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Article
Publication date: 17 May 2020

Weihua Liu, Wanying Wei, Cheng Si, Dong Xie and Lujie Chen

This study empirically examines the impact of announcements on supply chain strategic collaboration (SCSC) on companies' shareholder value.

Abstract

Purpose

This study empirically examines the impact of announcements on supply chain strategic collaboration (SCSC) on companies' shareholder value.

Design/methodology/approach

This study analyzes changes in shareholder value of companies listed in China based on data of 208 SCSC announcements. The signaling theory is applied to determine correlation among SCSC announcements and the market. An event study is used to estimate the stock market reaction to SCSC announcements. The common market model estimates stock abnormal returns after the event. The least squares method and regression model calculate the model parameter value.

Findings

There is a positive and statistically significant relationship between SCSC announcement and shareholder value. Market reaction to product development collaboration is significantly higher than to technology-sharing collaboration, market collaboration, and other SCSC types. The market reacts more positively to suppliers and companies with greater supply chain control power than to buyers and companies with lower control power. Announcements from the service supply chain can lead to stronger market reactions than those from manufacturing supply chains.

Practical implications

The findings provide a systematic assessment of how SCSC announcements contribute to firms' shareholder value. The result provides a benchmark of value promotion that can be expected from SCSC announcements.

Originality/value

This study fills the research gap that using secondary data to assess changes in companies’ shareholder value caused by SCSC announcements and firstly examines these changes by constructing the signaler–signal–receiver progress based on signaling theory. The research results provide a new reference and inspiration for deeper understanding of the impact mechanism of SCSC. Furthermore, this study contributes to the development of the signaling theory using an empirical study in an emerging market, China.

Details

International Journal of Operations & Production Management, vol. 40 no. 4
Type: Research Article
ISSN: 0144-3577

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Article
Publication date: 1 December 1994

Jos Lemmink and Hans Kasper

Generally it is assumed that quality improvements are important toolsfor companies to gain a sustainable competitive advantage. The result ofproduct quality improvements…

Abstract

Generally it is assumed that quality improvements are important tools for companies to gain a sustainable competitive advantage. The result of product quality improvements depends, for example on the reaction of competitors. If competitors react intensively and quickly, the outcome of a product quality improvement might be different from what was expected. From an empirical study in The Netherlands, concludes that, in general, the typical reaction of competitors is quite a fast reaction with only one marketing mix instrument. The intensity of the competitive reaction appears to be lower in mature and declining markets than it is in growing markets, and improvements in reliability and service quality aspects appear to be important weapons in quality competition. Service quality improvements are difficult to imitate swiftly. Moreover, they lead to higher market shares for the initiating company. Quality competition based on other quality aspects, like conformance to standards and performance, does not result in a real competitive advantage. For these quality improvements, following a “traditional” competitive pattern of action and, more‐or‐less the same reaction, are quite easy to imitate. They are also needed just to keep up with the leading competitors in the industry. However, they do not lead to long‐term sustainable advantages.

Details

European Journal of Marketing, vol. 28 no. 12
Type: Research Article
ISSN: 0309-0566

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Book part
Publication date: 6 November 2012

Vijay Gondhalekar, Mahendra Joshi and Marie McKendall

Purpose – This study examines both the short- and long-term share price reaction to announcements of financial restatements cited in the U.S. General Accounting Office…

Abstract

Purpose – This study examines both the short- and long-term share price reaction to announcements of financial restatements cited in the U.S. General Accounting Office (2006) database.

Methodology – It uses the augmented four-factor Fama-French model for assessing share price reaction.

Findings – The study finds that the average cumulative abnormal return (CAR) for a sample of 553 restatements (by 437 companies) is significantly negative (−1.58) for the three-day window surrounding the day of announcement. The average CAR for the one-year period prior to the announcement (−9.6%) and for each of the four years after the announcement is negative as well, with the average CAR for the four years adding up to −22%. The study also documents differences in CARs based on the entity prompting the restatement (company, auditor, and Securities and Exchange Commission), the reason behind the restatement (revenue, cost, reclassification of item, etc.), and for one-time versus repeat offenders.

Social implications – Taken together, the findings indicate that financial restatements impose significant short-term as well as long-term costs on shareholders.

