Malaysian Stock Research Articles

Environmental Reporting and Speed of Adjustment to Target Leverage: Evidence from a Dynamic Regime Switching Model

Abstract Background and Purpose: This study investigates the impact of environmental reporting on speed of adjustment and adjustment costs which is evaluated based on the ability of firms to adjust to target leverage level for non-financial firms listed in the Malaysian Stock Exchange (Bursa Malaysia). Design/Methodology/ Approach: The study selects Malaysian firms based on the contracting and political cost of the economy which is seen as a relationship-based economy. This in turn influences a firm’s ability to obtain external financing and thus has an important impact on capital structure decisions. In addition, the method employed allows for a direct measure on adjustment cost for firms. The current study utilises a dynamic regime switching model based on the DPF estimator to estimate rate of adjustment to optimal target levels based on the distinction of environmental reporting of public listed firms. The approach allows statistical inferences to control for potential serial correlation, endogeneity and heterogeneity concerns which accounts for firm specific characteristics. Results: The empirical findings suggest voluntary disclosure on environmental reporting increases a firm’s ability to access external financing at a cheaper cost as evidenced by a more rapid rate of adjustment. The findings are consistent across differing endogenous and exogenous factors indicating that these firms tend to face lower adjustment costs. Conclusion: The current study provides a direct measure on the ability of firms to adjust to target levels via security issues and repurchases in the capital markets. This in turn is a reflection of perceived riskiness and value from the investors’ point of view in an emerging market. Prior studies have focused on environmental reporting and equity risk premiums and have not evaluated the direct impact on firm value given that the trade-off theory of capital structure predicts that firm value is maximised at target i.e. optimal levels of leverage. This study addresses the current gap in the literature by evaluating the impact on firms’ value, based on the adjustment cost.

Firm Earning and Dividend Policy: A Case of Malaysian Stock Market

Firm Earning and Dividend Policy: A Case of Malaysian Stock Market

Does proprietary day trading provide liquidity at a cost to investors?

Capitalizing on the special case of Malaysia in which proprietary day traders (PDTs) are mandated to boost liquidity and the recent availability of trading data, this paper empirically examines the liquidity effect of proprietary day trading. Using daily data spanning October 2012 to June 2018, we find evidence that PDTs' trade volume is associated with higher aggregate liquidity in the Malaysian stock market, which can be attributed to the theoretical channel of intense competition among informed traders. However, such improved liquidity comes at a cost to investors, as proprietary day trading is found to be associated with higher conditional volatility and conditional skewness of closing percent quoted spreads. The former is due to the exchange-imposed immediacy for PDTs to close their open positions, whereas the latter can be attributed to the exclusive rights granted to PDTs to engage in intraday short selling.

The Impact of Commodity Prices, Interest Rate and Exchange Rate on Stock Market Performance: An Empirical Analysis From Malaysia

This paper examines the impact of commodity prices (palm oil price, oil price, and gold price), interest rate, and exchange rate on the Malaysian stock market performance. Employing the bounds test approach, the results of the study showed cointegrating relationships among variables. Specifically, the results revealed a significant influence of palm oil price on the stock market index. However, no significant influence was observed for both the oil price and gold price. Interest rate and exchange rate showed significant influences, which are consistent with past empirical studies. One important policy implication from this study is that the authorities should also pay attention to the effect of commodity prices, in addition to macroeconomic variables, in implementing relevant polices, as they may have a negative impact on the Malaysian stock market.

Board governance on dividend initiation by initial public offerings: Evidence from The Malaysian stock market

Within the realm of corporate finance, IPO (refers to the process of offering shares of corporation to the public for the first time) companies in Malaysia received little attention from the academ...

