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Published Articles for Year 2012
Multinational Finance Journal, 2012, vol. 16, no. 1/2, pp. 1-20
Selçuk Caner , International Monetary Fund, Washington D.C., USA
Mehmet Baha Karan , Hacettepe University, Ankara, Turkey    Corresponding Author

Abstract:
In this paper we estimate creditworthiness of small and medium-sized enterprises (SMEs) that receive financial and non-financial incentives from the small business development administration (KOSGEB) in Turkey. Assessing creditworthiness of SMEs to qualify for government support remains a concern since standard methods based on financial information on firms would be inadequate due to lack of transparent financial information. Such businesses apply for government support because they would not qualify for funding from financial institutions. To assess the creditworthiness of these businesses other firm-level data is essential. A logit model is used to estimate riskiness of SMEs including non-financial data obtained from the business survey obtained by KOSGEB. We find that efficient and internationally competitive SMEs are unlikely to default. Firms with high creditworthiness are also managed by owners and focus on their core businesses.

Keywords : Risk; creditworthiness; credit risk; default; SME; logit
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Multinational Finance Journal, 2012, vol. 16, no. 1/2, pp. 137-154
Rossitsa Yalamova , University of Lethbridge, Canada    Corresponding Author

Abstract:
This paper proposes the generalized use of fractional Brownian motion in a multifractal trading time framework to reveal variation in the index price diffusion process that appears before and after 'extreme' events of distinct origin. "Crashes" following internal self-organization and those caused by external shocks differ in the relaxation process. The goal of this paper is to test for differences in the price diffusion process related to the organization of trading.

Keywords : trading mechanics; multifractal spectrum; extreme events
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Multinational Finance Journal, 2012, vol. 16, no. 1/2, pp. 105-136
Guglielmo Maria Caporale , Brunel University, UK    Corresponding Author
Luis Gil-Alana , University of Navarra, Spain

Abstract:
This paper focuses on nominal exchange rates, specifically the US dollar rate vis-à-vis the Euro and the Japanese Yen at a daily frequency. In the paper both absolute values of returns and squared returns are modelled using long-memory techniques, being particularly interested in volatility modelling and forecasting. Compared with previous studies using fractional integration such as Granger and Ding (1996), a more general model is estimated, which allows for dependence not only at the zero but also at other frequencies. The results show differences in the behaviour of the two series: a long-memory cyclical model and a standard I(1) model seem to be the most appropriate for the US dollar rate vis-à-vis the Euro and the Japanese Yen respectively.

Keywords : Fractional integration; Long memory; Exchange rates, Volatility
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Multinational Finance Journal, 2012, vol. 16, no. 1/2, pp. 21-47
Jie (Michael) Guo , Durham University, U.K.    Corresponding Author
Dimitris Petmezas , University of Surrey, U.K.

Abstract:
This paper examines the link between the causes and effects of mergers and acquisitions. By using a sample of UK acquisitions, which have the distinct characteristics of limited use of stock as means of payment and dominance of private acquisitions, the evidence shows that, on average, there is a substantial price run-up for acquirers prior to an acquisition announcement followed by a significant drop of bidder’s price in the post-event period. This indicates, to an extent, that corporate acquisitions are the effect of good performance rather than the cause. However, the results also reflect that a relatively better acquisition strategy for a firm to create value is by making many small acquisitions rather than a small number of large acquisitions, implying that acquisitions also drive performance. Overall, the evidence found is mixed and suggests that in the UK market, acquisition returns cannot be solely based on the market driven explanation.

Keywords : mergers & acquisitions; price run-up; method of payment; frequent bidders; long-term wealth effects
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Multinational Finance Journal, 2012, vol. 16, no. 1/2, pp. 49-86
Olga Dodd , Auckland University of Technology, New Zealand    Corresponding Author
Christodoulos Louca , Cyprus University of Technology, Cyprus

Abstract:
This study evaluates the relationship between international cross-listings and shareholders’ wealth across different host markets and across time. For a sample of cross-listings by European companies in the US, in the UK, and within Europe, the findings show that US and UK cross-listings, on average, result in positive cumulative abnormal returns around the announcement of cross-listing. No such evidence exists for the rest of European cross-listings. In addition, the Sarbanes-Oxley Act (SOX) of 2002 affects negatively the wealth benefits of US cross-listings, while wealth creation around UK cross-listings is primarily concentrated in Alternative Investment Market listings rather than Main Market listings. There is no evidence that the introduction of the Euro affects the wealth effects of cross-listings within the Eurozone. Finally, this study provides evidence on the relative importance of alternative theories on the wealth effects of cross-listing, including market segmentation, legal bonding, liquidity, investor recognition, proximity preference, market timing and business strategy theories, after considering the effect of the introduction of the Euro and the adoption of SOX. The results show that significance of the alternative theories varies across host markets and over time.

