Abdul Karim, Zulkefly and Zaidi, Mohd Azlan Shah
(2015)
Monetary Policy, Firm Size And Equity Returns In An Emerging Market: Panel Evidence Of Malaysia.
Asian Academy of Management Journal of Accounting and Finance, 11 (2).
pp. 1-27.
ISSN 1823-4992
Abstract
The present study provides new empirical evidence on the effects of monetary policy
shocks (domestic and international monetary policy) on equity returns in an emerging
economy (i.e., Malaysia) for 1990–2008 using firm-level data. Using an augmented
Fama-French (1992, 1996) multifactor model, empirical results based on system GMM
estimations and a sample of 449 firms shows that firms' stock returns responded
negatively to monetary policy shocks. Moreover, the effect of domestic monetary policy
shocks also have differential effects, with a statistically significant impact on small firms'
equity returns but not on large firms' stock returns. The effect of international monetary
policy upon equity returns is also heterogeneous by firm size; significant effects were
observed for the equity returns of large firms but not for a case of small firms.
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