Monetary policy, firm size and equity returns in an emerging market

Panel evidence of Malaysia

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

The present study provides new empirical evidence on the effects of monetary policy shocks (domestic and international monetary policy) on equity returns in an emerging economy (i.e., Malaysia) for 1990–2008 using firm-level data. Using an augmented Fama-French (1992, 1996) multifactor model, empirical results based on system GMM estimations and a sample of 449 firms shows that firms' stock returns responded negatively to monetary policy shocks. Moreover, the effect of domestic monetary policy shocks also have differential effects, with a statistically significant impact on small firms' equity returns but not on large firms' stock returns. The effect of international monetary policy upon equity returns is also heterogeneous by firm size; significant effects were observed for the equity returns of large firms but not for a case of small firms.

Original languageEnglish
Pages (from-to)29-55
Number of pages27
JournalAsian Academy of Management Journal of Accounting and Finance
Volume11
Issue number2
Publication statusPublished - 2015

Fingerprint

Firm size
Emerging markets
Monetary policy
Malaysia
Equity returns
Monetary policy shocks
Small firms
Large firms
Stock returns
Emerging economies
Firm-level data
Return on equity
Empirical evidence
GMM estimation
Empirical results
Multifactor model
System-GMM

Keywords

  • Augmented Fama-French multifactor model
  • Dynamic panel data
  • Firm's stock return
  • Monetary policy shocks

ASJC Scopus subject areas

  • Accounting
  • Finance

Cite this

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title = "Monetary policy, firm size and equity returns in an emerging market: Panel evidence of Malaysia",
abstract = "The present study provides new empirical evidence on the effects of monetary policy shocks (domestic and international monetary policy) on equity returns in an emerging economy (i.e., Malaysia) for 1990–2008 using firm-level data. Using an augmented Fama-French (1992, 1996) multifactor model, empirical results based on system GMM estimations and a sample of 449 firms shows that firms' stock returns responded negatively to monetary policy shocks. Moreover, the effect of domestic monetary policy shocks also have differential effects, with a statistically significant impact on small firms' equity returns but not on large firms' stock returns. The effect of international monetary policy upon equity returns is also heterogeneous by firm size; significant effects were observed for the equity returns of large firms but not for a case of small firms.",
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AB - The present study provides new empirical evidence on the effects of monetary policy shocks (domestic and international monetary policy) on equity returns in an emerging economy (i.e., Malaysia) for 1990–2008 using firm-level data. Using an augmented Fama-French (1992, 1996) multifactor model, empirical results based on system GMM estimations and a sample of 449 firms shows that firms' stock returns responded negatively to monetary policy shocks. Moreover, the effect of domestic monetary policy shocks also have differential effects, with a statistically significant impact on small firms' equity returns but not on large firms' stock returns. The effect of international monetary policy upon equity returns is also heterogeneous by firm size; significant effects were observed for the equity returns of large firms but not for a case of small firms.

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