This research aims to provide empirical evidence about the effect of corporate governance (CG) re... more This research aims to provide empirical evidence about the effect of corporate governance (CG) reform on the financial reporting quality (FRQ). Using a sample of non-financial firms listed at Saudi stock market (TADAWAL), Abu Dhabi securities market (ADX) and Qatar stock market the study investigated the trend of the quality of the financial reporting at theses stock markets before and after corporate governance reforms that applied to the listed firms. This study adopts the working capital accruals quality as a measurement of the financial reporting quality that can determine the level of the efficiency and the effectiveness of the promoted reform of corporate governance. Panel data method was applied to McNicholas model (2002) to calculate firms FRQ. Independent sample t-test was performed to investigate the trend of the FRQ in the selected countries and to examine the significance degree of the differences between the means for the periods before and after the applied corporate g...
Mutual fund has become an increasingly important investment vehicle for retail investors, especia... more Mutual fund has become an increasingly important investment vehicle for retail investors, especially among households. Besides developing the institutional investment as an efficient momentum trader, the long-established separation of ownership and control in contemporary type of fund management has very much caused depreciation in shareholder value under minimum investor protection environment. The unobserved activities and widely magnitude decision skills of managers under imperfect contract with the tendency to serve self-interest exacerbates the shareholder wealth, predominantly in Shariah mutual fund, pertaining to dual investing interests. This paper reviews the theoretical and empirical literature with central attention given to the existing governance structure, Shariah governance in religious based fund, and some other related internal governance mechanisms. Concurrently, the review explains theoretically and conceptually the interrelationships among all relevant governance...
Although the agency theory has been widely used across a variety of corporate finance concepts fo... more Although the agency theory has been widely used across a variety of corporate finance concepts for the past three decades, little work has been undertaken with regard to how the agency theory could be used to explain simultaneous interrelation among internal solutions for Agency problem. In addition, no general consensus has emerged after many years of investigation and scholars can often disagree about the same empirical evidence. Among other, potential endogeneity of the agency mechanisms, as well as cultural and structural differences between developed and developing markets, has been stated to cause the complexity of corporate governance around the world. This article reviews the theoretical and empirical literature addressing causal effects of managerial incentives and financial controlling instrument due to agency problem. At the same time, the article aims to improve the understanding of how these instruments affect each other. The main part of the discussion is related to th...
This paper reports evidence of short-term momentum profits in a study of 700 stocks traded in the... more This paper reports evidence of short-term momentum profits in a study of 700 stocks traded in the emerging Malaysian stock market. For this purpose, momentum portfolios were formed over a full sample period and other sub-periods that included the Asian Financial Crisis, Global Financial Crisis and the period between the two crises. Significant negative returns were observed during the economic downturn brought about by the Asian Financial Crisis, consistent with literature. Moreover, the results showed positive returns over the period characterised by rising market index. This finding is consistent with publication and may be explained as due to investors' confidence being high in a rising market. In addition, individual stock momentum observed was studied to determine whether it was attributable to industry effect, which is a less explored topic. The results of the current study showed that strategies of buying past winning industries and selling past losing industries appeared...
Profit and loss sharing (PLS) based financing without collateral and interest rate could ease the... more Profit and loss sharing (PLS) based financing without collateral and interest rate could ease the financing difficulty of small and medium enterprises (SMEs). However, this PLS based financing is not widely offered by Islamic financial institutions (IFIs). This exploratory study illustrates that PLS based financing to SMEs is viable for IFIs. Using financial information of SMEs to calculate profit sharing ratio and net income under PLS based financing context, this study determined the profit margin ratio of IFIs from extending PLS based financing to SMEs. The findings show that extending PLS based financing to hypothetical diversified portfolios of SMEs generate higher profit margin compared to conventional lending at low risk based on the Markowitz portfolio theory of diversification. Moreover, as the number of SMEs in the portfolio increases, the risk of insufficient returns from the portfolio when an enterprise suffers a loss reduces.
This article examines the value-added phenomenon of Malaysian horizontal merger and acquisition a... more This article examines the value-added phenomenon of Malaysian horizontal merger and acquisition activities (M&A) in the long run for the period 1994–2010. In this regard, this article used economic value-added (EVA) approach and cost-efficiency approach (stochastic frontier analysis (SFA)) to investigate synergistic benefits. The findings suggest that bidder firms experience no significant improvement in operating and financial efficiencies in the long run. Specifically, the operating performance of bidder firms deteriorated after the merger exercise, whereas the target firms had no significant improvement in operating performance over the same period. In summary, the findings suggest no synergistic gains from horizontal mergers in Malaysia. These findings imply that the long-run performance of firms in the horizontal mergers or acquisitions is driven by other motives rather than synergistic gains.
