An evaluation of Malaysian capital controls

Document Information: Title: An evaluation of Malaysian capital controls Author(s): Fouzia Amin, (Finance, INCEIF, Kuala Lumpur, Malaysia), Sanmugam Annamalah, (Faculty of Business and Accounting, SEGi University, Kuala Lumpur, Malaysia) Citation: Fouzia Amin, Sanmugam Annamalah, (2013) "An evaluation of Malaysian capital controls", Journal of Economic Studies, Vol. 40 Iss: 4, pp.549 - 571 Keywords: Capital, Capital controls, Financial crisis, Global, Malaysia Article Research paper type: 10.1108/JES-08-2011-0099 (Permanent URL) DOI: Publisher: Emerald Group Publishing Limited Abstract: Purpose This research has been carried out to look into the long run impact of the controls on capital inflows imposed during the years 1998-2001 in Malaysia. The paper intends to capture the long-term impact of capital controls in changing the composition of capital flows into Malaysia and to examine whether the controls have been able to divert the short-term capital inflows to longer-term investments. Design/methodology/approach The autoregressive first differenced ordinary least square models have been used to examine whether the controls have been able to divert the short-term capital inflows to longer-term investments. Findings The capital controls have been successful in the short run in switching some of the short-term capital inflows into longer-term portfolio investments, without jeopardizing the Malaysian investment environment in the longer-term. Such controls did not have an impact on the decisions of foreign investors in the long run even if the rating agencies downgraded the Malaysian investments immediately after the controls were imposed. This paper suggests that capital flows into Malaysia were more a result of interest rate differentials between the domestic and the US interest rates and hardly depended on the Malaysian risk adjusted returns. Research limitations/implications One of the limitations of this research is the ephemeral nature of the econometric analysis. All the variables, except government spending, are first differenced, in order to overcome the problem of spurious regression. However, while taking the first difference, there is a possibility of losing valuable long-term relationship between the capital flows and the explanatory variables. Further, the analysis was carried out without much reference to the derivative market, which might have disguised some of the capital flows. Social implications Capital controls are adopted to prevent the volatility in domestic markets caused due to capital flight. The capital flight has huge macroeconomic implications on a society, including unemployment, interest rate volatility and subsequent economic slowdown and recession. If adopted with an

intention to provide a temporary breathing space, it might help the countries manage their domestic imbalances. Originality/value This paper provides a fresh look at the implications of capital controls with longer-term data that also include the period after the controls were withdrawn. The study is expected to be independent of market distortions, which might arise with narrow time frames that cover periods during and/or immediately after the crisis.

Value relevance of earnings and cash flows during the global financial crisis
Document Information: Value relevance of earnings and cash flows during the global financial Title: crisis Md Khokan Bepari, (School of Commerce and Law, Central Author(s): Queensland University, North Rockhampton, Australia), Sheikh F. Rahman, (School of Commerce and Law, Central Queensland University, Melbourne, Australia), Abu Taher Mollik, (Faculty of Business and Government, University of Canberra, Canberra, Australia) Md Khokan Bepari, Sheikh F. Rahman, Abu Taher Mollik, (2013) Citation: "Value relevance of earnings and cash flows during the global financial crisis", Review of Accounting and Finance, Vol. 12 Iss: 3, pp.226 - 251 Australia, Cash flow, Cash flows from operations, Earnings, Global Keywords: financial crisis, Share prices, Value relevance Research paper Article type: 10.1108/RAF-May-2012-0050 (Permanent URL) DOI: Emerald Group Publishing Limited Publisher: Acknowledgements: JEL classification M41. The authors thank the reviewer for valuable comments and suggestions that have improved the paper. Purpose The purpose of this paper is to investigate the incremental Abstract: value relevance of cash flow from operations (CFO) given book value and earnings. It also examines the relative value relevance of earnings and CFO and changes therein between the 2008-2009 global financial crisis (GFC) and the pre-crisis period (PCP). Design/methodology/approach Least square regressions are estimated

using modified Ohlson model to examine the research questions. Relative and incremental value relevance is examined by adjusted R2and Vuong Z statistics. Findings The findings suggest that CFO has value relevance incremental to book value and earnings. The findings also suggest that earnings has greater relative and incremental information content than CFO in the Australian market. The value relevance of earnings has increased and that of CFO has decreased during the GFC compared to the PCP. Research limitations/implications This study focuses on a single country. Future studies can conduct cross-country examination of the impact of the GFC on the value relevance of earnings and CFO. Practical implications This study contributes to the debate on the value relevance of CFO incremental to book value and earnings. It also extends the literature, showing that earnings has information content (value relevance) superior to CFO in the Australian market even during an economy-wide exogenous shock like the one of the 2008-2009 GFC. Originality/value This is the first known study examining the value relevance of fundamental accounting information such as earnings and CFO in the context of the 2008-2009 GFC. It extends prior research in East Asian countries in the context of 1997 Asian financial crisis and provides evidence on the impact of a world-wide exogenous shock on the value relevance of earnings and CFO from a relatively mature and developed country with different legal, institutional and enforcement backgrounds.