Managerial education and the wealth effect of corporate capital investment in Taiwan

2017 ◽  
Vol 43 (12) ◽  
pp. 1358-1374 ◽  
Author(s):  
Pi-Hsun Tseng ◽  
Xuan-Qi Su ◽  
Hsiu-Jung Tsai
Keyword(s):  
Agency Theory ◽  
Capital Investment ◽  
Abnormal Returns ◽  
Wealth Effect ◽  
Organizational Legitimacy ◽  
Capital Investments ◽  
Cross Sectional ◽  
Content Type ◽  
Corporate Capital ◽  
Education Levels

Purpose The purpose of this paper is to study the effect of managerial education levels on the wealth effect at the time of investment announcements, by testing two competitive hypotheses: the agency theory-based overinvestment hypothesis vs the Q-theory-based organizational legitimacy hypothesis. Design/methodology/approach The authors construct the sample by hand-collecting the announcement dates of capital investments from major newspapers published in Taiwan from 2006 to 2014. The authors then use the event study methodology to estimate cumulative abnormal returns at the time of investments announcements to measure the wealth effect. Finally, the authors examine the wealth effect for capital-investing firms with higher managerial education vs those with lower managerial education. The authors also conduct a cross-sectional regression to test the relation between the wealth effect of capital investment and managerial education. Findings The empirical results indicate that the wealth effect at the time of investment announcements is less favorable for firms with better-educated managers; this negative relation is mitigated for firms with higher institutional ownership and is aggravated for family-controlled firms; and the overall findings are supported by the agency theory-based overinvestment hypothesis, suggesting that higher managerial education lead to greater managerial optimism/overconfidence, which in turn increases the likelihood of overinvestment and implies a less favorable wealth effect associated with capital investment. Originality/value This study contributes to the literature by proposing a new, unexplored stock market’s reaction channel through which managerial education signals adverse information about potential overinvestment behavior, even though many studies suggests that managerial education serves as an indication of knowledge/capability and improves firm performance.

Announced versus canceled bank mergers and acquisitions

2016 ◽  
Vol 17 (5) ◽  
pp. 510-544 ◽  
Author(s):  
Armin Varmaz ◽  
Jonas Laibner
Keyword(s):  
Mergers And Acquisitions ◽  
Shareholder Value ◽  
Abnormal Returns ◽  
Bank Mergers ◽  
Cross Sectional ◽  
Market Reactions ◽  
Content Type ◽  
European Bank ◽  
Long Time ◽  
Loan Losses

Purpose This paper aims to empirically analyze the success of European bank mergers and acquisitions (M&As) by an analysis of the shareholder value implications of stock market reactions to announced and canceled M&As in the period from 1999 to 2015. Design/methodology/approach The analysis of a sample of 467 announced and 54 canceled European bank M&As is conducted using event study methodology. The determinants of the shareholder value creations in M&A are observed in cross-sectional regressions. The likelihood of M&As being canceled is estimated in logit regressions. Findings The paper finds that European bank M&As have not been successful in terms of shareholder value creation for acquiring banks, whereas targets experienced significant value gains. Abnormal returns for bidders and targets exhibit the same characteristics upon the announcement of M&As that are canceled at a later date, whereas the results for transaction cancelations deviate. Targets experience negative abnormal returns at a larger size than upon the transaction announcement. The findings for bidders are striking, as they destroy shareholder value upon the transaction cancelation, also, consequently they suffer twice. In particular, banks with higher profitability, higher efficiency and lower liquidity experience negative abnormal returns around the announcement dates. Negative abnormal returns prior to the transaction announcement and provision for loan losses increase significantly the likelihood of M&A cancelation. Originality/value This paper contributes to the literature expanding existing analyses to the shareholder value implications of canceled European bank M&As in a 17-year long time period. The findings reveal the destructive characteristics of canceled bank M&As and provide innovative insights into European capital market reaction to canceled M&As.

Thanks, neighbor! Stock market experience around significant European tax cuts

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Huabing Wang ◽  
Anne Macy
Keyword(s):  
Stock Market ◽  
Spillover Effect ◽  
Abnormal Returns ◽  
The Other ◽  
Stock Index ◽  
Corporate Tax ◽  
Cross Sectional ◽  
Content Type ◽  
Study Approach ◽  
Tax Cuts

