The ASE has developed greatly since its establishment and has succeeded in accomplishing several of its goals by mobilising capital into the productive sectors of the economy. ASE appears to be well organised, attractive, and aims to attract international investments in order to increase the depth of the market. The aim of the study is to explore the efficiency of this emerging market and investigate the integration with other capital markets in the region. Conventional tests beside recent econometric techniques are implemented. The thesis starts with a review of the development of the efficient market hypothesis, followed by an overview of the development of the Jordanian Financial Market. The autocorrelation and runs test - runs up and down, distributions of runs by length, and runs above and below -are applied to the daily price indices of ASE to examine whether ASE is weak form efficient. The empirical results reflect significant positive dependency patterns in stock prices and suggest that the price behaviour in ASE does not follow the random walk model over time. However, further investigation is applied to find whether these results could be exploited, through technical analysis, to outperform the simple buy and hold policy. Filter rules and moving average techniques are used. Furthermore, and for the results of moving average techniques, standard statistical testing is extended through the use of bootstrap techniques. According to the moving average rule, buy and sell signals are generated by two moving averages of the level of the index (long and short period averages). The conditional returns on buy or sell signals from actual data are compared to the conditional returns from simulated series generated by a range of models (random walk with a drift, AR (1), and GARCH-(M)). The results of this part of the study generally suggest that technical analysis helps predict stock price changes in the Jordanian stock market. In the next part of the thesis, recent econometric Procedures are employed to investigate the behavioural properties of ASE indices. The Box-Jenkins estimation, irrespective of the index examined produced different models with a high prediction performance, violating the EM: H conditions. The unit-root test also confirmed these results as the return series for all indices did not exhibit unit root, and all processes were stationary. The GARCH-M(l, l) model is estimated and present mix results cross the indices. To a certain limit, the results support the existence of a significant link between conditional volatility and stock returns, and the conditional variance is found to change over time as a result of volatility clustering effects. The last part of the thesis applies the cointegration and Granger causality tests to investigate the concept of market integration and comovements. These techniques are applied using, firstly, the five Jordanian daily indices, and secondly, the weekly price indices for ten MENA (Middle East and North Africa) markets. The cointegration test between the Jordan index and every other market index is applied. Moreover, different groups of markets (GCC, Africa, and Europe) are composed and the cointegration test is applied for each group. Results suggest that the Jordanian stock market does not exhibit a long run relationship with most other markets, and there is an advantage for investors looking for diversification in the Middle East markets.

The study deals with the relatively unexplored area of the evolution of HQ-subsidiary relations in emerging market Multinational Corporations (MNCs). The study uses a framework proposed by Harzing, Sourge and Paauwe (2001) to study the evolution of four components of the relationship over a ten year period, namely: control mechanisms, expatriate assignments, level of interdependence and degree of local responsiveness. The paper also assesses the impact of two additional factors on the relationship, namely subsidiary evolution and the country-of-origin effect. The study analyses the case of a South African MNC, UTi Worldwide Inc. (“UTi”) a leader in the global network of freight forwarding and contract logistics and distribution services. Seven propositions are tested by means of the case study method to analyse the factors that contribute to the said evolution in the MNC. The study found that there was indeed an evolution in most aspects of the MNC’s HQsubsidiary relationship over that last ten years. In addition, the subsidiary themselves had evolved and the nature of the country-of-origin effect had significantly changed over the same period. This evolution process was influenced by a number of factors specific to and circumstances unique to the MNC. / Dissertation (MBA)--University of Pretoria, 2010. / Gordon Institute of Business Science (GIBS) / unrestricted

This study originated in an interest in the evolving field of emerging markets and ongoing efforts being made by academics to test current theory and develop theories and approaches for emerging markets, which constitute a major growth component of today’s global market. This study specifically set out to verify whether or not Multi-National Corporation (MNC) theories and approaches proposed by International Business researchers and theorists in respect of strategy, locational considerations and market assessment also apply to multinational firms coming out of emerging markets, dubbed Emerging Multi National Corporations (EMNCs) or Emerging Multi National Enterprises (EMNEs). Ongoing review of present MNC theory and its applicability to these newcomers on the block is being undertaken and is coupled with research into the development of business models and approaches specific to EMNCs. The research was undertaken as a single case study, using the Standard Bank Group (SBG) and its Africa operations as an example of an EMNC with the specific objective of verifying present MNC theory in the areas of strategy, locational consideration and market assessment. Qualitative interviews with experts from the SBG Africa operations provided interactions and insights on the central themes of the research and these, in the light of approaches argued in the available literature, formed the basis of the research findings. / Dissertation (MBA)--University of Pretoria, 2010. / Gordon Institute of Business Science (GIBS) / unrestricted

