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    Essays on determinants of integration of Islamic and conventional financial markets : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University, Auckland, New Zealand
    (Massey University, 2020) Billah, Syed Mabruk
    This dissertation contains a series of essays, three in total, which examine the determinants of integration of Islamic and conventional financial markets. Academic and commercial interest in Islamic finance has increased in recent years, meaning that it is commonly seen as a reasonable alternative to mainstream finance. However, it is notable that growing awareness of Islamic finance has emerged alongside several relevant concerns surrounding the poor performance of Shariah-compliant indices. The limitations include minimal access to risk management tools, low regulatory standards in Islamic finance, and a suboptimal governance framework. With the large expansion of Islamic finance in recent years, Sukuk (Islamic bonds), which are the Shariah-compliant substitute to conventional bonds, are becoming more prominent. Although numerous studies have examined the impact of global shocks on conventional bond spreads, little attention has been paid to explore the effect of global shocks on the Sukuk spreads. Therefore, the first study's objective was to examine the impact of factors affecting the conventional bond and Sukuk markets, including financial factors, economic policy uncertainty, US and EU macroeconomic news. Using an ordinary least squares approach, the results indicated that for regions and countries such as the GCC (Gulf Cooperation Council), Malaysia, Indonesia, Turkey, and Singapore, global shocks play a vital role in explaining Sukuk spreads. Furthermore, employing a matched sample featuring firms from these regions and countries revealed that European and US macroeconomic announcements and economic policy uncertainty have a significantly greater impact on Sukuk spreads than on conventional bond spreads. The second study builds on the directional spillovers from Sukuk markets to Shariah-compliant equity markets and vice versa. The directions and magnitudes of spillovers are quite disperse among different countries and Islamic equity markets. Novel to the literature, we find that the Islamic equity markets' profitability and liquidity positions are highly influential on the magnitude of spillovers. We create a matched sample for 38 firms that issued both Sukuk and Islamic equities. Implementing similar spillover models, we indicate that firms' firm-level profitability and liquidity positions are essential in modeling the spillovers' magnitude between Sukuk and equities. Finally, the third study explores spillovers from regional and global equity markets to sectoral equity indices for several different regions/countries. First, we investigate sectoral equity return spillovers' connectedness and explore the different patterns and magnitudes of spillovers. Next, we look for the determinants of sectoral equity return spillovers. We find the regional and global markets spillovers on sector equity indices are highly dispersed across different markets. Novel to the literature, we examine the sectors' liquidity and financial positions and find that sector positions are highly influential in explaining the extent of the spillovers. Particularly, our exploration evidence that regional and global spillovers to specific sector equity markets jump significantly when a sector has higher debt and lower interest expense coverage. Similarly, higher profit margins of the sector make it less vulnerable to global and regional shocks. We also find market capitalization of the sectors inversely affects the spillovers' extent originating from global and regional markets.
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    Essays on Islamic equity investment : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University, Auckland, New Zealand
    (Massey University, 2020) Chowdhury, Md Iftekhar Hasan
    This thesis presents three self-contained studies on Islamic equity investment. Each of these studies contribute to advance understanding of the mechanics of investing in the rapidly growing Islamic equity market. The first study inspects the systematic risk exposure of a sample of equities domiciled in the United States that have transitioned to ethically screened, Shari’ah compliant, Islamic equities. The conjecture is that the anterior and posterior risk exposures will not be analogous. Our results indicate that Shari’ah compliance initially creates a shock in systematic risk, but transitional behaviors subsequently diverge. Particular screening ratios also behave similarly. In effect, the capital market reinforces the risk position and increases systematic risk. However, this is essentially a transition effect. Over the entire period, we find a downward trend in systematic risk. Shari’ah compliance makes the adopted equities less risky over the long-term with improved market information. Our findings hold even after controlling the screening ratios and conducting a number of robustness checks. The second study examines pair-wise, net, and total return and volatility spillovers across Islamic equity markets from widely dispersed locations. Using the generalized VAR-based spillovers index, we find increasing interactions in return and volatility spillovers while the extent of spillovers has been asymmetric across the countries. Interestingly, we find the presence of persistent clustering of spillovers. These clustered countries lead Islamic equity return and volatility spillovers in their respective regions. We do not find any supremacy of the cash and oil-rich GCC countries outside their region. Our results also highlight that in the crisis period, aggregate spillovers across the Islamic equity markets intensify. Additionally, we employ cross-section analyses to uncover the underlying macroeconomic variables influencing the magnitude of such spillovers. We find a convincing indication of geographic proximity along with economic linkages that explain the directions of return and volatility spillovers. The third study explores the investment style of actively managed Islamic equity funds domiciled in both Islamic and non-Islamic countries. We find that Islamic funds initially overwhelmingly skewed to value stocks in Islamic countries and growth stocks in non-Islamic countries. However, there is an increasing shift from these styles to a deep blend orientation. Similarly, we report a trend from initial mid-cap stocks to large-cap stocks in Islamic countries. In contrast, there is a consistent extreme large-cap tilt in non-Islamic countries. We conjecture such deportment as an extrapolative consideration. After inspecting the apparent shift in style over the years, we reveal strong evidence of style shift, with a higher rate in Islamic countries. Collectively, the propensity is larger in asset types than in asset sizes. Islamic funds are more likely to alter their portfolio exposure in the sight of negative performance. More mature funds in Islamic countries are more likely to shift often. Funds from non-Islamic countries are less likely to shift when the market is relatively volatile.
