scholarly journals CEO Turnovers: Transparency of Announcements and the Outperformance Puzzle

2021 ◽  
Vol 9 (3) ◽  
pp. 34
Author(s):  
Paul Farah ◽  
Hui Li
Keyword(s):  
Market Reaction ◽  
Ceo Turnover ◽  
Positive Signal ◽  
Past Performance ◽  
Market Reactions ◽  
Broad View ◽  
Early Action ◽  
The Future ◽  
Types Of Information ◽  
Negative Signal

This study investigates market reactions to announcements of CEO turnover and finds that forced turnovers are not accompanied by positive returns, which contradicts the broad view that firing a CEO sends a positive signal to the market. This contradiction is further explored by focusing on the nature of not only turnover but also a firm’s past performance. This study finds that the market seems to incorporate both types of information in reacting to CEO turnover announcements. Firing an underperforming CEO is viewed as a positive signal, whereas firing an outperforming CEO is viewed as a negative signal. Rather than taking early action against CEOs for a deterioration in their performance, firms appear to be firing outperforming CEOs owing to their apparent nonperformance-related reasons. This study also explores reasons behind the decision to fire a CEO from different news databases and finds that giving no clear reasons for a CEO’s departure increases uncertainty in the market, thereby causing a negative market reaction. However, stating performance as the reason for the departure assures investors about the future trajectory of the firm and results in a positive market reaction.

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.

Migrating Meanings

2019 ◽  
Author(s):  
James W. Underhill ◽  
Mariarosaria Gianninoto ◽  
Mariarosaria Gianninoto
Keyword(s):  
Mandarin Chinese ◽  
Historical Narratives ◽  
Individual Rights ◽  
Lingua Franca ◽  
Broad View ◽  
European Languages ◽  
The People ◽  
The Future ◽  
The Individual ◽  
Historical Accounts

Exploring the roots of four keywords for our times: Europe, the citizen, the individual, and the people, Mariarosaria Gianninoto’s and James Underhill’s Migrating Meanings (2019) takes a broad view of conceptualization by taking on board various forms of English, (Scottish, American, and English), as well as other European languages (German, French, Spanish & Czech), and incorporating in-depth contemporary and historical accounts of Mandarin Chinese. The corpus-based research leads the authors to conclude that the English keywords are European concepts with roots in French and parallel traditions in German. But what happens to Chinese words when they come into contact with migrating meanings from Europe? How are existing concepts like the people transformed? This book goes beyond the cold analysis of concepts to scrutinize the keywords that move people and get them excited about individual rights and personal destinies. With economic, political and cultural globalisation, our world is inseparable from the fates of other nations and peoples. But how far can we trust English to provide us with a reliable lingua franca to speak about our world? If our keywords reflect our cultures and form parts of specific cultural and historical narratives, they may well trace the paths we take together into the future. This book helps us to understand how other languages are adapting to English words, and how their worldviews resist ‘anglo-concepts’ through their own traditions, stories and worldviews.

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.

Trust and International Organization

2014 ◽  
Author(s):  
Kendall W. Stiles
Keyword(s):  
International Relations ◽  
International Organization ◽  
Past Performance ◽  
Future Behavior ◽  
Capacity To Act ◽  
Or Groups ◽  
The Future ◽  
The One

Trust is the expectation that one’s interests be looked after despite the possibility of exploitation by the one being trusted (trustee). Trusting always involves some risk on the part of the one trusting (truster). The truster is vulnerable—either by choice or by circumstance. One can never be absolutely sure that one’s interests are important to the trustee or that their past performance can allow one to predict future behavior. The trustee retains their agency and even has an incentive for betrayal in the future. Much of the research on trust in international relations is aimed at explaining cooperation amid anarchy. In this context, cooperation begins with a leap of faith by actors who trust generally rather than specifically. Such “generalized trusters” do not require evidence that the trustee in question is even trustworthy with respect to a particular issue, since all actors are assumed to be worthy of trust across all topics (assuming they have the capacity to act). This can be considered “credulity,” and it primarily involves having trustful attitudes, affects, emotions, or motivational structures that are not focused on specific people, institutions, or groups. Furthermore, one cannot speak of trust without some reference to affect, particularly since one can never absolutely calculate the odds of betrayal.

