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This paper empirically examines the relationship between different classes of mutual funds, measures of investors’ expectations and business cycle movements in the BRICS markets over the 1996Q1-2017Q3 period. Applying the Panel Vector Autoregressive (PVAR) model in a Generalized Method of Moments (GMM) setting, the results suggest a strong causal relationship between mutual fund flows and measures of investors’ future expectations. In particular, fund flows are forward-looking and assist in forecasting real economic conditions. Moreover, investors choose to invest in riskier funds when economic conditions are good, while they prefer safer options in poor economic situations. These findings have important implications for international diversification.

This study examines the relationship between bond fund flows, stock market returns and financial policies in developed and developing economies. The findings suggest a bidirectional (negati...

Whether banks in a concentrated market increase their profits through monopoly pricing is a question of prime concern for antitrust policies. We explore this question by introducing the role of bank conduct into the structure–performance relationship. We apply Two-step System GMM dynamic panel model to commercial banks in the Association of South East Asian Nations over the period of 1999–2014. The results indicate that the higher profits in concentrated banking industries are partially attributable to the anti-competitive conduct of banks. These findings are robust across alternative measures of market structure and bank conduct, and different time horizons. The implications of these findings require regulators to make sure that the consolidation policy for ASEAN is achieving its purpose – i.e. financial stability – and not allowing the banks to earn monopoly rents.

We examine contemporaneous and dynamic relationship among equity fund flows, market returns, and market risk in China by applying structural vector autoregression (SVAR) and reduced-form VAR models using monthly and quarterly data over the period of 2005–2016. Results from the reduced-form VAR suggest that equity funds can play important role in reducing market risk by actively participating in the equity market. Moreover, adverse market conditions can cause equity funds to refrain from active participation in trading activities. The results from the structural VAR show that market risk and stock returns are contemporaneously related to fund flows, suggesting that concurrent relationships are important in studying the linkages between aggregate equity fund flows and stock market variables. We also discuss the policy implications of findings in the context of recent downturn in the Chinese stock market.

We empirically examine the role of the banking market structure and financial development for the growth of manufacturing and the financially dependent industries in China over the period of 1999–2...

The level of bank concentration has increased significantly in the Association of South East Asian Nations (ASEAN) due to structural reforms undertaken in the banking sector, raising concerns about its potential negative impact on bank performance. In this paper, we empirically test the impact of bank concentration on competition in ASEAN using several indicators. The evidence indicates that the increase in the level of concentration has reduced bank competition and this finding is robust to employing several alternative measures of concentration and competition and empirical models. We discuss the policy implications of the findings.

We extend the work of Homma, Tsutsui, and Uchida (2014) to provide empirical evidence on nexus of relationships in efficient structure (ES) hypothesis. In this framework, we test causality from cost efficiency to bank growth and then from bank growth to market concentration. We apply this approach to banking industry in Association of South East Asian (ASEAN) over the period of 1999–2014. The efficiency scores have been estimated by employing Slack Based Measurements Data Envelopment Analysis (SMB DEA). We apply Two-step system Generalized Method of Moments (GMM) and Panel Vector Auto Regression (PVAR) to account for endogeneity in estimation models. The results show that cost efficiency enables the banks to grow and obtain higher market share. The resultant growth then leads to higher market concentration/bank market power. There is also some evidence to support for quiet life (QL) hypothesis. Therefore, both ES and QL hypotheses may coexist in ASEAN banking industry.