Originality/Value – The evidence about long-term share price reaction to financial restatements is missing in prior research. The relationship between long-term and short-term share price reaction to financial restatements fails to suggest systematic over/underreaction by the market.

Details

Advances in Financial Economics
Type: Book
ISBN: 978-1-78052-788-8

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Article
Publication date: 4 March 2019

Jomo Sankara, Dennis M. Patten and Deborah L. Lindberg

This paper investigates the market response to the poor quality of reporting on the first mandated set of conflict minerals disclosures in the US setting. The authors…

Abstract

Purpose

This paper investigates the market response to the poor quality of reporting on the first mandated set of conflict minerals disclosures in the US setting. The authors examine the reaction for both filing firms at their filing date and non-filing companies at the filing deadline.

Design/methodology/approach

The authors use standard market model methods to capture investor response and test for differences across reactions using comparisons of means and regression models. The authors also code reports for a sub-sample of firms and test for the relation between disclosure and market reactions.

Findings

The authors document a significant negative reaction for both filing and non-filing firms, with the latter group suffering a more negative reaction than the filers. The authors also find more extensive disclosure is associated with less negative market reactions. Finally, the authors provide evidence supporting the argument that the more pronounced reaction for the non-filers is due to concerns with incremental implementation costs for these firms.

Research limitations/implications

The results extend prior research into investor perceptions of exposures to social and political costs. The findings suggest that investors view both poor quality disclosure and lack of response to mandated requirements as increasing such exposures.

Practical implications

The negative market response could be expected to exert additional pressures on companies to better assess and report on conflict mineral exposures in their supply chains.

Social implications

The findings suggest investors pay attention to the corporate response to mandated social disclosure requirements, an important finding as mandates for similar types of disclosure appear to be in the offing.

Originality/value

This study is the first to extend the social and political cost exposure literature to analysis of mandated social disclosures.

Details

Sustainability Accounting, Management and Policy Journal, vol. 10 no. 1
Type: Research Article
ISSN: 2040-8021

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Article
Publication date: 1 July 2006

Steven E. Abraham

The purpose of this paper is to compare the market reaction to layoff announcements of union and nonunion employees.

Abstract

Purpose

The purpose of this paper is to compare the market reaction to layoff announcements of union and nonunion employees.

Design/methodology/approach

Event study methodology was utilized to assess the effects of layoff announcements of union versus nonunion employees. The union status of the laid‐off employees was determined for 135 layoff announcements reported in the Wall Street Journal in 1993 and 1994 and shareholder returns between the two groups was compared.

Findings

Over each event period tested, the market reaction was more negative when nonunion employees were downsized than when the announcement concerned unionized employees. Over the two days surrounding the announcement, the market reaction to the layoff announcement of unionized employees was actually positive, while the reaction was negative when nonunion employees were the subject of the announcement.

Research limitations/implications

The sample included layoff announcements from 1993 and 1994 only. The market reaction to announcements in different years might be different.

Originality/value

While many papers have examined the market reaction to layoff announcements, this is the first paper that compares the reaction to union versus nonunion employees.

Details

International Journal of Manpower, vol. 27 no. 5
Type: Research Article
ISSN: 0143-7720

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Article
Publication date: 1 October 2018

Katarzyna Byrka-Kita, Mateusz Czerwiński, Agnieszka Preś-Perepeczo and Tomasz Wiśniewski

The purpose of this paper is to analyse the market reaction to the appointments of chief executive officers (CEOs) in companies listed on the Warsaw Stock Exchange. The…

Abstract

Purpose

The purpose of this paper is to analyse the market reaction to the appointments of chief executive officers (CEOs) in companies listed on the Warsaw Stock Exchange. The authors focussed on the relationship between the characteristics of a newly appointed CEO and the shareholders’ reactions to the appointment of a CEO.

Design/methodology/approach

To measure shareholder reaction, the authors apply an event study methodology. The determinants of reaction are identified on the basis of multi-regression analysis.

