scispace - formally typeset
Search or ask a question

Showing papers on "Stock exchange published in 2002"


Journal ArticleDOI
TL;DR: In this article, the authors find that firms with greater experience and those that create a dedicated alliance function (with the intent of strategically coordinating alliance activity and capturing/disseminating alliance-related knowledge) realize greater success with alliances.
Abstract: This paper addresses two key questions: (1) what factors influence firms' ability to build alliance capability and enjoy greater alliance success, where firm-level alliance success is measured in two ways: (a) abnormal stock market gains following alliance announcements and (b) managerial assessments of long term alliance performance; and (2) are the two alternate ways of assessing alliance success correlated? We find that firms with greater alliance experience and, more importantly, those that create a dedicated alliance function (with the intent of strategically coordinating alliance activity and capturing/disseminating alliance-related knowledge) realize greater success with alliances. More specifically, firms with a dedicated alliance function achieve greater abnormal stock market gains (average of 1.35%) and report that 63 percent of alliances are successful whereas firms without an alliance function achieve much lower stock market gains (average of 0.18%) and only a 50 percent long-term success rate. We also find a positive correlation between stock market-based measures of alliance success and alliance success measured through managerial assessments. In addition to providing insights into the development of alliance capability among firms, this paper is one of the first to provide empirical support for the efficient markets argument by demonstrating that the initial stock market response to a key event positively correlates to the long-term performance and value of the event. Copyright © 2002 John Wiley & Sons, Ltd.

1,781 citations


Journal ArticleDOI
TL;DR: In this paper, the authors analyze the characteristics and post-listing performance of companies that cross-list in the U.S. and Europe, and find that companies that do so tend to be large and recently privatized firms and expand their foreign sales after listing abroad.
Abstract: This paper documents aggregate trends in the foreign listings of companies, and analyzes their distinctive prelisting characteristics and postlisting performance. In 1986‐1997, many European companies listed abroad, mainly on U.S. exchanges, while the number of U.S. companies listed in Europe decreased. European companies that cross-list tend to be large and recently privatized firms, and expand their foreign sales after listing abroad. They differ sharply depending on where they cross-list: The U.S. exchanges attract high-tech and export-oriented companies that expand rapidly without significant leveraging. Companies cross-listing within Europe do not grow unusually fast, and increase their leverage after cross-listing. FOREIGN LISTINGS ARE BECOMING an increasingly important strategic issue for companies and stock exchanges alike. As companies become global in their product market and investment strategies, direct access to foreign capital markets via an equity listing can yield important benefits. At the same time, the international integration of capital markets has led to unprecedented levels of competition among stock exchanges. In this competitive struggle, the winners are the exchanges that manage to attract more foreign listings and the attendant trading volume and business opportunities. Despite the importance of these issues, still little is known about which exchanges succeed in capturing more listings from abroad and why. This question is intimately related to a second issue, namely which advantages companies expect to get from a foreign listing: securing cheap equity capital for new investment, allowing controlling shareholders to divest on a liquid market, preparing for foreign acquisitions, or simply enhancing the compa

883 citations


Journal ArticleDOI
TL;DR: This paper investigated the impact of stock markets and banks on economic growth using a panel data set for the period 1976-98 and applying recent GMM techniques developed for dynamic panels and found that stock markets positively influence economic growth and these findings are not due to potential biases induced by simultaneity, omitted variables or unobserved country-specific effects.
Abstract: This paper investigates the impact of stock markets and banks on economic growth using a panel data set for the period 1976-98 and applying recent GMM techniques developed for dynamic panels. On balance, we find that stock markets and banks positively influence economic growth and these findings are not due to potential biases induced by simultaneity, omitted variables or unobserved country-specific effects.

764 citations


Journal ArticleDOI
TL;DR: In this paper, the authors focus on the aggregate daily order imbalance on the New York Stock Exchange and find that market returns are strongly affected by contemporaneous and lagged order imbalances.

723 citations


Journal ArticleDOI
TL;DR: In this article, the authors investigate whether firms' access to external financing, to fund growth differs between market-based, and bank-based financial systems, using firm-level data for forty countries, and compute the proportion of firms in each country that relies on external finance, and examine how that proportion differs across financial systems.