PurposeThis paper analyzes the effect of corporate tax cuts on the competitiveness of the tax-cutting countries and neighbor countries.Design/methodology/approachThis study utilizes four significant corporate tax reforms among the OECD countries in Europe that offer a one-time tax cut of 6% or more. The short-term event study approach examines the stock index reactions for both the tax-cutting countries and the other countries. Multivariate fixed-effect regressions are employed to study the cross-sectional variations in the non-tax-cut countries.FindingsThis paper finds positive excess returns for Slovakia and Germany around the tax-cut passage. Multivariate analysis of stock market reactions of the non-tax-cutting countries reveals some evidence supporting both the positive spillover effect and the negative competitive loss effect. More advanced countries are more likely to experience higher abnormal returns, while higher tax countries are more likely to suffer lower abnormal returns. Other factors identified that might have influenced the effect of a foreign tax cut include the existing trade flows with the tax-cutting countries, whether the country has a common currency and the export orientation of the economy.Research limitations/implicationsThe findings are subject to sample-size issues. The lack of results for the other two countries is due to complicating events, as suggested by the further investigation of concurrent news events around the event days.Practical implicationsThe simultaneous analysis of the reform countries and the other countries in the region suggests that policymakers need to consider the relative positioning of their country vs the other countries in terms of economic development and current tax burdens when determining the optimal policy for their country or to respond to the tax policy changes in the other countries.Originality/valueThis study offers empirical evidence regarding the effect of corporate tax changes on competitiveness through the lens of stock markets' reactions, which depend on the net results of the spillover gain vs the competitive loss.

Germany's Repeal of the Corporate Capital Gains Tax: The Equity Market Response

2004 ◽  
Vol 26 (s-1) ◽  
pp. 73-97 ◽  
Author(s):  
Courtney H. Edwards ◽  
Mark H. Lang ◽  
Edward L. Maydew ◽  
Douglas A. Shackelford
Keyword(s):  
Abnormal Returns ◽  
Economic Effects ◽  
Capital Gains ◽  
Capital Gains Tax ◽  
Cross Sectional ◽  
Price Response ◽  
Corporate Capital ◽  
Market Values ◽  
Lock In Effect ◽  
Lock In

In late 1999, the German government made a surprise announcement that it would repeal the large and long-standing capital gains tax on sales of corporate crossholdings effective in 2002. The repeal has been hailed as a revolutionary step toward breaking up the extensive web of crossholdings among German companies. The lock-in effect from the large corporate capital gains tax was said to act as a barrier to efficient acquisition and divestiture of German firms and divisions. Many observers predicted that once the lock-in effect was removed, Germany would experience a flurry of acquisition and divestiture activity. Several other industrialized countries were poised to follow suit, with similar proposals pending in France, Japan, and the United Kingdom. This paper provides evidence of the economic impact of the repeal by examining its effect on the market values of German firms. While event studies of tax legislation can be difficult, our study is aided by the fact that the repeal was both a surprise and was announced separately from other tax reform proposals. In addition, we provide cross-sectional evidence on the economic magnitude of the repeal, assess the likely beneficiaries from the repeal, and predict which sectors are most likely to experience a surge in acquisition and divestiture activity following the repeal. Our results suggest that the economic effects are highly concentrated. We find a positive association between firms' event period abnormal returns and the extent of their crossholdings, consistent with taxes acting as a barrier to efficient allocation of ownership. However, the reaction is limited to the six largest banks and insurers and their extensive minority holdings in industrial firms. These six large firms have a combined market capitalization equal to 22 percent of all 394 firms in this study. We also find evidence of a positive stock price response to the announcement for industrial companies held by these financial firms, consistent with shareholders in those firms benefiting from the likely reduction in investor-level tax burdens and expected increased efficiency following the tax law change.

The effect of media exposure on contraceptive adoption across “poverty line”

2015 ◽  
Vol 9 (3) ◽  
pp. 219-236 ◽  
Author(s):  
Kapil Khandeparkar ◽  
Pinaki Roy ◽  
Manoj Motiani
Keyword(s):  
Mass Media ◽  
Contraceptive Use ◽  
Media Exposure ◽  
Poverty Line ◽  
Cross Sectional ◽  
Content Type ◽  
Standards Of Living ◽  
Education Levels ◽  
Major Factors ◽  
Media Mix

Purpose – This study aims to explore the effect of mass media exposure on women contraceptive adoption. The intent was to show how factors affected contraceptive use, such as education, standards of living, etc., behave differently across the poverty line. Design/methodology/approach – Logistic regression was used to test the effect of exposure of various mass media on contraceptive adoption. Indian Human Development Survey (2005) was used for the analysis. Analysis was performed to compare results across the poverty line. Findings – Television exposure was found to be significant, and it had a strong effect on the likelihood that the family uses contraceptives. Newspaper readership was found significant above the poverty line and insignificant below. Research limitations/implications – The present study only analyzes cross-sectional data. A longitudinal study would be better suited to determine how these factors affect contraceptive use over time. Practical implications – The findings of this study can be useful in designing more effective media mix for the communications aimed at increasing contraceptive use in India. Social implications – The findings show the divide between the population segments above and below the poverty line. Low education levels, affordability issues and son preferences are the major factors deterring contraceptive use at this level. Originality/value – This is the first study to separately study the population samples across the poverty line. Compared to previous studies which focuses heavily on one media, this analysis includes other media variables and focuses on a variation of these factors across the poverty line.

