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Article
Publication date: 12 July 2018

Felix Canitz, Christian Fieberg, Kerstin Lopatta, Thorsten Poddig and Thomas Walker

This paper aims to hunt for the driving force behind the accrual anomaly and revisit the risk versus mispricing debate.

Abstract

Purpose

This paper aims to hunt for the driving force behind the accrual anomaly and revisit the risk versus mispricing debate.

Design/methodology/approach

In sorts of stock returns on abnormal and normal accruals, the authors find that abnormal accruals are the driving force behind the accrual anomaly. The authors then construct characteristic-balanced portfolios from dependent sorts of stock returns on the abnormal accrual characteristic and a related factor-mimicking portfolio to test whether the accrual anomaly is due to risk or mispricing (Daniel and Titman, 1997; Davis et al., 2000).

Findings

Similar to Hirshleifer et al. (2012), the authors find that the accrual anomaly is due to mispricing and that the measure of accruals used in Hirshleifer et al.’s study (2012) is a very broad measure of accruals. The authors therefore recommend the use of abnormal accruals in future research.

Originality/value

The results suggest that there are limits to arbitrage or behavioral biases with regard to the trading of low-accrual firms. Showing that the accrual effect is driven by the level of abnormal accruals, the findings of this study strongly challenge the rational risk explanation proposed by the extant literature.

Details

The Journal of Risk Finance, vol. 19 no. 3
Type: Research Article
ISSN: 1526-5943

Keywords

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Article
Publication date: 21 November 2016

Kerstin Lopatta, Felix Canitz and Christian Fieberg

García Lara et al. (2011) argue that there is a conservatism-related priced risk factor in US stock returns. To put this to the test, the authors aim to analyze whether…

Abstract

Purpose

García Lara et al. (2011) argue that there is a conservatism-related priced risk factor in US stock returns. To put this to the test, the authors aim to analyze whether the conditional conservatism effect comes from the loading on a conditional conservatism-related factor-mimicking portfolio (systematic risk) or the conservatism characteristic itself.

Design/methodology/approach

The authors form characteristic-balanced portfolios from dependent sorts of stocks on the firm’s degree of conservatism and the firm’s loading on the conservatism-related factor-mimicking portfolio as proposed by Daniel and Titman (1997) and Davis et al. (2000).

Findings

The tests indicate that it is the conditional conservatism characteristic rather than the factor loading that explains the cross-sectional differences in average stock returns. Consequently, they do not find evidence for a conservatism-related priced risk factor.

Originality/value

This finding suggests that investors misvalue the conservatism characteristic and casts doubt on the rational risk explanation as proposed by García Lara et al. (2011).

Details

The Journal of Risk Finance, vol. 17 no. 5
Type: Research Article
ISSN: 1526-5943

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Article
Publication date: 15 May 2017

Thomas Kaspereit, Kerstin Lopatta, Suren Pakhchanyan and Jörg Prokop

The aim of this paper is to study the information content of operational loss events occurring at European financial institutions with respect to the announcing bank’s…

Abstract

Purpose

The aim of this paper is to study the information content of operational loss events occurring at European financial institutions with respect to the announcing bank’s industry rivals from an equity investor’s perspective.

Design/methodology/approach

The authors conduct an event study to identify spillover effects of operational loss events using the Carhart (1997) four-factor model as a benchmark model. In addition, they conduct multiple regression analyses to investigate the extent to which firm-specific factors or the market environment affect abnormal returns.

Findings

They observe significant negative abnormal returns following operational loss announcements exceeding € 50 million for both the announcing firms and their competitors. In addition, they find that stock market reactions occur only within a very small event window around the announcement date, indicating a high degree of market efficiency. Finally, abnormal returns tend to be insignificant for smaller loss amounts.

Originality/value

While operational risk is often believed to be strictly firm-specific, the results show that large operational risk events are not purely idiosyncratic; rather, they are systemic in the sense that they have contagious effects on non-event banks. Thus, the authors shed new light on how operational risk affects equity investors’ investment behaviour in an opaque and highly interconnected banking market.

