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Testing
Dividend Theories: Evidence from Dividend Payments Versus
Earnings Retention -- Kaustav
Sen and P V Viswanath Researchers
have, typically, used data on variables such as dividend payout
ratio and divided yields to investigate theories of earnings
payout. In this paper, the authors suggest that, at least
in some cases, it may be more appropriate to look at earnings
retention rather than the more common dividend variables.
As an example, the tests of the Investment Opportunities hypothesis
in the context of deregulation in the utilities industry is
taken. Prior to deregulation, cash generated by the business
was largely returned to the stockholders; whereas, subsequent
to deregulation, firms have been free to acquire and merge
with other firms, as well as to make investments that were
either prohibited or frowned upon in the days of regulation.
Under these circumstances, the Investment Opportunities hypothesis
predicts that firms will reduce their dividend payouts in
order to pay for these investments. The impact of deregulation
in the utilities industry on firms' dividend policies is investigated.
While the evidence from dividend-based quantities is ambiguous,
it is found that firms have clearly increased their earnings
retention.
©
2005 IUP. All Rights Reserved.
Does
External Debt Burden Always Act as a Disincentive to Investments
for LDCs? Further Empirical Extension Based on the Nigerian
Evidence
-- Chinedu B Ezirim,
Michael I Muoghalu and Emmanuel N Emenyonu
This
paper attempts to answer the question of whether the external
debt stock and associated servicing always discourage domestic
investments in the Less Developed Countries (LDCs) as claimed
by some authors. Use was made of a comparative modeling approach
involving multiple log-linear regression, distributed lag,
and autoregressive models. Comparative estimation methods
were also employed, including the OLS, Cochrane-Orcutt, Maximum
Likelihood, instrumental variable techniques against time-series
annual Nigerian data from 1970 through 2001. The results,
among others, indicate that both external debt stock and debt
service are not always disincentives to domestic investments.
The debt service (debt burden) variable particularly holds
some positive effects for Nigeria's domestic investments especially
when such payments attract further capital inflows and the
externally-borrowed funds are put to best economic usage.
In this light, developing countries may have to change their
orientation, which is biased towards debt forgiveness, and
see some good in debt-servicing as a proper management strategy.
©
2005 IUP. All Rights Reserved.
Exchange
Rate Fluctuations and Macroeconomic Stability in Nigeria (1970
- 2001)
-- Emeka J Okereke
The
study X-rayed the effect of exchange rate fluctuations on
macroeconomic variables during the period 1970-2001. This
is against the backdrop of persistent exchange rate fluctuations
and comatose response of macroeconomic indices over the period
under review. In order to achieve this, secondary data, which
were sourced from the Central Bank of Nigeria (CBN), Nigeria
Deposit Insurance Corporation (NDIC) and other relevant publications,
were used. To ensure uniformity, the raw data were converted
into rates or ratios and that formed an operational data(as
presented in Table I). The data were analyzed using multiple
regression analysis, which is patterned after the Granger
causality test. The study revealed that exchange rate fluctuations
are not significant factors influencing macroeconomic variables
in Nigeria, except for the Level of Government Influence on
the Economy (LGIE). Again, while inflation and average interest
rate are significant factors influencing exchange rate fluctuations
in Nigeria, external reserves and level of government influence
are not. Given these findings, a triple-policy approach of
institutional, structural and attitudinal changes were recommended.
This, it is hoped, will enhance the value of the domestic
currency and ensure the stability of macroeconomic variables
as well as improve the living standard of the people.
©
2005 IUP. All Rights Reserved.
A
Stochastic Goal Programming Model for Capital Rationing-Carry
Forward of Cash Problem with Mixed Constraints
--
V Charles
The
primary objective of this paper is to develop and suggest
multi-objective criteria to the problem of capital rationing
by making use of the potentials of stochastic goal programming,
to deal with the proposed problem. Here, the concept of carry
forward of cash for the stochastic environment has been discussed.
Most of the literature on capital rationing decisions in the
past has been woven around the assumption of certainty and
single objective, whereas the reality is seldom so. One can
not simply assume the cash flows to be certain. But as soon
as these assumptions are violated one is apparently in a dilemma
in the processes of decision-making. The proposed model would
provide useful solution under those circumstances when the
event cash flows follow beta distribution and the period cash
flows obey the properties of normal distribution.
©
2005 IUP. All Rights Reserved.
Dynamics
Relationship Between Emerging Market and Developed Market:
An Empirical Study in the Global Context
--
Nalini Prava Tripathy
Globalization
of world economies have ushered in a sea change in the financial
architecture of economy. The presence of foreign institutional
investors has strengthened the integration between the domestic
and international capital markets. The international capital
market facilitated cross-country financial flows, which contribute
to a more efficient allocation of resources. The analysis
on international financial market has come to the fore since
this is the most sensitive segment of the world economy and
it is through this segment that the country's exposure to
the outer world is most readily felt. Keeping this in view,
the present study analyzes the relationship between emerging
market and developed market movement in the global context.
The study also used a single factor, i.e., International Capital
Asset Pricing Model, to determine the returns of emerging
and developed market, to test joint integration and asset
pricing in terms of world index. It also highlights the significance
of integration and segmentation of emerging and developed
market with greater confidence and resource strength.
©2005
IUP. All Rights Reserved.
Option
Trading in India: Volatility Forecasting Ability of the Market
-- A S Ramasastri and S Gangadaran
Options
were introduced in the Indian stock markets in the year 2001(the
index options in June and individual stock options in July).
There has been considerable increase in the volumes of trading
in these derivative instruments since then. Volatility is
the most important input in the pricing of an option. For
a sophisticated trader, option trading is volatility trading
and the trader who can forecast volatility the best is the
most successful trader. Since options have been introduced
only in 2001, it is interesting to study the degree of sophistication
attained by the participants of options markets in India during
the past three years. The present study attempts to compare
the ability of the market participants in forecasting volatility
during each one of the years. Using the data on prices of
stocks and options of selected scrips as well as the index
(Nifty) during the three years 2001-02, 2002-03 and 2003-04
(July-June), implied and realized volatilities have been calculated
and compared. Closer the implied volatility to the realized
volatility, better the forecasting ability of market participants.
Although the study could not establish that the markets have
improved in their forecasting ability of volatility, it has
shown that the predicting capability of the market has increased
in the case of several stocks during the period 2001-04. As
far as the forecasting capability of the index is concerned,
it has positively improved. The markets seem to be able to
forecast the volatility better in the case of those stocks,
whose options have a higher turnover. The study has also shown
that the predicting power is better in the case of those stocks
whose volatility is high.
©
2005 IUP. All Rights Reserved.
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