658 citations


Journal ArticleDOI
TL;DR: In this paper, the authors use estimates of the Black-Scholes sensitivity of managers' stock option portfolios to stock return volatility and the sensitivity of stock option portfolio to stock price to test the relationship between managers' risk preferences and hedging activities.
Abstract: We use estimates of the Black-Scholes sensitivity of managers' stock option portfolios to stock return volatility and the sensitivity of managers' stock and stock option portfolios to stock price to test the relationship between managers' risk preferences and hedging activities. We find that as the sensitivity of managers' stock and stock option portfolios to stock price increases, firms tend to hedge more. However, as the sensitivity of managers' stock option portfolios to stock return volatility increases, firms tend to hedge less. ONE OF THE AGENCY COSTS associated with the corporate form of ownership comes from the risk aversion of the firm's managers. The typical corporate manager has a significant portion of his or her wealth invested in the corporation, both through portfolio holdings and the value of firm-specific human capital. As a result, managers have an incentive to reduce firm risk more than may be desirable from the perspective of an unaffiliated, diversified shareholder. One way to mitigate managerial risk aversion is to provide the manager with contracts that have a payoff structure that is a convex function of the firm's stock price (Smith and Stulz (1985)). Guay (1999) finds that stock options are an important way in which convexity is added to managers' portfolios. However, as recognized by Carpenter (2000) and Lambert, Larcker, and Verrecchia (1991), stock options create two opposing effects on managerial incentives. The first effect is sensitivity to stock return volatility. Due to the convex payoff structure of options, the value of a manager's stock option portfolio increases with the volatility of the firm's stock returns. This sensitivity to stock return volatility should, ceteris paribus, give the manager an incentive to take more risk. The second effect is sensitivity to stock price. This effect comes from the direct link between the payoff of an option and

422 citations


Journal ArticleDOI
TL;DR: This article showed that international firms listing their shares on the New York Stock Exchange or the London Stock Exchange (LSE) experience a significant increase in visibility, as proxied by analyst coverage and print media attention (The Wall Street Journal or Financial Times).
Abstract: This study shows that international firms listing their shares on the New York Stock Exchange (NYSE) or the London Stock Exchange (LSE) experience a significant increase in visibility, as proxied by analyst coverage and print media attention (The Wall Street Journal or Financial Times) The increase in analyst following is also associated with a decrease in the cost of equity capital after the listing event in a way consistent with Merton's (1987) investor recognition hypothesis Our results are stronger for NYSE listing firms than for LSE listing firms This may partially compensate firms for the higher costs associated with NYSE listing (compared to LSE listing)

408 citations


Journal ArticleDOI
TL;DR: In this article, the role of select macroeconomic variables, i.e., GNP, the consumer price index, the money supply, the interest rate, and the exchange rate on stock prices in five ASEAN countries (Indonesia, Malaysia, Philippines, Singapore, and Thailand) was investigated.

397 citations


Journal ArticleDOI
TL;DR: This paper examined the relationship between stock market trading volume and returns for both domestic and cross-country markets by using the daily data of the three largest stock markets: New York, Tokyo, and London.
Abstract: This paper examines the dynamic relations – causal relations and the sign and magnitude of dynamic effects – between stock market trading volume and returns (and volatility) for both domestic and cross-country markets by using the daily data of the three largest stock markets: New York, Tokyo, and London. Major findings are as follows: First, trading volume does not Granger-cause stock market returns on each of three stock markets. Second, there exists a positive feedback relationship between trading volume and return volatility in all three markets. Third, regarding the cross-country relationships, US financial market variables, in particular US trading volume, contains an extensive predictive power for UK and Japanese financial market variables. Fourth, sub-sample analyses show evidence of stronger spillover effects after the 1987 market crash and an increased importance of trading volume as an information variable after the introduction of options in the US and Japan.

