The January effect anomaly: effect on the returns-earnings association

2015 ◽  
Vol 30 (2) ◽  
pp. 114-146
Author(s):  
Kathryn E. Easterday
Keyword(s):  
Firm Value ◽  
Analytical Framework ◽  
January Effect ◽  
Accounting Earnings ◽  
Content Type ◽  
Quarterly Earnings ◽  
Market Inefficiency ◽  
Model Coefficient ◽  
Investor Trading ◽  
Pricing Anomaly

Purpose – The purpose of this paper is to examine the January effect, a well-documented capital markets pricing anomaly in which January return premiums are observed to be on average higher than in other months of the year. Extant literature focusses primarily on investor trading behaviors and incentives. This study is different in that it investigates the link between the unusually high returns characteristic of the January effect and accounting earnings, a popular measure that investors use to judge firm value. Design/methodology/approach – The empirical model used in this study is derived from the analytical framework of Ohlson (1995) and Feltham and Ohlson (1995), which explains returns as a function of current and future accounting earnings. Isolating firms that exhibit January effect return premiums from those that do not offers a deeper look at the characteristics of the anomaly. Regression analyses are carried out using a modified Fama-MacBeth (1973) methodology. Quarterly earnings and returns data are drawn from Compustat and CRSP. Findings – The main finding is that the association between January returns and first quarter earnings is unexpectedly and significantly negative, not positive as predicted by the model. Coefficient signs for the other three quarters behave as expected. Additional analyses highlight a difference in the returns-earnings association between firms affected by the anomaly and those that are not. Robustness checks indicate that the findings are not spurious. Originality/value – Rather than applying trading or multifactor economic models that rely on some level of market inefficiency or irrational investor behavior, this study uses an accounting valuation approach that relies on neither. The unexpected negative association between January effect returns and earnings suggests that other factor(s) besides earnings may play into valuation judgments for investors in such firms, and invites further research.

Firm-specific risk, managerial certainty and optimism

2016 ◽  
Vol 9 (3) ◽  
pp. 383-402 ◽  
Author(s):  
Vivien E. Jancenelle ◽  
Susan F. Storrud-Barnes ◽  
Anthony L Iaquinto ◽  
Dominic Buccieri
Keyword(s):  
Firm Value ◽  
Research Question ◽  
Top Management Team ◽  
Management Team ◽  
Top Management ◽  
Conference Calls ◽  
Earnings Announcement ◽  
Content Type ◽  
Quarterly Earnings ◽  
Specific Risk

Purpose – The purpose of this paper is to focus on investor reactions to unanticipated changes in income, and whether those reactions can be mitigated by managerial discussion. The authors investigate how top-management team certainty and optimism during post-earnings announcement conference calls can serve as corrective actions and add back firm value in times of unexpected changes in firm-specific risk. Design/methodology/approach – The research question is tested empirically in the context of large, publicly traded, US firms’ quarterly earnings announcements, and their subsequent post-earnings announcement conference calls. The authors use the advanced content analysis software DICTION to measure the levels of managerial certainty and optimism displayed during post-earnings announcement conference calls, and event-study methodology to measure investors’ reactions. Findings – Results indicate that earnings surprises are negatively associated with firm value, but that this relationship is mitigated positively by displays of managerial certainty and optimism during post-earnings announcement conference calls. Originality/value – This work uses an innovative research design to study top-management team rhetoric in post-earnings announcement conference calls, and how specific discussions mitigate investors’ negative reactions to increases in firm-specific risk. The study highlights the importance of top-management team certainty and optimism for value creation in times of change in firm-specific risk, and the importance of rhetoric as a tool for corrective action.

