Agency Theory and Flotation Methods in Seasoned Equity Offerings: The Case in Taiwan

2008 ◽  
Vol 11 (04) ◽  
pp. 555-567 ◽  
Author(s):  
Kehluh Wang ◽  
Yi-Hsuan Chen ◽  
Szu-Wei Huang
Keyword(s):  
Agency Theory ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Seasoned Equity Offerings ◽  
Agency Cost ◽  
Share Price ◽  
Equity Offerings ◽  
Cross Sectional ◽  
Taiwan Stock Exchange ◽  
Negative Results

The purpose of this study is to examine the impacts of alternative flotation methods on price performance of seasoned equity offerings, and to compare the competing hypotheses supported by asymmetric information theory and agency theory. Based on 385 sample issues which were listed in Taiwan Stock Exchange from 1996 to 2006, we find that the bookbuilding flotation method demonstrates significant positive abnormal returns for issuing firms, whereas the fixed-price method exhibits negative results. The empirical findings support the agency theory in the sense that the bookbuilding procedure offers a mechanism to strengthen the external monitoring provided by blockholders, which can subsequently reduce the agency cost and thus increase the share price. Further cross sectional analysis confirms this argument. The result of the study implies that the governments should take effective actions to help regulate agency problems in emerging markets such as Taiwan.

scholarly journals The Determinants of the Stock Price Performance of Analyst Recommendations

2019 ◽  
Vol 15 (11) ◽  
pp. 25
Author(s):  
Yaling Lin ◽  
Liang-Chien Lee ◽  
Tsung-Li Chi ◽  
Chen-Chang Lo ◽  
Wai-Shen Chung
Keyword(s):  
Stock Price ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Market Model ◽  
Firm Characteristics ◽  
Cross Sectional ◽  
Insider Ownership ◽  
Taiwan Stock Exchange ◽  
Price Performance ◽  
Abnormal Performance

This study examines the cross-sectional determinants of the price reaction to analysts’ recommendations disseminated through various type of media and for firms listed in Taiwan stock markets. We measure abnormal returns using the market model of event study. Based on the type of media (traditional media/social media) and the type of exchange (Taiwan Stock Exchange (TWSE)/Taipei Exchange (TPEx)), we classify the combined sample observations into four samples and run quantile regressions to investigate whether the relation will be uniform across various quantile levels. Our results show that the relation between firm characteristics and cumulative abnormal returns is not homogeneous across various quantiles of abnormal returns. Our evidence indicates that in general the relation tends to be stronger for firms at higher performance quantile levels and tends to be more pronounced for TWSE firms. The strongest relation is found for the Traditional/TWSE sample, where the abnormal returns are positively related to insider ownership and prior-period earnings, and negatively related to institutional shareholding and price-to-book ratio for firms in the highest abnormal performance quantile.

scholarly journals Long-Run Underperformance on Seasoned Equity Offerings: An Evidence from Indonesia

2019 ◽  
Vol 10 (1) ◽  
pp. 41-49
Author(s):  
Abdur Rafik ◽  
Salsabila Annisa Azmi
Keyword(s):  
Stock Exchange ◽  
Abnormal Returns ◽  
Developed Countries ◽  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
Book Value ◽  
Market Capitalization ◽  
Performance Benchmarking ◽  
Long Run ◽  
The Right

The research aimed to analyze the underperformance phenomenon following Seasoned Equity Offering (SEO)in Indonesian context. Samples were all firms listed on the Indonesia Stock Exchange with the right issue in the observed periods, were chosen by purposive sampling with several criteria. In total, there were 109 issuing firms from 2009-2014 that were analyzed using performance benchmarking approaches. The approaches consisted of market-based, size-based, growth-based, and industry-based benchmarks. The market-based was constructed using a market return. Then, the size and the growth benchmarks were constructed on the basis of closest market capitalization and closest price-to-book value respectively. Then, the industry benchmark was based on a closest combined of market capitalization and Price to Book Value (PBV) of matched firms within the first-second digit of Standard Industry Classification (SIC). The test was conducted using standard t and Wilcoxon tests by examining the benchmark-based abnormal returns over various spans ranging from 3 to 36 months following the right offerings. Like several findings in developed countries, the results also confirm the underperformance phenomenon following right offerings in Indonesia. The negative abnormal returns are found for all benchmark performances, but they are only significant for the market benchmark and partially significant for the size and the growth benchmarks. Behavioral explanations need to be modeled to reveal the intuitions behind the results.

scholarly journals Fundamentals of Stock Price in Nepalese commercial banks

2019 ◽  
Vol 4 ◽  
pp. 83-98
Author(s):  
Prem Prasad Silwal ◽  
Samrina Napit
Keyword(s):  
Commercial Banks ◽  
Stock Price ◽  
Stock Exchange ◽  
Market Price ◽  
Negative Relationship ◽  
Influential Factor ◽  
Share Price ◽  
Cross Sectional ◽  
Book Value ◽  
Price Earnings Ratio

The aim of this study is to ascertain the determinants of the stock market price in Nepalese commercial banks for the period of 2065/66 to 2074/75. It is based on pooled cross-sectional data of ten banks for 10 years whose stocks are listed in Nepal stock exchange. The study employed correlational and causal comparative research design and result reveals that book value per share, price earnings ratio, return on equity have positive relationship with stock price. Dividend yield has positive but minimum influence on the price of the stock whereas size has negative relationship and is statistically insignificant with stock price. Further, it reveals that book value per share is a most influential factor that determines stock price in Nepal.

