Stock Market Reactions to Auto Manufacturers’ Environmental Failures

The automotive sector must meet strict regulations to increase mobility while reducing emissions to demonstrate environmental stewardship. Trust in the promise of a sustainable Fahrvergnügen was broken with recent scandals like Dieselgate denting the confidence of regulators and consumers. Overpromising on sustainable innovative technology resulted in unethical behavior, deceit, and failure to meet promised standards. We consider to what extent societal disapproval was evident in the stock market reaction to these events. We sampled 41 announcements (1984 to 2016) and observed a mean stock market reaction of -1.01%. There was no difference in the stock reaction in firms failing governmental vs. voluntary standards and more negative reactions for events following Dieselgate or when compensation was offered. The severity of the reaction to unethical misuse of environmental credentials should encourage maintaining promised environmental performances as a macromarketing strategy.

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

Journal of Strategy and Management ◽

10.1108/jsma-07-2020-0188 ◽

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.

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Market Reaction to Dividend Announcements During Pandemic: An Event Study

Vision The Journal of Business Perspective ◽

10.1177/09722629211066288 ◽

2021 ◽

pp. 097226292110662

Author(s):

Nisha Prakash ◽

Yogesh L

Keyword(s):

Stock Market ◽

Event Study ◽

Market Reaction ◽

Stock Exchange ◽

Abnormal Returns ◽

Weak Form ◽

Primary Objective ◽

Market Reactions ◽

The Difference ◽

Stock Market Reactions

This study analyses the difference in stock market reactions to dividend announcement during the pandemic. The thirty constituent stocks of Sensex, the index of Bombay Stock Exchange (BSE), is used for analysis. This allows cross-industry comparison of the market reaction. The study examines stock market reactions covering 44 days around the dividend announcement dates. The primary objective of this study is to understand whether the price adjustment linked to the dividend announcement news during the pandemic was different from the earlier years. This empirical study employs the conventional event study methodology using abnormal returns (ARs) to examine the stock market reaction to dividend announcement. The market reaction to dividend announcement was increasingly positive during the pandemic, compared to previous years. The statistical pooled t-tests showed there was a significant relationship between the pandemic and ARs. The findings also indicate that the difference in the market reaction to dividend announcement was more prominent in services stocks than that in manufacturing. Further, the results also verify the weak-form of efficiency of Indian stock exchange.

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The Effect of Pension Fund Activism on the Stock Market and the Role of Media: Evidence from Korea

Korean Journal of Financial Studies ◽

10.26845/kjfs.2020.08.49.4.489 ◽

2020 ◽

Vol 49 (4) ◽

pp. 489-513

Author(s):

Kyung Ryang Ko ◽

Woojin Kim

Keyword(s):

Stock Market ◽

Media Coverage ◽

Pension Fund ◽

Market Response ◽

Market Reactions ◽

Proxy Voting ◽

Stock Market Reaction ◽

Voting Decisions ◽

Stock Market Reactions

This study examines how the stock market reacts to pension fund activism. Recent changes in the Korea National Pension Service’s (NPS) voting policy present an ideal context to examine the effect of shareholder activism on stock market reactions. Using a sample of 46 firms for which the NPS pre-disclosed to veto agendas of 2019 annual shareholder meetings, this study demonstrates that the stock market reacts negatively to the NPS “vote no” announcements. The results reveal that shareholders pay attention to the negative signal the NPS’s veto announcement delivers. We also find that publicity is positively related to stock market reactions, consistent with the hypothesis that media coverage is an efficient mechanism for pension fund activism. The study further examines whether the negative stock market response is driven not by the NPS’s pre-disclosure to “vote no,” but just by the pre-disclosure. An event study is conducted using a sample of firms for which the NPS disclosed proxy voting decisions ahead of 2019 annual meetings but did not announce to veto. The results do not reveal a significant market response, suggesting that the pre-announcement itself does not affect the stock market reaction.

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CEO Duality: Newspapers and Stock Market Reactions

Journal of Risk and Financial Management ◽

10.3390/jrfm14010035 ◽

2021 ◽

Vol 14 (1) ◽

pp. 35

Author(s):

Marco Caiffa ◽

Vincenzo Farina ◽

Lucrezia Fattobene

Keyword(s):

Stock Market ◽

Financial Markets ◽

Empirical Support ◽

Market Reactions ◽

Ceo Duality ◽

Board Chair ◽

Stock Market Reaction ◽

Stock Market Reactions ◽

News Sentiment ◽

The Relationship

This study aims to investigate the unsettled issue of the relationship between CEO duality and a firm’s value through the perspective of investors’ reaction to news which mention apical directors with a single role and Board Chair CEOs. With a unique and hand-collected database of 60,805 newspaper articles, text-analysis, event-study and regression analysis methodologies were applied to capture news sentiment and study the direction and the magnitude of the stock market reaction. Results reveal that news mentioning Board Chair CEOs are negatively processed by investors, revealing a negative perception by investors about CEO duality. The study provides empirical support for the agency theory, in contrast to the stewardship theory, in the interpretation of CEO duality. It also proposes the methodology of systematically quantifying language to explore corporate governance issues and their link with financial markets.

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