The Effect of Debt Securities Issuance towards Equity Market Behavior in Malaysia (original) (raw)
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International Journal of Business and Management, 2010
The study investigates the relationship between firm specific characteristics and choices between straight debt and convertible debt issuances by Malaysian listed companies. The unique irredeemable feature of most convertible debts issued in Malaysia and the fast growth of the Malaysian bond market following the Asian economic crisis render this study to be conducted. Seven firm characteristics variables were selected based on previous literature namely tax consideration, debt ratio, tangibility, firm size, growth opportunities, profitability, and net operating cash flow. The result concludes that relatively smaller companies with lower debt tax shield, higher debt ratio, lower profitability and lower growth opportunity are more likely to issue convertible debt. The findings are consistent with the trade-offs theory where tax consideration and bankruptcy are given due attention in financing decision but does not provide support for the 'risk shifting hypothesis' and 'backdoor listing hypothesis'.
Market Reactions Towards the Announcement of Sukuk Issuance: Evidence from Malaysian Market
Jurnal Pengurusan, 2017
Drawing from the significance and implication that investors can use to properly comprehend the trend in market reaction from the new issuance of information, this study aims to investigate the market's reaction toward the announcement of Islamic bond or sukuk. The Islamic bond market provides not only an avenue for more dynamic capital trades and portfolio diversification but also functions as an engine that accelerates the growth of the Islamic capital market. This study specifically aims to investigate whether the announcements of sukuk issuance that carry any new information can create impact on the market's reactions. The overall sample time frame for this study is divided into three event windows; before, during and after the financial crisis in order to ascertain any unusual impact on the market's return during the 2007-2008 financial crises. The stock market return is measured via the FTSE and Bursa Malaysia's KLcI. In order to offer a more robust finding on the returns, this study re-measured the market return using Bursa Malaysia's FTSE EMAS Index as it is a better representation of the sample population. The data collected from Bursa Malaysia, Bloomberg and DataStream database will be then analysed using Brown and Warner's standard event study methodology of Brown and Warner (1985). Based on the 115 sukuk issuances between 2002 and 2013 (a period of 12 years), this study reveals that the effect of the announcement is significantly negative a day before and on the announcement date. On top of that, the result finds that there is a significantly positive reaction 30 days after the announcement of sukuk issuance which indicates that investors take a longer time to absorb the information from the sukuk announcement. The existence of a significantly positive reaction of stock markets during the financial crisis periods could be attributed to the conditions where the Islamic debt issuance might have sent an incredible signal about the financial position of the company, which have helped in solving the financial problem, especially during the economic downturn. However, the EMAS Index shows none of these significant results. The significant findings in this study (i.e., when uses the KLcI) are expecting to contribute clearer evidence and strategies concerning whether the information regarding sukuk can help investors to form a better investment strategy.
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This thesis attempts to meet four main objectives. Firstly, to examine the firm and country specific as determinants for debt maturity structure. Secondly, to examine worldwide governance indicators as new potential determinants for debt maturity structure. Thirdly, to examine factors that caused decision on debt maturity structure to be different across time and lastly, to examine determinants for adjustment of speed for debt maturity structure. All the aforesaid objectives are examined specifically on public and private debt securities in Malaysia and Singapore. The data for all the variables used in this study are collected from World Bank, Thomson Reuters Datastream, Bank Negara Malaysia, and Monetary Authority of Singapore over the period of 1996 to 2016. Altogether data of this study consist of 1,157 listed firms in Malaysia and Singapore. Two-step system generalized method of moment are employed in this study so that the four main objectives of this study are achieved. This s...
Dividend Payout and Bonds Risk in Listed Companies from Malaysia
International Journal of Academic Research in Business and Social Sciences, 2019
The study aims to examine the effect of dividend payout on distance to default of bonds issued by non-financial firms listed on Bursa Malaysia. For this purpose, the data is collected of 298 nonfinancial firms over the period 2006-2015. This paper focus on whether Dividend payout (hereafter abbreviate as DPO) is effect on distance to default (hereafter abbreviate as DtD). This study followed the Bharath and Shumway (2008) DtD mixtures model and combining both accounting and marketbased evidence to unravel the Malaysian corporate bonds DtD quality. The results indicated that an increase in dividend payout would results an increase in distance to default (DtD). Further indication on the determinants of DtD is found to be strong to various sensitivity examinations with different trials of variable. Bonds are increasingly playing a more critical role in the private debt intermediation process and are becoming more interconnected with financial system and more significant role in the development of corporate bonds.
