The stock market reaction to dividend reductions and omissions in China

2019 ◽  
Vol 45 (3) ◽  
pp. 381-398
Author(s):  
Jing Dong ◽  
Hui Li ◽  
Kerry Liu ◽  
Xiaohui Wu
Keyword(s):  
Stock Market ◽  
Market Reaction ◽  
Factor Model ◽  
Abnormal Returns ◽  
Chinese Stock Market ◽  
Government Ownership ◽  
Chinese Market ◽  
Content Type ◽  
Stock Market Reaction ◽  
The Government

Purpose The purpose of this paper is to investigate Chinese stock market reaction to the announcements of dividend reductions and omissions. Design/methodology/approach The data sets cover the period from 1990 to 2009. A rolling portfolio approach is performed and the Fama–French three-factor model is used to calculate the post-announcement long-term abnormal returns. The matching method and the sub-sample tests are used to examine the robustness. Findings After controlling for firm size, the unexpected earnings and government ownership, no evidence of the dividend announcement drift is found. The results also show that the government ownership and the large trading play a role in explaining the post-announcement abnormal returns. Originality/value This is the first study concerning the Chinese market that examines the Chinese stock market reaction to dividend cut and omission using a long-time period of data.

Stock market reaction to cash dividends: evidence from the Nigerian stock market

2019 ◽  
Vol 45 (3) ◽  
pp. 366-380
Author(s):  
Friday Kennedy Ozo ◽  
Thankom Gopinath Arun
Keyword(s):  
Stock Market ◽  
Event Study ◽  
Stock Price ◽  
Abnormal Returns ◽  
Cash Dividend ◽  
Content Type ◽  
Price Reaction ◽  
Stock Market Reaction ◽  
Dividend Announcements ◽  
Stock Price Reaction

PurposeVery little is known about the effect of dividend announcements on stock prices in Nigeria, despite the country’s unique institutional environment. The purpose of this paper is, therefore, to provide empirical evidence on this issue by investigating the stock price reaction to cash dividends by companies listed on the Nigerian Stock Exchange.Design/methodology/approachStandard event study methodology, using the market model, is employed to determine the abnormal returns surrounding the cash dividend announcement date. Abnormal returns are also calculated employing the market-adjusted return model as a robustness check and to test the sensitivity of the results toβestimation. The authors also examine the interaction between cash dividends and earnings by estimating a regression model where announcement abnormal returns are a function of both dividend changes and earnings changes relative to stock price.FindingsThe study find support for the signaling hypothesis: dividend increases are associated with positive stock price reaction, while dividend decreases are associated with negative stock price reaction. Companies that do not change their dividends experience insignificant positive abnormal returns. The results also suggest that both dividends and earnings are informative, but dividends contain information beyond that contained in earnings.Research limitations/implicationsThe sample for the study includes only cash dividend announcements occurring without other corporate events (such as interim dividends, stock splits, stock dividends, and mergers and acquisitions) during the event study period. The small firm-year observations may limit the validity of generalizations from these conclusions.Practical implicationsThe findings are useful to researchers, practitioners and investors interested in companies listed on the Nigerian stock market for their proper strategic decision making. In particular, the results can be used to encourage transparency and good governance practices in the Nigerian stock market.Originality/valueThis paper adds to the very limited research on the stock market reaction to cash dividend announcements in Nigeria; it is the first of its kind employing a unique cash dividends data.

Who can realize the “spot value” of corporate social responsibility?

