Showing papers on "Stock exchange published in 2008"
TL;DR: In this paper, the interactive relationship between oil price shocks and Chinese stock market using multivariate vector auto-regression was investigated, and it was shown that oil price volatility may increase the speculations in mining index and petrochemicals index, which raise their stock returns.
601 citations
TL;DR: In this paper, the authors investigate whether companies listed on the Jakarta Stock Exchange conduct efficient or opportunistic earnings management and examine the effect of ownership structure, firm size, and corporate-governance practices on it.
421 citations
TL;DR: In this article, the role of corporate governance indices on firm performance was investigated using data from companies listed in the Tehran Stock Exchange (TSE) for the years 2005-2006.
405 citations
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TL;DR: In this article, a large-scale econometric analysis of product innovation and associated marketing mix in the automobile industry was conducted to examine how product innovations and marketing investments for such product innovations lift stock returns by improving the outlook on future cash flows.
Abstract: Under increased scrutiny from top management and shareholders, marketing managers feel the need to measure and communicate the impact of their actions on shareholder returns. In particular, how do customer value creation (through product innovation) and customer value communication (through marketing investments) affect stock returns? This paper examines conceptually and empirically how product innovations and marketing investments for such product innovations lift stock returns by improving the outlook on future cash flows. We address these questions with a large-scale econometric analysis of product innovation and associated marketing mix in the automobile industry. First, we find that adding such marketing actions to the established finance benchmark model greatly improves the explained variance in stock returns. In particular, investors react favorably to companies that launch pioneering innovations, with higher perceived quality, backed by substantial advertising support, in large and growing categories. Finally, we quantify and compare the stock return benefits of several managerial control variables.Our results highlight the stock market benefits of pioneering innovations. Compared to minor updates, pioneering innovations obtain a seven times higher impact on stock returns, and their advertising support is nine times more effective as well. Perceived quality of the new-car introduction improves the firm's stock returns while customer liking does not have a statistically significant effect. Promotional incentives have a negative effect on stock returns, suggesting that price promotions may be interpreted as a signal of demand weakness. Managers may combine these return estimates with internal data on project costs to help decide the appropriate mix of product innovation and marketing investment.
324 citations
TL;DR: The fuzzy rule based model has successfully forecasted the price variation for stocks from different sectors with accuracy close to 97.6% in TSE index and 98.08% in MediaTek.
Abstract: In this paper, a Takagi-Sugeno-Kang (TSK) type Fuzzy Rule Based System is developed for stock price prediction. The TSK fuzzy model applies the technical index as the input variables and the consequent part is a linear combination of the input variables. The fuzzy rule based model is tested on the Taiwan Electronic Shares from the Taiwan Stock Exchange (TSE). Through the intensive experimental tests, the model has successfully forecasted the price variation for stocks from different sectors with accuracy close to 97.6% in TSE index and 98.08% in MediaTek. The results are very encouraging and can be implemented in a real-time trading system for stock price prediction during the trading period.
305 citations
TL;DR: This article found that the new board requirements affected CEO compensation decisions, and that the decrease in compensation was particularly pronounced in the subset of affected firms with no outside blockholder on the board and in affected firms having low concentration of institutional investors.
Abstract: In response to corporate scandals in 2001 and 2002, major U.S. stock exchanges issued new board requirements to enhance board oversight. We find a significant decrease in CEO compensation for firms that were more affected by these requirements, compared with firms that were less affected, taking into account unobservable firm effects, time-varying industry effects, size, and performance. The decrease in compensation is particularly pronounced in the subset of affected firms with no outside blockholder on the board and in affected firms with low concentration of institutional investors. Our results suggest that the new board requirements affected CEO compensation decisions.
290 citations
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TL;DR: In this paper, the authors examined the institutional and macroeconomic determinants of stock market development using a panel data of 42 emerging economies for the period 1990 to 2004 and found that macroeconomic factors such as income level, gross domestic investment, banking sector development, private capital flows, and stock market liquidity are important determinants for stock market in emerging market countries.
Abstract: This paper examines the institutional and macroeconomic determinants of stock market development using a panel data of 42 emerging economies for the period 1990 to 2004. The paper finds that macroeconomic factors such as income level, gross domestic investment, banking sector development, private capital flows, and stock market liquidity are important determinants of stock market development in emerging market countries. The results also show that political risk, law and order, and bureaucratic quality are important determinants of stock market development because they enhance the viability of external finance. This result suggests that the resolution of political risk can be an important factor in the development of emerging stock markets. The analysis also shows the factors identified above as determining stock market development in emerging economies can also explain the development of the stock market in South Africa.
