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1
Dutta, Anupam, and Probal Dutta. "Pricing of IPOs: further evidence from South Africa." Corporate Ownership and Control 12, no. 4 (2015): 281–85. http://dx.doi.org/10.22495/cocv12i4c2p4.
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We examine the long-term performance of 225 IPOs listed on the Johannesburg Securities Index (JSE) during the period from 1996 to 2006. The buy-and-hold abnormal return (BHAR) method and the calendar time portfolio (CTP) approach have been employed to measure the long-run performance of IPO stocks. The findings reveal that IPOs are highly underpriced when the abnormal returns are estimated by BHAR methodology. However, the use of control firm approach instead of market index for measuring abnormal performances significantly reduces the magnitude of this underpricing reported in previous studies on South African IPO stocks. Our major contribution to the literature is that we apply –for the first time- the calendar time portfolio approach to assess the aftermarket performance of IPOs listed on the JSE. In addition, we use control firm approach instead of market index to estimate the abnormal returns. These are the two significant cases which were not documented in previous research on measuring long-term performance of South African IPO stocks
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Jena, Sarthak Kumar, Chandra Sekhar Mishra, and Prabina Rajib. "Do Indian Companies Manage Earnings Before Share Repurchase?" Global Business Review 21, no. 6 (August 5, 2019): 1427–47. http://dx.doi.org/10.1177/0972150919856993.
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This article aims to detect the opportunistic EM before share buyback and its impact on the short-term and long-term abnormal return. The study also examines the relationship between EM and promoters’ holdings in the company. A sample of 117 companies over 1998–2013 is analyzed in the study. The quality of earnings is measured using discretionary accruals (DAs), and it is calculated by four different methods, that is, the Healy model (1985), DeAngelo model (1986), modified Jones model (1995) and performance-matched model (2005). Cumulative abnormal return (CAR) is calculated for a short-term abnormal return at around 3 days of the share repurchase announcement. Post-buyback buy hold abnormal return (BHAR) for 1 year is calculated for long-term performance. The regression model is used to examine the impact of DA on both CAR and BHAR. The findings of the article show that share buyback companies manage their earnings downward in the previous year of share repurchase than the year of share purchase and the next year of share repurchase. The sample firms deflate their earnings more as compared to matching non-buyback firms. Firms manage their earnings downward before open market share repurchase than the tender offer. There is a significant and negative relationship between abnormal accruals and 1-year buy hold abnormal return post-open market share repurchase. The study further observed that there is a negative relationship between promoters’ holdings and EM. The study is constrained by the small sample size, so the results should be viewed by keeping these limitations in mind. The article is the first study on the detection of the opportunistic EM before buyback and examination of the relationship between the earnings quality and abnormal return in the Indian context.
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Jaskiewicz, Peter, Víctor M. González, Susana Menéndez, and Dirk Schiereck. "Long-Run IPO Performance Analysis of German and Spanish Family-Owned Businesses." Family Business Review 18, no. 3 (September 2005): 179–202. http://dx.doi.org/10.1111/j.1741-6248.2005.00041.x.
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This article examines the long-run stock market performance of German and Spanish initial public offerings (IPOs) between 1990 and 2000. We distinguish between family-and nonfamily-owned business IPOs by using the power subscale of the F-PEC. Buy-and-hold-abnormal returns (BHAR) are calculated in order to determine abnormal returns. Our results show that three years after going public, investors, on average, realized an abnormal return of − 32.8% for German and − 36.7% for Spanish IPOs. In both countries, nonfamily business IPOs perform insignificantly better. Regression analyses show that for the whole sample there is a positive company size effect. In family-owned businesses, strong family involvement has a positive impact on the long-run stock market performance, whereas the age of the firm has a negative influence.
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Ledwani, Sanket, Suman Chakraborty, and Sandeep S. Shenoy. "Spatial tale of G-7 and BRICS stock markets during COVID-19: An event study." Investment Management and Financial Innovations 18, no. 2 (April 15, 2021): 20–36. http://dx.doi.org/10.21511/imfi.18(2).2021.03.
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The unprecedented outbreak of COVID-19 has affected every aspect of the human life, be it health, social, or economic dimensions. The anxiety and uncertainty wobbled the economies of affected countries worldwide. This study attempts to quantify the impact of COVID-19 on the performance of major stock markets of G-7 nations vis-à-vis BRICS nations. An event study methodology is employed to capture the effect of the systematic event in the form of Buy and Hold Abnormal Returns (BHAR) and Average Buy and Hold Abnormal Returns (ABHAR). The study considers a 90-day observation window, consisting of six sub-event windows after the COVID-19 news up-doves the world, and 120 days prior to the selected event date to estimate average expected returns. BHAR values in the four event windows are statistically significant, covering stock markets from panic and nosedive to their correction and recovery. ABHAR values reported are significantly negative in the event window ranging from –0.15% to –38.43% for G-7 and –0.06% to –37.12% for BRICS nations. Despite similar ABHAR trends, the BHAR values and correlation matrix exhibit a diverse reaction in BRICS nations compared to the highly synchronized reaction in the G-7 group of nations in the COVID period.
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Lee, BokHyun. "The Relationship between Technology Life Cycle and Korean Stock Market Performance." International Journal of Financial Studies 6, no. 4 (October 29, 2018): 88. http://dx.doi.org/10.3390/ijfs6040088.
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Through the three industrial revolutions, technology has enabled rapid changes in society. In a capitalist society, capital is invested where there is utility, for example, economic benefit. We intend to determine that the stock price of a company that uses a particular technology will change with the life cycle of the technology in question. Specifically, we filtered companies that mainly deal with augmented reality and are listed in Korea’s KOSDAQ market. We grouped these companies based on detailed technologies that constitute augmented reality. We used the event study method to calculate the stock returns against a benchmark. As a result, in the “Peak of Inflated Expectations” stage, the portfolios of all companies using augmented reality generally show higher returns than the benchmark. However, it is difficult to ascertain whether a return generated based on one of the detailed technologies that make up augmented reality is higher or lower than that of the benchmark. During the “Trough of Disillusionment” phase, there was neither a consistent trend of cumulative abnormal returns (CAR) nor buy-and-hold abnormal returns (BHAR). However, during this stage, there was a positive correlation of average BHAR and average abnormal returns between the entire sample’s portfolio and each detailed technology firm’s portfolio.
