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Book part
Publication date: 19 February 2024

Quoc Trung Tran

As a financial policy, dividend policy significantly affects firm value. This chapter analyzes how stock prices react to dividend decisions. First, a dividend payment is an…

Abstract

As a financial policy, dividend policy significantly affects firm value. This chapter analyzes how stock prices react to dividend decisions. First, a dividend payment is an extraction of value; therefore, stock price theoretically drops by the dividend amount on the ex-dividend day. In practice, the price drop and the dividend magnitude are not equal because of tax clientele, short-term trading, and market microstructure. Investors are indifferent in trading stocks before and after stocks go ex-dividend if they obtain equal marginal benefits from the two trading times. The difference in tax rates on dividends and capital gains leads to the gap between the price drop and the dividend amount. Moreover, if transaction costs are considerable, investors have high incentives to short-sell stocks until they cannot obtain more profits. The final outcome of this short-term trading is the difference between the price drop and the dividend amount. Furthermore, market microstructure factors such as limit orders, bid-ask spread, and price discreteness also create this gap. Second, dividend announcements convey valuable information to outsiders. When firms announce increases (decreases) in dividends, their stock prices tend to increase (decrease). Third, dividend policy is negatively related to stock price volatility. This negative relationship is explained by duration effect, rate of return effect, arbitrage realization effect, and information effect. Empirical evidence for this relationship is found in many countries. Finally, dividend smoothing is also considered as a signal about firms' future earnings. Consequently, firms with stable dividends have higher market value. In other words, dividend stability has a positive effect on stock prices.

Article
Publication date: 20 March 2023

Annu Kumari and Noopur Anand

Body positivity movement empowered plus-size women globally to speak up boldly about their clothing needs. Retailers cannot satisfy this group with some classic style offerings…

Abstract

Purpose

Body positivity movement empowered plus-size women globally to speak up boldly about their clothing needs. Retailers cannot satisfy this group with some classic style offerings anymore. By taking clue from existing literature, this study aims to identify clothing preferences and problems related to ready-made plus-size clothing in India. Although many past literature pointed out about poorly fitted and size unavailability issues worldwide, very few of them addressed about clothing style preferences.

Design/methodology/approach

A self-administered close-ended questionnaire was used to answer a set of objectives. A pilot study with 40 plus-size women was carried out to check the reliability and validity of the instrument. Four hundred subject's data were gathered from six Indian cities with a purpose of varied geographical importance. Statistical tests like binomial distribution was used to analyze fit-related problems of 12 bodily sites such as shoulder, upper arm, lower arm, bust, waist, stomach, abdomen, hip, thigh, lower leg, armhole and elbow, and frequency charts were used to examine Likert scale data of sizing problems. The choices of 12 clothing styles were mapped through four factors which affect the purchasing decision of a plus-size woman.

Findings

Poor-fitted clothes at 10 body sites out of the 12 reflected about the fit aspect of plus-size clothing in India. Findings associated to sizing issues like unavailability of trendy clothes in appropriate sizes, which also adorn Indian curvy figure, shows synonymy to the worldwide researcher's findings related to sizing chaos. Classic silhouettes like Straight Indian kurti, A-line dresses and regular-fit trousers were majorly preferred by women. Hiding body bulges was mostly preferred while purchasing loose-fitted garments, and fitted garments were preferred only if these suits to the curvy body proportion. Appropriate fit and size availability are always a prime requisite for this class of women.

Originality/value

The outcomes of research will help Indian retailers/manufacturers to update their patterns in order to provide desired fit. In this lacuna of standard size chart, the study will add value in the development of Indian plus-size women's size chart. The factor mapping with clothing preferences will be useful to reduce rejections and inventories.

Details

Journal of Fashion Marketing and Management: An International Journal, vol. 27 no. 6
Type: Research Article
ISSN: 1361-2026

Keywords

Open Access
Article
Publication date: 31 March 2023

Júlio Lobão

This paper aims to examine the extent of price clustering in a selection of Islamic stocks listed in Indonesia, Malaysia and Pakistan and also investigates the determinants of the…

Abstract

Purpose

This paper aims to examine the extent of price clustering in a selection of Islamic stocks listed in Indonesia, Malaysia and Pakistan and also investigates the determinants of the phenomenon at the firm level.

