Search results

1 – 10 of 539
Article
Publication date: 17 October 2022

Xinmin Tian, Zhiqiang Zhang, Cheng Zhang and Mingyu Gao

Considering the role of analysts in disseminating information, the paper explains the idiosyncratic volatility puzzle of China's stock market. As the largest developing country…

Abstract

Purpose

Considering the role of analysts in disseminating information, the paper explains the idiosyncratic volatility puzzle of China's stock market. As the largest developing country, China's research can provide meaningful reference for the research of financial markets in other new countries.

Design/methodology/approach

From the perspective of behavior, establishing a direct link between individual investor attention and stock price overvaluation.

Findings

The authors find that there is a significant idiosyncratic volatility puzzle in China's stock market. Due to the role of mispricing, individual investor attention significantly enhances the idiosyncratic volatility effect, that is, as individual investor attention increases, the greater the idiosyncratic volatility, the lower the expected return. Attention can explain the idiosyncratic volatility puzzle in China's stock market. In addition, due to the role of information production and dissemination, securities analysts can reduce the degree of market information asymmetry and enhance the transparency of market information.

Originality/value

China is the second largest economy in the world, and few scholars analyze it from the perspective of investors' attention. The authors believe this paper has the potential in contributing to the academia.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 31 October 2023

Kyungeun Kwon, Mi Zhou, Tawei Wang, Xu Cheng and Zhilei Qiao

Both the SEC (Securities and Exchange Commission) and the popular press have routinely criticized firms for the complexity of their financial disclosures. This study aims to…

Abstract

Purpose

Both the SEC (Securities and Exchange Commission) and the popular press have routinely criticized firms for the complexity of their financial disclosures. This study aims to investigate how financial analysts respond to the tone complexity of firm disclosures.

Design/methodology/approach

Using approximately 20,000 earnings conference call transcripts of S&P 1,500 firms between 2005 and 2015, the authors first calculate the abnormal negative tone, the measure of tone complexity; then use such tone measure in econometric models to examine analyst forecast behavior. The authors also test the robustness of the results under different model specifications, tone word lists and alternative tone measure calculations.

Findings

Consistent with the notion that analysts respond to the information demand from investors and incur more costs and effort to analyze firm disclosure when the tone is more complex, the authors find that higher tone complexity is positively and significantly associated with more analyst following, longer report duration, more forecast revisions, larger forecast error and larger forecast dispersion. In addition, the authors find that tone complexity has a long-term impact on analyst following but has a limited long-term impact on analyst report duration, analyst revision, forecast error and dispersion.

Originality/value

This study complements existing literature by highlighting the information role of financial analysts and by providing evidence that analysts incorporate the management tone disclosed during conference calls to adjust their forecasting behaviors. The results can be used by policymakers as evidence and support for further improving firm communication from a new dimension of disclosure tone.

Details

Asian Review of Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 19 September 2023

Pamela Fae Kent, Richard Kent and Michael Killey

This study aims to provide insights into US and Australian analysts' views regarding the relative importance of disclosing the direct method (DM) or indirect method (IM) statement…

Abstract

Purpose

This study aims to provide insights into US and Australian analysts' views regarding the relative importance of disclosing the direct method (DM) or indirect method (IM) statement of cash flows and forecasting firm performance.

Design/methodology/approach

Evidence is collected from responses to 104 surveys and 52 interviews completed by US and Australian analysts from 2017 to 2022. The survey and interview questions are developed with reference to the literature.

Findings

US and Australian analysts believe that the DM format provides incremental benefits compared to the IM for (1) confirming the reliability of earnings; (2) improving earnings confidence; (3) more accurate ex ante forecasts of operating cash flow and earnings; and (4) identifying opportunistic accruals manipulation. Analysts view that DM disclosure can lower firm-level cost of equity, although US interviewees more uniformly expect lower costs of equity under DM disclosure when firms yield low earnings quality. DM disclosure is also more important during unstable economic periods, as proxied by COVID-19.

Originality/value

Limited research currently exists regarding disclosure of the DM or IM and its impact on analysts' forecasting accuracy, earnings quality, economic uncertainty and cost of equity. Previous research has relied on archival research to examine differences between the DM and IM methods and are limited by data availability. Our findings are particularly relevant to the US market with few US firms reporting the DM format.

