scholarly journals THE PRICING OF DISCRETIONARY ACCRUALS - EVIDENCE FROM PAKISTAN

2019 ◽  
Vol 2 (2) ◽  
Author(s):  
Zunera Khalid ◽  
Farah Yasser ◽  
Muhammad Mobeen Ajmal
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Institutional Ownership ◽  
Discretionary Accruals ◽  
Minority Shareholders ◽  
High Quality ◽  
Market Prices ◽  
Significant Evidence ◽  
Block Holders ◽  
Audit Production

Even now with the cutting edge businesses and specialized management, a large number of the firms are owned by families in Pakistan. Agency disagreements and issues exist between the management and the owners as well as the minority shareholders and the block holders. To handle these feuds, accountants use discretionary accruals. These accruals help to manage earnings and smooth sharp trends to protect the interest of management and the owners. This study determines whether the investors manage the earnings through discretionary accruals or do they price these accruals when considering the stock price. This study finds significant evidence that the market prices discretionary accruals. We find that the firms with higher number of institutional ownership, high quality audit production and higher number of independent board have significantly higher impact of discretionary accruals on their stock returns as compared to other firms.

scholarly journals The Impacts Of Institutional Stock Ownership On Stock Returns And Performance: A Financial Market Perspective

2011 ◽  
Vol 3 (3) ◽  
Author(s):  
Johnston Osagie ◽  
Gbolahan Solomon Osho ◽  
Cynthia Sutton
Keyword(s):  
Stock Returns ◽  
Financial Market ◽  
Stock Prices ◽  
Stock Price ◽  
Institutional Ownership ◽  
Small Companies ◽  
Font Size ◽  
And Performance ◽  
The Relationship ◽  
Market Perspective

<p class="MsoBodyText" style="line-height: normal; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">Recent studies indicate that corporations with high Institutional ownership have higher stock prices than those with less Institutional ownership. Even small companies with high Institutional ownership have higher stock prices in their range. Institutions have researchers and analysts to investigate the financials and the industry potential of the firms. As a result, the perception is that high institutional ownership indicates good value<span style="color: #ff6600;">. </span>This study investigates if the percentage of institutional ownership directly correlates with the price of stocks.<span style="mso-spacerun: yes;">&nbsp; </span>The relationship between the Institutional ownerships and price was prevalent. This was more indicative among the large cap stocks than the small caps stocks.<span style="mso-spacerun: yes;">&nbsp; </span>It was also found that the higher the percentage of Institutional ownership does reflect a higher stock price.<span style="mso-spacerun: yes;">&nbsp; </span>This was manifest among the large caps than the small caps. </span></span></p>

Investor Sophistication and Patterns in Stock Returns after Earnings Announcements

2000 ◽  
Vol 75 (1) ◽  
pp. 43-63 ◽  
Author(s):  
Eli Bartov ◽  
Suresh Radhakrishnan ◽  
Itzhak Krinsky
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Trading Volume ◽  
Explanatory Variable ◽  
Earnings Announcements ◽  
Abnormal Returns ◽  
Institutional Ownership ◽  
Quarterly Earnings ◽  
Institutional Holdings ◽  
Investor Sophistication

This study tests whether the observed patterns in stock returns after quarterly earnings announcements are related to the proportion of firm shares held by institutional investors, a variable used by prior research to proxy for investor sophistication. Our findings show that the institutional holdings variable is negatively correlated with the observed post-announcement abnormal returns. Our findings also show that traditional proxies for transaction costs (i.e., trading volume, stock price) as well as firm size have little incremental power to explain post-announcement abnormal returns when institutional holdings is an explanatory variable. If institutional ownership is a valid proxy for investor sophistication, these findings suggest that the trading activity of unsophisticated investors underlies the predictability of stock returns after earnings announcements. However, tests evaluating the validity of institutional holdings as a proxy for investor sophistication yield only mixed results. This calls for caution in interpreting our findings.

