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1 – 5 of 5Hui Hong, Chien-Chiang Lee and Zhicun Bian
The purpose of this paper is to propose a new dynamic margin setting method for margin buying in China and evaluate the validity of its performance with the current margin system…
Abstract
Purpose
The purpose of this paper is to propose a new dynamic margin setting method for margin buying in China and evaluate the validity of its performance with the current margin system adopted by stock exchanges in extreme episodes.
Design/methodology/approach
This paper adopts the dynamic conceptual model of Huang et al. (2012) (which is based on Figlewski (1984)) but incorporates Markov chain to describe the data generation process of stock price changes. By applying the model to margin buying contracts for the period of March 16, 2018, to May 2, 2018 (baseline study) and June 15, 2015, to July 27, 2015 (robustness test), the model’s superiority to the current margin system adopted by stock exchanges is also tested.
Findings
The paper has several important findings. First, the margins derived by this system vary with market conditions, rising (declining) when stock prices go down (up), and are generally lower than the requirements imposed by stock exchanges. Second, this margin system induces lower overall percentage of costs than that adopted by stock exchanges. Third, parameter estimation plays an important role on shaping empirical results.
Research limitations/implications
The primary limitation of this paper lies in the fact that it does not solve the issue of determining optimal parameters of the Markov chain model. On the implication of findings, policy-makers and regulators on supervising margin buying activities may need a tune-up on the current margin system which features static margin requirements. Dynamic margins that incorporate market factors are virtually useful to balance the trade-off between liquidity and prudence.
Originality/value
To the best of the authors’ knowledge, this study is the first of its kind to develop a dynamic margin setting method for margin buying in China, aiming to balance the trade-off between liquidity and prudence. It not only takes into account the uniqueness of Chinese markets but also allows for time variations in both initial and maintenance margins.
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Chien‐Chiang Lee and Chun‐Ping Chang
The purpose of this paper is to re‐examine the long‐run co‐movement and causal relationship between GDP and social security expenditures.
Abstract
Purpose
The purpose of this paper is to re‐examine the long‐run co‐movement and causal relationship between GDP and social security expenditures.
Design/methodology/approach
The paper uses panel data unit root tests and panel cointegration tests, as well as estimation techniques appropriate for heterogeneous panels such as fully modified OLS. Data are employed on 12 Asian countries from 1972 to 2000.
Findings
The cointegration test results show strong evidence in favor of the existence of a long‐run equilibrium cointegrating relationship between GDP, capital stock and social security expenditures after allowing for heterogeneous country effects. Regarding the panel‐based error correction model and the Granger causality test, there are long‐run, bi‐directional causal linkages between social security expenditures and economic growth. In addition to the robust test, they display similar results.
Originality/value
The paper shows that in every moment, economic growth must be based in the social welfare policy contiguously, and the economic growth process can allow the social welfare policy to proceed contiguously
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Pedro Gomes Vasconcelos and Nelson Leitão Paes
In an attempt to reduce tax distortions and increase economic efficiency, in 2002 and 2003 Brazil promoted changes in the PIS/COFINS tax, the main federal tax on consumption…
Abstract
Purpose
In an attempt to reduce tax distortions and increase economic efficiency, in 2002 and 2003 Brazil promoted changes in the PIS/COFINS tax, the main federal tax on consumption. Thus, in addition to the old cumulative regime calculated on company revenues, the noncumulative regime was created with higher rates and the added value as a tax basis.
Design/methodology/approach
This paper analyzes the effects of the PIS/COFINS reform in a context of deindustrialization in the Brazilian economy, using a neoclassical model with two sectors.
Findings
The results suggest that after a small improvement in the aggregate economy in the short term, in the long term there was a worsening of the macroeconomic indicators. From the sector perspective, the PIS/COFINS reform may have contributed to the loss of industry participation in the Brazilian economy.
Originality/value
The study of the impact of the PIS/COFINS reform on industry through a neoclassical model is unprecedented in the national literature and contributes to the investigation of changes in the tax regime that occurred in the country.
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This study compares the motives of holding cash between developed (Australian) and developing (Malaysian) financial markets.
Abstract
Purpose
This study compares the motives of holding cash between developed (Australian) and developing (Malaysian) financial markets.
Design/methodology/approach
For the period 2006–2020, the t-test, fixed-effect and generalised method of moment (GMM) model have been applied to a sample of 1878 (1,165 Australian and 713 Malaysian) firms.
Findings
The empirical results reveal that firms in developed financial markets hold higher cash compared to the developing financial markets. The findings confirm that motives to hold cash differ between developed and developing financial markets. The GMM findings further show that cash holdings (CH) in Australia are higher due to higher ratios of cash flow, research and development (R&D) and return on assets (ROA), and lower due to larger dividend payments. In the Malaysian market, however, cash flows and R&D are ineffectual, ROA falls and dividend payments rise CH.
Practical implications
The study helps managers, practitioners and investors understand that firms' distinct economic, institutional, accounting and financial environments are important. To attain the desired outcomes, they must thus comprehend and consider these considerations while developing suitable liquidity strategies.
Originality/value
To the authors' best knowledge, this is the initial research demonstrating how varied cash motives and their ramifications are in developed and developing financial markets. Therefore, this study identifies the importance that CH motives varied among financial markets and that findings from a particular market cannot be generalised to other markets because of the market and financial structural variations.
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