The Moderating Effect of Context on the Market Reaction to IT Investments

2006 ◽  
Vol 20 (1) ◽  
pp. 19-44 ◽  
Author(s):  
Wonseok Oh ◽  
Joung W. Ki m ◽  
Vernon J. Richardson
Keyword(s):  
Market Reaction ◽  
Abnormal Returns ◽  
Interaction Effects ◽  
Asset Specificity ◽  
Event Studies ◽  
Growth Potential ◽  
It Investment ◽  
It Investments ◽  
Strategic Role ◽  
Main Effects

This paper examines the moderating effects of firm and IT characteristics on the market reaction to IT investment announcements. A special emphasis has been placed on the potential interaction effects of these two types of variables, since the previous event studies have paid limited attention to the possibility that they interact and jointly alter investors' perceptions in relation to IT investment announcements. Very recently, several authors have noted the importance of interaction effects on theory development for IS research. Their assessments are particularly relevant to IT-value event studies, since the market reaction to IT investment announcements involves a complex process shaped by the interaction of firm and IT characteristics. Based on the previous studies in IS, finance, and accounting, a firm's growth potential and uncertainty are used as proxies to represent firm characteristics, while IT strategic role and asset-specificity of IT are chosen as the variables reflecting IT characteristics. Three other variables (discloser information, firm size, and industry) are included to control for their effects. We develop eight hypotheses based on the examinations of the main and interaction effects of firm and IT characteristic variables on the shareholder's reaction to IT investment announcements. The results of the main effects indicate that a firm's growth prospects, uncertainty, the strategic role of IT, and discloser information are significantly related to cumulative abnormal returns (CARs), while no significant effect was observed for asset-specificity of IT resources. Interestingly, however, interaction effects reveal that the stock market reacts with a discount to announcements of IT investments that are characterized as highly asset-specific in the presence of uncertainty. In addition, the market reacts more favorably to investments with a transformational IT strategic role when the firm faces greater uncertainty. One of our main contributions in this study is to provide a finer level of granularity with regard to the market reaction to IT investments by considering the interaction as well as the main effects of firm and IT characteristics.

scholarly journals The efficiency of the Italian stock exchange: market reaction following changes in recommendations

2008 ◽  
Vol 5 (2) ◽  
pp. 434-448 ◽  
Author(s):  
Enrico Maria Cervellati ◽  
Antonio Carlo Francesco Della Bina ◽  
Pierpaolo Pattitoni
Keyword(s):  
Market Reaction ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Event Studies ◽  
Public Access ◽  
Exchange Market ◽  
Short Term ◽  
The Public ◽  
New Information ◽  
Peculiar Case

The main objective of this paper is to examine the market reaction to the recommendation changes issued by financial analysts. We study the peculiar case of Italy where analysts have to send their reports to the Stock Exchange Commission and the Stock Exchange the same day they give it to their clients. Reports are available on the Stock Exchange website. Our dataset includes about 5,200 reports issued on the 117 IPO firms that went public on the Italian Stock market between 1st January 1998 and 31st December 2003. We calculate abnormal returns and abnormal volumes associated with the dissemination of the reports and perform two short-term event studies: the first associated with the “report date”, the second one with regard to the “public access date”, i.e. when the report is freely and publicly available on the Stock Exchange website. The event study related to the public access date show very different results. We do not find statistically significant average abnormal returns around this date, indicating that the market efficiently does not react to the mere publication of the report on the Stock Exchange website, since prices already included the effect of the recommendation change at the report date, i.e. when the new information was given to analyst’s private clients. It remains to be investigated if the abnormal returns before the report date are due to the effect of news different from the recommendation change or if they show a violation of the Italian regulation.

scholarly journals Reaksi Pasar atas Penyebaran Coronavirus Disease 2019 (COVID-19)

2021 ◽  
Vol 31 (3) ◽  
pp. 577
Author(s):  
Alfian Nurwanto Putra ◽  
I Nyoman Wijana Asmara Putra
Keyword(s):  
Abnormal Return ◽  
Market Reaction ◽  
Abnormal Returns ◽  
Sampling Technique ◽  
Event Studies ◽  
Expected Returns ◽  
The World ◽  
The Difference ◽  
Negative Sentiment ◽  
Adjusted Model

