An Examination of Long-Term Abnormal Stock Returns and Operating Performance Following R&D Increases

2004 ◽  
Vol 59 (2) ◽  
pp. 623-650 ◽  
Author(s):  
Allan C. Eberhart ◽  
William F. Maxwell ◽  
Akhtar R. Siddique
Keyword(s):  
Stock Returns ◽  
Operating Performance ◽  
Abnormal Stock Returns

scholarly journals Institutional Investors and Hedge Fund Activism

2020 ◽  
Author(s):  
Simi Kedia ◽  
Laura Starks ◽  
Xianjue Wang
Keyword(s):  
Stock Returns ◽  
Institutional Investors ◽  
Operating Performance ◽  
Hedge Fund ◽  
Target Firms ◽  
Hedge Fund Activism ◽  
Institutional Shareholders

Abstract Hedge fund activists have ambiguous relationships with the institutional shareholders in their target firms. While some support their activities, others counter their actions. Due to their relatively small holdings in target firms, activists typically need the cooperation of other institutional shareholders that are willing to influence the activists’ campaign success. We find the presence of “activism-friendly” institutions as owners is associated with an increased probability of being a target, higher long-term stock returns, and higher operating performance. Overall, we provide evidence suggesting the composition of a firm’s ownership has significant effects on hedge fund activists’ decisions and outcomes.

Segment Profitability, Misvaluation, and Corporate Divestment

2007 ◽  
Vol 82 (1) ◽  
pp. 1-26 ◽  
Author(s):  
Peter F. Chen ◽  
Guochang Zhang
Keyword(s):  
Information Asymmetry ◽  
Stock Returns ◽  
Financial Reporting ◽  
Operating Performance ◽  
Equity Value ◽  
Abnormal Stock Returns ◽  
Voluntary Commitment ◽  
Value Model ◽  
Market Misvaluation ◽  
Number Of Segments

This paper develops a theoretical model to explain corporate divestment in the context of accounting-based valuation and provides empirical evidence to support the model's predictions. Building on Zhang's (2000) real-options-based equity value model, we develop a model to explain why firms with multiple business segments may have incentives in financial reporting to shift earnings from one segment to another to influence market valuation. Cross-segment earnings shifting, however, causes information asymmetry about segmental performance, which leads to market misvaluation. Divestment arises as a voluntary commitment by (some) firms to not engage in segmental earnings manipulation, with the aim of restoring valuation accuracy. Our theoretical analysis yields a number of testable implications. Consistent with our model's predictions, we find empirically that (1) divestment is preceded by an increased divergence in profitability between the divested and continuing segments of the divesting firm, (2) there are positive abnormal stock returns surrounding divestment announcements that are not dependent on increased expectations about future operating performance, (3) the magnitude of market revaluation increases with the profitability divergence between the divested and continuing segments, and (4) market revaluation is greater for more complex firms (in terms of having a larger number of segments and greater uncertainty facing investors).

Private public distinction of the target and the long run operating performance of acquirers

2016 ◽  
Vol 28 (1) ◽  
pp. 38-58 ◽  
Author(s):  
Syed M. M. Shams ◽  
Abeyratna Gunasekarage
Keyword(s):  
Stock Returns ◽  
Operating Performance ◽  
Cash Flows ◽  
Content Type ◽  
Organisational Form ◽  
Long Run ◽  
Two Samples ◽  
Short Run ◽  
Private And Public ◽  
Abnormal Stock Returns

Purpose – The purpose of this study is to examine whether the acquirers of private targets outperform their peers that acquire public targets in the long run. Design/methodology/approach – Using two samples of acquirers of private and public targets, this paper analyses their short-run market performance and long-run operating performance. Univariate analyses and multiple regressions are used to analyse abnormal stock returns and abnormal cash flow performances of bidders. Findings – Acquirers of private targets earn significantly higher abnormal return than acquirers of public targets during the announcement period. Similarly, the long-run operating performance of acquirers of private targets is significantly higher than that of the acquirers of public targets. However, the performance difference between two groups is more pronounced when cash flows are scaled by the market value of acquirers. Originality/value – This is the first Australian study to examine whether the long-run operating performance of acquirers depends on the organisational form of the target acquired.

