The Restating of Financial Statements by REITs

This article is the first to examine financial restatements by real estate investment trusts (REITs). We provide a descriptive breakdown of the underlying causes of REIT restatements as well as overall and subsample analyses of stock market reactions to restatements from 2000 to 2011. REIT restatements occur for a large variety of accounting issues with the most common being expense-related (e.g., leases, depreciation). We find that the average market reaction for REIT restatements is negative 0.63%, which is less negative than non-REIT restatements. Further investigation reveals that a significant portion of REIT restatements result in large positive or negative returns, the most extreme of which appear to be a result of both the restatement and other news released simultaneously. Cross-sectional analysis shows that the most important determinant of restatement cumulative abnormal returns (CARs) is whether the restatement is a result of Securities and Exchange Commission (SEC) comment letters or involves an investigation by regulators, which lowers the CAR by 5.64%. Overall, the findings suggest that REIT restatements occur for a variety of reasons, and REIT investors place high value on quality financial statements.

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Information Content of Dividend Changes in an Emerging Market

International Journal of Banking and Finance - Vol. 15, Number 2, 2020 ◽

10.32890/ijbf2004.2.1.8341 ◽

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.

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Stock Market Reactions to Financing and Payment Decisions for European Mergers and Acquisitions

The Central European Review of Economics and Management ◽

10.29015/cerem.868 ◽

2020 ◽

Vol 4 (2) ◽

pp. 41-89

Author(s):

Wolfgang Bessler ◽

David Kruizenga ◽

Wim Westerman

Keyword(s):

Stock Market ◽

Mergers And Acquisitions ◽

Abnormal Returns ◽

Market Reactions ◽

Valuation Effects ◽

Payment Methods ◽

Cumulative Abnormal Returns ◽

Study Methodology ◽

Acquisition Announcements ◽

Stock Market Reactions

Aim: We analyze stock market reactions to merger and acquisition announcements for firms in Europe and contribute to the literature by providing empirical evidence how the decisions with respect to alternative financing sources (equity or debt) and the methods of payment (cash or stock) affect the magnitude of the valuation effects. Research design: An event study methodology is applied to 717 M&A transactions. We analyze the size of the cumulative abnormal returns using the financing sources and payment methods and other variables as the relevant determinants. Findings: The cumulative abnormal results suggest that target shareholders and bidder shareholders in private deals benefit from mergers and acquisitions. The effect found is centered around the announcement date, making our findings consistent with market efficiency. Debt financed deals outperform equity financed deals and cash paid M&A outperform stock paid M&As, due to information asymmetry, signaling and agency effects. Originality: This study adds to our understanding of the relevance of the financing sources and the payment methods for mergers and acquisitions in Europe. Implications: This study may help practitioners to better assess the valuation effects of alternative financing sources and payment methods when acquiring other firms. JEL: G32, G34

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Stock Market Reactions to Pollution Information Disclosure: New Evidence from the Pollution Blacklist Program in China

Sustainability ◽

10.3390/su13042262 ◽

2021 ◽

Vol 13 (4) ◽

pp. 2262

Author(s):

Yalin Zhou ◽

Jing Cao ◽

Yujia Feng

Keyword(s):

Stock Market ◽

Information Disclosure ◽

Abnormal Returns ◽

Market Reactions ◽

Cumulative Abnormal Returns ◽

Green Finance ◽

Stock Market Performance ◽

Negative Effect ◽

Stock Market Reactions ◽

Polluting Firms

Public disclosure of environmental information has been widely used as an important instrument in green finance. In this paper, we examine a blacklist program of polluting firms and conduct an event study to evaluate how the stock market responds to the pollution news. Our results show that the pollution disclosure indeed had a significant negative effect on the stock market performance of listed companies on the blacklists, but only when the overall market was under downward shocks, suggesting that the shareholders were more sensitive to the pollution news in bad times. When the stock market performed well or was relatively stable, the blacklist effects were not evident. Our heterogeneity analyses further revealed that the magnitude of the cumulative abnormal returns depended on the firm size. That is, the larger the firms are, the less they suffer from the pollution news release. Our findings show that pollution disclosure does penalize the polluting firms through stock market response mechanisms.

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Announced versus canceled bank mergers and acquisitions

The Journal of Risk Finance ◽

10.1108/jrf-05-2016-0069 ◽

2016 ◽

Vol 17 (5) ◽

pp. 510-544 ◽

Cited By ~ 2

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.

