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Open Access
Article
Publication date: 26 February 2018

Ali Murad Syed and Ishtiaq Ahmad Bajwa

This study aims to find the response by stock market against the announcements of quarterly earnings is empirically tested by exploiting event study methodology. Efficient market…

18918

Abstract

Purpose

This study aims to find the response by stock market against the announcements of quarterly earnings is empirically tested by exploiting event study methodology. Efficient market hypothesis (EMH) on Saudi stock exchange is also tried on.

Design/methodology/approach

The market model is applied to help gauge the expected returns and to illustrate abnormal returns around the event date.

Findings

The results established that Saudi Stock Market does not bear semi-strong form of EMH. How efficient is the Saudi market is also reflected through evidence of significant abnormal returns and post-earnings announcement drift around earning announcements dates.

Research limitations/implications

The authors have not used analysts’ forecast as the expected earnings which are the limitation. As mentioned earlier, the authors used the quarterly earnings of the previous year as a proxy and that proxy could have been replaced by analysts’ forecast. Another limitation is that the trading volume in the event window is not considered.

Practical implications

The behavior of Saudi capital market is of much concern, and the study of this with a perspective of EMH is the significance of this paper.

Social implications

All stakeholders closely watch earnings announcements and its share price movement around the announcement date. Recently, Saudi Arabia has opened its doors to foreign investors, and big foreign investors are going to enter into Saudi capital market, and after their entry, the behavior of market could be different. In the authors’ opinion, this is the right time to study the efficiency of Saudi market before the entry of foreign investors.

Originality/value

This study is based on the gap created by EMH of Saudi market using event methodology, observed in the existing literature, and it will be a contribution to literature.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 11 no. 3
Type: Research Article
ISSN: 1753-8394

Keywords

Open Access
Article
Publication date: 3 December 2018

Razali Haron and Salami Mansurat Ayojimi

The purpose of this paper is to examine the impact of the Goods and Service Tax (GST) implementation on Malaysian stock market index.

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Abstract

Purpose

The purpose of this paper is to examine the impact of the Goods and Service Tax (GST) implementation on Malaysian stock market index.

Design/methodology/approach

This study used daily closing prices of the Malaysian stock index and futures markets for the period ranging from June 2009 to November 2016. Empirical estimation is based on the generalised autoregressive conditional heteroscedasticity (1, 1) model for pre- and post-announcement of the GST.

Findings

Result shows that volatility of Malaysian stock market index increases in the post-announcement than in the pre-announcement of the GST which indicates that educative programs employed by the government before the GST announcement did not yield meaningful result. The volatility of the Malaysian stock market index is persistent during the GST announcement and highly persistent after the implementation. Noticeable increase in post-announcement is in support with the expectation of the market about GST policy in Malaysia.

Practical implications

The finding of this study is consistent with expectation of the market that GST policy will increase the price of the goods and services and might reduce standard of living. This is supported by a noticeable increase in the volatility of the Malaysian stock market index in the post-announcement of GST which is empirically shown during the announcement and after the implementation of GST. Although the GST announcement could be classified as a scheduled announcement, unwillingness to accept the policy prevails in the market as shown by the increase in the market volatility.

Originality/value

Past studies on Malaysian stock market index volatility focus on the impact of Asian and global financial crisis whereas this study examines the impact of the GST announcement and implementation on the volatility of the Malaysian stock market index.

Details

Journal of Asian Business and Economic Studies, vol. 26 no. 1
Type: Research Article
ISSN: 2515-964X

Keywords

Open Access
Article
Publication date: 22 July 2021

Murat Isiker and Oktay Tas

The paper aims to measure the magnitude of the event-induced return anomaly around bonus issue announcement days in Turkey for recent years. Also, by describing the information…

1196

Abstract

Purpose

The paper aims to measure the magnitude of the event-induced return anomaly around bonus issue announcement days in Turkey for recent years. Also, by describing the information content of these announcements with the current data, the study tries to find out the factors that cause return anomaly in Borsa Istanbul when firm boards release the bonus issue decision.

