“Red” and “green” flags of risk disclosures – identifying associations between positive and negative key phrases and consecutive cumulative abnormal stock returns

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Deborah Yvonne Nagel ◽  
Stephan Fuhrmann ◽  
Thomas W. Guenther
Keyword(s):  
Stock Returns ◽  
Relevant Information ◽  
Risk Information ◽  
Information Value ◽  
Research Approach ◽  
Content Type ◽  
Abnormal Stock Returns ◽  
Key Phrases ◽  
Risk Disclosures ◽  
Selection Of

Purpose The usefulness of risk disclosures (RDs) to support equity investors’ investment decisions is highly discussed. As prior research criticizes the extensive aggregation of risk information in existing empirical research, this paper aims to provide an attempt to identify disaggregated risk information associated with cumulative abnormal stock returns (CARs). Design/methodology/approach The sample consists of 2,558 RDs of companies listed in the S&P 500 index. The RDs were filed within 10 K filings between 2011 and 2017. First, this study automatically extracted 35,685 key phrases that occurred in a maximum of 1.5% of the RDs. Second, this study performed stepwise regressions of these key phrases and identified 67 (78) key phrases that show positive (negative) associations with CARs. Findings The paper finds that investors seem to value most the more common key phrases just below the 1.5% rarest key phrase threshold and business-related key phrases from RDs. Furthermore, investors seem to perceive key phrases that contain words indicating uncertainty (impacts) as a negative (positive) rather than a positive (negative) signal. Research limitations/implications The research approach faces limitations mainly due to the selection of the included key phrases, the focus on CARs and the methodological choice of the stepwise regression analysis. Originality/value The study reveals the potential for companies to increase the information value of their RDs for equity investors by providing tailored information within RDs instead of universal phrases. In addition, the research indicates that the tailored RDs encouraged by the SEC contain relevant information for investors. Furthermore, the results may guide the attention of equity investors to relevant text passages whose deeper analysis might be useful with regard to investors’ capital market decisions.

A new look at the meeting clustering effect

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ángel Pardo ◽  
Eddie Santandreu
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Relevant Information ◽  
Investor Attention ◽  
Content Type ◽  
Potential Link ◽  
Clustering Effect ◽  
Trading Volumes ◽  
The Relationship

PurposeThe study aims to test the existence of a meeting clustering effect in the Spanish Stock Exchange (SSE).Design/methodology/approachThis paper studies the relationship between the clustering of annual general meetings and stock returns in the SSE. A multivariate analysis is carried out in order to analyse the relationship between monthly returns and the clustering of general meetings in the SSE.FindingsThe authors show that meeting clustering exists and that some months exhibit significant and positive additional returns related to the holding of ordinary or extraordinary general meetings.Research limitations/implicationsThe authors have explored some possible explanations for the meeting clustering effect, such as a potential link with the “Halloween” effect or the presence of higher-than-normal levels of volatility, trading volumes or investor attention. However, none of these can explain the meeting clustering effect that emerges as a new anomaly in the SSE.Practical implicationsThe authors have documented significant and positive abnormal returns in some months that coincide with the holding of general meetings. Therefore, the holding of ordinary and/or extraordinary meetings in some months involves the release of relevant information for investors.Originality/valueThis study complements the financial literature because it is focused on the clustering of meetings and its effect on a stock market whose legal order is based on civil law. This fact allows us to shed new light on meeting clustering and its effect on other types of markets.

The impact of information and communication technology on real estate agency in Lagos Metropolis, Nigeria

2018 ◽  
Vol 36 (2) ◽  
pp. 173-185 ◽  
Author(s):  
Theophilus Olugbenga Babatunde ◽  
Cyril Ayodele Ajayi
Keyword(s):  
Social Media ◽  
Real Estate ◽  
Information And Communication Technology ◽  
Communication Technology ◽  
Relevant Information ◽  
Research Approach ◽  
Content Type ◽  
Information And Communication ◽  
Estate Agency ◽  
The Impact

Purpose The purpose of this paper is to evaluate the effect of information and communication technology (ICT) on real estate agency transactions with a view to determine its influence on the performance of estate agents. Design/methodology/approach A research approach in which questionnaire was administered to elicit relevant information from 220 practicing Estate Surveyors and Valuers surveyed in the course of the study. Data collected were analysed using mean ranking, relative influence index and analysis of variance. Findings The results showed that the use of ICT impacted positively on real estate agency transactions by promoting company’s brand thereby increasing the level of patronage. Consequently, the increased level of patronage signifies an increase in the level of income of the agents. Research limitations/implications The study was limited to social media applications otherwise referred to as ICT, which are used in real estate agency transactions. Further study on other ICT media and their effects on more areas of real estate practice in the developing economy may be required. Originality/value This paper is one of the few works on the impact of ICT on real estate agency transactions with particular reference to the social media networking especially in an emerging economy. Most of the previous studies conducted on ICT and real estate focussed only on internet use with respect to real estate agents and practices.