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.

scholarly journals RE-EXAMINING THE EXISTENCE OF LOW PRICE-EARNINGS RATIO EFFECTS: A Descriptive Approach to the Case of Indonesian Stock Market

1999 ◽  
Vol 4 (2) ◽  
pp. 227
Author(s):  
Marwan Asri
Keyword(s):  
Stock Exchange ◽  
Point Of View ◽  
Past Performance ◽  
Statistical Point ◽  
Crisis Period ◽  
The Future ◽  
Other Information ◽  
Price Earnings Ratio ◽  
Future Return ◽  
Effect Hypothesis

From practical point of view, Price-Earnings (P/E) ratio is one of numerous important aspects to consider. Analysts, investors, and traders in stock markets use P/E ratio –together with other information- in analyzing the past performance, and predicting the future prospect of securities in the market. However, noting its importance, there are some significant disagreements among researchers regarding the ability of P/E ratio in providing “correct information” about the future return of company stocks. One of the topics under discussion is about the presence of so-called low P/E effect, which hypothesizes that high P/E will be followed by low returns and low P/E will be followed by high returns. This study, by repeating partially Johnson et al. (1989) procedures, was trying to confirm the low P/E effect hypothesis in Indonesian market. The study involved 267 stocks listed in Jakarta Stock Exchange in the sample frame and selected the period of 1994-2000 as the focus of analysis. The study also has an intention to investigate whether there was a structural change in return-P/E relationship from the pre-crisis period (1994-1996) to the crisis period (1998-2000). The procedure of analysis was divided into two sections. In the first section a descriptive macro (market) analysis was presented, to test the hypothesis at the market level. It started with an overview about the fluctuation and trend of market P/E ratios during the period of 1991-2000, and followed by investigating the relationship between market P/E and the following returns. A regression analysis was also performed to strengthen the analysis from statistical point of view. In the second section, analysis is more directed to the portfolio level where the portfolios were ranked according to their P/E ratios. The study was concluded with a main finding that does not support the low P/E effect hypothesis.

scholarly journals SENTIMENT MARKET ANALYSIS ON REPLACEMENT ANNOUNCEMENT OF CHIEF EXECUTIVE OFFICER (CEO)

2019 ◽  
Vol 1 (1) ◽  
pp. 14
Author(s):  
Novyandri Taufik Bahtera
Keyword(s):  
Leadership Style ◽  
Chief Executive Officer ◽  
Market Reaction ◽  
Poor Performance ◽  
Chief Executive ◽  
Ceo Turnover ◽  
Market Analysis ◽  
Test Information ◽  
Two Factors ◽  
High Degree

This study examines the market reaction to the announcement of Chief Executive Officer (CEO) measured by abnormal return. The study sample consisted of 55 CEO turnover announcements using the t-test to test information content of the announcement. The author groups the changes into two factors: (1) change process (routine and non-routine) and (2) substitute origin (inside and outside). The market reacts significantly positively to the announcement of CEO turnover routinely with the origin of the replacement from inside (inside) the company. Different reactions occur in the announcement of routine outside and non-routine insidediary CEO turnover where announcements are responded negatively and significantly. The market does not react to the announcement of non routine outside CEO changes. These results show that investors in Indonesia react positively to routine CEO turnover inside because investors believe that new CEOs will continue their strategy and leadership style and have lower levels of uncertainty. Negative reactions to routine outside CEO turnover are caused by the market belief that the successor will not continue the previous CEO's strategy and has a high degree of uncertainty. The cause of a negative market reaction to the announcement of a non-routine inside CEO turnover is that a replacement CEO will continue the old leadership style and jointly be responsible for the company's poor performance.

scholarly journals REAKSI PASAR ATAS ISU PADA PERISTIWA ACCOUNTING RESTATEMENT

2017 ◽  
Vol 1 (3) ◽  
pp. 230
Author(s):  
Dian Nirmala Dewi
Keyword(s):  
Capital Market ◽  
Abnormal Return ◽  
Market Reaction ◽  
T Test ◽  
Cumulative Abnormal Return ◽  
The Difference ◽  
Negative Signal

Accounting restatement is used to be assumed as a negative signal in capital market. This research is aimed to find out market reaction to accounting restatement in Indonesia. Specifically, the objective of this research is not only for empirically investigating market reaction in general, but also for investigating the difference of market reaction based on issue of restatement. Using abnormal return and cumulative abnormal return as the proxy of market reaction, one sample and two sample independent t-test were run to reach the objectives. 63 samples were obtained from the restatement event during 2009-2012. While, event period were determined for 5 days around restatement date. The result shows that, in average, market positively react to accounting restatement. Further, the results indicate that market do not react differently within the issue of restatement.

Sign in / Sign up

Export Citation Format

Share Document