Stock return predictability when growth and accrual measures are negatively correlated

2019 ◽  
Vol 9 (3) ◽  
pp. 401-422 ◽  
Author(s):  
Miao Luo ◽  
Tao Chen ◽  
Jun Cai
Keyword(s):  
Stock Returns ◽  
Negative Correlation ◽  
Abnormal Returns ◽  
High Growth ◽  
Cross Sectional ◽  
Content Type ◽  
Positive Correlation ◽  
Short Sale ◽  
Asset Growth ◽  
Fama And French

Purpose For most companies, growth measures such as asset growth are positively correlated with accrual measures. Just like investment in fixed assets, current accrual represents one form of investment and is an integral part of a firm’s business growth. This makes it difficult to distinguish between the growth-based and earnings quality-based interpretations of the accrual effects, because high accruals can represent both high growth and inflated earnings. The purpose of this paper is to add to the literature by examining an issue that has not received much attention: the correlation between asset growth and accruals and its implication on stock return predictability. The authors address the issue using Fama and Macbeth’s (1973) cross-sectional regressions that are conditional on the correlations between the two variables. Design/methodology/approach The authors partition firms based on whether the correlation between current accrual and asset growth in the past five years is positive (ρ+) or negative (ρ−). The authors refer to these two types of firms such as “positive correlation” and “negative correlation” groups. For both groups, the authors examine whether firms with higher asset growth and higher accruals are associated with lower future stock returns. The authors implement Fama and MacBeth’s cross-sectional regressions incorporating the effect of correlations between growth and accrual measures. In addition, the authors regress hedge portfolio returns on Fama and French (1993) three-factor and Fama and French (2015) five-factor models to see if the intercepts (a’s) from these regressions are significantly different from 0. Findings For each year, the authors partition firms based on whether the correlation between asset growth and current accrual is positive or negative. For both the “positive correlation” and “negative correlation” firms, the authors examine the association between accruals and future stock returns. The authors find that accruals remain strong in predicting future stock returns for both groups. The accrual effects from the “negative correlation” group cannot be attributed to the growth-based hypothesis because for these firms, when accruals are high, growth measures tend to be relatively low and vice versa. The effects are most likely driven by the alternative hypothesis that investors overvalue the accrual part of earnings. Research limitations/implications There exist a few issues when investors actually implement these strategies. These include liquidity costs, institutional holdings and short sale constraints. Lesmond (2008) concludes that the bulk of the trading profits is derived from the short side of the trade, but that this position suffers from high liquidity costs that reduces institutional holdings with consequent short sale constraints. The net gains after taking into account these issues remain an open question be addressed in the future. Practical implications The empirical results indicate that investors can do an implementable portfolio strategy of going long for a year on an initially equally weighted lowest asset growth (accrual) decile portfolio and going short for a year on an initially equally weighted highest asset growth (accrual) decile portfolio, which produces significant abnormal returns. The results further show that these abnormal returns can be improved if investors classify stocks into “the positive correlation” and “negative correlation” groups and implement trading similar trading strategies. Originality/value The empirical evidence finds that firm-year observations that exhibit a negative correlation between growth and accrual measures represents a significant 30 percent of the total firm-year observations during the sample period from July 1974 to June 2017. This highlights the necessity to undertake a detailed analysis on the issue. The authors continue to find accrual effects among these groups of firms. Therefore, the accrual effect cannot be attributed to the diminishing marginal return hypothesis. This is the main contribution of the paper.

What happens when a stock is added to the Nasdaq-100 index? What doesn’t happen?