Design/methodology/approach

The paper conducts event study methodology for detecting market anomaly around bonus issue announcements. For the pairwise comparison purpose, t-test and one-way ANOVA methods are applied to examine if abnormal returns vary according to the information content of the announcements.

Findings

Announcement returns for bonus issues from internal resources outperform the issues that are distributed from last year's net income as bonus shares. Findings indicate different return behaviour among internal resources sub-groups. Findings also suggest that investors in Turkey welcome larger-sized issues, while cumulated returns for the initial offers significantly differ from the latter issues.

Research limitations/implications

Findings are limited to the Turkish equity market. Also, the Public Disclosure Platform of Turkey, which is the main data source of the study, does not provide bonus issue announcements before 2010. Therefore, the previous year's data cannot be included in the analysis.

Originality/value

This paper is novel in terms of considering the main resources of the bonus issue in detail to measure the announcement's impact on stock returns.

Details

Journal of Capital Markets Studies, vol. 5 no. 1
Type: Research Article
ISSN: 2514-4774

Keywords

Open Access
Article
Publication date: 1 May 2020

Krishna Prasad and Nandan Prabhu

The purpose of this study is to investigate whether the earnings surprise influences decision to make earnings announcements during or after the trading hours is influenced by the…

2091

Abstract

Purpose

The purpose of this study is to investigate whether the earnings surprise influences decision to make earnings announcements during or after the trading hours is influenced by the earnings surprise resulting from the difference between consensus earnings estimates and the actual reported earnings.

Design/methodology/approach

Event study methodology was employed to test the hypotheses relating to earnings surprise and timing of earnings announcements. Twelve quarterly earnings announcements of 30 companies, drawn from BSE SENSEX of India, were studied to test the hypothesized relationships.

Findings

The study has found statistically significant differences in the market responses to the earnings announcements made during and after the trading hours. The market demonstrated a negative response to the earnings announcements made after the trading hours. Further, the results of the logistic regression have shown that the presence of significant earnings surprises is likely to induce firms to make earnings announcements after the trading hours. The results indicate that those firms that intend to reduce the overreaction and underreaction to earnings surprises are likely to make earnings announcements after the trading hours.

Originality/value

This paper highlights the market response to the earnings announcement made during and after the regular trading hour. Further, the paper examines if the earnings surprise influences the decision to announce the results.

Details

Asian Journal of Accounting Research, vol. 5 no. 1
Type: Research Article
ISSN: 2443-4175

Keywords

Open Access
Article
Publication date: 5 November 2019

Aykut Ahlatcioglu and Nesrin Okay

The purpose of this paper is to assess the information value of earnings announcements for the 2007–2017 period in Borsa Istanbul.

Abstract

Purpose

The purpose of this paper is to assess the information value of earnings announcements for the 2007–2017 period in Borsa Istanbul.

Design/methodology/approach

Abnormal volatility (AVOL) and abnormal absolute return (AAR) in the three-day window around the earnings announcement are used as proxies for information content. A pooled regression of AVOL and AAR is conducted to test for the existence of information content and analyze its time trend along with its determinants.

Findings

The authors find significantly positive AVOL and AAR which shows that earnings have information content for investors during the sample period. Furthermore, both proxies demonstrate a positive time trend after controlling for various firm characteristics and surprise measures. The authors take this as evidence that overall informativeness of earnings has increased over time. The authors observe that this increase is most prevalent for growth companies and earnings announcements with high absolute surprise. This study provides partial support for the hypothesis that value of earnings announcements has increased after an improvement in information dissemination technology with the inception of the online disclosure platform, KAP.

Practical implications

Understanding information value of earnings announcements is of interest for companies which prepare earnings reports, regulators who set standards on their content and frequency and investors which make investment decisions based on information released at these announcements.

Originality/value

There had been few non-US studies related to information value of earnings announcements. The overwhelming majority of these are conducted using limited data sets from the latter part of the last century and only analyze annual earnings announcements. The authors aim to shed light on the subject using a broad and recent sample of quarterly earnings announcements from a major emerging market, Turkey.