... The BBA contract must be higher in price than the cash sale contract therefore, if the bank s... more ... The BBA contract must be higher in price than the cash sale contract therefore, if the bank sell ... the first contract has given the bank a 10% profit of #5,000 on a #10,000 financing to the ... would use it Saiful and Sanusi (2001), this type of contract is acceptable in the Malaysia context ...
The stock index futures was introduced in Malaysia in December 1995 with the launching of the fut... more The stock index futures was introduced in Malaysia in December 1995 with the launching of the futures contract on the Kuala Lumpur Stock Exchange Composite Index. Due to its recentness in the country, many issues pertaining to this equity derivatives instrument ...
The objective of this paper is to discuss evidence of short run stock overreaction with respect t... more The objective of this paper is to discuss evidence of short run stock overreaction with respect to the arrival of dramatic events in the Malaysian stock market. The findings reveal that Malaysian stock market overreacts to economic crisis and extraordinary political events. The study shows significant overreaction behaviour existed in this market upon announcement of the removal of the deputy prime minister and announcement of the resignation of the prime minister. In contrast, evidence of underreaction was detected upon announcement of the national election. With regards to dramatic international events, Malaysian stock markets only disclose evidence of stock overreaction behaviour to SARS outbreak.
This paper attempts to seek linkage between stock overreaction behaviour and financial bubbles in... more This paper attempts to seek linkage between stock overreaction behaviour and financial bubbles in the Malaysian stock market. Monthly data over a period between January 1987 and December 2006 shows no clear evidence of stock overreaction behavior in the market. However, when the study split the analysis into two sub-periods, evidence of stock overreaction behaviour becomes significant in the pre-crisis sub-period, but there is no significant evidence of financial bubbles in the same sub-period. During the post crisis, evidence of stock overreaction seems to diminish, and evidence of financial bubbles however, is observed in the period. This study believes that evidence of bubbles observed in the Malaysian stock market in the post crisis period is due to stock overreaction that took place in the market prior to the crisis.
This study evaluates a battery of forecasting volatility models using daily data of the FTSE Burs... more This study evaluates a battery of forecasting volatility models using daily data of the FTSE Bursa Malaysia CI Index. The forecasting models include random walk model, historical mean model, and moving average models. The mean error statistic, mean absolute error statistic, root mean squared error statistic, mean absolute percentage error statistic, under-predictions mean mixed error, and over-prediction mean mixed error were used to evaluate precision of forecasts. The results suggested that the 3 years moving average model offered advanced forecasts volatility information. Nevertheless, the different models rankings indicated that they are sensitive toward the error statistic employed in evaluating the precision of the forecasts.
The relationship between ownership structures and company performance has been issue of interest ... more The relationship between ownership structures and company performance has been issue of interest among academics, investors and policy-makers. So far, there are still inconclusive findings that family and state ownership giving positive or negative impact on firm performance. This study employed technical efficiency and Malmquist productivity index to measure firm performance. Period of this study will be conduct from 1992 to 2007. Result of this study revealed that Technical efficiency study in Indonesia showed that state owned enterprises (SOEs) had better performance than family owned enterprises (FOEs) since SOEs' performance increased more stably during research period. Meanwhile Malaysia-based technical efficiency study demonstrated that FOEs samples had lower efficiency level than SOEs, which performed a little enhancement. In term of productivity, Indonesian FOEs had become more productive compare with SOEs during three sub-periods. On the other hand, Malaysian FOEs and SOEs had improved from time to time within the three sub-periods.
Findings for the whole period from January 1987 to December 2006 reveal that loser has insignific... more Findings for the whole period from January 1987 to December 2006 reveal that loser has insignificantly becomes loser and winner has significantly reversed in the subsequent period. Arbitrage portfolio does not provide any significant abnormal return thus, not consistent with the overreaction hypothesis. This is due to the reason that Malaysian investors are overoptimistic. After controlling for size, both small and large stocks have significantly support the overreaction hypothesis even after adjustment for difference in risk. No evidence of January effect is reported during the period; however, there is evidence of Chinese New Year effect documented in the findings. The study also shows that Malaysian Stock Market overreacts prior to 1997 Asian Financial crisis. During the post crisis, the results are not consistent with overreaction hypothesis. One possible reason to this behaviour is that investors are more aware of the phenomenon and have altered their trading strategy. As a res...
