Is ESG Relevant to Electricity Companies during Pandemics? A Case Study on European Firms during COVID-19

The electricity sector was negatively impacted by the coronavirus disease (COVID-19), with considerable declines in consumption in the initial phase. Investors were in turmoil, and stock prices for these companies plummeted. The aim of this paper is to demonstrate the significant negative influence of the pandemic on abnormal returns for the electricity sector, specifically for traditional and renewable companies and the influence of ESG scores, using the event study approach and multi-variate regressions. Our results show that the pandemic indeed had a negative impact on the electricity sector, with renewable electricity companies suffering a sharper decline than traditional ones. Moreover, we find that ESG pillar scores affected electricity companies differently and are sector-specific. For renewable electricity companies, the returns were positively influenced by the environmental ESG scores and negatively by governance ESG scores.

DAMPAK COVID-19 TERHADAP ABNORMAL RETURN DAN VOLUME PERDAGANGAN SAHAM

The COVID-19 pandemic is a non-natural disaster that has a huge impact around the world. This research is a quantitative research with event study method. The purpose of this research is to test the capital market reaction by looking at abnormal returns and trading volume activity before and after the COVID-19 non-natural disaster. The event day in this study was April 13rd, 2020 when the Presidential Decree was issued regarding the designation of COVID-19 as a national disaster. Using purposive sampling method, the sample of this study were 27 companies engaged in the hotel, restaurant, and tourism sub-sectors listed on the Indonesia Stock Exchange. The event period is 11 days, namely 5 days before the event, 1 day at the time of the event and 5 days after the event. Data analysis using t-test and wilxocon signed ranks test. The results of this study are: 1) there is no abnormal return during the event period, 2) there is no difference in the average abnormal return before and after the COVID-19 non-natural disaster event, 3) there is no difference in the average trading volume activity before and after the COVID-19 non-natural disaster event and after the COVID-19 non-natural disaster event. Keywords: Event Study, Abnormal Return, Trading Volume Activity, COVID-19.

The Market and Investors Reactions to Mariana’s and Brumadinho’s Environmental Disasters: Sentimental or Rational Decisions?

This research carried out event studies to analyze the reactions of the market and investors in Vale S.A. to the collapses of the Mariana and Brumadinho dams. It also assessed the extent to which the causes attributed to the market reactions to major disasters in previous research has helped to explain the reactions of the market and investors to the collapses of these dams. The analyses have shown that, in the case of the Fundão dam, there was a relevant reduction in the abnormal cumulative returns of common stocks and ADRs at the end of the eleven days of the collapse, despite the fact that the daily abnormal returns were not statistically significant. However, the abnormal trading volumes of these securities in the eleven days after the dam failure were generally negative and all statistically significant. In contrast, concerning the collapse of the Brumadinho dam, the abnormal returns on common stocks and ADRs were negative, relevant, and statistically significant, and, after the eleven days, the losses were considerable. The abnormal trading volumes of the securities were all positive and statistically significant, but the reactions of ADR investors were more intense than those of investors in common stocks. Examining the causal attributions made previously, there are indications that the market and investor reactions to the failures of the two dams were probably derived from the expectation that Vale and the other companies involved would incur severe losses and high contracting costs in political processes that would follow to the disasters, and from the difficulty the investors have had to assess the magnitude of these losses and costs.

Fundamental analysis and the use of financial statement information to separate winners and losers in frontier markets: evidence from Vietnam

PurposeThe pupose of the paper is to study the usefulness of Piotroski (2000)'s F-score in separating winners and losers in Vietnam.Design/methodology/approachThe authors adopt a portfolio analysis and regression analysis on a sample of 501 of listed firms between 2009 and 2019 in Vietnam.FindingsThe authors find that a hedge strategy that buys high-F-score firms and sells low-F-score firms yield market-adjusted return of over 30 percent annually, which is statistically and economically significant. The hedge strategy based on F-score is not only profitable for value (high book-to-market [BM]) firms but also earn abnormal returns in a sample of growth (low BM) firms, suggesting that the usefulness of F-score strategy is not just a phenomenon in value firms as documented in previous literature.Research limitations/implicationsWhilst the authors' paper documents economically significant returns obtained from the F-score strategy, the authors do not examine what drives the abnormal returns.Practical implicationsThe results provide supporting evidence for the use of financial statement analysis as a screening tool to improve the performance of value investment in Vietnam stock market and for the training of financial reporting and fundamental analysis in universities.Originality/valueThe authors' research is the first study examining the F-score strategy in Vietnam that provides insights about the usefulness of fundamental analysis in separating winners and losers in a frontier market and contributes to the literature on fundamental analysis and market efficiency in emerging and frontier markets.