376 citations


ReportDOI
TL;DR: In this article, the authors used micro data on income and asset holdings from the Panel Study of Income Dynamics and other US household level data sets to analyze reasons for nonparticipation in the stock market and for heterogeneity in portfolio choice within the set of stock market participants.
Abstract: The paper uses micro data on income and asset holdings from the Panel Study of Income Dynamics and other US household level data sets to analyze reasons for nonparticipation in the stock market and for heterogeneity in portfolio choice within the set of stock market participants. I find evidence of a positive effect of mean nonfinancial income on the probability of stock market participation and on the proportion of wealth invested in stocks conditional on being a participant. The volatility of nonfinancial income is found to have a negative impact on these two quantities. However, there is no evidence of an effect of the correlation of nonfinancial income with the stock market return on portfolio choice. Three different costs of stock market participation are considered, a fixed transactions cost, a proportional transactions cost, and a per period participation cost. I find evidence of structural state dependence in the stock market participation decision supporting the importance of fixed transactions costs. This is supported by findings of higher trading frequencies for high wealth households. Based on a simple model of the benefits of stock market participation I estimate that a per period stock market participation cost of just 50 dollars is sufficient to explain the choices of half of stock market nonparticipants.

366 citations


ReportDOI
TL;DR: The authors examines fifteen historical episodes of stock market crashes and their aftermath in the United States over the last one hundred years and concludes that financial instability is the key problem facing monetary policy makers and not stock market crash, even if they reflect the possible bursting of a bubble.
Abstract: This paper examines fifteen historical episodes of stock market crashes and their aftermath in the United States over the last one hundred years. Our basic conclusion from studying these episodes is that financial instability is the key problem facing monetary policy makers and not stock market crashes, even if they reflect the possible bursting of a bubble. With a focus on financial stability rather than the stock market, the response of central banks to stock market fluctuations is more likely to be optimal and maintain support for the independence of the central bank.

Posted Content
TL;DR: In this paper, the authors studied the relationship between stock market developments and consumer confidence in eleven European countries over the years 1986-2001 and found that stock returns and changes in sentiment are positively correlated for nine countries, with Germany as the main exception.
Abstract: This paper studies the (short-run) relationship between stock market developments and consumer confidence in eleven European countries over the years 1986-2001. We find that stock returns and changes in sentiment are positively correlated for nine countries, with Germany as the main exception. Moreover, stock returns generally Granger-cause consumer confidence at very short horizons (two weeks to one month), but not vice versa. The stock market-confidence relationship is driven by expectations about economy-wide conditions rather than personal finances. This suggests that the confidence channel is not part of the conventional wealth effect, but a separate transmission channel.

Posted Content
TL;DR: Li et al. as mentioned in this paper examined the impact of international capital market pressures on the voluntary disclosure of three types of information (strategic, financial, and non-financial) in the annual reports of former wholly state-owned enterprises, listed on the Stock Exchange of Hong Kong (SEHK).
Abstract: This study examines the impact of international capital market pressures on the voluntary disclosure of three types of information (strategic, financial, and non-financial) in the annual reports of former wholly state-owned People's Republic of China (PRC) enterprises, listed on the Stock Exchange of Hong Kong (SEHK). Consistent with a cost-benefit framework, we find that PRC H-Share firms disclose significantly more strategic and financial information than other SEHK firms. Additional analysis of disclosures in their home listings on the PRC exchanges, however, suggests an alternative explanation. The fact that these firms have been selected for "showcasing" in international capital markets may also play a role in our findings. While H-Share firm disclosures in the PRC also appear sensitive to management's assessment of the associated costs, the magnitude of differences across listing locations suggests that disclosure practices on the SEHK may also reflect the effects of state-encouraged disclosure policies. Our findings contribute to the understanding of disclosure behavior among former wholly state-owned enterprises and to the emerging literature on the efficacy of the privatization process.

