Monetary policy shocks, financial constraints and firm- level equity return: Panel evidence

Zulkefly, Abdul Karim and Bakri, Abdul Karim (2013) Monetary policy shocks, financial constraints and firm- level equity return: Panel evidence. Jurnal Pengurusan, 39. pp. 1-14. ISSN 0127-2713

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The present paper investigates the effect of monetary policy shocks upon the equity returns of financially constrained and less-constrained firms in Malaysia for the 1990-2008 period using firm-level data. Monetary policy shocks are generated via a recursive structural VAR (SVAR) identification scheme that allows the monetary authority to set the overnight interbank rate after observing the current value of world oil price, foreign income, foreign monetary policy, domestic output and inflation. The Malaysian firms examined are divided into two categories based upon the cash flow to income ratio, namely financially constrained and financially less-constrained. After augmenting the Fama and French (1992, 1996) multifactor model using a dynamic panel data approach, the results reveal that equity returns of financially constrained firms are more affected by domestic monetary policy than the returns of less constrained firms. Meanwhile, international monetary policy shocks significantly influence the equity returns of financially less-constrained firms, but not those of financially constrained firms.

Item Type: Article
Uncontrolled Keywords: Augmented Fama-French; Dynamic panel data; Financial constraints; Monetary policy, unimas, university, universiti, Borneo, Malaysia, Sarawak, Kuching, Samarahan, ipta, education, research, Universiti Malaysia Sarawak
Subjects: H Social Sciences > HG Finance
Divisions: Academic Faculties, Institutes and Centres > Faculty of Economics and Business
Depositing User: Saman
Date Deposited: 31 Mar 2017 08:42
Last Modified: 30 Jun 2021 15:06

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