Market Reactions to Transparency International Reports on Corporate Anti-Corruption

2016 ◽  
Vol 16 (1) ◽  
pp. 84-99 ◽  
Author(s):  
Renata Blanc ◽  
Dennis M. Patten ◽  
Manuel Castelo Branco
Keyword(s):  
Market Reaction ◽  
Market Reactions ◽  
Transparency International ◽  
Corporate Reporting ◽  
Environmental Domain ◽  
Country Level ◽  
Stakeholder Pressure ◽  
Political Cost ◽  
Time Periods ◽  
Environmental Events

ABSTRACT In this paper, we examine the investor response to the issuance of Transparency International's (TI) 2012 and 2014 Transparency in Corporate Reporting: Assessing the World's Largest Companies reports. Building on prior studies of political cost-inducing events in the environmental domain, we anticipate a negative market reaction, although we argue that the adjustment will be less severe for firms rated as having better anti-corruption disclosure. Focusing on a sample of U.S. companies to control for country-level effects and to allow for comparison with the prior environmental-themed studies, we document a significantly negative market reaction to the first TI report issuance. Although also negative, the market reaction to the 2014 report was not statistically significant. However, we also document that, as expected, market adjustments differ significantly across subgroups based on anti-corruption disclosure in both time periods. These results hold controlling for other factors potentially influencing investor perceptions of exposure to the report issuances. In general, our results are consistent with the prior studies and indicate that the market is savvy to political cost exposures arising from non-environmental events. The findings also suggest that TI's efforts may be increasing stakeholder pressure for corporate anti-corruption performance, but we caution that further investigation of the relation between disclosure and underlying performance in the corruption domain is warranted.

scholarly journals Financial Ratios, Economic Value Added and Market Reaction: A Quantitative Study on Indonesia Stock Exchange

2020 ◽  
Vol 7 (2) ◽  
pp. 82-91
Author(s):  
Indrawan Azis ◽  
Dara Ayu Nianty ◽  
Andi Marlinah
Keyword(s):  
Market Reaction ◽  
Stock Exchange ◽  
Economic Value ◽  
Value Added ◽  
Secondary Data ◽  
Partial Least Square ◽  
Least Square ◽  
Economic Value Added ◽  
Manufacturing Companies ◽  
Market Reactions

Reflecting on the phenomenon of stock market movements on the Indonesia Stock Exchange, this study was appointed to examine the effect of the effect of liquidity, solvency, and Economic Value Added (EVA) on market reactions in manufacturing companies listed on the IDX. The research method uses a quantitative approach, and types are categorized in explanatory research. The population in this study is manufacturing companies listed on the Indonesia Stock Exchange in the period 2017-2019. Determination of the sample to be tested in this study using a purposive sampling method and obtained 36 companies. Secondary data were obtained from the Capital Market Information Center (PIPM) the Indonesia Stock Exchange (IDX). The analytical method is Partial Least Square (PLS) with the assistant of SmartPLS 3.0 software. The results of the study showed that all exogenous variables positively and significantly influenced endogenous variable (EVA and Market Reaction). Research findings enrich previous studies on understanding market reactions and their impact on the development of corporate financial strategies in Indonesia.

Equal opportunity market

2019 ◽  
Vol 18 (3) ◽  
pp. 508-531
Author(s):  
Jennifer Bannister ◽  
Li-Chin Jennifer Ho ◽  
Xiaoxiao Song
Keyword(s):  
Stock Returns ◽  
Market Reaction ◽  
Information Environment ◽  
Market Model ◽  
Foreign Firms ◽  
Market Reactions ◽  
Analyst Following ◽  
Distance Information ◽  
Content Type ◽  
Domestic Firms