Design/methodology/approach

The author test the uniformity of price distribution in the selected securities. Then, the determinants of price clustering were investigated through multivariate analysis based on a binary logistic regression model. Following the arguments of Narayan et al. (2011), who emphasize the importance of considering firm heterogeneity when studying the phenomenon, the author conducts the empirical study at the firm level.

Findings

The evidence indicates that Islamic stocks show a mild level of price clustering. Only half of the stocks under analysis rejected the uniformity test in the distribution of prices. In these cases, investors exhibited a preference for prices ending at zero and five. The evidence does not confirm the cultural clustering theories. Price clustering is found to be positively associated with price level and relative bid-ask spread. Overall, the negotiation hypothesis, which predicts that investors prefer round prices to minimize the costs associated with negotiations, best explains most of our results.

Research limitations/implications

The existence of price clustering is difficult to reconcile with the prediction of the efficient market hypothesis that prices should follow a random walk. Moreover, the evidence indicates that Muslim investors share a preference for round prices in some settings, under the assumption that Islamic stocks are mostly traded by Muslim investors.

Originality/value

To the author’s best knowledge, this is the first study to address the subject of price clustering in Islamic stocks.

Details

Journal of Islamic Accounting and Business Research, vol. 15 no. 1
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 19 September 2023

Ahmed S. Baig, Muhammad Imran Chaudhry and R. Jared DeLisle

In this paper, the authors study the phenomenon of price clustering in the Pakistan Stock Exchange (PSX), a market viewed as one of the best-performing stock markets in the world…

Abstract

Purpose

In this paper, the authors study the phenomenon of price clustering in the Pakistan Stock Exchange (PSX), a market viewed as one of the best-performing stock markets in the world during 2014–2017. The authors study the effect of stock-level variables on price clustering and analyze the determinants of the cross-sectional patterns of price clustering in the PSX, in particular the causal link between price clustering and political instability.

Design/methodology/approach

The authors' dataset comprises daily observations on 100 PSX stocks spanning from January 1, 2009 to June 30, 2019. The authors use multivariate regression and spectral analysis to shed light on the dynamics of stock price clustering in PSX.

Findings

The authors document abnormally high levels of stock price clustering, particularly on integer increments, in PSX. The nature of stock price clustering in PSX is consistent with the negotiation hypothesis of Harris (1991). The levels of stock price clustering on PSX are persistent and contain a cyclical component. Furthermore, the authors find that political uncertainty in Pakistan is a significant contributor to the high levels of price clustering on PSX. The authors' conclusions are robust to alternative econometric specifications and different measures of price clustering and political uncertainty.

Practical implications

The authors' findings are of interest to investors and policymakers. Since price clustering decreases market quality and degrades the information content of stock prices, the authors' study shows that price efficiency in PSX has not improved despite major reforms over the last decade. One practical implication of the authors' results is that investors should be cautious while rebalancing portfolios around political events such as general elections because stock price clustering increases in the PSX during these periods. As a result, stock prices are likely to deviate from their intrinsic values.

Originality/value

Research on price clustering is limited to developed markets, and emerging/frontier markets have been largely overlooked. The phenomenon of price clustering in the PSX has yet to be studied, despite the relevance of the PSX for emerging/frontier market investors.

Details

Managerial Finance, vol. 50 no. 3
Type: Research Article
ISSN: 0307-4358

Keywords

Content available
Book part
Publication date: 19 February 2024

Quoc Trung Tran

Abstract

Details

Dividend Policy
Type: Book
ISBN: 978-1-83797-988-2

Article
Publication date: 6 January 2023

Soufiene Assidi

The purpose of this study is to examine whether voluntary disclosure (VD) and corporate governance (CG) are substitutes or complements to each other in improving firms’ value in a…

Abstract

Purpose

The purpose of this study is to examine whether voluntary disclosure (VD) and corporate governance (CG) are substitutes or complements to each other in improving firms’ value in a non-Anglo-Saxon setting, namely, France.