Details

Journal of Capital Markets Studies, vol. 3 no. 2
Type: Research Article
ISSN: 2514-4774

Keywords

Open Access
Article
Publication date: 26 January 2021

Murat Isiker and Oktay Tas

This paper aims to measure investors' perception of the rights issue announcement of publicly listed companies in five stock markets of Islamic countries. Then, these firms are…

Abstract

Purpose

This paper aims to measure investors' perception of the rights issue announcement of publicly listed companies in five stock markets of Islamic countries. Then, these firms are grouped according to their debt level to examine whether abnormal returns are different from those that are highly leveraged. Moreover, Sharīʿah compatibility of firms is checked to understand if return anomaly shows different behaviour around rights issue announcement days.

Design/methodology/approach

The analysis period includes the years 2010–2019, which includes 362 rights issue announcements. The event study methodology is applied to measure the level of impact that is triggered by the rights issue announcements. Hereafter, one-way ANOVA test is performed to identify whether there exists a difference among the sample groups according to their debt level.

Findings

Findings suggest that rights issue announcements cause −3.90% fall in share prices on average for the whole sample. However, negative abnormal return is found significant only in Egypt and Turkey. Individual regression analysis results suggest that an increase in debt level worsens the return anomaly only in Egypt. This refers that the rights issue announcement is perceived as less favourable for highly leveraged companies compared to others in this country. Finally, Sharīʿah-compliant companies show better performance compared to non-compliant counterparts around the event dates.

Originality/value

This paper is novel in evaluating market reaction during rights issue announcements in multiple Islamic countries. Also, to the best of the authors’ knowledge, this study is the first attempt to compare return behaviour of Sharīʿah-compliant and non-compliant firms around the rights issue announcements.

Details

Islamic Economic Studies, vol. 28 no. 2
Type: Research Article
ISSN: 1319-1616

Keywords

Open Access
Article
Publication date: 23 February 2022

Dharen Kumar Pandey, Vineeta Kumari and Brajesh Kumar Tiwari

The authors examine the impacts of corporate announcements on stock returns during the pandemic stress.

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Abstract

Purpose

The authors examine the impacts of corporate announcements on stock returns during the pandemic stress.

Design/methodology/approach

The authors employ the event study methodology with the market model on a sample of 90 events (announcement and ex-date).

Findings

The authors find that all the corporate announcements do not impact the stock returns in a similar pattern. While the bonus announcement, ex-bonus and ex-split events led to positive significant abnormal returns on the event date, the rights issue and stock-split announcements failed to influence the stock returns. The findings suggest that before making such announcements, the corporates should wait until the market recovers because even the positively impacting events result in negative market responses during pandemic stress.

Practical implications

This study will guide the policymakers to stimulate share prices during such pandemics with the help of various corporate announcements. The investors will be assisted in understanding the stock market mechanism and making wise decisions before reacting to corporate actions during a pandemic or emergency period. While the policymakers are concerned with influencing the share prices, the investors are concerned with the composition of the risk-return parameters in their portfolio. This study will act as an essential investment tool for both.

Originality/value

To the best of the authors’ knowledge, the authors conduct the first-ever study to examine the impacts of corporate announcements during a pandemic stress period that significantly contributes to the literature. The authors examine the announcement effects in India and accurately anticipate that this study will be a pioneer in this field. This study also paves the way for future researches in this area.

Details

Asian Journal of Accounting Research, vol. 7 no. 2
Type: Research Article
ISSN: 2443-4175

Keywords

Open Access
Article
Publication date: 18 May 2021

Fernanda Pagin, Matheus da Costa Gomes, Rafael Moreira Antônio, Tabajara Pimenta Júnior and Luiz Eduardo Gaio

This paper aims to identify if there is an impact of the rating announcements issued by the agencies on the returns of the stocks of Brazilian companies listed on Brasil Bolsa…

Abstract

Purpose

This paper aims to identify if there is an impact of the rating announcements issued by the agencies on the returns of the stocks of Brazilian companies listed on Brasil Bolsa Balcão, from August 2002 to August 2018, identifying which types of announcement (upgrade, downgrade or the same initial classification) cause variations in prices around the date of disclosure of the rating.