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    Factors influencing bank deposits : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy (PhD) in Banking at Massey University, Palmerston North, New Zealand
    (Massey University, 2020) Srivastava, Nikhil
    This thesis comprises three essays that investigate the effects of human capital, financial markets, and the banking system development on bank deposits, deposit funding, retail, and time deposits proportions. The first two essays are country level studies, whereas the third is at bank level. The data related to first essay has been obtained from the World Bank and the World Health Organisation (WHO). For the second and third essays, bank level data is from Bankscope and macroeconomic variables data are from the World Bank. The first essay investigates the effects of human capital development on bank deposits, employing 2SLS method in a cross-country setup. Human capital development includes the development of the healthcare system and education level. I use two dependent variables: deposits to GDP ratio and value of total deposits. Results show a positive relationship between human capital development and bank deposits. However, the impact of healthcare system on total deposits is higher than the bank deposits to GDP ratio, suggesting that an improvement in the healthcare system increases households’ income and a proportion of that increased income goes into the banking system. The impact of education is higher in high financially included countries than in less financially included countries. The second essay examines the effects of financial markets development on bank deposits, using instrumental variables methods. Empirical results suggest that investors in developed and developing economies use financial markets differently. In highly financially integrated economies, the financial markets and banking system complement each other, whereas in fragmented markets they compete. The third essay explores the effects of competition on bank deposit funding and composition. Interest cost has been used to measure deposit competition and the Herfindahl- Hirschman Index (HHI3) at deposits and loans levels to measure market structure. The results show that increased deposit competition encourages banks to increase the proportion of less costly funds, causing a reduction in deposit funding. In contrast, high interest rates attract retail depositors, especially for time deposits, thereby increasing the proportion of retail deposits. However, this finding varies according to the financial development level of the countries. Market concentration shows negative effects on bank deposit funding and composition.
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    Political ties and venture capital : evidence from China : a thesis presented in fulfilment of the requirement for the degree of Doctor of Philosophy in Finance at Massey University, Palmerston North, New Zealand
    (Massey University, 2016) Wang, Qing
    This thesis investigates whether venture capital firms (VCs) benefit from political ties (PTs), and whether VCs add value to China’s public equity market by constraining earnings management (EM) and improving corporate governance of their backed firms. The first essay examines whether PTs facilitate VCs’ successful exits via either initial public offerings (IPOs) or merger and acquisitions (M&As). Using a sample of 2578 Chinese portfolio firms that received their initial VC funding during 2004-2010, this essay shows that PTs increases the likelihood of VCs’ successful exit through mainland stock markets and M&A markets. It further shows that VCs with management-level PTs enjoy greater success than those with ownership-level PTs, whereas no significant difference between central and local government PTs on VC exits. The second essay examines whether VCs with PTs are better able to constrain opportunistic earnings management (EM) in Chinese IPO markets. It shows that IPOs backed by VCs with ownership-level PTs are more likely to conduct opportunistic IPO-year EM, while those backed by VCs with management-level PTs are associated with lower IPO-year EM. The higher EM in IPOs backed by VCs with ownership-level PTs is mainly driven by VC lock-up sale within six months following VC lock-up expiration, while the lower EM in IPOs backed by VCs with management-level PTs is not significantly associated with VC lock-up sale. Lastly, IPOs subject to immediate exits from VCs with ownership-level PTs exhibit poorer post-issue stock performance, while IPOs backed by VCs with management-level PTs exhibit better post-issue stock performance regardless of VC lock-up sale. The final essay investigates how VCs influence the size and composition of corporate boards. Using hand-collected data from 924 IPO prospectuses, this essay shows that VC-backed IPOs have more independent boards in China. Furthermore, VCs with management-level PTs improve governance by using their networks to recruit specialist independent directors with industry relevant expertise. Lastly, this essay shows that IPOs with more independent boards are not necessarily associated with better performance. However, IPOs backed by VCs with management-level PTs and firms that have a larger percentage of independent directors with industry relevant expertise exhibit higher long-term stock returns.
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    An empirical analysis of the transmission of market movements : linkages between equity markets in the Asia Pacific region : a thesis presented in partial fulfilment of the requirements for the degree of Master of Business Studies in Finance at Massey University
    (Massey University, 1998) Dekker, Arie
    This study provides an empirical analysis of the transmission of market movements to examine the linkages between markets, and the efficiency with which innovations between markets are transmitted in the Asia Pacific region. Vector autoregression (VAR) analysis has been carried out on daily data for the period, January 1, 1987 to May 29, 1998, for ten markets in the Asia Pacific region: Australia, Hong Kong, Japan, Malaysia, New Zealand, the Philippines, Singapore, Taiwan, Thailand and the United States. This is the first study, that the author is aware of, to consider the generalised approach to forecast error variance decomposition and impulse response analysis in favour of the traditional orthogonalised approach for studying the linkages between equity markets. The generalised approach is invariant to the order of the variables in the VAR model. Forecast error variance decomposition and impulse response analysis has been used to study the nature of the linkages between markets in the region, and the efficiency with which innovations are transmitted between the markets in the region. The Asia Pacific region is characterised by a number of markets with strong linkages. The dominant influence of the U.S. market in the region is also apparent from the results. The impulse response functions are consistent with the notion of informationally efficient equity markets in the Asia Pacific region. The analysis has been carried out on exchange rate adjusted data as well as local currency data so that the effect of exchange rate risk can be taken into account.