2020 ◽  
Vol 11 (4) ◽  
pp. 717-743
Author(s):  
Shiyu Wang ◽  
Yan Zhang ◽  
Guanzhen Wang ◽  
Zhibin Chen
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Voluntary Disclosure ◽  
Abnormal Returns ◽  
Chinese Stock Market ◽  
Chinese Market ◽  
Content Type ◽  
Retail Investors ◽  
Csr Disclosure ◽  
Corporate Social

Purpose This paper answers, in the Chinese stock market, who can realize the “spot value” of corporate social responsibility (CSR). Design/methodology/approach The authors use event-study to build the research framework. Using CSR report content analysis, the authors measure the specification level of CSR disclosure. Applying the Baidu index, the authors mine Chinese investors’ profiles data to investigate retail investor heterogeneity closely. Findings The authors find strong evidence that the measure captures a behavioral bias in CSR pricing: firms that choose to disclose CSR report experience positive abnormal return more among retail investors than institutional investors, more among young investors than older, but no difference between female and male investors. Practical implications For Chinese public firms, the authors give them evidence that they can realize positive abnormal returns by applying certain CSR disclosure strategies. For Chinese investors, especially retail investors and youths, the authors ask them to rethink whether their positive evaluation of CSR is a rational trade-off choice or whether they are fooled by the “hedging mask” and “attention-grabbing.” Social implications The findings can give some suggestions to regulators: encouraging voluntary disclosure and reducing mandatory disclosure can drive enterprises to engage in more CSR activities because the voluntarily CSR disclosure can realize both long-term value and “spot value.” Complementarily, a more rigorous CSR report auditing regulation can suppress the “greenwash” by increasing the “lying cost.” Originality/value Using behavioral finance theory, the authors connect the gap between neoclassical research on the “U-shaped” value realization of CSR and the increasing voluntary CSR disclosure in the Chinese market. The authors find that heuristic reason and emotionality orientation results in the Chinese “CSR-friendly” market.

Is disposition related to momentum in Chinese market?

2015 ◽  
Vol 41 (6) ◽  
pp. 600-614 ◽  
Author(s):  
Liu Liu Kong ◽  
Min Bai ◽  
Peiming Wang
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Disposition Effect ◽  
Chinese Stock Market ◽  
Momentum Effect ◽  
Chinese Market ◽  
Firm Level ◽  
Content Type ◽  
Level Data ◽  
The Relationship

Purpose – The purpose of this paper is to examine whether the framework of Prospect Theory and Mental Accounting proposed by Grinblatt and Han (2005) can be applied to analyzing the relationship between the disposition effect and momentum in the Chinese stock market. Design/methodology/approach – The paper applies the methodology proposed by Grinblatt and Han (2005). Findings – Using firm-level data, with a sample period from January 1998 to June 2013, the authors find evidence that the momentum effect in the Chinese stock market is not driven by the disposition effect, contradicting the findings of Grinblatt and Han (2005) concerning the US stock market. The discrepancies in the findings between the Chinese and US stock markets are robust and independent of sample periods. Research limitations/implications – The findings suggest that Grinblatt and Han’s model may not be applicable to the Chinese stock market. This is possibly because of the regulatory differences between the two stock markets and cross-national variation in investor behavior; in particular, the short-selling prohibition in the Chinese stock market and greater reference point adaptation to unrealized gains/losses among Chinese compared to Americans. Originality/value – This study provides evidence of the inapplicability of Grinblatt and Han’s model for the Chinese stock market, and shows the differences in the relationship between disposition effect and momentum between the Chinese and US stock markets.

Environmental disclosures and changes in firm value: new evidence from the BP oil spill

2019 ◽  
Vol 32 (4) ◽  
pp. 610-626
Author(s):  
Steve A. Garner ◽  
Michael J. Lacina
Keyword(s):  
Stock Market ◽  
Oil Spill ◽  
Firm Value ◽  
Market Reaction ◽  
Negative Relationship ◽  
Positive Association ◽  
Environmental Disclosure ◽  
Content Type ◽  
Bp Oil Spill ◽  
Stock Market Reaction

