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Stock Price Reaction (stock + price_reaction)
Kinds of Stock Price Reaction Selected AbstractsStock Price Reactions to the Repricing of Employee Stock Options,CONTEMPORARY ACCOUNTING RESEARCH, Issue 4 2005Barbara M. Grein Abstract We study whether the repricing of employee stock options is in the best interests of common shareholders by examining the excess stock returns associated with timely, noncontamin-ated repricing announcements made by Canadian firms. On the basis of three theories of why firms reprice, we develop competing predictions about the mean announcement-date excess stock return and the cross-sectional relations among excess stock returns, the estimated probability of repricing, and proxies for predictions from each theory. For a sample of 72 noncontaminated repricing announcements made by Canadian firms between November 1994 and July 2001, we find a reliably positive three-day announcement-date mean excess return of 4.9 percent. The results of our cross-sectional analyses suggest that the market responds favorably to repricings because they assist in retaining key employees even though, at the margin, they enable managers to extract rents from shareholders. We do not find sufficient statistically significant evidence to reliably conclude that repricings are done to realign employee incentives. [source] Corporate Governance, Audit Firm Reputation, Auditor Switches, and Client Stock Price Reactions: The Andersen ExperienceINTERNATIONAL JOURNAL OF AUDITING, Issue 3 2010Sharad C. Asthana The financial scandal surrounding the collapse of Enron caused erosion in the reputation of its auditor, Arthur Andersen, leading to concerns about Andersen's ability to continue in existence and ultimately to the firm's demise. In this paper we investigate the role of corporate governance on the timing of the auditor switch by former Andersen clients. After controlling for factors associated with switching costs, we find clients with strong corporate governance were more likely to switch early. We also find that clients switching from Andersen experienced positive abnormal returns during the three-day window surrounding the announcement of the switch. We attribute this positive response to the reduction in uncertainty associated with the cost of finding a new auditor. [source] The Importance of Board Quality in the Event of a CEO DeathFINANCIAL REVIEW, Issue 3 2006Kenneth A. Borokhovich G34 Abstract We examine board quality and executive replacement decisions around deaths of senior executives. Stock price reactions to executive deaths are positively related to board independence. Controlling for such factors as the deceased's stockholdings, outside blockholdings, board size, and whether the deceased was a founder, board independence is the most significant factor explaining abnormal returns. Board independence is particularly important when there is no apparent successor and firm performance is poor. The results are consistent with independent boards being reluctant to discipline poorly performing incumbent managers, but nevertheless using the opportunity of an executive death to improve the quality of management. [source] TERRORISM AND THE RETURNS TO OILECONOMICS & POLITICS, Issue 3 2009BROCK BLOMBERG The effect of terrorism on global oil prices has been largely explained through demand-side effects. We estimate an empirical model to re-examine the effect of terrorism on the price of global oil stocks across oil market regimes that reflect different supply constraints. We believe that terrorism will have larger impacts when global capacity is tight (i.e. when global demand is close to global supply). This means that any shock to capacity (say by conflict) should have the largest impact on profits before the first OPEC shock in the early 1970s. Since then, conflict shocks would not allow firms to exploit production in the same way, thus reducing the available profits that could be garnered by such production manipulation. If capacity constraints are binding when a conflict occurs, then we predict that a positive stock price reaction can be expected for oil firms from such a shock. We exploit a new panel dataset to investigate the relationship between oil profitability and conflict, using conflict data from the top 20 oil producing and exporting countries in the world. We show that in the later part of our sample, 1974,2005, as cartel behavior of OPEC member countries has diminished and as conflict has become more regular and thus the information surrounding it noisier, oil stock prices do not increase in response to conflict. However, in earlier capacity constrained eras, we find that oil stocks can in fact increase in response to conflict. In some cases, the impact of conflict may cause the return of oil stocks to increase by as much as 10 percentage points. [source] The Credibility of Voluntary Disclosure and Insider Stock TransactionsJOURNAL OF ACCOUNTING RESEARCH, Issue 4 2007FENG GU ABSTRACT We examine stock price reaction to voluntary disclosure of innovation strategy by high-tech firms and its relation with insider stock transactions before the disclosure. We find that, despite the qualitative and subjective nature of strategy-related disclosure, there is positive stock price reaction to the disclosure. The evidence suggests that investors view the disclosure as credible good news. We also find that the disclosure is associated with more positive stock price reaction when it is preceded by insider purchase transactions. This evidence is consistent with insider purchase enhancing the credibility of the disclosure. The credibility-enhancing effect is found