Journal ArticleDOI
TL;DR: In this article, the authors provide empirical evidence on the economic benefits of negotiating trades in the upstairs trading room of brokerage firms relative to the downstairs market, and they find that upstairs trades tend to have lower information content and lower price impacts than downstairs trades.
Abstract: We provide empirical evidence on the economic benefits of negotiating trades in the upstairs trading room of brokerage firms relative to the downstairs market. Using Helsinki Stock Exchange data, we find that upstairs trades tend to have lower information content and lower price impacts than downstairs trades. This is consistent with the hypotheses that the upstairs market is better at pricing uninformed liquidity trades and that upstairs brokers can give better prices to their customers if they know the unexpressed demands of other customers. We find that these economic benefits depend on price discovery occurring in the downstairs market. Copyright 2002, Oxford University Press.

Journal ArticleDOI
TL;DR: In this paper, the authors empirically estimate cross-section and time-series models to determine the fundamental factors that influence the correlation and evolvement of the correlation between emerging stock markets, which can provide a better grasp of the functioning of global stock markets and allow investors and policy-makers to ask additional questions such as: would an increase in bilateral trade between two countries, for example due to a new trade agreement, change the interdependence of their stock markets?

Journal ArticleDOI
TL;DR: Li et al. as mentioned in this paper examined the impact of international capital market pressures on the voluntary disclosure of three types of information (strategic, financial, and non-financial) in the annual reports of former wholly state-owned People's Republic of China (PRC) enterprises, listed on the Stock Exchange of Hong Kong (SEHK).
Abstract: This study examines the impact of international capital market pressures on the voluntary disclosure of three types of information (strategic, financial, and non-financial) in the annual reports of former wholly state-owned People’s Republic of China (PRC) enterprises, listed on the Stock Exchange of Hong Kong (SEHK). Consistent with a cost­benefit framework, we find that PRC H-Share firms disclose significantly more strategic and financial information than other SEHK firms. Additional analysis of disclosures in their home listings on the PRC exchanges, however, suggests an alternative explanation. The fact that these firms have been selected for “showcasing” in international capital markets may also play a role in our findings. While H-Share firm disclosures in the PRC also appear sensitive to management’s assessment of the associated costs, the magnitude of differences across listing locations suggests that disclosure practices on the SEHK may also reflect the effects of state-encouraged disclosure policies. Our findings contribute to the understanding of disclosure behavior among former wholly state-owned enterprises and to the emerging literature on the efficacy of the privatization process.

Journal ArticleDOI
TL;DR: In this paper, the issue of whether stock prices and exchange rates are related or not has received considerable attention after the East Asian crisis, during which the countries affected saw turmoil in both currency and stock markets.
Abstract: I. INTRODUCTION The issue of whether stock prices and exchange rates are related or not has received considerable attention after the East Asian crisis. During the crisis the countries affected saw turmoil in both currency and stock markets. If stock prices and exchange rates are related and the causation runs from exchange rates to stock prices, then the crisis in the stock markets can be prevented by controlling the exchange rates. Moreover, developing countries can exploit such a link to attract/stimulate foreign portfolio investment in their own countries. Similarly, if the causation runs from stock prices to exchange rates then authorities can focus on domestic economic policies to stabilise the stock market. If the two markets/prices are related then investors can use this information to predict the behaviour of one market using the information on other market.

Journal ArticleDOI
TL;DR: The authors examined systematic liquidity in an order-driven market structure using data from the Stock Exchange of Hong Kong and found that commonality in liquidity includes both market and industry components, and is pervasive across size-sorted portfolios.
Abstract: Events such as the 1997 East Asian financial crisis indicate that individual firm liquidity is strongly influenced by marketwide factors Previous market microstructure research, however, focuses almost exclusively on the firm-specific attributes of liquidity Our study follows the recent shift in emphasis toward commonality by examining systematic liquidity in an order-driven market structure Using data from the Stock Exchange of Hong Kong, we show that commonality in liquidity includes both market and industry components, and is pervasive across size-sorted portfolios We also find a significant market and industry component in individual firms' order flow In contrast to quote-driven results, we do not find a positive relation between firm size and sensitivity to changes in marketwide bid-ask spreads

Journal ArticleDOI
TL;DR: In this paper, the authors investigated the short-run and long-run relationships among stock indices of the US, Europe, Asia, Latin America, and Eastern Europe-Middle East for the pre-Asian crisis and for the crisis period.