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Komenkul, Kulabutr, and Santi Kiranand. "Aftermarket Performance of Health Care and Biopharmaceutical IPOs: Evidence From ASEAN Countries." INQUIRY: The Journal of Health Care Organization, Provision, and Financing 54 (January 1, 2017): 004695801772710. http://dx.doi.org/10.1177/0046958017727105.
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We examine the evidence from the long-run abnormal returns using data for 76 health care and biopharmaceutical initial public offerings (IPOs) listed in a 29-year period between 1986 and 2014 in the Association of Southeast Asian Nations (ASEAN) countries such as Indonesia, Malaysia, Singapore, Thailand, the Philippines, Vietnam, Myanmar, and Laos. Based on the event-time approach, the 3-year stock returns of the IPOs are investigated using cumulative abnormal return (CAR) and buy-and-hold abnormal return (BHAR). As a robustness check, the calendar-time approach, related to the market model as well as Fama-French and Carhart models, was applied for verifying long-run abnormal returns. We found evidence that the health care IPOs overperform in the long-run, irrespective of the alternative benchmarks and methods. In addition, when we divide our sample into 5 groups by listing countries, our results show that the health care stock prices of the Singaporean firms behaved differently from those of most of the other firms in ASEAN. The Singaporean IPOs are characterized by a worse post-offering performance, whereas the IPOs of Malaysian and Thai health care companies performed better in the long-run.
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Dutta, Anupam. "Seasoned Equity Offerings: Further Evidence from Australia." Global Business Review 18, no. 4 (May 2, 2017): 1010–18. http://dx.doi.org/10.1177/0972150917692403.
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While numerous empirical studies document significant long-run underperformance of seasoned equity offerings (SEOs) in different security markets, Allen and Soucik (2008, Mathematics and Computers in Simulation, 78(2–3), 146–154) argue that such an underperformance is dependent on the definition of ‘long-run’. They show that if ‘long-run’ is defined as 12 years instead of the usual 5 years, Australian SEOs seem to turn around their performance particularly during the sixth and seventh year, and the abnormal performance tends to disappear by the eighth year. This article reassesses whether the underperformance following SEOs is related to the length of the holding period. To facilitate direct comparison with the findings of Allen and Soucik, we use the same data and sample period as them. In addition, we propose a refined calendar time portfolio (CTP) methodology to investigate the long-term performance of Australian SEOs. To assess the robustness of our findings, the buy-and-hold abnormal return (BHAR) approach has also been employed to measure the long-run performance of SEO stocks. The empirical analysis reveals that SEOs underperform when the abnormal returns are estimated by employing the BHAR methodology. Our refined CTP approach, on the other hand, finds evidence of abnormal performance only for equally weighted portfolios.
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Komenkul, Kulabutr, Mohamed Sherif, and Bing Xu. "Prospectus disclosure and the stock market performance of initial public offerings (IPOs): the case of Thailand." Investment Management and Financial Innovations 13, no. 4 (December 29, 2016): 160–79. http://dx.doi.org/10.21511/imfi.13(4-1).2016.02.
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This study examines if the prospectus disclosure of the motives for an initial public offering (IPO) explains the long-run performance of equity issuers using hand-collected data for 245 IPOs from the Stock Exchange of Thailand (SET), and also the Market for Alternative Investments (MAI), in the 12-year period between 2001 and 2012. The stock returns of the IPOs were investigated using cumulative abnormal return (CAR) and buy-and-hold abnormal return (BHAR). The authors find a significant impact for the level of use-of-proceeds disclosure on IPO underpricing, and further that the ex-ante uncertainty and signalling hypotheses explain the IPO underpricing phenomenon in the Thai IPO market. Furthermore, Thai firms citing investment needs show significant positive abnormal returns after the offering, but issuers that state general corporate purposes and debt payments motives underperform. The authors provide evidence that the offering size and bull-market conditions significantly affect the IPO pricing and the strategic disclosure of information in the prospectus. Our results are robust, having been subjected to a wide range of sensitivity checks. Keywords: Prospectus disclosure, IPO performance, Thailand. JEL Classification: G14, G30, G32
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Singh, Amit Kumar, and Srishti Jain. "Foreign Direct Investment and Initial Public Offerings: Exploring the Roads Less Travelled." FIIB Business Review 9, no. 4 (December 2020): 309–18. http://dx.doi.org/10.1177/2319714520973849.
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This article examines the performance of initial public offerings (IPOs) issued by the economic sectors in India. It analyses the level of underpricing measured by market adjusted initial return (MAIR), short-run performance measured by market-adjusted abnormal return (MAAR) and long-run performance measured by 3-year buy and hold abnormal return (BHAR) methodology relative to Sensex and Nifty for 40 IPOs approaching the capital market during the period 2006–2016. The selection of IPOs is based on the foreign direct investment (FDI) limit of USD 3,000 million in each economic sector, that is, primary sector, secondary sector and tertiary sector. The long-run analysis is done at the end of the first year, the second year and the third year. It is found using the ordinary least square (OLS) regression that variables like age of the issuing firm and volume traded on the first day of listing have a positive relation with initial returns, while offer size of the IPO has a negative relation with the initial return. Further, this study also finds out that the secondary sector performs poorly in the long run relative to the primary and tertiary sectors. This study can be of importance to investors for assessing different sectors before investing.
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Khadim, Muhammad Irfan, and Samreen Fahim Babar. "IPO Intra Industry Effects on Peer Firm's Earnings, Composition and Stock Returns." Global Economics Review VI, no. II (June 30, 2021): 41–48. http://dx.doi.org/10.31703/ger.2021(vi-ii).04.
