Quarterly Publication of Multinational Finance Society • ISSN 1096-1879

Volume 2    Number 4    December 1998

 Information Content of Earnings in the Emerging Capital Market: Evidence from the Warsaw Stock Exchange
(Multinational Finance Journal, 1998, vol. 2, no. 4, pp. 245–267)

Eva K. Jermakowicz
University of Southern Indiana
Sylwia Gornik-Tomaszewski
Baldwin-Wallace College

This article investigates the association between stock returns and the annual earnings, derived from the new accounting and reporting standards, of firms listed on the Warsaw Stock Exchange between 1995 and 1997. Following a brief history of the Warsaw Stock Exchange, two major issues affecting the effectiveness of the Polish securities market are discussed. These are the transition process from public to private enterprise ownership, and the development of accounting and reporting standards compatible with the capital market requirements and the European Union regulation. The empirical results indicate significant association between stock returns and the annual earnings. Results are compared with those for more developed capital markets.

Keywords: accounting and reporting standards Poland, earnings and returns, privatization, Warsaw Stock Exchange.

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Public Utility Regulation in the US and Asymmetric Return Responses to Positive and Negative Abnormal Earnings
(Multinational Finance Journal, 1998, vol. 2, no. 4, pp. 269–293)

Emeka T. Nwaeze
Rutgers University, U.S.A

This article focuses on regulation and variation in rate structures to investigate asymmetric return responses to positive and negative abnormal earnings. The abnormal earnings (AE) metric is measured as the difference between the actual profit rate and the maximum allowed profit rate, scaled by the beginning-period price. The analysis is motivated by the anticipated asymmetry in the information contents of positive and negative AE induced by existing rate structures which permit utilities to recover below normal profits but allow them to retain abnormal profits. Accordingly, negative AE is expected to be largely transitory and price-irrelevant whereas positive AE is expected to persist and be price-relevant. The results reveal significant asymmetry in return responses to positive and negative AEs. Specifically, the magnitude of return responses is larger for positive than for negative AEs. The results further show variations in the magnitudes of price responses across regulatory structures.

Keywords: abnormal earnings, asymmetric return responses, egulatory structure.

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Securitizing Eastern Europe's External Bank Debt
(Multinational Finance Journal, 1998, vol. 2, no. 4, pp. 295–310)

Christopher Korth
Western Michigan University
Zane Swanson
Emporia State University
Robert Singer
Quincy University

Most of the Eastern European countries are burdened by heavy foreign debts. Securitization could be helpful in solving the vexing problem of servicing the debt of Eastern European countries and improving their financial situation. Three formats for securitizing the loans are broadly available. While all three formats could be used to enhance significantly the marketability of existing Eastern European debts, create a more favorable lending climate for new syndicated loans, and accelerate the development of large, integrated secondary markets, the analysis indicates that the mortgage-backed bond provides the best alternative (JEL F21,F34,G15,G21,O16).

Keywords: securitization, Eastern Europe, loans and financial
Intermediaries

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