scholarly journals Agency conflicts and the wealth effects of proxy contests

2014 ◽  
Vol 12 (1) ◽  
pp. 8-30
Author(s):  
Gurmeet Singh Bhabra ◽  
Chris Wood
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Agency Costs ◽  
Shareholder Wealth ◽  
Good News ◽  
Wealth Effects ◽  
Agency Conflicts ◽  
Target Firm ◽  
Proxy Contests

We examine the shareholder wealth impact of proxy contests and find that over the three years preceding the contest, target stock prices significantly underperform their industry peers. In addition, consistent with the monitoring role of proxy contests, the announcement and full contest periods result in a positive stock price reaction suggesting that the market views the initiation of a proxy contest as good news. Interesting differences emerge between firms in which dissidents win seats and those where they do not win seats. While target firm stock prices appreciate for all firms at the announcement, such wealth gains are permanent only for the subsample of targets which not only are afflicted with elevated levels of agency problems but also make significant reduction in discretionary expenditures. When dissidents do not win seats, no attempt to reduce agency costs is apparent, and as a result, these firms experience a sustained wealth loss over the years surrounding the contest. The steps taken to reduce agency costs primarily in firms in which dissidents win seats suggests that proxy contests fulfil their intended role of disciplining the board and improve firm performance.

scholarly journals How Does the Accounting Conservatism Affect the Stock Price Crash Risk in Pakistan: The Complementary Role of Managerial and Institutional Ownership

2021 ◽  
Vol 7 (3) ◽  
pp. 607-621
Author(s):  
Aon Waqas ◽  
Danish Ahmed Siddiqui
Keyword(s):  
Stock Prices ◽  
Information Disclosure ◽  
Stock Price ◽  
Panel Data Analysis ◽  
Institutional Ownership ◽  
Accounting Conservatism ◽  
Crash Risk ◽  
Agency Conflicts ◽  
Complementary Role

Purpose: The conservatism of accounting and robustness of accounting information disclosure may restrain the irrational behavior of investors and help to reduce the risk of stock price crashes. This study aims to explore this in the context of developing country Pakistan. More specifically, this study investigates the effect of accounting conservatism on stock price crash risk. We also examine the complementary role of managerial and institutional ownership in strengthening this effect. Design/Methodology/Approach: This study conducts the panel data analysis of 155 nonfinancial firms listed in PSX from 2007 to 2019. This study calculates the C-Score to measure accounting conservatism. This study measures the firm’s stock price crash risk by calculating the DUVOL of weekly share prices. Findings: This study finds that there is a significant negative effect of accounting conservatism on firms’ stock price crash risk. This study also finds that managerial ownership enhances the stock price crash risk of the sample firms significantly as a moderator while there is no significant moderating influence of institutional ownership. Implications/Originality/Value: The competent authorities of Pakistan should consider agency conflicts. They should direct the firms’ management to share equal information in time regardless of whether the information is good or bad for stock prices.

scholarly journals Merger announcements and share price return: The role of the relationship between acquiring and target firms

1988 ◽  
Vol 19 (1) ◽  
pp. 1-10 ◽  
Author(s):  
R. C. Van Den Honert ◽  
G. D.I. Barr ◽  
J. F. Affleck-Graves ◽  
G. Smale
Keyword(s):  
Shareholder Wealth ◽  
Share Price ◽  
Wealth Effects ◽  
Target Firm ◽  
Distribution Of Wealth ◽  
Acquiring Firms ◽  
Average Abnormal Return ◽  
Target Firms ◽  
The Relationship

The authors examine, in a cumulative average abnormal return (CAAR) framework, the effect of four easily identifiable features of merger activity on acquirer/target shareholder wealth. The features considered are the relatedness of the acquiring and target firms involved in the merger, the relative sizes of the acquirer and target, the prior control position, and the medium of exchange. The results indicate that the relatedness of the acquirer and target firm and the prior control position are strong factors in determining the distribution of any wealth effects between the shareholders of the target and acquiring firms. The size and the medium of exchange are shown to be weaker factors in determining the distribution of wealth. In all cases it is seen that the shareholders of acquiring firms do not tend to benefit in the short term from the merger while those of the target firms show significant gains.