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The present study is conducted to see how an IPO event affects the existing firm's performance within the same industry. For this purpose, 88 IPO firms were examined from Pakistan Stock Exchange (PSX) from 1998-2016. IPO is examined from three major perspectives IPO proceeds, initial returns and time Lag between IPO listing date and IPO subscription. The study uses Buy and Hold Abnormal Returns (BHAR) and Cumulative Abnormal Returns (CAR) to calculate competitor's abnormal returns. To calculate the operating performance of competitors, the Wilcoxon significance test was applied. IPO intra-industry effects are significant in the long run, whereas insignificant results are shown in the short run. In addition, IPO proceeds and abnormal returns are significant but negatively related to competitors' stock returns (long term). Moreover, Herfindahl Hirschman Index (HHI) finds IPO improves competitiveness in the industry environment. This present study is an important one from an emerging economy perspective.
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Alqahtani, Faisal, and Zakaria Boulanouar. "Long-run market performance of initial public offerings in Saudi Arabia: Does sharia-compliant status matter?" Corporate Ownership and Control 14, no. 3 (2017): 293–98. http://dx.doi.org/10.22495/cocv14i3c2art3.
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This research presents a comprehensive analysis of initial public offerings (IPOs) in Saudi Arabia, using a sample of 72 IPOs examined during the period between 2004 and September 2010. To compute the market performance of the IPOs, we split the sample into two sub-samples: sharia-compliant and non-sharia-compliant and we use two methods of calculations which are buy and hold abnormal returns (BHAR) and cumulative abnormal returns (CAR). In contrast to the majority of reported outcomes worldwide, our results show that based on one-year after-market performance, on average, underperformance does not exist in the Saudi market. The regression analysis shows that the factors driving long-run market performance include initial return and ownership structure, firm level risk, age and sharia-compliant status. The highlight of this paper, however, underscored using T-test for equality of means that was performed on the two sub-samples aftermarket adjusted returns is that Sharia-compliant status significantly alters the level of one-year market performance. This result supports our hypothesis that sharia-compliant firms will enjoy superior non-negative returns compared to non-sharia compliant firms, and supports the over-reaction hypothesis. Based on this result, we introduce a new factor which we call non-sharia-compliant underperformance.
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Tewari, Manish, Pradip Banerjee, and Soumen De. "Valuation effects of cultural disparity on cross border mergers: The evidence from India." International Journal of Finance & Banking Studies (2147-4486) 8, no. 4 (October 26, 2019): 21–40. http://dx.doi.org/10.20525/ijfbs.v8i4.551.
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The object of this study is to explore the effect of cultural distance on both the long run and short run performance of cross border mergers and acquisitions undertaken by Indian acquiring firms. We utilize buy and hold returns (BHAR), cumulative abnormal returns (CAR) and cross-sectional regression analysis in our study. Adopting the traditional Hofstede measure of cultural distance and other pertinent variables, commonly used to measure cultural differences, we document a negative and statistically significant influence of cultural distance on Indian cross-border M&As and corroborate some of other findings reported in prior research. Also, we find that the BHAR is nevertheless higher when the acquisitions are friendly, paid for 100% cash, and the acquiring firm is large, older and belongs to a business group. The inclusion of the variable ‘business group’ along with industry relatedness and acquirer size provides valuable insights into the Indian cross border acquisition landscape, wherein business groups dominate to a great extent.
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Dhamija, Sanjay, and Ravinder Kumar Arora. "Determinants of Long-run Performance of Initial Public Offerings: Evidence from India." Vision: The Journal of Business Perspective 21, no. 1 (February 10, 2017): 35–45. http://dx.doi.org/10.1177/0972262916681243.
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The article examines the long-run performance of 377 initial public offerings (IPOs) made by Indian companies during the period 2005–2015. The objectives of the article are to analyze whether Indian IPOs underperform or outperform the broad market in the long run and to identify the key determinants of their long-run performance. The results show that the Indian IPOs outperform the broad market initially followed by significant underperformance in the long run. The IPOs listed on the main board during 2005–2015 yielded average initial excess returns (IERs) of about 22 per cent. However, 37 per cent of the IPOs provided negative IERs. The IPOs underperformed the broad market generating –57.33 per cent buy-and-hold abnormal return (BHAR) over 36 months after listing. Only 38 out of 377 IPOs (10 per cent) outperformed the benchmark index over a 36-month holding period. The important issue characteristics that influence the long-run performance of IPOs in India are the type of issuer (government-owned or private), lead manager prestige (LMP), promoter holding and the issue size.
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Hasan, Md Mahadi, Yusnidah Ibrahim, Raji Jimoh Olajide, Mohd Sobri Minai, and Md Mohan Uddin. "Malaysian Acquiring Firms' Shareholders' Wealth Effect Following Cross-Border Acquisition." Journal of Accounting and Finance in Emerging Economies 3, no. 2 (June 30, 2017): 147–58. http://dx.doi.org/10.26710/jafee.v3i2.95.
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Purpose: The purpose of this study is to investigate long run shareholders' wealth effect (SWE) of Malaysian acquiring firms following cross-border acquisition (CBA).
Methodology: Using buy-and-hold abnormal returns (BHAR) measure of SWE and Euclidean distance method for identifying matching firms, the study investigated 176 CBA deals of Malaysian acquiring firms for the years 2004-2015. Both parametric tests (such as conventional t-statistics, skewness adjusted t-statistics, bootstrapping skewness adjusted t-statistics and Multivariate of Analysis of Variance) and non-parametric statistical (such as Wilcoxon-Mann-Whitney test) tools were employed to analyze the data and test the hypotheses regarding the impact of CBA deals on acquiring firms' SWE.
Results: The research found that the SWE of acquiring firms is significantly positive in the shorter period while negative or mixed in the longer period. Furthermore, SWE is found to be different across several groups: (i) Shariah-complaint status firms vs. conventional firms (ii) level of control in target firm (such as major vs. minor acquisitions), (iii) Diversifying acquisition (for example, related vs unrelated acquisition). However, SWE does not differ from industry to industry.
Implications: This research presents unique empirical evidences related to long run SWE of Malaysian acquiring firms following CBA. The findings imply that CBA is more success in the longer period.
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Sahoo, Seshadev, and Prabina Rajib. "After Market Pricing Performance of Initial Public Offerings (IPOs): Indian IPO Market 2002–2006." Vikalpa: The Journal for Decision Makers 35, no. 4 (October 2010): 27–44. http://dx.doi.org/10.1177/0256090920100403.
