Overreaction or Underreaction to Intra-Industry Earnings Information Transfer: A Cross-Country Analysis

We apply the moderated confidence hypothesis (MCH) to investigate overreaction and underreaction in intra-industry earnings information transfers in an international setting. MCH predicts that late announcing firms’ investors overreact (underreact) to early announcing industry peers’ earnings news when early announcing peers’ earnings news is imprecise (precise) signals of late announcing firms’ earnings. Consistent with early announcing peers’ earnings news being imprecise signals of late announcing firms’ earnings in an international setting, we find that late announcing firms’ investors overreact to early announcing peers’ earnings news. The country-level information environment and culture shape the precision of peers’ earnings as signals of each other’s earnings and investor behaviors. Consistent with MCH, we find that late announcing firms’ investors are more likely to underreact in countries with a richer information environment, are more likely to overreact in countries with higher individualism and are less likely to overreact in countries with higher uncertainty avoidance.

Characteristics and Shareholder Wealth Effects of Mergers and Acquisitions Involving European Renewable Energy Companies

The present study documents a positive market reaction to mergers and acquisition (M&A) deals involving renewable energy companies. Acquirers record positive post-deal cumulative risk-adjusted returns upon taking over a renewable energy target, especially if the former also operates in the renewable energy sector. Such deals often involve purchases of majority equity stakes financed with acquirers’ stock rather than cash. Acquirers of renewable energy firms tend to be more profitable and cash-rich than their industry peers, yet they are less likely to be serial acquirers and channel cash reserves towards M&As. We evidence that the quality of corporate governance in the energy sector may play a substantial role in shaping the choice of targets; a director’s outside affiliations increase the likelihood of takeovers of non-energy firms, while the presence of outsiders on board appears to incentivize diversification into renewable energy. While acquisitions of renewable energy firms feature lower-than-average acquisition premia and generate positive short-term stock returns, they are found to exercise an overall negative short- and medium-term impact on the combined entities’ operating performance. Overall, capital markets appear to attach a sizeable premium to risky deals involving renewable energy firms, possibly in expectation of wealth accrual in the long term.

The bonding hypothesis revisited: evidence from US class action lawsuits

PurposeConsistent with an “absolute bonding hypothesis,” the benefits of listing on US exchanges experienced by cross-listed firms are accompanied by an increased risk of experiencing a spillover effect due to negative news within their industry. The purpose of this study is to test this form of the bonding hypothesis by analyzing the spillover effect to cross-listed firms when class action lawsuits are filed against their industry peers.Design/methodology/approachThe bonding hypothesis is tested by analyzing the spillover effect to non-sued cross-listed firms of class action lawsuits brought against US domestic firms in the same industry. The spillover effect is identified using cumulative abnormal returns around lawsuit filing dates from 1996 to 2020. A sample of matched non-sued cross-listed and domestic peer firms is evaluated in a cross-sectional analysis to identify country and firm-level characteristics that mitigate the negative spillover effect to cross-listed firms.FindingsWhile US firms realize significantly negative abnormal returns when class action suits are filed against their industry peers, the impact to cross-listed peers is statistically insignificant. In multivariate analyses, we show that the ability of cross-listed firms to avoid this negative spillover effect is stronger for firms with greater profitability that are headquartered in countries with better shareholder protections and governance characteristics.Originality/valueResults suggest that cross-listed firms may have a level of immunization from the negative industry spillover effect of class action lawsuits and, thus, exhibit only “partial bonding” to the US market.

A Multi-Level Analysis of Role Negotiation: A Bona Fide Group Approach to Work Team Socialization

This study used a multi-level analysis to gain a comprehensive understanding of work team socialization as a process that extends beyond work team and organizational boundaries. Findings, based on interviews of 27 IT employees organized into teams, reaffirmed some previous research on newcomer information seeking, but provided a more complex understanding of information seeking during socialization by identifying the importance of nexus or overlap with other internal and external groups. Nexus 1 included cross-functional meetings, as well as external workshops and conferences involving industry peers. Individual and group communication with members of internal and external groups helped employees negotiate and learn their roles as well as led to changes in their understanding of their team and organization. This multi-level analysis identified how individual, group, internal organizational communication, and extra-organizational communication all contribute to the process of socialization for team members.

