CEO social capital and asset sell-offs

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Charles Danso ◽  
Margarita Kaprielyan ◽  
Md Miran Hossain
Keyword(s):  
Decision Making ◽  
Social Capital ◽  
Information Asymmetry ◽  
Abnormal Returns ◽  
Chief Executive ◽  
Multivariate Regression Analysis ◽  
Market Model ◽  
Good Decision ◽  
Content Type ◽  
Announcement Returns

PurposeRecent studies explore how chief executive officer (CEO) social capital affects corporate decision-making. Well-connected CEOs can have greater access to information, which can lead to better corporate decisions or permit them to amass power from hierarchy status and make self-serving decisions. This study examines whether investors perceive CEO social capital as a signal of good decision-making (assuming information asymmetry) surrounding asset sell-off events.Design/methodology/approachThe authors use multivariate regression analysis to examine the effect of CEO social capital on the cumulative abnormal returns (CARs) of the asset buyers and sellers. CARs are estimated using a market model in the period proximate to asset sell-off announcements.FindingsThe authors find that CEO social capital is positively associated with announcement returns of the asset sellers. Moreover, the positive effect of CEO social capital on announcement returns is more pronounced for sellers facing greater information asymmetry. An analysis of post-announcement stock performance reveals that the seller CEO social capital is associated with additional value generated for the shareholders of the seller after a month from the announcement date, especially if the transaction price is disclosed. Overall, findings are consistent with the argument that CEO social capital provides value in high information asymmetry environment.Originality/valueTo the authors' knowledge this is the first study to examine the effect of CEO social capital on the shareholders' wealth created by divestitures.

scholarly journals The impact of rating classifications on stock prices of Brazilian companies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Fernanda Pagin ◽  
Matheus da Costa Gomes ◽  
Rafael Moreira Antônio ◽  
Tabajara Pimenta Júnior ◽  
Luiz Eduardo Gaio
Keyword(s):  
Decision Making ◽  
Asset Allocation ◽  
Stock Prices ◽  
Market Reaction ◽  
Investment Decision ◽  
Abnormal Returns ◽  
Investment Strategy ◽  
Market Model ◽  
Content Type ◽  
The Impact

Purpose This paper aims to identify if there is an impact of the rating announcements issued by the agencies on the returns of the stocks of Brazilian companies listed on Brasil Bolsa Balcão, from August 2002 to August 2018, identifying which types of announcement (upgrade, downgrade or the same initial classification) cause variations in prices around the date of disclosure of the rating. Design/methodology/approach The event study methodology was applied to verify the market reaction around the announcement dates in a 21-day event window (−10, +10). The market model was used to calculate the abnormal returns (ARs), and subsequently, the accumulated ARs. Findings The hypotheses tests allowed to verify that the accumulated ARs are different, before and after the three types of rating announcements (upgrades, downgrades and the same classification); in upgrades, the mean of accumulated ARs increases in the days before the event, while in downgrades, this increase occurs after the event. This paper concluded that the rating announcements have an impact on the return of stock of the Brazilian market and that the market reaction occurs most of the time before the event happens, which indicates that the market can anticipate the information contained in the changes in credit ratings. Practical implications The results have considerable implications for portfolio managers, institutional investors and traders. It facilitates investment decision-making in the face of rating classification announcements. Market participants can pay more attention to their investment strategies and asset allocation during periods of risk rating announcements. Additionally, traders can understand the form of investment strategy for superior earnings. Originality/value The importance of the study is related to the fact that the results may explain the causes of specific movements in the Brazilian financial market related to a source of information that may or may not be able to influence the decisions of the financial agents that operate in this market. The justification is centred on the idea that, for investors who somehow react to the announcements, it is relevant to understand the impact of rating classifications on companies, as access to such information allows for more conscious decision-making.

