|
2004
(Issue No. 127)
Synopsis
Information
Provided by Accrual and Cash Flow Measures in Determining Firms' Performance:
The Malaysian Evidence
by Norita Mohd Nasir and Shamsul Nahar Abdullah
Accrual and cash flow measures have been argued to be able to evaluate
a firm's performance, although the results are inconclusive throughout
countries and time. This study examined the accrual and cash flow measures
independently and jointly among Malaysian firms. The study predicted that low
cash flow subgroups (high income to cash flow firms) would show better results
in operating, investing and financing activities. Our descriptive analysis on
the firms' structural components seemed to confirm that low cash firms
relatively had higher sales, total assets and shareholders' equity than the
high cash firms, indicating that these firms showed better operating
performance than other subgroups. With regard to investing and financing
activities, the small firms group confirmed the expectations but big firms
exhibit different results. Further analysis on the correlation among variables
yielded evidence to suggest that there is a significant relationship between
non-current assets and debts with investing and financing cash flows, in the
expected direction of movement. However, using income and cash flow measures,
independently and jointly, the results show that none of the measures can be
used to evaluate Malaysian firms' performance. The findings appear to be not
supportive of previous research which argued that income and cash flow measures
have incremental and joint information in assessing firms' performance.
Latest Odds About
IPO Success and Failure
by Prof Steven M Dawson
In a research conducted 5 years ago, we studied the odds of gains and losses
for initial public offerings (IPO) investors for a 20-year period. We found
there were large initial gains and the shares were likely to remain profitable
if held for a full year. If the shares were bought in the market, however, the
odds of a gain were generally less than 50/50. In this updated study, we find
that in the past 5 years, compared to the preceding 20 years, the initial
underpricing is lower, the odds of loss are greater over the first year, and
when shares are bought in the market the odds of a profit are lower.
Top
The Market for
Financial Derivatives: Removing Impediments to Growth
by Dr Obiyathulla Ismath Bacha and Omar Malek Ali Merican
This paper begins with an evaluation of the performance of the Malaysian market
for financial derivatives. Despite a headstart, Malaysia appears to be lagging
substantially when compared to the performance of other Asian derivative
markets. While the other Asian markets, though newer, have seen explosive
growth in volume, in Malaysia the trading volume appears to have shrunk. We
examine why this has been the case and identify several macro and micro level
impediments. Among macro-level impediments have been the imposition of capital
controls, reduced equity market volatility, falling interest rates and a
fragmented regulatory/operational structure. The lack of market makers,
regulation and settlement rules were identified as impediments at the market
micro structure level.
We propose several measures to help turn around the local derivatives market.
These include privatising and deregulating risk management, facilitating market
making, liberalisation of unit trust guidelines with regard to their use of
derivatives and the initiation of derivative funds. We also recommend the
reactivation of securities borrowing and lending, introduction of new
derivative products and streamlining of licensing/regulations.
Does Purchasing
Power Parity Hold Among Selected East Asian Developing Economies? An Empirical
Study
by Dr Tan Juat Hong
This study uses the threshold autoregressive model with asymmetric adjustments
to investigate the purchasing power parity (PPP) for six East Asian economies,
namely Malaysia, Singapore, Thailand, South Korea, Indonesia and the
Philippines. Overall, the empirical results support the long-run PPP. Stronger
evidence of PPP is revealed when the Singapore dollar is used as the numeraire
currency as compared to using other numeraire currencies like the Malaysian
ringgit, Thai baht and Korean won.
Top
Critical Success Factors of Insurance Agents
by Dr Salleh Yahya and Darshana Kumari Ragupathy
This research looks into the critical success factors of insurance agents. A
total of 225 insurance agents participated in this study. The results were
analysed by using the Statistical Package for Social Sciences (SPSS) and Linear
Structural Relationships (LISREAL). The study found that an agent's behaviour
traits were the most important factor compared to knowledge and selling
approach. Examples of behaviour traits are punctuality, able to see and act on
opportunities, persistence, commitment, self-confidence, persuasion, high
achievement and honesty.
A Critical Analysis
of the Basle 'Know Your Customer' Principle
by John Tee Chwee Ming
Money laundering activities within the banking system have shown a growing
trend in the past 5 years (1998-2002). As such, the Basle Committee on
Regulation and Prudential Supervision and the Financial Action Task Force
(FATF) continue to introduce new minimum standards and best practices to reduce
the likelihood of banks becoming vehicles for money laundering and terrorist
financing activities. This will help protect the integrity of, and depositor's
confidence in the banking system.
In order to provide more transparency in the flow of money within the banking
system, banks are required to formulate their respective Know Your Customer
(KYC) programmes. The KYC programme should include various elements: (a)
customer acceptance policy, (b) customer identification, (c) on-going
monitoring of higher risk accounts, and (d) risk management. KYC is a dynamic
process, whereby it has to be updated periodically to reflect current changes
in the financial market and instruments. This paper aims to critically provide
an analysis of these essential elements of KYC, especially the strengths and
weaknesses, and to propose strategies to beef up surveillance on money
laundering activities in the banking system. Although the proposed strategies
would not eliminate money laundering activity in total, criminal organisations
will view the banking system as an unattractive vehicle to pursue their money
laundering activities, which will in turn help curb such activities.
Top
Role of Development Financial Institutions in Assisting SMEs to Tap the Capital
Market
by Datuk C Rajandram
This paper, which has been edited for publication in this journal, was
presented at the International CEO Forum of Development Finance Institutions,
held in August 2004 in Kuala Lumpur. The author discusses the major issues that
small and medium enterprises face in raising capital for project financing, and
how development financial institutions can assist SMEs in securing funds from
the capital market.
Innovative Financing
for Small and Medium Enterprises: The Philippine Experience
by Ambassador Jesus P Tambunting
This paper, which has been edited for publication in this journal, was
presented at the International CEO Forum of Development Finance Institutions,
held in August 2004 in Kuala Lumpur. The author gives an insight into how the
Plantersbank, a privately-owned, profit-driven financial institution, can
engage in SME financing as a commercial and profitable undertaking.
Top
Back |