Stock Price Jumps and Cross-Sectional Return Predictability

2013 ◽  
Vol 48 (5) ◽  
pp. 1519-1544 ◽  
Author(s):  
George J. Jiang ◽  
Tong Yao
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Stock Return ◽  
Return Predictability ◽  
Value Premium ◽  
The Other ◽  
Stock Return Predictability ◽  
Cross Sectional ◽  
Return Dynamics

AbstractWe identify large discontinuous changes, known as jumps, in daily stock prices and explore the role of jumps in cross-sectional stock return predictability. Our results show that small and illiquid stocks have higher jump returns to the extent that cross-sectional differences in jumps fully account for the size and illiquidity effects. Based on value-weighted portfolios, jumps also account for the value premium. On the other hand, jumps are not the cause of momentum or net share issue effects. The findings of our study shed new light on stock return dynamics and present challenges to conventional explanations of stock return predictability.

scholarly journals Financial Markets’ Governance, Transparency and Informational Efficiency: Role of IfRS Norms, Auditors and Financial Analysts

2016 ◽  
Vol 9 (5) ◽  
pp. 100
Author(s):  
Imen Lamiri ◽  
Adel Boubaker
Keyword(s):  
Financial Markets ◽  
Stock Prices ◽  
Stock Price ◽  
Financial Analysts ◽  
Negative Relationship ◽  
Developed Countries ◽  
Coefficient Of Determination ◽  
Specific Information ◽  
Informational Efficiency

<p>This article explores the informational role of three essential modern financial markets actors such IFRS norms, the Big”4” and the financial analysts for a panel of emergent and developed countries during the period from 2001 to 2010. We hypothesis that these mechanisms help improving the quality of specific information incorporated into stock prices measured by the stock price synchronicity (SPS). The main result is that both financial analyst’s coverage and IFRS adoption's effects seem to be stronger for emerging than developed markets. The results also show a negative relationship between auditors’ opinion and coefficient of determination (R<sup>2</sup>).</p>

scholarly journals The Role of Exchange Rates in the Stock Price Development of Chemical Companies in the Visegrad Four Countries

2019 ◽  
Vol 22 (3) ◽  
pp. 117-129
Author(s):  
Jana Šimáková ◽  
Nikola Rusková
Keyword(s):  
Exchange Rate ◽  
Pharmaceutical Industry ◽  
Exchange Rates ◽  
Stock Prices ◽  
Stock Price ◽  
Stock Exchanges ◽  
The Exchange Rate ◽  
Chemical Companies ◽  
The Empirical Analysis

The aim of the paper is to evaluate the effect of exchange rates on the stock prices of companies in the chemical industry listed on the stock exchanges in the Visegrad Four countries. The empirical analysis was performed from September 2003 to June 2016 on companies from the petrochemical and pharmaceutical industry. The effect of the exchange rate on stock prices is analyzed using Jorion’s approach on monthly data. In contrast to the selected petrochemical companies, the pharmaceutical companies did not use any hedging instruments in the tested period. The effect of the exchange rate on the stock price was proved only in the case of companies from the pharmaceutical industry. This suggests that exchange rate risk could be eliminated by using hedging instruments.

The real effects of primary and secondary equity markets on firm performance

2017 ◽  
Vol 13 (4) ◽  
pp. 397-418 ◽  
Author(s):  
Andriansyah Andriansyah
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Operating Performance ◽  
Equity Markets ◽  
Secondary Market ◽  
Price Informativeness ◽  
Content Type ◽  
Real Effects ◽  
Stock Price Informativeness

Purpose The purpose of this paper is to investigate the real effects of primary and secondary equity markets on the post-issue operating performance of initial public offering (IPO) firms. Design/methodology/approach The author utilizes the intended use of proceeds as a proxy variable for the primary market and the investment-to-price sensitivity and the informativeness of stock prices as alternative proxy variables for the secondary market. The compositional data, and non-parametric quantile regressions which are more robust to outliers than standard least square regressions, are employed for Indonesian equity market over the period of 1999-2013. Findings While confirming that firm operating performance can be explained by the firm’s motivation to go public, the author also shows that the operating performance is positively affected by investment-to-price sensitivity and negatively affected by stock price informativeness. The stock prices affect investment decisions by the way that the more liquid a stock is, the more informative its price is, and the more relevant stock prices are in investment decisions. These findings still hold after controlling for ownership structure. Originality/value Departing from the existing literature, the author investigates the role of primary and secondary equity markets for firm performance in an integrated framework because both markets interact closely in reality. The author shows that public listed firms can benefit both from the capital-raising function of the primary market and from the informational role of the stock prices of the secondary market. A measure of stock price informativeness, 1−R2, however, must be understood in the context of thin trading in the sense that the level of liquidity affects the level of stock price informativeness.

