Effect Of Geographical Diversification On Informational Efficiency In Emerging Countries
Loading...
Date
2016-09
Authors
Poh, Suan
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
The main objective of this study is to investigate the effect of geographical diversification on informational efficiency. Informational efficiency is measured using price delay measure and is further divided into informational efficiency related to local news and informational efficiency related to global news. Geographical diversification is proxied by using 4 different variables which are foreign sales dummy, number of foreign countries, foreign sales ratio and Herfindahl Index. The sample study involves public listed companies from 12 emerging countries ranging from year 2005 to year 2014. The regression results prove that all 4 geographical diversification proxies show positive and significant effect on local price delay. All the regression models in this study are robust to heteroskedasticity and multicolinearlity problems. All geographical diversification proxies remain significant towards local delay when alternative delay measures are used and financial crisis is controlled by using crisis dummy. For implication on the government policy, this study suggests that all geographical diversified public listed companies should be mandated to disclose their business structures according to geographical areas in their annual reports to simplify the analysis process of investors. The disclosure can facilitate investor to do research on the company and reduce the cost and barrier of investor to retrieve information about the company. This policy changes will definitely decrease the price delay caused by geographical diversification and ultimately improve the informational efficiency of stock market.
Description
Keywords
The effect of geographical diversification , on informational efficiency.