Band 5, Heft 1

This paper compares the effectiveness of market discipline mechanisms in the banking sector before and after the 2001 financial crisis in Turkey. It employs an empirical model that incorporates the contemporaneous feedback effects between deposits growth rate and the implicit interest rate. Using 3SLS procedure, the results show that market disciplinary forces in Turkey have been effective both before and after the 2001 financial crisis. The findings show that the effect of the implicit interest rate on deposits becomes more sensitive to bank risk fundamentals after the 2001 financial crisis. Depositors, on the other hand, do not change their behavior in the aftermath of the crisis which can be explained by an implicit “too-big-to-fail'' protection at work.

This paper examines the existence of integration between the Turkish stock market and the markets in some developed and emerging countries, using both the conventional Engle and Granger (1987) cointegration test and the Gregory and Hansen (1996) test, which allows a structural break in the cointegration vector. The conventional test suggests that there is no long-run relationship between the Turkish stock market and any of the sample countries' stock markets. The results from the Gregory and Hansen (1996) test, however, suggest that the Turkish stock market is cointegrated with the markets in the sample. Moreover, the error correction version of the ARDL model, which takes the structural break dates into account, is also used to specify the short-run and long-run dynamics of the stock prices. The results indicate that the speed of adjustment is especially higher in the cases of major trading partners of Turkey (i.e., France, Germany, and the UK). The presence of these equilibrium relations could also be attributed to the growing exposure of the Turkish stock market to foreign capital flows since late 1980's.

Do different institutional investors possess different sets of information? The extent to which different institutional investors offer different information to individual/naive investors remains an interesting question in information poor emerging stock markets. Using a comprehensive data of institutional investors' trades from the Casablanca Stock Exchange, we find that foreign institutions have the least information and financial institutions have the most information in their buy trades. The paper also provides evidence that financial institutions have the least information in their sell trades. Our results have implications for individual/naive investors in the way that they can infer valuable information from financial institutions' buy trades and foreign institutions' as well as politically-connected institutions' sell trades.

The study examines whether United Arab Emirates (U.A.E.) investors value more Islamic financial institutions in comparison with traditional financial institutions and other companies in the economy during the period from 2001 to 2005. The study highlights the major differences between products offered by Islamic versus traditional financial institutions. It is argued that these differences do not necessarily affect the measures of profitability and performance. The main finding of the paper is that stockholders of Islamic financial institutions in the U.A.E. were willing to pay a premium for their Islamic faith. This highlights the U.A.E. clientele preference for institutions that closely follow Islamic laws.