The changing relation between CEOs and shareholders

2017 ◽  
Vol 23 (4) ◽  
pp. 375-400 ◽  
Author(s):  
Abe de Jong ◽  
Marieke van der Poel ◽  
Michiel Wolfswinkel
Keyword(s):  
Twentieth Century ◽  
Stock Market ◽  
Stock Prices ◽  
Stock Price ◽  
Transition Period ◽  
Chief Executive ◽  
Investor Relations ◽  
Market Prices ◽  
Content Type

Purpose This paper aims to present case study evidence on the changes in the relations between chief executive officers (CEOs) of large firms and shareholders in the past three decades of the twentieth century. In line with insights from agency theory, the CEOs have experienced increased scrutiny from their principals, the shareholders. This development has affected financial communication and investor relations as well as stock market prices. Design/methodology/approach The Dutch electronics firm Royal Philips NV in the transition period of 1971-2001 has been studied using publicly available disclosures and stock market prices. A descriptive case study approach is combined with event study methodology. Findings It was observed that the increased emphasis on shareholder interests has affected the interactions between Philips’ respective CEOs and the shareholders’ reactions to strategic decisions as measured by stock price changes. Around the beginning of the twenty-first century, clarity and openness in CEO communication was the norm and deviations were punished with volatile stock prices. Research limitations/implications The study relies on publicly available data. Originality/value The case study of Philips can be extrapolated to other exchange-listed firms in the late twentieth century, which faced changed expectations about the role of the CEO, investor relations and the CEO’s accountability toward shareholders. This transition is relevant not only as a historical observation, but also as a background to studies in finance and management about top management and financial markets.

scholarly journals Differences In Intrinsic Value With Stock Market Prices Using The Price Earning Ratio (Per) Approach As An Investment Decision Making Indicator (Case Study Of Manufacturing Companies In Indonesia Period 2016 - 2017)

2019 ◽  
Vol 1 (1) ◽  
pp. 82-92
Author(s):  
Ardy Indra Lekso Wibowo Putra ◽  
Aditya Dwiansyah Putra ◽  
Murni Sari Dewi ◽  
Denny Oktavina Radianto
Keyword(s):  
Decision Making ◽  
Stock Market ◽  
Stock Price ◽  
Stock Exchange ◽  
Intrinsic Value ◽  
Investment Decision ◽  
Manufacturing Companies ◽  
Market Prices ◽  
Investment Decision Making

An investor must be able to consider all kinds of steps that will be taken or that will be carried out, assessing stocks - shares that will provide optimal benefits in making an investment decision. By analyzing the intrinsic value of the price of a company's stock, investors can assess the fairness of the stock price. The method used to analize intrinsic value is fundamental analysis using the Price Earning Ratio (PER) approach. The samples to be taken in this research are manufacturing companies in Indonesia which are listed on the Indonesia Stock Exchange (IDX) for the period 2016 - 2017 with certain criteria. The results of this research will show that the shares of companies listed are in overvalued, undervalued or correctly valued conditions. So investors can decide to buy, hold or sell their shares.

Life-cycle asset allocation and the peso problem: does ambiguity aversion matter?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nuno Silva
Keyword(s):  
Life Cycle ◽  
Stock Market ◽  
Asset Allocation ◽  
Stock Prices ◽  
Stock Price ◽  
Ambiguity Aversion ◽  
Content Type ◽  
Portfolio Decisions ◽  
State Of The Economy ◽  
The Impact

PurposeThe study aims to show that ambiguity aversion exerts a non-negligible effect on the investors' decisions, especially due to the possibility of sharp declines in stock prices.Design/methodology/approachThe vast majority of previous studies on life-cycle consumption and asset allocation assume that the equity premium is constant. This study evaluates the impact of rare disasters that shift the stock market to a low return state on investors' consumption and portfolio decisions. The author assumes that investors are averse to ambiguity relative to the current state of the economy and must incur a per period cost to participate in the stock market and solve their optimal consumption and asset allocation problem using dynamic programming.FindingsThe results show that most young investors choose not to invest in stocks because they have low accumulated wealth and the potential return from their stock market investments would not cover the participation costs. Furthermore, ambiguity-averse investors hold considerably fewer stocks throughout their lifetime than ambiguity-neutral ones. The fraction of wealth invested in stocks over the typical consumer's life is hump-shaped: it is low for a young individual, peaks at his early 30s and then decreases until his retirement age.Originality/valueTo the best of the author’s knowledge, this is the first study that assesses the impact of negative stock price jumps on the optimal portfolio of an ambiguity-averse investor.

