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1 – 10 of over 1000Victoria C. Edgar, Niamh M. Brennan and Sean Bradley Power
Taking a communication perspective, the paper explores management's rhetoric in profit warnings, whose sole purpose is to disclose unexpected bad news.
Abstract
Purpose
Taking a communication perspective, the paper explores management's rhetoric in profit warnings, whose sole purpose is to disclose unexpected bad news.
Design/methodology/approach
Adopting a close-reading approach to text analysis, the authors analyse three profit warnings of the now-collapsed Carillion, contrasting the rhetoric with contemporaneous investor conference calls to discuss the profit warnings and board minutes recording boardroom discussions of the case company's precarious financial circumstances. The analysis applies an Aristotelian framework, focussing on logos (appealing to logic and reason), ethos (appealing to authority) and pathos (appealing to emotion) to examine how Carillion's board and management used language to persuade shareholders concerning the company's adverse circumstances.
Findings
As non-routine communications, the language in profit warnings displays and mimics characteristics of routine communications by appealing primarily to logos (logic and reason). The rhetorical profiles of investor conference calls and board meeting minutes differ from profit warnings, suggesting a different version of the story behind the scenes. The authors frame the three profit warnings as representing three stages of communication as follows: denial, defiance and desperation and, for our case company, ultimately, culminating in defeat.
Research limitations/implications
The research is limited to the study of profit warnings in one case company.
Originality/value
The paper views profit warnings as a communication artefact and examines the rhetoric in these corporate documents to elucidate their key features. The paper provides novel insights into the role of profit warnings as a corporate communication vehicle/genre delivering bad news.
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David Lau, Koji Ota and Norman Wong
The purpose of this study is to investigate whether audit quality is associated with the speed with which managers revise earnings forecasts to arrive at the actual earnings…
Abstract
Purpose
The purpose of this study is to investigate whether audit quality is associated with the speed with which managers revise earnings forecasts to arrive at the actual earnings through the lens of the auditor selection theory. This study examines this relationship in a unique institutional setting, Japan, where nearly all managers disclose earnings forecasts.
Design/methodology/approach
The authors pioneer an empirical proxy to capture the speed of management forecast revisions based on well-established principles from the finance and disclosure literatures. This proxy is tested alongside other disclosure proxies (namely, accuracy, frequency and timeliness) to assess the influence of audit quality on managerial forecasting behavior.
Findings
This empirical analysis shows that forecast revision speed is higher for firms that select higher-quality auditors. While firms that select higher-quality auditors revise forecasts in a more timely fashion, these firms revise less frequently. Moreover, the authors find that the influence of audit quality on forecast revisions is asymmetric. Specifically, the analysis of downward forecast revisions shows that higher-quality auditors are associated with firms that disclose bad news via forecasts revisions faster, more frequently and in a more timely fashion. However, the analysis of upward forecast revisions shows that higher-quality auditors have no effect on the speed with which firms disclose good news via forecast revisions, even though they are associated with less frequent but more timely forecast revisions. These findings have important implications for prior studies that consistently document an asymmetric response of the stock market to good news and bad news.
Originality/value
The authors provide evidence on the relationship between audit quality and management earnings forecasts using a novel and intuitive measure that captures forecast revision speed. This measure speaks to the growing interest in understanding the notion of speed and timing of voluntary disclosures. This study provides a more robust and comprehensive measure of the speed with which managers revise their earnings forecasts to arrive at the actual earnings. Furthermore, this study is among the first to document an asymmetric effect of audit quality on the type of news disclosed in forecast revisions.
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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…
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.
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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…
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.
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Bernat López and Lina Casadó-Marín
This study aims to analyze and assess 21 years of media coverage (2000–2020) of Flix, a small industrial village located in an rural area on north-eastern Spain, which has endured…
Abstract
Purpose
This study aims to analyze and assess 21 years of media coverage (2000–2020) of Flix, a small industrial village located in an rural area on north-eastern Spain, which has endured in these years a severe environmental and industrial crisis, with a strong potential for stigmatization of the place.
Design/methodology/approach
The research is conceptualized under the Social Amplification of Risk Framework, a theoretical/conceptual approach aimed at accounting for the huge gaps that often arise between public perception of technological or environmental risks of some technologies, products and places and the expert estimations of these risks. The authors studied the coverage on Flix by a local, a regional and a national newspaper through a content analysis where the corpus (1,524 news pieces) was coded for several variables, including tone, genre and thematic area.
Findings
The studied coverage was in general overwhelmingly negative and strongly focused on “bad news” relating to pollution and deindustrialization, although this was much less the case in the local newspaper than in the regional and, in particular, the national newspaper. Thus, a territorially escalated pattern clearly emerges from our research concerning the stigmatization potential of news media coverage for the specific case under scrutiny.
Originality/value
To the authors’ knowledge, this is the first time such a longitudinal study of media coverage and its potential for place stigmatization is performed with this specific territorial perspective.
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Informed traders may prefer the options market to the stock market for reasons including the leverage effect, transaction costs, restrictions on short sale. Many studies try to…
Abstract
Informed traders may prefer the options market to the stock market for reasons including the leverage effect, transaction costs, restrictions on short sale. Many studies try to predict future returns of stocks using informed traders' behavior in the options market. In this study, we examine whether the trading volume ratios of single stock options have the predictive power for future returns of the underlying stock. By analyzing the stock price responses to the “preliminary announcement of performance” of 36 underlying stocks on the Korea Exchange from November 2014 to March 2021 and the trading volume of options written on those stocks, we investigate the relation between the option ratios, which are the call option volume to put option volume ratio (C/P ratio) and the option volume to stock volume ratio (O/S ratio), and the future returns of the underlying stock. We also examine which ratio is better in predicting the future returns. The authors found that both option ratios showed the statistically significant predictability about future returns of the underlying stock and that the return predictability of the O/S ratio is more robust than that of the C/P ratio. This study shows that indicators generated in the options market can be used to predict future underlying stock returns. Further, the findings of this study contributed to a dearth of literature pertaining to single stock options. The results suggest that the single stock options market is efficient and influences the price discovery in the stock market.