This research aims to provide empirical evidence about the effect of corporate governance (CG) re... more This research aims to provide empirical evidence about the effect of corporate governance (CG) reform on the financial reporting quality (FRQ). Using a sample of non-financial firms listed at Saudi stock market (TADAWAL), Abu Dhabi securities market (ADX) and Qatar stock market the study investigated the trend of the quality of the financial reporting at theses stock markets before and after corporate governance reforms that applied to the listed firms. This study adopts the working capital accruals quality as a measurement of the financial reporting quality that can determine the level of the efficiency and the effectiveness of the promoted reform of corporate governance. Panel data method was applied to McNicholas model (2002) to calculate firms FRQ. Independent sample t-test was performed to investigate the trend of the FRQ in the selected countries and to examine the significance degree of the differences between the means for the periods before and after the applied corporate g...
Mutual fund has become an increasingly important investment vehicle for retail investors, especia... more Mutual fund has become an increasingly important investment vehicle for retail investors, especially among households. Besides developing the institutional investment as an efficient momentum trader, the long-established separation of ownership and control in contemporary type of fund management has very much caused depreciation in shareholder value under minimum investor protection environment. The unobserved activities and widely magnitude decision skills of managers under imperfect contract with the tendency to serve self-interest exacerbates the shareholder wealth, predominantly in Shariah mutual fund, pertaining to dual investing interests. This paper reviews the theoretical and empirical literature with central attention given to the existing governance structure, Shariah governance in religious based fund, and some other related internal governance mechanisms. Concurrently, the review explains theoretically and conceptually the interrelationships among all relevant governance...
Although the agency theory has been widely used across a variety of corporate finance concepts fo... more Although the agency theory has been widely used across a variety of corporate finance concepts for the past three decades, little work has been undertaken with regard to how the agency theory could be used to explain simultaneous interrelation among internal solutions for Agency problem. In addition, no general consensus has emerged after many years of investigation and scholars can often disagree about the same empirical evidence. Among other, potential endogeneity of the agency mechanisms, as well as cultural and structural differences between developed and developing markets, has been stated to cause the complexity of corporate governance around the world. This article reviews the theoretical and empirical literature addressing causal effects of managerial incentives and financial controlling instrument due to agency problem. At the same time, the article aims to improve the understanding of how these instruments affect each other. The main part of the discussion is related to th...
This paper reports evidence of short-term momentum profits in a study of 700 stocks traded in the... more This paper reports evidence of short-term momentum profits in a study of 700 stocks traded in the emerging Malaysian stock market. For this purpose, momentum portfolios were formed over a full sample period and other sub-periods that included the Asian Financial Crisis, Global Financial Crisis and the period between the two crises. Significant negative returns were observed during the economic downturn brought about by the Asian Financial Crisis, consistent with literature. Moreover, the results showed positive returns over the period characterised by rising market index. This finding is consistent with publication and may be explained as due to investors' confidence being high in a rising market. In addition, individual stock momentum observed was studied to determine whether it was attributable to industry effect, which is a less explored topic. The results of the current study showed that strategies of buying past winning industries and selling past losing industries appeared...
Profit and loss sharing (PLS) based financing without collateral and interest rate could ease the... more Profit and loss sharing (PLS) based financing without collateral and interest rate could ease the financing difficulty of small and medium enterprises (SMEs). However, this PLS based financing is not widely offered by Islamic financial institutions (IFIs). This exploratory study illustrates that PLS based financing to SMEs is viable for IFIs. Using financial information of SMEs to calculate profit sharing ratio and net income under PLS based financing context, this study determined the profit margin ratio of IFIs from extending PLS based financing to SMEs. The findings show that extending PLS based financing to hypothetical diversified portfolios of SMEs generate higher profit margin compared to conventional lending at low risk based on the Markowitz portfolio theory of diversification. Moreover, as the number of SMEs in the portfolio increases, the risk of insufficient returns from the portfolio when an enterprise suffers a loss reduces.
This article examines the value-added phenomenon of Malaysian horizontal merger and acquisition a... more This article examines the value-added phenomenon of Malaysian horizontal merger and acquisition activities (M&A) in the long run for the period 1994–2010. In this regard, this article used economic value-added (EVA) approach and cost-efficiency approach (stochastic frontier analysis (SFA)) to investigate synergistic benefits. The findings suggest that bidder firms experience no significant improvement in operating and financial efficiencies in the long run. Specifically, the operating performance of bidder firms deteriorated after the merger exercise, whereas the target firms had no significant improvement in operating performance over the same period. In summary, the findings suggest no synergistic gains from horizontal mergers in Malaysia. These findings imply that the long-run performance of firms in the horizontal mergers or acquisitions is driven by other motives rather than synergistic gains.
