Dispelling the myth of a value premium: contrary evidence of Malaysian crony capitalism

Muhammed-Shahid Ebrahim, Robert Hudson, Abdullah Iqbal and Mohamed Shah

International Journal of Banking, Accounting and Finance, 2016, vol. 7, issue 1, 1-33

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; crony capitalism; investment patterns. (search for similar items in EconPapers)
Date: 2016
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