Search Results (18)

This paper explores the impact of the Israel–Palestine conflict on the stock performance of U.S. companies and their public positions on the conflict. In an era where corporate positions on geopolitical issues are increasingly scrutinized, understanding the market implications of such statements is critical. This research aims to capture the complex, non-linear relationships between corporate actions, media coverage, and financial outcomes by integrating traditional statistical techniques with advanced machine learning models. To achieve this, we constructed a novel dataset combining public corporate announcements, media sentiment (including headline and article body tone), and philanthropic activities. Using both classification and regression models, we predicted whether companies had affiliations with Israel and then analyzed how these affiliations, combined with other features, affected their stock returns over a 30-day period. Among the models tested, ensemble learning methods such as stacking and boosting achieved the highest classification accuracy, while a Multi-Layer Perceptron (MLP) model proved most effective in forecasting abnormal stock returns. Our findings highlight the growing relevance of machine learning in financial forecasting, particularly in contexts shaped by geopolitical dynamics and public discourse. By demonstrating how sentiment and corporate stance influence investor behavior, this research offers valuable insights for investors, analysts, and corporate decision-makers navigating sensitive political landscapes. Full article

This study investigates the occurrence and persistence of abnormal stock returns surrounding corporate earnings announcements, particularly emphasizing how varying frequencies of financial reporting influence market behavior. Specifically, this research examines the effects of the timing and frequency of disclosures on market reactions and stock price volatility during critical earnings announcement periods. By analyzing firms within the Dow Jones Industrial Average (DJIA) from 2014 to 2024, this study evaluates the interplay between financial reporting schedules and market responses to stock prices. Furthermore, it considers the impact of peer firms’ reporting practices on the assimilation of firm-specific information into stock prices. Using econometric models, including Vector Auto Regression (VAR), Impulse Response Functions (IRFs), and Self-Exciting Threshold Autoregressive (SETAR) models, causal relationships between reporting frequency, stock price volatility, and abnormal return patterns across different volatility regimes are identified. The findings highlight that quarterly reporting practices intensify market responses and contribute to significant variations in stock price behavior in high-volatility periods. These insights provide a deeper understanding of the role of financial disclosure practices and forward-looking guidance in shaping market efficiency. This study contributes to ongoing discussions about balancing the transparency benefits of frequent reporting with its potential to amplify market volatility and sector-specific risks, offering valuable implications for policymakers, investors, and corporate managers. Full article

Over the past four decades, China’s real estate industry has experienced rapid growth, accompanied by frequent regulatory interventions. These shifts present an ideal context for examining the characteristics of private equity placements (PEPs) under varying industrial policy environments. This study examines the PEPs of Chinese real estate firms from 2006 to 2023, calculating the cumulative abnormal returns during announcement periods and the transaction discounts across various regulatory phases. The analysis reveals significant positive announcement effects, even in times of policy tightening, with these effects becoming more pronounced during periods of policy relaxation. However, regression analyses suggest that the policy environment does not significantly impact the announcement effects. Contrary to traditional views, PEP discounts tend to be shallower during policy tightening and deeper during policy loosening. Further analysis indicates that investors are willing to accept smaller discounts in exchange for more valuable investment opportunities. Full article

This paper examines the market reaction to the European bank stress test announcement and results release events. Using event study methodology (calculating abnormal returns on a three-day period around the event dates), we find that the market reacts differently between the announcement event and the results release event. We also show that the market seems to positively overreact one day before each event, and that this positive reaction is either fully or partially reversed one day after the event. We thus conclude that researchers should consider both events when exploring the market reaction to stress-testing exercises. Full article

This paper aims to measure the effects of delisting on stock returns for the Vietnam stock market. This study employs a sample of 118 stocks that were compulsorily delisted from the market between January 2011 and December 2021. Using an event study methodology, the empirical findings confirm that the delisting has negative effects on stock returns in the Vietnam stock market. Specifically, results derived from tests show that the average abnormal return of delisted stocks continuously declines during three trading days following the announcement of delisting. Moreover, it is found that the differences in cumulative abnormal returns between post-delisting and pre-delisting periods are significantly negative for all tracking periods. Apart from the negative effect of delisting on stock abnormal returns, we also find that the impact of delisting on stock returns for smaller companies is greater than for bigger companies. These results imply that investors can earn abnormal returns by using delisting information in the Vietnam stock market. Full article