Journal ArticleDOI
TL;DR: In this paper, the authors report on the comprehensiveness of voluntary corporate governance disclosures in the annual reports and management information circulars of Toronto Stock Exchange (TSE) firms and assess the influence of publicized corporate governance failures on disclosure, concluding that the choices of disclosure medium and the extent of disclosure are made concurrently, and are influenced by the strategic considerations of management.
Abstract: We report on the comprehensiveness of voluntary corporate governance disclosures in the annual reports and management information circulars of Toronto Stock Exchange (TSE) firms. We focus on disclosure of the corporate governance practices implemented by our sample of TSE 300 firms vis-a-vis the 14 guidelines set out in the TSE's report on corporate governance Where Were the Directors? Our analysis indicates that only a very few firms disclose that they have fully implemented the TSE guidelines, and that the extent of disclosure of corporate governance practices implemented varies widely among the firms. We then test factors associated with the comprehensiveness of such disclosures and the choice of disclosure medium using simultaneous equations multivariate analysis. We also assess the influence of publicized corporate governance failures on disclosure. Overall, our results suggest that the choices of disclosure medium and the extent of disclosure are made concurrently, and are influenced by the strategic considerations of management.

Journal Article
TL;DR: In this article, the authors studied the use of the Internet by Spanish companies to disclose financial information, and discussed about the reasons of companies to use the new technologies to communicate with interested parties and its consequences.
Abstract: During the last decade there has been a profound revolution in the information technology by means of the Internet, and obviously accounting has been directly affected by this change. Although the main objective of this paper is to study the use of the Internet by Spanish companies to disclose financial information, we also discuss about the reasons of companies to use the new technologies to communicate with interested parties and its consequences. The empirical research is based on companies listed on the Madrid stock exchange , we analyse not only the information provided, but also the factors that explain the different attitudes of companies towards this vehicle for investors relationships. The results show that size is the main factor that explains not only the quantity but also the quality of financial information.


Posted Content
TL;DR: This article examined patterns in abnormal returns in the days around these trades on the London Stock Exchange and found that medium-sized trades are more informative for short-term returns than large ones, consistent with Barclay and Warner's (1993) stealth trading hypothesis whereby informed traders avoid trading in blocks.
Abstract: Previous work examined the long-run profitability of strategies mimicking the trades company directors in the shares of their own company, as a way of testing for market efficiency. The current paper examines patterns in abnormal returns in the days around these trades on the London Stock Exchange. We find movements in returns that are consistent with directors engaging in short-term market timing. We also report that some types of trades have superior predictive content over future returns. In particular, medium-sized trades are more informative for short-term returns than large ones, consistent with Barclay and Warner's (1993) "stealth trading" hypothesis whereby informed traders avoid trading in blocks. Another contribution of this study is to properly adjust the abnormal return estimates for microstructure (spread) transactions costs using daily bid-ask spread data. On a net basis, we find that abnormal returns all but disappear.


Journal ArticleDOI
TL;DR: This article examined whether the shift in aggregate foreign portfolio investment activity in Japan exacerbated the effect of the crisis on markets, or whether it simply reflected positive-feedback trading behavior, and found evidence of consistent positive feedback trading before, during and after the Asian crisis among foreign investors, while Japanese banks, financial institutions, investment trusts and companies themselves were aggressive contrarian investors.
Abstract: Foreigners became net sellers of Japanese equities during the Asian financial crisis in 1997. In this study, I examine whether this shift in aggregate foreign portfolio investment activity in Japan exacerbated the effect of the crisis on markets, or whether it simply reflected positive-feedback trading behavior. The data draws from weekly reports to the Tokyo Stock Exchange (TSE) of aggregate purchases and sales of Japanese equities by foreigners and local institutional and individual investors. I find evidence of consistent positive-feedback trading before, during and after the Asian crisis among foreign investors, while Japanese banks, financial institutions, investment trusts and companies themselves were aggressive contrarian investors. There is no evidence that this trading activity by foreigners destabilized the markets during the crisis.

