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1 – 10 of 329As 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.
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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.
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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.
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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.
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Daniel Werner Lima Souza de Almeida, Tabajara Pimenta Júnior, Luiz Eduardo Gaio and Fabiano Guasti Lima
This study aims to evaluate the presence of abnormal returns due to stock splits or reverse stock splits in the Brazilian capital market context.
Abstract
Purpose
This study aims to evaluate the presence of abnormal returns due to stock splits or reverse stock splits in the Brazilian capital market context.
Design/methodology/approach
The event study technique was used on data from 518 events that occurred in a 30-year period (1987–2016), comprising 167 stock splits and 351 reverse stock splits.
Findings
The results revealed the occurrence of abnormal returns around the time the shares began trading stock splits or reverse stock splits at a statistical significance level of 5%. The main conclusion is that stock split and reverse stock split operations represent opportunities for extraordinary gains and may serve as a reference for investment strategies in the Brazilian stock market.
Originality/value
This study innovates by including reverse stock splits, as the existing literature focuses on stock splits, and by testing two distinct “zero” dates that of the ordinary general meeting that approved the share alteration and the “ex” date of the alteration, when the shares were effectively traded, reverse split or split.
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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.
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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.
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