Details

Journal of Accounting Literature, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0737-4607

Keywords

Open Access
Article
Publication date: 2 February 2024

Sumathi Annamalai and Aditi Vasunandan

With Industry 4.0 and the extensive rise of smart technologies, we are seeing remarkable transformations in work practices and workplaces. Scholars report the phenomenal progress…

Abstract

Purpose

With Industry 4.0 and the extensive rise of smart technologies, we are seeing remarkable transformations in work practices and workplaces. Scholars report the phenomenal progress of smart technologies. At the same time, we can hear the rhetoric emphasising their potential threats. This study focusses on how and where intelligent machines are leveraged in the workplace, how humans co-working with intelligent machines are affected and what they believe can be done to mitigate the risks of the increased use of intelligent machines.

Design/methodology/approach

We conducted in-depth interviews with 15 respondents working in various leadership capacities associated with intelligent machines and technologies. Using NVivo, we coded and churned out the themes from the qualitative data collected.

Findings

This study shows how intelligent machines are leveraged across different industries, ranging from chatbots, intelligent sensors, cognitive systems and computer vision to the replica of the entire human being. They are used end-to-end in the value chain, increasing productivity, complementing human workers’ skillsets and augmenting decisions made by human workers. Human workers experience a blend of positive and negative emotions whilst co-working with intelligent machines, which influences their job satisfaction level. Organisations adopt several anticipatory strategies, like transforming into a learning organisation, identifying futuristic technologies and upskilling their human workers, regularly conducting social learning events and designing accelerated career paths to embrace intelligent technologies.

Originality/value

This study seeks to understand the emotional and practical implications of the use of intelligent machines by humans and how both entities can integrate and complement each other. These insights can help organisations and employees understand what future workplaces and practices will look like and how to remain relevant in this transformation.

Details

Central European Management Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2658-0845

Keywords

Article
Publication date: 2 January 2024

Xunzhuo Xi, Can Chen, Rong Huang and Feng Tang

This study aims to examine whether Chinese firms increase their concerns about analysts’ earnings forecasts following the split-share structure reform (SSR) in 2005, which removed…

Abstract

Purpose

This study aims to examine whether Chinese firms increase their concerns about analysts’ earnings forecasts following the split-share structure reform (SSR) in 2005, which removed trading restrictions on approximately 70% of the shares of listed firms.

Design/methodology/approach

Using data from 2002 to 2019, the authors empirically test the association between meeting or beating analysts’ earnings expectations and the implementation of SSR.

Findings

The authors find that firms are more inclined to meet analysts’ earnings expectations after the introduction of SSR. Further analysis shows that firms guide analysts to walk their forecasts down by manipulating third-quarter earnings, suggesting enhanced value relevance between analysts’ forecasts and third-quarter earnings management in the postreform period.

Practical implications

The findings reveal an undesirable side effect of SSR and suggest that policymakers and regulators should consider and carefully manage the complex relationships between firms and analysts.

Originality/value

In contrast to prior studies that predominantly focus on the positive effects of the reform, this study reveals the side effects of SSR and provides new evidence on the mechanisms of meeting or beating analysts’ earnings expectations.

Details

International Journal of Accounting & Information Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1834-7649

Keywords

Article
Publication date: 24 October 2023

Ying Zhao, Hongdi Xu, Guangyan Liu, Yanting Zhou and Yan Wang

Digital transformation and innovation-driven development have become an international consensus. The purpose of this paper is to examine the effects of relationships, mechanisms…

Abstract

Purpose

Digital transformation and innovation-driven development have become an international consensus. The purpose of this paper is to examine the effects of relationships, mechanisms and economic consequences between digital transformation and enterprise innovation quality in order to provide a benchmark for developing countries to implement digital transformation strategies and innovation-driven strategies and provide a major support for economic recovery in the post-coronavirus disease 2019 (COVID-19) era.

Design/methodology/approach

Using microdata from A-share listed enterprises in Shanghai and Shenzhen from 2010 to 2021, this study examines the relationship between digital transformation and enterprise innovation quality and further reveals the internal logic and economic consequences of digital transformation to improve enterprise innovation quality through the mediating effect and moderating effect models.

Findings

The results demonstrate that digital transformation is beneficial for improving enterprise innovation quality. The heterogeneity test demonstrates that digital transformation has a larger effect on improving enterprise innovation quality in non-state-owned enterprises and eastern enterprises in China. The mechanism test demonstrates that digital transformation can improve enterprise innovation quality by improving internal control quality and analyst attention. Furthermore, with the increase in enterprise innovation inputs, digital transformation plays a significantly stronger role in improving enterprise innovation quality. The extended analysis demonstrates that digital transformation can significantly improve enterprise financial performance by improving innovation quality.

