Market Reactions to Announcements of Valuation Losses on Conversion Rights Embedded in Convertible Instruments

2020 ◽  
Vol 28 (1) ◽  
pp. 35-61
Author(s):  
Su Jeong Lee ◽  
Young Jun Kim ◽  
Eugenia Y. Lee ◽  
Ga-young Choi
Keyword(s):  
Stock Returns ◽  
Financial Reporting ◽  
Stock Prices ◽  
Stock Price ◽  
Fair Value ◽  
Convertible Bonds ◽  
Market Reactions ◽  
Announcement Date ◽  
Abnormal Stock Returns ◽  
Trading Volumes

Convertible instruments are financial instruments embedded with conversion rights such as convertible bonds or convertible preferred stocks. Under the Korean International Financial Reporting Standards (K-IFRS), the embedded conversion rights with certain conditions (i.e., a refixing clause) are recognized as derivative liabilities and are recognized at fair value in issuer’s financial statements. Since the value of convertible rights varies with the underlying stock value, an increase in the issuers’ stock price causes the issuers of convertible instruments to announce large derivative valuation losses. Using disclosures under the title of ‘Loss from Derivatives Trading’ from the KOREA EXCHANGE (KRX) during January 2016 through December 2019, this study examines market reactions to the disclosure of valuation losses on conversion rights embedded in convertible instruments. We find the following results. First, abnormal stock returns on the loss announcement date are significantly negative. Second, abnormal trading volumes peak on the loss announcement date. Third, abnormal stock returns persist in the long-term. Collectively, our findings suggest that investors perceive the loss disclosures as negative news, but fail to impound the information into issuer’s stock prices effectively. This study emphasizes the importance of education on convertible instruments and improvement in the disclosure requirements on valuation losses of conversion rights embedded in convertible instruments by providing evidence that investors face difficulty in understanding the related disclosures.

The cost of presidential impeachment to politically connected firms

2019 ◽  
Vol 21 (2) ◽  
pp. 109-121
Author(s):  
Ha Na Lee ◽  
B. K. Song
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Stock Price ◽  
Constitutional Court ◽  
Korean History ◽  
South Korean ◽  
Price Data ◽  
Political Events ◽  
Abnormal Stock Returns ◽  
The Cost

AbstractThis study examines the ways political events can affect the stock prices of politically connected firms by studying one of the biggest corruption scandals in modern South Korean history, which led to the first-ever impeachment of a sitting president. We analyzed the stock returns of firms that donated money to foundations allegedly controlled by the president's confidante. We found that the abnormal stock returns of politically connected firms decreased when the president was removed from office. Using tick-by-tick stock price data, we were able to pinpoint the exact moments when the stock prices of firms that donated money fluctuated, as the president's fate was determined by the justices of the Constitutional Court.

scholarly journals Normal and reverse stock splits in the V4 countries

2016 ◽  
Vol 13 (4) ◽  
pp. 95-105 ◽  
Author(s):  
Manuela Raisová ◽  
Martin Užik ◽  
Christian M. Hoffmeister
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Stock Price ◽  
Abnormal Returns ◽  
Stock Splits ◽  
Announcement Date ◽  
Reverse Stock Splits ◽  
Stock Split ◽  
Reverse Stock Split ◽  
A Company

The economic crisis has forced managers of joint stock companies to look for short-term solutions for the sharp changes in stock prices of their companies. Even the companies of the V4 countries are not the exception. The authors have focused on those companies where have been used either reverse stock split or stock split. They analyzed the effects of the reverse stock split or stock splits on the abnormal returns of stocks. In this paper, the authors analyzed a dataset from 1993 until 2015 with 124 reverse stock splits and 184 stock splits in total focused on the stock market in V4. Based on their own research they conclude that when reverse stock splits were used stock returns significantly decreased one day around the announcement date. They conclude that managers of a company might use this instrument to move the stock price back to the optimal trading range outside of the penny stock area. In the case of stock splits, the authors concluded that the use of this tool results in a significant increase in the returns of a stock after the announcement date. However, the results are in contrast to some former studies which found no positive effect on the returns caused by stock splits. The authors conclude that managers of a company might use this instrument to transport information content of future (positive) performance of a company to the traders. Keywords: Vysegrad group countries, normal stock split, reverse stock split, abnormal returns. JEL Classification: G11, G23, G32

The Reliability of Fair Value versus Historical Cost Information: Evidence from Closed-End Mutual Funds

2003 ◽  
Vol 18 (1) ◽  
pp. 1-24 ◽  
Author(s):  
Thomas J. Carroll ◽  
Thomas J. Linsmeier ◽  
Kathy R. Petroni
Keyword(s):  
Stock Returns ◽  
Mutual Funds ◽  
Stock Prices ◽  
Stock Price ◽  
Value Relevance ◽  
Fair Value ◽  
Cost Information ◽  
G7 Countries ◽  
Historical Cost ◽  
Equity Securities