The effects of goals attainment on CEO-owner satisfaction and the role of family involvement

2019 ◽  
Vol 10 (2) ◽  
pp. 116-127
Author(s):  
Ondřej Machek ◽  
Jiří Hnilica
Keyword(s):  
Family Involvement ◽  
Family Business ◽  
Firm Value ◽  
Family Firms ◽  
Hierarchical Regression ◽  
Content Type ◽  
Business Goals ◽  
Growth Increase ◽  
The Family ◽  
Owner Satisfaction

Purpose The purpose of this paper is to examine how the satisfaction with economic and non-economic goals achievement is related to the overall satisfaction with the business of the CEO-owner, and whether family involvement moderates this relationship. Design/methodology/approach Based on a survey among 323 CEO-owners of family and non-family businesses operating in the Czech Republic, the authors employ the OLS hierarchical regression analysis and test the moderating effects of family involvement on the relationship between the satisfaction with different goals attainment and the overall satisfaction with the business. Findings The main finding is that family and non-family CEO-owner’s satisfaction does not differ significantly when economic goals (profit maximisation, sales growth, increase in market share or firm value) and firm-oriented non-economic goals (satisfaction of employees, corporate reputation) are being achieved; both classes of goals increase the overall satisfaction with the firm and the family involvement does not strengthen this relationship. However, when it comes to external non-economic goals related to the society or environment, there is a significant and positive moderating effect of family involvement. Originality/value The study contributes to the family business literature. First, to date, most of the studies focused on family business goals have been qualitative, thus not allowing for generalisation of findings. Second, there is a lack of evidence on the ways in which family firms integrate their financial and non-financial goals. Third, the authors contribute to the literature on the determinants of personal satisfaction with the business for CEOs, which has been the focus on a relatively scarce number of studies.

The distributive knot: negotiators’ responsibility to untie complex demands

2017 ◽  
Vol 32 (4) ◽  
pp. 535-540 ◽  
Author(s):  
Alain Lempereur ◽  
Michele Pekar
Keyword(s):  
Demand Response ◽  
Automotive Industry ◽  
Design Methodology ◽  
Analytical Framework ◽  
Content Type ◽  
Business System ◽  
Response Dynamic ◽  
Managerial System ◽  
Deal Making ◽  
Different Levels

Purpose This article aims to explore the fundamental negotiation structure as a demand/response dynamic. It tests it in a complex business system, where a manager as a negotiator is confronted with multiple demands or pressures at different levels from a variety of stakeholders, both external and internal. Design/methodology/approach Based on concrete examples from the automotive industry, it presents an analytical framework to tackle all negotiation interactions. Findings This article suggests that it is possible to describe all negotiation interactions, whether they are simple or complex, through a demand/response framework. Originality/value This contribution examines a fundamental structure for negotiation responsibility – the demand/response dynamic – defining the mission of any negotiator in deal-making or dispute resolution as to try to supply a response to the expressed crossed demands. Second, the proposed theoretical model of demand/response is transposed and tested in a managerial system where a sales negotiator is confronted with demands from more sources, both external and internal, with the responsibility to satisfy as best as possible the various stakeholders and the capacity to address each of them with different moves.

Do the calendar anomalies still exist? Evidence from Indian currency market

2016 ◽  
Vol 42 (2) ◽  
pp. 136-150 ◽  
Author(s):  
Satish Kumar ◽  
Rajesh Pathak
Keyword(s):  
Least Square ◽  
January Effect ◽  
Currency Markets ◽  
Content Type ◽  
Currency Market ◽  
Before And After ◽  
Calendar Anomalies ◽  
Ordinary Least Square Regression ◽  
The 2008 Financial Crisis ◽  
Using Data