266 citations
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TL;DR: In this paper, the authors examine the economic impact of the Sarbanes-Oxley Act (SOX) by analyzing foreign listing behavior onto U.S. and U.K stock exchanges before and after the enactment of the Act in 2002.
Abstract: In this paper, we examine the economic impact of the Sarbanes-Oxley Act (SOX) by analyzing foreign listing behavior onto U.S. and U.K. stock exchanges before and after the enactment of the Act in 2002. Using a sample of all listing events onto U.S. and U.K. exchanges from 1995-2006, we develop an exchange choice model that captures firm-level, industry-level, exchange-level and country-level listing incentives, and test whether these listing preferences changed following the enactment of the Act. After controlling for firm characteristics and other economic determinants of these firms' exchange choice, we find that the listing preferences of large foreign firms choosing between U.S. exchanges and the LSE's Main Market did not change following the enactment of Sarbanes-Oxley. In contrast, we find that the likelihood of a U.S. listing among small foreign firms choosing between the Nasdaq and LSE's Alternative Investment Market decreased following the enactment of Sarbanes-Oxley. The negative effect among small firms is consistent with these marginal companies being less able to absorb the incremental costs associated with SOX compliance. The screening of smaller firms with weaker governance attributes from U.S. exchanges is consistent with the heightened governance costs imposed by the Act increasing the bonding-related benefits of a U.S. listing.
248 citations
TL;DR: In this paper, the authors investigate the effects of terrorism on the financial markets and show that terrorism has a significant impact on both stock markets and the stock market volatility, and the magnitude of these effects are larger in emerging markets.
242 citations
TL;DR: In this article, the authors developed a behavioral model for liquidity and volatility based on empirical regularities in trading order flow in the London Stock Exchange, which can be viewed as a very simple agent-based model in which all components of the model are validated against real data.
235 citations
TL;DR: This paper examined cyclical variation in the effect of Fed policy on the stock market and found a much stronger response of stock returns to unexpected changes in the Federal funds target rate in recession and in tight credit market conditions using firm-level data.
Abstract: This paper examines cyclical variation in the effect of Fed policy on the stock market We find a much stronger response of stock returns to unexpected changes in the Federal funds target rate in recession and in tight credit market conditions Using firm-level data, we also show that firms that face financial constraints are more affected by monetary shocks in tight credit conditions than the relatively unconstrained firms Overall, the results are consistent with the credit channel of monetary policy transmission
TL;DR: In this paper, the authors study changes in liquidity following the introduction of a new electronic limit order market when trading is centralized in a single-limit order market and also study how automation of routing decisions and trading fees affect the relative liquidity of rival markets.
Abstract: We study changes in liquidity following the introduction of a new electronic limit order market when, prior to its introduction, trading is centralized in a single limit order market. We also study how automation of routing decisions and trading fees affect the relative liquidity of rival markets. The theoretical analysis yields three main predictions: (i) consolidated depth is larger in the multiple limit order markets environment, (ii) consolidated bid-ask spread is smaller in the multiple limit order markets environment and (iii) the liquidity of the entrant market relative to that of the incumbent market increases with the level of automation for routing decisions (the proportion of "smart routers"). We test these predictions by studying the rivalry between the London Stock Exchange (entrant) and Euronext (incumbent) in the Dutch stock market. The main predictions of the model are supported.
TL;DR: Wang et al. as discussed by the authors found that ownership concentration had a U-shaped relationship with board compensation, board size and the presence of independent directors, and corroborating evidence that principal-principal conflict can lead to high agency costs.
Abstract: By examining the level of ownership concentration across firms, we determine how principal-principal conflict, defined as the incongruence of ownership goals among shareholder groups in a corporation, impacts agency costs of Chinese boards of directors. Based on data from Chinese companies listed on the Shanghai and Shenzhen stock exchanges during 1999-2003, we found that ownership concentration had a U-shaped relationship with board compensation, board size and the presence of independent directors. These results provide corroborating evidence that principal-principal conflict can lead to high agency costs.
TL;DR: In this article, the authors examine the key factors that affect the timeliness of corporate internet reporting (CIR) by the Egyptian listed corporations on the Cairo and Alexandria stock exchange.
Abstract: Purpose – This study seeks to examine the key factors that affect the timeliness of corporate internet reporting (CIR) by the Egyptian listed corporations on the Cairo and Alexandria Stock Exchange.Design/methodology/approach – The authors use firm characteristics and corporate governance variables to investigate the influence on the timeliness of CIR. They also develop a disclosure index to measure the timeliness of CIR for the listed Egyptian corporations.Findings – The primary analysis finds a significant relationship between the timeliness of CIR and firm size, type of industry, liquidity, ownership structure, board composition and board size. The results indicate that firms typically in the service sector, that are large and have a high rate of liquidity, a high proportion of independent directors, a large number of board directors and a high free float disclose more timely information on their web sites. Furthermore, a significant association between the entire independent variables and some items o...