This research examines the value-relevance of fair value accounting relative to historical cost accounting for financial instruments held by closed-end mutual funds to provide evidence on the reliability of fair value estimation. Closed-end funds are considered because their balance sheets and income statements typically are reported at fair value and there is great variation in the types of securities held by various funds. For a sample of 143 closed-end mutual funds during 1982–1997, we find a significant association between stock prices and the fair value of investment securities, as well as between stock returns and fair value securities gains and losses, even after controlling for historical costs. To examine whether differences in the perceived reliability of the investment securities fair values affect investors' assessments of the usefulness of the information, we examine the association between stock price metrics and fair values across different fund types (e.g., publicly held equity securities from G7 countries, equity securities other than those publicly held from G7 countries, U.S. government or municipal securities, corporate bonds). We find that in all cases there is a significant association between the stock price metrics and fair values. This suggests that the need to estimate fair values for securities traded in thin markets, such as private or non-G7 equities, does not cause the incremental value-relevance of fair value information to be eliminated. Our strong and consistent findings in the closed-end fund setting suggest that reliability problems in measuring the fair values of investment securities are not the primary explanation for the inconsistency in prior research results; instead such inconsistency may be attributed to the incomplete availability of fair value measures in other settings.

scholarly journals Factors Affecting The Equity Price Impacts Of Convertible Bonds

2011 ◽  
Vol 8 (4) ◽  
pp. 79 ◽  
Author(s):  
Bruce R. Kohlman ◽  
Robert C. Radcliffe
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Convertible Bonds ◽  
Equity Returns ◽  
Convertible Bond ◽  
Factors Affecting ◽  
Price Impacts ◽  
Bond Issues ◽  
Abnormal Stock Returns ◽  
Equity Price

This study examines abnormal stock returns associated with both the date a convertible bond issue is announced and the date it is sold. Results suggest the negative stock price effects observed I this and previous studies are due to the equity component inherent in convertible bonds, and an easily observed measure of that equity component is offered. In addition, results suggest that convertible bond issues sold by firms with previously issued outstanding convertibles are met with larger negative abnormal equity returns.

scholarly journals Management turnover and corporate performance in Taiwanese electronic industries

2009 ◽  
Vol 6 (3) ◽  
pp. 482-488
Author(s):  
Yi-Hsien Wang ◽  
Che-Yang Lin
Keyword(s):  
Stock Returns ◽  
Board Of Directors ◽  
Corporate Performance ◽  
Power Structure ◽  
Management Turnover ◽  
Corporate Power ◽  
Announcement Date ◽  
Abnormal Stock Returns ◽  
Trading Volumes

This paper analyzes the impacts of management turnover in Taiwanese electronic industries during 1996-2006 using the price and the trading volumes of underlying stock around the TSE announcement date. These results provide evidences that market participator would hold an active position following the appointment of a specialized, innovative, and self-motivated CEO. Hence, positive abnormal stock returns and trading volumes were expected. However, chairman turnover suggests that the corporate power structure of Board of Directors is unbalanced, thus, market participators would hold a conservative position.

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.

Perbandingan harga saham, volume transaksi dan return saham sebelum dan sesudah terjadi pandemi covid-19 pada PT Agung Podomoro Land, Tbk

2021 ◽  
Vol 5 (4) ◽  
pp. 720
Author(s):  
Anggun Putri Romadhina ◽  
Eka Kusuma Dewi
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Stock Price ◽  
Research Data ◽  
Paired Sample ◽  
First Case ◽  
Significant Difference ◽  
Before And After ◽  
Stock Transaction

The first Covid-19 case in Indonesia was announced on March 2, 2020. This study aims to determine whether there is a significant difference in stock prices, stock transaction volume and stock returns due to the COVID-19 pandemic (case study at PT. Agung Podomoro Land, Tbk). This research data was taken 90 days before and 90 days after the announcement of the first case of COVID-19 in Indonesia. The data was processed by paired sample t-test, using SPSS version 20. From the results of data processing, it was shown that there was a significant difference in stock prices before and after the announcement of the first case of covid-19 in Indonesia. This is indicated by a significance value of 0.000 < 0.05 where the stock price has decreased compared to before the Covid-19 case. Meanwhile, the volume of stock transactions also showed a significant difference with a significance value of 0.007 <0.05, where the volume of stock transactions after the announcement showed a decrease. Likewise, stock returns show a significant difference with a significance value of 0.025 < 0.05 where stock returns have decreased after the announcement of the first case of covid-10 in Indonesia.  