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.

scholarly journals Financial Crises, Macroeconomic Variables, and Long-Run Risk: An Econometric Analysis of Stock Returns Correlations (2000 to 2019)

2021 ◽  
Vol 14 (3) ◽  
pp. 127
Author(s):  
Marco Tronzano
Keyword(s):  
Stock Returns ◽  
Risk Premium ◽  
Financial Crises ◽  
Stock Price ◽  
Financial Risk ◽  
Swiss Franc ◽  
Chinese Stock Market ◽  
Stock Market Index ◽  
Defensive Role ◽  
Long Run

This paper focuses on four major aggregate stock price indexes (SP 500, Stock Europe 600, Nikkei 225, Shanghai Composite) and two “safe-haven” assets (Gold, Swiss Franc), and explores their return co-movements during the last two decades. Significant contagion effects on stock markets are documented during almost all financial crises; moreover, in line with the recent literature, the defensive role of gold and the Swiss Franc in asset portfolios is highlighted. Focusing on a new set of macroeconomic and financial series, a significant impact of these variables on stock returns correlations is found, notably in the case of the world equity risk premium. Finally, long-run risks are detected in all asset portfolios including the Chinese stock market index. Overall, this empirical evidence is of interest for researchers, financial risk managers and policy makers.

scholarly journals Will Households Invest in Safe Sanitation? Results from an Experimental Demand Trial in Nakuru, Kenya

2021 ◽  
Vol 18 (9) ◽  
pp. 4462
Author(s):  
Rachel Peletz ◽  
Caroline Delaire ◽  
Joan Kones ◽  
Clara MacLeod ◽  
Edinah Samuel ◽  
...  
Keyword(s):  
Low Income ◽  
Low Income Countries ◽  
Health Concern ◽  
High Quality ◽  
Market Prices ◽  
Price Point ◽  
Improved Sanitation ◽  
Sanitation Infrastructure ◽  
The City ◽  
Experimental Demand

Unsafe sanitation is an increasing public health concern for rapidly expanding cities in low-income countries. Understanding household demand for improved sanitation infrastructure is critical for planning effective sanitation investments. In this study, we compared the stated and revealed willingness to pay (WTP) for high-quality, pour-flush latrines among households in low-income areas in the city of Nakuru, Kenya. We found that stated WTP for high-quality, pour-flush latrines was much lower than market prices: less than 5% of households were willing to pay the full costs, which we estimated between 87,100–82,900 Kenyan Shillings (KES), or 871–829 USD. In addition, we found large discrepancies between stated and revealed WTP. For example, 90% of households stated that they would be willing to pay a discounted amount of 10,000 KES (100 USD) for a high-quality, pour-flush latrine, but only 10% of households redeemed vouchers at this price point (paid via six installment payments). Households reported that financial constraints (i.e., lack of cash, other spending priorities) were the main barriers to voucher redemption, even at highly discounted prices. Our results emphasize the importance of financial interventions that address the sizable gaps between the costs of sanitation products and customer demand among low-income populations.

scholarly journals The impact of the COVID-19 outbreak on Chinese-listed tourism stocks

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Wenmin Wu ◽  
Chien-Chiang Lee ◽  
Wenwu Xing ◽  
Shan-Ju Ho
Keyword(s):  
Stock Returns ◽  
Cultural Differences ◽  
Stock Price ◽  
Negative Impact ◽  
Tourism Industry ◽  
Regression Analyses ◽  
Short Term ◽  
Tourism Sector ◽  
Event Study Method ◽  
The Impact

AbstractThis research explored the effects of the coronavirus disease (COVID-19) outbreak on stock price movements of China’s tourism industry by using an event study method. The results showed that the crisis negatively impacted tourism sector stocks. Further quantile regression analyses supported the non-linear relationship between the government’s responses and stock returns. The results present that the resurgence of the virus in Beijing did bring about a short-term negative impact on the tourism industry. The empirical results can be used for future researchers to conduct a comparative study of cultural differences concerning government responses to the COVID-19.

