Abdul Wahid

Bio: Abdul Wahid is an academic researcher. The author has contributed to research in topics: Alternative investment. The author has an hindex of 1, co-authored 1 publications receiving 4 citations.

Managerial Entrenchment and Shareholder Wealth Revisited: Theory and Evidence from a Recessionary Financial Market

Abstract: Does managerial entrenchment create or destroy shareholder value? This Article presents both theory and evidence that the answer to this question is not monolithic, but rather depends on factors that vary greatly with the macroeconomic climate, such as firm profitability, takeover frequency, and valuation of takeover premiums. The mainstream view, both of academics and market participants, is that entrenchment reduces accountability to shareholders and amplifies agency costs, thus decreasing shareholder wealth. Two influential studies (Bebchuk, Cohen & Ferrell (2009) and Gompers, Ishii & Metrick (2003)) present empirical evidence consistent with this conclusion, finding statistically significant negative correlations between entrenchment and stock returns during the historic bull market of the 1990s. However, there is no a priori reason to conclude that these effects will persist. Rather, a close examination of first principles suggests that the benefits attributable to the market for corporate control are substantially minimized during recessions. Testing this hypothesis using data from the recent economic crisis, this Article finds that the previously identified, statistically significant correlations between high entrenchment and negative stock returns disappeared entirely during the recent financial crisis, even for the most and least entrenched companies. In fact, the opposite effect was observed: firms with above-average levels of entrenchment outperformed less entrenched firms during the sample period. A portfolio buying firms with above-average entrenchment while simultaneously shorting firms with below-average entrenchment would have generated statistically significant annualized abnormal returns of 5.2%. Moreover, companies that entrenched themselves the most in the year prior to the current crisis outperformed companies that either reduced, maintained, or slightly increased their level of entrenchment. While correlation is not causation, these findings are consistent with the theory that there are significant costs, not just benefits, to exposing managers to an unfettered market for corporate control.

Asymmetric and Volatility Spillover between Stock Market and Foreign Exchange Market:Indian Experience

Abstract: The 2008 financial crisis created a series of setbacks in major financial institutions worldwide. This paper attempts to investigate the volatility spillover effect between foreign exchange and stock market during different periods like pre-, post- and in-crisis period in India. By applying GARCH and EGARCH models in the daily data series of both rupee-dollar exchange rate and CNX Nifty return series, we report evidence of asymmetric and volatility spillover in the three sub-periods between these two markets. The post-crisis period has higher asymmetric and volatility spillover as compared to other periods. This result may help the investors, policy makers as well as portfolio managers for taking appropriate investment decisions.

The Underpricing of Infrastructure IPOs: Evidence from China

Abstract: This study investigates the underpricing of 154 infrastructure IPOs in China from 1993 to 2012. It follows infrastructure IPO studies in Australia and India which report average underpricing returns to subscribers of 3.5% and 25.4% respectively. The average underpricing return for Chinese infrastructure IPOs is substantially higher at 91.1% but interestingly substantially lower than the underpricing of Chinese IPOs generally. The issue size, the offer price, the time delay to listing and the broad market return from the date of the prospectus to the date of listing are helpful in explaining the underpricing of Chinese infrastructure IPOs. Government ownership retention and underwriter reputation do not appear to have much explanatory power.