Purpose – The purpose of this paper is to examine the presence of the day-of-the-week (DOW) and January effect in the Indian currency market for selected currency pairs; USD-(Indian rupee) INR, EUR-INR, GBP-INR and JPY-INR, from January, 1999 to December, 2014. Design/methodology/approach – Ordinary least square regression analysis is used to examine the presence of DOW and January effect to test the efficiency of the Indian currency market. The sample period is later divided into two sub-periods, that is, pre- and post-2008 to capture the behavior of returns before and after the 2008 financial crisis. Further, the authors also use the non-parametric technique, the Kruskal-Wallis test, to provide robustness check for the results. Findings – The results indicate that the returns during Monday to Wednesday are positive and higher than the returns on Thursday and Friday which show negative returns. The returns during January are found to be higher than the returns during rest of the year. Further, all currencies exhibit significant DOW and January effects in pre-crisis period, however, post-crisis; these effects disappear for all currencies indicating that the markets have become more efficient in the later time. The findings can be further attributed to the increased intervention in the forex markets by the Reserve Bank of India after the crisis. Practical implications – The results have important implications for both traders and investors. The findings suggest that the investors might not be able to earn excess profits by timing their positions in some particular currencies taking the advantage of DOW or January effect which in turn indicates that the currency markets have become more efficient with time. The results are in conformity with those reported for the developed markets. The results might be appealing to the practitioners as well in a way that they can consider the state of financial market for financial decision making. Originality/value – The authors provide the first study to examine the calendar anomalies (DOW and January effect) across a range of emerging currencies using 16 years of data from January, 1999 to December, 2014. To the best of the authors’ knowledge, no study has yet examined these calendar anomalies in the currency markets using data which covers two important periods, pre-2008 and post-2008.

Internationalization of emerging multinationals: the Latin American case

2014 ◽  
Vol 26 (6) ◽  
pp. 588-602 ◽  
Author(s):  
Mauricio Losada-Otálora ◽  
Lourdes Casanova
Keyword(s):  
Latin American ◽  
Global Economy ◽  
Secondary Data ◽  
Developed Countries ◽  
Analytical Framework ◽  
Content Type ◽  
Emerging Multinationals ◽  
Internationalization Strategies ◽  
American Case ◽  
Key Resources

Purpose – The purpose of this paper is to develop an analytical framework that challenges the condescending view of multinationals of emerging countries. In this paper, it is showed that emerging multinational companies (EMNCs) developed valuable resources that leveraged their internationalization strategies. Design/methodology/approach – An exploratory approach was used to investigate the internationalization strategies of EMNCs. A qualitative study was built on secondary data sources, particularly analysis of cases of the internationalization of Latin American companies. Findings – The internationalization strategies deployed by EMNCs are similar to the strategies of traditional multinationals (firms of developed countries). Similarly, EMNCs exploit, acquire or defend their resources in foreign markets. Additionally, the selection of each strategy depends on the availability, transferability and substitutability of the resources involved in the internationalization. Research limitations/implications – The traditional approaches that study the role of resources in the internationalization of the EMNCs have some shortcomings. It is worth conducting additional research including the approach developed here to advance in the comprehension of the behavior of EMNCs. Practical implications – Managers must identify and develop key resources to invest abroad. Additionally, managers need to take into account the characteristics of the resources of their firms to select an adequate strategy abroad. Originality/value – This paper shows that EMNCs are not resource laggards. Consequently, theoretical and empirical evidence is provided to advance the development of comprehensive theories of the internationalization of EMNCs. This paper offers academics and practitioners with a new focus to analyze the internationalization of EMNCs which are recognized as a driving force of the global economy.

Finding beneficiaries: trade adjustment assistance system in South Korea

2017 ◽  
Vol 16 (2) ◽  
pp. 92-105 ◽  
Author(s):  
Joon-heon Song
Keyword(s):  
South Korea ◽  
Analytical Framework ◽  
Policy Preferences ◽  
Trade Adjustment Assistance ◽  
Content Type ◽  
South Korean ◽  
Policy Failure ◽  
Short Period ◽  
Trade Adjustment ◽  
The Government

Purpose The purpose of this study is to explore the essential cause for the policy failure of Trade Adjustment Assistance (TAA) in South Korea. Design/methodology/approach To substantiate the claims made for the failure of the policy, this paper focuses on the differences in policy preferences among the government ministries and agencies involved in TAA. Findings The failure in the TAA policy, according to this study, was attributed to the conflicts and miscoordination arising from the differences in policy preferences among government ministries and agencies. To rectify this failure, the South Korean government had to revise its laws and regulations several times over a short period. Originality/value Drawing on the analytical framework of the literature on policy failure, this paper examines the causal relationships between outcomes of TAA policy and the conflicts or miscoordination among government bodies at each stage: initiatives and planning, implementation and operation of the policy.