The effect of knowledge management on intellectual capital, social capital, and firm innovation

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mahdi Salehi ◽  
Mohammad Ali Fahimi ◽  
Grzegorz Zimon ◽  
Saeid Homayoun
Keyword(s):  
Social Capital ◽  
Knowledge Management ◽  
Intellectual Capital ◽  
Chief Executive Officers ◽  
Structural Equation ◽  
Chief Executive ◽  
Equation Modeling ◽  
Capital Social ◽  
Manufacturing Companies ◽  
Content Type

Purpose This study aims to analyze the literature on knowledge management on intellectual capital, social capital and its contribution to Iranian companies’ innovation. Design/methodology/approach To investigate knowledge management’s relationship on intellectual capital, social capital and innovation, using structural equation modeling based on data collected from 205 chief executive officers, production managers and marketing managers of Iranian companies. The research instrument is a standard questionnaire consisting of 109 questions in which 5 of them are demographic questions, 26 questions were asked to reveal the knowledge management process, 40 questions for intellectual capital, 21 for social capital and 17 for innovation. Findings The results show that knowledge management has a positive and significant relationship between intellectual capital and social capital. Knowledge management did not have a significant effect on innovation. However, intellectual capital and social capital have a significant effect on innovation. On the other hand, knowledge management mediated by intellectual capital and social capital has a positive and significant indirect effect on innovation. Originality/value The paper includes the implications for developing knowledge management and intellectual, social capital leading to innovation in manufacturing companies. Knowledge management can improve the innovation performance of a company if it is shared and applied effectively. This study addresses an important subject and the findings may be used by professionals and managers or another person interested in advancing knowledge management that leads to innovation.

Satisfaction with democracy and social capital in Greece

2018 ◽  
Vol 45 (4) ◽  
pp. 614-628 ◽  
Author(s):  
Irene Daskalopoulou
Keyword(s):  
Social Capital ◽  
Multivariate Regression Analysis ◽  
Political Organization ◽  
Content Type ◽  
Satisfaction With Democracy ◽  
The Social ◽  
Different Types ◽  
European Values ◽  
The Relationship ◽  
The Continuum

Purpose The purpose of this paper is to investigate how different types of social capital contribute to the satisfaction with democracy (SWD) in Greece. Understanding the relationship between different variants of social capital and SWD allows one to situate the Greek democracy in the continuum of democracy types, from primary to modern. Design/methodology/approach The study uses microdata extracted from the European Values Surveys of 2002-2010 and multivariate regression analysis. Findings The results are compatible with a conception of the Greek political organization as a civil virtue democracy. A change in the nature of the relationship is observed after the recent economic crisis in the country. Research limitations/implications The study contributes to the empirical knowledge regarding the relationship between different variants of social capital and SWD. Originality/value Using a typology approach, the micro-relationship between democracy and social capital is analyzed as embedded in a continuum of different democracy types. In addition, this is the first study that uses microdata to analyze the effect of social capital upon SWD in Greece. The results of the study provide valuable understanding of the social and institutional arrangements that might sustain Greece’s efforts to meet its overall developmental challenges.

The impact of qualified audit opinion on stock returns: an empirical study at Amman stock exchange

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rana Bayo Flees ◽  
Sulaiman Mouselli
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Market Model ◽  
Content Type ◽  
Going Concern ◽  
Study Approach ◽  
Audit Opinions ◽  
The Impact ◽  
First Time