scholarly journals Stock Market Prices Prediction using Random Forest and Extra Tree Regression

2019 ◽  
Vol 8 (3) ◽  
pp. 1224-1228
Keyword(s):  
Machine Learning ◽  
Stock Market ◽  
Stock Prices ◽  
Stock Price ◽  
Stock Exchange ◽  
Research Area ◽  
Support Vector ◽  
Market Prices ◽  
Machine Learning Approach ◽  
Innovative Work

Prediction of Stock price is now a day’s an existing and interesting research area in financial and academic sectors to know the scale of economies. There did not exists any significant set of rules to estimate and predict the scale of share in the stock exchange. Many evolutionary technologies are existing such as technical, fundamental, time, statistical and series analysis which help us to attempt the prediction process, but none of the methods are proved as reliable and accurate tool to the society in the estimation of stock exchange or share market scales. Here in this paper we attempted to do innovative work through Machine Learning approach to predict or sense the behaviour tracking of the stock market sensex. Linear regression, Support Vector regression, Decision Tree, Ramdom Forest Regressor and Extra Tree Regressor are the Machine Learning models implemented effectively in predicting the stock prices and define the activity between the exchanges the securities between the buyers and sellers. We predicted the price of the stock based on the closing value and stock price. An algorithm with high accuracy we do the process of comparison for the accuracy of each of the model and finally is considered as better algorithm for predicting stock price. As share market is a vague domain we cannot predict the conditions occur, and also share market can never be predicted, this job can be done easily and technically through this work and the main aim of this paper is to apply algorithms in Machine Learning in predicting the stock prices.

Managerial equity incentives and anti-dilutive convertible debt decisions

2018 ◽  
Vol 17 (3) ◽  
pp. 341-358
Author(s):  
Henri Akono
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Chief Executive ◽  
Probit Model ◽  
Convertible Debt ◽  
Design Decisions ◽  
Content Type ◽  
Financing Decisions ◽  
Equity Incentives ◽  
Debt Issuance

PurposeThis paper aims to examine whether high equity incentives motivate executives to avoid issuing convertible debt and/or to design convertible debt issues as anti-dilutive to earnings-per-share (EPS).Design/methodology/approachTests are conducted using the Heckman two-step probit model to control for potential self-selection bias between firms that issue straight debt and those that issue convertible debt. Further, analyses are conducted separately and jointly for the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) to assess the differential impact of CEOs’ and CFOs’ equity incentives on convertible debt issuance and design decisions.FindingsFirms are more likely to design convertible debt issues as anti-dilutive to EPS when CFOs have high levels of equity incentives, but only when the firm stock price is sensitive to diluted EPS. High CEOs’ equity incentives have limited impact of convertible debt issuance and design decisions.Research limitations/implicationsThe main limitation of this study is the generalizability of the findings and implications of this study due to the smaller sample size of convertible debt issues.Originality/valuePrior research has shown that bonus incentives influence CEOs with disincentive for EPS dilution and motivate them to make anti-dilutive financing decisions. Further, there is evidence that high equity incentives motivate CEOs to manage earnings to boost short-term prices. This study extends prior literature by showing that high equity incentives provide executives with disincentive for EPS dilution and motivate CFOs to design convertible debt issues as anti-dilutive to EPS possibly to avoid reduced stock prices. Further, this study shows that CFOs have greater influence over convertible debt design choices than CEOs do.

scholarly journals How Does Stock Prices Respond to Various Macroeconomic Factors? A Case Study of Pakistan

2014 ◽  
Vol 1 (4) ◽  
pp. 25-30
Author(s):  
Ayaz Khan
Keyword(s):  
Stock Market ◽  
Stock Prices ◽  
Stock Price ◽  
Stock Exchange ◽  
Correction Term ◽  
Macroeconomic Factors ◽  
Market Prices ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
Long Run

Over the time everything flourished, at the same token the interrelationship among the stock market prices, returns and macroeconomic factors got attendance of the researchers in the field of finance and economics around the world. In this respect current study is an attempt to investigate the response of various macroeconomic factors (GDP, Money Supply, inflation, exchange rate and Size of firm) toward stock market prices in case of Karachi stock exchange over a period of 1971 to 2012. The study utilizes Autoregressive Distributed lag model (ARDL) technique. The results shows that in long run each factor significantly contribute to the stock price while in shot run some factors were significant while some were not but the error correction term shows significant convergence toward equilibrium. The findings of study suggest that for smoothness of stock market the current factors must be targeted.

