Quarterly publication of the Multinational Finance Society     ISSN 1096-1879

Macroeconomic Stability, Bank Soundness, and Designing Optimum Regulatory Structures
(Multinational Finance Journal, 2004, vol. 8, no. 3 & 4, pp. 141-171)

George Kaufman
Loyola University of Chicago, U.S.A. and Federal Reserve Bank of Chicago, U.S.A.

This paper focuses on the strong links between macroeconomic stability and bank soundness and argues that if the first is not achieved the second is not likely either with serious adverse consequences. Instability in banking is most often the result of actions by governments directed at the macroeconomy and banks to achieve short-run goals with little consideration for unintended immediate or longer-term consequences. Without government interference, there is little evidence that the banking system is unstable. This paper develops a framework for designing optimum regulatory structures that, if adopted by countries, will help to reduce instability in their banking systems and thereby also in their macroeconomies (E44, G21,G28).

Keywords: macroeconomic stability, bank soundness, designing optimum regulatory structures.

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Testing for Multiple Types of Marginal Investor in Ex-Day Pricing
(Multinational Finance Journal, 2004, vol. 8, no. 3 & 4, pp. 173–209)

Jan Bartholdy
Aarhus School of Business, Denmark
Kate Brown
University of Otago, New Zealand

The observed changes in share prices at the ex-dividend day have led researchers to look for a single marginal investor, either a long or a short term trader with different tax status, dominating all trades to explain the ex-day pricing in different markets. This paper provides a model which extends this research in three directions. One, it allows for the possibility that different types of traders may influence different stocks, thereby generating a separating equilibrium. Two, it identifies an additional marginal investor who has the option of being taxed as a short term or long term trader. Three, it explicitly models the fact that it can take a considerable time from when a dividend based trade is made until taxes have to be paid on that trade. A unique data set from New Zealand is used for the empirical analysis. Evidence of a separating equilibrium with at least two types of marginal investors is found (JEL: G10, G35).

Keywords: dividends, ex-day pricing, taxation.

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Shareholders Wealth Effects of Joint Venture Strategies
(Multinational Finance Journal, 2004, vol. 8, no. 3 & 4, pp. 211–225)

Gertjan Schut
IBM Business Consulting Services, Netherlands
Ruud van Frederikslust
Erasmus University Rotterdam, Netherlands

We investigate the shareholder wealth effects of 233 joint venture announcements of Dutch public companies in the period 1987 till 1998. The research shows that, on average, establishing joint ventures has a positive effect on the market value of Dutch companies. Using the strategic characteristics of joint ventures it is possible to explain and understand these wealth effects. Our research shows that the factors of strategic intention, the context in which the strategy is unfolded and the extent to which the company has control over the implementation strongly explains the extent to which a joint venture can create value (JEL G14, G15, G34 , F23).

Keywords: joint venture strategy, event studies, shareholders value.

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Public Information Arrival and Emerging Markets Returns and Volatility
(Multinational Finance Journal, 2004, vol. 8, no. 3 & 4, pp. 227–245)

Ali M. Kutan
Southern Illinois University-Edwardsville, U.S.A.
Tansu Aksoy
Southern Illinois University-Edwardsville, U.S.A.

Recent findings have heightened the debate about the usefulness of public information in asset markets. Using daily composite and sector index returns, this paper examines the role of public information arrival in an emerging, high-inflation economy like Turkey. The findings reveal that real GDP and industrial production announcements have the most important impact on stock returns. Regarding inflation, nominal stock returns increase in response to unfavorable inflation announcements, but only for the financials sector and partially. Market volatility is more sensitive to news about real GNP, balance of trade, tourism and construction. Implications of the findings for market participants are discussed (JEL E6, F3, G2).

Keywords: emerging markets, GARCH models, stock market volatility.

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Impact of ADR Listing on the Trading Volume and Volatility in the Domestic Market
(Multinational Finance Journal, 2004, vol. 8, no. 3 & 4, pp. 247–274)

Demissew Diro Ejara
Fairleigh Dickinson University, U.S.A.
Chinmoy Ghosh
University of Connecticut, U.S.A.

This paper investigates the impact of ADR listing on the trading volume and volatility of the domestic market. Existing theories indicate that trading shifts to a market with lower transaction costs, and the level of volatility is directly related to the level of trading activity. The analyses provide empirical evidence showing increase in both trading volume and price volatility in the domestic market after ADR listing. The increase in volatility is attributed to noise resulting from public information as opposed to from increased trading friction. This suggests improvement in liquidity following ADR listing. Comparison across country groups indicates marginally higher gain for emerging market stocks although the difference is not statistically significant. Auction type markets gain more in terms of increase in trading volume than dealer type markets (JEL: G15, N20).

Keywords: ADR, cross listing, market segmentation, market liquidity., transparency.

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