For the past forty-two years, the debate has raged over the optimal use of debt in the firm?s capital structure. Numerous studies have looked at the factors that affect a firm?s capital structure, in both the domestic and foreign markets. Many of these studies have focused their attention on the U.S. and developed countries. Similarities and differences between the U.S. and other industrialized countries have been explored and noted. The objective of this study is to determine if there are similarities between the factors that determine capital structure in emerging markets and those of more developed nations. Are the determining factors different for emerging markets and what are possible explanations for these difference? This study attempts to determine if factors that have been shown to influence the capital structure of developed nations are, in fact, influential in emerging market. The study also incorporates additional factors that may be particular to emerging markets to determine if they have an impact of the firm?s choice of capital structure. This study finds that capital structure determinants are more portable to firms in Asian markets than in Latin American markets. The study also finds that the means by which debt is measure does, in fact, have a bearing on the significance of the explanatory variables.

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This study investigates stock market anomalies in the Kuala Lumpur Stock Exchange (KLSE), Malaysia, with some comparisons with three other Far-Eastern markets, namely the Stock Exchange of Singapore (SES), the Stock Exchange of Thailand (SET) and the Stock Exchange of Hong Kong (SEHK). The main anomaly investigated is overreaction in the KLSE. Seasonality and firm size effects, which are usually associated with the overreaction effect, are also examined individually, and in the context of the overreaction effect. The impact of time-varying risk on overreaction is also investigated. First, stock market seasonality across four markets - KLSE, SES, SET and SEHK- is examined. The evidence suggests the existence of December and January effects in Singapore and Hong Kong respectively. A Chinese New Year effect is observed in all countries except Thailand. Next, stock market overreaction in the KLSE is investigated. Two portfolios of extreme stocks (based on their past 3-year excess returns) are formed, and their performance is measured in the next three years for evidence of overreaction. The initial results are consistent with overreaction; winner (loser) portfolios, which outperform (underperform) the market in the prior period, underperform (outperform) the market in the next period. The reversal in performance is more dramatic for losers. Further analyses show that risk and size factors cannot explain fully the observed phenomenon. A seasonal pattern is revealed in the excess returns of winners and losers; there is a pronounced February effect in both. Moreover, the February effect is observed to be greater for smaller firms. Lastly, a post-script chapter is included whereby the effect of the recent Asian economic turmoil on the markets, and on KLSE overreaction, is looked at. It is found that several months into the crisis, both winners and losers underperform the market.

The global strategies of the three South African retail giants are examined with a view to understand what factors motivate South African multinational enterprises to move into Africa, as well as what motivates their particular choice of countries, and how the capabilities and resources are deployed and managed in their foreign operations, so as to remain competitive in both local and foreign markets. The South African retail giant geographic expansion is a way to penetrate new markets, explore new opportunities and deliver the growth they seek on the journey to high performance. Their choice of countries is determined by various factors that contribute to the competitive nature of a country, namely: national values and cultures; macro and micro economic environment; political stability; institutions, and history. As these emerging market multinational enterprises cannot depend on countryspecific advantages, the contenders accelerate their development of firm-specific advantages at a rapid rate. South African companies have developed expertise for trading in Africa as they are more familiar with the physical, regulatory and social terrain than businesses from other parts of the world. The market, the culture and realities of infrastructure, poverty, lack of skills, as well as the technology in their non-South African operations are not a shock to the South African companies. The business strategies will, therefore, not entirely be the same as those of the multinationals from the developed world. / Dissertation (MBA)--University of Pretoria, 2010. / Gordon Institute of Business Science (GIBS) / unrestricted

The aim of this paper is to understand the roles knowledge and network play in the internationalization process of a small company in an emerging Kenyan market. The research is based on a qualitative approach using an embedded case study design where primary data was collected from Hydro Standard AB, Swedish Trade Council and two water companies in Kenya; Mombasa and Mavoko water companies. Semi-structured and in-depth interviews were used in the project. Findings from the study show that the internationalization process of Hydro Standard AB was successful and mainly driven by building of networks. The study also found out that tacit knowledge is crucial for a firm to develop itself in the Kenyan market which is very informal. Through tacit knowledge, a firm is able to gain knowledge and handle challenges concerning business culture and other unwritten rules found in the market. Further, building relationships with politicians or local branch managers can enhance a firm's performance.