COVID-19 has become a negative sentiment for stock markets around the world. On Monday, March 2, 2020, Indonesian President Joko Widodo announced the findings of the first COVID-19 infection case in Indonesia. This study aims to test whether there is a market reaction to the spread of COVID-19. Market reaction in this study is measured by abnormal returns, which is the difference between expected returns and realized returns. Abnormal returns in this study were estimated using a market-adjusted model. This study was conducted on issuers included in the LQ 45 index. The sample in this study was determined using purposive sampling technique. This research was conducted using March 2, 2020 and March 9, 2020 as the date of the event. The number of companies used in this study amounted to 45 companies. The results of this study indicate that on March 2 2020 there was no market reaction to the spread of COVID-19, while on March 9 2020 there was a market reaction to the spread of COVID-19. Keywords: Event Studies; Abnormal Return; COVID-19.

Director trading, or lack thereof, and acquiring firm performance

2016 ◽  
Vol 29 (3) ◽  
pp. 332-347 ◽  
Author(s):  
Md Mosharraf Hossain ◽  
Richard Arthur Heaney ◽  
SzeKee Koh
Keyword(s):  
Cross Section ◽  
Design Methodology ◽  
Market Reaction ◽  
Abnormal Returns ◽  
Event Studies ◽  
Good News ◽  
Content Type ◽  
Acquiring Firms ◽  
Practical Implications ◽  
Is Value

Purpose This paper aims to address the question of whether acquiring firm directors trading, prior to a merger or acquisition (M&A) announcement, predicts the share market reaction on M&A announcement. Design/methodology/approach Event studies and cross-section regression were used in this analysis. Findings This paper finds that acquiring firms with no director trading and firms with net director purchases in the 12 months prior to the M&A announcement earn positive abnormal returns. It is also found that share market reaction to M&A announcements is considerably larger for acquiring firms whose directors do not trade relative to those companies with directors who do trade over the prior 12 months. This director non-trading result is further born out in regression analysis. Research limitations/implications The absence of pre-M&A announcement director trading could reflect lower agency costs for the acquiring firm and this might explain to stronger announcement day effect for this group of firms. Practical implications The fact that directors choose not to trade in their shares prior to a M&A transaction appears to be viewed as good news by the market. Social implications Director trading is value relevant for the acquiring firm and so it is critical that director trading is transparent. Originality/value To the best of the authors' knowledge, this question has not been addressed in the literature before, particularly the finding for firms with no director trading in the period prior to the M&A announcement.

Divestiture and Its Market Reaction in a Consolidating Industry: The Global Brewing Industry

2021 ◽  
pp. 1-21
Author(s):  
Ludwig Erl ◽  
Florian Kiesel
Keyword(s):  
Mergers And Acquisitions ◽  
Capital Market ◽  
Market Reaction ◽  
Market Performance ◽  
Abnormal Returns ◽  
Brewing Industry ◽  
Efficiency Gains ◽  
Market Values ◽  
Jel Classifications ◽  
The Capital Market

Abstract This study provides a perspective on the market performance of divestitures in the global brewing industry. In 2018, the five largest players accounted for 60% of the global beer volume. We analyze to what extent the capital market values divestitures in an industry where players usually seek efficiency gains and growth through mergers and acquisitions. Based on a sample of 61 divestiture intent announcements in the period from 1999–2018, this study shows that publicly listed brewing groups experience significant positive abnormal returns of about 1.4%. We measure the influential effect of success determinants concerning the underlying industry, the divested business, the divestiture structure, and the divestor itself. (JEL Classifications: G14, G34, L25, Q14)

scholarly journals Governing information technology (IT) investment: A contingency perspective on organization’s IT investment goals

2021 ◽  
pp. 031289622110095
Author(s):  
Syaiful Ali ◽  
Peter Green ◽  
Alastair Robb ◽  
Adi Masli
Keyword(s):  
Information Technology ◽  
Boards Of Directors ◽  
Contingency Theory ◽  
Jel Classification ◽  
It Investment ◽  
It Investments ◽  
Contingency Perspective ◽  
Uniform Approach ◽  
Business Executives

Using contingency theory, we argue that there is not a uniform approach for companies to govern information technology (IT) investments. Rather, the level of governance over IT investments is contingent upon the organization’s goals for its IT investments. We find that Australian organizations with both operation- and market-focused IT investment goals (i.e. dual-focused IT goals) demonstrate higher IT investment governance (ITIG) levels than those with less focused IT goals. We also document that dual-IT-focused firms that do not implement high levels of ITIG underperform. Our study informs business executives, boards of directors, and other practitioners interested in governance implementations over IT investments. JEL Classification: M1

