Economic links and the wealth effects of layoff announcements along the supply chain

PurposeThis paper investigates the effects of layoff announcement by customers on the valuation and operating performance of their supply chain partners.Design/methodology/approachThe authors collect corporate layoff announcements from 8-K filings submitted by US publicly-traded firms from 2004 to 2017. Using event study methodology, they examine the information externality of corporate layoffs on announcing firms' suppliers.FindingsResults show that suppliers, on average, experience a negative stock price reaction around their major customers' layoff announcements. The negative price effect is exacerbated when industry rivals of layoff-announcing customers also suffer from negative intra-industry contagion effects. Additionally, supply chain spillover effects are asymmetric, with only “bad news” layoff announcements causing significant value implications for suppliers, but not “good news” announcements. Supplier firms also reduce their investments in and sales dependence on layoff-announcing customers in subsequent years.Practical implicationsThis study shows that layoff decisions, often aimed at improving firms' efficiency and effectiveness, create uncertainty for the suppliers' operation and cause negative value implications on firms' upstream partners. Findings should be useful to corporate decision-makers in making layoff decisions.Originality/valueThis paper is one of the first to address the value implications of corporate layoffs on announcing firms' suppliers. It provides a more comprehensive picture of the economy-wide impact of achieving efficiency through employee layoffs.

The Information Content of Publicly Accessible Federal Court Documents

Prior literature documents a negative stock price reaction to initial securities lawsuit filings, on average. Securities litigation produces a host of publicly accessible court documents, however, and prior research provides no evidence regarding whether or how the market prices information generated by the litigation process. We shed light on the information content of federal court filings by examining the market response to a large sample of initial plaintiff complaints and subsequent docket events. We find the market response to the initial lawsuit filing varies significantly with information about governance and control problems signaled by details of the plaintiff’s complaint. We also find a significant market response to subsequent court filings that increases with measures of litigation severity and decreases as the litigation progresses over time. Overall, our results highlight the role of federally accessible court filings in facilitating the market’s pricing of defendant firms.

The Impact of Disclosure Sentiment on the Share Prices of Russian Companies

Information about companies published in a news feed is invariably tinted by emotional tonality. As such, resultingperceptions may influence the opinion of market players, and consequently affect the dynamics of a company’s shareprice. This study aims to evaluate various hypotheses about the impact of the tone of news items regarding dividends,capital expenditures, and development on the stock prices of Russian companies. Information disclosure is extensivelystudied, and there have been limited studies on the effect of disclosures on Russian companies. However, until now, therehave been no research studies which verify hypotheses on the influence of news sentiment on corporate share prices inthe Russian market. This analysis was conducted using data from 49 Russian public companies included in the Moscow exchange indexover the period from the end of 2017 to the beginning of 2019. To account for the proximate impact of news items onconsequential market phenomena, an event study methodology was applied in order to estimate and construct themodels of dependency of cumulative abnormal return (CAR) on news tone level, and control for financial and nonfinancialfactors. Our results provide evidence for the positive impact of the tone of news texts on the share prices of Russian companies.The increase in news tone by one standard deviation leads to a cumulative abnormal stock return increase of 0.26percentage points. This result is consistent with previous research conducted on data from developed stock markets.Moreover, the relationship between the tone or sentiment level of a news item and the stock price reaction is linear,without the diminishing marginal effect. Our conclusions should prompt companies to invest effort in delivering information in a tonally positive way,highlighting the most positive news. Investors, in turn, should rationally approach the interpretation of publishedinformation.

Corporate Green Bond and Stock Price Reaction

The aim of this paper is to investigate the investors’ reaction to environmental actions taken by companies such as the issues of “green bond”. We conduct an event study around the announcement of green bond issuances for all publicly traded companies in the World in the period 2013-2019 (the largest period in literature on this field). Using CARs, we investigate the stock price behavior to green bond issues for 414 listed companies and we demonstrated significant stock price increases around the announcement date of first-time green bond issues. For second issues, the positive stock price reaction to eco-friendly initiatives decreases while it completely disappears for the subsequent issues. From the management perspective, green bond issue seems an eco-friendly action with decreasing marginal benefits, because after the first issue, the market is already aware about the firm’s commitment to green projects.