scholarly journals Transparency Regulation and Stock Price Informativeness: Evidence from the European Union's Transparency Directive

2019 ◽  
Vol 18 (2) ◽  
pp. 89-113 ◽  
Author(s):  
Olena V. Watanabe ◽  
Michael J Imhof ◽  
Semih Tartaroglu
Keyword(s):  
Stock Price ◽  
Stock Return ◽  
Data Availability ◽  
Price Informativeness ◽  
Financial Reports ◽  
Corporate Transparency ◽  
Financial Disclosures ◽  
Stock Price Informativeness ◽  
Transparency Directive ◽  
Jel Classifications

ABSTRACT We examine changes in stock price informativeness following the European Union's Transparency Directive (TPD). The TPD, implemented by country between 2007 and 2009, enhanced corporate transparency through mandating regular firm financial disclosures and facilitating the dissemination of financial reports. Using stock return synchronicity as a proxy for stock price informativeness, we find that price informativeness improved following implementation of the TPD. This improvement was more pronounced in countries with strong regulatory environments than those with weak regulatory environments. We additionally examine a later amendment to the TPD that eliminated the requirement of quarterly financial disclosures and document an increase in stock return synchronicity following the amendment. Our findings support prior research suggesting that transparency regulations improve financial information. JEL Classifications: F30; G15; G30; M4. Data Availability: Data are available from the sources cited in the text.

Effect of Stock Price Information on Timing of Share Repurchases

2019 ◽  
Vol 4 (1) ◽  
pp. 36-46
Author(s):  
Chong-Meng Chee ◽  
Nazrul Hisyam Bin Ab Razak
Keyword(s):  
Cost Saving ◽  
Private Information ◽  
Stock Price ◽  
Stock Return ◽  
Market Timing ◽  
Abnormal Returns ◽  
Jel Classification ◽  
Share Repurchases ◽  
Price Informativeness ◽  
Stock Price Informativeness

Objective - This study investigates whether private information newly incorporated into stock price enhances performance in timing share repurchases. Methodology/Technique - Cost saving gained in share repurchases is used a proxy for performance of market-timing in share repurchases and firm-specific stock return variation is used to gauge stock price informativeness. A sample of 334 U.S. repurchasing firms are tested using panel data regression. Findings - The paper concludes that managers possess better market timing skill by obtaining more cost saving from their share repurchases when private information is reflected in stock price. Stock price informativeness may be the tool for managers to improve their market timing skill to take advantage of the stock market. Furthermore, firms with smaller size and a higher market-to-book ratios, and firms with higher cash-to-assets ratios are found to achieve more cost saving in buying back their shares indicating that these firms are able to time the market in share repurchasing. Novelty – Despite numerous previous studies focusing solely on using share repurchases announcement for computing cumulative abnormal returns in testing managerial market timing, this study contributes to the literature in several ways: (i) providing evidence relating stock price informativeness and performance of market-timing in share repurchases; (ii) developing a better timing measure constructed using actual repurchasing data; (iii) adopting a cost saving measure as the timing measure instead of cumulative abnormal return. Type of Paper - Empirical. Keywords: Managerial Learning Hypothesis; Market Timing; Stock Repurchase; Stock Price Informativeness; Firm-specific Stock Return Variation. JEL Classification: G12, G13, G14. DOI: https://doi.org/10.35609/jfbr.2019.4.1(5)

Interim Reporting Frequency and the Mispricing of Accruals

2018 ◽  
Vol 32 (3) ◽  
pp. 29-47
Author(s):  
Shou-Min Tsao ◽  
Hsueh-Tien Lu ◽  
Edmund C. Keung
Keyword(s):  
Financial Reporting ◽  
Stock Prices ◽  
Data Availability ◽  
Financial Reports ◽  
Regulatory Changes ◽  
Sample Composition ◽  
Reporting Frequency ◽  
Over Time ◽  
Jel Classifications ◽  
Accrual Mispricing

SYNOPSIS This study examines the association between mandatory financial reporting frequency and the accrual anomaly. Based on regulatory changes in reporting frequency requirements in Taiwan, we divide our sample period into three reporting regimes: a semiannual reporting regime from 1982 to 1985, a quarterly reporting regime from 1986 to 1987, and a monthly reporting regime (both quarterly financial reports and monthly revenue disclosure) from 1988 to 1993. We find that although both switches (from the semiannual reporting regime to the quarterly reporting regime and from the quarterly reporting regime to the monthly reporting regime) hasten the dissemination of the information contained in annual accruals into stock prices and reduce annual accrual mispricing, the switch to monthly reporting has a lesser effect. Our results are robust to controlling for risk factors, transaction costs, and potential changes in accrual, cash flow persistence, and sample composition over time. These results imply that more frequent reporting is one possible mechanism to reduce accrual mispricing. JEL Classifications: G14; L51; M41; M48. Data Availability: Data are available from sources identified in the paper.

Tax-Advantaged Trust Use Among IPO Executives: Determinants and Implications for Valuation and Future Performance

2019 ◽  
Vol 95 (3) ◽  
pp. 145-175 ◽  
Author(s):  
Michael J. Dambra ◽  
Matthew Gustafson ◽  
Phillip J. Quinn
Keyword(s):  
Stock Price ◽  
Relevant Information ◽  
Data Availability ◽  
Market Prices ◽  
The Public ◽  
Future Performance ◽  
Estate Taxes ◽  
Price Appreciation ◽  
One Year ◽  
Jel Classifications

ABSTRACT We examine the prevalence and determinants of CEOs' use of tax-advantaged trusts prior to their firm's IPO. Twenty-three percent of CEOs use tax-advantaged pre-IPO trusts, and share transfers into tax-advantaged trusts are positively associated with CEO equity wealth, estate taxes, and dynastic preferences. We project that pre-IPO trust use increases CEOs' dynastic wealth by approximately $830,000, on average. We next examine a simple model's prediction that trust use will be positively related to IPO-period stock price appreciation. We find that trust use is associated with 12 percent higher one-year post-IPO returns, but is not significantly related to the IPO's valuation, filing price revision, or underpricing. This evidence is consistent with CEOs' personal finance decisions prior to the IPO containing value-relevant information that is not immediately incorporated into market prices. JEL Classifications: D14; G12; G32; M21; M41. Data Availability: Data are available from the public sources cited in the text.

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