scholarly journals Differential Effect Of The Sarbanes-Oxley Act On Individual And Institutional Investors

2016 ◽  
Vol 32 (2) ◽  
pp. 517
Author(s):  
Sorah Park
Keyword(s):  
Stock Returns ◽  
Institutional Investors ◽  
Differential Effect ◽  
Empirical Test ◽  
Individual Investors ◽  
Earnings Announcement ◽  
Quarterly Earnings ◽  
Sarbanes Oxley ◽  
The Impact ◽  
Investor Reaction

This study investigates the differential effect of the Sarbanes-Oxley Act of 2002 (“SOX”) on unsophisticated individual investors and sophisticated institutional investors. I examine the relationship between abnormal stock returns around quarterly earnings announcements before and after SOX and investor sophistication. Empirical test results show that SOX positively affected stock returns reaction around the quarterly earnings announcement, consistent with prior literature. However, the increased stock returns reaction in the post-SOX period appears to be unrelated to individual investors. I find that the impact of SOX on institutional investor reaction to earnings announcement is statistically significant, whereas individual investor reaction to earnings announcement is not affected by SOX. This suggests that institutional investors have improved on the extent to which earnings information is efficiently priced after SOX, but not individual investors. These findings are important because the differential effect of the accounting disclosure regulation on investors has received little attention in the literature.

Predictability of Analyst Earnings Forecast Errors and Institutional and Individual Investors’ Reactions to Earnings News

2020 ◽  
pp. 0148558X2093933
Author(s):  
Nilhabra Bhattacharya ◽  
Per Olsson ◽  
Hyungshin Park
Keyword(s):  
Institutional Investors ◽  
Forecast Error ◽  
Individual Investors ◽  
Earnings Forecast ◽  
Forecast Errors ◽  
Financial Reports ◽  
Earnings Announcement ◽  
Quarterly Earnings ◽  
Earnings Information ◽  
Analyst Earnings

We decompose analysts’ earnings forecast error into predictable and unpredictable components and investigate individual vis-à-vis institutional investors’ reactions to each of these components. We find that in the immediate post-earnings announcement window, only individuals under-react to the predictable component, while both individuals and institutions under-react to the unpredictable component. The price drift in this window is driven primarily by investors’ under-reaction to the unpredictable component. This drift remains highly significant in larger firms and intensifies in firms with complex financial reports, suggesting that it likely represents the slow and noisy process of price discovery. Around the next quarterly earnings announcement, only individuals under-react to the previous quarter’s predictable component, and this fixation drives the entire price drift in this window. This drift disappears in larger firms and gets exacerbated in firms with greater forecast error autocorrelations, suggesting that it is likely attributable to incomplete processing of earnings information by individuals.

A study of prominence for disposition effect: a systematic review

2019 ◽  
Vol 11 (1) ◽  
pp. 2-21 ◽  
Author(s):  
Syed Aliya Zahera ◽  
Rohit Bansal
Keyword(s):  
Mutual Funds ◽  
Behavioral Finance ◽  
Mutual Fund ◽  
Institutional Investors ◽  
Disposition Effect ◽  
Individual Investors ◽  
Content Type ◽  
Experimental Market ◽  
The Individual ◽  
The Impact

Purpose The purpose of this paper is to study the disposition effect that is exhibited by the investors through the review of research articles in the area of behavioral finance. When the investors are hesitant to realize the losses and quick to realize the gains, this phenomenon is known as the disposition effect. This paper explains various theories, which have been evolved over the years that has explained the phenomenon of disposition effect. It includes the behavior of individual investors, institutional investors and mutual fund managers. Design/methodology/approach The authors have used the existing literatures from the various authors, who have studied the disposition effect in either real market or the experimental market. This paper includes literature over a period of 40 years, that is, Dyl, 1977, in the form of tax loss selling, to the most recent paper, Surya et al. (2017). Some authors have used the PGR-PLR ratio for calculating the disposition effect in their study. However, some authors have used t-test, ANNOVA, Correlation coefficient, Standard deviation, Regression, etc., as a tool to find the presence of disposition effect. Findings The effect of disposition can be changed for different types of individual investors, institutional investors and mutual funds. The individual investors are largely prone to the disposition effect and the demographic variables like age, gender, experience, investor sophistication also impact the occurrence of the disposition effect. On the other side, the institutional investors and mutual funds managers may or may not be affected by the disposition effect. Practical implications The skilled understanding of the disposition effect will help the investors, financial institutions and policy-makers to reduce the adverse effect of this bias in the stock market. This paper contributes a detailed explanation of disposition effect and its impacts on the investors. The study of disposition effect has been found to be insufficient in the context of Indian capital market. Social implications The investors and society at large can gains insights about causes and influences of disposition effect which will be helpful to create sound investment decisions. Originality/value This paper has complied the 11 causes for the occurrence of disposition effect that are found by the different authors. The paper also highlights the impact of the disposition effect in the decision-making of various investors.

