Showing papers in "Journal of Business Finance & Accounting in 1997"
TL;DR: In this paper, the authors examined a comprehensive data set of large domestic takeovers by UK listed companies between 1984 and 1992 and showed that the average abnormal return for up to two years post-acquisition is unambiguously and significantly negative.
Abstract: This study examines a comprehensive data set of large domestic takeovers by UK listed companies between 1984 and 1992. The contribution of this paper is to show, by using a series of models of abnormal returns, together with the Ibbotson (1975) ‘Returns Across Time Series’ model and a simple cross-sectional model of returns across all listed UK companies, that the average abnormal return for up to two years post-acquisition is unambiguously and significantly negative. In particular, acquirers financing a takeover through equity, and single (as opposed to regular) acquirers exhibit significant negative performance. There is also some evidence to suggest that diversifying acquirers perform worse than non-diversifying acquirers and that recommended bids are associated with poorer subsequent under-performance by acquirers than are hostile bids.
331 citations
TL;DR: In this paper, an analysis of the "small firms effect" whilst simultaneously controlling for the "fund size effect" is presented, showing that the ethical unit trusts have significantly greater exposure than general unit trusts to the small firms effect and that net of this there is no significant evidence of over or under performance by ethical trusts using an adjusted Jensen measure.
Abstract: Recent papers which have examined unit trusts have controlled either for a ‘fund size effect’ or for the ‘small firms effect’ in the investment portfolio. The contribution of this paper is an analysis of the ‘small firms effect’ whilst simultaneously controlling for the ‘fund size effect’. We show that the ethical unit trusts have significantly greater exposure than general unit trusts to the ‘small firms effect’, and that net of this there is no significant evidence of over or under performance by ethical trusts using an adjusted Jensen measure. Using two cross-sectional approaches, we demonstrate that whilst a ‘small firms effect’ has a role to play in explaining unit trust performance, fund size is not correlated with the financial performance of unit trusts. This cross-sectional analysis also provides some evidence that ethical unit trusts may perform less well than general unit trusts.
296 citations
TL;DR: In this paper, the authors examined the relationship among stock prices in eighteen national stock markets by using unit root and cointegration tests for the period 1961-92 and found that the world equity markets are weak-form efficient.
Abstract: This study examines the relationships among stock prices in eighteen national stock markets by using unit root and cointegration tests for the period 1961--92 All the markets were analyzed individually and collectively in regions to test for market efficiency The results from unit root tests suggest that the world equity markets are weak-form efficient The cointegration test results show that there are only a small number of significant cointegrating vectors over the last three decades However, the number of significant cointegrating vectors increases after the October 1987 stock market crash, a result that is consistent with the contagion effect
291 citations
TL;DR: In this article, the authors employ a multinomial logit model to better understand the motives behind takeovers and show that the characteristics of hostile and friendly targets differ significantly and that these differences also vary depending on the time period under investigation.
Abstract: This paper employs a multinomial logit model in an attempt to better understand the motives behind takeovers. The results from the multinomial logit models show that the characteristics of hostile and friendly targets differ significantly and that these differences also vary depending on the time period under investigation. The results give some support to the disciplining role of the hostile takeover. Furthermore, conclusions based on a simple binomial logit model are likely to be misleading and result in incorrect inferences regarding the characteristics of firms subject to takeover.
239 citations
TL;DR: In this article, the authors developed models of audit fee structure and found that the size of the company is a major determinant of the audit fee and that payments for non-audit services are positively and significantly associated with audit fees.
Abstract: There have been a number of studies examining audit fees and this research has covered various nations. Recent legislation in Norway requires a company to disclose information on the audit fee and the fees for non-audit services paid to its auditor. Using this data, models of audit fee structure are developed. As with other studies, the size of the company is a major determinant of the audit fee. Payments for non-audit services are positively and significantly associated with audit fees; this relationship is difficult to explain although it parallels some research in the United States. Overall, the models explain about 75 per cent of the variability in audit fees.
235 citations
TL;DR: In this article, the reliability of a basic earnings and equity model of value is tested using 8,287 cases drawn from UK industrial and commercial firms reporting during 1987-1995, and a respecification of this model is used to investigate the value relevance of dividends, capital structure and capital expenditure.