Six Sigma, stock returns and operating performance

2017 ◽  
Vol 40 (3) ◽  
pp. 331-351 ◽  
Author(s):  
Bora Ozkan ◽  
J. Francisco Rubio ◽  
M. Kabir Hassan ◽  
James R. Davis
Keyword(s):  
Stock Returns ◽  
Six Sigma ◽  
Design Methodology ◽  
Operating Performance ◽  
Fortune 500 ◽  
Operational Performance ◽  
Content Type ◽  
Fortune 500 Companies ◽  
Negative Growth

Purpose This paper aims to expand the literature on financial and operational performance by analyzing the effects of undergoing through Six Sigma training. Design/methodology/approach The effects of implementing Six Sigma trainings is analyzed for 108 Fortune 500 companies. The authors estimate long-term stock returns and 14 financial ratios of Six Sigma companies, both pre- and post-adoption periods. Furthermore, The authors match the 108 companies by size and industry to 108 non-Six Sigma companies also within the Fortune 500. Findings Looking at long-term stock returns, the evidence shows that Six Sigma firms need at least four years before they start to outperform the controlling sample. Furthermore, looking at operational performance, unlike prior reported results, the authors find supporting, and more importantly, persisting statistical evidence that Six Sigma firms are less liquid and have a negative growth in staff levels in comparison to the matching firms. Social implications The findings of this suggest that if Six Sigma provides any value to the company, it comes at the expense of overloaded staff levels, as evidenced by the fact that Six Sigma firms have less growth in staff levels than the matching firms. Originality/value It is one of the first paper to thoroughly investigate the effects on both financial performance and operational performance of spending, sometimes billions of dollars, in Six Sigma training.

scholarly journals Long-term underperformance of public versus rights offering firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ju Hyun Kim ◽  
Kyojik Song
Keyword(s):  
Stock Returns ◽  
Operating Performance ◽  
Theoretical Models ◽  
Seasoned Equity Offering ◽  
Rights Offering ◽  
Public Offering ◽  
Rights Issue ◽  
Public Offer ◽  
Equity Offering

The authors compare the post-issue stock and operating performance of rights issue versus public offer firms using Korean data. The authors find that the stock returns of rights issue firms are less negative than those of public offering firms during the three years subsequent to the seasoned equity offering. The authors further find that the profitability of rights offering firms is superior to those of public offering firms and that the ratio of sales to assets for rights issue firms is much higher over the post-issue period. The results substantiate Heinkel and Schwartz’s (1986) and Eckbo and Masulis’ (1992) theoretical models that posit firms with better quality tend to select the rights issue rather than public offer method when issuing seasoned equity.

Inside Debt and Mergers and Acquisitions

2014 ◽  
Vol 49 (5-6) ◽  
pp. 1365-1401 ◽  
Author(s):  
Hieu V. Phan
Keyword(s):  
Mergers And Acquisitions ◽  
Stock Returns ◽  
Risk Taking ◽  
Chief Executive ◽  
Wealth Transfer ◽  
Inside Debt ◽  
Bond Returns ◽  
Abnormal Stock Returns ◽  
Corporate Risk

AbstractI empirically investigate the relation between chief executive officer (CEO) inside debt holdings and mergers and acquisitions (M&As), and find evidence consistent with the agency theory’s prediction of a negative relation between CEO inside debt holdings and corporate risk taking. Further analysis shows that CEO inside debt holdings are positively correlated with M&A announcement abnormal bond returns and long-term operating performance, but negatively correlated with M&A announcement abnormal stock returns. Finally, I find evidence that acquirers restructure the postmerger composition of CEO compensation that mirrors their capital structure in order to alleviate incentives for wealth transfer from shareholders to bondholders or vice versa.

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