Purpose This paper aims to compare US market reactions to the restatement announcements of foreign firms listed in the USA and those of US firms by applying the Capital Market Liability of Foreignness (CMLOF) concept. It further investigates the incremental effect of an improved information environment, proxied by analyst following, on mitigating the negative market reaction to a restatement for foreign vs domestic firms. Design/methodology/approach Regression tests are performed on a matched-sample, which matches foreign and domestic firms based on industry and firm size. Market reaction is defined as three-day abnormal stock returns calculated using a market model. The sources of CMLOF are defined as institutional distance, information costs, unfamiliarity costs and cultural distance. Findings Results suggest that, on average, the magnitude of the market reaction to a restatement is 1.8 per cent lower for foreign firms than for domestic firms. Information and unfamiliarity costs contribute to the differing market reactions. In addition, it appears that the improved information environment created by a higher analyst following is more important for foreign firms who face CMLOF than for domestic firms. Originality/value While prior research establishes a negative market reaction to restatement announcements, comparing the market reactions for foreign and domestic firms provides evidence regarding whether US investors treat foreign and domestic firms differently. Additionally, to the best of the authors’ knowledge, this is the first study that examines CMLOF using restatement announcements.

An Empirical Test of the Signaling Effect of Management's Earnings Forecasts: A Decomposition of the Earnings Surprise and Forecast Surprise Effects

1995 ◽  
Vol 10 (4) ◽  
pp. 787-802 ◽  
Author(s):  
Gillian Hian Heng Yeo ◽  
David A. Ziebart
Keyword(s):  
Stock Market ◽  
Market Reaction ◽  
Empirical Test ◽  
Earnings Forecasts ◽  
The Other ◽  
Earnings Forecast ◽  
Corporate Management ◽  
Management Earnings Forecasts ◽  
Market Reactions ◽  
Earnings Surprise

When corporate management issues an earnings forecast there are potentially two surprises. One potential surprise is that a forecast was issued and the other is the surprise in the earnings forecast. Accordingly, the observed stock market reaction to management earnings forecasts may be due to one or the other, or both. This study decomposes the cross-sectional variability in stock market reactions to management earnings forecasts into the portions attributable to the forecast surprise and the earnings surprise. The results indicate that the market's reaction is a function of both the earnings surprise and the forecast surprise. However, the market reaction is more associated with forecast surprise than with the earnings surprise. This suggests that results in previous studies on the market reactions to management earnings forecasts may need to be reconsidered.

DETERMINANTS OF DEFENCE INDUSTRY CORRUPTION RISK: FIRM LEVEL EMPIRICAL EVIDENCE USING TRANSPARENCY INTERNATIONAL’S ANTI-CORRUPTION INDEX

2019 ◽  
Vol 64 (03) ◽  
pp. 675-708
Author(s):  
CHANDRASEKHAR KRISHNAMURTI ◽  
DOMENICO PENSIERO ◽  
ESWARAN VELAYUTHAM
Keyword(s):  
Composite Index ◽  
Developed Countries ◽  
Firm Level ◽  
Listed Firms ◽  
Transparency International ◽  
Market Participants ◽  
Country Level ◽  
Defence Industry ◽  
Corruption Index

Since there is a general perception that the defence industry is more susceptible to corruption compared to other sectors, using a unique database provided by Transparency International (TI), we examine the role of firm level antecedents on firm level corruption risk in the defence industry. We find that larger firms have lower levels of firm level corruption risk. Managerial shareholding is associated with higher levels of corruption risk. Firms that voluntarily disclose more information regarding their corruption control systems tend to have lower levels of corruption risk. Finally, listed firms also have lower levels of firm level corruption risk. We find that the “listing effect” is stronger among firms in financially developed countries ostensibly due to the better scrutiny and monitoring by market participants. In our analysis, we control for country level variables such as a composite index of government effectiveness in controlling defence industry corruption.

scholarly journals Strong Country Level Correlation between Syphilis and HSV-2 Prevalence

2016 ◽  
Vol 2016 ◽  
pp. 1-6 ◽  
Author(s):  
Chris Richard Kenyon ◽  
Achilleas Tsoumanis ◽  
Kara Osbak
Keyword(s):  
Risk Factors ◽  
Herpes Simplex ◽  
Simple Linear Regression ◽  
Country Level ◽  
Syphilis Testing ◽  
Time Periods ◽  
Testing Algorithm ◽  
Simplex Virus ◽  
Herpes Simplex Virus 2 ◽  
The Relationship