Economic links and the wealth effects of layoff announcements along the supply chain

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yetaotao Qiu ◽  
Michel Magnan
Keyword(s):  
Supply Chain ◽  
Stock Price ◽  
Spillover Effects ◽  
Good News ◽  
Wealth Effects ◽  
Content Type ◽  
Efficiency And Effectiveness ◽  
Comprehensive Picture ◽  
Stock Price Reaction ◽  
Information Externality

PurposeThis paper investigates the effects of layoff announcement by customers on the valuation and operating performance of their supply chain partners.Design/methodology/approachThe authors collect corporate layoff announcements from 8-K filings submitted by US publicly-traded firms from 2004 to 2017. Using event study methodology, they examine the information externality of corporate layoffs on announcing firms' suppliers.FindingsResults show that suppliers, on average, experience a negative stock price reaction around their major customers' layoff announcements. The negative price effect is exacerbated when industry rivals of layoff-announcing customers also suffer from negative intra-industry contagion effects. Additionally, supply chain spillover effects are asymmetric, with only “bad news” layoff announcements causing significant value implications for suppliers, but not “good news” announcements. Supplier firms also reduce their investments in and sales dependence on layoff-announcing customers in subsequent years.Practical implicationsThis study shows that layoff decisions, often aimed at improving firms' efficiency and effectiveness, create uncertainty for the suppliers' operation and cause negative value implications on firms' upstream partners. Findings should be useful to corporate decision-makers in making layoff decisions.Originality/valueThis paper is one of the first to address the value implications of corporate layoffs on announcing firms' suppliers. It provides a more comprehensive picture of the economy-wide impact of achieving efficiency through employee layoffs.

Shareholder-Initiated Class Action Lawsuits: Shareholder Wealth Effects and Industry Spillovers

2009 ◽  
Vol 44 (4) ◽  
pp. 823-850 ◽  
Author(s):  
Amar Gande ◽  
Craig M. Lewis
Keyword(s):  
Stock Price ◽  
Shareholder Wealth ◽  
Class Action ◽  
Wealth Effects ◽  
Filing Date ◽  
Class Action Lawsuits ◽  
Price Reactions ◽  
Stock Price Reactions ◽  
Anticipation Effect

AbstractThis paper documents significantly negative stock price reactions to shareholder-initiated class action lawsuits. We find that shareholders partially anticipate these lawsuits based on lawsuit filings against other firms in the same industry and capitalize part of these losses prior to a lawsuit filing date. We show that the more likely a firm is to be sued, the larger the partial anticipation effect (shareholder losses capitalized prior to a lawsuit filing date) and the smaller the filing date effect (shareholder losses measured on the lawsuit filing date). Our evidence suggests that previous research that typically focuses on the filing date effect understates the magnitude of shareholder losses, and that such an understatement is greater for firms with a higher likelihood of being sued.

scholarly journals Institutional Investment Constraints and Stock Prices

2017 ◽  
Vol 52 (2) ◽  
pp. 465-489 ◽  
Author(s):  
Jie Cao ◽  
Bing Han ◽  
Qinghai Wang
Keyword(s):  
Portfolio Management ◽  
Stock Prices ◽  
Stock Price ◽  
Bad News ◽  
Good News ◽  
Stock Return Predictability ◽  
Institutional Investment ◽  
Price Momentum ◽  
The Impact ◽  
Investment Constraints

We test the hypothesis that investment constraints in delegated portfolio management may distort demand for stocks, leading to price underreaction to news and stock return predictability. We find that institutions tend not to buy more of a stock with good news that they already overweight; they are reluctant to sell a stock with bad news that they already underweight. Stocks with good news overweighted by institutions subsequently significantly outperform stocks with bad news underweighted by institutions. The impact of institutional investment constraints sheds new light on asset pricing anomalies such as stock price momentum and post–earnings announcement drift.

scholarly journals THE MEDIATING ROLE OF DEBT AND DIVIDEND POLICY ON THE EFFECT PROFITABILITY TOWARD STOCK PRICE

2020 ◽  
Vol 22 (1) ◽  
pp. 1-10
Author(s):  
Akhmadi Akhmadi ◽  
Nurohman Nurohman ◽  
Robiyanto Robiyanto
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Dividend Policy ◽  
Stock Exchange ◽  
Sampling Technique ◽  
Return On Equity ◽  
Mediating Role ◽  
Debt Policy ◽  
Positive Effect

This study aimed to obtain an empirical explanation of the role of debt policy and dividend policy as variables mediating the influence of profitability on stock prices. This study used six mining companies listed on the Indonesia Stock Exchange (IDX) during the period of 2012–2016 as samples, hence there were 30 observational data. The sampling technique in this study was purposive sampling. This study found that profitability had a positive effect on stock prices, but the increasing profitability would not necessarily reduce the debt policy. The increasing profitability did not significantly increase the dividend policy, however, increasing dividend policy would increase the stock prices. The results also proved that debt and dividend policy did not mediate the influence of return on equity on the stock prices.

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