The impact of qualified audit opinion on stock returns: an empirical study at Amman stock exchange

Purpose This paper aims to investigate the impact of qualified audit opinions on the returns of stocks listed at Amman Stock Exchange (ASE) after the introduction of the recent amendments by the International Auditing and Assurance Standard Board (IAASB) on audits reporting and conclusions. It further investigates if results differ between first time qualified and sequenced qualifications, and between plain qualified opinion and qualifications with going concern. Design/methodology/approach Audit opinions’ announcements and stock returns data are collected from companies’ annual reports for the fiscal years 2016 to 2019 while stock returns are computed from stock closing prices published at ASE website. The authors apply the event study approach and use the market model to calculate normal returns. Cumulative abnormal returns (CARs) and average abnormal returns (AARs) are computed for all qualified audit opinions’ announcements. Findings The empirical evidence suggests that investors at ASE do not react to qualified audit opinions announcements. That is, the authors find an insignificant impact of qualified audit opinion announcements on stock returns using both CAR and AAR estimates. The results are robust to first time and sequenced qualifications, and for qualifications with going concern. Results are also robust to the use of risk adjusted market model. Research limitations/implications The insignificant impact of qualified audit opinions on stock returns have two potential conflicting research implications. First, the new amendments introduced to auditors’ report made them more informative and reduce the negative signals contained in the qualified opinions. That is, investors are now aware of the real causes of qualifications and not overreacting to the qualified opinion. Second, the documented insignificant impact confirms that ASE is not a semi-strong form efficient. Practical implications The apparent excessive use of qualifications should ring the bell on whether auditors misuse their power or companies are really in trouble. Hence, the Jordanian regulatory bodies need to warn auditors against the excessive use of qualifications on the one hand, and to raise the awareness of investors on the implications of auditors’ opinions on the other hand. Originality/value This study is innovative in twofold. First, it explores the impact of qualified audit opinions on stock returns after the introduction of new amendments by IAASB at ASE. In addition, it uses event study approach and distinguishes between first time qualified and sequenced qualifications, and between plain qualified opinion and qualifications with going concern. The results are consistent with efficient market theory and behavioral finance explanations.

Portfolio Investment in Malaysia and Saudi Arabia

Several strategies are adopted by investors in lowering the risk of investment while maximising its return. Graham's stock selection criteria are noted as one of the best strategies in selecting portfolios by investors. Although the model is universally accepted, it is less commonly practised and examined in emerging markets. Considering the growth of these emerging countries' financial markets, it is worthwhile to investigate the doctrine's effect on investment in these countries. This study endeavours to review the consequence of Graham's stock selection criteria on portfolio returns in the Malaysian and Saudi Arabian stock markets. Each country represents the fastest growing market in their region which justifies this study. The study found that the Malaysian stock market is capable of proffering abnormal returns to investors while the Saudi stock market is capable to offer abnormal returns to investors despite being an undeveloped and immature stock market. The study concludes that the model of stock selection remains beneficial and indeed valuable to regional investments.

Layoffs and stock market performance during the COVID-19 pandemic: evidence from the US

PurposeThe authors examine the short-term stock market reaction surrounding US layoffs during the coronavirus disease 2019 (COVID-19) period. The authors’ specific interest is on any changes that may be observed in US stock markets during the COVID-19 outbreak. This information will help us assess the extent to which policymakers adopted at time revenue and expenditures measures to minimize its negative impact.Design/methodology/approachThe authors study the linkage between layoffs announced by firms and stock markets in US for the COVID-19 period between March 2020 and October 2020. This period shows important economic figures; a huge number of job cuts announced by blue-chip companies listed in the New York Stock Exchange (NYSE) due to widespread economic shutdowns. The authors examine whether and to what extent stock markets in US have reacted to layoff announcements during the COVID-19 pandemic using an event-study methodology.FindingsThe study’s results show that US layoffs during the pandemic did not cause any abnormalities on the stock returns, either positive or negative. Based on the mean-adjusted volume, the authors find that layoffs increase the stocks' trading volume, especially on the event date and the day following the event. US stocks become more volatile on the days following the event. Interestingly, on the event date, the authors find that stocks get the highest abnormal volatility; however, the result is statistically insignificant.Practical implicationsThe authors suggest that layoffs announcements follow the business cycle quite closely in most industries. The study’s results have implications for investors, regulators and policymakers as they permit to examine the effectiveness of the measures adopted.Social implicationsThe study’s results show that policymakers reduced uncertainty implementing intensive measures quickly and should follow similar policy in the future pandemic and/or unexpected events.Originality/valueThis paper contributes to the literature in two directions: First, to the best of the authors’ knowledge this is the first study that provides empirical evidence and assesses the extent to which a major global shock such as the COVID-19 pandemic may have altered the reaction of US stock markets to layoff announcements. Second, this is the first study on this topic that examines volume and volatility abnormalities, while the authors check the robustness of the findings with different methods to calculate abnormal returns.