Details

The Journal of Risk Finance, vol. 18 no. 3
Type: Research Article
ISSN: 1526-5943

Keywords

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Article
Publication date: 15 May 2017

Felix Canitz, Panagiotis Ballis-Papanastasiou, Christian Fieberg, Kerstin Lopatta, Armin Varmaz and Thomas Walker

The purpose of this paper is to review and evaluate the methods commonly used in accounting literature to correct for cointegrated data and data that are neither…

Abstract

Purpose

The purpose of this paper is to review and evaluate the methods commonly used in accounting literature to correct for cointegrated data and data that are neither stationary nor cointegrated.

Design/methodology/approach

The authors conducted Monte Carlo simulations according to Baltagi et al. (2011), Petersen (2009) and Gow et al. (2010), to analyze how regression results are affected by the possible nonstationarity of the variables of interest.

Findings

The results of this study suggest that biases in regression estimates can be reduced and valid inferences can be obtained by using robust standard errors clustered by firm, clustered by firm and time or Fama–MacBeth t-statistics based on the mean and standard errors of the cross section of coefficients from time-series regressions.

Originality/value

The findings of this study are suited to guide future researchers regarding which estimation methods are the most reliable given the possible nonstationarity of the variables of interest.

Details

The Journal of Risk Finance, vol. 18 no. 3
Type: Research Article
ISSN: 1526-5943

Keywords

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Article
Publication date: 16 October 2019

Kerstin Lopatta, Magdalena Tchikov and Finn Marten Körner

A credit rating, as a single indicator on one consistent scale, is designed as an objective and comparable measure within a credit rating agency (CRA). While research…

Abstract

Purpose

A credit rating, as a single indicator on one consistent scale, is designed as an objective and comparable measure within a credit rating agency (CRA). While research focuses mainly on the comparability of ratings between agencies, this paper additionally questions empirically how CRAs meet their promise of providing a consistent assessment of credit risk for issuers within and between market segments of the same agency.

Design/methodology/approach

Exhaustive and robust regression analyses are run to assess the impact of market sectors and rating agencies on credit ratings. The examinations consider the rating level, as well as rating downgrades as a further measure of empirical credit risk. Data stems from a large global sample of Bloomberg ratings from 11 market sectors for the period 2010-2018.

Findings

The analyses show differing effects of sectors and agencies on issuer ratings and downgrade probabilities. Empirical results on credit ratings and rating downgrades can then be attributed to investment grade and non-investment grade ratings.

Originality/value

The paper contributes to current finance research and practice by examining the credit rating differences between sectors and agencies and providing assistance to investors and other stakeholders, as well as researchers, how issuers’ sector and rating agency affiliations act as relative metrics.

Details

The Journal of Risk Finance, vol. 20 no. 5
Type: Research Article
ISSN: 1526-5943

Keywords

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Article
Publication date: 19 February 2018

Frerich Buchholz, Reemda Jaeschke, Kerstin Lopatta and Karen Maas

The purpose of this paper is to examine how CEO narcissism can be related to the usage of an abnormal optimistic tone in financial disclosures. Drawing on upper echelons…

Abstract

Purpose

The purpose of this paper is to examine how CEO narcissism can be related to the usage of an abnormal optimistic tone in financial disclosures. Drawing on upper echelons theory, this paper suggests a link between CEO characteristics, such as narcissism, and accounting choices, such as optimistic financial reporting language.

Design/methodology/approach

To measure the narcissistic trait of a CEO, the study builds on a model using a set of 15 archival indicators. The usage of an abnormal optimistic tone is assessed quantitatively when looking at firms’ 10-K filings, where “abnormal” refers to tone that is unrelated to a firm’s performance, risk, and complexity. This approach allows for the use of firm-fixed effects for a sample of US listed firms over the period 1992-2012.

Findings

The results show that CEO narcissism is significantly positively related to abnormal optimistic tone in 10-K filings. If a highly abnormal optimistic tone is present, the level of CEO narcissism is positively related to the likelihood of future seasoned equity offerings and larger future investments in research and development.

