Financial liberalization and dynamics of firm-level financing and investment decisions in the Southeast Asian countries

This thesis examines the dynamics of firm-level financing and investment decisions for six Southeast Asian countries. The study provides empirical evidence on the impacts of changes in the firm-level financing decisions during the period of financial liberalization by considering the debt and equity financing decisions of a set of non-financial firms. The empirical results show that firms in Indonesia, Pakistan, and South Korea have relatively faster speed of adjustment than other Southeast Asian countries to attain optimal debt and equity ratios in response to banking sector and stock market liberalization. In addition, contrary to widely held belief that firms adjust their financial ratios to industry levels, the results indicate that industry factors do not significantly impact on the speed of capital structure adjustments. This study also shows that non-linear estimation methods are more appropriate than linear estimation methods for capturing changes in capital structure. The empirical results also show that international stock market integration of these countries has significantly reduced the equity risk premium as well as the firm-level cost of equity capital. Thus stock market liberalization is associated with a decrease in the cost of equity capital of the firms. Developments in the securities markets infrastructure have also reduced the cost of equity capital. However, with increased integration there is the possibility of capital outflows from the emerging markets, which might reverse the pattern of decrease in cost of capital in these markets.

The impact of Foreign Direct Investment and trade openness on ICT expansion: A comparative analysis of Asia-Pacific and Middle Eastern countries

This study investigates the impact of foreign direct investment (FDI) inflow and trade openness on the expansion of information and communication technologies (ICTs) for the period of 1996 to 2005, in the Asia-Pacific and Middle East regions. The results of regression analyses conducted indicate that while dissimilarities exist among the countries included in this study in terms of their level of socio-economic and political development, factors such as trade openness, education and the growth of GDP had a positive impact on their ICT development. While FDI inflow had positive impact on the expansion of ICTs on Asia-Pacific countries its impact on Middle Eastern countries was not statistically significant. The study results also show that governmental intervention in economic activities has a negative impact on ICT expansion in both regions. In the Middle East, regional conflict imposes additional negative impact on FDI inflow and trade openness and consequently, ICT expansion. The regression results show that those countries that implemented liberalization of their ICT sector were able to not only reduce the digital divide with other developed countries, but also increase their operations in both local and global markets.