Dispelling the Myth of a Value Premium: Contrary Evidence of Malaysian Crony Capitalism

Ebrahim, M-S., Hudson, R., Iqbal, A. and Shah MohdRasid, M.E. (2016) ‘Dispelling the myth of a value premium: Contrary evidence of Malaysian crony capitalism’, International Journal of Banking, Accounting and Finance, Vol. 7 (1), 1-33

Posted: 6 Dec 2017

See all articles by Muhammed Shahid Ebrahim

Muhammed Shahid Ebrahim

Durham Business School

Robert Hudson

Hull University Business School (HUBS)

Abdullah Iqbal

University of Kent, Canterbury

Mohamed Shah

International Centre for Education in Islamic Finance (INCEIF)

Date Written: September 8, 2016

Abstract

This paper contradicts the existence of a universal value anomaly by studying Malaysia, a country with a unique institutional setting. We investigate this counter-example to attribute the anomaly to: 1) the leverage effect of value firms; 2) the investment pattern of growth firms; 3) the economic environment. We find that the value premium cannot be ascribed solely to risk as it is time varying and dependent on the attributes of the companies. Our results illustrate that small cap value firms perform relatively well during favourable economic conditions. In contrast, large cap growth firms perform better than their counterparts (i.e., large cap value firms) in economic upturns as they are preferentially awarded projects to revive the nation’s growth.

Keywords: Asset Pricing, Growth Stocks, Multifactor Models, Value Premium, Value Stocks, Malaysia

Suggested Citation

Ebrahim, Muhammed Shahid and Hudson, Robert and Iqbal, Abdullah and Shah, Mohamed, Dispelling the Myth of a Value Premium: Contrary Evidence of Malaysian Crony Capitalism (September 8, 2016). Ebrahim, M-S., Hudson, R., Iqbal, A. and Shah MohdRasid, M.E. (2016) ‘Dispelling the myth of a value premium: Contrary evidence of Malaysian crony capitalism’, International Journal of Banking, Accounting and Finance, Vol. 7 (1), 1-33. Available at SSRN: https://ssrn.com/abstract=3080887

Muhammed Shahid Ebrahim (Contact Author)

Durham Business School ( email )

Mill Hill Lane
Durham, Durham DH1 3LB
United Kingdom

Robert Hudson

Hull University Business School (HUBS) ( email )

Hull, HU6 7RX
United Kingdom

Abdullah Iqbal

University of Kent, Canterbury ( email )

Canterbury, Kent CT2 7PE
United Kingdom

Mohamed Shah

International Centre for Education in Islamic Finance (INCEIF) ( email )

Kuala Lumpur
Malaysia

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