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Dispelling the myth of a value premium: contrary evidence of Malaysian crony capitalism

Ebrahim, Muhammed-Shahid; Hudson, Robert; Iqbal, Abdullah; Eskandar Shah MohdRasid, Mohamed

Authors

Muhammed-Shahid Ebrahim

Abdullah Iqbal

Mohamed Eskandar Shah MohdRasid



Abstract

This paper contradicts the existence of a universal value anomaly by studying Malaysia, a country with a unique institutional setting. We investigate this counter-example to attribute the anomaly to: 1) the leverage effect of value firms; 2) the investment pattern of growth firms; 3) the economic environment. We find that the value premium cannot be ascribed solely to risk as it is time varying and dependent on the attributes of the companies. Our results illustrate that small cap value firms perform relatively well during favourable economic conditions. In contrast, large cap growth firms perform better than their counterparts (i.e., large cap value firms) in economic upturns as they are preferentially awarded projects to revive the nation's growth.

Journal Article Type Article
Publication Date 2016
Journal International journal of banking accounting and finance
Print ISSN 1755-3830
Electronic ISSN 1755-3849
Publisher Inderscience
Peer Reviewed Peer Reviewed
Volume 7
Issue 1
Pages 1-33
Institution Citation Ebrahim, M., Hudson, R., Iqbal, A., & Eskandar Shah MohdRasid, M. (2016). Dispelling the myth of a value premium: contrary evidence of Malaysian crony capitalism. International Journal of Banking, Accounting and Finance, 7(1), 1-33. https://doi.org/10.1504/ijbaaf.2016.079164
DOI https://doi.org/10.1504/ijbaaf.2016.079164
Keywords Asset pricing, Growth (i.e., glamour) stocks, Multifactor models, Real options, Value (i.e., unspectacular) stocks
Publisher URL http://www.inderscience.com/info/inarticle.php?artid=79164
Additional Information Authors' accepted manuscript of article published in: International journal of banking accounting and finance, 2016, v.7 issue 1.

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