2015 ◽  
Vol 41 (5) ◽  
pp. 480-506 ◽  
Author(s):  
Susana Yu ◽  
Gwendolyn Webb ◽  
Kishore Tandon
Keyword(s):  
Trading Volume ◽  
Selection Process ◽  
Operating Performance ◽  
Abnormal Returns ◽  
Indirect Evidence ◽  
Market Liquidity ◽  
Cross Sectional ◽  
Content Type ◽  
Liquidity Measures ◽  
Bid Ask Spreads

Purpose – Prior research on additions to the S & P 500 and the smaller MidCap 400 and SmallCap 600 indexes reach different conclusions regarding the key variables that explain the cross-section of announcement period abnormal returns. Most notable in this regard is that liquidity measures, long thought to be of importance, do not appear to explain abnormal returns of the S & P 500 when other factors are controlled for. By contrast, they do appear to matter for additions to the smaller stock indexes. To explore this difference, the purpose of this paper is to analyze the abnormal returns upon announcement that a stock will be added to the Nasdaq-100 Index in a cross-sectional manner, controlling for several possible alternative factors. Design/methodology/approach – This paper analyzes abnormal returns upon announcement that a stock will be added to the Nasdaq-100 Index. The authors consider several possible sources of the positive price effects in a multivariate setting that controls simultaneously for measures of liquidity, arbitrage risk, operating performance and investor interest and awareness. The authors then analyze both trading volume and the bid-ask spreads. The authors finally examine analyst and investor interest, focussing on changes in analyst coverage. Findings – The authors find that only liquidity variables are significant, but that factors representing feedback effects on the firm’s operations and level of managerial effort are not. The authors find that the average bid/ask spreads of stocks added to the Nasdaq-100 index are lower after the addition. The authors also find that the number of analysts following a stock increases significantly after addition, verifying increased analyst interest. Both forms of evidence are consistent with the hypothesis that the additions are associated with enhanced liquidity for the stocks. Originality/value – The authors conclude that what does happen to a Nasdaq stock when it is announced that it will be added to the Nasdaq-100 Index is that more analysts are drawn to it, and its market liquidity is enhanced. The authors conclude that what does not happen is that there is no evidence of significant effects of enhanced managerial effort or operating performance associated with the inclusion. This difference is noteworthy because it suggests that a certification effect of additions to the S & P indexes associated with S & P’s selection process are unique to it and do not apply to the Nasdaq-100 Index additions based on market cap alone. The results provide indirect evidence on the existence and significance of the certification effect associated with additions to the S & P indexes.

scholarly journals Relationship between Human Capital Investment and Employees’ Work Efficiency in ATAP Bauchi: The Relevance of TETFund Interventions

2021 ◽  
Vol 3 (1) ◽  
pp. 15-21
Author(s):  
Hashim Sabo Bello
Keyword(s):  
Higher Education ◽  
Human Capital ◽  
Capital Investment ◽  
Labour Force ◽  
Human Capital Investment ◽  
Intellectual Ability ◽  
Capital Investments ◽  
Work Efficiency ◽  
Cross Sectional ◽  
Human Capital Investments

As it is an established fact that, no nation or organization develops beyond the intellectual ability of its human resources. Nowadays, investment on human capital is paramount to sustain labour force participation in the progress and development of higher education in Nigeria. Besides, the Nigerian Universities and Colleges of Education, the polytechnic system provides another option for higher education in Nigeria where Certificates, National Diploma and Higher National Diploma courses are offered and awarded. The study aimed at evaluating the relevance of TETFund intervention on human capital investments and its bearing to employees’ work efficiency in the polytechnic communities in Bauchi state to be specific and Nigeria by extension. This study generates data from quantitative and qualitative sources, using questionnaire instrument to randomly collect a cross sectional data from one of the two (2) existing polytechnics in Bauchi state of Nigeria. A total of 45 structured questionnaires were administered on our respondents and 44 were valid for analysis. The research adopted the descriptive statistics as well as the Chi-square, X2, to analyze the results and test the hypothesis to give the tentative prediction about the nature of the relationship between the research variables. Thus the research believes that there is a significant relationship between TETFund intervention in human capital investment and employees’ work efficiency within educational polytechnic system in Nigeria. This research study recommended for the public organizations in Nigeria especially the education institutions to harnessed and take full advantage of the reciprocal benefits of human capital investments and the work efficiency in educational tertiary institutions as this will go a long way to raise organizational achievement towards an end with the least amount of resources.