Research limitations/implications

The findings are relevant for shareholders and stakeholders as well as auditors and legislators. All stakeholders should be aware of the overly optimistic reporting language resulting from CEO narcissism and need to make allowances for it when assessing firm performance based on financial disclosures.

Originality/value

This study is the first to show in a large-scale sample how CEO narcissism can be related to a firm’s use of optimistic language, and thus contributes to the question of how personality traits affect an organization’s financial reporting strategy.

Details

Accounting, Auditing & Accountability Journal, vol. 31 no. 2
Type: Research Article
ISSN: 0951-3574

Keywords

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Article
Publication date: 18 May 2015

Thomas Kaspereit, Kerstin Lopatta and Jochen Zimmermann

This paper aims to empirically investigate the relationship between the level of compliance with the German Corporate Governance Code’s (GCGC) recommendations and the…

Abstract

Purpose

This paper aims to empirically investigate the relationship between the level of compliance with the German Corporate Governance Code’s (GCGC) recommendations and the implied cost of equity capital (ICC). German listed companies are required by law to annually disclose their compliance with the recommendations of the GCGC. Whether the GCGC achieves its aim to promote the trust of stakeholders in the management and supervision is still an open question.

Design/methodology/approach

ICC is regressed on a score that captures compliance with the GCGC and several control variables. The dataset covers the period of 2003-2012 with declarations of compliance from 447 companies. ICC is chosen as an outcome variable, as it captures general investment risk as well as risk arising from asymmetric information and mistrust of investors in management.

Findings

The results of the empirical analysis demonstrate that a higher level of GCGC compliance is associated with lower ICC.

Research limitations/implications

It is expected that the results of this study will strengthen acceptance of the GCGC and empirically support the work of the government commission that is responsible for it. It has not been analyzed yet whether the firms cite good reasons why they do not adhere to certain items.

Originality/value

This empirical analysis is the first to provide statistically reliable evidence on how compliance with the GCGC affects ICC and whether the work of the government commission reflects good corporate governance as perceived by capital markets.

Details

The Journal of Risk Finance, vol. 16 no. 3
Type: Research Article
ISSN: 1526-5943

Keywords

Content available
Article
Publication date: 18 May 2015

Bonnie G Buchanan

Abstract

Details

The Journal of Risk Finance, vol. 16 no. 3
Type: Research Article
ISSN: 1526-5943

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Article
Publication date: 18 December 2017

Kerstin Kräusche and Stefanie Pilz

The purpose of this paper is to present the development of an integrated sustainability reporting. In this paper success criteria are named and empirical values when…

Abstract

Purpose

The purpose of this paper is to present the development of an integrated sustainability reporting. In this paper success criteria are named and empirical values when dealingwith specific challenges are formulated. The focus is on the development of criteria for reporting, the involvement of university members and quality assurance.

Design/methodology/approach

The voluntary and compulsory reporting requirements of German universities are presented, and the concept for integrated reporting is developed from them. Possible criteria catalogues for the evaluation of sustainable development are presented and evaluated. However, the focus is on the practical experience that the university has made in the launch and implementation of an integrated sustainability reporting – both in terms of content and organisation.

Findings

A prerequisite for the preparation of a sustainability reporting is that the university develops a common understanding of sustainability and formulates objectives. This results in a structure for the reporting which is self-explanatory. For the project management before, during and after the reporting, it is indispensable to structure the work sequence (data collection, data analysis, text editor, etc) and to ensure a process-accompanying communication. Participation by all university groups in reporting is necessary.

Practical implications

Universities have a special responsibility for the sustainable development of society. To be accountable for their activities in the field of sustainability, the practical report provides a handbook on which universities can set up their own sustainability reporting.

Originality/value

At German universities, there is a lively discussion on how to define a criteria catalogue to report objectively on sustainability. The Eberswalde University for Sustainable Development is involved in the discussion and, at the same time, sets a good example. This article describes the practical implementation of the Sustainability Report.

Details

International Journal of Sustainability in Higher Education, vol. 19 no. 2
Type: Research Article
ISSN: 1467-6370

Keywords

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