Abstract: The reliability of a basic earnings and equity model of value is tested using 8,287 cases drawn from UK industrial and commercial firms reporting during 1987–1995. A respecification of this model is used to investigate the value relevance of dividends, capital structure and capital expenditure. Both the dividend and capital expenditure signals appear to be significant and the impact of the former is surprisingly strong. There is no convincing evidence that equity value is affected by the level of debt. Further investigation of dividends confirms that they are less influential in large firms or in firms with high return on equity.
181 citations
TL;DR: The APT with macroeconomic factors put forward by Chen, Roll and Ross (1986) was tested using monthly Australian sectoral share-price indexes for 1980-1994 as discussed by the authors.
Abstract: The APT with macroeconomic factors put forward by Chen, Roll and Ross (1986) was tested using monthly Australian sectoral share-price indexes for 1980–1994. The inflation rate was found to be consistently priced. The significance of other factors was found to depend on the choice of sample period and estimation method. The model was compared to both an APT with artificial factors and the CAPM. Both versions of the APT were found to clearly out-perform the CAPM but neither version of the APT was clearly superior to the other in terms of both within- and out-of-sample explanatory power.
168 citations
TL;DR: The authors examined the association between differences in ownership structure and income smoothing behavior in firms and found that managers' incentive structures, and firm profitability are important factors in explaining the existence of a non-monotonic relationship between ownership differences and firms' income-smoothing behavior.
Abstract: This paper examines the association between differences in ownership structure and income smoothing behavior in firms. The underlying constructs affecting this association include agency relationships, managerial incentives, information asymmetry, and firm profitability. A logistic regression model is used to test the association between income smoothing and variables related to inside ownership, institutional holdings, leverage, managerial compensation, profitability, and firm size. The evidence suggests that ownership differences, managers' incentive structures, and firm profitability are important in explaining income smoothing behavior in firms. By separating inside ownership and levels of debt into different levels, we are able to show the existence of a non-monotonic relationship between ownership differences and firms' income smoothing behavior.
156 citations
TL;DR: In this paper, the authors examined the impact of new credit ratings, credit rating changes and Credit Watch announcements on UK common stock returns and found that new ratings, whether short or long-term, have no significant impact on returns.
Abstract: This is the first study to use daily data from a major capital market outside of the US to examine the role of corporate bond and commercial paper rating changes on common stock returns. Using data published by Standard and Poors' credit rating agency between 1984 and 1992, we examine the impact of new credit ratings, credit rating changes and Credit Watch announcements on UK common stock returns. We find significant negative excess returns around the date of a downgrade and positive returns close to the date of a positive CreditWatch announcement. Hence, the financial markets would appear to place some importance on rating agency pronouncements in the UK. New ratings, whether short or long-term, have no significant impact on returns. We also attempt to quantify the impact of a new credit rating upon firm cost of capital through measures of conditional volatility and systematic risk. However, we find only weak evidence to suggest that a stock's cost of capital is reduced after a long-term credit rating is awarded for the first time.
123 citations
TL;DR: The authors investigates the evidence on the stock market overreaction hypothesis (ORH), which holds that, if stock prices systematically overshoot as a consequence of excessive investor optimism or pessimism, price reversals should be predictable from past price performance.
Abstract: This paper investigates the evidence on the stock market overreaction hypothesis (ORH), which holds that, if stock prices systematically overshoot as a consequence of excessive investor optimism or pessimism, price reversals should be predictable from past price performance. The ORH stands in contradiction to the efficient markets hypothesis which is a cornerstone of financial economics. This study is unique in the overreaction literature because it is restricted to larger and better-known listed companies, whose shares are more frequently traded. This restriction more or less eliminates two alternative explanations to the overreaction hypothesis: it minimises the influence of bid-ask biases and infrequent trading, and reduces the possibility that reversals are primarily a small-firm phenomenon. The paper also investigates a third alternative explanation, namely that time-varying risk explains the reversal effect. The study employs unbiased methods of return computation and uses data from 1975 to 1991 for nearly 1,000 UK companies. Overall, the evidence appears to be consistent with the overreaction hypothesis, subject to certain qualifications.
121 citations
TL;DR: In this article, the authors examined intra-day variations in the bid-ask spread, volatility and volume for stocks traded on the London Stock Exchange during the first quarter of 1991.