The disappearing abnormal returns to a fundamental signal strategy

2017 ◽  
Vol 43 (4) ◽  
pp. 406-424
Author(s):  
John Dorey ◽  
Sangwan Kim ◽  
Yong-Chul Shin
Keyword(s):  
Design Methodology ◽  
Value Relevance ◽  
Abnormal Returns ◽  
Predictive Ability ◽  
Publication Date ◽  
Cross Sectional ◽  
Content Type ◽  
Pricing Anomalies ◽  
Valuation Process ◽  
Using Data

Purpose The purpose of this paper is to examine whether abnormal returns to a fundamental signal (FS) strategy disappear after the publication of Abarbanell and Bushee (1998). Design/methodology/approach Using data on NYSE/AMEX firms from 1974 to 2012, this research estimates annual Fama and MacBeth (1973) cross-sectional regression of risk-adjusted buy-and-hold returns on the FSs after controlling for contemporaneous earnings changes and a proxy for market risk. Findings This paper finds that predictable hedge returns to the FSs substantially decrease and become statistically insignificant after the Abarbanell and Bushee’s publication date. This research also finds that the FSs have not lost their importance to equity valuation process; value relevance of the FSs has not diminished, and the FSs have retained their predictive ability over time. The evidence on changing information and trading environments appears to contribute to the disappearing abnormal returns to a FS strategy. Originality/value This paper adds to the growing body of literature on the persistence of pricing anomalies.

In government we trust: rise and fall of Canadian business income trust conversions

2009 ◽  
Vol 35 (9) ◽  
pp. 784-802 ◽  
Author(s):  
Lawrence Kryzanowski ◽  
Ying Lu
Keyword(s):  
Firm Value ◽  
Abnormal Returns ◽  
Cash Flows ◽  
Market Impact ◽  
Cross Sectional ◽  
Content Type ◽  
Trust Level ◽  
Business Income ◽  
The Government ◽  
Income Trusts

PurposeThe purpose of this paper is to assess the market impact of announcements that publicly traded limited liability firms would convert to business income trusts, and to test the robustness of the tax motive as the primary determinant of any conversion announcement effects by estimating the market impact of the announcement by the Canadian Federal Government that the corporate income of Canadian income trusts would be taxed at the trust level.Design/methodology/approachEvent‐study methodology (including various tests of robustness) is used to examine the market impacts of the initial conversion announcement and the announcement that the corporate income of Canadian income trusts would be taxed at the trust level. Cross‐sectional regressions are used to identify the determinants of the market effect associated with income trust conversion announcements.FindingsThe paper finds that the market‐ and risk‐adjusted abnormal returns (ARs) are positive and very significant on the announcement dates and not significant on the conversion effective dates. The price discovery process is not as smooth for the Canadian government's announcement after the market close on Halloween day 2006, that it would tax income trusts at the trust level. While the ARs are negative and very significant on the first and second trading days after the announcement, much of the second day ARs are reversed in the subsequent two days. Furthermore, negative and significant ARs precede the government announcement. The market impact of trust conversion announcements is primarily related to the tax savings associated with such conversions and more weakly related to potential agency problems associated with free cash flows.Research limitations/implicationsThe research indicates the importance of any taxation changes associated with changes in organization form on firm value. It also identifies the potential for informational leakage associated with government decisions.Originality/valueThe paper highlights the importance of taxes and tax changes and organization form changes on firm valuation.

The wealth effects of accelerated stock repurchases

2014 ◽  
Vol 40 (5) ◽  
pp. 434-453
Author(s):  
Ken C. Yook ◽  
Partha Gangopadhyay
Keyword(s):  
Abnormal Returns ◽  
Wealth Effect ◽  
Wealth Effects ◽  
Open Market ◽  
Stock Repurchase ◽  
Content Type ◽  
Number Of Factors ◽  
The Press ◽  
Completion Date ◽  
Sampling Problems

Purpose – The wealth effect of accelerated stock repurchase (ASR) documented by previous studies is not as large as the authors would have expected. The authors believe that there are potentially important sampling problems in the previous studies, which make the results less reliable. Identifying a number of factors that can possibly affect the announcement-period returns, the purpose of this paper is to reexamine the wealth effect of ASRs. Design/methodology/approach – The paper identifies a number of factors that can possibly affect the announcement-period returns to ASRs which include: whether an ASR announcement in the press is the initiation date or the completion date of the ASR; the size of the ASR program; whether an ASR is part of an open market repurchase (OMR) program; the frequency of ASR announcements by a firm; whether other corporate news is announced simultaneously with an ASR. The paper partitions the ASR sample into three groups, and then examines the wealth effect of these groups. Findings – The empirical results show that the market reacts differently to the announcement of ASR in these three groups. The three-day announcement-period CAR (t=−1, +1) is 3.59 percent for the high-wealth-effect group, 2.01 percent for the medium-wealth-effect group, and 1.48 percent for the low-wealth-effect group. The paper also identifies the size of the ASR program, whether the ASR is announced simultaneously with an OMR or not, and the frequency of ASR announcements are the most important determinants of the announcement-period abnormal returns. Originality/value – These findings suggest that the weaker wealth effects of ASRs that have been documented in previous studies are due to sampling related issues.

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