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Investor wealth, the IMF, and the Asian crisis

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  • Kutan, Ali M.
  • Muradoglu, Gulnur

Abstract

This study further investigates the impact of IMF actions on stock markets during the Asian crisis. Extending two earlier studies by Kho and Stulz (2000) and Evrensel and Kutan (2007), we investigate the long-term shareholder wealth impact of IMF actions and programs on both financial and real sector returns in the stock markets of Thailand, Indonesia, and Korea. We perform a series of tests employed in Cornett and Tehranian (1989, 1990) that incorporate heteroscedasticity across sectors and contemporaneous dependence of the disturbances. The findings indicate that IMF actions regarding liquidity disbursement or liquidity concerns in markets are the most important events affecting abnormal returns and hence investor wealth in both real and financial sectors. However, the response of the financial sector to IMF actions is much stronger than that of the real sector. In addition, the results suggest moral hazard effects during the Asian crisis in all the three countries.

Suggested Citation

  • Kutan, Ali M. & Muradoglu, Gulnur, 2014. "Investor wealth, the IMF, and the Asian crisis," International Review of Financial Analysis, Elsevier, vol. 33(C), pages 130-137.
    • Handle: RePEc:eee:finana:v:33:y:2014:i:c:p:130-137
    DOI: 10.1016/j.irfa.2014.02.001
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    Cited by:

    1. Kutan, Ali M. & Muradoğlu, Yaz G., 2016. "Financial and real sector returns, IMF-related news, and the Asian crisis," Finance Research Letters, Elsevier, vol. 16(C), pages 28-37.
    2. Brzeszczyński, Janusz & Gajdka, Jerzy & Kutan, Ali M., 2015. "Investor response to public news, sentiment and institutional trading in emerging markets: A review," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 338-352.
    3. Ali M. Kutan & Yaz Gülnür Muradoğlu & Zhong Yu, 2016. "Worldwide impact of IMF policies during the Asian crisis: who does the IMF help, creditors or crisis countries?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 19(2), pages 116-147, June.

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