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Associations between active travel and diet: cross-sectional evidence on healthy, low-carbon behaviours from UK Biobank

BMJ Open ◽

10.1136/bmjopen-2019-030741 ◽

2019 ◽

Vol 9 (8) ◽

pp. e030741

Author(s):

Michaela A Smith ◽

Jan Rasmus Boehnke ◽

Hilary Graham ◽

Piran C L White ◽

Stephanie L Prady

Keyword(s):

Active Travel ◽

Processed Meat ◽

Low Carbon ◽

Cross Sectional ◽

Dietary Consumption ◽

Underlying Causes ◽

Behavioural Factors ◽

The Uk ◽

Sectional Analysis ◽

Red And Processed Meat

ObjectivesTo examine whether there are associations between active travel and markers of a healthy, low-carbon (HLC) diet (increased consumption of fruit and vegetables (FV), reduced consumption of red and processed meat (RPM)).DesignCross-sectional analysis of a cohort study.SettingsPopulation cohort of over 500 000 people recruited from 22 centres across the UK. Participants aged between 40 and 69 years were recruited between 2006 and 2010.Participants412 299 adults with complete data on travel mode use, consumption of FV and RPM, and sociodemographic covariates were included in the analysis.Exposure measuresMutually exclusive mode or mode combinations of travel (car, public transport, walking, cycling) for non-work and commuting journeys.Outcome measuresConsumption of FV measured as portions per day and RPM measured as frequency per week.ResultsEngaging in all types of active travel was positively associated with higher FV consumption and negatively associated with more frequent RPM consumption. Cycling exclusively or in combination with walking was most strongly associated with increased dietary consumption of FV and reduced consumption of RPM for both non-work and commuting journeys. Overall, the strongest associations were between non-work cycling and FV consumption (males: adjusted OR=2.18, 95% CI 2.06 to 2.30; females: adjusted OR=2.50, 95% CI 2.31 to 2.71) and non-work cycling and RPM consumption (males: adjusted OR=0.57, 95% CI 0.54 to 0.60; females: adjusted OR=0.54, 95% CI 0.50 to 0.59). Associations were generally similar for both commuting and non-work travel, and were robust to adjustment with sociodemographic and behavioural factors.ConclusionsThere are strong associations between engaging in active travel, particularly cycling, and HLC dietary consumption, suggesting that these HLC behaviours are related. Further research is needed to better understand the drivers and dynamics between these behaviours within individuals, and whether they share common underlying causes.

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Systemic operational risk

The Journal of Risk Finance ◽

10.1108/jrf-11-2016-0141 ◽

2017 ◽

Vol 18 (3) ◽

pp. 252-267 ◽

Cited By ~ 5

Author(s):

Thomas Kaspereit ◽

Kerstin Lopatta ◽

Suren Pakhchanyan ◽

Jörg Prokop

Keyword(s):

Factor Model ◽

Abnormal Returns ◽

Operational Risk ◽

Spillover Effects ◽

Market Reactions ◽

Content Type ◽

Banking Market ◽

Specific Factors ◽

Stock Market Reactions ◽

High Degree

Purpose The aim of this paper is to study the information content of operational loss events occurring at European financial institutions with respect to the announcing bank’s industry rivals from an equity investor’s perspective. Design/methodology/approach The authors conduct an event study to identify spillover effects of operational loss events using the Carhart (1997) four-factor model as a benchmark model. In addition, they conduct multiple regression analyses to investigate the extent to which firm-specific factors or the market environment affect abnormal returns. Findings They observe significant negative abnormal returns following operational loss announcements exceeding € 50 million for both the announcing firms and their competitors. In addition, they find that stock market reactions occur only within a very small event window around the announcement date, indicating a high degree of market efficiency. Finally, abnormal returns tend to be insignificant for smaller loss amounts. Originality/value While operational risk is often believed to be strictly firm-specific, the results show that large operational risk events are not purely idiosyncratic; rather, they are systemic in the sense that they have contagious effects on non-event banks. Thus, the authors shed new light on how operational risk affects equity investors’ investment behaviour in an opaque and highly interconnected banking market.

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Stock market reactions to layoff announcements – analysis of the renewable energy sector

International Journal of Energy Sector Management ◽

10.1108/ijesm-02-2016-0004 ◽

2017 ◽

Vol 11 (2) ◽

pp. 311-328 ◽

Cited By ~ 3

Author(s):

Stephan Kunert ◽

Dirk Schiereck ◽

Christopher Welkoborsky

Keyword(s):

Renewable Energy ◽

Stock Market ◽

Capital Market ◽

Abnormal Returns ◽

Shareholder Wealth ◽

Energy Sector ◽

Market Reactions ◽

Content Type ◽

The Public ◽

Stock Market Reactions

Purpose This study aims to analyze stock market reactions to layoff announcements in the renewable energy sector. The global renewable energy sector and most of the producers of wind and solar energy equipment are struggling. While changes in the regulation and in the promotion of energy production from renewable sources reduced the attractiveness of these technologies, many involved companies had to downsized their workforce to increase performance. The public often perceives these announcements as a way of increasing shareholder wealth at the cost of the employees. Support for this claim is often given in the form of isolated case study considerations. However, the case may be different for the renewable energy sector as changes in the overall institutional environment have sustainably deteriorated the prospects of this industry. Design/methodology/approach This study analyses stock market reactions of 65 layoff announcements made by companies in the renewable energy industry in the years from 2005 to 2014. The reactions are measured by cumulative abnormal returns, which are obtained by using the event study methodology. Findings It shows a significantly negative market reaction to the announcement of a layoff plan on the event day. The findings are generally in line with our expectations and underline the negative perspectives of the sector from a capital market point of view and the declining importance of the sector with respect to employment numbers. Originality/value The results of this study are important for investors when estimating the capital market reactions to layoff announcements and when they form their own expectations regarding possible future layoff announcements. For the public, the results are of interest as the prejudice, that layoff plans are used to increase shareholder wealth, can be dismantled. The opposite is shown.