Purpose This paper aims to investigate the impact of qualified audit opinions on the returns of stocks listed at Amman Stock Exchange (ASE) after the introduction of the recent amendments by the International Auditing and Assurance Standard Board (IAASB) on audits reporting and conclusions. It further investigates if results differ between first time qualified and sequenced qualifications, and between plain qualified opinion and qualifications with going concern. Design/methodology/approach Audit opinions’ announcements and stock returns data are collected from companies’ annual reports for the fiscal years 2016 to 2019 while stock returns are computed from stock closing prices published at ASE website. The authors apply the event study approach and use the market model to calculate normal returns. Cumulative abnormal returns (CARs) and average abnormal returns (AARs) are computed for all qualified audit opinions’ announcements. Findings The empirical evidence suggests that investors at ASE do not react to qualified audit opinions announcements. That is, the authors find an insignificant impact of qualified audit opinion announcements on stock returns using both CAR and AAR estimates. The results are robust to first time and sequenced qualifications, and for qualifications with going concern. Results are also robust to the use of risk adjusted market model. Research limitations/implications The insignificant impact of qualified audit opinions on stock returns have two potential conflicting research implications. First, the new amendments introduced to auditors’ report made them more informative and reduce the negative signals contained in the qualified opinions. That is, investors are now aware of the real causes of qualifications and not overreacting to the qualified opinion. Second, the documented insignificant impact confirms that ASE is not a semi-strong form efficient. Practical implications The apparent excessive use of qualifications should ring the bell on whether auditors misuse their power or companies are really in trouble. Hence, the Jordanian regulatory bodies need to warn auditors against the excessive use of qualifications on the one hand, and to raise the awareness of investors on the implications of auditors’ opinions on the other hand. Originality/value This study is innovative in twofold. First, it explores the impact of qualified audit opinions on stock returns after the introduction of new amendments by IAASB at ASE. In addition, it uses event study approach and distinguishes between first time qualified and sequenced qualifications, and between plain qualified opinion and qualifications with going concern. The results are consistent with efficient market theory and behavioral finance explanations.

The effect of the imposition of a public reprimand on the stock price of companies in Malaysia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Emie Famieza Zainudin ◽  
Hafiza Aishah Hashim ◽  
Shahnaz Ismail
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Design Methodology ◽  
Negative Impact ◽  
Abnormal Returns ◽  
Investment Decisions ◽  
Market Model ◽  
Market Reactions ◽  
Content Type ◽  
A Company

Purpose This paper aims to examine the effect of the imposition of public reprimands on the underlying stock prices of companies in Malaysia. Design/methodology/approach Data on 148 companies that received public reprimands during the period from 2007 to 2013 were collected from the Bursa Malaysia website to analyse the market reactions to the imposition of public reprimands. Findings Based on a market model of abnormal returns, the empirical result showed that the imposition of a public reprimand had a negative impact on a company’s stock price. Moreover, when a market model of average abnormal returns (AAR) was used, the result indicated that companies that had received a public reprimand had a negative AAR value. Research limitations/implications The findings from this study have implications for shareholders in making their investment decisions because they can switch their investments to other companies and markets after a company in which they are interested or have made an investment has received a public reprimand. Originality/value There is limited research on the imposition of public reprimands and the effect that it has on companies in developing countries. Hence, this study contributes to research in this area by providing evidence on the effect of public reprimand on stock price reactions in the context of a developing country, namely, Malaysia.

Do firms harvest from political connections during general elections? Case of Pakistan

2020 ◽  
Vol 27 (1) ◽  
pp. 258-273
Author(s):  
Ayesha Ashraf ◽  
M. Kabir Hassan ◽  
Khurram Abbas ◽  
Qamar Uz Zaman
Keyword(s):  
Stock Returns ◽  
Abnormal Returns ◽  
Share Price ◽  
Market Model ◽  
Political Connections ◽  
Content Type ◽  
Connected Group ◽  
Playing Field ◽  
General Elections ◽  
The Impact

Purpose This paper aims to examine the impact of general elections on the stock returns of the politically connected group affiliated firms of Pakistan. Design/methodology/approach This study uses the market model to assess the impact of political connections (PCs) on abnormal stock returns, before and after election events. We have used share price data of non-financial firms of Pakistan for the years 2008-2013. Findings It has been found that behavior of cumulative average abnormal returns (CAAR) is significantly different for standalone and politically connected group affiliated firms. The results reveal that CAARs of politically connected group affiliated firms have experienced less deviation as compared to stand alone firms. Therefore, it is argued that politically connected group firms may reduce the impact of political uncertainty on stock returns in comparison to stand alone firms. Practical implications This study is helpful for policy regulators of Pakistan to devise appropriate policies to maintain a level playing field for politically connected and standalone firms. Originality/value This study provides a new dimension to understand the role and association of PCs and general elections with stock markets returns.