to be stronger for firms with higher degrees of information asymmetry (younger firms, firms with lower analyst following, loss firms, and firms with higher research and development (R&D) intensity). Our evidence also indicates that predisclosure insider purchase is associated with greater future abnormal returns, suggesting that managers are privy to good news shortly before the disclosure. [source] Are Banks Still Special?JOURNAL OF APPLIED CORPORATE FINANCE, Issue 1 2000New Evidence on Their Role in the Corporate Capital-Raising Process Bankers appear to play a special role in providing commitment-based financing to corporations. This type of lending is important not only for small firms that lack access to public debt markets but for large and medium-size companies as well. For such companies, commitment-based financing provides access to debt capital that becomes valuable when the firm has an immediate need for funding but interest rates in public debt markets are prohibitively high, or the firm is undervalued by the market. A good example of this was provided by the Asian crisis in the last quarter of 1998, when $10 billion of commercial paper was retired and $20 billion of net new commercial loans were booked. The authors also suggest that the fact that commitment-based financing is used by larger companies when they believe themselves to be undervalued in the market is probably the best explanation of why announcements of these types of loans elicit a positive stock price reaction. [source] The Multijurisdictional Disclosure System and Value of Equity OfferingsJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 1 2006Usha R. Mittoo The Canada and US multijurisdictional disclosure system (MJDS) implemented in 1991 lowered the indirect barriers for investors and issuers by easing reporting and disclosure requirements for cross-border issues. This paper examines the impact of the MJDS and related regulatory changes on Canada,US equity market segmentation using a sample of Canadian seasoned equity offerings in the 1991,1998 period. We find that the number of cross-border issues by Canadian firms increased, and the typical negative stock price reaction that accompanies seasoned equity issues declined over time, supporting increased integration between the two markets after the MJDS. We also document that cross-border issues experience about 1.4 per cent lower negative stock price reaction compared with domestic issues, consistent with Canada,US market segmentation. We find mixed support for Merton's (1987) investor recognition hypothesis. While Canadian firms cross-listed in the US experience a less adverse price reaction to their cross-border offerings compared with their non-US-listed peers, there is no significant difference between the two groups in the case of purely domestic issues. [source] Price Pressure around MergersTHE JOURNAL OF FINANCE, Issue 1 2004Mark Mitchell ABSTRACT This paper examines the trading behavior of professional investors around 2,130 mergers announced between 1994 and 2000. We find considerable support for the existence of price pressure around mergers caused by uninformed shifts in excess demand, but that these effects are short-lived, consistent with the notion that short-run demand curves for stocks are not perfectly elastic. We estimate that nearly half of the negative announcement period stock price reaction for acquirers in stock-financed mergers reflects downward price pressure caused by merger arbitrage short selling, suggesting that previous estimates of merger wealth effects are biased downward. [source] DO TRACKING STOCKS REDUCE INFORMATION ASYMMETRIES?THE JOURNAL OF FINANCIAL RESEARCH, Issue 2 2005AN ANALYSIS OF LIQUIDITY AND ADVERSE SELECTION Abstract A firm's announcement that it intends to restructure based on tracking stock is usually associated with a positive stock price reaction, at least in the short run. Typically, this reaction is attributed to expected reductions in a diversification discount, through reduced agency costs or information asymmetries. We reinvestigate this latter hypothesis by focusing on the liquidity provided by market makers before and after a firm issues a tracking stock. Our results suggest that such restructurings are not effective at reducing information asymmetries. Rather, firms that issue tracking stocks exhibit less liquidity and greater adverse selection than comparable control firms. [source] Stock Returns and Operating Performance of Securities IssuersTHE JOURNAL OF FINANCIAL RESEARCH, Issue 3 2002Gil S. Bae Abstract We examine long-run stock returns and operating performance around firms' offerings of common stock, convertible debt, and straight debt from 1985 to 1990. We find that pre-issue abnormal returns are positive and significant for stock issuers, but not for convertible and straight debt issuers. The post-issue mean returns show that common stock and convertible debt issuers experience underperformance during the post-issue periods, but straight debt issuers do not. Consistent with these results, common stock issuers experience the best pre-issue operating performance among all three types of issuers, and operating performance declines during the post-issue periods for common stock and convertible debt issuers. Using a new approach in linear model estimations to correct heteroskedasticity and to adjust for finite sample, we find a positive relation between post-issue operating performance and issue-period stock price reactions. The results suggest that future operating performance is anticipated at the issue and that securities issues provide information on issuers' future performance. [source] | ||||||||||||||||||||||