Background. Syphilis is curable but Herpes Simplex Virus-2 (HSV-2) is not. As a result, the prevalence of syphilis but not HSV-2 may be influenced by the efficacy of national STI screening and treatment capacity. If the prevalence of syphilis and HSV-2 is found to be correlated, then this makes it more likely that something other than differential STI treatment is responsible for variations in the prevalence of both HSV-2 and syphilis. Methods. Simple linear regression was used to evaluate the relationship between national antenatal syphilis prevalence and HSV-2 prevalence in women in two time periods: 1990–1999 and 2008. Adjustments were performed for the laboratory syphilis testing algorithm used and the prevalence of circumcision. Results. The prevalence of syphilis was positively correlated with that of HSV-2 for both time periods (adjusted correlations, 20–24-year-olds: 1990–99: R2=0.54, P<0.001; 2008: R2=0.41, P<0.001 and 40–44-year-olds: 1990–99: R2=0.42, P<0.001; 2008: R2=0.49, P<0.001). Conclusion. The prevalence of syphilis and HSV-2 is positively correlated. This could be due to a common set of risk factors underpinning both STIs.

Anti-corruption reporting in emerging country multinationals

2019 ◽  
Vol 26 (3) ◽  
pp. 861-873 ◽  
Author(s):  
José Vale ◽  
Manuel Castelo Branco
Keyword(s):  
Design Methodology ◽  
Emerging Market ◽  
Emerging Countries ◽  
Risk Level ◽  
Content Type ◽  
Emerging Market Multinationals ◽  
Transparency International ◽  
Corporate Reporting ◽  
Emerging Country ◽  
International Report

Purpose Based on a lens of analysis combining legitimacy and stakeholder theories, this paper aims to explore some factors which influence anti-corruption (AC) reporting in large multinationals from emerging countries. Design/methodology/approach An ordinal logistic regression is used to assess the relation between the AC reporting and multinationals’ industrial affiliation, number of countries of operations, membership of the United Nations Global Compact (UNGC) and public ownership. The sample was drawn from the 2016 Transparency International Report “Transparency in Corporate Reporting – Assessing Emerging Market Multinationals”. Findings Evidence suggests that in emerging countries, listed multinationals, which operate in a large number of countries or are members of the UNGC, present significant levels of AC reporting. Unexpectedly, results also suggest that such reporting is not significantly affected by the corruption risk level of the industries to which the multinationals belong. Finally, results suggest that in emerging markets, the dependency for resources may also affect AC reporting. Originality/value This paper contributes to the extant literature, by exploring different determinants of AC reporting, namely, a thus far unexplored one: public vs private ownership. This paper also contributes to the literature by providing insights into the relationships in a specific context: that of emerging countries. Finally, the reliance on the international community for the provision of resources is shown as a factor that potentially affects AC reporting.

Does Auditor Industry Specialization Matter? Evidence from Market Reaction to Auditor Switches

2007 ◽  
Vol 26 (1) ◽  
pp. 19-45 ◽  
Author(s):  
W. Robert Knechel ◽  
Vic Naiker ◽  
Gail Pacheco
Keyword(s):  
Audit Quality ◽  
Market Reaction ◽  
Abnormal Returns ◽  
Brand Name ◽  
Market Reactions ◽  
Industry Specialization ◽  
Big 4 ◽  
Audit Firms ◽  
Auditor Switches ◽  
Differential Costs

Numerous capital market studies have investigated the stock market's reaction to firms switching to and from brand name auditors (Big 8/6/5/4 auditors). However, audit firm brand name is only one possible indication of the quality of an auditor. This study contributes to the existing literature on auditor switching, by examining how the market reacts to auditor switches to or from audit firms that are considered to be industry specialists. Consistent with our hypotheses, we find that firms switching between Big 4 auditors experience significant positive abnormal returns when the successor auditor is an industry specialist, and they experience significant negative abnormal returns when the successor auditor is not a specialist. We also find that these market reactions are more likely to be due to changes in perceived audit quality rather than differential costs of using specialist auditors. In supplemental analysis of switches involving non-Big 4 auditors, we find that firms that switch from a specialist Big 4 auditor to a non-Big 4 auditor suffer the largest negative market reaction. Surprisingly, we also observe that the market reacts most positively when a company switches from a non-Big 4 auditor to a Big 4 auditor who is not a specialist. These results suggest that the market does perceive audit quality differences based on industry specialization to be relevant to the valuation of a company's market value.

scholarly journals Market Reaction to Dividend Announcements During Pandemic: An Event Study

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.