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Stock Market Reactions to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership’s Approval: Evidence from Vietnam

Journal of Economic Integration ◽

10.11130/jei.2021.36.3.462 ◽

2021 ◽

Vol 36 (3) ◽

pp. 462-490

Author(s):

Son Tung Ha ◽

Thi Hong Hanh Pham ◽

Thi Nguyet Anh Nguyen

Keyword(s):

Stock Market ◽

Abnormal Returns ◽

Stock Exchanges ◽

Market Returns ◽

Market Reactions ◽

Listed Firms ◽

Stock Market Performance ◽

Study Methodology ◽

Stock Market Reactions ◽

Event Study Methodology

We examine the stock market performance of Vietnam’s listed firms in response to the country’s approval of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Employing an event study methodology, we first calculate the abnormal returns of all listed Vietnamese firms around the CPTPP’s approval date. Then, we attempt to link these abnormal returns to firms’ characteristics. We find evidence that the announcement of the CPTPP’s approval is associated with positive abnormal returns for Vietnam’s listed firms. We also find considerable heterogeneity in the magnitude and pace of the impacts of the CPTPP’s approval on market returns across Vietnam’s two stock exchanges. However, we fail to reject the null hypothesis that the market did not react to the CPTPP’s approval at the sectoral level.

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Asymmetric information and opportunism in insider share-pledging

Managerial Finance ◽

10.1108/mf-06-2020-0322 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Michael R. Puleo ◽

Steven E. Kozlowski

Keyword(s):

Private Information ◽

Abnormal Returns ◽

Risk Assessments ◽

Corporate Policies ◽

Market Reactions ◽

Content Type ◽

Hurdle Models ◽

Cumulative Abnormal Returns ◽

Earnings Surprises ◽

The Us

PurposeAmid growing attention from investors, regulators and advisory firms in recent years, this study assesses whether managers exploit private information to time share-pledge transactions and extract personal benefits while avoiding unintended market scrutiny.Design/methodology/approachWe use hand-collected pledging data for a random sample of S&P 1500 firms to examine whether private information influences insider share-pledging activity using Heckman selection and two-part hurdle models of the pledge decision. We also conduct an event study analysis of announcement returns to measure market reactions to pledging news and determine whether share-pledge disclosures affect investor risk assessments.FindingsConsistent with insiders timing pledges prior to anticipated performance declines, both the likelihood and level of pledging increase significantly with negative earnings surprises. New share-pledges precede significant decreases in abnormal returns, and public announcement of new pledging corresponds with significant negative cumulative abnormal returns. The evidence suggests that insiders exploit private information to time pledges, and that investors update risk assessments and value estimates based on information conveyed by these transactions.Practical implicationsOur findings hold important implications for governance and regulation of pledged shares, indicating that permissive reporting requirements in the US facilitate informed pledging and may undermine incentive alignment between managers and shareholders. The analysis promotes transaction-specific disclosures and transparent corporate policies for insider share-pledging.Originality/valueOurs is among the first empirical analyses of share-pledging in US firms and the first to examine the role of private information in pledging decisions. We offer novel evidence on the opportunistic use of pledged shares and provide insight to predictors of share-pledging behavior.

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Is User-Generated Twittersphere Activity Associated with Stock Market Reactions to 8-K Filings?

Journal of Information Systems ◽

10.2308/isys-2020-034 ◽

2021 ◽

Author(s):

ROGER DEBRECENY ◽

Asheq Rahman ◽

TAWEI WANG

Keyword(s):

Information Content ◽

Trading Volume ◽

Abnormal Returns ◽

Market Returns ◽

Stock Valuation ◽

Market Reactions ◽

Stock Liquidity ◽

Economic Significance ◽

Corporate Announcements ◽

Stock Market Reactions

Prior studies have demonstrated that company-generated tweets as a device for the dissemination of corporate announcements help reduce information asymmetry. This paper demonstrates that user-generated tweets around corporate announcements have information content in addition to the information content of the announcement itself. Using a sample of S&P 1500 firms, we test the effects of abnormal levels of user-generated tweets and abnormal sentiment in the tweets over the three days surrounding 8-K filings of unanticipated events on market returns and liquidity of stocks. Results show that abnormal levels of user-generated tweets are positively associated with both the absolute cumulative abnormal returns and cumulative abnormal trading volume. We also find an indication of a cautionary stance by the market when sentiment is negative around the announcements. Our results have economic significance from both the stock valuation and the stock liquidity perspectives.

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