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Market Response (market + response)
Kinds of Market Response Selected AbstractsMarket Response to Earnings Surprises Conditional on Reasons for an Auditor Change,CONTEMPORARY ACCOUNTING RESEARCH, Issue 2 2002Karl E. Hackenbrack Abstract Our interest in this study is the relative informativeness of earnings announcements reported before and after Form 8-K disclosures of the reason for an auditor change. We appeal to several models that predict that the market's response to an earnings surprise is positively related to the perceived precision of the earnings report. We predict that the Form 8-K reason disclosures aid investors in updating their expectations of earnings precision by providing useful information about the financial reporting process that produces the earnings report. For 802 auditor changes from late 1991 through late 1997, the average price response per unit of earnings surprise is lower subsequent to an auditor change for companies that switched for disagreement-related or fee-related reasons and higher for those that switched for service-related reasons. This paper provides further evidence on the effects of differential earnings quality on differences in the returns-earnings relation across companies and over time as well as the efficacy of Form 8-K disclosures of reasons for auditor changes. [source] An Examination of the Equity Market Response to The Gramm-Leach-Bliley Act Across Commercial Banking, Investment Banking, and Insurance FirmsJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 9-10 2006H. Semih Yildirim Abstract:, This paper examines the wealth effects of the events surrounding the passage of the Gramm-Leach-Bliley Act of 1999 and changes in systematic risk from the pre-Act period to the post-Act period for commercial banks, investment banks, and insurance firms. The results suggest that investment banks and insurance firms are better positioned to exploit the benefits of product-line diversification opportunities allowed by the legislation compared to commercial banks that experience no significant market reaction. Further evidence indicates a significant risk shift and overall reduction in riskiness for the financial sectors under consideration around the event period. [source] Exploring strategic priorities for regional agricultural R&D investments in East and Central AfricaAGRICULTURAL ECONOMICS, Issue 2 2010Liangzhi You O13; O32; O55; Q16 Abstract The 11 countries of East and Central Africa have diverse but overlapping agroclimatic conditions, and could potentially benefit from spillovers of agricultural technology across country borders. This article uses high-resolution spatial data on actual and potential yields for 15 major products across 12 development domains to estimate the total benefits available from the spread of new agricultural technologies around the region. Market responses and welfare gains are estimated using the,Dynamic Research Evaluation for Management,model, taking account of current and future projections of local and international demand. Results suggest which crops, countries, and agroclimatic regions offer the largest total benefits. Downloadable data and program files permit different assumptions and additional information to be considered in the ongoing process of strategic priority setting. [source] Share Repurchases, the Clustering Problem, and the Free Cash Flow HypothesisFINANCIAL MANAGEMENT, Issue 3 2009Chuan-San Wang We examine the market reaction to announcements of actual share repurchases, events that cluster both within and across firms. Using a multivariate regression model, we find that the market reacts positively to the events, indicating that these announcements provide additional information to that contained in the initial repurchase intention announcements. Further, the market response is especially favorable for firms with overinvestment problems as measured by Tobin's q, and is not related to signaling costs as measured by the size of the repurchase. Our findings generally support the hypothesis that share repurchases reduce the agency costs of excessive free cash flow. [source] Information technology and its impact on stock returns and trading volumeINTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 3 2010Uri Benzion Abstract This study investigates the impact of information technology on common stock returns and trading volume. By focusing mainly on the peak period of the hi-tech phenomenon, the findings imply that the market response to website launching is positive. During the event day and the two preceding days, the abnormal stock return and the abnormal trading volume both are positive and statistically significant. In particular, the impact is stronger for non-US firms than for domestic companies, for initial rather than subsequent site launches, for those sites that are launched on Monday rather than on other days of the week, and for innovative industries such as electronics and computers. As expected, while the launch of a website had a stronger effect at the beginning of the hi-tech phenomenon, the impact has diminished in later years. Copyright © 2009 John Wiley & Sons, Ltd. [source] European monetary policy surprises: the aggregate and