The Review of Finance and Banking

43-62

Authors: Andrey Kudryavtsev

The study explores the holiday effect on large daily stock price changes and on subsequent stock returns. The motivation for the study is based on the Mood Maintenance Hypothesis and on the literature documenting lower stock trading activity before holidays. I hypothesize that if a company-specific shock takes place before a holiday, then investors striving to maintain their positive pre-holiday mood, may be less willing to make influential trading decisions, and therefore, may react relatively more weakly to the shock. This kind of behavior may create an underreaction to the shock and result in subsequent price drift. I analyze all major daily stock price moves, defined according to a number of alternative proxies, for all the constituents of S&P 500 Index over the period from 1993 to 2017. I document that both positive and negative stock price moves occurring immediately before public holidays are followed by significant price drifts on the next two (post-holiday) trading days and over five- and twenty-day intervals following the initial price move. The magnitude of these post-event drifts increases over longer time windows. On the other hand, I find that large stock price changes taking place on regular days are followed by either non-significant or marginally significant price reversals. The effect is more pronounced for small and more volatile stocks.

7-26

Authors: Bogdan Capraru, Nicoleta-Livia Pintilie

The current paper provides new insights on competition degree among 2,024 commercial, cooperative and savings banks from the 28 European Union states during 2005-2015. Bank-level Lerner index, its efficiency-adjusted form and Boone indicator are the computed indices, with total output consisting in loans, customer deposits and securities. The estimates of marginal costs result from solving a Fourier flexible form of translog cost function. The banks included in the sample remain very competitive over time with the commercial and cooperative ones displaying the highest competitiveness. Non-OECD, upper-middle income and Eurozone states have a more competitive banking sector comparing to their counterparts.

43-52

Authors: Pattaragit Netiniyom

This research aims to investigate alternative investment illiquidity stocks in an emerging market, the Stock Exchange of Thailand. The new sample, illiquidity stocks, is evaluated by the ranking of stock trading volume from 2011 to 2012. Data screening yielded 163 listed companies. The OLS model is applied with quarterly data for the study period from 2011 to 2014. Because of the reflection between ROE and TOBIN Q, the usage of the OLS model might lead to biased results due to the autocorrelation of the variables. Thus the TSLS model is applied for the final prediction. The results of the study may be important; in the case of stocks with low liquidity, shareholder wealth depends on investor choice as to whether they prefer a quick payment as a dividend yield, or whether to wait to receive the return from company reinvestment in the future. The regulators could apply the results in decisions about free float criteria. Alternative investment could be supported by encouraging the issue of stock analysis reports.

61-75

Authors: Ingrid-Mihaela Dragota, Aura-Cristina Stefan-Dobrin

This work adds to the debate on the determinants of debt-equity mix providing new insights for four Nordic countries - Denmark, Finland, Norway and Sweden, less studied in the existing literature. Using a sample of 79 companies from Nasdaq Omx Nordic Index for the period 1995-2014, and a panel data approach, we draw on a complex set of firm- and country- specific variables to find the determinants for the total debt and, respectively, for the long-term debt ratios. Our results support the hypothesis that the regulatory quality is the most important determinant for both types of leverage, next to the domestic credit to private sector as percentage of GDP. Regarding the firm-specific factors, the tax implications of debt are an important determinant. The substitution effect seems to be not applicable for the Nordic firms due to the positive relation between the leverage and the non-debt tax shield, whatever the measure for the leverage is analysed. We also find that companies with high volatility in earnings have a higher risk of bankruptcy and borrow less than others. We reinforce that profitable companies avoid debt, and that large companies are more indebted than the small ones.

7-20

Authors: Prayagsing Chakeel Coomar, Jankee Kheswar

This paper confirms that, in a pre-financial crisis environment, alternative forms of corporate arrangements and operation of internal financial markets impact differently on corporate investment decisions, tested in heterogeneous samples in Mauritius. Innovatively, a more rational measure of internal finance (net liquidity), in line with International Accounting Standards, is adopted. It is found that only certain categories of firms rely more on internal finance than others and also do not resort to debts. Based on the results available, several policies are proposed for the authorities and financial institutions in view of addressing the problem of financial constraints (FC) and enhancing corporate investments.

7-15

Authors: Daniel Traian Pele, Vasile Nicolae Stanciulescu

This paper uses a straightforward application of alpha-stable distributions for Romanian Stock Market, showing how a relatively simple implementation in the real world of a complex mathematical tool can be much more reliable in risk management than the classical Gaussian or log-normal distributions. In this paper we use a SAS macro for estimating the parameters of an alpha-stable distribution, using the time-series regression method from Kogon and Williams (1998). Using the Fast Fourier Transform, we estimate the probability density function, the cumulative distribution function and consequently, the VaR (99.5%) and TVaR (99%). For numerical illustration we are using daily logreturns of the BET Index; the measures of market risk, estimated on rolling windows using alpha-stable distributions and Gaussian distribution, are then compared to the actual logreturns of the BET Index. Numerical experiments show that using alpha-stable distributions for estimating VaR and TVaR can be a better alternative for managing the risk of financial assets.