Addressing the COVID-19 challenges by SMEs in the hotel industry – a Czech sustainability message for emerging economies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Radka MacGregor Pelikanova ◽  
Eva Daniela Cvik ◽  
Robert Kenyon MacGregor
Keyword(s):  
Emerging Economies ◽  
Negative Impact ◽  
Hotel Industry ◽  
Analytical Framework ◽  
Behavioral Strategies ◽  
Content Type ◽  
Socratic Questioning ◽  
Entrepreneurial Readiness ◽  
Entrepreneurial Strategies

Purpose Emerging economies have to address positive challenges such as sustainability, digitalization, entrepreneurial readiness and planning and behavioral strategies and negative challenges, such as corruption and bureaucracy. The COVID-19 pandemic hit all economies and arguably made hotel businesses that are from less typical emerging economies, such as the Czech Small and medium-sized enterprises (SMEs), to deal with similar challenges to that of their counterparts from typical emerging economies. How do Czech hotel SMEs address the COVID-19 challenges and what sustainability message can be extracted from that with the relevance for not only businesses from emerging economies? The purpose of this paper is to explore how Czech hotel SMEs address the COVID-19 challenges and what sustainability. Design/methodology/approach A consolidated parsing of the literature, legislative and analytical framework, along with an investigative case study of 11 Czech hotel SMEs was performed, based on the questionnaire survey and semi-structured in-depth direct interviews. The holistic thematic analysis processed this fresh data and allowed Socratic questioning and glossing while addressing both research questions. Findings The performed case study reveals that typical challenges faced by entrepreneurs in emerging economies became, via COVID-19, universal challenges, these challenges are a valuable impulse for digitalization and changes of entrepreneurial strategies, but not so much for sustainability, and the omnipresent negative impact of corruption and bureaucracy. Originality/value This paper presents a pioneering study regarding the addressing COVID-19 and sustainability concerns by SMEs in a less typical emerging economy and offering a universal, partially comparative and sadly not so sustainable, message which is not just limited to emerging economies.

The financial consequences of human capital disclosure as part of integrated reporting

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Antonio Salvi ◽  
Nicola Raimo ◽  
Felice Petruzzella ◽  
Filippo Vitolla
Keyword(s):  
Human Capital ◽  
Firm Value ◽  
Fixed Effects ◽  
Cost Of Capital ◽  
Positive Impact ◽  
Firm Risk ◽  
Integrated Reporting ◽  
Content Type ◽  
Financial Consequences ◽  
The Cost

PurposeThe purpose of this paper is to analyse the financial consequences of the level of human capital (HC) information disclosed by firms through integrated reports. Specifically, this work examines the effect of HC information on the cost of capital and firm value.Design/methodology/approachA manual content analysis is used to measure the level of HC information contained in integrated reports. A fixed-effects regression model is used to analyse 375 observations (a balanced panel of 125 firms for the period 2017–2019) and test the financial consequences of HC disclosure.FindingsThe empirical outcomes indicate that HC disclosure has a significant and negative effect on the cost of capital and a positive impact on firm value. Our results show that companies can reduce investors' perceived firm risk by improving HC disclosure, leading to a lower cost of capital. Moreover, our findings support the notion that increased levels of HC disclosure are linked to firms' improved access to external financial resources, consequently enhancing firm value.Originality/valueThis study is the first contribution to examine the financial consequences of HC disclosure and is one of the first to examine the level of HC information within integrated reports.