Currency returns during democratic transition: evidence from Tunisia

2019 ◽  
Vol 45 (7) ◽  
pp. 966-979
Author(s):  
Ghadi Saad ◽  
Taoufik Bouraoui
Keyword(s):  
Design Methodology ◽  
Democratic Transition ◽  
Abnormal Returns ◽  
Market Model ◽  
Study Analysis ◽  
Content Type ◽  
Policy Effects ◽  
Cumulative Abnormal Returns ◽  
New Evidence ◽  
The International Monetary Fund

Purpose The purpose of this paper is to investigate the question whether democratic transition elections influence currency returns. Also, the paper examines the behavior of the currency market around these elections in Tunisia. Design/methodology/approach Empirical data are collected from the International Monetary Fund, the Central Bank of Tunisia and the Tunisian stock market websites. The paper employs event study analysis using a market model and investigates abnormal currency returns around the four election events that occurred during the period of democratic transition in Tunisia (2011–2015). A robustness test is also conducted to control for monetary policy effects. Findings The results indicate that democratic transition does impact currency returns. The authors did not find any significant effect on the events dates (t0). However, event windows around the elections days reacted significantly to the events. The authors notice a significant decrease in cumulative abnormal returns (CARs) at event periods leading up to the elections. Post-event windows perceived negative CARs in the first and second election, and positive CARs in the last two elections. The authors also find that the change in the victors of the elections does not cause major differences to CARs. Further, the authors do not find significant results when controlling for inflation and interest rate. Originality/value There is no evidence yet on how democratic transition elections can affect currency returns. Given that currency is a leading indicator of the performance of the financial sector, this paper should provide policymakers with new evidence on the response of currency returns to democratic transition.

Do financial blogs serve an infomediary role in capital markets?

2016 ◽  
Vol 31 (1) ◽  
pp. 17-40 ◽  
Author(s):  
Laura K. Rickett
Keyword(s):  
New Media ◽  
Information Asymmetry ◽  
Capital Markets ◽  
Earnings Quality ◽  
Abnormal Returns ◽  
Information Environment ◽  
Economic Uncertainty ◽  
Market Conditions ◽  
Content Type ◽  
Retail Investors

Purpose – Financial blogs provide an online platform whereby retail investors effortlessly gain access to an abundant array of investment guidance. Prior studies find that the market reacts to financial blogs and similar online venues but results are inconsistent and financial blogs, a growing area in new media and distinct from other online venues, have received little attention. The purpose of this paper is to examine the particular conditions in which financial blogs serve an infomediary role in capital markets; when information asymmetry is high, earnings quality is low, and during economic uncertainty. These are conditions in which retail investors may seek easily accessible advice for their investment decisions. Design/methodology/approach – Abnormal returns for firms mentioned in blog posts on the SeekingAlpha.com financial blog are examined using a multivariate regression to determine whether or not the market reaction associated with these posts is related to information asymmetry, earnings quality, and economic uncertainty. Findings – Results indicate that abnormal returns are associated with the SeekingAlpha.com financial blog when information asymmetry is high and during bearish market conditions, and in particular when buy recommendations are posted on the blog for firms with high information asymmetry. This association is strengthened for firms with low institutional ownership, a proxy for unsophisticated or retail investors. Research limitations/implications – Results are based on a sample collected during a specific time period in order to detect whether financial blogs serve an infomediary role during uncertain market conditions. Practical implications – Results of this study can be useful to company executives who may want to monitor investment advice posted about their firm on financial blogs. Financial blogs and other forms of social media such as Twitter and Facebook are becoming the “new normal” in the investor information environment, a trend that is likely to continue. Originality/value – Financial blogs provide an abundance of supplemental information demanded by investors. Financial blogs represent a form of “new media,” now considered a key component of firms’ information environment (Saxton, 2012). In contrast to prior studies which primarily investigate only whether the market reacts to financial blogs or similar online platforms such as stock message boards, this study attempts to understand the specific conditions in which the market reacts to financial blogs. The results provide a rationale as to when and why investors rely on financial blogs and whether financial blogs serve an infomediary role in capital markets.