Findings

The results reveal a negative market reaction to all CEO appointments, both new appointments and reappointments. Investor reaction is driven more by the financial condition of the company, the company’s market performance and the free float, than by the characteristics of a newly appointed CEO. Neither the origins and generation (age) nor the gender of a CEO influence share prices. The relationship between the educational background of a CEO and shareholders’ reactions is mixed. Furthermore, the appointment of an inexperienced CEO seems to be preferred by investors.

Research limitations/implications

The study is restricted by certain limitations related to the adopted measures, the single-market research, data gaps and the selection of variables for regression analysis. A further cross-country study including Central and Eastern Europe and/or the transition economies of the Baltic Region is recommended. The relationship between the operating performance of a firm and its internal control mechanisms could be explored.

Practical implications

The findings might influence the decisions made by company owners and supervisory boards when appointing top executives, and might contribute to a better understanding of how CEO appointments can affect shareholder value creation. The results also provide important guidelines for institutions that oversee the financial system.

Originality/value

The findings of this study are expected to the findings are expected to contribute to the literature on the empirical analysis of the shareholder wealth effect, on signalling theory, on the phenomenon of information asymmetry and on corporate governance. The study covers a full economic cycle of the capital market, including the financial crisis and financial bubbles, and it fills a gap in the research regarding emerging markets and transition economies in Europe.

Details

Baltic Journal of Management, vol. 13 no. 4
Type: Research Article
ISSN: 1746-5265

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Article
Publication date: 18 October 2011

Elisabete Simões Vieira

The purpose of this paper is to examine the effect of investor sentiment (ISENT) on the market reaction to dividend change announcements.

Abstract

Purpose

The purpose of this paper is to examine the effect of investor sentiment (ISENT) on the market reaction to dividend change announcements.

Design/methodology/approach

The author used the European Economic Sentiment Indicator data, from Directorate General for Economic and Financial Affairs, as a proxy for ISENT and focus on the market reaction to dividend change announcements, using panel data methodology.

Findings

Using data from three European markets, the results indicate that ISENT has some influence on the market reaction to dividend change announcements, for two of the three analysed markets. Globally, no evidence was found of ISENT influencing the market reaction to dividend change announcements for the Portuguese market. However, evidence was found that the positive share price reaction to dividend increases enlarges with sentiment, in the case of the UK markets, whereas the negative share price reaction to dividend decreases reduces with sentiment, in the French market.

Research limitations/implications

The author had no access to dividend forecasts, so, the findings are based on naïve dividend changes and not unexpected change dividends.

Originality/value

This paper offers some insights on the effect of ISENT on the market reaction to firms' news, a strand of finance that is scarcely developed and contributes to the analysis of European markets that are in need of research. To the best of the author's knowledge, this is the first study to analyse the effect of ISENT on the market reaction to dividend news, in the context of European markets.

Details

Managerial Finance, vol. 37 no. 12
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 6 August 2018

Nicolas Hardy, Nicolas S. Magner, Jaime Lavin, Rodrigo A. Cardenas and Mauricio Jara-Bertin

The purpose of this paper is to provide evidence about the effects of the MILA agreement in terms of improving financial market efficiency.

Abstract

Purpose

The purpose of this paper is to provide evidence about the effects of the MILA agreement in terms of improving financial market efficiency.

Design/methodology/approach

The authors measure efficiency by studying the stock reaction to earnings announcements using a conditional heteroscedasticity generalized autoregressive conditional heteroscedasticity-adjusted market model and the most commonly implemented event study tests for 3,399 events across four countries in the Latin American Integrated Market (MILA).

Findings

Contrary to expectations, the results show that the MILA agreement has isolated gains in terms of reaction to corporate earnings announcements, which translates into partial improvements in market efficiency. However, the evidence indicates that the MILA agreement favored cointegration, which is in line with other studies.

Practical implications

This paper provides evidence for policymakers and regulators that a stock market agreement is a condition that promotes market cointegration, but it is not an element that in itself ensures an improvement in market efficiency. To achieve greater MILA benefits, regulatory and market-level changes are required.

Originality/value

This is the first study that analyses the effect of a stock market agreement on the efficiency of markets, expanding on what has been studied in the finance literature regarding the influence of these agreements on cointegration.

Propósito

Esta investigación entrega evidencia sobre los efectos del acuerdo MILA respecto a mejoras en la eficiencia de los mercados accionarios involucrados.