TL;DR: In this paper, the authors investigated the role of behavioural finance and investor psychology in investment decision-making at the Nairobi Stock Exchange with special reference to institutional investors and found that behavioural factors such as representativeness, overconfidence, anchoring, gambler's fallacy, availability bias, loss aversion, regret aversion and mental accounting affected the decisions of the institutional investors operating at NSE.
Abstract: This study investigated the role of behavioural finance and investor psychology in investment decision-making at the Nairobi Stock Exchange with special reference to institutional investors. Using a sample of 23 institutional investors, the study established that behavioural factors such as representativeness, overconfidence, anchoring, gambler's fallacy, availability bias, loss aversion, regret aversion and mental accounting affected the decisions of the institutional investors operating at the NSE. Moreover, these investors made reference to the trading activity of the other institutional investors and often exhibited an institutional-herding behaviour in their investment decision-making.
TL;DR: In this article, an investigation of the valuation and agency consequences of corporate governance policy was conducted by examining variation in voluntary adoption by Australian listed firms, during the period from 1992 to 2002, of Corporate governance frameworks representative of the governance code of practice introduced by the Australian Stock Exchange in 2003.
Abstract: This paper provides an investigation of the valuation and agency consequences of corporate governance policy. This is achieved by examining variation in voluntary adoption by Australian listed firms, during the period from 1992 to 2002, of corporate governance frameworks representative of the governance code of practice introduced by the Australian Stock Exchange in 2003. The findings indicate benefits for firms from overall corporate governance structuring, but not in isolation, in line with the requirements now in place, and a significant role played by institutional and external shareholders as alternative agency mechanisms. Corporate governance structure is found to be important, however, the likely impact of disclosure of governance practice or compliance on valuation is less clear.
TL;DR: In this paper, the authors examine the economic impact of the Sarbanes-Oxley Act (SOX) by analyzing foreign listing behavior onto U.S. and U.K stock exchanges before and after the enactment of SOX in 2002.
Abstract: In this paper, we examine the economic impact of the Sarbanes-Oxley Act (SOX) by analyzing foreign listing behavior onto U.S. and U.K. stock exchanges before and after the enactment of SOX in 2002. Using a sample of all listing events onto U.S. and U.K. exchanges from 1995–2006, we develop an exchange choice model that captures firm-level, industry-level, exchange-level, and country-level listing incentives, and test whether these listing preferences changed following the enactment of SOX. After controlling for firm characteristics and other economic determinants of these firms' exchange choice, we find that the listing preferences of large foreign firms choosing between U.S. exchanges and the London Stock Exchange's (LSE) Main Market did not change following the enactment of SOX. In contrast, we find that the likelihood of a U.S. listing among small foreign firms choosing between the NASDAQ and LSE's Alternative Investment Market decreased following the enactment of SOX. The negative effect among small firms is consistent with these marginal companies being less able to absorb the incremental costs associated with SOX compliance. The screening of smaller firms with weaker governance attributes from U.S. exchanges is consistent with the heightened governance costs imposed by SOX increasing the bonding-related benefits of a U.S. listing.
TL;DR: In this article, the authors examined the causal relation between ownership concentration and corporate performance by employing Granger causality tests in panel data models and considering investment and leverage as transmission mechanisms within a simultaneous equation system.
Abstract: Manuscript Type: Empirical
Research Question/Issue: This study examines the causal relation between ownership concentration and corporate performance by employing Granger causality tests in panel data models and considering investment and leverage as transmission mechanisms within a simultaneous equation system.
Research Findings/Results: Using a panel of manufacturing firms listed on the first section of the Tokyo Stock Exchange from 1980 through 2005, we find that ownership concentration has a significant effect on contemporary and subsequent corporate performance. Specifically, a U-shaped relation of concentration to performance is consistent with the expropriation effect and monitoring effect of large shareholders. However, the study fails to find that changes in performance are accompanied by changes in ownership concentration due to the relatively illiquid securities market and stable shareholding arrangement in Japan.
Theoretical Implications: Extending previous literature, the study sheds light on the endogenous and dynamic nature of the ownership–performance relationship. As exemplified by Japan, the results provide a general understanding for economies with concentrated ownership and further evidence of the international diversity of corporate governance.
