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

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

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.

Citation

Ebrahim, M.-S., 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

• Journal Article Type: Article
• Acceptance Date: May 31, 2016
• Online Publication Date: Sep 14, 2016
• Publication Date: 2016
• Deposit Date: Jun 8, 2016
• Publicly Available Date: Sep 14, 2016
• Journal: International journal of banking accounting and finance
• Print ISSN: 1755-3830
• Publisher: Inderscience
• Peer Reviewed: Peer Reviewed
• Volume: 7
• Issue: 1
• Pages: 1-33
• 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
• Public URL: https://hull-repository.worktribe.com/output/439258
• 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.
• Contract Date: Jun 8, 2016