Abstract: This paper examines intra-day variations in the bid-ask spread, volatility and volume for stocks traded on the London Stock Exchange. The data set used consists of quote and transactions data for a large sample of 835 stocks traded during the first quarter of 1991. The focus of the study is twofold; first, is to document a number of stylized facts regarding the intra-day behaviour of spread, trading volume, volatility etc. Second, the paper tests some predictions of two theoretical models of intra-day behaviour: the Admati and Pfleiderer and the Brock and Kleidon models. In addition, the paper also studies qualitatively the intra-day behaviour of several variables of interest including volume per transaction, transactions per fifteen-minute interval and spreads/trading volume for stocks of differing liquidity. The results suggest that the bid-ask spread is wide at the open, constant through the day and rises slightly at the close. Trading volume, in contrast is not highest at the open and the close. Volatility, based on the mid-point of the inside spread, shows a U-shaped pattern. Volume per transaction, in contrast, is fairly constant throughout the day. Further, the intra-day trading volume pattern differs for liquid and illiquid stocks. The results provide mixed support for current theoretical models of intra-day behaviour of spread, volume and volatility on the London Stock Exchange
TL;DR: This article examined the impact of earnings timeliness and its effect on earnings information transfers and found that earlier earnings releases yield negative information transfers to firms that previously released their earnings reports, and later earnings releases yielded negative information transfer to companies that have not yet disclosed earnings.
Abstract: This study examines earnings timeliness and its effect on earnings information transfers. Empirical analyses focus on a sample of approximately fifteen hundred earnings reports and nearly four thousand information transfers. The principal findings are: (1) earlier earnings releases yield negative information transfers, (2) earnings releases yield negative (nominal) information transfers to firms that previously (subsequently) release their earnings reports, and (3) earlier earnings releases yield negative information transfers to firms that have not yet disclosed earnings. These findings show that the timing of earnings reports has significant and far-reaching economic consequences.
TL;DR: This article asked 82 experienced managers to value a set of real options by taking decisions on invented case studies, and found that managers valued their options erratically and generally optimistically, though their responses to changes in moneyness, volatility and maturity tended to be in the ‘correct’ directions.
Abstract: We asked 82 experienced managers to value, in effect, a set of real options, by taking decisions on invented case studies. The classic Black Scholes model should set an upper bound for rational valuations of these options (since it assumes a risk neutral discount rate, which may be optimistic). The managers valued their options erratically, and generally optimistically, though their responses to changes in moneyness, volatility and maturity tended to be in the ‘correct’ directions. Oil industry managers over-valued least, relative to Black-Scholes, and Brewery managers most. Questionnaires explored managers' perceptions of the real option parameters encountered in their workplaces.
TL;DR: In this article, the authors empirically test whether or not using the inability of a firm to pay debts when due, loan default/accommodation, as a response measure produces different results than using legal bankruptcy as the response measure.
Abstract: Since 1966, researchers have examined financial distress prediction models to determine the usefulness of accounting information to lenders. These researchers primarily used legal bankruptcy as the response variable for economic financial distress, or included legal bankruptcy with other events in dichotomous prediction models. However, theoretical models of financial distress normally define financial distress as an economic event, the inability to pay debts when due (insolvency). This study uses a loan default/accommodation response variable as a proxy for the inability to pay debts when due. The purpose of this note is to empirically test whether or not using the inability of a firm to pay debts when due, loan default/accommodation, as a response measure produces different results than using legal bankruptcy as the response measure. The study's empirical results show that legal bankruptcy and loan default/accommodation financial distress prediction models produce different statistical results, thus suggesting that the responses measure different constructs. A loan default/accommodation model also fits the data better than a bankrupt model. Our results suggest that a loan default/accommodation response may be a more appropriate measure to determine which accounting information is most useful to lenders in evaluating a firm's credit risk.
TL;DR: In this paper, the relative roles of agency and tax considerations in corporate debt versus equity issuance decisions were examined. And they found that both tax and agency issues are important determinants of security issuance decisions.
Abstract: This paper is an empirical examination of the relative roles of agency and tax considerations in corporate debt versus equity issuance decisions. Unlike earlier work, we conduct our tests on a sample of UK firms since the UK system of taxation does not create an obvious tax advantage to debt and hence affords an opportunity to evaluate the relevance of tax arbitrage considerations. We find that both tax and agency issues are important determinants of security issuance decisions. In addition, we demonstrate that our specification is robust to a variety of alternative explanations which have appeared in the empirical literature.
