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We examine changes in controlling shareholder holdings, looking for evidence of financial tunneling (unfair wealth transfers from public investors to controlling shareholders). Our sample comprises yearly data during 2000–2011 on 75 large Israeli companies. We find that controlling shareholders are successful in timing the stock market – there exists a significant negative correlation between changes in the mean controlling shareholders’ equity holdings and market return. There is also some evidence that controlling shareholders increase (decrease) their holdings before years of positive (negative) excess returns in their shares. However, statistically significant mean excess returns are documented only after decreases in controlling shareholders’ holdings. Thus, we offer only limited support for the financial tunneling hypothesis.

The purpose of this paper is to illustrate the centralization of control in the Israeli economy.

The paper uses data published by the Israeli stock market authority to identify owners holding more then 5 percent of a company's value.

The total worth of stocks traded in the Tel‐Aviv stock exchange was 690 billion shekels (about 180 billion current US dollars), while the worth of the 25 largest companies was about 479 billion shekels (69.4 percent). The party of interest holdings share in these companies was 35.2 percent (while the public share was 64.8 percent).

In order to reach economic efficiency, we are willing to pay the social cost of unequal income distribution. There is no reason not to use the same logic regarding the taxing of inheritance. If it is more economically efficient, inheritance should be taxed, although it has already been taxed in the past.

How can we improve income distribution without levying taxes that reduce economic efficiency? The answer is high taxes on inheritance.

The paper suggests a practical policy to reduce inequality in Israel.

The aim of this paper is to examine the dynamic relationships between Middle East stock markets.

Daily data from the Egyptian (CMA) and Israeli Tel Aviv Stock Exchange (TASE‐100) stock indices are considered. The paper employs a Bivariate cointegration GARCH(1,1) model to explain price discovery and lead‐lag relationships for the period July 1997 – August 2007.

Empirical results confirm that the Egyptian market plays a price discovery role, implying that CMA prices contain useful information about TASE‐100 prices. CMA market is more informationally efficient than TASE‐100 market. Further, CMA index reflects new information faster than TASE‐100 index.

Future research should examine the dynamic relationships between Middle East stock markets using intraday (high frequency) data and recent dynamic (long memory) methods.

The findings are helpful to financial managers and traders dealing with Middle East stock markets.

The contribution of this paper is to provide evidence on the stock market dynamics and financial linkages between two Middle East emerging markets using recent daily data and a modern econometric model. To the best of the author's knowledge, no previous study has tested the dynamic relationships between daily prices of CMA and TASE‐100.

The research question we address in this paper is whether the effort invested by the internal auditor in the firm is associated with better firm performance. Our measure of effort is the number of audit hours invested in the firm, and firm performance is measured by the likelihood of a restatement of the firm's financial results. This study is the first to analyze this question, an endeavor made possible by a difference in disclosure requirements regarding internal audit effort between the US and Israel. Our analysis is conducted using hand-collected data on firms traded on Tel Aviv Stock Exchange (TASE) during the period 2010–2014. We expect that auditor effort is negatively associated with the likelihood of restatements of the firm's financial results. Indeed, our findings support this hypothesis. We also consider the association between restatements and two audit committee characteristics – the degree of independence and the degree of expertise of its members. However, these associations are not upheld by the data.

The purpose of this paper is to analyze different seasonal anomalies for the Israeli securities markets for the pre- and post-global financial crisis periods.

The closing values of six indices of the Tel Aviv Stock Exchange (TASE) of Israel have been considered. The time frame ranges from 2000 to 2018. Further, the overall time frame has been segregated into pre- and post-financial crisis periods. The study employs dummy variable regression technique for assessing different calendar anomalies.

The results show evidence pertaining to different seasonal anomalies for the Israeli markets. The results specifically show that the anomalies change considerably across the pre- and post-financial crisis periods. The results are more apparent for three anomalies including the day of the week effect, the month of the year effect and the holiday effect. However, anomalies including the Halloween effect and the trading month effect are found to be insignificant across both pre- and post-financial crisis periods.

The study is first of its kind that analyzes different seasonal anomalies across pre- and post-financial crisis periods for the Israeli markets. The study provides newer insights about the overall return patterns observed in different indices of the TASE.

