Stock Price Informativeness and Corporate Governance: An International Study

Purpose This study investigates the nature of the association between profit warnings and stock price informativeness in the context of Jordan as an emerging country. Design/methodology/approach The authors used a large panel data set that related to stock price synchronicity and profit warnings percentages on the Amman Stock Exchange for the period spanning 2007–2018. Robust regression was used as a parametric test. This enabled us to obtain stronger results that fall in line with our prediction that a profit warning encourages firm investors to collect and process more firm-specific information than common market information. Findings Our findings show a significant positive effect of profit warnings on the amount of firm-specific information incorporated into stock price, which means that the greater the percentage of profit warnings the more likely that more firm-specific information will be incorporated in stock price synchronicity. In addition, corporate governance characteristics (moderating variables) significantly increase the level of the relationship between profit warnings and stock price synchronicity. Practical implications Our study results could be useful to investors, senior managers, and regulators in Jordanian firms, particularly in relation to decisions about enhancing the quality of financial statements. In addition, our results provide new evidence about the consequences of earnings announcements for information content and the informativeness of stock prices. Our methodology and evaluation of profit warnings may also demonstrate useful evidence for future researchers on profit warnings and stock price informativeness in developing economies, especially given that such evidence is scarce in developing economies. Originality/value This research is the first study of its kind on emerging markets, particularly in the Middle East. Moreover, entering the corporate governance variables as moderating variables to the robust regression was found to be more powerful than other regressions.

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Stock Price Informativeness, CSR and Corporate Governance

SSRN Electronic Journal ◽

10.2139/ssrn.3458971 ◽

2019 ◽

Author(s):

Yuan George Shan ◽

Joey (Wenling) Yang ◽

Junru Zhang

Keyword(s):

Corporate Governance ◽

Stock Price ◽

Price Informativeness ◽

Stock Price Informativeness

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Corporate Governance and Stock Price informativeness: Evidence from an Emerging Market

Journal of Accounting and Finance in Emerging Economies ◽

10.26710/jafee.v6i2.1279 ◽

2020 ◽

Vol 6 (2) ◽

pp. 593-605

Author(s):

Muhammad Shahid Rasheed ◽

Shahzad Kouser

Keyword(s):

Corporate Governance ◽

Institutional Investors ◽

Stock Price ◽

Emerging Market ◽

Investor Protection ◽

Cash Flows ◽

Governance Mechanism ◽

Price Informativeness ◽

Controlling Shareholders ◽

Stock Price Informativeness

Emerging markets usually have weaker legal and governance environment. The weaker enforcement of investor protection laws leads to a poor information environment. Using data of all the listed non-financial firms from Pakistan stock exchange (PSX), we document the relationship between corporate governance variables and stock price informativeness. The results from two-stage least squares (2SLS) reveal that controlling shareholders in the form of block holding plays an effective role in improving informativeness. Due to the presence of these block ownership, the institutional investors remain largely short term investors and act passively. This behavior of institutional investors encourages managers to extract more cash flows leading to higher synchronicity. These findings suggest market regulators develop such a corporate governance mechanism that not only ensures investor protection but also advise firms to reduce information asymmetry by better disclosure and transparency. More specifically, in the Pakistani context, traditional corporate governance mechanisms through board room regulations may not improve informativeness, and regulators need to regulate the ownership regulations, including family ownership and controlling shareholders.

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The impacts of managerial and institutional ownership on firm performance: The role of stock price informativeness and corporate governance

Corporate Ownership and Control ◽

10.22495/cocv6i4p11 ◽

2009 ◽

Vol 6 (4) ◽

pp. 115-127 ◽

Cited By ~ 1

Author(s):

William Cheung ◽

Scott Fung ◽

Shih-Chuan Tsai

Keyword(s):

Corporate Governance ◽

Firm Performance ◽

Stock Price ◽

Positive Impact ◽

Institutional Ownership ◽

Managerial Ownership ◽

Price Informativeness ◽

Internal Governance ◽

Future Performance ◽

Stock Price Informativeness

This paper provides new evidence on the relations between managerial and institutional ownerships and firm performance. These relations are found to be affected by firm’s stock price informativeness and corporate governance. Based on a sample of US firms from NYSE, AMEX, and NASDAQ between 1989 and 2006, we document three important findings. First, managerial ownership and firm future performance are non-linearly related; the positive relation is stronger for firms with less informative prices or more agency problems. This finding suggests that poor governance and uninformative price increase the importance of managerial value creation for their firms by improving internal governance. Second, institutional ownership has a significant positive impact on firm future performance, with larger impact for firms with less informative prices or good governance. However, institutional ownership, which reflects external monitoring, has a weaker positive effect compared to managerial ownership, which controls for internal governance. Third, the interaction between managerial ownership and institutional ownership has a significant positive impact on firm future performance, suggesting that there are synergistic effects of internal and external corporate governance mechanisms in improving firm value.

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Corporate governance and the divergence of learning channels

Corporate Ownership and Control ◽

10.22495/cocv8i3p1 ◽

2011 ◽

Vol 8 (3) ◽

pp. 9-17

Author(s):

William Ming Yan Cheung ◽

Adrian Lei ◽

Libin Tao

Keyword(s):

Corporate Governance ◽

Stock Prices ◽

Stock Price ◽

Informed Trading ◽

Market Liquidity ◽

Price Informativeness ◽

Cross Sectional ◽

Bid Ask Spread ◽

Trading Activities ◽

Stock Price Informativeness

We study the relation between corporate governance, market liquidity and stock price informativeness. Firms with more informative stock prices are associated with larger transaction volume, larger bid-ask spread and better corporate governance. Thisliquidity-informativeness relation is significant for firms with high antitakeover provision (bad corporate governance). However, bid-ask spread is insignificantly associated withprice informativeness for firms with less antitakeover provision (good corporate governance). This supports that firm-specific return variation better measures stock price informativeness when firm has strong corporate governance framework. Our results suggest that (i) more (less) informed trading activities associated with weak (strong) corporate governance, and (ii) corporate governance explains the cross-sectional variation in information efficiency of stock prices. Our results are consistent with theories in financial market learning that investor learn from informed trading activities associated with weak governance firms and informative disclosure from strong governance firms.

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