Diseño/metodología/enfoque

Medimos eficiencia estudiando la reacción de los mercados accionarios tras anuncios de resultados utilizando un modelo de mercado ajustado por heteroscedasticidad condicional (GARCH). Además, consideramos las pruebas de estudios de evento más utilizadas en la literatura para 3,399 eventos en los 4 países involucrados en el acuerdo MILA.

Resultados

Contrario a lo esperado, los resultados muestran que el acuerdo MILA genera aumentos marginales en la reacción frente a anuncios corporativos, lo cual se traduce en mejoras parciales de la eficiencia de mercados accionarios. Sin embargo, la evidencia muestra que el MILA sí favorece a la cointegración, lo cual va en línea con estudios previos.

Implicancias prácticas

Esta investigación entrega evidencia para reguladores de que un acuerdo de integración bursátil promueve cointegración entre mercados, pero no es un elemento que por sí solo asegure una mejora en eficiencia. Para alcanzar mayores beneficios del acuerdo MILA, se requieren cambios adicionales a nivel de mercado accionario y de regulación.

Originalidad/valor

Este es el primer estudio que analiza el efecto de un acuerdo de integración bursátil en la eficiencia de los mercados accionarios, expandiendo lo que ha sido ya encontrado en la literatura financiera respecto a la influencia de estos acuerdos en cointegración.

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Article
Publication date: 30 March 2012

Dmitri G. Markovitch and Joel H. Steckel

The purpose of this paper is to examine the correspondence between the stock market's immediate reactions to new product introduction announcements and those products'…

Abstract

Purpose

The purpose of this paper is to examine the correspondence between the stock market's immediate reactions to new product introduction announcements and those products' subsequent commercial performance.

Design/methodology/approach

The main study uses standard event study methodology.

Findings

The paper finds that the stock market reacts “incorrectly” to announcements of new product introductions more often than one would expect from a market that is assumed to be highly efficient.

Research limitations/implications

The paper's findings raise questions about the appropriateness of using daily stock returns to assess the profitability of marketing actions with highly uncertain outcomes.

Originality/value

Event studies of stock prices have been a popular method to assess the profit impact of marketing actions in a timely manner; yet, there has been surprisingly little research addressing the stock market's ability to react immediately to firm actions in a manner consistent with how effective the actions actually turn out to be. The authors' intended contribution is to guide marketing researchers investigating determinants of firm profitability.

Details

European Journal of Marketing, vol. 46 no. 3/4
Type: Research Article
ISSN: 0309-0566

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Article
Publication date: 2 February 2021

Ali Sheikhbahaei and Syed Shams

This paper investigates the relationship between a firm's susceptibility to a hostile takeover and investors' reactions to a seasoned equity offering (SEO).

Abstract

Purpose

This paper investigates the relationship between a firm's susceptibility to a hostile takeover and investors' reactions to a seasoned equity offering (SEO).

Design/methodology/approach

The study applies ordinary least squares (OLS) with fixed effects regression analyses to a sample of 2,517 observations from US listed companies. Event study methodology was employed to capture market reactions to the announcement of newly issued stocks. To achieve cross-sectional analyses, time variations in takeover laws allowed us to perform the desired tests across two decades of data.

Findings

The results suggest that investors react positively to the announcement of an equity offering when the threat of hostile takeover is higher. The magnitude of positive stock market reactions varies over two decades due to time series variations in takeover laws. Furthermore, the findings show that a higher hostile takeover index (HTI) score reduces investors' concerns about the inefficient usage of proceeds in acquisitions.

Practical implications

The results demonstrate that the corporate takeover legal environment provides an important external governance mechanism through which investors' confidence increases during an SEO event. The study's empirical evidence implies that the extent of external disciplinary mechanism plays a significant role in reducing investors' uncertainty about the misuse of raised capital.

Originality/value

The exogenous fast-evolving legal environment surrounding the takeover market in the United Status allowed our study to bypass the endogeneity concerns in measuring governance strength. From the review of prior literature, this paper appears to be the first to use HTI scores to examine investors' reactions to a corporate announcement.

Details

International Journal of Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1743-9132

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