Design/methodology/approach

This study uses a sample of 990 listed firms in France from 2010 to 2020 to test the theoretical predictions. A random effect regression and two-stage least squares estimators are used to test the relationships. The results are largely robust across a number of econometric models that take into account diverse kinds of endogeneities.

Findings

This study reveals that VD and CG are positively associated with firm value. The finding also indicates that VD and CG work together as substitutes rather than as complements. Furthermore, the author’s evidence suggests that ownership structure and CEO characteristics are substitutive with VD in their effect on firm value. This evidence is consistent with the view that VD can add value to the firm but only under a number of conditions.

Practical implications

The results shed further light on how a firm could improve its value among stakeholders by designing VD and CG practices effectively. Specifically, as VD generally acts as a substitute to CG, to accomplish their optimal economic outcomes, firms need to be discerning in executing VD and governance practices. In addition, firms have strategic flexibility in constructing VD and governance practices contingent on their own settings. Policymakers, investors and managers could use these results to examine CG and VD practices in France following the implementation of new regulations.

Originality/value

This study extends and contributes to the mixed or equivocal evidence of the relationships between VD, CG mechanisms and firm value. It contributes to the extant literature by first providing additional evidence, which suggests value-increasing effects of better-governed and more transparent firms. Second, this study reconciles extant disparate results by suggesting that VD can substitute CG in improving firm value. These findings have profound implications for policymakers, investors and firm’s managers.

Details

Competitiveness Review: An International Business Journal , vol. 33 no. 6
Type: Research Article
ISSN: 1059-5422

Keywords

Article
Publication date: 18 July 2023

Ben Le, Nischala Reddy and Paula Hearn Moore

This study aims to examine the effects of market liquidity on earnings management (EM) of seasoned equity offering (SEO) firms considering external capital access.

Abstract

Purpose

This study aims to examine the effects of market liquidity on earnings management (EM) of seasoned equity offering (SEO) firms considering external capital access.

Design/methodology/approach

This study uses a panel data set of 158 Vietnamese SEO firms from 2007 to 2019. Both real and accrual EM measures are analysed. The study uses two proxies for market liquidity: stock turnover (the ratio of total shares traded over the year divided by total shares outstanding for the year) and high–low spread (estimated following Corwin and Schultz [2012]) and fixed-effects panel and two-stage least squares regression in the analysis.

Findings

Firms with high (low) market liquidity report low (high) EM, and the result is robust after controlling for endogeneity. The results hold for both real and accrual-based EM for both market liquidity proxies. However, the results are robust only for firms with low external capital access and non-state-owned companies. The authors find a negative market reaction to earnings manipulation.

Practical implications

This study’s findings help policymakers, investors and managers make better decisions regarding SEO firms and reduce the risk of inaccurate information due to EM.

Originality/value

Among the few studies that test the influence of market liquidity on EM, to the best of the authors’ knowledge, this study is the first to examine the effect of market liquidity on EM in the context of SEO firms considering the impact of capital access.

Details

Pacific Accounting Review, vol. 35 no. 5
Type: Research Article
ISSN: 0114-0582

Keywords

Article
Publication date: 20 December 2023

Allah Karam Salehi and Elham Soleimanizadeh

The abnormality of the month-of-the-year and Ramadan effects has extensively existed in the stock and other markets. The commercial strategy pattern and the computation of such…

Abstract

Purpose

The abnormality of the month-of-the-year and Ramadan effects has extensively existed in the stock and other markets. The commercial strategy pattern and the computation of such predictable patterns in the market allow investors to make money. By using anomalies such as the month-of-the-year and the Ramadan effects on earnings management (EM), it is possible to achieve such a goal. This study aims to investigate the month-of-the-year effect and the Ramadan effect on the relationship between accrual earnings management and real earnings management (AEM and REM, respectively) and liquidity in the Iranian capital market.

Design/methodology/approach

This empirical analysis comprises a panel data set of 80 listed firms (400 observations) on the Tehran Stock Exchange from 2016 to 2020.

Findings

The findings exhibit that when AEM and REM increase, information asymmetry also increases. The simultaneous increase of these variables leads to a decrease in stock liquidity. Furthermore, the results indicate that the month-of-the-year and Ramadan effects intensify the negative relationship between AEM and REM with stock liquidity. Therefore, EM is affected by the investor’s behavior in specific months.