We investigate the association between attributes of the audit committee of a firm and the likelihood of negative events occurring in the firm’s life in Israel. The mandate of the audit committee in Israel is substantially different from its mandate in the US. The responsibilities of the committee in the US are divided between two committees in Israel, one of which deals with reviewing the financial statements and the other one, titled “audit committee,” is in charge of the remaining tasks of the US-type audit committee. This allows us a unique opportunity to focus on the roles of the audit committee other than reviewing the financial statements. Using hand-collected data on firms traded on Tel Aviv Stock Exchange in 2010–2014, we find that the larger the audit committee size, the larger the likelihood of negative events, consistent with the cumbersome workings and potential conflicts of interests characterizing a large committee. The percentage of directors with accounting and financial expertise on the audit committee is associated with a lower likelihood of negative events, in line with the value of such experts in tasks beyond reviewing the financial statements. The fraction of independent directors on the audit committee is not found to be significantly related to the likelihood of negative events. This is consistent with the notion that some independent directors are independent in form but not necessarily in substance, which is surprising in light of the comprehensive regulation regarding audit committee independence imposed by the Israeli regulator.

We collect data on CEO pay in 122 closely held firms traded on the Tel-Aviv Stock Exchange during 1995–2001. After estimating CEO pay performance sensitivity and CEO “excess pay,” we examine how these two pay attributes affect end of period (year 2001) Tobin's Q. Our main findings and conclusions are that (1) when CEO is from the controlling family, the end of period Q is negatively correlated with “excess” pay – “excess” pay to family-CEOs appears like a form of private benefits; (2) when a professional nonowner CEO runs the firm, end of period Q is positively correlated with CEO pay performance sensitivity – incentives to professional CEOs help promote firm value.

The desire to increase investor interest in emerging markets has motivated many studies of return and risk characteristics of equity prices in these markets. Using data from January 1999 to December 2002, we examine the dynamic relationships between oil, currency, and stock prices in the four major markets in the Middle East. Three of the four are highly correlated with the major stock markets. The potential for diversifying in Middle East markets is limited. The Egyptian and Jordanian markets, on one hand, and the Israeli and Saudi markets, on the other, are marginally integrated. While Israeli shekels significantly explain their equity prices, crude oil futures prices fairly explain oil‐rich Saudi and Egyptian equity prices. We conclude that it takes a long time for crude oil futures prices to reach equilibrium with stock prices in Israel when there is a shock to the system. However, it takes relatively a short time for crude spot oil prices and currency price to reach equilibrium with stock prices when there is a shock in the system of Saudi Arabia or Egypt. Our results suggest that, in the short and long term, investor decisions in these markets are influenced by oil and currency prices.

This paper presents the statistical distribution of credit ratings and their migration in Israel, and shows that for 16 years the distribution of ranks has been skewed to the left. The purpose of this paper is to analyze why firms with average quality debt have not changed their tactics and consent to publishing their grade which would then differentiate an average quality debt from a riskier one.

The paper estimates the mean values of ranks and the diagonal of the migration matrix on the basis of data on 1,639 bond rankings listed on the Tel‐Aviv Stock Exchange and publications by the largest Israeli rating agency, Maalot.

From 1992 to 2004, one‐third of the Israeli firms that had initially requested ranking from a rating agency decided to prevent publication. The findings show the average bond rankings published by Israeli rating agencies tend to be relatively high, while bond rating migration is relatively slow. There was no change in the shape of the statistical distribution of ratings between 2004 and 2007. The strategy of borrowers has remained stable and shows no change over 16 years of credit ratings in Israel.

Debtors with an average quality debt view the publications of the credit agency as a weak signal and do not expect the investment community to give them better credit for an average grade. To obtain more detailed ratings, regulators along with the credit rating agencies should consider enforcement of the publication of the rank of firms that requested evaluation.

The paper offers insights into why credit ratings in Israel have remained stable over the last decade and explains why Israeli firms with average quality debt do not change their strategy and do not request credit rating agencies to issue their grade publically which could then distinguish them from firms with worse quality debt.

How does downsizing affect long‐ and short‐term organizational performance? The present study aims to address this important question and attempts to extend previous research by examining the effect of both personnel and assets reduction on long‐ and short‐term firm performance.

The paper uses data collected through secondary sources on 196 firms traded on the Tel Aviv Stock Exchange (TASE) between 1992 and 2001.

Econometric analyses indicate the positive impact of a combination of downsizing strategies on short‐term performance, and the negative effect of this combination on long‐term performance and high‐tech industry performance is negatively related to assets and personnel cutbacks. Whereas downsizing affects the short‐term performance of larger and established companies positively, it generally affects long‐term performance inversely.

This study offers a first examination of the effects of simultaneous cutbacks in personnel and assets. This combined strategy goes further than dismissing employees, since layoffs are linked to the sale of such tangible assets as product lines or manufacturing facilities. By so doing, firms downscale their activities commensurate with the reduction in workforce and are less likely to generate excess workload on the remaining employees.