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1 – 10 of over 71000Howard Chan, Robert Faff, Yee Kee Ho and Alan Ramsay
This study aims to test the effects of forecast specificity on the asymmetric short‐window share market response to management earnings forecasts (MEF).
Abstract
Purpose
This study aims to test the effects of forecast specificity on the asymmetric short‐window share market response to management earnings forecasts (MEF).
Design/methodology/approach
The paper examines a large sample of hand‐checked Australian data over the period 1994 to 2001. Using an analyst news benchmark, it estimates a series of regressions to investigate whether the short‐term impact from bad news announcements is greater in magnitude than from good news announcements and whether this differs between routine and non‐routine MEFs. Additionally, it examines whether (after controlling for news content of MEF) there is a differential market impact conditional on specificity: minimum versus maximum versus range versus point.
Findings
The results indicate that an asymmetric response is evident for the overall sample and a sub‐set of non‐routine forecasts. Contrary to predictions, the results show that forecast specificity, minimum, maximum, range and point MEFs make no additional contribution to the differences in the market reaction to bad or good news.
Originality/value
The study extends the research investigating the short‐run market impact of MEFs. The main element of innovation derives from the interaction between specificity and news content, as well as distinguishing between routine versus non‐routine cases. Notably, it found little support for the view that more specific forecasts elicit greater market responses. What the results do suggest is that managers appear to choose the form of the forecast to suit the news being delivered. In particular, bad news delivered in a minimum forecast seems to be ignored by the market.
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Razaz Felimban, Christos Floros and Ann-Ngoc Nguyen
The purpose of this paper is to investigate the stock market response to dividend announcements in high growth emerging markets of Gulf countries.
Abstract
Purpose
The purpose of this paper is to investigate the stock market response to dividend announcements in high growth emerging markets of Gulf countries.
Design/methodology/approach
The sample includes 1,092 dividend announcements from 299 listed firms over the period 2010-2015.
Findings
In the environment where there is an absence of capital gain and income tax, the authors find some evidence for the stock price reaction that partly supports the signaling hypothesis. The findings show that the Gulf Cooperation Council (GCC) market is inefficient because of the leakage information before the announcement in bad news, and the delay of share price adjustment in good news. In addition, the authors report significant trading volume (TV) reaction in all the three announcements clusters, where dividends increase, decrease, and are constant, lending support to the hypothesis that the dividend change announcements have an impact on the TV response due to different investors’ preferences.
Originality/value
This is the first empirical paper on market reaction in share price and TV around dividend announcement using data for the majority of GCC countries.
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Pornanong Budsaratragoon, Suntharee Lhaopadchan and David Hillier
We investigate whether limited investor attention is a factor in the effectiveness of institutional shareholder activism. Prior research has shown that an inability of market…
Abstract
We investigate whether limited investor attention is a factor in the effectiveness of institutional shareholder activism. Prior research has shown that an inability of market participants to allocate sufficient intellectual effort to the investment decision can have an impact on market price and volume behavior. We extend this research in an applied setting by considering the effectiveness of the California Public Employees’ Retirement System (CalPERS) focus list, whose aim is to improve the performance and corporate governance of target firms. We find that the share price and volume response to being included in the focus list is a function of the investor attention in a stock, which in turn has an impact on the subsequent managerial response. This suggests that when attention is a scarce cognitive resource, the proactive exploitation of news signals can be an efficient activism strategy.
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Carl Pacini, William Hillison and Bradley K. Hobbs
Recent research has examined the effect of the Financial Services Modernization Act of 1999, more commonly known as the Gramm–Leach–Bliley Act (GLB), on the market value of U.S…
Abstract
Recent research has examined the effect of the Financial Services Modernization Act of 1999, more commonly known as the Gramm–Leach–Bliley Act (GLB), on the market value of U.S. commercial banks, life insurers, property-liability insurers, thrifts, finance companies, and securities firms. This study fills a gap in our understanding of the Act by measuring the price and trading volume effects of the GLB on U.S.-listed foreign banks. A primary contribution of this study is to examine the role, if any, of two corporate governance perspectives, the stakeholder (code law), and shareholder (common law) models, in a cross-sectional analysis of foreign bank market reaction to the GLB.
Using a generalized least squares (GLS) portfolio approach, Corrado's rank statistic, and confirmed by the traditional market model approach, we find significant negative share price reactions to certain legislative announcements surrounding the passage of the GLB. Trading volume reactions corroborate the significant share price responses. In general, our results indicate that investors in foreign banks reacted negatively to key legislative action. In a cross-sectional analysis, younger, higher-risk foreign banks with less concentrated ownership and more subordinated debt from countries with higher quality accounting standards appear to have more positive (or less negative) share price reactions.
Guoping Liu and Jerry Sun
The purpose of this study is to examines whether clients’ share prices responded to three events, including the Securities and Exchange Commission (SEC) launch of administrative…
Abstract
Purpose
The purpose of this study is to examines whether clients’ share prices responded to three events, including the Securities and Exchange Commission (SEC) launch of administrative proceedings against five Chinese accounting firms on December 3, 2012, for their failure to hand over audit work papers due to conflict of jurisdiction; the issuance of SEC Administrative Law Judge Elliot’s ruling on January 22, 2014; and the settlement of the administrative proceedings on February 6, 2015.
Design/methodology/approach
This study uses the Schipper and Thompson approach.
Findings
It is found that share prices responded negatively around December 3, 2012, for USA-listed Chinese companies who were audited by Chinese auditors.
Originality/value
This study provides evidence on how share prices reacted to SEC enforcement actions against an affair of non-audit failure.
