varies considerably with the investor’s degree of risk aversion and that the EMG approach is capable of being utilized by all classes of risk averse investors, in contrast to the standard minimum variance approach. In addition, the results show strong evidence of a duration effect and support the use of the extended mean Gini approach when cross hedges are involved

Keywords : hedging; futures; mean-gini; risk aversion
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Multinational Finance Journal, 2005, vol. 9, no. 3/4, pp. 161-187
Söhnke M. Bartram , Lancaster University, U.K.    Corresponding Author

Abstract:
Commodity prices are more volatile than exchange rates and interest rates. Hence, a priori, commodity price risk represents a more important source of risk to corporations. This paper presents a comprehensive analysis of the economic commodity price exposure of a large sample of nonfinancial firms. The results indicate that corporations exhibit net exposures with regard to several commodity prices. Even though commodity prices are highly volatile, commodity price risk is, however, not found to be of greater importance than other financial risks. The results are consistent with few cash flows being affected by commodity price movements, and with corporate hedging of commodity price risk

Keywords : capital markets; commodity prices; corporate finance,;derivatives; exposure; risk management
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Multinational Finance Journal, 2005, vol. 9, no. 3/4, pp. 189-214
Benilde Maria do Nascimento Oliveira , University of Minho, Portuga    Corresponding Author
Manuel José da Rocha Armada , University of Minho, Portugal.

Abstract:
This paper examines the impact of the introduction of the futures market, on the volatility of the underlying Portuguese stock market. The simple analysis of variance is only the first step to a later undertaking of a much more robust methodology which involves the application of a GARCH model, with the main purpose of studying some potential changes on the structure of the conditional volatility of the Portuguese stock market. The results for the Portuguese market are not identical to those generally found internationally. The initial and simple analysis of variance seems to suggest a strong increase in the level of volatility. When a GARCH model is applied, with the main purpose of studying the evolution of the structure of the conditional volatility, a reduction in market efficiency, measured by its ability to quickly incorporate new information, is identified.

Keywords : Index futures; conditional volatility; information; GARCH
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Multinational Finance Journal, 2005, vol. 9, no. 3/4, pp. 215-236
Lawrence Kryzanowski , Concordia University, Canada    Corresponding Author
Skander Lazrak , Brock University, Canada
Ian Rakita , Concordia University, Canada

Abstract:
Microstructure effects for 359 TSX listed IPO’s in the period 1984-2002 are examined. Based on first day returns, earning positive mean returns is very difficult even when most IPO’s are purchased at the offer price. Mean daily trade volume for the first five days of IPO trading is large relative to the means for the first thirty days and for longer periods. The dollar volume of sells is always significantly larger than that of buys suggesting that institutional investors are active on the sell side in the aftermarket. Liquidity as measured by quoted depth is initially large and decays rapidly over time. Gross returns are often low or negative, and average round-trip trade costs increase from 1.5% to 2.9% and 1.8% to 3.7% for more and less patient traders, respectively, over the first nine months of trading for an average IPO. Early amortized spreads are relatively large due to large initial share turnover

Keywords : initial public offerings; microstructure; spreads; decimalization
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Multinational Finance Journal, 2005, vol. 9, no.3/4, pp. 237-269
Mitchell Ratner , Rider University, New Jersey, USA    Corresponding Author
Ricardo P. C. Leal , COPPEAD Graduate School of Business, Brazil

Abstract:
One of the main reasons that investment advisors recommend international investments is that foreign stocks are not highly correlated with U.S. stocks. As world economies become increasingly interrelated, it may become more difficult for investors to achieve effective diversification. This research investigates international stock market correlation, and assesses whether global diversification on a sector basis is beneficial to U.S. investors. This analysis includes 38 developed and emerging stock markets from 1981-2000. In addition to demonstrating a potential loss of diversification benefits, this paper utilizes an optimal global asset allocation model to illustrate the effects of sector diversification on portfolio performance over time.

Keywords : sectors; optimal portfolio; international diversification; co-movement
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