A broad analysis of short-term overreactions in the market for cryptocurrencies

PurposeThe purpose of this study is to analyze market inefficiencies in the market for cryptocurrencies by providing a comprehensive analysis of short-term (over)reactions that follow significant price changes of such currencies.Design/methodology/approachThis study identifies and analyzes overreactions and mispricing in markets for cryptocurrencies by applying a broad set of thresholds that depend on market-specific dynamics and volatilities. This study also analyzes the returns on days following abnormal returns and identifies significant differences from normal returns using the t-test and the Mann–Whitney U-test. The researchers further complement the literature by using end-of-the-day returns in addition to high-low returns. Additionally, this study considers a broad sample of 50 cryptocurrencies for an expanded time span (2015–2020) that includes the big currencies as well as smaller currencies.FindingsFindings detect the existence of overreactions and, thus, market inefficiencies in crypto markets. The findings for different methodological approaches are similar, which underpins the robustness of the findings. By considering a broad sample that includes small and big currencies, we can show the existence of a market size effect. By considering a broad set of thresholds, the authors further found evidence for a magnitude effect, which means that higher initial abnormal returns are related to higher inefficiencies.Practical implicationsThis paper has practical implications. Market inefficiencies were detected, which can be used in practical trading to obtain excess returns. In fact, methodological approach of this study and its results can be used to derive a strategy for trading in cryptocurrencies that can be easily implemented. Based on the study’s findings, the authors can expect positive access returns by applying this trading strategy.Originality/valueThe authors complement the literature on market inefficiencies and mispricing in crypto markets by analyzing price patterns after initial abnormal returns. Researchers contribute by applying different methodological approaches in addition to the approaches used so far, by considering a set of different thresholds and by applying a much broader data set that enables the study to analyze additional aspects.

Apakah Pembatasan Sosial Berskala Besar Warga Negara Asing Berdampak Pada Average Abnormal Return?

This study examines the differences in stock prices listed on the Indonesia Stock Exchange as measured using average abnormal returns on events (event studies) before and after the enactment of Large-Scale Social Restrictions for Foreign Citizens, especially COVID-19 which has an impact not only threatening human health but also has an impact on the economic sector. This condition will certainly have an impact on all sectors including stock trading on the Indonesia Stock Exchange, especially the Tourism, Hospitality, and Restaurant sub-sector. By using a sample of 41 companies on the Indonesia Stock Exchange with a research period of 3 months (16 November 2020 to 15 February 2021) the type of purposive sampling research that meets the criteria and using paired sample t-test, the results show that there is no difference Average Abnormal Return before and after the occurrence of a PSBB event for Foreign Citizens. So it can be concluded that the PSBB for Foreign Citizens has no impact on the average abnormal return obtained by investors.

Does the short squeeze lead to market abnormality and antileverage effect? Evidence from the Gamestop case

PurposeThis study examines the Gamestop (GME) short squeeze in early 2021. Using intraday data for the period 4/1/2021–5/2/2021, the author provides empirical evidence that the GME stock price exhibited abnormal behavior.Design/methodology/approachThe author uses the popular Runs test to show that the GME returns were not randomly distributed, which is an indication of a violation of the Efficient Market Hypothesis (EMH). The main objective of the paper is to provide new quantitative evidence that stock returns are abnormal when short squeeze conditions emerge. The author employs the asymmetry Generalized AutoRegressive Conditional Heteroskedasticity (GARCH) models (the Exponential GARCH (EGARCH) and the Threshold GARCH (TGARCH)) and provides evidence that an exceptional time series feature emerged during the examined period: the antileverage effect.FindingsThe results show that the GME returns were not randomly distributed during the examined period and the asymmetry GARCH models indicate that, in contrast to what the time series normally show, volatility increased when the GME prices increased.Research limitations/implicationsThis paper presents a new/alternative approach for the study of EMH and abnormal returns in financial markets. Further studies on market performance during similar short squeeze conditions should be carried out in order to obtain empirical evidence for the antileverage effect abnormality.Practical implicationsThis paper could be useful for scholars who examine the EMH in financial markets because it suggests an additional method for testing abnormalities. It also presents a useful tool that allows practitioners to monitor for indications of abnormality in the stock market during a short squeeze, since the emergence of the antileverage abnormality could function as such an indication. Additionally, the outcome of this analysis could be useful for regulators because coordination among investors is easier than ever in the Internet era and such events may happen again in the future; even under normal (not short squeeze) conditions and lead to market instability.Originality/valueThis research differs from other studies that examine the GME case because it presents a new way to quantitatively present the abnormal performance of the stock markets for reasons that could be linked with the emergence of short squeeze conditions.