Quarterly Publication of Multinational Finance Society • ISSN 1096-1879

Volume 2    Number 1    March 1998

 
Are the Market Effects Associated with Revisions to the TSE300 Index Robust?
(Multinational Finance Journal, 1998, vol. 2, no. 1, pp. 1–36)

Richard Chung
Concordia University, Canada
Lawrence Kryzanowski
Concordia University, Canada

This article examines the stock market effects of changes in the composition of the TSE300 index over the period 1990-94. The test methodology adjusts for thin trading, pre- and post-revision abnormal performance and sample selection criterion effects. The models used to characterize returns include factors such as illiquidity and large trade activity. The positive and transitory median changes in traded volumes become insignificant when market-adjusted volumes are examined. No permanent effects on trade and analyst price behavior are identified. Traditional market-adjusted abnormal return inferences are not robust. The announcement window abnormal returns are smaller for annual versus nonannual index additions. This suggests that a longer advance notice period more than compensates for a larger number of simultaneous index revisions. The findings support the price pressure and liquidity hypotheses. Temporary changes in liquidity costs temporarily move stock prices from their equilibrium values, and announcement window abnormal returns are essentially reversed in subsequent periods (JEL G14).

Keywords: index revision, abnormal returns, liquidity, event study.

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Financial Liberalization and the Exchange-Rate Exposure of the Taiwanese Firms: A Nonparametric Analysis
(Multinational Finance Journal, 1998, vol. 2, no. 1, pp. 37–61)

Jang-Ting Guo
University of California–Riverside, U.S.A.
Rong-Chang Wu
Shin Chien University, Taiwan

This article adopts a nonparametric approach to examine the exchange-rate exposure of Taiwanese firms between December 1979 and January 1995. The evidence indicates that financial liberalization that took place in July 1987 has introduced an important structural break to firms' foreign exchange exposure. In the pre-liberalization period, no industry shows significant exposure to changes in the exchange rate. By contrast, in the post-liberalization period, exchange-rate movements exert significant contemporaneous and lagged impacts on the value of firms, particularly those with high involvement in international trade (JEL C14, F31, G18).

Keywords: financial liberalization, foreign exchange exposure effect, nonparametric econometrics.

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Ownership Structure, Managerial Turnover and Takeovers: Further U.K. Evidence on the Market for Corporate Control
(Multinational Finance Journal, 1998, vol. 2, no. 1, pp. 62–83)

Jay Dahya
University of Wales College of Cardiff, U.K.
Ronan Powell
Queen's University of Belfast, Northern Ireland

This article investigates the impact that successful hostile and friendly takeovers have on the rates of top management change for U.K. target firms. The results shows that hostile takeovers are associated with a greater degree of both top executive and top team forced departure rates compared to that of friendly takeovers. Furthermore, prior to takeover, hostile targets have lower abnormal returns, lower profitability, higher debt, lower managerial ownership and a high ownership stake held by external block holders relative to friendly targets. The results give further support to the disciplining role of the hostile takeover (JEL G3).

Key words: managerial control, hostile takeover, top management turnover, friendly takeover, ownership structure 

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