Purpose The purpose of this study is to use a sample of oil and gas firms and examine the relationship between environmental disclosure in the USA Form 10-K and the stock market reaction after the BP oil spill. Design/methodology/approach The study focused on three important time periods associated with the oil spill: the time period beginning with the explosion on April 20, 2010 and ending August 5, 2010, one day after BP permanently sealed the oil leak; the period beginning with the explosion on April 20 and ending with the sinking of the Deepwater Horizon oil rig on April 22; and the period associated with President Obama’s first public comments on the oil spill and his administration’s ban on oil drilling, i.e. April 29-30 and May 3. Findings The results show a negative relationship between environmental disclosure and stock market reaction. Social implications The findings of a negative association could be the result of higher disclosure by firms with more environmental risk because they indeed are riskier and/or they engage in “window dressing” to legitimize their operations and practices and maintain acceptance by society. Originality/value The results in this study run counter to a positive association documented in prior research studying the effects of environmental disasters.

Information Transfer among Internet Firms: The Case of Hacker Attacks

2003 ◽  
Vol 17 (2) ◽  
pp. 71-82 ◽  
Author(s):  
Michael L. Ettredge ◽  
Vernon J. Richardson
Keyword(s):  
Stock Market ◽  
Information Transfer ◽  
Market Reaction ◽  
Denial Of Service ◽  
Abnormal Returns ◽  
Internet Security ◽  
The Internet ◽  
Denial Of Service Attacks ◽  
Internet Firms ◽  
Stock Market Reaction

This study focuses on the stock market reaction to denial of service attacks against certain well-known Internet firms in February 2000. Investors appear to have used several heuristics in deciding which firms were “similar” to those attacked, and thus predicted that they were also likely to be attacked. The primary heuristic employed appears to have been similarity in reliance on the Internet to conduct operating activities (i.e., the set of Internet firms). We find negative mean abnormal returns among Internet firms not actually attacked (i.e., information transfer). This occurred both within Internet industries in which some firms were attacked, and within Internet industries with no attacks. A secondary heuristic appears to have been that Internet firms similar in size to those attacked (i.e., relatively large) were more likely to be attacked. In contrast to all other Internet industries, providers of Internet security products and services experienced positive mean abnormal returns.

Corporate culture and stock returns: evidence from Indian companies

2019 ◽  
Vol 12 (4) ◽  
pp. 464-480
Author(s):  
Tariq Aziz ◽  
Valeed Ahmad Ansari ◽  
Mahfooz Alam
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Corporate Culture ◽  
Factor Model ◽  
Market Performance ◽  
Abnormal Returns ◽  
Point Of View ◽  
Content Type ◽  
Market Index ◽  
Stock Market Performance

Purpose The purpose of this paper is to investigate the stock market performance of companies featured in the survey “Best Companies to Work For” as a proxy for corporate culture. Design/methodology/approach The authors employed the portfolio formation and event study methods from finance to examine the linkage between corporate culture and future stocks returns. The lists of India’s best place to work for by Great Place to Work® Institute and Business Today (BT), India’s leading business magazine, form the primary surrogate for a great corporate culture. The authors compared the stock market performance of the culture portfolio vis-à-vis market index, in addition to using Carhart’s (1997) four-factor model. Findings A portfolio of Indian firms that featured in the “Best Companies to Work For” by Great Place to Work© Institute and BT magazine provides a higher return than the market index Sensex both on an ordinary return and on a risk-adjusted basis. The four-factor αs of the value-weighted culture portfolios are significant, implying that these portfolios have provided abnormal returns during the sample period. Moreover, the findings suggest a positive drift in the abnormal returns after inclusion in the “Best Companies to Work For” list. Research limitations/implications The results are largely in conformity with the prediction of the theory that states that corporate culture is an economic asset for a firm that increases its value. Practical implications From an investor’s point of view, the study indicates that investment in “Best Companies to Work For” is a better alternative than passive index investing. Originality/value This study fills the empirical void in the relationship between corporate culture and stock market performance in the Indian context.