Market effects of SEC regulation of short-term borrowing disclosure

2016 ◽  
Vol 12 (5) ◽  
pp. 529-557 ◽  
Author(s):  
Trevor C. Chamberlain ◽  
Abdul-Rahman Khokhar ◽  
Sudipto Sarkar
Keyword(s):  
Stock Returns ◽  
Event Study ◽  
Market Reaction ◽  
Short Term ◽  
Content Type ◽  
Financial Firms ◽  
Announcement Date ◽  
Abnormal Stock Returns ◽  
Expected Benefits ◽  
Sec Regulation

Purpose The purpose of this paper is to offer an alternative approach to measure the cost-benefit tradeoff, by analyzing stockholders’ reactions to the announcement and vote on the proposed rule. More specifically, the authors use event study methodology to investigate the stock price reaction on two key dates; that is, the announcement date and the voting date of the proposed short-term borrowing disclosure regulation, and argue that positive abnormal stock returns indicate that the expected benefits of the regulation outweigh the compliance costs. A negative reaction would indicate that, in the eyes of investors, the costs of compliance exceed the expected benefits. Design/methodology/approach The authors use event study analysis and apply the market model to equal-weighted portfolios of 2,450 financial and 3,985 non-financial US firms to calculate mean cumulative abnormal stock returns (MCARs, hereafter) on the announcement and voting dates. Then, the authors conduct mean difference tests on firm-level MCARs across three event windows, that is, (−30,−1), (0,+1) and (+2,+30), to confirm if the MCARs of financial firms are different from those of non-financial firms on both the announcement and the voting dates. Finally, robustness tests are performed with alternate benchmark, using value-weighted portfolios, for the market. Findings The authors find that the market reaction is positive and significant at the announcement date and negative and significant at the voting date of the proposed regulation of short-term borrowing disclosure regulation. Overall, the paper documents a positive market reaction, indicating the usefulness of the disclosure from the vantage point of users. Examining and comparing the results for various subsets, including commercial banks and saving institutions, bank holding companies, size quartiles, and exchange listed and OTC registrants, the authors find that a “one-size-fits-all” approach to regulation is undesirable. Originality/value This is first empirical study, to best of the authors’ knowledge, to explore stockholder reaction to a proposed, rather than an enforced, Securities and Exchange Commission (SEC) regulation and may contribute to the SEC’s final decision on the rule. Second, given a dissimilar reaction from investors of different firms, the results suggest that the SEC needs to reconsider its one-size-fit-all approach for the proposed rule. Finally, because the proposed disclosure would affect all SEC registrants, the economic implications of the findings are important not only for stockholders, but also for regulators, as they attempt to manage systematic risk and optimize the level of market intervention.

A unified model of organizational effectiveness

2019 ◽  
Vol 6 (2) ◽  
pp. 114-128 ◽  
Author(s):  
Nidhi Sharma ◽  
Reetesh K. Singh
Keyword(s):  
Organizational Effectiveness ◽  
Unified Model ◽  
The Body ◽  
Future Research ◽  
Research Approach ◽  
Content Type ◽  
Extant Literature ◽  
Big Picture ◽  
The Subject ◽  
Selection Of

Purpose Scholars for long have been interested in finding effective ways to assess organizational effectiveness. However, lack of consensus on its definition, and consequently on measure parameters has dogged researchers, almost to the point that some academics have declared organizational effectiveness a subject that cannot be researched. The purpose of this paper is to present a unified model of organizational effectiveness by recognizing the underlying synergy in the body of research – a framework that could guide future research on organizational effectiveness as a comprehensive, but contextual paradigm. Design/methodology/approach This paper is based on extensive exploratory review and critique of extant literature on organizational effectiveness. Findings The lack of consensus among scholars on the meaning of organizational effectiveness and its measures is primarily the result of compartmentalized perspectives. The authors found that there is an underlying synergy among them. Basis a big picture review and analysis of extant literature, the authors have been able to identify a unifying framework for the apparently disparate and conflicting models of organizational effectiveness. Practical implications This paper can provide guidance to managers on appropriate selection of organizational effectiveness measures, and to scholars on developing a more holistic and pragmatic research approach on the subject. It can potentially lead to development of context-based scales that facilitate meaningful comparative studies. Originality/value This paper presents a unified model and framework for organizational effectiveness by building on the valuable but disparate contributions of previous researchers. The authors believe that this is a novel attempt that simplifies the discourse on organizational effectiveness, and will help to remove some of the negativity around the research subject.