Does idiosyncratic risk matter? Evidence from mergers and acquisitions

2019 ◽  
Vol 20 (4) ◽  
pp. 313-329
Author(s):  
Pascal Nguyen ◽  
Younes Ben Zaied ◽  
Thu Phuong Pham
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Prices ◽  
Firm Value ◽  
Stock Price ◽  
Negative Relationship ◽  
Idiosyncratic Risk ◽  
Idiosyncratic Volatility ◽  
Content Type ◽  
Acquisition Announcements

Purpose This paper aims to investigate whether idiosyncratic volatility is a priced risk factor in the Australian stock market. Design/methodology/approach The authors use the change in idiosyncratic volatility around acquisition announcements and the related stock price revaluation to test whether the idiosyncratic risk is priced. If the idiosyncratic risk is priced, increases (decreases) in idiosyncratic volatility should be associated with decreases (increases) in the acquirer’s stock price, as the latter’s future cash flows are discounted at a higher (lower) rate. The sample consists of 2,656 completed acquisitions by Australian listed firms over the period January 1990 to October 2014 for which deal value represents more than 5 per cent of the acquirer’s market value. Findings Increases (decreases) in idiosyncratic risk are associated with significant decreases (increases) in firm value. This negative relationship is robust to the presence of outliers; is unaffected by the incidence of the 2007-2008 financial crisis; holds using alternative measures of idiosyncratic risk; and is more significant after excluding the resources sector. Firms with a higher idiosyncratic risk prior to the acquisition, and firms avoiding stock to pay for the acquisition, experience a more significant stock price increase in relation to a decrease in idiosyncratic risk. Research limitations/implications Considering the small size of the Australian economy, investors may have less scope to mitigate idiosyncratic risk. As a consequence, idiosyncratic risk is associated with the positive excess return, contrary to what standard asset pricing theory assumes. The results support Merton’s (1987) hypothesis that investors are exposed to idiosyncratic risk due to imperfect portfolio diversification and receive compensation for bearing that risk. Practical implications The pricing of idiosyncratic risk may also explain why the Australian stock market has historically offered a high equity risk premium. A practical implication would be for international investors to take advantage of the diversification constraints of local investors to capture higher risk premiums and achieve superior returns. Originality/value While prior studies demonstrate that stocks with higher idiosyncratic risk are associated with higher subsequent returns, the authors show that an increase in idiosyncratic risk is associated with a decrease in stock prices using acquisition announcements as shocks to a firm’s idiosyncratic risk. In other words, the results arise from within-firm variations rather than from cross-sectional differences in stock returns.

scholarly journals influence of rumors and its consequences in dynamics of stock market prices

2013 ◽  
Vol 7 ◽  
Author(s):  
Fábio Marques da Cruz ◽  
Maria Yêda Falcão Soares de Filgueiras Gomes
Keyword(s):  
Stock Market ◽  
Information Asymmetry ◽  
Stock Prices ◽  
Trading Volume ◽  
Stock Exchange ◽  
Spot Market ◽  
Perfect Competition ◽  
Market Prices ◽  
The Press

This work is part of an ongoing study that aims to analyze the influence of rumors on the price dynamics in the stock market, through a case study of companies whose shares are traded much among financial agents. For this purpose we used historical prices of securities traded in the spot market of Sao Paulo Stock Exchange in the years 2007 to 2011, from files available in its website. A sample of 10 companies was selected among the stocks with higher trading volume during this period to collect the documents presented for communication of relevant facts and clarifications in stock exchange’s site. Only communications presented on the period specified that provide clarification related to news and unverified information disclosed in the press were brought within the scope of data collection. Until now, only the company communications with the most actively traded stocks were collected, whose analysis allowed the categorization of information and creation of a diagram for representing information about the rumors treated on these documents. This diagram was applied to a database where the information collected was stored for later retrieval and analysis. From this information, asset prices were retrieved to analyze the influence of rumors reported by the press in the price fluctuation of the asset. The authors Kapferer, Müller and Martins form the theoretical framework. As a result, the research has identified some rumors that interfered in the stock prices, as well as classified the rumors about the issues they address. So, as many times the rumor rises from the void of knowledge and information asymmetry, it is noted that there is no perfect competition among financial agents.

scholarly journals Differences In Intrinsic Value With Stock Market Prices Using The Price Earning Ratio (Per) Approach As An Investment Decision Making Indicator (Case Study Of Manufacturing Companies In Indonesia Period 2016 - 2017)