The Intraday Performance of Contrarian Strategies: Evidence from the Taiwan Stock Exchange

2009 ◽  
Vol 12 (04) ◽  
pp. 655-674 ◽  
Author(s):  
Kuei-Yuan Wang ◽  
Su-Chun Peng ◽  
Yen-Sheng Huang
Keyword(s):  
Transaction Costs ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Trading Costs ◽  
Taiwan Stock Exchange ◽  
Holding Period ◽  
Contrarian Strategies ◽  
Intraday Analysis ◽  
Average Abnormal Return ◽  
Using Data

This paper examines the intraday performance of contrarian strategies using data from 438 listed stocks on the Taiwan Stock Exchange in 2004. The results indicate significantly positive abnormal returns for the contrarian strategies. For the whole trading day, the contrarian strategies earn an average abnormal return of at least 0.18% for all strategies, and above 0.3% in 24 out of the 36 contrarian strategies prior to transaction costs. Moreover, the contrarian profit increases from a formation period of five minutes to 10 minutes, and then declines toward a longer formation period of 60 minutes. This pattern suggests that price reversals occur around 10 minutes into the formation period. The intraday analysis also indicates that the abnormal returns earned by the contrarian strategies are higher in the opening and the closing intervals than in the middle of the trading day. Finally, the results indicate that price reversals occur for both prior losers and prior winners, with prior winners experiencing larger price reversals than prior losers when the holding period becomes longer. However, the above results of profitable abnormal returns are based on gross returns before transaction costs were deducted. When reasonable explicit trading costs are considered, none of the 36 contrarian strategies produce any "free lunches" for investors.

The long run performance of secondary equity offerings on the Johannesburg Stock Exchange

2018 ◽  
Vol 13 (5) ◽  
pp. 1211-1232
Author(s):  
Jesse Alves da Cunha ◽  
Yudhvir Seetharam
Keyword(s):  
Stock Exchange ◽  
Operating Performance ◽  
Investor Sentiment ◽  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
Content Type ◽  
Market Participants ◽  
Johannesburg Stock Exchange ◽  
Long Run ◽  
The Impact

Purpose Opinions have been divided on whether there is a rational explanation to the reason behind seasoned equity offerings (SEOs) or whether the explanation lies within the behavioural intricacies attributed to stock market participants. The paper aims to discuss these issues. Design/methodology/approach This study investigates the long-run performance of firms conducting SEOs on the Johannesburg Stock Exchange (JSE) over the period of 1998–2015, by examining the return performance and operating performance of firms, along with the impact of investor sentiment on these variables. Findings The results of this study are inconsistent with the existing literature, which argues that the long-run performance of issuing firms signalled an initial underreaction to SEOs buoyed by over-optimistic investors. Research limitations/implications Instead, the long-run performance of issuing firms is adequately explained by the rational models centred on the risk-return framework, implying that investors are reacting swiftly to SEOs in an unbiased fashion. Originality/value Investor sentiment does not materially influence the long-run share performance or operating performance of issuing firms, casting doubt on the ability of the market timing theory to explain the long-run performance of SEOs. The authors thus find that SEO performance cannot be explained by behavioural-based reasoning, in contrast to some asset pricing studies on the JSE which indicate the role of sentiment in explaining returns.

scholarly journals Insider Trading and the Classification of Seasoned Equity Offerings: Evidence from Taiwan

2017 ◽  
Vol 9 (5) ◽  
pp. 58 ◽  
Author(s):  
Han-Ching Huang ◽  
Hsiu-Hsin Chiu
Keyword(s):  
Insider Trading ◽  
Abnormal Returns ◽  
Seasoned Equity Offerings ◽  
Growth Potential ◽  
Equity Offerings ◽  
Announcement Effects ◽  
Cumulative Abnormal Returns ◽  
Long Run ◽  
The Impact

This paper investigates whether insider purchasing or selling before Season equity offerings (SEO) announcement have the impact on the cumulative abnormal returns (CAR) around SEO announcement in Taiwan. We find that there are negative announcement effects around the SEO announcement, which is not consistent with the argument that there are usually positive announcement effects around the SEO announcement in Taiwan. Moreover, long-run abnormal returns following SEOs are negative. Therefore, the motivation of SEO has changed from investment to overvaluation.. Although there is net buying prior to SEO announcement, the outside investors still regard SEO announcement as a signal of overvaluation instead of growth potential.