sectoral stock market responseINTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 2 2009Don Bredin Abstract In this paper we investigate the stock market response to international monetary policy changes in the UK and Germany. Specifically, we analyse the impact of (un)expected changes in the UK and German/Euro area policy rates on the UK and German aggregate and sectoral equity returns in an event study. The decomposition of (un)expected changes in policy rates is based on futures markets. Overall, our results suggest that, the UK monetary policy surprises have a significant negative influence on both aggregate and industry level returns in both countries. The influence of German/Euro area monetary policy shocks appears insignificant for both Germany and the UK. Copyright © 2007 John Wiley & Sons, Ltd. [source] The Association between Corporate Boards, Audit Committees, and Management Earnings Forecasts: An Empirical AnalysisJOURNAL OF ACCOUNTING RESEARCH, Issue 3 2005IRENE KARAMANOU ABSTRACT We study how corporate boards and audit committees are associated with voluntary financial disclosure practices, proxied here by management earnings forecasts. We find that in firms with more effective board and audit committee structures, managers are more likely to make or update an earnings forecast, and their forecast is less likely to be precise, it is more accurate, and it elicits a more favorable market response. Together, our empirical evidence is broadly consistent with the notion that effective corporate governance is associated with higher financial disclosure quality. [source] Confirming Management Earnings Forecasts, Earnings Uncertainty, and Stock ReturnsJOURNAL OF ACCOUNTING RESEARCH, Issue 4 2003Michael Clement In this study we examine the association among confirming management forecasts, stock prices, and analyst expectations. Confirming management forecasts are voluntary disclosures by management that corroborate existing market expectations about future earnings. This study provides evidence that these voluntary disclosures affect stock prices and the dispersion of analyst expectations. Specifically, we find that the market's reaction to confirming forecasts is significantly positive, indicating that benefits accrue to firms that disclose such forecasts. In addition, although we find no significant change in the mean consensus forecasts (a proxy for earnings expectations) around the confirming forecast date, evidence indicates a significant reduction in the mean and median consensus analyst dispersion (a proxy for earnings uncertainty). Finally, we document a positive association between the reduction of dispersion of analysts' forecasts and the magnitude of the stock market response. Overall, the evidence suggests that confirming forecasts reduce uncertainty about future earnings and that investors price this reduction of uncertainty. [source] GAAP versus The Street: An Empirical Assessment of Two Alternative Definitions of EarningsJOURNAL OF ACCOUNTING RESEARCH, Issue 1 2002Mark T. Bradshaw Managers, security analysts, investors, and the press rely increasingly on modified definitions of GAAP net income, known by such names as "operating" and "pro forma" earnings. We document this phenomenon and discuss competing explanations for the recent rise in the use of such modified earnings numbers and implications for the interpretation of related accounting research. Our results show that over the past 20 years there has been a dramatic increase in the frequency and magnitude of cases where "GAAP" and "Street" earnings differ. Further, there is a very strong bias toward the reporting of a Street earnings number that exceeds the GAAP earnings number. We also show that the market response to the Street earnings number has displaced GAAP earnings as a primary determinant of stock prices. Finally, through an analysis of earnings releases, we show that management has taken a proactive role in defining and emphasizing the Street number when communicating to analysts and investors. [source] FINANCIAL STRATEGY FOR MIDDLE MARKET COMPANIES: a ROUNDTABLE DISCUSSIONJOURNAL OF APPLIED CORPORATE FINANCE, Issue 4 2000Article first published online: 5 APR 200 Dennis Soter begins with the provocative observation that "U.S. companies, private as well as public, are systematically underleveraged," and goes on to suggest that debt-financed stock repurchases may help address the current valuation problems faced by many middle market companies (and by many larger firms in basic industries as well). Soter makes his case by presenting two case histories. In the first, Equifax, the Atlanta-based provider of credit information services, combined a leveraged Dutch auction stock repurchase with a multi-year series of open market repurchase programs and an EVA incentive plan to produce large increases in operating efficiency and shareholder value. In the second, FPL Group (the parent of Florida Power and Light) became the first profitable utility to cut its dividend, substituting a policy of ongoing stock repurchase for its 33% reduction in dividend payments. Following Soter, John Brehm, the CFO of IPALCO Enterprises (the parent of Indianapolis Power and Light), explains the rationale for his company's decision to become