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This paper is motivated by the apparent belief that IPOs are underpriced on the initial listing day and thereafter underperforms compared to the market benchmark. While evaluation of the listing day performance seems straightforward on surface, it actually invokes several complications for the subsequent performance measurement. This paper focuses on the evaluation of price performance of IPOs up to a period of 36 months including the listing day. It also examines the usefulness of IPO characteristics at the time of issue to seek an explanation for the post-issue price performance. The paper presents fresh evidence on IPO performance, i.e., short-run underpricing and long-run underperformance for 92 Indian IPOs issued during the period 2002–2006. It is reported that on an average the Indian IPOs are underpriced to the tune of 46.55 per cent on the listing day (listing day return vis-à-vis issue price) compared to the market index. Another contribution of this paper is the evaluation of the long-run post-issue price performance of Indian IPOs. The long-run performance of IPOs up to a period of 36 months are measured by using the two most promising evaluation techniques, i.e., wealth relative (WR) and buy-and-hold abnormal rate of return (BHAR), both being adjusted with market index, CNX-Nifty. Further, the results evidence that the underperformance is most pronounced during the initial year of trading, i.e., up to 12 months from the listing date followed by over�performance. To get possible explanations for long-run underperformance for Indian IPOs, factors like underpricing rate (listing day return), offer size, leverage at IPO date, ex-ante uncertainty, timing of issue, age of IPO firm, rate of subscription, promoter groups retention, and price-to-book value (as proxy for growth) are considered. Evidence is found, that initial day return, offer size, leverage at IPO date, ex-ante uncertainty, and timing of issue are statistically significant in influencing underperformance. However, there is no evidence favourable to the age of the IPO firm, rate of subscription, promoter group's retention, and price-to-book value impact on the long-run underperformance. The empirical results suggest that the investors who are investing in IPOs through direct subscription are earning a positive market-adjusted return throughout the period of study. But investors who have bought shares on the IPO listing day are earning negative returns up to 12 months from the listing date and expect to earn positive market-adjusted return thereafter. For future research, we suggest the extension of this analysis for additional explanatory variables including issue fundamental characteristics of IPO firms. The scope of the research study could even be improved by extending the time period of study prior to 2002.
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Hassan, Mohamad, and Evangelos Giouvris. "Financial institutions mergers: a strategy choice of wealth maximisation and economic value." Journal of Financial Economic Policy 12, no. 4 (October 19, 2020): 495–529. http://dx.doi.org/10.1108/jfep-06-2019-0113.
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Purpose This study Investigates Shareholders' value adjustment in response to financial institutions (FIs) merger announcements in the immediate event window and in the extended event window. This study also investigates accounting measures performance, comparison of post-merger to pre-merger, including several cash flow measures and not just profitability measures, as the empirical literature review suggests. Finally, the authors examine FIs mergers orientations of diversification and focus create more value for shareholders (in the immediate announcement window and several months afterward) and/or generates better cash flows, profitability and less credit risk. Design/methodology/approach This study examines FIs merger effect on bidders’ shareholder’s value and on their observed performance. This examination deploys three techniques simultaneously: a) an event study analysis, to estimate and calculate abnormal returns (ARs) and cumulative abnormal returns (CARs) in the narrow windows of the merger announcement, b) buy and hold event study analysis, to estimate ARs in the wider window of the event, +50 to +230 days after the merger announcement and c) an observed performance analysis, of financial and capital efficiency measures before and after the merger announcement; return on equity, liquidity, cost to income ratio, capital to total assets ratio, net loans to total loans, credit risk, loans to deposits ratio, other expenses and total assets, economic value addition, weighted average cost of capital and return on invested capital. Deal criteria of value, mega-deals, strategic orientation (as in Ansoff (1980) growth strategies), acquiring bank size and payment method are set as individually as control variables. Findings Results show that FIs mergers destroy share value for the bidding firms pursuing a market penetration strategy. Market development and product development strategies enable shareholders’ value creation in short and long horizons. Diversification strategies do not influence bidding shareholders’ value. Local bank to bank mergers create shareholders’ value and enhance liquidity and economic value in the short run. Bank to bank cross border mergers create value for bidders’ in the long term but are associated with high costs and higher risks. Originality/value A significant advancement over the current literature is in assessing mergers, not only for bank bidders but also for the three pillars FIs of the financial sector; banks, real-estate companies and investment companies mergers. It is an improvement over current finance literature because it deploys two different strategies in the analysis. At a univariate level, shareholder value creation and market reaction to merger announcements are examined over short (−5 or +5 days) and long (+230 days) windows of the event. Followed by regressing, the resultant CARs and BHARs over financial performance variables at the multivariate level.
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Hull, Robert Martin, Sungkyu Kwak, and Rosemary Walker. "Hedge fund variables and short-run SEO returns." International Journal of Managerial Finance 14, no. 3 (June 4, 2018): 322–41. http://dx.doi.org/10.1108/ijmf-09-2017-0194.
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Purpose The purpose of this paper is to determine if hedge fund variables (HFVs) are associated with short-run daily buy and hold abnormal returns (BHARs) for a 30-day window around announcement dates for seasoned equity offerings (SEOs). Design/methodology/approach This paper utilizes the event study metric that computes BHARs. These BHARs are used in a regression model as dependent variables with HFVs and nonhedge fund variables (NFVs) as independent variables. For regression tests, standard errors are clustered at the month level. Findings This paper offers three new findings. First, HFVs are significantly associated with SEO BHARs. Second, HFVs are capable being associated with stronger statistical significance compared to NFVs. Third, not using HFVs can produce an omitted-variable bias. Research limitations/implications This paper does not have information on which individual hedge funds use a strategy during the month of the offering but only the proportion of hedge funds that do. A research implication is the proportion can be associated with SEO BHARs in a fashion predicted based on a long or short position. Practical implications Hedge funds can use trading strategies to capitalize on established patterns of price behavior. Social implications Hedge funds enjoy a trading advantage over smaller investors. Originality/value This paper is the first study to document the association between hedge fund stratagems and stock returns around a major corporate event. It shows researchers should consider institutional trading strategies when studying the market response to a major corporate event.