Practitioner Implications: The study recommends that policy makers and managers increase their awareness of the importance of ownership structure to generate better corporate governance, introduce diversified ownership structure to enhance performance, and adopt market-oriented reform measures to improve the liquidity and efficiency of the stock market.
TL;DR: In this article, the authors investigated the impact of monetary policy on stock returns in 13 OECD countries over the period 1972-2002 and showed that monetary policy shifts significantly affect stock returns.
TL;DR: In this paper, the authors predict that enhanced voluntary disclosure reduces stock price comovement and provide evidence in support of this prediction using analyst evaluation of firm disclosure policy, and the evidence supports the effectiveness of the disclosure policy in increasing the amount of firm-specific information contained in stock returns.
Abstract: According to theory, comovement in stock prices reflects comovement in the fundamental factors underlying the values of stocks. Recent theory contends that stock price comovement can be driven by information markets or the informational opacity of the firm. To the extent that voluntary disclosure reduces information acquisition cost and enhances firm transparency, we predict that enhanced voluntary disclosure reduces stock price comovement. We provide evidence in support of this prediction using analyst evaluation of firm disclosure policy. Overall, our evidence supports the effectiveness of firm disclosure policy in increasing the amount of firm-specific information contained in stock returns.
TL;DR: In this article, the authors present two new models that are corporate ethics based on numerically quantifying the corporate value index (CV-Index) based on a set of predefined parameters and the second model estimates the market-to-book values of equity in relation to the CV-Index as well as other parameters.
Abstract: In this empirical study, we present two new models that are corporate ethics based. The first model numerically quantifies the corporate value index (CV-Index) based on a set of predefined parameters and the second model estimates the market-to-book values of equity in relation to the CV-Index as well as other parameters. These models were applied to Canadian companies listed on the Toronto Stock Exchange (TSX). Through our analysis, we found statistically significant evidence that corporate values (CV-Index) positively correlated with firm performance. The results are even more significant for firms with low market-to-book values. Our empirical findings suggest that corporate ethics is vital for management, employees, shareholders, stakeholders, and the community at large. In addition, we have tested and confirmed five hypotheses that are used to illustrate corporate ethics behavior and performance.
TL;DR: In this article, the authors examined two oscillators, the Moving Average Convergence-Divergence (MACD) and the Relative Strength Index (RSI), to see if these rules are profitable.
Abstract: This article examines two oscillators – the Moving Average Convergence–Divergence (MACD) and the Relative Strength Index (RSI) – to see if these rules are profitable. Using 60-year data of the London Stock Exchange FT30 Index, it is found that the RSI as well as the MACD rules can generate returns higher than the buy-and-hold strategy in most cases.
TL;DR: In this paper, the authors examined how macroeconomic indicators affect the performance of stock markets by using the Ghana Stock Exchange as a case study and found that lending rates from deposit money banks have an adverse effect on stock market performance and particularly serve as major hindrance to business growth in Ghana.
Abstract: Purpose – The study aims at examining how macroeconomic indicators affect the performance of stock markets by using the Ghana Stock Exchange as a case study.Design/methodology/approach – Quarterly time series data covering the period 1991‐2005 were used. Cointegration and the error correction model techniques are employed to ascertain both short‐ and long‐run relationships.Findings – Findings of the study reveal that lending rates from deposit money banks have an adverse effect on stock market performance and particularly serve as major hindrance to business growth in Ghana. Again, while inflation rate is found to have a negative effect on stock market performance, the results indicate that it takes time for this to take effect due to the presence of a lag period; and that investors benefit from exchange‐rate losses as a result of domestic currency depreciation.Originality/value – The single most important contribution of this study is its emphasis on macroeconomic variables and stock market performance i...
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TL;DR: Li et al. as mentioned in this paper study the asset pricing mechanism in Chinese stock markets, with the objective of identifying variables that capture the cross-sectional variation in average stock returns, and find that while the market risk (beta) is not priced, there is a significantly negative relationship between firm-specific risk and expected returns.
Abstract: China's stock markets have grown rapidly since their inception and have become an increasingly important emerging market for international investors. However, there are few systematic studies on how asset prices are formed in Chinese domestic equity markets; popular financial media even depict the market as irrational. In this paper, we study the asset pricing mechanism in the nascent Chinese stock markets, with the objective of identifying variables that capture the cross-sectional variation in average stock returns. We focus on the effects of various market imperfections in China. We find that while the market risk (beta) is not priced, there is a significantly negative relationship between firm-specific risk and expected returns. Chinese investors are willing to pay a significant premium for more liquid stocks or for dividend-paying stocks. Furthermore, investors value local A-shares more if there are offshore counterparts (e.g., B- and H- shares) for foreigners, implying that a Chinese firm with a foreign shareholder base has a lower cost of capital, ceteris paribus. Lastly, as with U.S. and other mature markets, firm size and the book-to-market ratio are systematically related to stock returns. Given market imperfections, stocks are priced rather rationally in China, despite the widespread perception to the contrary.