TL;DR: The authors showed that companies that have listed on the Johannesburg Stock Exchange by means of a public offering between 1980 and 1991 have subsequently performed poorly, with an average return of 18.0% as opposed to 81.5% for a size-matched sample of seasoned companies.
Abstract: Companies that have listed on the Johannesburg Stock Exchange by means of a public offering between 1980 and 1991 have subsequently performed poorly. This long run post issue performance is remarkably consistent with the South African evidence for seasoned rights issuing companies and the international evidence for both initial public offerings (IPOs) and seasoned equity offerings (SEOs). Over the four years post issue, the newly listed companies earned an average return of 18.0% as opposed to 81.5% for a size-matched sample of seasoned companies. This study adds to the increasing body of international evidence suggesting the IPO under performance ‘puzzle’ referred to by Ibbotson (1975), Loughran and Ritter (1995) and Spiess and Affleck-Graves (1995) is not simply sample or country specific.
TL;DR: In this article, the authors explored seasonality in the UK stock market and examined the impact of alternative company year-ends on returns and seasonality of bid-ask spreads and trading activity variables including volume, number and size of trades.
Abstract: This paper explores seasonality in the UK stock market. It examines the impact of alternative company year-ends on returns as well as seasonality in bid-ask spreads and trading activity variables including volume, number and size of trades. Consistent with the evidence elsewhere, seasonal variation in stock returns and trading activity is established although there is little evidence of a seasonal pattern in relative bid-ask spreads. Trading rules based on the seasonal patterns do not suggest that seasonality can be exploited to earn excess profits.
TL;DR: In this article, the authors present a review of the literature on capital budgeting decisions in settings characterized by dispersed information and incentive problems, and highlight their key economic and mathematical properties, reveal their common economic forces and collect and organize their basic results.
Abstract: The purpose of this paper is to selectively review research that addresses capital budgeting decisions in settings characterized by dispersed information and incentive problems. The papers are theoretical; they formulate and analyze models that vary in the number of periods considered, the number of economic actors involved, and the number of alternative projects available. The aims of the review are to describe some of the formulations that have been studied, to highlight their key economic and mathematical properties, to reveal their common economic forces, and to collect and organize their basic results.
TL;DR: In this article, transition matrix techniques are used to relate the past and present performance of pension fund portfolios to study the tendency of portfolios to remain in the same quartile of the ranking as they were in the previous period.
Abstract: Transition matrix techniques are used to relate the past and present performance of pension fund portfolios. In particular, funds are ranked to study the tendency of portfolios to remain in the same quartile of the ranking as they were in the previous period. For raw returns, funds in both of the top quartiles are found to be more likely to remain in the same quartile than would be expected by chance. This result can be taken as limited evidence for the consistency of performance. Similar systemic effects are observed on a risk-adjusted basis. There appears to be clear evidence that some fund managers can offer a degree of consistent good performance.
TL;DR: In this paper, a game-theoretic model was proposed in which a client can potentially avoid a going-concern opinion and its self-fulfilling prophecy by switching auditors.
Abstract: This paper analyzes a game-theoretic model in which a client can potentially avoid a going-concern opinion and its self-fulfilling prophecy by switching auditors. Incumbent auditors are less willing to express a going-concern opinion the more credible the client's threat of dismissal and the stronger the self-fulfilling prophecy effect. Similarly, the client is more willing to switch auditors the more likely it is that auditors' reporting judgments will differ and the stronger the self-fulfilling prophecy effect. Further, with greater noise in the auditor's forecast of client viability, the auditor tends to express fewer going-concern opinions.
TL;DR: This paper examined the stability and persistence of the market overreaction hypothesis as posited by DeBondt and Thaler (1985 and 1987), and reinforced by Chopra, Lakonishok, and Ritter (1992).
Abstract: This paper examines the stability and persistence of the market overreaction hypothesis as posited by DeBondt and Thaler (1985 and 1987), and reinforced by Chopra, Lakonishok, and Ritter (1992). Using monthly CRSP data for the period 1926 through 1992, we find that returns obtained from a contrarian investment strategy are not time-stationary. Specifically, there is no winner-loser portfolio relationship during the post-war period of 1940_50s. The relationship resumes during the pre-energy-crisis subperiod, but weakens again during the post-energy-crisis subperiod. The effectiveness of trading based upon the overreaction hypothesis is, therefore, suspect.