A semi-strong efficient market incorporates relevant new information immediately. Using an event study, we investigate whether and to what extent regular earnings announcements of Swiss companies listed on the Swiss Market Index show the expected effects in share prices. For this purpose, we test for abnormal returns caused by earnings announcements in the period from 2012 until 2022. In contrast to previous studies of the Swiss market, we find that deviations from analysts’ expected earnings lead to pronounced immediate movements in stock prices, as predicted by the semi-strong efficient market hypothesis. Pre- and post-announcement abnormal returns are modest and generally not statistically significant. Full article

Using a large database of U.S. seasoned equity offering (SEO) announcements from 2010 to 2015, we examine the effects of several explanatory variables—firm specific, macroeconomic, fixed income, and stock market variables—on the announcement period abnormal stock returns and on the longer-run post-issue abnormal returns. We use five different statistical methods—multivariate linear regression, regression on a reduced model using principal components analysis, year-by-year regression on a reduced model using principal components analysis, random forest regression on the whole sample, and year-by-year random forest regression. In general, across the methods, we find that firm’s profitability in the recent past is an important explanatory factor in both short-term and long-term abnormal stock returns, but several other significant explanatory factors change based on the statistical method used. Therefore, the statistical method used affects the results reported. Full article

This paper investigates the impact of 19 announcements pertaining to the introduction of value-added tax (VAT) in the United Arab Emirates (UAE) on equities listed on the Abu Dhabi Stock Exchange (ADX). Using a well-established event study methodology over the period 2015 to 2018, a sector-wise assessment of the value constructiveness or destructiveness of these announcements is conducted. In addition, an estimation of sector-wise changes in systematic risk following these announcements is provided. Significant sectoral differences in abnormal returns are observed with industries such as insurance and retail showing higher sensitivity. Certain announcements are identified as exerting more impact than others. The results document the outcome of the implementation of VAT and provide guidance to other countries in the Gulf region that plan to introduce VAT. Full article

Using a large sample of bank seasoned equity offerings (SEO) from 2002 to 2017, we first documented detailed descriptive statistics, and showed that nonperforming assets ratio, our primary measure of bank asset quality, reached the highest value immediately after the 2008 economic crisis, which also corresponds to a higher number of SEOs around these years because banks needed to recapitalize. The capital ratio, which is required to be at least at a minimum level (relative to risk-weighted assets) for banks by regulation, also increased after the economic crisis, which may be due to a higher requirement for banks as well as banks’ desire to hold more capital. The SEO announcement period abnormal stock-returns reached the lowest number around the economic crisis, as did the longer-run 6-month, post-SEO cumulative abnormal returns and buy-and-hold abnormal returns. Examining the differences between banks, we found, in both univariate and multivariate regression results controlling for other variables, that the bank capital ratio as at the time of the SEO announcement is significantly and positively associated with announcement period abnormal returns, while nonperforming assets ratio of the bank as at the time of SEO announcements is not. However, the nonperforming assets ratio as at the time of the SEO announcements had a significantly negative association with post-SEO, 6-month longer-run abnormal stock returns, while the capital ratio did not have any significant association. The nonperforming assets ratio as at the time of SEO announcement was also significantly and negatively related to bank return on assets 6 months and 12 months after SEO, while the capital ratio was not. Thus, investors appear to perceive a well-ingrained, well-publicized regulatory norm—the capital ratio—as indicative of value creation as at the time of bank SEO announcements, while loan asset quality, which may be relatively more opaque, may determine post-SEO performance. Full article

Using a large database of U.S. mergers and acquisitions (M&As) announced from 2010 through 2017, we examine the effects of capital ratio (leverage) on the announcement period stock price reaction as well as on longer-term stock returns and performance, for banks, making comparisons with non-banks. We compare announcement period reactions (computed in different ways) for lower (lower than sample median) capitalized banks and non-banks with that for higher capitalized banks and non-banks. We confirm our results using multivariate analyses—after controlling for year and industry fixed effects—and we check the associations of capital ratio with announcement period abnormal returns, longer-term performance, as well as certain bank-specific and non-bank specific performance measures. For banks, we find that a lower capital ratio of acquirers at the time of the announcement of the M&A is significantly associated with negative announcement period abnormal returns. However, for these banks, the longer-run abnormal returns and performance are positive. The opposite is true for non-bank M&A announcements: higher equity ratios (lower leverage) of acquirers as at the time of the announcement is significantly associated with negative announcement period abnormal returns. Yet, for such non-banks, the longer-run abnormal returns and performance are positive. This shows that the market may misreact, on average, to both bank and non-bank M&A announcements based on the acquirer’s leverage at the time of the announcement. Full article