We examine the role of bank competition for the transmission of monetary policy through the bank lending channel. We also consider the extent to which banks' characteristics – i.e. size, capitalization and liquidity – affect the banks' response to monetary policy shocks. We apply two structural and two non-structural indices to assess the level of competition. The two-step system GMM dynamic panel estimator is applied to bank level data from five ASEAN countries over the period of 1999–2014. The results from three competition measures (CR5, HHI and Lerner Index) imply that the effect of monetary policy on banks' loans reduces as the level of competition decreases. However, the results from the Boone Indicator suggest that a decrease in the level of competition strengthens the monetary policy transmission through the bank lending channel. The weakening/strengthening effect is stronger for highly capitalized, highly liquid and large banks. These findings are robust in relation to alternative measures of monetary policy and different sample periods. The use of alternative competition measures enables us to argue that based on a single measure, the implications about the role of competition can be misleading. The results of this study necessitate policy measures that can counter the adverse effects of changes in banking competition on the effectiveness of monetary policy transmission.

We test the structure-conduct-performance (SCP) hypothesis for ASEAN, which predicts that the concentrated markets allow banks to collude and earn higher profits through monopoly pricing. We propose a new estimation approach that corrects the methodological issues in previous studies by including lags of explanatory variables and autoregressive terms in estimated models. The estimation results imply that the banks’ profitability in a concentrated market is entirely attributable to the anti-competitive behavior of banks. From a theoretical perspective, the findings exclude the alternative explanations – i.e. the efficient structure (ES) hypothesis or the relative market (RMP) hypothesis – for the SCP relationship in ASEAN.

The study examines the relationship among mutual fund flows, stock market returns, and macroeconomic indicators for nine Asian developing economies. Data for the period 2001–2017 encompass more than 9600 equity and bond funds. Monthly frequency is used to analyze the relationship between fund flows and market returns, with quarterly frequency adopted with the incorporation of macroeconomic variables. The study employs a panel vector autoregressive model in the context of generalized method of moments estimation to identify the dynamic relationships. The findings suggest that fund flows respond to past stock market returns, equity fund flows positively so and bond fund flows negatively so. Once macroeconomic variables are controlled for, a reverse causality from fund flows to market returns is not discerned. The study further finds bi-directional causality between fund flows and macroeconomic conditions, which means not only do investors respond to past conditions, they also correctly anticipate future conditions.

The purpose of this study is to examine the dividends behavior of Pakistani firms by taking a macroeconomicperspective. In doing that inflation and real growth are also considered. The paper examines the relationshipbetween dividend yield, return on equity, real growth and inflation in the Pakistan by applying ARDL approachwhich is used to examine the relationship in the long run. Moreover, VECM is also applied to capture the shortrun impact. Results of ARDL revealed a positive relationship between inflation and dividend payments, whichcan be interpreted in two ways. First, inflation affects revenues and variable cost not the fixed cost; it simplyincreases the nominal value of corporate earnings and therefore dividend payouts, and second is that managersmay try to pursue a dividend policy, which is considered to be optimal, believing that there is a desirable level ofreal dividend income to be paid to their investors. The results of ARDL approach show that inflation, in longterm as well as in short run have positive relationship with dividends while return on equity and real growth ratesshowed insignificant relationship with dividend yield in both long and short run. The estimated equation remainsstable over the period of study as indicated by CUSUM and CUSUMQ stability tests. This study is helpful forvarious investors in deciding for investment when they have fear of considerable acceleration of inflationarypressure. For example they can protect themselves against accelerating inflation rates when buying the stocks.While formulating an optimal dividend policy of the firm, managers should carefully examine the inflationaryenvironment.

In this study, we examine the role of market structure for growth in financially dependent industries from 10 emerging Asian economies over the period of 1995-2011. Our approach departs from existing studies in that we apply four alternative measures of market structure based on structural and non-structural approaches and compare their outcomes. Results indicate that higher bank concentration may slow down the growth of financially dependent industries. Bank competition on the other hand, allows financially dependent industries to grow faster. These findings are consistent across a number of sensitivity checks such as alternative measures of financial dependence, institutional factors (including property rights, quality of accounting standards and bank ownership), and endogeneity consideration. In sum, our study suggests that financially dependent industries grow more in more competitive/less concentrated banking systems. Therefore, regulatory authorities need to be careful while pursuing a consolidation policy for banking sector in emerging Asian economies.