2019 ◽  
Vol 1 (1) ◽  
pp. 82-92
Author(s):  
Ardy Indra Lekso Wibowo ◽  
Aditya Dwiansyah Putra ◽  
Murni Sari Dewi ◽  
Denny Oktaviana Radianto
Keyword(s):  
Decision Making ◽  
Stock Market ◽  
Stock Price ◽  
Stock Exchange ◽  
Intrinsic Value ◽  
Investment Decision ◽  
Manufacturing Companies ◽  
Market Prices ◽  
Investment Decision Making

An investor must be able to consider all kinds of steps that will be taken or that will be carried out, assessing stocks - shares that will provide optimal benefits in making an investment decision. By analyzing the intrinsic value of the price of a company's stock, investors can assess the fairness of the stock price. The method used to analize intrinsic value is fundamental analysis using the Price Earning Ratio (PER) approach. The samples to be taken in this research are manufacturing companies in Indonesia which are listed on the Indonesia Stock Exchange (IDX) for the period 2016 - 2017 with certain criteria. The results of this research will show that the shares of companies listed are in overvalued, undervalued or correctly valued conditions. So investors can decide to buy, hold or sell their shares.

Macroeconomic Factors and Pakistani Equity Market”

2004 ◽  
Vol 43 (4II) ◽  
pp. 619-637 ◽  
Author(s):  
Muhammad Nishat ◽  
Rozina Shaheen
Keyword(s):  
Stock Market ◽  
Industrial Production ◽  
Stock Prices ◽  
Stock Price ◽  
Consumer Price Index ◽  
Reverse Causality ◽  
Macroeconomic Factors ◽  
Macroeconomic Variables ◽  
Equilibrium Relationships

This paper analyzes long-term equilibrium relationships between a group of macroeconomic variables and the Karachi Stock Exchange Index. The macroeconomic variables are represented by the industrial production index, the consumer price index, M1, and the value of an investment earning the money market rate. We employ a vector error correction model to explore such relationships during 1973:1 to 2004:4. We found that these five variables are cointegrated and two long-term equilibrium relationships exist among these variables. Our results indicated a "causal" relationship between the stock market and the economy. Analysis of our results indicates that industrial production is the largest positive determinant of Pakistani stock prices, while inflation is the largest negative determinant of stock prices in Pakistan. We found that while macroeconomic variables Granger-caused stock price movements, the reverse causality was observed in case of industrial production and stock prices. Furthermore, we found that statistically significant lag lengths between fluctuations in the stock market and changes in the real economy are relatively short.

Big data investments in knowledge and non-knowledge intensive firms: what the market tells us

2017 ◽  
Vol 21 (3) ◽  
pp. 623-639 ◽  
Author(s):  
Tingting Zhang ◽  
William Yu Chung Wang ◽  
David J. Pauleen
Keyword(s):  
Big Data ◽  
Knowledge Management ◽  
Stock Market ◽  
Value Chain ◽  
Stock Prices ◽  
Economic Value ◽  
Information Value ◽  
Publicly Traded ◽  
Content Type ◽  
Knowledge Intensive

Purpose This paper aims to investigate the value of big data investments by examining the market reaction to company announcements of big data investments and tests the effect for firms that are either knowledge intensive or not. Design/methodology/approach This study is based on an event study using data from two stock markets in China. Findings The stock market sees an overall index increase in stock prices when announcements of big data investments are revealed by grouping all the listed firms included in the sample. Increased stock prices are also the case for non-knowledge intensive firms. However, the stock market does not seem to react to big data investment announcements by testing the knowledge intensive firms along. Research limitations/implications This study contributes to the literature on assessing the economic value of big data investments from the perspective of big data information value chain by taking an unexpected change in stock price as the measure of the financial performance of the investment and by comparing market reactions between knowledge intensive firms and non-knowledge intensive firms. Findings of this study can be used to refine practitioners’ understanding of the economic value of big data investments to different firms and provide guidance to their future investments in knowledge management to maximize the benefits along the big data information value chain. However, findings of study should be interpreted carefully when applying them to companies that are not publicly traded on the stock market or listed on other financial markets. Originality/value Based on the concept of big data information value chain, this study advances research on the economic value of big data investments. Taking the perspective of stock market investors, this study investigates how the stock market reacts to big data investments by comparing the reactions to knowledge-intensive firms and non-knowledge-intensive firms. The results may be particularly interesting to those publicly traded companies that have not previously invested in knowledge management systems. The findings imply that stock investors tend to believe that big data investment could possibly increase the future returns for non-knowledge-intensive firms.

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