In this thesis I study two fields of empirical finance: market integration and economic forecasting. The first two chapters focus on studying regional integration of Mexican and U.S. equity markets. In the third chapter, I propose the use of the daily term structure of interest rates to forecast inflation. Each chapter is a free-standing essay that constitutes a contribution to the field of empirical finance and economic forecasting. In Chapter 1, I study the ability of multi-factor asset pricing models to explain the unconditional and conditional cross-section of expected returns in Mexico. Two sets of factors, local and foreign factors, are evaluated consistent with the hypotheses of segmentation and of integration of the international finance literature. Only one variable, the Mexican U.S. exchange rate, appears in the list of both foreign and local factors. Empirical evidence suggests that the foreign factors do a better job explaining the cross-section of returns in Mexico in both the unconditional and conditional versions of the model. This evidence provides some suggestive support for the hypothesis of integration of the Mexican stock exchange to the U.S. market. In Chapter 2, I study further the integration between Mexico and U.S. equity markets. Based on the result from chapter 1, I assume that the Fama and French factors are the mimicking portfolios of the underlying risk factors in both countries. Market integration implies the same prices of risk in both countries. I evaluate the performance of the asset pricing model under the hypothesis of segmentation (country dependent risk rewards) and integration over the 1990-2004 period. The results indicate a higher degree of integration at the end of the sample period. However, the degree of integration exhibits wide swings that are related to both local and global events. At the same time, the limitations that arise in empirical asset pricing methodologies with emerging market data are evident. The data set is short in length, has missing observations, and includes data from thinly traded securities. Finally, Chapter 3, coauthored with John Maheu and Alex Maynard, studies the ability of daily spreads at different maturities to forecast inflation. Many pricing models imply that nominal interest rates contain information on inflation expectations. This has lead to a large empirical literature that investigates the use of interest rates as predictors of future inflation. Most of these focus on the Fisher hypothesis in which the interest rate maturity matches the inflation horizon. In general, forecast improvements have been modest. Rather than use only monthly interest rates that match the maturity of inflation, this chapter advocates using the whole term structure of daily interest rates and their lagged values to forecast monthly inflation. Principle component methods are employed to combine information from interest rates across both the term structure and time series dimensions. Robust forecasting improvements are found as compared to the Fisher hypothesis and autoregressive benchmarks.

The economic reforms in Jordan during the last two decades have highlighted and promoted the role that non-financial firms play within the Jordanian economy. The ability of firms to play this role is in major part determined by the structure of the financial system in which they operate, and in particular whether this financial system is able to make capital available efficiently to those firms that need it. Whether this is the case can be investigated by analysing the impact of firm characteristics on some of the most important financial decisions taken by these firms, and how these decisions are influenced by the presence of market imperfections. The thesis examines the relation between the financing and investment decisions, where the effect of financial constraints on the firm’s investment decision is investigated. In particular, this thesis focuses on how financial constraints affect different firms by investigating the extent to which the reliance on internal cash flow is affected by firm characteristics such as size, age, dividend payout ratio, and market listing. We find that Jordanian firms are financially constrained, but that these constraints do not appear to be related to firm characteristics. Further, results show that Jordanian firms use debt rather than equity to finance their investment. The second empirical chapter focuses on the main determinants of firms’ capital structure. Here the results show that Jordanian firms follow the pecking order theory, where profitability and liquidity have a negative impact on the level of debt. Size and market to book value have a positive impact, supporting the view that there are significant constraints on debt financing since indicators of the financial health of the firms affect their capital structure ratio. There is also evidence that ownership structure affects the firm’s access to debt. The final empirical chapter examines the impact of firm characteristics on dividend policy, and shows that profitability and market to book value have a positive impact on dividend policy, implying that firms with better access to capital or credit pay dividends. This implies that firms retain earnings in order to ensure that they have sufficient capital to invest, confirming the initial result that Jordanian firms are financially constrained. There is also evidence of the impact of ownership structure, consistent with the predictions of agency cost theory, while institutional investors appear to follow the prudent-man restrictions, being positively associated with firms that pay dividends. This thesis confirms the presence of market imperfections that have a significant influence on the financial decisions taken by Jordanian firms. The consistent evidence of the importance of retained earnings shows that these firms face substantial constraints in terms of their access to external funds, despite the reforms to the Jordanian financial system over the last two decades.