Volatility and Information Behavior: A Study on Sharīʿah Index and General Index

The fact that there is an increased demand for Sharīʿah-based financial products demands modeling the risk-return structures of such products for the benefits of investors, practitioners, and policymakers. This study attempts to discover the superiority of information and volatility patterns of Sharīʿah-based indices over the general index traded in the Malaysian stock exchange. The Vector Error Correction Model combined with EGARCH is administered to achieve the objectives of this study

The Relevance of Bird-in-Hand Theory to ShariahInclined Investors: A Case Study of Malaysia

The purpose of this study is to identify whether the wealth of Shariah-inclined investors is affected by dividend policy. This study is different from other studies because earlier studies do not differentiate between Shariah-compliant and non-Shariah compliant stocks, creating a gap for dividend signaling theory and bird-in-hand theory on Shariah-compliant financial products. This study employs panel data analysis and multiple linear regression with the most recent data representing eight (8) out of twelve (12) sectors in the Malaysian stock market. Dividend per share and retained earnings per share are used as a proxy for dividend policy while market price per share is used as a proxy for shareholders’ wealth. It was found that for Shariah-compliant stocks, both dividend per share and retained earnings per share are insignificant in affecting shareholders’ wealth. Unlike other studies on dividend policy which do not discriminate between Shariah-compliant and non-Shariah compliant stocks, this study finds that dividend policy to be irrelevant to Shariah-inclined investors.

ISLAMIC SOCIAL REPORTING (ISR) ANALYSIS IN INDONESIA AND MALAYSIA

The purposes of this study are to examine the effect of company size, profitability, board of commissioners, proportion of independent commissioners, and frequency of meetings on the level of Islamic Social Reporting (ISR) in Indonesia and Malaysia and to test whether there is difference ISR in Indonesia and Malaysia. The sample of this study are 10 companies that issued sukuk at Indonesia Shariah Stocks Index and 8 companies on Malaysia Stock Exchange in 2013-2017. Multiple regression and different tests are used in this research as analysis techniques. The results show that the size of the company effects on the level of ISR in Indonesia positively but not in Malaysia. Profitability, board size, and the proportion of independent commissioners does not effect on ISR levels in Indonesia and Malaysia. The frequency of board of commissioners meetings effect on ISR levels in Indonesia and Malaysia positively and there is difference ISR in Indonesia and Malaysia. The implication of this research is that there is a need for regulations that regulate ISR disclosure in Indonesia to improve the quality of ISR disclosure to the stakeholders

Google Search and Stock Market Performance: Evidence from Malaysia

Nowadays, the internet changes the way for information searching and processing. Along with that, Google search had become the most popular search engine on the web since it allows users access to the information at a minimal cost. This study intends to investigate the relationship between Google search volume and the Malaysian stock market performance in the aspects of returns, volatility, and trading volume. The sample of this study consisted of 29 listed companies from the Malaysian stock market. The sample period of this study covered the period from 2016 to 2018. The data related to the stock market were downloaded from Investing.com, whereas the data related to Google search were downloaded from the database of Google Trend. The results indicated that the Google search volume index (GSVI) of the previous week tends to have significant positive impacts on the stock price changes. Thus, a higher search volume of the specific company name tends to increase the stock price of the particular company in the following week. Besides that, this study also revealed that the stock market performance tends to be affected by stock market performance in the previous week. Lastly, this study suggested that signals of GSVI need to be included in the investment strategies.

CO-MOVEMENT AND CAUSAL RELATIONSHIP BETWEEN STOCK MARKET AND MACROECONOMIC VARIABLES: LATEST EVIDENCE FROM MALAYSIA

Previous studies pertaining to the co-movement and causal relationship between Malaysian stock markets and domestic macroeconomic variables are by now quite well documented. Nonetheless, to the best of authors’ knowledge, there is a void in the literature about foreign macroeconomic variables. Therefore, this paper aims to examine co-movement and causal relationship between FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBMKLCI) with foreign macroeconomic variables namely world crude oil price, gold price, and five world major stock market indices; Singapore’s Straits Times Index (STI), Chinese Shanghai A-Share Index (SHAI), the US’s Dow Jones Industrial Average (DJIA), Hong Kong’s Hang Seng Index (HSI) and Japanese Nikkei 225 Index (NIK). We also include domestic macroeconomic variables namely private sector domestic credit, gross international reserves and foreign currency assets, and an exchange rate of Malaysian ringgit (MYR) to the US dollar (USD) in this study. Using 9-year monthly data series from 2010 to 2018, the Augmented Dickey-Fuller (ADF) test reveals that data series have unit root in level order, but become integrated when converted into the first difference. The t-statistics of the Trace test suggests that FBMKLCI co-moves with Malaysian gross international reserves and foreign currency assets, world gold price and STI in the long run, respectively. Further, the VECM notes the absence of long-run or short runs causal relationships except Singapore’s STI to FBMKLCI in the short run. The pairwise Granger causality test indicates a one-way causal relationship running from FBMKLCI to gross international reserves and foreign currency assets. The findings benefit stock market investors, diversified portfolio fund managers, market regulators, and policymakers besides enriching the existing literature.