Cross-Sectional Return Predictability in Taiwan Stock Exchange: An Empirical Investigation

2014 ◽  
Vol 17 (02) ◽  
pp. 1450010 ◽  
Author(s):  
Nusret Cakici ◽  
Kudret Topyan ◽  
Chia-Jane Wang
Keyword(s):  
Cash Flow ◽  
Predictive Power ◽  
Empirical Investigation ◽  
Stock Exchange ◽  
Return Predictability ◽  
Idiosyncratic Volatility ◽  
Short Term ◽  
Cross Sectional ◽  
Multiple Regressions ◽  
Taiwan Stock Exchange

This paper provides an analysis of the effectiveness of certain return predictors in Taiwan Stock Exchange (TWSE) from January 1990 to December 2011 by employing both portfolio method and cross-sectional regressions. While we found no statistically significant predictive power of beta, total volatility, and idiosyncratic volatility the two cheapness variables, book-to-market (BKMT) and cash-flow-to-price (FPR) ratios showed strong consistent economically and statistically significant predictive powers. In addition, our multiple regressions found predictive power in total volatility, short-term reversal (STREV), and market capitalization in the set of small stocks, while our all stock set showed predictive power only in total volatility and STREV.

scholarly journals Long-Term Performance Of Foreign Food And Beverage Equities Traded On The New York Stock Exchange: A Look At Investment Opportunities

2011 ◽  
Vol 5 (3) ◽  
Author(s):  
R. Stephen Elliott ◽  
Mark Schaub
Keyword(s):  
New York ◽  
Initial Public Offerings ◽  
Stock Exchange ◽  
Seasoned Equity Offerings ◽  
New York Stock Exchange ◽  
Equity Offerings ◽  
Excess Returns ◽  
Great Opportunity ◽  
York Stock Exchange ◽  
Food And Beverage

Because of the growth of international trade and the increase in sales and profits in the food and beverage industry in recent years investors may believe there is a great opportunity to reap high returns from foreign equities. Cumulative excess returns from all newly issued foreign food and beverage equities over a 36-month period following the date listed on the New York Stock Exchange are tested for significant differences in performance to determine whether they outperform the S & P 500 returns. Although the 36-month cumulative excess returns are not significant, findings indicate that the food and beverage ADRs performed 13.55 percent lower than the S & P 500 Index which serves as a proxy for the market in general. Food and beverage seasoned equity offerings outperformed initial public offerings.

scholarly journals Earnings management, directors’ discretions and information content affecting discretionary accruals of Malaysian publicly listed companies

2014 ◽  
Vol 11 (4) ◽  
pp. 625-634
Author(s):  
Yap Voon Choong ◽  
Kok Thim Chan ◽  
John Stanley Murugeshu
Keyword(s):  
Earnings Management ◽  
Firm Value ◽  
Stock Exchange ◽  
Explanatory Power ◽  
Discretionary Accruals ◽  
Agency Cost ◽  
Share Price ◽  
Future Earnings ◽  
Financial Variables ◽  
Political Costs

Managers have reporting discretion permitted by accounting standards over a combination of earnings management choices. The objective of this study is to identify the types of discretionary accounting choices that are indicative of earnings management. Based on a sample of 947 companies listed on the Malaysian stock exchange, the results indicate that a number of firm specific financial variables that proxy for agency cost, political costs and information asymmetry capture discretionary accruals behaviour. This study also seeks to examine the explanatory power of the earnings management in predicting future earnings and firm value. The results indicate that discretionary accruals can improve the informativeness of a firm’s current and past earnings when predicting future earnings and share price

scholarly journals Information Content of Dividend Changes in an Emerging Market

2004 ◽  
Author(s):  
Nur Adiana Hiau Abdullah ◽  
Rosemaliza Abdul Rashid ◽  
Yusnidah Ibrahim
Keyword(s):  
Cash Flow ◽  
Emerging Market ◽  
Abnormal Returns ◽  
Agency Cost ◽  
Free Cash Flow ◽  
Cross Sectional ◽  
Market Reactions ◽  
Dividend Announcements ◽  
Stock Market Reactions ◽  
Relationship Of

Supports on the free cash flow and agency cost theory from dividend announcements studies have been heavily discussed in the Western literature, but they have not been given much attention in the Asian countries, particularly in Malaysia. This paper focuses on examining the relationship of the stock market reactions due to dividend announcements and ten company-specific variables identified from the literature as potential determinants. The results from cross-sectional and stepwise regressions both showed that none of the determining variables could explain the variation in cumulative abnormal returns (CARs) for the increasing dividend announcements. For decreasing dividend announcements, both regressions identified the degree of anticipation to be significant and inversely related to CARs. In addition, the indigenous population ownership, which is a unique characteristic of the Malaysian equity market is also found to be significant in influencing the effect of decreasing dividend announcements. The findings provide no support for the free cash flow and agency cost theory.  

Sign in / Sign up

Export Citation Format

Share Document