In this study we attempt to investigate the long run relationship between money and income in Malaysia. We constructed Divisia monetary aggregates for Malaysia and compared its performance with the Simple-sum monetary aggregates for the period 1980:1 to 1994:4. The long run relationship between the monetary aggregates and income were evaluated using the Engle-Granger's two-step procedure (testing for cointegration) and the error-correction for weak exogeneity and superexogeneity. Our result suggest that the use of monetary aggregates as policy indicators are not subject to the Lucas critique and that there is potential role for Divisiamonetary aggregates as a useful guide for monetary policy purpose in Malaysia.
This paper investigates the long run relationship between exchange rate and money demand in Malaysia. The Johansen-Juselius (1990) likelihood ratio tests support the importance of exchange rate in m2 but not in ml money demand. The Hansen-Johansen (1993) likelihood ratio tests however found some evidence of instability in the long run parameters and this could be due to the recent financial crisis in this region. Overall analysis has provided support to the empirical investigation of the relation between exchange rate and money demand.
This article examines the economic rationale for auditor change by Malaysian listed firms by examining audit switch effect on share prices. The auditor change decision by management to retain or to change involves a switch across audit firms with different quality. Audit quality is defined by classifying the audit firms into Tier 1 (Big-5) firms and Tier 2 (non-Big 5) firms. The distinguishing attribute between the two groups of audit products is believed to be the credibility that each group brings to the audit engagement. Factors associated with the choice of audit firm and changes for firm characteristics associated with auditor choice were investigated using the logistic regression model. The findings show that the auditor switch of Malaysian listed firms is partly explained by changes in management and turnover growth. Changes in firms' characteristics such as asset growth, purchase of fixed asset to total asset, leverage and changes in financing activities explain auditor switches. There appears to be no evidence of significant wealth effect from auditor switch announcements.
With the rapidly changing and increasingly more competitive environment, the role of a management control system (MCS) in an organization in providing information feedback to management for monitoring the effectiveness and appropriateness of the organization's competitive strategy to achieve its goals is becoming more important. This study examines the extent of usage of various management control measures and the compatibility of these control measures with the competitive priorities or orientations of firms. A structured questionnaire was prepared and randomly sent to 250 organizations in the Klang Valley, A total of 93 usable responses were analyzed. The results show that organizations, generally, perceived competition based on product price, quality and service/promotion to be more intense than that based on product variety and innovation. Consistent to their perceived intensity of competition, their competitive priorities or orientations also stressed more highly on competition based on low price, high quality and service, with a much lower emphasis on wide product variety and product uniqueness. Except for an apparent pervasive high usage of the "budget vs. actual" financial control measure, there was a fairly balanced usage of accounting-based controls and modern management practices for monitoring, evaluating and controlling the organizational activities. Small enterprises tended to adopt less formal management control systems and had less extensive usage of the various control measures than the large firms. Evidence of a lack of proper alignment or incompatibilities in the usage of certain management control measures was indicated in this study. The implications of the findings are discussed.
Management control system; accounting control measures; management practices; corporate strategies; intensity of competition; competitive priority or orientation
Unit trust is an investment scheme that offers investors a well diversified portfolio managed by a professional fund manager or organisation. The investment horizon is medium to long term depending on the stipulated objective of the unit trust. Due to the long holding period and compounding effect, a slight difference in the annual rate of returns can be very detrimental to the investor. Therefore the performance of a unit trust as well as the fund manager must be carefully evaluated before committing to the fund. As we know, a high rate of returns in a single period can be very misleading if we do not study the volatility of the historical returns. Risk adjusted returns offer a solution to this problem, but this is only a "snapshot" performance measurement analysis. Snail-Trail analysis was introduced to overcome these drawbacks and better portray the dynamic history of fund manager's performance. 17 equity growth funds were selected for the purpose of this study. From the snail-Trail analysis, two promising unit trusts were found to be Asia Progress and KLMF Growth. Both funds have shown improvement in relative performance from the "high return high risk" and "low return low risk" quadrant moving up to "high return low risk", the most favourable, quadrant. Meanwhile, three funds have been classified as below average as the snail trail diagrams shown deteriorating performance. These three funds are BHLB High Growth, KLMF Industry, and KLMF Aggressive Growth, the performance of which has been falling rapidly over recent years, from the "high return low risk" quadrant to "low return high risk" quadrant. Four unit trusts showing the most consistency in fund risk-return performance are SBB Premium Capital, HLB Growth, OSK Equity and RHB Capital.
Unit trust, Snail-Trail analysis, equity growth funds
A futures contract is an agreement between a seller and a buyer that calls for the seller to deliver to the buyer a specified quantity and grade of an identified commodity, at a fixed time in the future, and at a price agreed in the contract. Stock index futures contract specify an equity index as the underlying asset. Arbitrage opportunity exists when the actual futures price deviates from the fair price by more than transactions costs. This study measures the arbitrage opportunities on the daily FKLI contracts price from calendar years 1996 through 1999. The pricing efficiency of the futures contracts was determined by the standard error between the closing actual and theoretical fair values for each month FKLI futures contract, where the theoretical value was estimated using the cost-of-carry model. The findings show that the actual futures prices do not converge towards theoretical prices with the passage of time. Arbitrage opportunities are consistently available for traders who have full use of proceeds. One crucial assumption driving this result is the ability to sell short the cash index (or a subset of stocks in the KLSE CI). The results also reveal that the stock index futures contract pricing is not monotonic but rather varies over time with periods of both greater and lesser efficiency.
Stock index futures, price efficiency, arbitrage, short-selling