Robustness of efficient decision-making unit based on production model of stochastic frontier analysis with different distribution error

In the empirical stochastic frontier analysis, there has been an increasing interest in exploring the consistency of the production model for decision-making units. Among it is the issue of consistency, which has been recognized as a complex process due to many factors such as different model estimations, the behavior of inefficiency effects and types of distributional errors. This paper focuses on analyses the technical efficiency of Malaysian stock performance over the period of 2013 to 2017. By utilizes SFA production function (Cobb-Douglas and Translog), which allows two decompositions of inefficiency effect into its time-variant and time-invariant, within two distributional assumptions known as truncated-normal and half-normal, which is predicted to estimate the technical efficiency score and provides a ranking efficiency based on the model estimation performance. Finally, to investigate the consistency of the estimated SFA efficiency score by examining its relationship with four models. These main findings figure out, using time-invariant inefficiency effect, Cobb-Douglas function with truncated-normal distribution more preferable for the dataset of study. By using four models with different distributional assumptions and production models, Spearman’s rank-order was implemented and revealed that there was a high degree of correlation is found between efficiency estimates that derives from the models applied. Based on the empirical study, this research shows that the ranking efficiency for selected stock performance in Malaysia was said to be robust to different kinds of distributional errors and production models. This paper provides new evidence on consistency relative efficiency of stochastic frontier model based on the three assumptions; inefficiency effect, distribution error for technical inefficiency and production function.

Prediction of Malaysian stock market movement using sentiment analysis

Financial and business news contain various information about different companies, stock markets and other financial information. This information could be useful for predicting the stock market movement. The aim of this study is to determine whether financial news could be used to predict the Malaysian stock market movement. The sentiment analysis and classification were done using Hybrid Naïve Bayes algorithm. The data for this study was collected from Genting Berhad for a period of 11 months. The method resulted in news classification accuracy of 68.75% and showed a correlation of 58.41% between historical stock price and the sentiment data.

Factors Affecting the Integrity of Manufacturing Company Financial Statements in Indonesian Stock Exchange and Malaysian Stock Exchange

This study aims to examine the effect of managerial ownership, auditors switching and intellectual capital on the integrity of financial statements with leverage and firm size as control variables. The study employed literature and observation study of the research object to obtain the research data. The research objects are manufacturing companies listed on IDX and MYX within the period of 2014-2017. Research data were analyzed using Eviews software with multiple linear regression analysis method. In this study the t statistical test is used to measure and assess the significance level of each independent variable (managerial ownership, auditor switching and intellectual capital) and control variables (firm size and leverage) on the dependent variable, namely the integrity of financial statements applied in Indonesia and Malaysia. The results showed that in the Indonesian manufacturing companies, managerial ownership, auditors switching and intellectual capital have a positive effect on the integrity of financial statements. Meanwhile, in the Malaysian manufacturing companies, from the three dependent variables used in the study, only managerial ownership has an effect on the integrity of financial statements. With regard to the control variables used, leverage and firm size are equally positive for the integrity of financial statements of companies just in Indonesia. This research is different from the previous study in that the objects of this study are manufacturing companies listed on the Indonesia Stock Exchange (IDX) and Bursa Malaysia (MYX) within the period of 2014-2017, which is a longer period of time. Further, the researchers add independent variables to managerial ownership, auditor switching, and intellectual capital

Determinants of Initial Public Offering (IPO) Underpricing in Malaysian Stock Market

The primary purpose of this study is to examine the effect of issue-specific characteristics and company’s attributes on the existence of underpricing of IPOs listed in Malaysia Stock Exchange from 2012 to 2015. Market-adjusted abnormal return is used as a proxy of dependent variable in this study, namely degree of IPO underpricing whereas the independent variables are the determinants of IPO. This paper aims to illustrates the relationship between the degree of IPO underpricing and the four determinants namely issues price, offer size, company age and market capitalization. Upon the analysis, the degree of IPO underpricing is 21.05% from a sample of 59 IPOs listed in the stock market. By applying multiple regression analysis, noted that market capitalization shows positive relationship with the degree of IPO underpricing whereas issues price and offer size are negatively related to the dependent variable. Moreover, the analysis indicates that the relationship between degree of IPO underpricing and company age is insignificant.