Research limitations/implications

First, the construction of the core explanatory variable digital transformation index in this study is based on the Python data analysis software, which calculates the frequency of digital transformation in the text of the business situation analysis portion of the annual report of the listed companies and then obtains the degree of digital transformation of the company in this year. There may be some deviation from the degree of digital transformation in the actual production and operation of enterprises. Second, in addition to internal control quality and analyst attention, are there other mediating mechanisms for the impact of digital transformation on the quality of enterprise innovation? Third, whether the moderating effect of innovation input on digital transformation and innovation quality is related to human capital factors of the research and development (R&D) team, such as the technical background of R&D personnel, etc.

Originality/value

This study enriches the relevant theories of digital transformation and broadens the research boundaries of digital transformation and enterprise innovation. This study's result provides an empirical basis for enterprises to improve enterprise innovation quality and financial performance from the perspective of digital transformation at the micro level and points out specific practical directions, combining theory with practice.

Details

European Journal of Innovation Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1460-1060

Keywords

Article
Publication date: 3 October 2023

Ruwan Adikaram and Alex Holcomb

In this study, the authors investigate if analysts, as knowledgeable information intermediaries, can correctly identify bank corporate social responsibility (CSR) activities and…

Abstract

Purpose

In this study, the authors investigate if analysts, as knowledgeable information intermediaries, can correctly identify bank corporate social responsibility (CSR) activities and can reliably transmit that information to investors. Hence, the authors specifically explore if analysts perceive and behave differentially in the presence of genuine bank CSR activities (strengths). The authors also analyze if financial markets differentially assess bank CSR strengths. The authors further explore the viability of focusing on analyst and financial markets to validate genuine bank CSR strengths.

Design/methodology/approach

The authors use COMPUSTAT and CRSP for firm and financial data, I/B/E/S for analyst reporting data and MCSI Research KLD for CSR data. The sample consists of 329 distinct banks and 2,525 bank-year observations from 2003 to 2016. The primary CSR score is the total number of CSR strengths less the total number of CSR concerns, across six of the seven dimensions for each firm in each year of the sample (Adjusted CSR Score). In addition, the authors estimate all the analyses with dis-aggregated measures of total CSR strengths and total CSR concerns (Adjusted Total Strength Score).

Findings

The authors find that analysts correctly distinguish and construe bank CSR strengths from CSR concerns. Specifically, bank CSR strengths increase analyst following and forecast accuracy, while decreasing analyst forecast dispersion. The authors further find that bank CSR strengths increase bank market returns. These results are reversed for bank CSR concerns. Additionally, the authors demonstrate that this method using knowledgeable intermediaries can help validate bank CSR strengths.

Research limitations/implications

The sample is limited to US banks and financial markets. The regulatory and information environment is likely to be different from global or emerging markets. However, since banks in many countries aspire to emulate the US banks, these results would be a precursor of banking sectors conditions in emerging markets. Additionally, the availability of data limits the sample to a period that ends in 2016. To the extent that the importance of ESG and CSR concerns has increased in the intervening time, the results may not accurately reflect the current state of the market.

Practical implications

This investigation benefits researchers, customers, banking executives, regulators and activist groups. First, the authors show that in addition to customers, analysts and the financial markets appreciate bank CSR strengths. Second, despite sophisticated financial reporting by banks, analysts correctly distinguish and construe bank CSR strengths. Third, the authors demonstrate a method for bank marketing researchers to validate genuine bank CSR activity, as well as provide additional support for customer related bank CSR outcomes. Fourth, the findings highlight the importance for banks to have high-quality CSR reporting. This might be especially helpful to a bank rebuilding its reputation after a CSR failure. Finally, this investigation using US banks could serve as a precursor for future bank CSR research and help develop CSR reporting guidelines for banks in emerging economies.

Social implications

This investigation benefits researchers, customers, banking executives, regulators and activist groups.

Originality/value

This investigation benefits researchers, customers, banking executives, regulators and activist groups. First, the authors show that in addition to customers, analysts and the financial market appreciates bank CSR strengths. Second, despite sophisticated financial reporting by banks, analysts correctly distinguish and construe bank CSR strengths. Third, the authors demonstrate a method for bank marketing researchers to validate genuine bank CSR activity, as well as provide additional support for customer related bank CSR outcomes. Fourth, the findings highlight the importance for banks to have high-quality CSR reporting. This might be especially helpful to a bank rebuilding its reputation after a CSR failure. Finally, this investigation using US banks could serve as a precursor for future bank CSR research and help develop CSR reporting guidelines for banks in emerging economies.

