Monetary Policy Shocks, Financial Constraints and Firm-Level Equity Return: Panel Evidence
Kejutan Dasar Monetari, Kekangan Kewangan, dan Pulangan Ekuiti Firma: Bukti Panel

Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi, Selangor, MALAYSIA

mz@ukm.my

Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi, Selangor, MALAYSIA

azlan@ukm.my

Faculty of Economics and Business
Universiti Malaysia Sarawak (UNIMAS)
94300 Kota Samarahan, Sarawak, MALAYSIA

akbakri@feb.unimas.my

Abstract

The present paper investigates the effect of monetary policy shocks upon the equity returns of financially constrained and less-constrained firms in Malaysia for the 1990-2008 period using firm-level data. Monetary policy shocks are generated via a recursive structural VAR (SVAR) identification scheme that allows the monetary authority to set the overnight interbank rate after observing the current value of world oil price, foreign income, foreign monetary policy, domestic output and inflation. The Malaysian firms examined are divided into two categories based upon the cash flow to income ratio, namely financially constrained and financially less-constrained. After augmenting the Fama and French (1992, 1996) multifactor model using a dynamic panel data approach, the results reveal that equity returns of financially constrained firms are more affected by domestic monetary policy than the returns of less constrained firms. Meanwhile, international monetary policy shocks significantly influence the equity returns of financially less-constrained firms, but not those of financially constrained firms.

Keywords

augmented Fama-French; dynamic panel data; financial constraints; Monetary policy

Citation

Abdul Karim, Z., Zaidi, M. A. S., & Abdul Karim, B. (2013). Monetary Policy Shocks, Financial Constraints and Firm-Level Equity Return: Panel Evidence. Jurnal Pengurusan, 39, 51–63.

@article{karim2013monetary,
  title={Monetary Policy Shocks, Financial Constraints and Firm-Level Equity Return: Panel Evidence},
  author={Abdul Karim, Zulkefly and Zaidi, Mohd. Azlan Shah and Abdul Karim, Bakri},
  journal={Jurnal Pengurusan},
 

volume={39},
  number={},
  pages={51—63},
  year={2013},
  doi={},
  publisher={Penerbit UKM},
}

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39 (2013) 51 – 63

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