Journal ArticleDOI
TL;DR: In this paper, the authors identify the macroeconomic factors that influence Italian equity returns and test the stability of their relation with securities returns, and find that the relation between stock returns and macro economic factors is unstable: not only are the factor loadings of individual securities virtually uncorrelated over time, but a high percentage of the shares experience a reversal of the sign of the estimated loadings.
Abstract: This paper identifies the macroeconomic factors that influence Italian equity returns and tests the stability of their relation with securities returns. The relation between stock returns and the macroeconomic factors is found to be unstable: Not only are the factor loadings of individual securities virtually uncorrelated over time, but a high percentage of the shares experience a reversal of the sign of the estimated loadings. This result is not confined to single periods or to a small group of shares, but holds in different sub-periods and for securities in all risk classes. These findings suggest that research should carefully investigate the specification of the return generating process and the stability of the risk measures.

Journal ArticleDOI
TL;DR: The authors examined patterns in abnormal returns in the days around these trades on the London Stock Exchange and found that medium-sized trades are more informative for short-term returns than large ones, consistent with Barclay and Warner's (1993) stealth trading hypothesis whereby informed traders avoid trading in blocks.
Abstract: Previous work examined the long-run profitability of strategies mimicking the trades company directors in the shares of their own company, as a way of testing for market efficiency. The current paper examines patterns in abnormal returns in the days around these trades on the London Stock Exchange. We find movements in returns that are consistent with directors engaging in short-term market timing. We also report that some types of trades have superior predictive content over future returns. In particular, medium-sized trades are more informative for short-term returns than large ones, consistent with Barclay and Warner’s (1993) ‘stealth trading’ hypothesis whereby informed traders avoid trading in blocks. Another contribution of this study is to properly adjust the abnormal return estimates for microstructure (spread) transactions costs using daily bid-ask spread data. On a net basis, we find that abnormal returns all but disappear.

Journal ArticleDOI
TL;DR: In this paper, the authors used recent data from the eight largest African stock markets to test whether these markets meet the criterion of weak-form stock market efficiency with returns characterised by a random walk.
Abstract: The development of financial institutions has been viewed in recent years as critical to the economic development process. This research uses recent data from the eight largest African stock markets to test whether these markets meet the criterion of weak-form stock market efficiency with returns characterised by a random walk. Results are then compared with similar tests on emerging stock markets in South-east Asia and Latin America. Conclusions from the research indicate that test results for weak-form efficiency in the emerging African stock markets compare favourably with those performed on other emerging stock markets.

Journal ArticleDOI
TL;DR: In this article, the authors analyzed the effect of the introduction of stock index futures on the volatility of the Italian Stock Exchange and found that the impact of futures onset on the underlying market volatility is likely to be immediate.
Abstract: The impact of futures trading on the underlying asset volatility, and its characteristics, is still debated both in the economic literature and among practitioners. The aim of this study is to analyse the effect of the introduction of stock index futures on the volatility of the Italian Stock Exchange. This study mainly addresses two issues: first, the study analyses whether the reduction of stock market volatility showed in the post-futures period, already pointed out in previous research, is effectively due to the introduction of futures contract. Second, whether the ‘futures effect’, if confirmed, is immediate or delayed with respect to the moment of the futures trading onset is tested. The results show that the introduction of stock index futures per se has led to diminished stock market volatility and no other contingent cause seems to have systematically reduced it. Further, they also suggest that the impact of futures onset on the underlying market volatility is likely to be immediate. These findin...

Journal ArticleDOI
TL;DR: In this paper, seasonal effects are tested for in stock returns, the January effect anomaly and the tax-loss selling hypothesis using monthly stock returns in eighteen emerging stock markets for the period 1987-1995.
Abstract: Seasonal effects are tested for in stock returns, the January effect anomaly and the tax-loss selling hypothesis using monthly stock returns in eighteen emerging stock markets for the period 1987–1995. Even though considerable evidence for seasonal effects applies in several countries, very little evidence is found in favour of the January effect and the tax-loss selling hypothesis. These results provide some support to the informational efficiency aspect of the market efficiency hypothesis.