TL;DR: In this paper, the authors examine whether companies report risk-relevant information to prospective investors and find that the majority of the companies do not report risk relevant information to their investors, while corporate risk communication is important for the well-functioning of capital markets.
Abstract: This study examines whether companies report risk-relevant information to prospective investors. While corporate risk communication is important for the well-functioning of capital markets, our cur...
TL;DR: In this article, the authors used a sample consisting of 145 restatements from NGAAP to IFRS for firms listed on the Oslo Stock Exchange in Norway and found no evidence of increased value-relevance after adopting IFRS when comparing and evaluating the two regimes unconditionally.
Abstract: Firms listed on stock exchanges within the European Economic Area are required to report consolidated financial statements according to IFRS from 2005 The firms that adopted IFRS in 2005 were also required to restate their 2004 financial statements from national GAAP to provide comparable accounting figures These two sets of financial statements for 2004 are thus based on identical underlying economic activities and are fully specified according to two different reporting regimes Our sample consists of 145 restatements from NGAAP to IFRS for firms listed on the Oslo Stock Exchange in Norway We test whether the IFRS accounting figures correlate more strongly with stock market values than the corresponding NGAAP figures We find little evidence of increased value-relevance after adopting IFRS when comparing and evaluating the two regimes unconditionally On the other hand, when evaluating the change in the accounting figures from NGAAP to IFRS, we find evidence that the reconcilement adjustments to IFRS are marginally value-relevant due to increased relevance of the balance sheet and the normalized net operating income By weighting our sample by firm size, intangible asset intensity and profitability, we learn that the increased value-relevance of the net operating income stems from different reporting of intangible assets Since more intangible assets are capitalized according to IFRS than NGAAP, our finding is consistent with the view that capitalizing intangible assets is more value-relevant than expensing them as incurred or through goodwill amortization
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01 Jan 2008
TL;DR: In this article, the authors examined the dynamics and determinants of dividend payout policy of 320 non-financial firms listed in Karachi Stock Exchange during the period of 2001 to 2006 and found that the firms rely on both current earning per share and past dividend per share to set their dividend payments.
Abstract: This study examines the dynamics and determinants of dividend payout policy of 320 non-financial firms listed in Karachi Stock Exchange during the period of 2001 to 2006.
It is also one of the very first examples which try to identify the potential dynamics and determinants of dividend payout in Pakistan by using the well established dividend models in context of emerging market. For dynamic equation we used the extended model of Lintner, Fama and Babiak and ‘Proposed’ model in dynamic setting. The results
consistently support that Pakistani listed non-financial firms rely on both the change in dividends and change in net earnings which clearly demonstrate that the firms rely on both current earning per share and past dividend per share to set their dividend payments. However the study clearly shows that dividend tends to be more sensitive to current earnings than prior dividends. The listed non financial firms having the high speed of adjustment and low target payout ratio show the instability to smoothing their dividend payments. To find out the determinants of dividend payout policy dynamic panel regression has been performed. Firstly, profitable firms with more stable net earnings can afford larger free cash flows and therefore pay larger dividends. Furthermore the ownership concentration and market liquidity have the positive impact on dividend payout policy. Besides, the slack and leverage have the negative impact on dividend payout policy. The market capitalization and size of the firms have the negative impact on dividend payout policy which clearly shows that the firms prefer to invest in their assets rather than pay
dividends to its shareholders.
TL;DR: In this paper, the authors employed monthly realized moments for stock market returns for the US, the UK, Germany and Japan to assess the linkages holding across moments and markets over the period 1973-2004.
TL;DR: In this article, the authors test the implications of a multi-asset equilibrium model in which a finite number of risk-averse liquidity providers accommodate non-informational trading imbalances.
TL;DR: In this paper, the importance and price implications of style investing by institutional investors in the stock market were explored, and it was found that institutional investors reallocate across style groupings more intensively than across random stock groupings.
Abstract: This paper explores the importance and price implications of style investing by institutional investors in the stock market. To analyze styles, we assign stocks to deciles or segments across three style dimensions: size, value/growth, and sector. We find strong evidence that institutional investors reallocate across style groupings more intensively than across random stock groupings. In addition, we show that own segment style inflows and returns positively forecast future stock returns, while distant segment style inflows and returns forecast negatively. We argue that behavioral theories play a role in explaining these results.