Product and Market Diversification and the Stock Market Response to Business Combinations

2006 ◽  
pp. 216-241
Author(s):  
Pablo Sanchez-Lorda ◽  
Esteban Garcia-Canal
Keyword(s):  
Stock Market ◽  
Information Asymmetry ◽  
Strategic Alliances ◽  
Market Reaction ◽  
Abnormal Returns ◽  
Business Combinations ◽  
Stock Market Reaction ◽  
Resource Complementarity ◽  
The Relationship ◽  
Work First

In this chapter, we analyzed the stock market reaction to internationalization and diversification of the European telecom firms through acquisitions or strategic alliances. We analyzed these operations with the purpose of verifying to what extent the stock market reaction to these business combinations is influenced by information asymmetry, resource complementarity, and management costs. There are two main findings of this work. First, while acquisitions are more valued when entering into one of the more related businesses—telecommunication equipment shops—alliances, however, are only positively valued in the less related businesses. Second, the strength of the competitive position of the firm moderates the relationship between product and market diversification and abnormal returns.

Managers' sexually-oriented behavior and firm performance: linking media reports to stock market reactions and legal risk

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Amy Nicole Baker ◽  
David King ◽  
Michael Nalick ◽  
Melissa Tempio ◽  
Vishal K. Gupta ◽  
...  
Keyword(s):  
Sexual Harassment ◽  
Stock Market ◽  
Market Reaction ◽  
Market Reactions ◽  
Content Type ◽  
Stock Market Reaction ◽  
Workplace Romance ◽  
Media Reports ◽  
Stock Market Reactions ◽  
The Impact

PurposeThe goal of this study is to examine the association between managers' sexually-oriented behavior in publicly traded firms and subsequent stock market reactions. Both sexual harassment and nonharassing sexually-oriented behavior (i.e. workplace romance) are associated with negative shareholder reactions. The authors also examine factors that may alter the stock market reaction and those that may reduce the risk of lawsuit in sexual harassment cases.Design/methodology/approachInformation about incidents of sexually-oriented behavior was collected from media reports and content coded. An event study with a stock market reaction was used to measure the impact of disclosed sexually-oriented behaviors. Logistic regression was used to assess the relationship between incident characteristics and sexual harassment lawsuits.FindingsDisclosure of managers' sexually-oriented behavior is associated with a negative stock market reaction. Interestingly, the reaction was not more severe for sexual harassment disclosures compared to nonharassing behavior (i.e. workplace romance). Results also suggest that terminating a manager prior to disclosure of an event is negatively related to a harassment lawsuit.Originality/valueThe authors report this as the first study to focus on the stock market reaction of sexually-oriented harassing and nonharassing behavior of managers. This work complements research that documents the negative impact of sexual harassment on individuals by demonstrating these behaviors are associated with loss and risk at an organizational level.

Manufacturing Research on the Ability of Finance Statement Information in Predicting Abnormal Return of Investing Chinese Manufacturing Companies

2014 ◽  
Vol 1056 ◽  
pp. 114-117
Author(s):  
Xin Ming Sun ◽  
Jia Ji Zhang
Keyword(s):  
Stock Market ◽  
Abnormal Return ◽  
Abnormal Returns ◽  
Financial Information ◽  
Financial Statement ◽  
Chinese Stock Market ◽  
Manufacturing Companies ◽  
Chinese Market ◽  
Stock Performance ◽  
Precise Formulation

In 1934, Grahamd and Dodd gave a precise formulation between investor and speculator , as follow: “ a investment operation is one which ,upon thorough analysis promises safety of principle and an adequate return. Operations, not meeting these requirements are speculative”. Since then, a lot of scholars have employed financial information in predicting abnormal returns successfully, among them, Ou and Penman (1989) Through conducting financial statement information in some models, to predicting abnormal returns in Chinese stock market, we examine whether its usefulness in Chinese Manufacturing Companies and found that it was impossible to predict stock performance in the Chinese market which was proved useful in other stock market.

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