Robust Hybrid Optimization Method to Reduce Investment Portfolio Risk Using Fusion of Modern Portfolio Theory and Genetic Algorithm

Main objective of this study is to develop hybrid optimization method for reducing investment portfolio risk. The methods selected in this study are the combination of Modern Portfolio Theory (MPT) and genetic algorithm optimization approach. Three stocks from Malaysian Stock Exchange are selected in developing the investment portfolio namely Malayan Banking Berhad, Hap Seng Consolidated Berhad and Top Glove Corporation Berhad. Result indicates the modern portfolio theory can give optimal portfolio weightage with maximum return for tolerate level of investment risk. In addition, genetic algorithm enhanced the optimal searching method to find global minimum of investment risk. Result shows the minimum portfolio risk in objective function is 2.122118 with implementation genetic algorithm optimization. The optimal combination of portfolio investment is 32.24 % in asset A (Malayan Banking Berhad), 52.37 % in asset B (Hap Seng Consolidated Berhad), and 15.30 % in asset C (Top Gove Corporation Berhad). The important of this study is it will assist investor in making better decision to optimize their return for given level of investment risk. Furthermore, this hybrid method provides a better accuracy of prediction for return of investment and portfolio risk.

Influence of International Financial Reporting Standards on Earnings Management: Comparative Study of Pre-Post IFRS Era in Malaysia

Purpose—The motive of this study is to examine the IFRS (International Financial Reporting Standards) and to investigate the influence of its introduction on earning management in the companies (registered as public listed companies) of Malaysia, as the idea of IFRS is to make the statements of the companies more transparent and comparable. Design/Methodology/Approach—100 firms listed on Bursa Malaysia (Stock exchange) were taken for the sampling of data and were investigated to examine the quality of accounting information. In this study, the motive was to evaluate and measure the Earning Management Score (EMS) with respect to the context of Malaysian listed companies. It is based upon cross-sectional study which was introduced by Kothari et al. (2005) and later modified by Jones. The discretionary accruals in this study are evaluated on the basis of the historical estimations of the industry. Findings—The findings of this research suggests that IFRS influences the recognition of the losses in financial statements which depends upon the disclosure requirements and also the relevance of the financial data. Research Limitations/Implications—Every research is bounded by certain limitations. Similarly, in this study there were also few limitations encountered. Firstly, this study covers only one aspect of IFRS which is observance of the intensity of Earning Management, Therefore the conclusion is drawn towards that respective aspect only. Also, the EM (Earning management) is not only and always apprehended via the accrual models, so in future reference other models can be used as well. Finally, this study was based on cross-sectional approach which assumes that all the firms in the industry tend to have same accruals. Whereas, in reality companies differ from each other in structure, characteristically and in all aspects.

An Empirical Evaluation on the Financial Performance of the Companies in Malaysia with Z Score Model

Most companies wish to achieve financial stable condition and good financial performance. The companies with unstable financial condition will face bankruptcy. Financial ratios analysis is very important for evaluation on the financial performance of the companies. The Z score model has been introduced to evaluate the financial performance of the companies based on the financial ratios analysis. The objective of this paper is to evaluate the financial performance of the companies in Malaysia with Z score model. Besides that, the significant financial ratios that will be affecting the Z score are identified in this study with regression model. The data of this study consists of the financial ratio of some financial variables for 18 financial sector companies that listed in Malaysian stock market. The results of this study show that the financial condition of the companies is identified whether the companies are in safe zone, grey zone or financially distressed based on the Z score. The companies with Z score below 1.81 indicate the companies are financially distressed whereas the Z score above 2.99 indicates the companies are in safe zone. The companies with Z score between 1.81 and 2.99 indicate the companies are in grey zone and need to be observed. This study is significant because it will predict the solvency of the companies and further promote economic growth in Malaysia.