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Mumtaz, Muhammad Zubair, and Ather Maqsood Ahmed. "Long-Run Pricing Performance of Initial Public Offerings (IPOs) in Pakistan." NUST Journal of Social Sciences and Humanities 2, no. 2 (January 21, 2021): 97–140. http://dx.doi.org/10.51732/njssh.v2i2.14.
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This study investigates the long-run pricing performance of 90 IPOs listed on the Karachi Stock Exchange from 1995 to 2010. This study finds evidence that IPOs show signs of underpricing and underperform over three years after listing; however, the observed pattern of underperformance is not always statistically significant. The equal-weighted buy-and-hold abnormal returns and calendar-time analysis confirm the significance of the IPO underperformance over the three year period after listing on the exchange. Extreme bounds analysis is used to test the sensitivity and robustness of twenty six explanatory variables in determining the IPO underperformance. The results reveal that the robust predictors of IPO underperformance include underpricing, financial leverage, age of the firm and oversubscription for buy-and-hold return calculations and underpricing, hot activity period, post issue promoters’ holding, issue proceeds and aftermarket risk level for cumulative abnormal return calculations. Moreover, the fads hypothesis and the window of opportunity hypothesis are applied to explain long-run IPO performance.
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Boubaker, Sabri, and Taher Hamza. "Short- And Long-Term Wealth Gains From UK Takeovers: The Case Of The Financial Industry." Journal of Applied Business Research (JABR) 30, no. 4 (June 30, 2014): 1253. http://dx.doi.org/10.19030/jabr.v30i4.8673.
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The present study analyzes the short- and long-term performance of UK financial acquiring firms by examining a sample of 40 takeovers over the period 19962007. In particular, it investigates i) the short- and long-term stock return performance of these acquiring firms and ii) the relation between their short-term abnormal return around the announcement date of takeovers and their long-term performance. The event study methodology shows that bidders experience significant short-term wealth destruction. In contrast, both the buy-and-hold abnormal returns and bidders portfolio return approaches indicate positive and significant wealth effects over the long run. Business cycle analysis shows that acquirers obtain significantly higher returns during downward financial market cycles. Furthermore, the results show that the market reaction to the bid announcement better predicts bidders long-term performance in the case of positive short-term abnormal returns.
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El Ansary, Osama, and Mona Atuea. "Testing the Effect of Technical Analysis Strategies on Achieving Abnormal Return: Evidence from Egyptian Stock Market." Accounting and Finance Research 6, no. 2 (February 27, 2017): 26. http://dx.doi.org/10.5430/afr.v6n2p26.
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This study examined the effect of using inter and exit signals of three of the most common used technical analysis strategies on achieving abnormal return compared with the buy and hold strategy in the Egyptian security market. The tests were done using data for short term, relatively long term, during bull and bear market. Using bootstrap methodology and wilcoxon/mann-whitney test for daily closing prices during the period from 1-1-1998 to 14-1-2016, the results indicated that; First, market timing with technical analysis yields more return and reduces risk in general. Second, short term investing is not recommended at all, as it is less profitable even than bear market period. Third, in long term and during bull market technical analysis is more profitable than short term. Fourth, technical analysis importance have been reduced during the last few years due to the effect of the Egyptian revolution on the security market. As for investors, they should use technical analysis trading rules to determine when to enter and exit the market, so that they can improve their investment decisions, as it leads to achieve abnormal return and reduces risk more than buy and hold strategy in all cases, while pay more attention for the current and political events than before.
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Suryani, Ani Wilujeng, and Karina Dian Pertiwi. "Lombok’s Tsunami and Stock Abnormal Returns." Accounting Analysis Journal 10, no. 1 (February 24, 2021): 1–8. http://dx.doi.org/10.15294/aaj.v10i1.42584.
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Natural disaster often brings damage to the economy, including the decrease of stock’s market value. For this reason, this study aims to determine the effect of the tsunami earthquakes in Lombok in 2018 on abnormal returns and cumulative abnormal returns of insurance companies. This study used the event study approach, with three days window period after the three tsunami earthquakes from July to August 2018. The sample of this study is the stock price of 14 insurance companies listed on the Indonesia Stock Exchange. To test whether abnormal return exists, a one-sample t-test was used on the average abnormal and cumulative returns. The results show that the tsunami earthquake disasters in Lombok in 2018 have a significant effect on cumulative abnormal returns of insurance companies stocks, and this effect even bigger on the third tsunami. This finding shows that the market reacts to continuous disaster by considering the earthquake as negative information and thus decrease the stock price. This study implies that investors may buy the stocks after the disaster to get a cheaper price or hold the stocks to avoid loss.
Keywords: abnormal return; event study; Lombok tsunami earthquake; signaling theory
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Rossi, Fabrizio. "Creation or Destruction of Value in Mergers? An Empirical Analysis on the Italian Stock Market." International Journal of Business & Technology 1, no. 1 (October 1, 2012): 27–40. http://dx.doi.org/10.33107/ijbte.2012.1.1.04.
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The objective of this paper is to investigate whether mergers create value for shareholders in both the short and long term. For this purpose, 120 announcements of mergers that were registered in Italy during the period 1994-2006 among listed companies were examined. The short-term analysis was conducted using the event study methodology in order to estimate the cumulative abnormal returns (CARs) in the time window around the announcement date (-10, +10). In this work, the sample of 120 mergers was divided into two sub-samples: the first considers the mergers that were carried out in all sectors of the economy, and the second focuses only on bank mergers. From the results obtained it would appear that, while the sub-sample of all mergers registered a statistically significant value creation for the shareholders of both the bidder and target companies, values also confirmed by combined analysis, the second sub-sample registered negative values for bidder companies and positive values for target companies. Negative values also seem to be confirmed by the results of the combined analysis both at the date of announcement and throughout the entire period of observation. For the long-term analysis the Buy and Hold Abnormal Returns methodology (BHARs) was used, with which it was possible to observe the returns for three years. In the 36 months following the merger, the portfolio showed a significant destruction of value.
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Blajer-Gołębiewska, Anna, and Leszek Czerwonka. "Corporate governance and propensity to share information: The long-run effect." Corporate Ownership and Control 10, no. 1 (2012): 399–407. http://dx.doi.org/10.22495/cocv10i1c4art1.