Out of tune: Perceptions of, engagement with, and responses to mental health interventions by professional popular musicians—A scoping review

Professional popular musicians are at increased risk of psychological distress, substance use problems, and suicide, yet little evidence is available on effective psychotherapeutic practices to address these issues. This scoping review aims to understand how professional popular musicians perceive, engage with, and respond to mental health interventions. Four databases were searched, garnering a total of 310 articles. Of these, six met inclusion criteria. Four thematic categories were explored: (1) amenability of professional popular musicians to particular therapeutic approaches; (2) attribution of treatment outcomes to tailored approaches; (3) professional popular musicians’ perceived barriers to treatment; and (4) recommendations for treatment approaches. The scoping review supports the importance of considering the characteristics of professional popular musicians as a distinct group with unique well-being needs, challenges, and strengths. There is a clear preference for tailored, affordable, and accessible approaches that consider the uniquities of musicianship and the need to explore the role of nonclinical support, such as friends, family, and industry peers.

When an Industry Peer Is Accused of Financial Misconduct: Stigma versus Competition Effects on Non-accused Firms

Research on misconduct suggests that accusations against industry peers generate negative consequences for non-accused firms (a “stigma effect”). Yet, building on research on competitive dynamics, we infer that such accusations can benefit non-accused firms that compete with these peers (a “competition effect”). To reconcile these opposing perspectives, we posit that the negative stigma effect will increase with greater product market overlap between the non-accused firm and its accused peer, up to a point, beyond which the positive competition effect will counterbalance it. We further conjecture that the competition effect will be relatively more pronounced when the market classification used by investors for assessing the market overlap is more fine-grained. Accordingly, we suggest that more sophisticated investors, who rely on more fine-grained market classifications, increase their shareholdings in non-accused firms to a greater extent than less sophisticated investors as the market overlap between the non-accused firm and the accused peer increases. Using elaborate data on products and investments, we analyze investors’ shareholdings and stock market returns of non-accused firms in the U.S. software industry following accusations of financial misconduct by their industry peers, and we find support for our predictions. Our study elucidates the interplay between stigma and competition following misconduct by industry peers.

The Influence of Nation-Level Institutions on Acquisition Premiums: A Cross-Country Comparative Study

We build on neo-institutional theory to examine the manner in which nation-level institutions systematically affect domestic acquisitions—that is, acquisitions involving acquirers and targets from the same country. Specifically, we study in what way premiums are influenced through a set of cognitive, normative, and regulatory forces. In terms of cognitive pressures, we theorize that prior premium decisions of industry peers in the same country influence focal acquisition premiums, since prior premium decisions serve as reference frames for firms. In addition, we posit that normative forces in the form of the national cultural values of uncertainty avoidance, future orientation, and in-group collectivism affect bid premiums, as these factors influence the manner in which firms deal with the uncertainty, payoff time, and merger of groups inherent to acquisitions. Furthermore, we propose that a country’s regulatory pressures through its disclosure requirements influence premiums, since they reduce information asymmetries and affect a firm’s confidence in assessing its potential gains from acquisitions. Using a sample of domestic acquisitions, we find support for several of the hypotheses. Our work offers a cross-country comparative study of how nation-level institutions affect domestic bid premiums and makes theoretical contributions to acquisition premium research and institutional theory.

Peer Effects on Investment Decisions: Do Industry Leaders and Young Firms Behave Differently?

This study examines the influence of peer firms on a firm’s investment policy in Pakistan during the period 2001–2017. It also investigates the heterogeneity in peer effects by taking into account a firm’s age and its leadership role in the industry. The system-GMM estimation results suggest that peer firms significantly influence a firm’s investments on both tangible and intangible assets. Yet, peer effects are more pronounced for tangible investment. We also observe that young firms are more prone to imitate the investment decisions of their industry peers. However, the findings indicate that mimicking is not a tactical behaviour for industry leader firms. These findings have important implications for both the firm management and the owner community.

Incorporating Data Analytics in a Technical Tax Setting: A Case Using Excel and Tableau to Examine a Firm’s Schedule M-3 and Tax Risk

New tax accountants are expected to possess strong technical tax and data analytic skills. This case provides an opportunity to improve students’ corporate tax and accounting for income taxes knowledge and experience with professional tax workpapers. It also provides exposure to two powerful data analytic platforms, Tableau and Excel. Students must complete a set of tax workpapers including a Schedule M-3 reconciliation. Students begin to view tax through an analytical mindset, gaining familiarity with descriptive data for tax analyses. This case helps students calculate GAAP and cash effective tax rates, taxable income, and temporary and permanent book-tax differences and formulate a professional written communication. Students also complete tax workpapers; benchmark tax data across time and industry peers; clean, format, and combine data using Excel and Tableau; and analyze and visualize data using Tableau.