scholarly journals The impact of board diversity and voluntary risk disclosure on financial outcomes. A case for the manufacturing industry

2020 ◽  
Vol 35 (5) ◽  
pp. 445-462
Author(s):  
Nuria Reguera-Alvarado ◽  
Francisco Bravo-Urquiza
Keyword(s):  
Boards Of Directors ◽  
Manufacturing Industry ◽  
Value Relevance ◽  
Risk Information ◽  
Future Research ◽  
Board Diversity ◽  
Content Type ◽  
Financial Outcomes ◽  
Risk Disclosures ◽  
The Impact

Purpose The purpose of this paper is to analyse how board diversity affects firm financial outcomes through the way in which this diversity helps to improve voluntary disclosures. Design/methodology/approach The partial least squares (PLS) technique is used, and a sample of the manufacturing firms listed in Standard and Poor’s 500 for 2009 is studied. In relation to board diversity, two specific characteristics are considered, namely, gender diversity and ethnic diversity. Content analysis techniques are used to measure risk disclosures. Findings The results show that there is a positive association between board diversity and firms’ financial outcomes, which is explained by disclosing risk information. Research limitations/implications The results indicate that the effect of boards of directors on firm outcoumes is influenced by the board involvement in specific strategies, thereby providing encouraging opportunities for future research. Practical implications These findings have implications both for companies, when selecting board members, and for policymakers, when establishing requirements concerning board composition. Moreover, the evidence highlights the role of disseminating risk information, which has direct implications for managers and regulators, who may better understand the value-relevance of risk disclosures. Originality/value The use of PLS technique is one of the novelties of this paper. The novelty of this approach provides fresh insights into the literature, highlighting that the effect of boards on firm outcomes may be mediated by director involvement in specific disclosure strategies.

Firm opacity and informed trading around spinoffs

2018 ◽  
Vol 19 (3) ◽  
pp. 262-276 ◽  
Author(s):  
Yuan Wen
Keyword(s):  
Stock Returns ◽  
Design Methodology ◽  
Informed Trading ◽  
Options Market ◽  
Organizational Complexity ◽  
Content Type ◽  
Abnormal Stock Returns ◽  
Options Trading ◽  
The Relationship ◽  
Corporate Spinoffs

Purpose This paper aims to examine the prevalence of informed trading around corporate spinoffs and the relation between firm opacity and informed trading using option market data. Design/methodology/approach The author investigates the prevalence of informed trading by examining the relationship between abnormal stock returns associated with spinoffs and the volatility spread/volatility skewness of options prior to the spinoffs. Furthermore, the author examines how opacity and organizational complexity prior to the spinoffs affect informed trading. Findings The study shows that option volatility spread and volatility skewness for the five days prior to the spinoffs can predict the abnormal stock returns on the spinoff announcement days, suggesting that there is informed trading in the options market prior to spinoffs. The study shows that informed trading is more prevalent for firms that are more opaque prior to the spinoff. Furthermore, informed trading decreases after spinoffs. Originality/value To the best of knowledge, this is the first empirical research that examines the prevalence of informed trading around spinoffs by using options volatility spread/skewness and the relation between firm opacity and informed options trading.