Our goal in this paper is to answer this research question: Do investors understand the longer-term value-implications of cross border mergers and acquisitions, as at the time of their announcements? We examine acquirers’ operating efficiencies around and after cross-border acquisitions and relate this to the announcement-period stock-market reaction. Using a dataset of cross-border mergers and acquisitions (M&A) entailing U.S. acquirers over the period 1990–2013, and using a bootstrapped-DEA (Data Envelopment Analysis) model because any one indicator may not reflect the whole performance of the merger, we find that the operating efficiency of the acquirers decreases around the acquisition, and up to three years after. However, we document evidence of stock market mis-reaction at announcement: the announcement-period acquirer abnormal stock-price return is not significantly associated with acquirer’s operating efficiency post-acquisition. Therefore, investors should be careful interpreting the announcement-period stock-price reaction in cross-border mergers and acquisitions as indicative of merger efficiency gains. Full article

Innovation is the key to the development of the pharmaceutical industry. The pilot program of China’s “4 + 7” volume-based procurement policy (“4 + 7” procurement policy) brings the drug price back to a reasonable level through trading procurement quantities for lower drug prices. The policy manages to reduce the burden of the health care system, improve efficiency, and push the pharmaceutical industry to transform and update from the era of high gross profit of generic drugs to innovative drugs. So far, few studies have investigated the influence of the volume-based procurement policy on the innovation of pharmaceutical firms. By combining the event study and Difference-in-Difference (DiD) methodology, this study finds that the abnormal return (AR) of firms with high R&D intensity is lower than that of firms with low R&D intensity during the event window period. Moreover, further analysis identifies the moderating effect of firm size and firm type. Specifically, the results show that the negative influence of high R&D intensity on abnormal return (AR) during the announcement of the “4 + 7” procurement policy is stronger in large firms and innovative pharmaceutical firms. Finally, we discuss the policy implications of our study. Full article

We estimate the effect of acquisition performance and acquisition activity on CEO compensation for the full set of CEOs of large public U.S. corporations in the Execucomp database over the period 1992–2016. Most previous work has focused on publicly traded acquisition targets. We focus on the comparison between public and private targets, showing significant differences between the two. One primary finding, based on panel data regressions (using both fixed and random effects) is that the performance of private acquisitions, as measured by abnormal announcement returns, has a statistically significant positive effect of plausible economic magnitude on CEO compensation. Public acquisitions exhibit a smaller positive effect that is statistically insignificant. For both, acquisition activity (number of acquisitions) has a statistically significant positive effect on compensation. Our main results suggest that agency considerations are important for both public and private acquisitions but are more important for public acquisitions. Full article

This study examines the announcement effects of convertible and warrant bond issues with embedded refixing option in Korea from January 2001 to December 2018. Refixing option denotes an adjustment right of the conversion price embedded in equity-linked debt when the underlying stock price falls under conversion price. I find statistically significant declines of 2.6 to 2.7 percentage points in cumulative abnormal returns for the inclusion of a refixing clause and especially further declines of 6.2 to 6.3 percentage points during the period from 2016 to 2018. This result implies that the market’s concerns about the dilution of existing shareholder value due to the exercise of the refixing rights are reflected in the market response. I further find that the degree of negative market response varies according to the changes in macroeconomic conditions and the stock exchange on which the issuing firms are listed. The findings are robust after controlling for the effect of firm-, issue-, and market-specific characteristics. Full article

This study explores U.S. public companies’ reactions to scientific announcements by the IPCC (Intergovernmental Panel on Climate Change) with respect to updated climate change knowledge and how it affects their stock valuations, given their carbon emission/environmental outlooks. Based on a sample of total daily returns collected for 10 industry indexes from the S&P 500 Index over the period 1990–2014, and using an event study approach, we analyze the connection between IPCC assessment report announcements and firms’ returns to evaluate panel data models. We found that various sectors, regardless of their carbon profiles, react abnormally to IPCC report announcements without remarkable long-run cumulative effects. The implications of these results are that there is no clear violation of the efficient markets hypothesis, yet short-term profits may be gained. Furthermore, the market still reacts to new scientific announcements, even though 24 years have passed since the first IPCC report. In addition, there is a negative relationship for low and medium carbon-intensive industries, especially in the short term. Full article