scholarly journals Rational Expectations, Irrational Exuberance: Linkage between U.S. Investors and Pacific-Basin Stock Returns

2009 ◽  
Author(s):  
Rahul Verma
Keyword(s):  
Hong Kong ◽  
Stock Returns ◽  
Institutional Investors ◽  
Rational Expectations ◽  
Pacific Basin ◽  
Individual Investors ◽  
Investor Sentiments ◽  
Irrational Exuberance ◽  
The U.S

We shed new light on the relevance of rational expectations and irrational exuberance of U.S. individual and institutional investors on Pacific-Basin stock returns. We find insignificant effects of irrational exuberance and significant effect of rational expectations on Asian markets with varying degrees of intensity. There are greater responses of Hong Kong, Malaysia, Philippines, and Singapore while weaker linkages with Taiwan, Thailand, and Korea. Overall evidence suggests that rational expectations of institutional investors are transmitted to a greater extent than those of individual investors. These results are consistent with the view that international effects of the U.S. market can be attributed to rational investor sentiments.  

scholarly journals An Empirical Study of Institutional Investor and Enterprise Innovation

2018 ◽  
Vol 14 (1) ◽  
pp. 227
Author(s):  
Cheng Min
Keyword(s):  
Technological Innovation ◽  
Institutional Investors ◽  
Positive Impact ◽  
Empirical Test ◽  
Institutional Investment ◽  
National Competitiveness ◽  
Social And Economic Development ◽  
Enterprise Innovation ◽  
The Impact

Innovation is the driving force of social and economic development, and a decisive factor in enhancing national competitiveness. In recent years, more and more countries have taken innovation to a strategic height. Chinese institutional investors have an increasing share of the overall ownership and make a remarkable improvement in the market position. Based on an increasingly significant role in the capital market, they actively intervene in the management of the enterprise, focusing on long-term improvement of corporate performance. Correspondingly, Institutional investors can also affect the level of technological innovation by participating in corporate governance. This study analyzes the mechanism of institutional investment affecting the technological innovation of enterprises, and takes an empirical test of institutional investors on the impact of technological innovation. The results show that the overall ownership of institutional investors has a significant positive impact on corporate R&D expenditure. This paper proposes that the future policies should still be oriented toward the development and support of institutional investors, and give further play to their efforts to promote technological innovation of enterprises.

scholarly journals Quarterly Earnings Announcement Effect on Stock Return and Trading Volume in Nepal

2019 ◽  
Vol 4 ◽  
pp. 32-47
Author(s):  
Jeetendra Dangol ◽  
Ajay Bhandari
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Trading Volume ◽  
Earnings Announcements ◽  
Good News ◽  
Fiscal Year ◽  
Event Analysis ◽  
Earnings Announcement ◽  
Quarterly Earnings ◽  
Analysis Methodology

The study examines the stock returns and trading volume reaction to quarterly earnings announcements using the event analysis methodology. Ten commercial banks with 313 earnings announcements are considered between the fiscal year 2010/11 and 2017/18. The observations are portioned into 225 earning-increased (good-news) sub-samples and 88 earning-decreased (bad-news) sub-samples. This paper finds that the Nepalese stock market is inefficient at a semi-strong level, but there is a strong linkage between quarterly earnings announcement and trading volume. Similarly, the study provides evidence of existence of information content hypothesis in the Nepalese stock market.

Individual investor attention to stock split and the disposition effect

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Wendy Kesuma ◽  
Irwan Adi Ekaputra ◽  
Dony Abdul Chalid
Keyword(s):  
Stock Returns ◽  
Private Information ◽  
Stock Exchange ◽  
Stock Splits ◽  
Disposition Effect ◽  
Individual Investors ◽  
Investor Attention ◽  
Content Type ◽  
Stock Split ◽  
The Impact

PurposeThis paper investigates whether individual investors are attentive to stock splits and whether higher split ratios (stronger private information signals) reduce the disposition effect.Design/methodology/approachThis study employs stock split events and transaction data in the Indonesia Stock Exchange (IDX) from January 2004 to December 2017. The authors measure individual investors' attention using buy-initiated trades. To test the effect of split signal on disposition effect, the authors regress individual investors' sell-initiated trades on past stock returns.FindingsUnlike Birru (2015), the authors find that individual investors are attentive to stock splits, especially when stock split ratios are high. In turn, stock splits tend to weaken the disposition effect. The higher the stock split ratios, the weaker the disposition effect.Research limitations/implicationsThis study has a limitation in that the authors exclude all stock splits with dividend events around the split date. These stock splits cover 37% of all splits in Indonesia.Practical implicationsPractically, individual investors should look for stock-related information to reduce disposition bias.Originality/valueTo the best of authors’ knowledge, this study is the first to test individual investors' attention on stock splits based on their buy-initiated trades. This study is also the first to test the impact of stock split ratios on the disposition effect reduction. This study's findings enrich the scant literature on individual investors' attention and how to reduce their disposition effect bias.

