The market reaction to profitability: Does leverage matter?

This study examined the market reaction to profitability by discussing the impact of dividends yield (DY) and earnings yield (EY) based on leverage (LVRG), as a control variable, on stocks’ prices (SP) of the industrial companies listed on Amman Stock Exchange (ASE), for the whole sample and the two subsamples (low and high leveraged companies). For this purpose, the data of the three samples were analyzed, for seven years from 2011 to 2017. The multiple regression analysis results showed that based on the leverage ratio (LVRG), as a control variable, there is a significant effect of DY on SP at 1% significance level, and an insignificant effect of EY on SP at 5% significance level, in the high leveraged sample. The impact of DY and EY on SP at 5% significance level in the whole and low leveraged samples is insignificant.

MARKET REACTION TO THE TONES OF EARNINGS CONFERENCE CALLS

RESUMO Este estudo tem como objetivo analisar os diferentes tons transcritos utilizados pelos participantes nas teleconferências de resultados e sua influência na geração de retornos anormais das ações. Este estudo preenche uma lacuna de pesquisa que é a segregação da análise do tom por tipo de analista e de representantes corporativos durante a teleconferência de resultados. A amostra abrangeu o período de 2010 a 2017, totalizando 1.165 transcrições de teleconferências de resultados de 44 empresas brasileiras listadas na B3 – Brasil, Bolsa, Balcão. O principal achado é que o tom transcrito e as palavras utilizadas com base no dicionário de Loughran e McDonald (2011) têm poder de previsão significativo sobre as reações do mercado de ações após as teleconferências de resultados.

Market Reaction to Dividend Announcements During Pandemic: An Event Study

This study analyses the difference in stock market reactions to dividend announcement during the pandemic. The thirty constituent stocks of Sensex, the index of Bombay Stock Exchange (BSE), is used for analysis. This allows cross-industry comparison of the market reaction. The study examines stock market reactions covering 44 days around the dividend announcement dates. The primary objective of this study is to understand whether the price adjustment linked to the dividend announcement news during the pandemic was different from the earlier years. This empirical study employs the conventional event study methodology using abnormal returns (ARs) to examine the stock market reaction to dividend announcement. The market reaction to dividend announcement was increasingly positive during the pandemic, compared to previous years. The statistical pooled t-tests showed there was a significant relationship between the pandemic and ARs. The findings also indicate that the difference in the market reaction to dividend announcement was more prominent in services stocks than that in manufacturing. Further, the results also verify the weak-form of efficiency of Indian stock exchange.

Reaksi Pasar terhadap Penerapan Pembatasan Sosial Berskala Besar pada Masa Pandemi Covid-19

On April 6, 2020, the government approved the implementation of the first Large-Scale Social Restrictions (PSBB) in Indonesia in the context of accelerating the handling of the Covid-19 pandemic. This study uses this event as an event under study to observe the market reaction before and after it, with a window period of 11 days. The average abnormal return and the average trading volume activity of stocks are used as indicators of market reaction. The study was conducted on 152 trading, service and investment sector companies listed on the Indonesia Stock Exchange (IDX), which were determined using a non-probability sampling method with a purposive sampling technique. Data were analyzed by using paired sample t-test and Wilcoxon signed rank test. The results showed that there was no difference between the average abnormal return and the average trading volume activity before and after the first PSBB was approved in Indonesia. The absence of market reaction is assumed because the level of market efficiency in Indonesia is still weak. Keywords : Covid-19; Social Distancing Policy; Market Reaction; Abnormal Return; Trading Volume Activity.

Analysis of the Financial Information Contained in the Texts of Current Reports: A Deep Learning Approach

An important role in the fundamental analysis is played by the acquisition and analysis of various types of information about the company. Text documents are an increasingly important source of this information. Their accurate and quick analysis is an increasingly important challenge for financial analysts. Research in the area of financial text analysis is based on sentiment analysis. The deep neural networks and the stocks’ cumulative abnormal return are used in this article to analyze the sentiment of financial texts. The proposed approach, unlike those used so far, does not require manual labeling of data or the creation of dictionaries and is free from the subjective assessment of the researcher. Taking into account the broad context of words and their meaning in financial texts, it also eliminates the problem of ambiguity of words in various contexts. The sentiment of financial texts presented in this paper is directly related to the market reaction to the information contained in these texts. For texts belonging to one of the two classes (positive or negative) with the highest probability, the deep learning model gives predictions with a precision of 62% for the positive class and 55% for the negative class. The event study results show that the sentiment calculated under the proposed method can be successfully used to determine the probable direction of the market reaction to the information contained in current reports with a 1 percent significance level. The results can be used in market efficiency research, investment strategy development or support of investment analysts using fundamental analysis.

Disclosure of interim review reports: Do interim going concern conclusions have information content?

This paper examines the information content of interim review assurance in the Australian mandatory disclosure setting. First, we find a strong negative market reaction to interim going concern conclusions (IGCC) contained in the review of interim financial statements. Second, we find no significant difference between the market reaction to IGCCs and annual going concern opinions (AGCO) received at the annual report audit. Finally, we show IGCCs are significant predictors of subsequent AGCOs, and provide incremental information from the previous annual report audit opinion. Overall, these results contribute to the literature on the benefits of mandatory interim assurance by showing that going concern conclusions contained in interim financial statements provide investors with new and relevant information.

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

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.