the first utility to do a leveraged recap (while also cutting its dividend by a third). As in the case of Equifax, IPALCO's dramatic change in capital structure (also combined with an EVA incentive plan) was associated with major operating improvements and a positive stock market response. But, of course, high leverage is not right for all companies. And, to reinforce that point, James Perry, CEO of Argosy Gaming, recounts his harrowing experience of having to raise new equity shortly after taking charge of his overleveraged company. By arranging an infusion of convertible preferred, Argosy was able not only to stave off bankruptcy, but to fund major new investment and engineer a remarkable turnaround of its operations. Finally, William Dutmers, Chairman of Knape & Vogt, a small midwestern manufacturing company, discusses the role of debt-financed stock repurchases and an EVA management approach in his company's recent operating improvements. [source] Modeling the Korean Chonsei Lease ContractREAL ESTATE ECONOMICS, Issue 1 2003Brent W. Ambrose Chonsei is a unique Korean lease contract in which the tenant pays an up,front deposit, typically about 40 to 80% of the value of the property, with no requirement for periodic rent payments. At the contract maturation, the landlord then returns the nominal value of the deposit. Since there is no legal obligation on the part of the landlord to deposit the money in an escrow account, the principal default risk associated with the chonsei contract falls on the tenant. We discuss the development and popularity of this contractual agreement in the context of the public policy initiatives, historical and institutional settings surrounding the Korean housing and housing finance market. We develop a contingent,claims model that recognizes the compound options embedded in the chonsei contract. Theoretical predictions are confirmed by an empirical analysis using monthly data from 1986 to 2000. Our analysis shows that the chonsei contract is an indigenous market response to economic conditions prevalent in Korea. [source] Is Disinflation Good for the Stock Market?THE JOURNAL OF FINANCE, Issue 4 2002Peter Blair Henry The stock market appreciates by an average of 24 percent in real dollar terms when countries attempt to stabilize annual inflation rates that are greater than 40 percent. In contrast, the average market response is 0 when the pre,stabilization rate of inflation is less than 40 percent. These results suggest that the potential long,run benefits of stabilization may dominate short,run costs at high levels of inflation, but at low to moderate levels of inflation, benefits may be offset by costs in a present value sense. Stock market responses also help predict the change in inflation and output in the year following all 81 stabilization efforts. [source] The response of volume and returns to the information shocks in China's commodity futures marketsTHE JOURNAL OF FUTURES MARKETS, Issue 9 2005Gongmeng Chen This study investigates the response of returns and volume to different information shocks in China's commodity futures markets using bivariate moving average representation (BMAR) and bivariate vector autoregression (BVAR) methodologies. Consistent with the conclusions from stock market studies that have used these methodologies, it is found that the informational/permanent components are the dominant components for returns movements, and the noninformational/transitory components are the dominant components for trading volume. It is also found that the market response of copper futures improved during the sample period, and the market responses of actively traded futures (copper and soybeans) are better than those of the less actively traded futures (aluminum and wheat). © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:893,916, 2005 [source] Market Implications of the Audit Quality and Auditor Switches: Evidence from ChinaJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 1 2009Z. Jun Lin Independent audits enhance the credibility of corporate financial reports and assist investors to make rational decisions in the capital market. Nonetheless, the utility of the auditing function depends upon the quality of audits, which is determined by the independence and expertise of auditors. Hence, auditor choice and switch will not only affect an audit's quality, but will also influence decisions made by investors and other market participants. The purpose of this paper is to investigate how investors respond to the quality of audits and auditor switches in the Chinese context. Empirical results show that the quality of an audit and switching to a larger auditor have a positive (negative) impact on earnings response coefficients (ERCs) for firms with positive (negative) abnormal earnings. In contrast, switching to a smaller auditor has a negative (positive) impact on ERCs for firms with positive (negative) abnormal earnings. These results suggest that large auditing firms (Top 10) in China are perceived as more effective for curbing income-increased earnings management, which leads to higher (lower) ERCs for clients with positive (negative) abnormal earnings. Firms' switching to a larger auditor may signal high-quality earnings. Therefore, investors