Determinants of Corporate Bond Yield: The Case of Malaysian Bond Market
International Journal of Business and Society, 2016
Default risk has been recognized as one of the key determinants of bond yield. Past studies argue that default risk can be reflected by issue characteristics, issuer characteristics and interest rate behaviors on riskless security. As default risk is believed to be higher in developing markets due to the issue of illiquidity, capital inadequacy and a developing lending system, more empirical works must be focused on these markets. The present study examines the association between selected determinants and corporate bond yield in Malaysian market. Instead of focusing on the aggregate market level as has widely been carried out in previous studies, the present study concentrates on the individual issue level. The results of cross-sectional multiple regression analyses based on 61 observations in 2012 indicate that bond maturity, coupon payment, trading frequency, issuer's rating, debt to equity ratio and return on equity ratio are the significant determinants of bond yield.
Frequency and Sequence: Convertible Debt Issuance Announcement Effect on Stock Returns
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Convertible debt that shares the characteristics of debt and equity is perceived to be riskier than straight debt, therefore the issuance announcement tends to lead to adverse market reaction. In this study we show that convertible debt issuance announcement is also associated with negative abnormal returns with evidence from the Malaysia capital market. We argue that the substantially smaller and illiquid convertible debt market do not affect the consistency of the findings. However, the main purpose of this study is to examine the effect of frequency and sequence of convertible debt issuance announcement on the issuers stock return. We find that both the frequency and sequence of issuance significantly affect the announcement returns. In the longer event window, we observe negative abnormal returns for the infrequent issuers. While frequent issuers report positive abnormal returns. Looking at the sequence of issuance, the first issues of convertible debt lead to negative market re...
Examining the factors influence bond market performance in Malaysia / Muhammad Syukri Mohd Jefri
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This study investigates the factors that influence bond market performance in Malaysia by analyzing the relationship between bond market performance that is measured by government bond price 10Y (BP), maturity of bond (N), interest rates (R), inflation rate (I) and bond yields (YTM). This study covers the Malaysian bond market in which Malaysia government decides to make the bonds as priority in the market and become the main sources for long term financing due to the Asian financial crisis that has been occurred in year 1997 (Fabella & Madhur, 2003). Besides, this study chose Malaysian government bond as the financial data from the year 2010 to 2017 were used 32 observations for this study. A multiple linear regression analysis was executed in this study to see the relationship between dependent and independent variables. The dependent variable is bond market performance and is measured by government bond 10Y price (BP), whereas the independent variables are maturity of bond (N), i...
Agency costs and Islamic bond issuers' long-run performance in Malaysia
Global Business and Economics Review, 2017
The extensive issuance of Islamic bonds in different parts of the world raises the question of whether such a financing activity leads to better firm performance or not and what the determinants are of this performance. The literature offers scant answers. Thus, this study measures the long-run performance of Malaysian firms following their Islamic debt issues and explores the agency cost explanations of the performance. One-, two-, and three-year stock return performances are measured by the buy and hold abnormal return (BHAR) of Islamic debt issues using samples of 113, 101, and 86 Islamic debt issues, respectively, in the 2001-2009 period. The significance of the performance is tested by heteroscedasticity-and-serial correlation-consistent t-statistics. The determinants of BHAR are investigated using the ordinary least square regression method. The results show a significant positive long-run performance beyond a one-year period that is negatively influenced by growth opportunity and free cash flow when the issue increases the debt ratio.
Information Content Of Islamic Private Debt Announcement: Evidence From Malaysia
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Different types of Islamic debts have been increasingly utilized as preferred means of debt funding by Malaysian private firms in recent years. This study examines the impact of Islamic debts announcement on private firms- stock returns. Our sample includes forty five listed companies on Bursa Malaysia involved in issuing of Islamic debts during 2005 to 2008. The abnormal returns and cumulative average abnormal returns are calculated and tested using standard event study methodology. The results show that a significant, negative abnormal return occurs one day before announcement date. This negative abnormal return is representing market participant-s adverse attitude toward Islamic private debt announcement during the research period.