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Published Articles for Year 2013
Multinational Finance Journal, 2013, vol. 17, no. 1/2, pp. 1-47
Anand B. Gulati , Hanken School of Economics, Finland    Corresponding Author
James W. Kolari , Texas A&M University, USA
Johan Knif , Hanken School of Economics, Finland

Abstract:
This study empirically examines how exchange rate shocks affect firms’ competitiveness in the small, export-oriented country of Finland. Specifically, using Sweden as a benchmark and controlling for cross-country sector and industry effects, the forex competition hypothesis is tested using the impact of exchange rate shocks on Finnish stock returns. The empirical tests reveal statistically significant exchange rate exposure of Finnish stock returns. Comparing pre- versus post-euro periods, equities’ exchange rate exposure is much stronger after the introduction of the euro. Further results indicate that Finnish and Swedish sector and industry stock returns positively co-move. This implies market integration in contradiction to the forex competition hypothesis. However, for some sectors and industries interaction variables reveal that the co-movement is conditional on exchange rate movements, especially in the post-euro period.

Keywords : exchange rate exposure; stock returns; cross-country industry competition; market integration; pre- and post-euro
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Multinational Finance Journal, 2013, vol. 17, no. 1/2, pp. 77-106
Xiangnan Meng , University of South Australia, Australia
Xin Deng , University of South Australia, Australia    Corresponding Author

Abstract:
This study employs a GARCH model to investigate the effects of interest rate and foreign exchange rate changes on Chinese banks’ stock returns. The results suggest that market movement and foreign exchange rate changes are statistically significant in explaining banks’ stock returns, despite different reactions from different bank portfolios in regard to risks. Interest rate fluctuations, on the other hand, appear to be insignificant factors in equity pricing. The results confirm the link between market risks and stock returns and highlight the need for further interest rate liberalization.

Keywords : risks; GARCH; banking industry; China
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Multinational Finance Journal, 2013, vol. 17, no. 1/2, pp. 107-148
Dimitrios V Kousenidis , Aristotle University of Thessaloniki, Greece    Corresponding Author
Christos Negakis , University of Macedonia, Greece

Abstract:
In the present paper we study the performance of young closed-end funds (CEFs) in Greece. Using monthly CEF data from 1997 to 2007, we provide evidence showing that young funds underperform both old funds and the market. As in Kaplan and Schoar (2005), we note that new underperforming funds occur more frequently during hot market periods, potentially due to the presence of uninformed investors. The entrance of the newly raised funds in the market dilutes the overall industry performance and motivates financial institutions to take over fairly-performing subsidiary funds. As a result, well-performing funds are gradually delisted from the market and eventually only poor-performing funds survive. In this context the takeover activities prevail as a rational explanation for the underperformance and the shrinking of the closed-end fund industry in Greece

Keywords : closed-end funds; young fund underperformance; models of portfolio performance; ATHEX
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Multinational Finance Journal, 2013, vol. 17, no. 3/4, pp. 165-200
Thomas Chiang , Drexel University, USA
Lin Tan , California State Polytechnic University, USA
Jiandong Li , Central University of Finance and Economics, China
Edward Nelling , Drexel University, USA    Corresponding Author

Abstract:
This study examines investor herding behavior in Pacific-Basin equity markets. Results indicate that the level of herding is time-varying, and is present in both rising and falling markets. It is positively related to stock market performance, but negatively related to market volatility. Herding estimates across markets are positively correlated, signifying comovement of herding behavior in the region. The findings suggest that tests for herding should consider its dynamic behavior.

Keywords : herding behavior, stock return dispersion, kalman filter, nonlinearity, pacific-basin markets
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Multinational Finance Journal, 2013, vol. 17, no. 3/4, pp. 243-293
Wenjuan Xie , University of New Hampshire, USA    Corresponding Author

Abstract:
This paper studies the accounting performance measure, profit efficiency and investor valuation of 1,262 Chinese firms listed in Shanghai and Shenzhen Stock Exchanges from 2001 to 2010. Profit efficiency is defined as the ratio of actual profit realized to the optimal profit described by stochastic frontier approach. An estimation of robust ordinary least square model for accounting performance measures (ROA) controlling for industry effect results in negative skewness of the residuals, indicating the existence of profit inefficiency. A year-by-year cross-section stochastic frontier analysis documents a declining pattern of accounting performance and a contrastive increasing tendency of profit efficiency. Linking the market valuation ratios to profit efficiency illustrates a significant empirical relationship that Chinese investors reward firms of higher efficiency with higher market valuation. The over-time improvement of efficiency is also associated with increased market valuation.