Effect of quarterly earnings announcement under different market conditions

2014 ◽  
Vol 6 (2) ◽  
pp. 128-154 ◽  
Author(s):  
Santu Das ◽  
Jamini Kanta Pattanayak ◽  
Pramod Pathak
Keyword(s):  
Event Study ◽  
Stock Price ◽  
Earnings Announcements ◽  
Market Condition ◽  
Market Conditions ◽  
Price Movement ◽  
Earnings Announcement ◽  
Content Type ◽  
Quarterly Earnings ◽  
The Impact

Purpose – The main purpose of this research study is to investigate the impact of quarterly earnings announcements on stock price movement of the firms constituting the SENSEX under two different market conditions – booming followed by recessionary. Analysis of price effect of quarterly earnings announcements during the five-year period prior to trading suspension, which is also characterized by a booming market condition have been made. Similar analysis during the five-year period following the trading suspension and marked by recessionary market condition has also been carried out side by side. Design/methodology/approach – Event study methodology using daily returns and market model has been used for the purpose of analyzing the quarterly earnings announcement effects on the security prices of the firms. A sign test has also been used along with the event study. Findings – The study reveals that quarterly earnings announcement does not have statistically significant effect on stock returns during the booming as well as the recessionary market conditions. The impact of quarterly earnings announcements on stock price movement of firms constituting the SENSEX has been similar for both periods undertaken in the study. Research limitations/implications – The study has been undertaken using the firms listed in BSE SENSEX. The effect of the quarterly earnings announcement with reference to firms listed in other indices, if covered, may provide different sets of results. Originality/value – The paper identifies the informational value of quarterly earnings announcement of BSE-SENSEX.

The Earnings Event-Time Seasonal and the Calendar-Time Seasonal in Stock Returns: Naive Use of Earnings Information or Announcement Timing Effect?

1995 ◽  
Vol 10 (4) ◽  
pp. 677-698 ◽  
Author(s):  
Ray Ball ◽  
Eli Bartov
Keyword(s):  
Stock Returns ◽  
Abnormal Returns ◽  
Calendar Time ◽  
Earnings Announcement ◽  
Future Earnings ◽  
Quarterly Earnings ◽  
Earnings Information ◽  
Event Time ◽  
Unexpected Earnings ◽  
Day Of The Week

We document a pattern in the day-of-the-week timing of future earnings announcements that is predictable from knowledge of the current quarter's earnings. The pattern mimics the predictable (+, +, 0, -) dependence previously reported in both seasonally differenced quarterly earnings themselves and in estimated abnormal returns at future quarterly earnings announcement dates (the “SUE effect”; see Rendleman, Jones, and Latané [1987]; Bernard and Thomas [1990]). The predictability of abnormal returns at future earnings announcement dates therefore is not independent of the well-documented day-of-the-week seasonal in stock returns (the “DOW effect”; see Osborne [1962]; Cross [1973]; French [1980]; Gibbons and Hess [1981]). Although the DOW effect is too small to fully explain the SUE effect, it appears to contribute to it, since both past SUE and current earnings announcement DOW are incremental in explaining announcement-day estimated abnormal returns. The unclear role of size and the presence of errors in estimating both unexpected earnings and its announcement day suggest caution in interpreting these results.

Herding on Earnings News: The Role of Institutional Investors in Post–Earnings-Announcement Drift

2017 ◽  
Vol 32 (4) ◽  
pp. 536-560 ◽  
Author(s):  
Linda H. Chen ◽  
Wei Huang ◽  
George J. Jiang
Keyword(s):  
Stock Returns ◽  
Institutional Investors ◽  
Stock Prices ◽  
Institutional Trading ◽  
Earnings Announcement ◽  
Post Earnings Announcement Drift ◽  
Gradual Process ◽  
Earnings Surprises ◽  
Institutional Herding

We examine the role of institutional investors underlying post–earnings-announcement drift (PEAD). Our results show that while institutional investors generally herd on earnings news, such correlated trading among institutions does not eliminate or reduce market underreaction to earnings surprises. Instead, PEAD is significant only in the subsample of stocks where institutions herd in the same direction as earnings surprises. In fact, institutional herding is also positively related to next-quarter earnings announcement returns. We provide evidence that institutional herding on or against earnings news is largely driven by firm characteristics, particularly past firm performance and stock returns. In addition, we find that relative to nontransient institutions, transient institutions have a stronger tendency to herd on earnings information. Finally, based on long-run stock returns, we show that when institutions herd on earnings surprises, institutional trading represents a gradual process of incorporating information into stock prices. However, when institutions herd against earnings surprises, institutional trading slows down stock price discovery.

Sign in / Sign up

Export Citation Format

Share Document