Investor protection and market reaction to unusual market activity replies

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Chun-Teck Lye ◽  
Tuan-Hock Ng ◽  
Kwee-Pheng Lim ◽  
Chin-Yee Gan
Keyword(s):  
Market Reaction ◽  
Investor Protection ◽  
Abnormal Returns ◽  
Stock Exchanges ◽  
Uncertain Information ◽  
Information Uncertainty ◽  
Content Type ◽  
Market Activity ◽  
Information Hypothesis ◽  
New Information

PurposeThis study uses the unique setting of unusual market activity (UMA) replies to examine the market reaction and the effects of disclosure and investor protection amid information uncertainty.Design/methodology/approachA total of 1527 hand-collected UMA replies from the interlinked stock exchanges of Indonesia, Malaysia, Thailand and Singapore for the period of 2015–2017 were analysed using event study and Heckman two-step methods with market and matched control firm benchmarks.FindingsThe overall results support the uncertain information hypothesis. The UMA replies with new information were also found to reduce information uncertainty, but not information asymmetry, and they are complementary to investor protection in enhancing abnormal returns. The overall finding suggests that the UMA public query system can be an effective market intervention mechanism in improving information certainty and efficiency.Research limitations/implicationsThis study provides insight on the effects of news replies and investor protection on abnormal returns, and support for the uncertain information hypothesis. The finding is useful to policymakers and stock exchanges as they seek to understand how to alleviate investors' anxiety and to create an informationally efficient market. Nevertheless, this study is limited by the extensiveness of the hand-collected UMA replies and also the potential issue of simultaneity-induced endogeneity.Originality/valueThis study uses UMA replies and cross-country data taking into account the effects of market surroundings such as information uncertainty and the level of investor protection on market reaction.

Exploring the Role of Interaction Effects in Visual Conjoint Analysis

2015 ◽  
Vol 137 (9) ◽  
Author(s):  
Brian Sylcott ◽  
Jeremy J. Michalek ◽  
Jonathan Cagan
Keyword(s):  
Conjoint Analysis ◽  
Consumer Preferences ◽  
Consumer Preference ◽  
Interaction Effects ◽  
Fractional Factorial ◽  
Main Effects ◽  
Full Factorial ◽  
Biased Estimates ◽  
Data Requirements

In conjoint analysis, interaction effects characterize how preference for the level of one product attribute is dependent on the level of another attribute. When interaction effects are negligible, a main effects fractional factorial experimental design can be used to reduce data requirements and survey cost. This is particularly important when the presence of many parameters or levels makes full factorial designs intractable. However, if interaction effects are relevant, main effects design can create biased estimates and lead to erroneous conclusions. This work investigates consumer preference interactions in the nontraditional context of visual choice-based conjoint analysis, where the conjoint attributes are parameters that define a product's shape. Although many conjoint studies assume interaction effects to be negligible, they may play a larger role for shape parameters. The role of interaction effects is explored in two visual conjoint case studies. The results suggest that interactions can be either negligible or dominant in visual conjoint, depending on consumer preferences. Generally, we suggest using randomized designs to avoid any bias resulting from the presence of interaction effects.

Studying the Effect of Changing the Managing Director on the Abnormal Returns of Shares of Companies Listed on the Iraqi Stock Exchange

2021 ◽  
Vol 39 (11) ◽  
Author(s):  
Hussein Hasan ◽  
Hudaa Nadhim Khalbas ◽  
Farqad Mohammed Bakr AL Saadi
Keyword(s):  
Stock Returns ◽  
Significant Relationship ◽  
Stock Prices ◽  
Market Reaction ◽  
Stock Exchange ◽  
Hypothesis Test ◽  
Abnormal Returns ◽  
The Other ◽  
Other Hand ◽  
Abnormal Stock Returns

The aim of this research is to study the market reaction to the change of the managing director and how this change affects the abnormal returns of the shares. The research is based on the information published by the companies listed on the Iraq Stock Exchange, and 35 companies were selected for the period from 2015 to 2019. The results of the hypothesis test for this study show that there is a negative and significant relationship between the change of the managing director and abnormal stock returns. On the other hand, investors undervalue stock prices when changing CEOs. As a result, the stock returns are less than expected.

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