Design/methodology/approach

The event study methodology was applied to verify the market reaction around the announcement dates in a 21-day event window (−10, +10). The market model was used to calculate the abnormal returns (ARs), and subsequently, the accumulated ARs.

Findings

The hypotheses tests allowed to verify that the accumulated ARs are different, before and after the three types of rating announcements (upgrades, downgrades and the same classification); in upgrades, the mean of accumulated ARs increases in the days before the event, while in downgrades, this increase occurs after the event. This paper concluded that the rating announcements have an impact on the return of stock of the Brazilian market and that the market reaction occurs most of the time before the event happens, which indicates that the market can anticipate the information contained in the changes in credit ratings.

Practical implications

The results have considerable implications for portfolio managers, institutional investors and traders. It facilitates investment decision-making in the face of rating classification announcements. Market participants can pay more attention to their investment strategies and asset allocation during periods of risk rating announcements. Additionally, traders can understand the form of investment strategy for superior earnings.

Originality/value

The importance of the study is related to the fact that the results may explain the causes of specific movements in the Brazilian financial market related to a source of information that may or may not be able to influence the decisions of the financial agents that operate in this market. The justification is centred on the idea that, for investors who somehow react to the announcements, it is relevant to understand the impact of rating classifications on companies, as access to such information allows for more conscious decision-making.

Details

Journal of Economics, Finance and Administrative Science, vol. 26 no. 51
Type: Research Article
ISSN: 2077-1886

Keywords

Open Access
Article
Publication date: 16 August 2019

Hong Thi Hoa Nguyen, Dat Tien Nguyen and Anh Hong Pham

The purpose of this paper is to examine the effects of share repurchase announcements on the stock price of rival firms in the same industry in Vietnam during 2010–2017.

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Abstract

Purpose

The purpose of this paper is to examine the effects of share repurchase announcements on the stock price of rival firms in the same industry in Vietnam during 2010–2017.

Design/methodology/approach

Both event study and t-test are employed to test the effects of share repurchase announcements on rival firms. In addition, cross-sectional analysis by ordinary least square regression is also applied for investigating the heterogeneous effects due to information transfer.

Findings

The finding shows that stock repurchase announcements result in a positive and significant valuation effect for both announcing firms and rival firms in Vietnam. Furthermore, the degree of signal to the industry is conditional on the degree of signal about the announcing firms as a contagious effect. Intra-industry effects are more favorable when profit performance of rival firms is good and when leverage of rival firms is low.

Practical implications

Rival firms can seize opportunities surrounding share repurchase announcements in the same industry in Vietnam. However, due to firm characteristics, intra-industry effects of stock repurchases differ among industries.

Originality/value

By examining different methods, the paper attributes valuable results to investigate the stock price behavior of rival firms in the same industry when firms announce stock repurchase in Vietnam.

Open Access
Article
Publication date: 13 December 2022

Heewoo Park and Yuen Jung Park

The authors investigate whether the effects of stock buyback announcements on credit default swap (CDS) spread changes for US firms depend on macroeconomic conditions. The authors…

Abstract

The authors investigate whether the effects of stock buyback announcements on credit default swap (CDS) spread changes for US firms depend on macroeconomic conditions. The authors find that abnormal CDS spreads increase for small-sized firms announced to repurchase a higher share ratio during the normal period. In contrast, abnormal CDS spreads decrease for big-sized firms regardless of the magnitude of the repurchase ratio during the crisis period. The results of this study suggest that the wealth transfer effect dominates the signaling effect for small-sized firms with higher target ratios during the normal period. In contrast, the signaling effect is stronger for bondholders of big-sized firms during the crisis period.

Details

Journal of Derivatives and Quantitative Studies: 선물연구, vol. 31 no. 1
Type: Research Article
ISSN: 1229-988X

Keywords

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