Investor reactions to restatements conditional on disclosure of internal control weaknesses

2018 ◽  
Vol 19 (3) ◽  
pp. 423-439 ◽  
Author(s):  
Yiwen Li ◽  
You-il Park ◽  
Jinyoung Wynn
Keyword(s):  
Stock Returns ◽  
Financial Reporting ◽  
Internal Control ◽  
Private Information ◽  
Abnormal Returns ◽  
Content Type ◽  
Sarbanes Oxley ◽  
Financial Restatements ◽  
Abnormal Stock Returns ◽  
Internal Control Weaknesses

Purpose The purpose of this paper is to investigate investor reactions to financial restatements conditional on disclosures of internal control weaknesses under Section 404 of the Sarbanes-Oxley Act. Design/methodology/approach The research uses cumulative abnormal stock returns (CARs) as a proxy for investor reactions. Restatements and internal control reports are available on audit analytics. Multivariate regression analyses were used for testing. Findings Using a sample of restating firms whose original misstatements are linked to underlying internal control weaknesses, the research finds that cumulative abnormal returns for firms disclosing internal control weaknesses in a timely manner is negative in a three-day window around the restatement announcements. The finding indicates that restatements with early disclosure of internal control weaknesses provide more persuasive evidence of the ineffectiveness of a firm’s internal control over financial reporting, rather than early disclosure lowering the information asymmetry between a firm and investors. Research limitations/implications This study employs CARs to examine the market reaction to restatements conditional on disclosure of internal control weaknesses. Practical implications Further study on reactions by creditors who have access to private information on firms could extend the implications of the finding. Originality/value The study contributes to the existing research by documenting that early disclosure of material weaknesses in internal control affects investors’ reactions to financial restatements.

The financial impact of retail store closure announcements

2017 ◽  
Vol 47 (6) ◽  
pp. 536-556 ◽  
Author(s):  
Jaideep Chowdhury ◽  
Sourish Sarkar
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Event Study ◽  
Retail Store ◽  
Financial Impact ◽  
Sales Growth ◽  
Content Type ◽  
Abnormal Stock Returns ◽  
The Impact ◽  
Closure Decisions

Purpose While store closure announcements frequently appear in newspapers, little is known about the financial impact of store closure decisions on the retailer’s market value. The purpose of this paper is to investigate the stock market reaction to the announcements of retail store closure decisions. Design/methodology/approach The authors collect data from news articles on store closure announcements in the USA during 1995-2016. Using the four-factor model in an event study, the authors compute the abnormal stock returns for the retail firms due to these announcements. Findings Based on the authors’ analysis for sample and matching control firms, the abnormal stock returns for store closure announcements are found to be positive overall. The authors find evidence that the positive effects of the announcements are stronger, particularly for the firms which have positive sales growth at the time of the announcements. The authors also report that industry competition acts as a negative moderator in the relationship between announcements and financial impacts. Practical implications The authors’ analysis implies the investors’ positive sentiment of store closure announcements as a viable cost-cutting strategy, especially when it is done proactively by better performing retailers. The findings should be useful to the supply chain managers of retail industries in making store closure decisions. Originality/value This paper is believed to be the first to address the impact of retail store closure announcements on the stock market. The authors’ approach of categorizing the firms based on their sales growth seems to be the first in the event study literature on corporate restructuring.

The role of online freelance stock analysts in correcting overly pessimistic market sentiment

2018 ◽  
Vol 44 (8) ◽  
pp. 954-971
Author(s):  
Myungsun Kim ◽  
Robert Kim ◽  
Onook Oh ◽  
H. Raghav Rao
Keyword(s):  
Stock Returns ◽  
Relevant Information ◽  
Content Type ◽  
Market Sentiment ◽  
Value Stocks ◽  
Stock Market Reaction ◽  
Negative Tone ◽  
Stock Analysts ◽  
Practical Implications

Purpose The purpose of this paper is to examine the role of online freelance stock analysts in correcting mispricing of hard-to-value firms during sentiment-driven market periods. Design/methodology/approach The sample covers 23,758 Seeking Alpha articles obtained for the period between January 2005 and September 2011. The authors use OLS regressions to test the stock market reaction around Seeking Alpha analysts’ reports. The information in online analysts’ reports is measured by the tone of stock articles posted in SeekingAlpha.com (SA). Findings The analysis reveals that the degree of negative tone of their stock articles is related to three-day stock returns around the article posting dates. It further reveals that the relation between these returns and prevailing market sentiment depends on firm-specific susceptibility to the market sentiment. The three-day stock returns are higher during low market sentiment periods for firms that are more susceptible to the market sentiment, hence, harder to value. The tone of the stock articles during low sentiment periods also predicts the news in the forthcoming earnings. Practical implications The findings help stock investors identify value-relevant information provided by online freelance stock analysts, particularly for hard-to-value stocks and during the low market sentiment period. Originality/value This study utilizes a unique dataset obtained from SA. This is the first paper to examine whether online analysts help investors correct potential undervaluation of hard-to-value firms during the low market sentiment period.

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