The effect of intangible assets on sustainable growth and firm value – Evidence on intellectual capital investment in companies listed on Bucharest Stock Exchange

Kybernetes ◽  
2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Catalin Ionita ◽  
Elena Dinu
Keyword(s):  
Growth Rate ◽  
Intellectual Capital ◽  
Firm Value ◽  
Intangible Assets ◽  
Stock Exchange ◽  
Listed Companies ◽  
Sustainable Growth ◽  
Content Type ◽  
Sustainable Growth Rate ◽  
The Impact

PurposeThe present study investigates the connection between company investments in intellectual capital (IC) and how they translate into financial value. The aim is to test the impact of intangible assets on the firm value and its sustainable growth.Design/methodology/approachThe research employs computation models to determine the sustainable growth rate (SGR) and the firm value (FV), and by using the ordinary least squares (OLS) model through a linear regression assesses the relationship between the dependent variables and expenditures on intangibles like R&D, IT programs and patents. A sample of 42 companies has been selected out of the 78 listed at Bucharest Stock Exchange (BSE), based on the appropriateness of the information disclosed in the financial reports for the period 2016–2019.FindingsThe results show that intangibles classified as innovative competences (R&D and Patents) do not have a positive impact on SGR and FV in listed companies from Romania. Moreover, R&D has a negative and significant effect on FV, while IT Programs have a positive and significant impact on FV, but not on the SGR. Variables categorised as economic competencies (Brands, Shares held in associates and jointly controlled entities) and firm structure-specific variables (Leverage, Firm Performance) seem to have a significant effect on SGR and FV. Shares held in associates and jointly controlled entities is the variable that can have the biggest impact when it comes to FV for companies listed at BSE.Research limitations/implicationsDue to non-disclosure of specific information by some companies, or lack of investments in intangibles the sample had to be reduced and does not cover all listed companies.Practical implicationsCompanies listed on the Regulated Market from the Bucharest Stock Exchange should maintain their scale of liabilities at a reasonable level when financing intangible assets in order to ensure corporate long-term and sustainable development. Also, these companies should maintain awareness about the importance of intangible assets and invest more in specific sub-components, in order to sustain competitive advantage. Recognizing the roles of intangibles, managers need to develop strategies to invest in profitable intangibles by reasonably allocating their limited resources, in order to achieve sustainable growth and increase company success.Originality/valueStudies concerning the relation between investments in intangibles and sustainable growth rate and firm value of listed Romanian companies are very scarce. This paper reveals new research, never before undertaken, concerning expenditures on intangibles by Romanian companies and the valuation of such investments on Bucharest Stock Exchange.

Measuring paper industry's ecological performance in an imprecise and vague scenario: a fuzzy DEA-based analytical framework

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sunil Kumar Jauhar ◽  
Natthan Singh ◽  
A. Rajeev ◽  
Millie Pant
Keyword(s):  
Fuzzy Logic ◽  
Paper Industry ◽  
Paper Mill ◽  
Analytical Framework ◽  
Efficiency Score ◽  
Comparative Performance ◽  
Content Type ◽  
Ecological Performance ◽  
Fuzzy Dea ◽  
Desirable And Undesirable Outputs

PurposeProductivity improvement is key to sustainability performance improvements of organizations. In a real-world scenario, the nature of inputs and outputs is likely to be imprecise and vague, leading to complexity in comparing firms' efficiency measurements. Implementation of fuzzy-logic based measurement systems is a method for dealing with such cases. This paper presents a fuzzy weight objective function to solve Data Envelopment Analysis (DEA) CCR model for measuring paper mills' performance in India for 15 years.Design/methodology/approachAn integrated methodology is proposed to solve DEA models having fuzzy weights. The fuzzy DEA methodology is an extended version of the DEA approach that researchers have used for performance measurement purposes in imprecise and vague scenarios. The ecological performance of the paper industry is evaluated, considering some desirable and undesirable outputs. The effect of non-discretionary input on the performance of a paper mill is also analyzed.FindingsAnalysis suggests that the productivity of the paper industry is improving consistently throughout the period. The comparative evaluation of methods suggests that a diverse cluster of DMUs and integration of DEA with the fuzzy logic increases the diversity in the efficiency score while DEA-DE imitates the results of CCR DEA.Originality/valueProposed a fuzzy DEA-based analytical framework for measuring the paper industry's ecological performance in an imprecise and vague scenario. The model is tested on data from the paper industry in a developing country context and comparative performance analysis using DEA, fuzzy DEA and DE algorithm is done.

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