Practical implications

Anomalies caused by the Ramadan effect and the month-of-the-year effect on reducing liquidity in the Iranian stock market were confirmed. Investors can use these anomalies to identify predictable patterns, exchange securities according to those patterns and earn abnormal returns.

Originality/value

To the best of the authors’ knowledge, this is the first study that empirically examined the simultaneous effect of Gregorian and Islamic calendar anomalies on the relationship between EM and liquidity, and while helping managers and other readers, it can be the basis for future research.

Details

Journal of Islamic Accounting and Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 25 April 2023

James Bentley and Zhangxin (Frank) Liu

The purpose of this study is to examine the impact of a recent innovation in the uranium market, the Global X Uranium Exchange-Traded Fund (URA), on the trading characteristics of…

593

Abstract

Purpose

The purpose of this study is to examine the impact of a recent innovation in the uranium market, the Global X Uranium Exchange-Traded Fund (URA), on the trading characteristics of constituent and non-constituent stocks.

Design/methodology/approach

The authors analyse bid-ask spread measures, relative effective spreads and adverse selection costs to assess changes in information asymmetry among uranium stocks. The authors also study abnormal returns to assess the impact of URA on the market.

Findings

Over a three-month period, following the introduction of URA, the authors find uranium stocks display decreased bid-ask spread measures, driven by reductions in information asymmetry. Relative effective spreads decrease by 36% after the introduction of URA, and adverse selection costs decline by 24% over the same period. Uranium stocks experience a significant positive abnormal return of 5.0% the day after the introduction of URA with subsequent price reversals. These suggest that the introduction of URA prompted uninformed traders to rebalance portfolios and migrate to the less information-sensitive Exchange-Traded Fund (ETF), causing temporary deviations in trading characteristics.

Originality/value

The authors demonstrate that the introduction of new financial securities to the market can have a significant impact on the trading characteristics of related equities. As URA is the only ETF in the uranium sector, the authors thereby avoid the influence of multiple ETFs that may have impacted previous studies.

Details

Journal of Accounting Literature, vol. 45 no. 3
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 9 January 2023

Leilei Shi, Xinshuai Guo, Andrea Fenu and Bing-Hong Wang

This paper applies a volume-price probability wave differential equation to propose a conceptual theory and has innovative behavioral interpretations of intraday dynamic market…

542

Abstract

Purpose

This paper applies a volume-price probability wave differential equation to propose a conceptual theory and has innovative behavioral interpretations of intraday dynamic market equilibrium price, in which traders' momentum, reversal and interactive behaviors play roles.

Design/methodology/approach

The authors select intraday cumulative trading volume distribution over price as revealed preferences. An equilibrium price is a price at which the corresponding cumulative trading volume achieves the maximum value. Based on the existence of the equilibrium in social finance, the authors propose a testable interacting traders' preference hypothesis without imposing the invariance criterion of rational choices. Interactively coherent preferences signify the choices subject to interactive invariance over price.

Findings

The authors find that interactive trading choices generate a constant frequency over price and intraday dynamic market equilibrium in a tug-of-war between momentum and reversal traders. The authors explain the market equilibrium through interactive, momentum and reversal traders. The intelligent interactive trading preferences are coherent and account for local dynamic market equilibrium, holistic dynamic market disequilibrium and the nonlinear and non-monotone V-shaped probability of selling over profit (BH curves).

Research limitations/implications

The authors will understand investors' behaviors and dynamic markets through more empirical execution in the future, suggesting a unified theory available in social finance.

Practical implications

The authors can apply the subjects' intelligent behaviors to artificial intelligence (AI), deep learning and financial technology.

Social implications

Understanding the behavior of interacting individuals or units will help social risk management beyond the frontiers of the financial market, such as governance in an organization, social violence in a country and COVID-19 pandemics worldwide.

Originality/value

It uncovers subjects' intelligent interactively trading behaviors.

Details

China Finance Review International, vol. 13 no. 4
Type: Research Article
ISSN: 2044-1398

Keywords

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