TL;DR: In this article, the authors examined the stock market reaction to write-off announcements and found that the stock price reaction was associated with the expected cash flow implications of the events surrounding the writeoff.
Abstract: This paper examines the stock market reaction to write-off announcements. The increasing prevalence of write-offs over the last decade has lead the Financial Accounting Standards Board to issue new guidelines on the accounting for write-offs, and there has been much discussion about the stock market reaction to these types of announcements. By focusing on the expected cash flow implications of the different types of write-off announcements, this paper documents that the stock price reaction to write-off announcements is associated with the expected cash flow implications of the events surrounding the write-off.
TL;DR: In this paper, the authors show that the relationship between payment method and target firm abnormal returns is indirect and that the size of the abnormal return is related to the relative size of this direct payment.
Abstract: Research indicates that at the time of a takeover announcement, target firm shareholders receiving cash earn larger abnormal returns than those receiving stock. Our work confirms that cash targets receive larger direct payments from bidders and that the size of target firm abnormal returns is related to the relative size of this direct payment. Once we control for the size of the payment, however, we find the target firm abnormal returns to be unrelated to the payment method. Thus the relationship between payment method and target firm abnormal returns is indirect. This finding is important because it casts doubt on the signaling (asymmetric information) hypothesis. That is, cash offers do not seem to be valued by the market as a means of reducing this uncertainty. Something else, such as the tax implication differences between cash and stock offers, drives cash target firms to demand larger payments from bidding firms.
TL;DR: The second in a series of studies investigating tax compliance costs incurred by public-listed companies as discussed by the authors found evidence of a size effect which was more pronounced when absolute measures of costs were used than when a relative measure, cost/sales turnover, was used.
Abstract: This study is the second in a series of studies investigating tax compliance costs incurred by public-listed companies. We found evidence of a size effect which is a predominant finding of similar studies. The size effect was more pronounced when absolute measures of costs were used than when a relative measure, cost/sales turnover, was used. Additional evidence was found of limited success relating to the IRAS's moves to simplify the tax system. Specifically, only large companies with sales turnover exceeding $500m benefited and considerably reduced their overall compliance costs. Most of the decrease was a result of the computational component of compliance costs. This resulted in the gap in absolute costs narrowing between Group 3 and any of the other categories of companies. There was also greater reliance on external professionals, the smaller the company. Views elicited indicate that more could be done to increase accessibility to IRAS publications for Group 1 and Group 2 companies.
TL;DR: In this article, the authors test the random walk hypothesis in the Spanish stock market using disaggregated daily data base spanning the period January 1980 to December 1992 and find that daily returns are strongly correlated and nonlinear dependent.
Abstract: In this paper we test the random walk hypothesis in the Spanish stock market using disaggregated daily data base spanning the period January 1980 to December 1992. We find that daily returns are strongly correlated and nonlinear dependent. Furthermore, using the variance-ratio test, that is robust to heteroscedasticity, the results suggest that the rejection of the random walk hypothesis cannot be attributed completely to the effects of time varying volatilities. In this sense, the price changes can be potentially predictable over, at least, short time spans.
TL;DR: In this article, the authors investigated how accounting losses affect the relationship between accounting earnings and stock returns, i.e., earnings response coefficients (ERCs), in different leverage and growth categories.
Abstract: This paper investigates how accounting losses affect the relationship between accounting earnings and stock returns, i.e. earnings response coefficients (ERCs), in different leverage and growth categories. In a sample of NYSE firms between 1975 and 1990, the exclusion of losses improves the ERCs considerably. While the impact of losses on ERCs is highest in the subgroup including high growth opportunity firms, the exclusion of losses does not improve ERCs as significantly among firms with low growth opportunities. The results further support the hypothesis that the impact of losses on ERCs is different in different financial leverage subgroups. The measured increase in ERCs is most significant among the least levered firms. The observation that the impact of losses on ERCs is related to growth opportunities and financial leverage is clearly observable also in different size categories. The effects of growth opportunities and financial leverage are also incrementally important with respect to each other. In general, the results indicate that the impact of growth opportunities and financial leverage on ERCs is clearly observable especially when losses and profits are analyzed separately.