Keywords : Cross-listing; shareholders? wealth; Euro; AIM; the Sarbanes-Oxley Act
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Multinational Finance Journal, 2012, vol. 16, no. 1/2, pp. 87-103
Briance Mascarenhas , Rutgers University, USA    Corresponding Author

Abstract:
Many firms facing global competition are seeking to become specialists. This study examines international specialists, defined as companies that produce, sell, and expand internationally within one industry. This study examines their capital sourcng and deployment. Analysis of a knowledge-intensive industry, pharmaceuticals, suggests that firms which pursue this focused strategy match their funding and deployment of financial resources. They use equity funding and invest it heavily in research in order to develop international proprietary niches.

Keywords : strategy; focus; niche; international; diversification; finance
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Multinational Finance Journal, 2012, vol. 16, no. 3/4, pp. 225-260
Jean Canil , University of Adelaide, Australia    Corresponding Author
Bruce Rosser , University of Adelaide, Australia

Abstract:
We test the option incentive models of Hall and Murphy (2000, 2002) and Choe (2003). Hall and Murphy (2000, 2002) posit optimal grant size and exercise price contingent on the executive’s levels of risk aversion and private diversification. Choe (2003) relates these choices to firm characteristics, principally the target risk level and financial leverage. A unique hand-collected data set of Australian grants is employed, wherein exercises prices and grant sizes are unconstrained by taxation and accounting practices. The Hall and Murphy (2000, 2002) model is found to explain observed exercise prices while neither model satisfactorily explains grant sizes. However, there is some evidence that CEO influence is associated with larger grants than posited by these optimal incentive models, but does not impact on exercise prices.

Keywords : Executive; stock options; optimal; grant size; exercise price; governance
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Multinational Finance Journal, 2012, vol. 16, no. 3/4, pp. 189-223
Stephen Matteo Miller , Monash University, Australia    Corresponding Author

Abstract:
Selling (buying) a country’s equity index in exchange for equity investments elsewhere during a stock market crash (boom) is analogous to exercising an option to exchange an underperforming country (global benchmark) index for a global benchmark (country) index. This can be shown by extending an existing single factor option pricing framework to determine the exchange option value of entering and exiting an emerging market. As country betas, corrected for non-synchronous trading bias, rise during the Asian Crisis and fall thereafter, exit option values on average increase by at least 14 cents per dollar invested for each unit increase in country betas during the first stage of the crisis in 1997. Exit option values on average rise by 29 cents per dollar invested during the last stage in January 1999. So even if the benefits of diversification fall during a crisis, the effects of a crisis might be hedged.

Keywords : Country Systematic Risk and Risk-Adjusted Performance; Exchange Options; International Transmission; Net Capital Flow Monitoring; Non-synchronous Trading Bias
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Multinational Finance Journal, 2012, vol. 16, no. 3/4, pp. 261-301
Seraina Anagnostopoulou , Athens University of Economics and Business, Greece    Corresponding Author

Abstract:
This study comparatively examines the determinants of working capital management for listed vs. unlisted firms, and assesses the impact of this policy on profitability by focusing on the cash conversion cycle, a commonly used measure of working capital management. By using a large UK public and private firm sample, it is found that private firms have significantly lower cash conversion cycles than their public counterparts, and that traditional determinants of the cycle significantly differ between the two groups. The findings are robust to matching public and private firms according to a number of fundamental characteristics, allowing only for their listing status to differ. Results further indicate that the cash conversion cycle has a relatively stronger (negative) impact on operating profitability for private, compared to public firms. This is consistent with greater importance of efficient working capital management for firms with more restricted access to external financing.

Keywords : working capital; cash conversion cycle; private firms; listing status
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Multinational Finance Journal, 2012, vol. 16, no. 3/4, pp. 155-188
Robert Faff , University of Queensland, Australia
Annette Nguyen , Deakin University, Australia
Bonnie H.I. Ip , BPM Financial Modelling, Australia
Philip Gharghori , Monash University, Australia    Corresponding Author

Abstract:
This study applies return-based style analysis to a sample of Australian managed and superannuation funds, seeking to compare their asset allocation strategies across different style groups. Style analysis is performed using a rolling window estimation technique. As expected, riskier fund classes are more exposed to the riskier benchmarks. Further, differences in institutional and legal settings lead the managers of managed and superannuation funds to invest differently, with the latter employing a more conservative investment strategy despite having longer investment horizons.

Keywords : Style analysis; managed funds; superannuation funds; fund performance
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