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The optimal corporate governance system aims to give shareholders confidence that a company is managed efficiently, to create the highest possible profit and to preserve a firm’s reputation. The aim of the research is to find out if the lower level of information asymmetry in corporate governance systems in the Polish listed companies implies higher rates of return for shareholders in the future. We put forward a hypothesis that the impact of lower information asymmetry on company’s performance is overestimated and in reality no long-run effect on the higher abnormal returns occurs. Taking into consideration the initial level of propensity to share information index we analysed future buy-and-hold abnormal returns achieved by 61 companies during the next 3 years.
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Dutta, Anupam. "Investigating long-run stock returns after corporate events: the UK evidence." Corporate Ownership and Control 12, no. 1 (2014): 298–307. http://dx.doi.org/10.22495/cocv12i1c2p7.
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The objective of this paper is to assess the robustness of the existing long-run event study methodologies in the UK stock market. In doing so, the study employs the buy-and-hold abnormal return approach and the calendar time portfolio method to identify the long-term abnormal performance following corporate events. Although many recent studies consider the application of these two widely used approaches, each of the methods is a subject to criticisms. This paper uses the standardized calendar time approach (SCTA) which presents a number of important improvements over the traditional calendar time methodology. The empirical analysis reveals that all the traditional methodologies perform well in the UK security market. Our findings further report that SCTA documents better specification and power than the conventional approaches
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Sekhar, Bichith C., and A. Umamaheswari. "A Study On Technical Analysis With Reference To International Forex." Think India 22, no. 3 (September 27, 2019): 1129–44. http://dx.doi.org/10.26643/think-india.v22i3.8470.
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The foreign exchange market (Forex, FX, or currency market) is a global decentralized market for the trading of currencies. The foreign exchange market assists international trade and investments by enabling currency conversion. Our study is to test the technical tools to analyze about the technical impact and its return in the market. For this purpose 13 cross currency pairs were taken as sample size and Jensen’s Alpha, Beta, Relative Strength Index, and Buy and Hold Abnormal Return were used as technical tool for analysis and the conclusion is that it’s not preferred to invest in JPY pairs as the volatility and the return are not up to the mark and its preferred to invest in EURCAD as the return was high when compared to other scripts and the market was moving accordingly to its cross currency pair.
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Badshah, Koerniadi, and Kolari. "Testing the Information-Based Trading Hypothesis in the Option Market: Evidence from Share Repurchases." Journal of Risk and Financial Management 12, no. 4 (November 29, 2019): 179. http://dx.doi.org/10.3390/jrfm12040179.
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The informed options trading hypothesis posits that option prices lead stock prices. In this paper, we extended the research on this hypothesis to open-market share repurchases. Empirical tests showed that the implied volatility spread was not significantly related to buy-and-hold abnormal stock returns. However, further evidence reveal a significant relationship between implied volatility spread and subsequent stock return volatility around open-market share repurchase events. We concluded that option traders have private information on the volatility of stock returns and superior information processing ability that accounts for prescient pricing behavior in options relative to stocks.
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Masry, Mohamed. "The Impact of Technical Analysis on Stock Returns in an Emerging Capital Markets (ECM’s) Country: Theoretical and Empirical Study." International Journal of Economics and Finance 9, no. 3 (February 15, 2017): 91. http://dx.doi.org/10.5539/ijef.v9n3p91.
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Technical analysis, even if deliberated by some as purely conjecture, is still generally acknowledged as additional information to main brokerage companies. There are existent two reasons for the achievement of technical analysis and why its success is still debated: (1) stock return predictability stems from efficient markets that can be analysed by time-varying equilibrium returns, and (2) stock return predictability forms from prices wandering apart from their fundamental valuations. Fundamentally, both explanations show some kind of overall market inefficiency where investors are capable of exploiting. Therefore, technical analysis derived its importance from its ability to train investors to take investment decision based on historical trends of securities prices. To help find answers to the issues raised and to structure the study, the following general research question is set: is it possible for technical analysis to achieve abnormal returns in an Emerging Capital Markets (ECM’s) country, more specifically, the Egyptian Stock Exchange? If yes, hence it could be possibly used to help individual investors to take effective investment decision. By means of theoretical and empirical investigation, this study provides significant evidences that technical analysis achieved abnormal returns in inefficiency periods. This study suggests that simple trading rules, more specifically; the simple moving average beat the standard buy-and-hold strategy for the Egyptian stock exchange.
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Papachristou, George, Stephanos Papadamou, and Eleftherios Spyromitros. "Asymmetric price responses to stock addition to and deletion from the Athens Stock Exchange Index." Managerial Finance 44, no. 4 (April 9, 2018): 406–23. http://dx.doi.org/10.1108/mf-12-2016-0350.
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Purpose The purpose of this paper is to investigate the response of investors to the announcements on the inclusion and exclusion of companies from the FTSE-ASE 20 index. Design/methodology/approach Data on the inclusion and exclusion of companies from the FTSE-ASE 20 index in the period 2000-2012 were used. The authors performed an event study analysis using a constant return model and a market model. Two different measures of aggregated abnormal returns, namely the cumulating abnormal returns and the buy-and-hold abnormal return, were used in this investigation. Findings The results suggest that the exclusion of a company from the index has a significant negative effect on stock returns. Specifically, such a stock takes more than 15 days to recover. However, for a company’s inclusion in the index, the authors observe short-lived positive reactions on stock returns. Practical implications Capital market regulators and investors should find the policy implications of this paper meaningful. Investment strategies can be implemented on the basis of the news of exclusion from the index, which can lead to higher performance for investors. As far as authorities are concerned, the decision of inclusion and exclusion to the most significant stock index in the Greek market should be carefully considered because it creates financial instability for a significant time period. Originality/value By using a battery of parametric and non-parametric econometric tests, the existence of abnormal returns of the FTSE-ASE 20 index is explored over a long time period, including the recent financial crisis.