TL;DR: In this paper, the authors investigated the effect of management resistance to a takeover bid on the overall wealth gains associated with the bid and the probability of successful bid success in the UK.
Abstract: for corporate control. It estimates the effect of bid resistance on the wealth gains of target firms and the probability of bid success for a sample of takeover bids in the UK. Our results shed light on the nature and extent of the agency problem in the modern corporation. When managers express hostility towards a takeover bid by adopting specific defence measures their action has a two-fold effect. First, they affect the overall wealth gains associated with the bid. If the bid is designed to replace inefficient management, bid resistance by incumbent managers may lower the market’s valuation of the firm. Managers, therefore, are not acting as wealth maximising agents and this is clearly to the detriment of shareholders. In the corporate control literature this is described as managerial entrenchment or the managerial welfare hypothesis. Alternatively, it could be argued that bid resistance sets in motion an auctioning process whose effect is to bid up share price whether the bid is successful or not. Managerial resistance is therefore in keeping with wealth maximising behaviour and this is to the obvious benefit of those who own the firm. In this event, active bid defence suggests managerial alignment, that is, the shareholder welfare hypothesis. The second effect of bid resistance by target managers relates to the outcomeof thebid. If resistanceis effective, theprobabilityof bidsuccess falls. Managers are therefore promoting their job security and in so doing are promoting their own self interest. Most of the empirical evidence concerning the role of takeover resistance centresonitseffectonwealthgainsinthetargetfirm.Thisworkissummarised in Table 1. Early US studies report lower abnormal returns for merger bids vetoed by target management (Dodd, 1980), for firms making various antitakeover amendments (DeAngelo and Rice, 1983), and for firms making poison pill announcements (Malatesta and Walkling, 1988; Ryngaert, 1988
TL;DR: In this article, the effects of differences in predisclosure information asymmetry on trading volume reaction during quarterly earnings announcements were investigated and it was shown that trading volume is positively related to the level of information asymmetric and to the magnitude of the price reaction to the announcements.
Abstract: This study investigates the effects of differences in predisclosure information asymmetry on trading volume reaction during quarterly earnings announcements. The analyses show that trading volume reaction to quarterly earnings announcements is positively related to the level of predisclosure information asymmetry and to the magnitude of the price reaction to the announcements. These results are consistent with Kim and Verrecchia's (1991a) theoretical trading volume proposition, and with Atiase and Bamber's (1994) tests of the proposition based on annual earnings announcements. This study also provides evidence on the relation of predisclosure information asymmetry and trading volume before and after quarterly earnings announcements.
TL;DR: In this article, the authors evaluate the performance of glamour and value strategies and test the extrapolation model for the Japanese equity market and find that value stocks outperform glamour stocks by between 6 and 12 percent per annum for the five years after portfolio formation.
Abstract: This paper evaluates the performance of glamour and value strategies and tests the extrapolation model for the Japanese equity market. In general, value stocks outperform glamour stocks by between 6 and 12 percent per annum for the five years after portfolio formation. Evidence from past, future and expected growth provides strong support for the story developed in Lakonishok, Shleifer and Vishny (1994). It is difficult to attribute the value premia to the difference, if any, in risk factors. In addition, the book-to-market premium is much closer to an arbitrage opportunity than the size premium.
TL;DR: In this article, the authors study value strategies for four European countries (France, Germany, Netherlands and the United Kingdom) and find an outperformance for all four value variables which are investigated: the earnings-to-price (E/P) ratio, the cash-flow-toprice (CF/P), the book-tomarket (B/M) ratio and the dividend yield.
Abstract: In this paper we study value strategies for four European countries (France, Germany, the Netherlands and the United Kingdom).We find an outperformance for all four value variables which are investigated: the earnings-to-price (E/P) ratio, the cash-flow-to-price (CF/P) ratio, the book-to-market (B/M) ratio and the dividend yield.This outperformance is especially remarkable for the CF/P ratio, which amounts to 20.8% between the top and bottom quintiles in an univariate model.In a regression analysis, in which all four value variables as well as a correction for the size effect are taken into account, we find a difference of 11.8% for the CF/P ratio.We demonstrate that this result can not be explained by risk differences alone.Our findings confirm the outperformance of value strategies as found earlier by Chan, Hamao and Lakonishok (1991) and Lakonishok, Shleifer and Vishny (1994) for Japan and the United States respectively.