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Dhiaa Shamki and Azhar Abdul Rahman
The paper aims to examine the influence of financial disclosure (FD) level and time on the value relevance of earnings, book value, and cash flows relative to three share price…
Abstract
Purpose
The paper aims to examine the influence of financial disclosure (FD) level and time on the value relevance of earnings, book value, and cash flows relative to three share price proxies, namely average annual share price, annual closing share price, and share price after a three-month period following the financial year-end for Jordanian companies.
Design/methodology/approach
The paper employs price model to examine the influence of FD level and time on the value relevance of three accounting variables relative to three share price proxies for 91 Jordanian companies (consisting of 5,460 observations) within 2004-2009.
Findings
Relative to three share price proxies, the findings proved that FD level and time have a significant influence on the value relevance of book value, but not for cash flows. Also, FD level and time have a significant influence on the value relevance of earnings relative to annual closing share price, while they are not relative to share price after a three-month period following the financial year-end. FD time has a significant influence on the value relevance of earnings relative to the average annual share price. Annual closing share price is the most reliable in indicating value relevance of accounting information.
Originality/value
The paper confirms that there is a shift away from earnings towards book value as the basis for firm valuation. Market participants might be able to conclude the firm value through the value relevance of accounting information influenced by company's FD.
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Kenneth Bartunek, Jeff Madura and Alan L. Tucker
Acquisitions of bankrupt firms can be beneficial because the bankrupt targets may be more receptive to acquisition offers for the purpose of survival, courts can override any…
Abstract
Acquisitions of bankrupt firms can be beneficial because the bankrupt targets may be more receptive to acquisition offers for the purpose of survival, courts can override any resistance that may occur, information on the target is disclosed within the formal reorganization plan, acquirers can accrue tax benefits, and acquirers may assume favorable debt contracts. However, two disadvantages of acquiring a bankrupt firm are higher costs of completing the conversion and the high degree of uncertainty about the target's future cash flows. Results of our analysis suggest that firms announcing acquisitions of bankrupt targets experience favorable wealth effects. Thus, the market appears to anticipate that the present value of future cash flows derived from the target will exceed the cost of the acquisition. Our analysis also found that acquisitions of bankrupt firms yield more favorable wealth effects than acquisitions of healthy firms. The acquisitions of bankrupt firms were especially well received by the market when the acquirer was the sole bidder and when the target's business was closely related to that of the acquirer.
Jocelyn D. Evans, Mark K. Pyles and Hyuntai Choo
The purpose of this paper is to analyze the role of large equity ownership by both institutions and outside block shareholders in monitoring the board of directors’ decision to…
Abstract
Purpose
The purpose of this paper is to analyze the role of large equity ownership by both institutions and outside block shareholders in monitoring the board of directors’ decision to initially adopt defense mechanisms and the subsequent capital market reaction to the adoption.
Design/methodology/approach
This paper employs an empirical methodology that controls for selection bias. Multiple regressions were employed to assess the relationship among the variables.
Findings
Stockholder wealth effects of poison pills are positively related to pressure‐resistant institutions, which is consistent with effective monitoring. The wealth effects of poison pills, however, are negatively related to pressure‐sensitive investors, consistent with passivity. No empirical relation was found between ownership structure and shareholder approved amendments such as classified boards and fair price amendments.
Research limitations/implications
This study was conducted as a large sample analysis over an earlier time period that was more applicable for evaluating anti‐takeover techniques.
Practical implications
The results are consistent with pressure‐resistant institutions actively monitoring to prevent unilaterally implemented defense mechanisms of all types, whereas pressure‐sensitive institutions appear to more readily accept poison pills.
Originality/value
These results suggest that failing to control for the type of outside investor may not clearly portray documented relations in other corporate governance studies.
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J. Dahyaa, A.A. Lonie and D.M. Power
Reviews previous research on share price response to annoucements of changes in top management and the accounting policies/reported earnings around such changes. Uses 1989‐1992 UK…
Abstract
Reviews previous research on share price response to annoucements of changes in top management and the accounting policies/reported earnings around such changes. Uses 1989‐1992 UK data for a sample of 420 announcements of changes in top management, divided into routine departures, non‐routine departures and appointments, to analyse share price reaction and accounting performance. Finds insignificant price reactions but identifies consistent patterns in operating profit in the years before and after the change, according to the type of change involved. Considers consistency with other research, the underlying reasons for the findings and the limitations of the study. Promises further research to explore changes in industry‐adjusted gearing, liquidity and activity ratios when senior executives come and go.
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Apostolos Dasilas, Katerina Lyroudi and Demetrios Ginoglou
The purpose of this paper is to empirically investigate stock price and trading volume reactions to simultaneous interim dividend and earnings announcements by the Greek firms…
Abstract
Purpose
The purpose of this paper is to empirically investigate stock price and trading volume reactions to simultaneous interim dividend and earnings announcements by the Greek firms listed on the Athens stock exchange (ASE).
Design/methodology/approach
Classical event study methodology was employed to examine the share price and trading volume reaction to interim dividends and earnings announcements.
Findings
Results confirm the signaling hypothesis which predicts positive market reaction to the joint dividend and earnings announcements. However, the magnitude of the price reaction initiated by the final dividend announcement seems to be higher than the one by the interim dividend announcement.
Research limitations/implications
The observations are not many, although the whole population was included, since there are no data available prior to 1998.
Practical implications
The findings are useful to researchers, practitioners and investors who have an interest in firms listed on the ASE for their proper strategic decision making.
Originality/value
For the first time, the stock price and trading volume behaviour of firms listed on the ASE around contemporaneous dividend and earnings announcement dates is examined.
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