more often increase stock prices when firms have positive abnormal earnings and less often depreciate prices for negative abnormal earnings. Similarly, switching to a smaller auditor may signal lower earning quality, resulting in opposite market responses. In general, the empirical evidence suggests that audit information is valued by the capital market in China. Large auditing firms have been able to product-differentiate themselves within the Chinese stock market. [source] ECONOMIC FUNDAMENTALS IN LOCAL HOUSING MARKETS: EVIDENCE FROM U.S. METROPOLITAN REGIONSJOURNAL OF REGIONAL SCIENCE, Issue 3 2006Min Hwang ABSTRACT This paper investigates the effects of national and regional economic conditions on outcomes in the single-family housing market: housing prices, vacancies, and residential construction activity. Our three-equation model confirms the importance of changes in regional economic conditions, income, and employment on local housing markets. The results also provide the first detailed evidence on the importance of vacancies in the owner-occupied housing market on housing prices and supplier activities. The results also document the importance of variations in materials, labor and capital costs, and regulation in affecting new supply. Simulation exercises, using standard impulse response models, document the lags in market responses to exogenous shocks and the variations arising from differences in local parameters. The results also suggest the importance of local regulation in affecting the pattern of market responses to regional income shocks. [source] Is Disinflation Good for the Stock Market?THE JOURNAL OF FINANCE, Issue 4 2002Peter Blair Henry The stock market appreciates by an average of 24 percent in real dollar terms when countries attempt to stabilize annual inflation rates that are greater than 40 percent. In contrast, the average market response is 0 when the pre,stabilization rate of inflation is less than 40 percent. These results suggest that the potential long,run benefits of stabilization may dominate short,run costs at high levels of inflation, but at low to moderate levels of inflation, benefits may be offset by costs in a present value sense. Stock market responses also help predict the change in inflation and output in the year following all 81 stabilization efforts. [source] The response of volume and returns to the information shocks in China's commodity futures marketsTHE JOURNAL OF FUTURES MARKETS, Issue 9 2005Gongmeng Chen This study investigates the response of returns and volume to different information shocks in China's commodity futures markets using bivariate moving average representation (BMAR) and bivariate vector autoregression (BVAR) methodologies. Consistent with the conclusions from stock market studies that have used these methodologies, it is found that the informational/permanent components are the dominant components for returns movements, and the noninformational/transitory components are the dominant components for trading volume. It is also found that the market response of copper futures improved during the sample period, and the market responses of actively traded futures (copper and soybeans) are better than those of the less actively traded futures (aluminum and wheat). © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:893,916, 2005 [source] The Australian grocery industry: a competition perspective,AUSTRALIAN JOURNAL OF AGRICULTURAL & RESOURCE ECONOMICS, Issue 1 2006Rhonda L. Smith This article discusses whether at a theoretical level the large and growing role of the vertically integrated supermarket chains raises a buyer-power concern because of potential harm to other retailers, suppliers, and/or consumers. Even if this is possible, whether it is a real concern depends on whether provision exists to constrain the exercise of that power through market responses, such as entry, or through regulatory provisions, such as those contained in the Trade Practices Act. [source] Market Response to Earnings Surprises Conditional on Reasons for an Auditor Change,CONTEMPORARY ACCOUNTING RESEARCH, Issue 2 2002Karl E. Hackenbrack Abstract Our interest in this study is the relative informativeness of earnings announcements reported before and after Form 8-K disclosures of the reason for an auditor change. We appeal to several models that predict that the market's response to an earnings surprise is positively related to the perceived precision of the earnings report. We predict that the Form 8-K reason disclosures aid investors in updating their expectations of earnings precision by providing useful information about the financial reporting process that produces the earnings report. For 802 auditor changes from late 1991 through late 1997, the average price response per unit of earnings surprise is lower subsequent to an auditor change for companies that switched for disagreement-related or fee-related reasons and higher for those that switched for service-related reasons. This paper provides further evidence on the effects of differential earnings quality on differences in the returns-earnings relation across companies and over time as well as the efficacy of Form 8-K disclosures of reasons for auditor changes. [source] | ||||||||||||||||||||||||||||