The diffusion and adoption of integrated reporting: a cross-country analysis on the determinants

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Megawati Oktorina ◽  
Sylvia Veronica Siregar ◽  
Desi Adhariani ◽  
Aria Farah Mita
Keyword(s):  
Empirical Evidence ◽  
Diffusion Of Innovation ◽  
Disclosure Quality ◽  
Integrated Reporting ◽  
Diffusion Of Innovation Theory ◽  
Content Type ◽  
Corporate Reporting ◽  
Country Level ◽  
Reporting Framework ◽  
New Entrants

Purpose This study aims to provide empirical evidence on the determinants of voluntary integrated reporting (<IR>) disclosure quality. Design/methodology/approach The samples include companies from the Integrated Reporting Examples Database on the International Integrated Reporting Committee’s (IIRC) website, except South Africa and Brazil, where reporting is mandatory. The final sample includes 29 countries, with 148 companies and 592 observations for the study period 2014–2017. Content analysis is used to measure <IR> disclosure quality derived from the <IR> principles and elements published by IIRC (2013). The fraction regression probit model is used to test the proposed hypothesis. Findings This study provides empirical evidence that competition from new entrants and country-level accounting competence encourage companies to implement the International Integrated Reporting Framework (IIRF). Signaling theory and diffusion of innovation theory can be used to explain this association. Meanwhile, product market competition of existing rivals has been found to reduce the adoption of the <IR> framework, which is consistent with the proprietary cost theory. Finally, this study finds that company reputation does not affect voluntary <IR> disclosure quality. Research limitations/implications This study did not examine the barriers to entry to explain the effect of competition from new entrants as a possible determinant of <IR> disclosure quality. Furthermore, the inclusion of <IR> in the accounting curriculum of universities and certification bodies in certain countries has not been considered as a control variable. The results might also be limited to companies that voluntarily submitted into the Integrated Reporting Examples Database on the IIRC website. All these limitations provide ample avenues for future research. Practical implications This research provides implications for governments and standard setters to further sharpen the competence of accountants through memberships in professional accountancy organisations or through training and seminars related to <IR>. The results also suggest that universities should include the topic of <IR> in the accounting program curriculum to increase the understanding of prospective accountants about this reporting regime. The results also show differences on the impact of competition between new entrants and existing rivals on <IR> disclosure quality. This can be used by IIRC or other standard setters to predict the <IR adoption>. Originality/value This study uses the diffusion of innovation theory to explain the association between country-level accounting competence and <IR> disclosure quality. Few studies have researched this association. The results show that a country’s accounting competence increases the application of the IIRF in corporate reporting. <IR> has been considered an innovation in corporate reporting and can be implemented by the company if its professional accountants have enough knowledge of this reporting framework.

scholarly journals Measuring the agency costs of dispersed ownership: the case of repurchase initiations

2014 ◽  
Vol 11 (3) ◽  
pp. 30-49
Author(s):  
Ruth Gesser ◽  
Rony Halman ◽  
Oded Sarig
Keyword(s):  
Stock Prices ◽  
Media Coverage ◽  
Agency Costs ◽  
Market Reaction ◽  
Cash Flows ◽  
Payout Policy ◽  
Conclusive Evidence ◽  
Market Reactions ◽  
Repurchase Announcements ◽  
Dispersed Ownership

Empirical investigations of the agency costs of dispersed ownership yield mixed results. A possible explanation for the lack of conclusive evidence is inaccurate measurement of the extent of the problem. We suggest that the extent of the problem be measured as theory suggests: by the wealth that managers commit to their firms. We examine the relative performance of different measures of the agency problem of dispersed ownership in the context of changes in payout policy affected by repurchase initiations. We find that the suggested measure – managerial equity wealth – can explain better than any other measure the market reaction to repurchase initiations. We also find that market reaction to repurchase initiation is smaller for firms with high media coverage than for firms with low media coverage and that repurchases that follow a large rise in stock prices elicit relatively small market reactions. Lastly, we find that market reaction to repurchase announcements decreases with the dividend yield of the firm, which suggests that share repurchases are relatively less important when dividends are used to alleviate the problems of free cash flows. Our results are robust to several modifications of the main test.

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