Article
Publication date: 21 December 2023

Steven D. Silver and Marko Raseta

The intention of the empirics is to contribute to the general understanding of investor responses to market price shocks. The authors review assumptions about investor behavior in…

Abstract

Purpose

The intention of the empirics is to contribute to the general understanding of investor responses to market price shocks. The authors review assumptions about investor behavior in response to price shocks and investigate alternative rebalancing heuristics.

Design/methodology/approach

The authors use market data over 40 years to define market shocks. Portfolio rebalancing implements constrained Markowitz mean-variance (MV) heuristics.

Findings

Momentum rebalancing in portfolio management outperforms contrarian rebalancing in the study interval. Sensitivity analysis by decade, sector constraints and proportion of security holdings bought or sold continue to support momentum rebalancing.

Research limitations/implications

The results are consistent with under-responding to price shocks at consensus levels in financial markets. The theoretical background provides a basis for experimental lab studies of shocks of different magnitudes under conditions in which participants have information on the levels of other participants and a condition in which they can only observe their previous estimates.

Practical implications

Managing portfolios in the face of price disturbances of different magnitudes is informed by empirical studies and their implications for investor behavior.

Originality/value

This is the first study the authors can locate that uses market data with alternative rebalancing heuristics to estimate price returns from the respective heuristics over a time interval of 40 years. The authors support the results with sensitivity estimates and consider implications for the underlying agent heuristics in light of background studies.

Details

Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 5 October 2023

Kléber Formiga Miranda and Márcio André Veras Machado

This article analyzes the hypothesis that analysts issue higher long-term earnings growth (LTG) forecasts following a market-wide investor sentiment.

Abstract

Purpose

This article analyzes the hypothesis that analysts issue higher long-term earnings growth (LTG) forecasts following a market-wide investor sentiment.

Design/methodology/approach

This study analyzed 193 publicly traded Brazilian firms listed on B3 (Brasil, Bolsa, Balcão), totaling 2,291 observations. To address the potential selection bias resulting from analysts' preference for more liquid firms, this study used the Heckman model in the analysis with samples with only one analyst and the entire sample. The study also applied other robustness tests to ensure the reliability of the findings.

Findings

The results suggest that market-wide investor sentiment influences LTG when the firm's stocks are difficult to value. Market optimism did not reflect five-year profit growth after the forecast issue, suggesting lower forecast accuracy during high investor sentiment values.

Practical implications

Volatile-earnings firms have relevant implications in LTG forecasts during bullish moments. According to the study’s evidence, investors' decisions and policymakers' and regulators' rules should consider analysts' expertise as independent information when considering LTG as input for valuation models, even under market optimism.

Originality/value

This paper contributes to the literature on the influence of investor sentiment on analysts' forecasts by incorporating two crucial elements in the discussion: the scenario free from herding behavior, as usually only one analyst issues LGT forecast for Brazilian firms, and the analysis of research hypotheses incorporates the difficulty of pricing a firm given the uncertainty of its earnings as an explanation to bullish forecast.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 29 March 2024

Jing Jiang, Huijuan Dong, Yanan Dong, Yuan Yuan and Xingyong Tu

Although employee overqualification is a common occurrence in the workplace, most research has focused on overqualification at the individual level rather than at the team level…

Abstract

Purpose

Although employee overqualification is a common occurrence in the workplace, most research has focused on overqualification at the individual level rather than at the team level. Drawing on social cognitive theory, this study aimed to uncover how leaders' perception of team overqualification influenced their cognition and follow-up behavior.

Design/methodology/approach

We performed two studies to test our model. In Study 1, we conducted an experiment to examine the causal relationship between leaders' perception of team overqualification and leadership self-efficacy. In Study 2, a two-wave field study was conducted to test the overall model based on a sample obtained from a steel company in China.

Findings

We found that leaders' perception of team overqualification reduced leadership self-efficacy, which in turn hindered leaders' empowering behavior. In addition, leaders' social face consciousness strengthened the negative relationship between leaders' perception of team overqualification and leadership self-efficacy, such that the relationship was more negative when leaders' social face consciousness was high rather than low.

Originality/value

Our study contributes to the literature on employee overqualification and its effects on leaders through investigation at the team level to show how leaders respond to overqualified teams.

Details

Journal of Managerial Psychology, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0268-3946

Keywords

1 – 10 of 539