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Fonseca, Nelson Ferreira, Wagner Moura Lamounier, and Aureliano Angel Bressan. "Retornos Anormais no Ibovespa Utilizando Modelos para Dados de Alta Frequência." Brazilian Review of Finance 10, no. 2 (June 26, 2012): 243. http://dx.doi.org/10.12660/rbfin.v10n2.2012.3654.
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This article aims to identify profitable trading strategies based on the effects of leads and lags between the spot and futures equity markets in Brazil, using high frequency data. To achieve this objective and based on historical data of the Bovespa and the Bovespa Future indexes, four forecasting models have been built: ARIMA, ARFIMA, VAR, and VECM. The trading strategies tested were: net trading strategy, buy and hold strategy, and filter strategy – better than average predicted return. The period of analysis of this paper extends from August 1, 2006 to October 16, 2009. In this work, it was possible to obtain abnormal returns using trading strategies with the VAR model on the effects of leads and lags between the Bovespa index and Bovespa Future index.
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Sholichah, Mu’minatus, Basuki ., and Andry Irwanto. "Divergences of Opinion and Long Term Performance of Post Stocks Initial Public Offerings at Indonesia Stock Exchange." International Journal of Emerging Research in Management and Technology 6, no. 7 (June 29, 2018): 7. http://dx.doi.org/10.23956/ijermt.v6i7.179.
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This study examines and analyzes the effect of divergence of opinion on long-term performance of stock post IPO with initial return control variable, firm size, offering size, reputation of underwriter and return on equity. The study was conducted using 2004-2013 data, with 157 IPO companies in Indonesia capital market. The test is done by using multiple linear regression. The results of this study found that the divergence of opinion has a positive effect on the long-term performance of post-IPO shares. This occurs in the long-term performance period of post-IPO shares with an abnormal cumulative measurement of return12 months, 24 months. The result of opinion divergence regression and variable of all control with long term performance of stock post IPO revealed significant result at period of 12 months and 36 months. By measuring the buy and hold of abnormal returns, the opinion regression divergence with the long-term performance of post-IPO shares is significant in the 12-month period. The regression result of opinion divergence and all control variables with long-term performance of post-IPO shares is significant in the period of 12 months and 24 months. Variable characteristics of companies that are considered by investors in IPO stock transaction are firm size, initial return, offer size and reputation of underwriter. The implication of this study shows that risk factors play an important role in long-term performance of post-IPO shares.
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Lizińska, Joanna, and Leszek Czapiewski. "Long-Term Equity Performance in Poland – Searching for Answers with the Calendar-Time Portfolio Approach." Folia Oeconomica Stetinensia 19, no. 1 (June 1, 2019): 43–55. http://dx.doi.org/10.2478/foli-2019-0004.
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Abstract Research background: The study examines the performance of companies that are going public with equity issuance (IPO) in Poland. Purpose: Some scholars argue that the buy-and-hold strategy that has been quite widely used suffers from cross correlation and the “bad model” problem. Hence, the calendar-time portfolio approach is used to extend the methodology. Research Methodology: The empirical procedure is two-step. At the beginning, we calculate an average abnormal return for the portfolio of IPOs firms. The portfolio is rebalanced each month. Next, the risk-adjusted performance is measured by regressing returns on a multifactor time-series regression model. We employ the Fama-French (1993) three-factor model and CAPM for the robustness check. Results: In a sample of IPOs listed on the Warsaw Stock Exchange, we find negative and highly significant abnormal returns. Alphas are statistically significant in all of the Fama-French regressions and in most of the cases for CAPM. Novelty: This paper discusses the puzzle of the long-term equity performance of initial public offerings (IPOs) using the calendar-time portfolio approach. Our results point to the economic and statistical significance of long-term IPO underperformance.
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Du, Min, Frank Kwabi, and Tianle Yang. "State ownership, prior experience and performance: a comparative analysis of Chinese domestic and cross-border acquisitions." International Journal of Accounting & Information Management 29, no. 3 (July 16, 2021): 472–91. http://dx.doi.org/10.1108/ijaim-01-2021-0027.
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Purpose Drawing on three theoretical frameworks, this paper aims to examine the effects of state-owned enterprises (SOEs) and the interaction between SOEs and prior acquisition experience of Chinese domestic and cross-border acquirers. Design/methodology/approach Using a sample of 4,116 firms consisting of 3,939 domestic mergers and acquisitions (M&As) and 177 cross-border M&As over the period 2004–2017, this study adopts both accounting- and market-based performance measures, namely, return on assets, return on equity and buy-and-hold abnormal return to analyse the effects of SOEs and the interaction between SOEs and prior acquisition experience on acquirers’ performance. Findings First, this paper finds SOEs to exert a positive influence on acquirer performance, contrary to agency theory but in line with the resource-based view. However, the positive relationship between SOEs and performance appears more pronounced for domestic M&A compared to cross-border M&As. Second, this study also finds prior acquisition experience and the combined effect of SOE and prior acquisition experience to have a positive and significant bearing on performance. Research limitations/implications The limitation of this study is the lack of cross-border M&A data with all the relevant information compared to domestic M&A. Thus, the cross-border M&A sample appears lower compared to the domestic M&A sample. Practical implications The results imply that the moderating role of prior acquisition experience on the relationship between SOEs and performance appears to be crucial for cross-border M&A performance compared to domestic M&A. Originality/value The findings of this study show SOEs increase performance, contrary to the widely held view based on agency theory that SOEs are inefficient.
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Dang, Huong Dieu, and Michael Jolly. "Red flags for IPO downfalls in New Zealand." Managerial Finance 43, no. 9 (September 11, 2017): 1034–51. http://dx.doi.org/10.1108/mf-05-2017-0197.
