Institutions and Economies

Capital Market Opportunities: In an Age of Transformation

Andrew Sheng — 2023-07-01

Do Environmental, Social and Corporate Governance Practices Enhance Malaysian Public-Listed Companies Performance?

Li-Chen Lee — 2023-07-01

This study examines whether there is a positive relationship between Environmental, Social and Governance (ESG) disclosure and financial performance, as measured by Tobin’s Q. Using a sample of 59 listed firms under the FTSE4Good Bursa Malaysia (F4GBM) Index from 2014 to 2021, our panel regression analyses show: First, ESG has a significant positive impact on company performance. Second, Social Disclosure (SOC) positively impacts financial performance. As a policy suggestion, the government must have a complete mechanism to monitor and promote the ESG blueprint. In addition, the government should develop programmes that are pro-ESG by giving tax exemption to firms that implement ESG strategies, for example, increasing the publicity of the Green Investment Tax Credit (GITA) to promote the development of green technology in Malaysia.

The Road to Sustainable Investing: Corporate Governance, Sustainable Development Goals, and the Financial Market

Ooi Kok Loang — 2023-07-01

This study investigates the impact of corporate governance (CG) and sustainable development goals (SDGs) practices on financial markets and company performance in Malaysia compared to developed countries like the United States, United Kingdom, Canada, and Singapore. The study uses panel data regression models to analyse the impact of CG and SDG adoption on stock return, volatility, investor sentiment, profitability, liquidity, and solvency from 2017 to 2021. The findings show that CG and SDG practices have a positive impact on financial market and company performance in both developed and developing countries. However, the strength and specific variables of the relationship differ depending on the country context. In developed countries, board responsibilities, remuneration, engagement with stakeholders, SDG4 (Quality Education), and SDG10 (Reduce Inequalities) are positively associated with stock return. In contrast, audit committee effectiveness and SDG8 (Decent Work and Economic Growth), SDG11 (Sustainable Cities and Communities), and SDG13 (Climate Action) are significant in Malaysia and Singapore. The study emphasizes the significance of context-specific factors in determining the effect of CG and SDG practices on financial market and company performance. It recommends Malaysia learn from developed countries’ best practices and adopt a tailored approach to implementation based on its country context.

A Five-Factor Asset Pricing Model of Shariah Compliant Firms in the United States

Asyraf Abdul Halim — 2023-07-01

Shariah compliant firms operating in an environment with little to no access to a robust Islamic capital market (such as in the United States (US) stock market) will exhibit a consistent bias towards certain corporate financial behaviour. Does this bias subsequently lead to a skewed asset pricing behaviour? To answer this question, this paper investigates the asset pricing behaviour of multiple samples of Shariah compliant firms listed in the US as compared to an overall conventional sample by employing the Fama & French Five-Factor Model. By applying contemporary Shariah stock screening methodology on a sample of all stocks listed in the NYSE, NASDAQ and the IEX from January 2000 to December 2019, this paper shows that asset pricing behaviour differs not only between Shariah compliant and conventional samples, but also amongst Shariah compliant samples themselves. Ultimately, this paper shows that when deriving the appropriate expected return for Shariah compliant portfolios in the US, there are evidence to suggest that the Fama & French Five-Factor model is more suitable compared to the traditional Capital Asset Pricing Model (CAPM) since the additional risk premiums show consistent significance across groups of Shariah compliant firms.

Behavioural Biases and Investment Decisions during COVID-19: An Empirical Study of Chinese Investors

Ivy S.H. Hii — 2023-07-01

Due the outbreak of the COVID-19 pandemic, China’s economy and securities market were significantly impacted, prompting the need to understand investor behaviour during this emergency. This study investigates the investment behaviour of Chinese investors during the COVID-19 pandemic, focusing on four types of investor biases: representativeness, overconfidence, disposition effect, and herding effect. The study utilized a quantitative research design, collecting data through an online questionnaire and a convenience sampling method from investors who traded in the Shanghai Stock Exchange and the Shenzhen Stock Exchange. Multiple linear regression analysis was employed to examine the impact of behavioural biases on investment decisions during the pandemic. Results showed that representativeness, disposition effect and herding effect significantly influenced investors’ investment decisions. This study contributes to the literature on behavioural finance by providing empirical evidence of the impact of behavioural biases on Chinese investors’ investment decisions during a crisis. The findings have practical implications for financial institutions to better understand the behaviour of Chinese investors during times of crisis and suggest the need for financial institutions to incorporate behavioural finance principles in their risk management practices.

Digitalisation: The Effectiveness of e-Learning in Capital Market Education

Shahkila Mohd Arif — 2023-07-01

In today’s digital economic landscape, financial literacy has become increasingly important in making informed financial decisions. To meet this growing need, Securities Industry Development Corporation (SIDC) has been entrusted to develop a targeted e-Learning capacity building initiative where everyone could participate without the limitations of cost, time and location. However, there has been no study to date exploring the effectiveness of the e-Learning programme in the field of the capital market education. Hence, this preliminary study aims to gain insight into the effectiveness of capital market e-Learning programme by adopting a convergent parallel mixed-method approach, collecting both quantitative and qualitative data based on Kirkpatrick's model (Level 2) to measure the level of knowledge transfer and satisfaction of learning among participants. The finding showed a positive knowledge transfer, with a mean score of 25.5% and the survey questionnaire submitted by 1,423 respondents revealed that the average course rating was 4.4 out of 5.0. Hence, this indicates the effectiveness of the programme. It is hoped that the findings can be used as a benchmark, reference or guidance for capital market training providers to develop a successful e-Learning programme.