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Kingstone Nyakurukwa and Yudhvir Seetharam
Utilising a database that distinctly classifies firm-level ESG (environmental, social and governance) news sentiment as positive or negative, the authors examine the information…
Abstract
Purpose
Utilising a database that distinctly classifies firm-level ESG (environmental, social and governance) news sentiment as positive or negative, the authors examine the information flow between the two types of ESG news sentiment and stock returns for 20 companies listed on the Johannesburg Stock Exchange between 2015 and 2021.
Design/methodology/approach
The authors use Shannonian transfer entropy to examine whether information significantly flows from ESG news sentiment to stock returns and a modified event study analysis to establish how stock prices react to changes in the two types of ESG sentiment.
Findings
Using Shannonian transfer entropy, the authors find that for the majority of the companies studied, information flows from the positive ESG news sentiment to stock returns while only a minority of the companies exhibit significant information flow from negative ESG news sentiment to returns. Furthermore, the study’s findings show significantly positive (negative) abnormal returns on the event date and beyond for both upgrades and downgrades in positive ESG news sentiment.
Originality/value
This study is among the first in an African context to investigate the impact of ESG news sentiment on stock market returns at high frequencies.
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Arthur Ribeiro Queiroz, João Prates Romero and Elton Eduardo Freitas
This article aims to evaluate the entry and exit of companies from local productive structures, with a specific focus on the sectoral complexity of these activities and the…
Abstract
Purpose
This article aims to evaluate the entry and exit of companies from local productive structures, with a specific focus on the sectoral complexity of these activities and the complexity of these portfolios. The study focuses on empirically demonstrating the thesis that related economic diversification exacerbates the development gap between more and less complex regions.
Design/methodology/approach
The article uses indicators formulated by the economic complexity approach. They allow a relevant descriptive analysis of the economic diversification process in Brazilian micro-regions and provide the foundation for the econometric tests conducted. Through three distinct estimation strategies (OLS, logit, probit), the influence of complexity and relatedness on the entry and exit events of firms from local portfolios is tested.
Findings
In all estimated models, the stronger relationship between an activity and a portfolio significantly increases its probability of entering the productive structure and, at the same time, acts as a significant factor in preventing its exit. Furthermore, the results reveal that the complexity of a sector reduces the probability of its specialization in less complex regions while increasing it in more complex regions. On the other hand, sectoral complexity significantly increases the probability of a sector leaving less complex local structures but has no significant effect in highly complex regions.
Research limitations/implications
Due to the data used, the indicators are calculated considering only formal job numbers. Additionally, the tests do not detect the influence of spatial issues. These limitations should be addressed by future research.
Practical implications
The article characterizes a prevailing process of uneven development among Brazilian regions and brings relevant implications, primarily for policymakers. Specifically, for less complex regions, policies should focus on creating opportunities to improve their diversification capabilities in complex sectors that are not too distant from their portfolios.
Originality/value
The article makes an original contribution by proposing an evaluation of regional diversification in Brazil with a focus on complexity, introducing a more detailed differentiation of regions based on their complexity levels and examining the impact of sectoral complexity on diversification patterns within each group.
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James Guthrie, Francesca Manes Rossi, Rebecca Levy Orelli and Giuseppe Nicolò
The paper identifies the types of risks disclosed by Italian organisations using integrated reporting (IR). This paper aims to understand the level and features of risk disclosure…
Abstract
Purpose
The paper identifies the types of risks disclosed by Italian organisations using integrated reporting (IR). This paper aims to understand the level and features of risk disclosure with the adoption of IR.
Design/methodology/approach
The authors use risk classifications already provided in the literature to develop a content analysis of Italian organisations’ integrated reports published.
Findings
The content analysis reveals that most of the Italian organisations incorporate many types of risk disclosure into their integrated reports. Organisations use this alternative form of reporting to communicate risk differently from how they disclose risks in traditional annual financial reporting. That is, the study finds that the organisations use their integrated reports to disclose a broader group of risks, related to the environment and society, and do so using narrative and visual representation.
Originality/value
The paper contributes to a narrow stream of research investigating risk disclosure provided through IR, contributing to the understanding of the role of IR in representing an organisational risk.
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Anupam Dutta, Naji Jalkh, Elie Bouri and Probal Dutta
The purpose of this paper is to examine the impact of structural breaks on the conditional variance of carbon emission allowance prices.
Abstract
Purpose
The purpose of this paper is to examine the impact of structural breaks on the conditional variance of carbon emission allowance prices.
Design/methodology/approach
The authors employ the symmetric GARCH model, and two asymmetric models, namely the exponential GARCH and the threshold GARCH.
Findings
The authors show that the forecast performance of GARCH models improves after accounting for potential structural changes. Importantly, we observe a significant drop in the volatility persistence of emission prices. In addition, the effects of positive and negative shocks on carbon market volatility increase when breaks are taken into account. Overall, the findings reveal that when structural breaks are ignored in the emission price risk, the volatility persistence is overestimated and the news impact is underestimated.
Originality/value
The authors are the first to examine how the conditional variance of carbon emission allowance prices reacts to structural breaks.
Details