The impact of public scrutiny on executive compensation

2019 ◽  
Vol 27 (3) ◽  
pp. 303-323
Author(s):  
Andrew Glen Carrothers
Keyword(s):  
Executive Compensation ◽  
Chief Executive ◽  
Multivariate Regression Analysis ◽  
Government Support ◽  
Executive Pay ◽  
Data Set ◽  
Content Type ◽  
Public Scrutiny ◽  
The 2008 Financial Crisis ◽  
The Impact

Purpose This paper aims to examine the impact of public scrutiny on chief executive officer (CEO) compensation at Standard & Poor’s (S&P) 500 firms. Design/methodology/approach This paper uses the unique opportunity provided by the 2008 financial crisis and, in particular, government support and legislated compensation restrictions in the US Department of the Treasury’s Troubled Asset Relief Program (TARP). It aggregates monetary and non-monetary executive compensation information from 2006 to 2012, with firm- and manager-level data. It presents univariate summary compensation results and uses multivariate regression analysis to isolate the impact of public scrutiny and legislated compensation restrictions on executive pay. Findings Overall, the results are consistent, with increased public scrutiny having a lasting impact on perks and temporary impact on wage and legislated compensation restrictions having a temporary impact on wage. Changes in specific perk items provide evidence on which perks firms perceive as excessive and which provide common value. Originality/value The paper contributes to the discussion of perks as excess by introducing a novel data set of perk compensation at S&P500 firms and by studying how firms choose to alter levels of specific perk items in response to increased public scrutiny and legislated compensation restrictions. The paper contributes to the literature on executive pay as there has been little inquiry into the impact of public scrutiny on compensation. Public scrutiny could be an important source of external governance if firms change behavior in response to explicit and implicit scrutiny costs.

scholarly journals Managing information asymmetry in public–private relationships undergoing a digital transformation: the role of contractual and relational governance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tom A.E. Aben ◽  
Wendy van der Valk ◽  
Jens K. Roehrich ◽  
Kostas Selviaridis
Keyword(s):  
Decision Making ◽  
Information Processing ◽  
Information Asymmetry ◽  
Digital Technologies ◽  
Digital Transformation ◽  
Information Uncertainty ◽  
Governance Mechanisms ◽  
Relational Governance ◽  
Information Requirements ◽  
Content Type

PurposeInter-organisational governance is an important enabler for information processing, particularly in relationships undergoing digital transformation (DT) where partners depend on each other for information in decision-making. Based on information processing theory (IPT), the authors theoretically and empirically investigate how governance mechanisms address information asymmetry (uncertainty and equivocality) arising in capturing, sharing and interpreting information generated by digital technologies.Design/methodology/approachIPT is applied to four cases of public–private relationships in the Dutch infrastructure sector that aim to enhance the quantity and quality of information-based decision-making by implementing digital technologies. The investigated relationships are characterised by differing degrees and types of information uncertainty and equivocality. The authors build on rich data sets including archival data, observations, contract documents and interviews.FindingsAddressing information uncertainty requires invoking contractual control and coordination. Contract clauses should be precise and incentive schemes functional in terms of information requirements. Information equivocality is best addressed by using relational governance. Identifying information requirements and reducing information uncertainty are a prerequisite for the transformation activities that organisations perform to reduce information equivocality.Practical implicationsThe study offers insights into the roles of both governance mechanisms in managing information asymmetry in public–private relationships. The study uncovers key activities for gathering, sharing and transforming information when using digital technologies.Originality/valueThis study draws on IPT to study public–private relationships undergoing DT. The study links contractual control and coordination as well as relational governance mechanisms to information-processing activities that organisations deploy to reduce information uncertainty and equivocality.

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