Keywords : market valuation; profitability; efficiency; stochastic frontier; chinese listed firms
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Multinational Finance Journal, 2013, vol. 17, no. 3/4, pp. 295-340
I-Ju Chen , Yuan Ze University, Taiwan    Corresponding Author
Shin-Hung Lin , Yuan Ze University, Taiwan

Abstract:
This study investigates the relationship between managerial optimism, investment efficiency and firm valuation. This study follows the Campbell’s measurement for managerial optimism and investigates the influences of the different levels of managerial optimism on improving investment efficiency and firm value when firms tend to under-invest or over-invest. The results indicate that an under-invested firm with a CEO who has a higher level of managerial optimism can improve the firm’s investment efficiency by reducing the degree of underinvestment, which further increases the firm’s value. However, when firms tend to overinvest, there is insufficient evidence to show that a firm with a lower level of CEO managerial optimism will effectively improve the firm’s investment efficiency and increase firm value by reducing the degree of overinvestment.The results generated in this study help scholars and practitioners understand how managerial optimism affects the investment efficiency of firms

Keywords : managerial optimism, investment efficiency, overinvestment, underinvestment
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Multinational Finance Journal, 2013, vol. 17, no. 3/4, pp. 201-241
Wendy Rotenberg , University of Toronto, Canada    Corresponding Author

Abstract:
This study explores whether the valuation of Canadian natural resource firms is related to their decisions to present financial reports in U.S. dollars or to allow dual currency (Canadian and U.S. dollar) trades of their shares in Canadian markets. The results indicate that firms electing to report their financial results in U.S. dollars do enjoy a higher proportion of U.S. trades, and a higher market value, compared with firms reporting in domestic currency. These findings are consistent with U.S. dollar reporting reducing the behavioral phenomenon known as “home bias”, for U.S. investors. In contrast, giving investors the opportunity to transact in U.S. dollars in Canada does not appear to have a beneficial impact. This latter finding is consistent with the practical observation that very few Canadian firms adopted dual currency trading. The dual currency trading experiment on the TSX appears to have failed.

Keywords : home bias, dual currency trading, reporting currency, natural resource firms
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Multinational Finance Journal, 2013, vol. 17, no. 3/4, pp. 149-163
Marc Oliver Rieger , University of Trier, Germany    Corresponding Author
Thorsten Hens , University of Zurich, Switzerland
Mei Wang , WHU Otto Beisheim school of Economics, Germany

Abstract:
We examine time discounting factors in an international survey. Our analysis reveals a significant relationship between time discount factors and historical equity premiums across 27 countries. This result implies that higher historical equity risk premiums are observed in countries where survey participants tend to be more short-term oriented. This finding is consistent with the explanation of the equity premium puzzle provided by myopic loss aversion.

Keywords : equity risk premium; time discounting; myopic loss aversion; cultural finance
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Multinational Finance Journal, 2013, vol. 17, no. 3/4, pp. 341-369
Prasad Padmanabhan , St. Mary’s University, USA    Corresponding Author
Wenqing Zhang , SolBridge International School of Business, South Korea
Chia-Hsing Huang , SolBridge International School of Business, South Korea

Abstract:
Today, firms are facing a globally competitive environment. Against this backdrop, firms can ill afford to make mistakes in their capital budgeting and acquisition decisions. When making major decisions, firms may be faced with additional costs associated with managerial anchoring. Using simulation results, it is shown that firms making off-shoring decisions can be better off using two or more managers when managerial anchoring can lead to significant cost increases. This paper shows the conditions under which management by committee can involve higher incremental costs, but are offset by decreased anchoring costs if managers anchor in different directions. It is also shown that firms cannot completely eliminate the impact of anchoring even if they hire an infinite number of managers. Firms should consider hiring additional managers in instances where major decisions are involved, if the incremental cost of hiring the additional manager is offset by decreased anchoring costs.

Keywords : behavior finance; anchoring; manager; financial decision
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Multinational Finance Journal, 2013, vol. 17, no. 1/2, pp. 49-76
Dimitris Kenourgios , University of Athens, Greece    Corresponding Author
Dimitrios Dimitriou , University of Athens, Greece
Apostolos Christopoulos , University of Athens, Greece

Abstract:
This study investigates the contagion effects of the 2007-2009 global financial crisis across multiple asset markets and different regions. It uses daily return data of six asset classes: stocks, bonds, commodities, shipping, foreign exchange and real estate. A robust analysis of financial contagion is provided by estimating and comparing asymmetric conditional correlations among asset markets during stable and turmoil periods. Results provide evidence on the existence of a correlated-information channel as a contagion mechanism among the US stocks, real estate, commodities and emerging Brazilian bond index. The findings also support the decoupling of BRIC equity markets from the crisis, the diversification benefits of shipping and foreign exchange value of the US dollar indices, and the existence of a flight to quality mechanism from risky US assets to German bonds. This evidence has important implications for portfolio diversification strategies and the future work of policymakers.

Keywords : global financial crisis; asset markets; contagion; asymmetric dynamic conditional correlations
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Multinational Finance Journal, 2013, vol. 17, no. 3/4
Hersh Shefrin , Santa Clara University, USA    Corresponding Author

Abstract:
Proponents of behavioral finance have as their goal the introduction of realistic psychological concepts into the study of finance. I call this the “behavioralizing finance.” In this respect, behavioral finance is more of an approach than a field. This special issue is devoted to behavioralizing multinational finance. In this regard, the issue focuses on topics that provide insights into the manner in which the psychological concepts manifest themselves in different countries and across the financial spectrum. The papers in this issue explore the broadening of behavioral finance, in terms of new applications and different countries, thereby providing deeper insights into issues that have been prominent in the existing behavioral literature.

Keywords : n/a
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