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Jurnal Ekonomi Malaysia

51 (2) 2017 23 – 32

Does Market Integration Promote to Firm Information Efficiency? Empirical Evidence for Malaysia Listed Firms
Adakah Integrasi Pasaran Menggalakkan Kecekapan Maklumat Firma? Bukti Empirik untuk Firma-Firma Tersenarai

AIA Berhad
Senior Associate
Partnership Distribution
No 19, Jalan Kelawai, 10250 Penang
MALAYSIA

kuiguan.tai@aia.com

School of Management
Universiti Sains Malaysia
11800 USM Pulau Pinang
MALAYSIA

cwhooy@usm.my

Abstract

Global information transmits fast into share price if a company is highly integrated with the world market. On the contrary, a segmented firm that has higher integration with local market is expected to have slow response to global information. This paper tested whether the above is true for listed firms in Malaysia, a fast-emerging market that consists of large pool of both integrated and segmented firms. The degree of market integration is measured by the variance ratios while informational efficiency is captured by the price delay measure. A panel of 265 firms from 1995 to 2010 have been used in this study and found that firms with higher integration with world market have better global information efficiency while segmented firms were significantly slow to impound global news. Results are robust to the choice of different proxies of informational efficiency as well as different control variables and a variety of alternative regression specifications. Findings imply that the policymakers should consider further liberalize the Malaysian stock market to increase its transparency and reduce information barriers so that information efficiency can be improved and contribute to economic growth agenda.

Keywords

financial crisis; Informational efficiency; Market integration; Price delay; Variance ratios
http://dx.doi.org/10.17576/JEM-2017-5001-3
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Guan, , & Hooy, (2017). Does Market Integration Promote to Firm Information Efficiency? Empirical Evidence for Malaysia Listed Firms. Jurnal Ekonomi Malaysia, 51(2), 23–32. http://dx.doi.org/10.17576/JEM-2017-5001-3

@article{guan2017market,
  title={Does Market Integration Promote to Firm Information Efficiency? Empirical Evidence for Malaysia Listed Firms},
  author={Guan, Tai Kui and Hooy, Chee-Wooi},
  journal={Jurnal Ekonomi Malaysia},
  volume={51},
  number={2},
  pages={23—32},
 

year={2017},
}

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