Market reactions to the inclusion of people with disabilities

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Claudia Araceli Hernández González
Keyword(s):  
Event Study ◽  
Stock Prices ◽  
Stock Price ◽  
Abnormal Returns ◽  
People With Disabilities ◽  
Market Reactions ◽  
Content Type ◽  
Study Methodology ◽  
Research Advance ◽  
The Impact

PurposeThis study aims to provide evidence of market reactions to organizations' inclusion of people with disabilities. Cases from financial journals in 1989–2014 were used to analyze the impact of actions taken by organizations to include or discriminate people with disabilities in terms of the companies' stock prices.Design/methodology/approachThis research is conducted as an event study where the disclosure of information on an organization's actions toward people with disabilities is expected to impact the organization's stock price. The window of the event was set as (−1, +1) days. Stock prices were analyzed to detect abnormal returns during this period.FindingsResults support the hypotheses that investors value inclusion and reject discrimination. Furthermore, the impact of negative actions is immediate, whereas the impact of positive actions requires at least an additional day to influence the firm's stock price. Some differences among the categories were found; for instance, employment and customer events were significantly more important to a firm's stock price than philanthropic actions. It was observed that philanthropic events produce negative abnormal returns on average.Originality/valueThe event study methodology provides a different perspective to practices in organizations regarding people with disabilities. Moreover, the findings in this research advance the literature by highlighting that organizations should consider policies and practices that include people with disabilities.

scholarly journals FACTORS AFFECTING OPERATING CASH FLOW TO STOCK RETURN THROUGH STOCK PRICE

2018 ◽  
Vol 5 (2) ◽  
Author(s):  
Aprih . Santoso
Keyword(s):  
Stock Returns ◽  
Cash Flow ◽  
Stock Prices ◽  
Stock Price ◽  
Stock Return ◽  
Stock Exchange ◽  
Sampling Technique ◽  
Financial Statements ◽  
Manufacturing Companies ◽  
Operating Cash Flow

Abstract : Companies need funds in order to carry out operations such as the financing of production activities, pay employees, pay other expenses related to the operation of the company. One way to obtain these funds is to attract investors to invest in companies in the form of stock, but in making this investment is certainly not easy for investors, because investors need consideration beforehand to find out how the company's performance. The purpose of this study was to examine and analyze the effect of operating cash flow to stock return through stock price at companies listed on the Stock Exchange Year 2012-2015. The data used in this study dala are secondary data from the financial statements of companies listed on the Indonesia Stock Exchange period 2012 - 2015. The data are in the form of financial statements can be obtained from the Indonesian Capital Market Directory (ICMD), the IDX website www.idx.co. id as well as from various other sources to support this research. The population in this research is manufacturing companies listed on the Stock Exchange the period 2012 - 2015. The samples taken by the sampling technique used purposive sampling.From the test results and analysis of the data it can be concluded that operating cash flow directly and indirectly has no effect on stock returns through stock prices showed no significant results. Keywords :  Operating Cash Flow, Stock Price, Stocks Return

scholarly journals Systematic illiquidity, characteristic illiquidity, and stock returns: Timeseries analysis

2022 ◽  
Vol 9 (2) ◽  
pp. 72-80
Author(s):  
Soltane et al. ◽  
Keyword(s):  
Emerging Markets ◽  
Stock Returns ◽  
Stock Prices ◽  
Stock Price ◽  
Stock Exchange ◽  
Systematic Risk ◽  
Timeseries Analysis ◽  
The Relationship

The objective of this research is to investigate the relationship between illiquidity and stock prices on the Tunisian stock exchange. While previous researches tended to focus on one form of illiquidity to examine this relationship, our study unifies three forms of illiquidity at the same time. Indeed, we simultaneously consider illiquidity as systematic risk, as a characteristic of the market, and as a characteristic of the stock. The aggregate illiquidity of the market is the average of individual stock illiquidity. The illiquidity risk is the sensitivity of the stock price to illiquidity shocks. Shocks of market illiquidity are estimated by the innovations in the expected market illiquidity. Results show that investors on the Tunisian stock exchange do not require higher returns when they expect a rise of market illiquidity, whereas investors on U.S markets are compensated for higher expected market illiquidity. In addition, shocks of market illiquidity provoke a fall in stock prices of small caps, while large caps are not sensitive to market illiquidity shocks. This differs slightly from results based on U.S. data where illiquidity shocks reduce all stock prices but most notably those of small caps. Robustness tests validate our findings. Our results are consistent with previous studies which reported that the “zero-return” ratio predicts significantly the return-illiquidity relationship on emerging markets.

Sign in / Sign up

Export Citation Format

Share Document