ANALISIS PENGARUH PERPUTARAN KAS, PERPUTARAN PERSEDIAAN, PERPUTARAN PIUTANG TERHADAP TINGKAT LABA SERTA DAMPAKNYA TERHADAP HARGA SAHAM (Studi Terhadap Perusahaan Otomotif pada Malaysia Exchange Stock Tahun 2011-2016)

AbstractThis study aims to analyze the effect of cash turnover, inventory turnover, receivable turnover to profit rate and its impact on stock prices at automotive companies listed on the Malaysia Stock Exchange. The population in this study finished 10 registered compananies on the Malaysian ExchangeStock period 2011-2016. In this research obtained finished 5 (five) companies determined as sample, companies that were used as samples taken using purposive sampling method,. Statistical testimg is done using regression test of panel data of random effect Eviews 9.0 model. this research method uses descriptivequantitative by doing the activity of collecting secondary data from company annual report. Cash turnover, inventory turnover, receivable turnover as independent variable, and net profit as moderating variable. While stock price is measured by Change of stock price. The results showed that simultaneously, variable cash turnover, inventory turnover and receivable turnover significantly affect the level of earnings. Partially, inventory turnover and receivable turnover have a positive and significant influence to profit rate but cash turnover variable has negative and significant influence to profit rate. While the level of profit has a positive and significant effect on stock prices.

Board ethical commitment and corporate performance: Malaysian evidence

PurposeThe purpose of this study is to examine the relationship between board ethical commitment and the performance of the company. When directors embed ethics in discharging their duty, it will prohibit frauds, unnecessary actions and decisions that are detrimental to the company.Design/methodology/approachThis study collected data for two years i.e. 2013 and 2014 from the annual report of the biggest 500 companies by market capitalisation as of 31 December 2013 listed under Bursa Malaysia stock exchange. Board ethical commitment is measured based on the Malaysian Code of Corporate Governance (MCCG) and various international best practices while corporate performance is measured based on return on equity, return on assets, net profit margin, market to book value and TobinQ.FindingsThis study found that ethical commitment by the board has a significant positive relationship with corporate performance. The findings are robust to the alternative performance measurements and lagged one-year corporate performance.Research limitations/implicationsThis paper enhances the theoretical understanding of the contribution of the board of ethical commitment to the sustainable performance of the company. However, this study suffered from a limited data collection period of two years only from the annual report of the company.Practical implicationsThis study provides an indicator that the directors need to provide a good ethical leadership example to the employees and committed to built a good ethical work culture in the organisation via establishment of code of ethics. In addition, this code needs to be promoted, enforced and embedded in the operations of the organisation.Originality/valueThis study is original as it not only examines board ethical commitment from MCCG 2012 but also international best practices from various countries such as UK, USA and Europe. It also contributed to the literature and theoretical understanding of the importance of board ethical commitment specifically in developing countries like Malaysia that scarce in the literature.

PERBANDINGAN RETURN SAHAM PADA PERUSAHAAN PERKEBUNAN BEI DAN BURSA MALAYSIA

The purpose of this research is to know the difference between the actual return and the expected return of the stock using the CAPM model in plantation sector companies listed on the Indonesia Stock Exchange and Malaysia Stock Exchange during the period 2015-2017. This research is a quantitative study using secondary data in the form of stock closing price data, stock index and interest rates by the Central Bank. The hypothesis test in this study is an independent sample t-test to compare the results of the calculation of returns obtained. Results of this study is (1) There is a significant difference between actual return and expected return on plantation companies listed on the Indonesia Stock Exchange, (2) There is no significant difference between actual return and expected return on plantation companies listed on Bursa Malaysia, and (3) There is a significant difference between stock returns of plantation sector companies listed on the Indonesia Stock Exchange and Malaysia Stock Exchange during the 2015-2017 period. Both Indonesia and Malaysia obtained negative returns during the study period, but Malaysia's value is better than Indonesia. Keywords: Actual Return, CAPM, Expected Return, and Stock Investment.