An Analysis of the Sources of Value Loss Following Financial Restatements

2021 ◽  
pp. 0148558X2198991
Author(s):  
Philip K. Hong ◽  
Jaywon Lee ◽  
Sang-Hyun Park ◽  
Sukesh Patro
Keyword(s):  
Stock Returns ◽  
Cash Flow ◽  
Discount Rate ◽  
Stock Price ◽  
Cash Flows ◽  
Financial Fraud ◽  
Earnings Persistence ◽  
Flow Component ◽  
Financial Restatements ◽  
Value Loss

We decompose the total value loss around firms’ announcements of financial restatements into components arising from investors’ revisions in cash flows and discount rates. First, relative to population benchmarks, restatements represent circumstances in which the cash flow component becomes more important in explaining valuations. While we find significant contributions from both sources, with the cash flow component explaining more than 33% of the variation in stock returns surrounding restatement announcements, this component explains only 13% to 22% in comparable non-restating firms. When restatements are caused by underlying financial fraud, the discount rate impact becomes more important, explaining about 88% of return variation. On the contrary, the cash flow impact is relatively larger for firms with higher earnings persistence or restatements associated with errors. Our decomposition of the value loss helps explain returns in the post-announcement period. Firms with a higher relative discount rate impact experience a significant downward stock price drift after the initial announcement-related price decline. For firms with a higher relative cash flow impact, the evidence suggests the initial impact of the restatement announcement is more complete with no subsequent drift pattern. Our findings close gaps in the evidence on financial restatements and extend the literature on the drivers of stock price movements.

scholarly journals Valuation Implications of FAS 159 Reported Gains and Losses From Fair Value Accounting for Liabilities

2021 ◽  
pp. 0148558X2110178
Author(s):  
Sung Gon Chung ◽  
Cheol Lee ◽  
Gerald J. Lobo ◽  
Kevin Ow Yong
Keyword(s):  
Stock Returns ◽  
Accounting Standards ◽  
Institutional Ownership ◽  
Fair Value ◽  
Negative Association ◽  
Financial Accounting ◽  
Fair Value Accounting ◽  
Economic Implications ◽  
Current Period ◽  
Gains And Losses

This study examines the economic implications of fair value liability gains and losses arising from the adoption of Statement of Financial Accounting Standards No. 159 (hereafter, FAS 159). We find a positive correspondence between a firm’s FAS 159 fair value liability gains and losses and current period stock returns, consistent with the notion that these gains and losses are priced by equity investors. However, further analysis indicates that fair value gains and losses from liabilities have a statistically significant negative association with future returns, suggesting that investors misprice this earnings component and subsequently correct the mispricing. We also find that the negative association for fair value gains is stronger for firms with lower levels of institutional ownership.

Stock Market Reaction on Green-Bond Issue: Evidence from Indian Green-Bond Issuers

2021 ◽  
pp. 097226292110225
Author(s):  
Rakesh Kumar Verma ◽  
Rohit Bansal
Keyword(s):  
Stock Returns ◽  
Financial Institutions ◽  
Stock Price ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Developed Countries ◽  
Low Carbon ◽  
Bond Issue ◽  
The Government ◽  
The Impact

Purpose: A green bond is a financial instrument issued by governments, financial institutions and corporations to fund green projects, such as those involving renewable energy, green buildings, low carbon transport, etc. This study analyses the effect of green-bond issue announcement on the issuer’s stock price movement. It shows the reaction of the stock price after the issue of green bonds. Methodology: This study is based on secondary data. Green-bond issue dates have been collected from newspaper articles from different online sources, such as Business Standard, The Economic Times, Moneycontrol, etc. The closing prices of stocks have been taken from the NSE (National Stock Exchange of India Limited) website. An event window of 21 days has been fixed for the study, including the 10 days before and after the issue date. Data analysis is carried out through the event study method using the R software. Calculation of abnormal returns is done using three models: mean-adjusted returns model, market-adjusted returns model and risk-adjusted returns model. Findings: The results show that the issue of green bonds has a significant positive effect on the stock price. Returns increase after the green-bond issue announcement. Although the announcement day shows a negative return for all the samples taken for the study, the 10-day cumulative abnormal return (CAR) is positive. Thus, green-bond issues lead to positive sentiments among investors. Research implications: This research article will help the government issue more green bonds so that the proceeds can be utilized for green projects. The government should motivate corporations and financial institutions to issue more green bonds to help the economy grow. In India, very few organizations have issued a green bond. It will be beneficial if these players issue green bonds, as it will increase the firms’ value and boost returns to the investors. Originality/value: The effect of green-bond issue on stock returns has been analysed in some studies in developed countries. This is the first study to examine the impact of green-bond issue on stock returns in the Indian context, to the best of our knowledge.

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