... The BBA contract must be higher in price than the cash sale contract therefore, if the bank s... more ... The BBA contract must be higher in price than the cash sale contract therefore, if the bank sell ... the first contract has given the bank a 10% profit of #5,000 on a #10,000 financing to the ... would use it Saiful and Sanusi (2001), this type of contract is acceptable in the Malaysia context ...
The stock index futures was introduced in Malaysia in December 1995 with the launching of the fut... more The stock index futures was introduced in Malaysia in December 1995 with the launching of the futures contract on the Kuala Lumpur Stock Exchange Composite Index. Due to its recentness in the country, many issues pertaining to this equity derivatives instrument ...
The objective of this paper is to discuss evidence of short run stock overreaction with respect t... more The objective of this paper is to discuss evidence of short run stock overreaction with respect to the arrival of dramatic events in the Malaysian stock market. The findings reveal that Malaysian stock market overreacts to economic crisis and extraordinary political events. The study shows significant overreaction behaviour existed in this market upon announcement of the removal of the deputy prime minister and announcement of the resignation of the prime minister. In contrast, evidence of underreaction was detected upon announcement of the national election. With regards to dramatic international events, Malaysian stock markets only disclose evidence of stock overreaction behaviour to SARS outbreak.
This paper attempts to seek linkage between stock overreaction behaviour and financial bubbles in... more This paper attempts to seek linkage between stock overreaction behaviour and financial bubbles in the Malaysian stock market. Monthly data over a period between January 1987 and December 2006 shows no clear evidence of stock overreaction behavior in the market. However, when the study split the analysis into two sub-periods, evidence of stock overreaction behaviour becomes significant in the pre-crisis sub-period, but there is no significant evidence of financial bubbles in the same sub-period. During the post crisis, evidence of stock overreaction seems to diminish, and evidence of financial bubbles however, is observed in the period. This study believes that evidence of bubbles observed in the Malaysian stock market in the post crisis period is due to stock overreaction that took place in the market prior to the crisis.
This study evaluates a battery of forecasting volatility models using daily data of the FTSE Burs... more This study evaluates a battery of forecasting volatility models using daily data of the FTSE Bursa Malaysia CI Index. The forecasting models include random walk model, historical mean model, and moving average models. The mean error statistic, mean absolute error statistic, root mean squared error statistic, mean absolute percentage error statistic, under-predictions mean mixed error, and over-prediction mean mixed error were used to evaluate precision of forecasts. The results suggested that the 3 years moving average model offered advanced forecasts volatility information. Nevertheless, the different models rankings indicated that they are sensitive toward the error statistic employed in evaluating the precision of the forecasts.
The relationship between ownership structures and company performance has been issue of interest ... more The relationship between ownership structures and company performance has been issue of interest among academics, investors and policy-makers. So far, there are still inconclusive findings that family and state ownership giving positive or negative impact on firm performance. This study employed technical efficiency and Malmquist productivity index to measure firm performance. Period of this study will be conduct from 1992 to 2007. Result of this study revealed that Technical efficiency study in Indonesia showed that state owned enterprises (SOEs) had better performance than family owned enterprises (FOEs) since SOEs' performance increased more stably during research period. Meanwhile Malaysia-based technical efficiency study demonstrated that FOEs samples had lower efficiency level than SOEs, which performed a little enhancement. In term of productivity, Indonesian FOEs had become more productive compare with SOEs during three sub-periods. On the other hand, Malaysian FOEs and SOEs had improved from time to time within the three sub-periods.
Findings for the whole period from January 1987 to December 2006 reveal that loser has insignific... more Findings for the whole period from January 1987 to December 2006 reveal that loser has insignificantly becomes loser and winner has significantly reversed in the subsequent period. Arbitrage portfolio does not provide any significant abnormal return thus, not consistent with the overreaction hypothesis. This is due to the reason that Malaysian investors are overoptimistic. After controlling for size, both small and large stocks have significantly support the overreaction hypothesis even after adjustment for difference in risk. No evidence of January effect is reported during the period; however, there is evidence of Chinese New Year effect documented in the findings. The study also shows that Malaysian Stock Market overreacts prior to 1997 Asian Financial crisis. During the post crisis, the results are not consistent with overreaction hypothesis. One possible reason to this behaviour is that investors are more aware of the phenomenon and have altered their trading strategy. As a res...
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