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Purpose The strong performance of New Zealand’s equity market and the Government’s efforts to encourage small investors to invest in initial public offering (IPO) firms raises two questions: should retail investors invest in IPO offers and what types of IPOs are worth buying in the long term? The paper aims to discuss these issues. Design/methodology/approach The authors construct buy and hold equally weighted portfolios of IPOs and peers based on sales forecast, market capitalisation, and price-to-book ratio. The authors employ four benchmark-adjusted performance measures: cumulative average abnormal return (CAR), holding period return difference, wealth relative, and excess return (α). Findings IPOs underperform their peers over the medium and long term, with a five-year CAR ranging between −6.4 and −19.7 per cent. IPOs listed post-GFC show inferior benchmark-adjusted performance with a statistically significant average monthly CAPM α of −1.07 per cent (vs −0.13 per cent for pre-2009 IPOs). Over a five-year horizon, mature IPOs, IPOs with high market cap, high sales forecast, high leverage, low price-to-book ratio, and positive earnings forecast outperform other IPOs. Small IPOs or those with a small degree of leverage exhibit the worst five-year CAR ranging between −30.2 and −49.1 per cent. Of all IPOs examined, large firms, well-established firms, and value firms achieved positive five-year CARs of between 6.6 and 17.5 per cent. Practical implications The results are useful for retail investors and financial advisors in making sensible investment decisions. Originality/value This study is the first to utilise book-to-market and sales forecast to construct peer samples and to identify the red flags for IPO downfalls in New Zealand. It covers the longest sample period (1991-2015) in New Zealand’s context.
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Bhabra, Harjeet Singh, and Ashrafee Tanvir Hossain. "The Sarbanes-Oxley Act and corporate acquisitions." Managerial Finance 43, no. 4 (April 10, 2017): 452–70. http://dx.doi.org/10.1108/mf-10-2016-0291.
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Purpose The purpose of this paper is to analyze and compare the performance of corporate acquisitions between the pre- and post-SOX periods, using both short-term and long-term analyses. Design/methodology/approach The sample includes 9,463 mergers and tender offers undertaken by publicly traded US firms between 1996 and 2009. The authors used the standard event study methodology for short-term performance analysis; Berkovitch and Narayanan (1993) method to identify merger motives; and standard benchmark adjusted return on assets (sales) (Barber and Lyon, 1996) and buy-and-hold abnormal returns (Mitchell and Stafford, 2000) to analyze long-term performance. Findings Compared to the pre-SOX period, US acquirers experience significantly higher announcement returns in the post-SOX period; the results are robust to various controls like bidder, target and deal characteristics, bidder management quality, and product market competition. Similar results (in favor of post-SOX US acquirers) are obtained with long-term post-acquisition operating and stock performance analyses. Research limitations/implications This paper only addressed domestic acquisitions. Originality/value This paper adds to the growing body of research on the impact of SOX on publicly traded US corporations. By examining corporate acquisitions, an important long-term investment decision for a firm, the paper shows that despite the complex nature of SOX, substantial compliance costs and the unintended negative consequence it engendered, the act had a beneficial impact in an important area of corporate finance.
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Han, Lei, and Daniel F. Hsiao. "Examination of firm performance following the early adoption of SFAS 142." International Journal of Accounting & Information Management 25, no. 2 (May 2, 2017): 138–76. http://dx.doi.org/10.1108/ijaim-09-2015-0062.
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Purpose The purpose of this study is to investigate the long-term performance of firms that early adopted Statement of Financial Accounting Standard 142 (SFAS 142). Design/methodology/approach In particular, the paper focuses on a relatively lengthy time frame after the standard became effective in 2002 and examines whether the firms which early adopted SFAS 142 exhibit different characteristics from their non-early adopting counterparts when comparing operating returns, stock returns and earnings quality over the same time period. Profit margin, return on assets and return on equity are used to measure operating returns; buy-and-hold return, Tobin’s Q and price-to-book ratio are used to measure stock returns; and abnormal accruals and accruals quality are used to measure earnings quality. Findings Based on a sample of 692 firm-year observations over five years between 2002 and 2006, the authors find that early adopters tend to exhibit lower operating performance (most noticeable when measuring profit margin and return on assets) and lower earnings quality following the early adoption of SFAS 142 than non-early adopters. However, little relation is found between post-adoption market returns and the choice to early adopt SFAS 142. Research limitations/implications This study helps fill the gap in accounting literature by investigating the long-term performance of firms post adoption of SFAS 142. The empirical results may provide greater understanding of the firms choosing to early adopt SFAS 142, and offer additional insight to guide standard setters on similar accounting issues in the future. Originality/value This study’s research questions attempt to identify potential differences in operating and stock performance and earnings quality by comparing early adopters and non-early adopters of SFAS 142 over a five-year period between 2002 and 2006, which extends the research beyond the relatively short window covered by prior research, and also takes into consideration Statement of Financial Accounting Standard 141 (SFAS 141)-R “Business Combination”, issued in 2007, to supersede SFAS 141 of 2001.
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Farooqi, Javeria, Thanh Ngo, and Surendranath Jory. "Real activities manipulation by bidders prior to mergers and acquisitions." Review of Accounting and Finance 16, no. 3 (August 14, 2017): 322–47. http://dx.doi.org/10.1108/raf-12-2014-0132.
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Purpose This study aims to examine the ability of investors to process signs of real activities manipulations at bidder firms in the quarters leading to the announcement of a merger. It further provides a supplementary explanation for the post-merger underperformance puzzle. Design/methodology/approach Examining a sample of cash-only, stock swap and mixed mergers completed between 1980 and 2011, it was found that bidder firms increase the use of real activities manipulation in the quarters leading up to the merger announcements. Using average abnormal stock return method, it is shown that the short-term positive effect of real activities manipulation on share prices is stronger than accrual-based earnings management. Findings While bidders are able to escape investors’ scrutiny in the short run, it is not the case in the long run. It was found that bidders’ long-run stock performance, measured by matched buy-and-hold stock returns, is inversely related to their pre-announcement level of earnings management. This paper contributes to the literature on earnings management by considering how real activities manipulations affect stock prices in mergers and acquisitions. Originality/value This study tests whether real activities manipulation, in addition to accrual-based earnings management, explains the underperformance puzzle of the acquiring firms in M&As. Zang (2012) argues that there is a greater likelihood for firms to engage in real activities manipulation, especially when firms are constrained in their use of accrual-based earnings management owing to heightened scrutiny or overuse in prior years.
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Grigorieva, Svetlana, and R. Morkovin. "The Effect Of Cross-Border And Domestic Acquisitions On Shareholder Wealth: Evidence From Brics Acquirers." Journal of Corporate Finance Research / Корпоративные Финансы | ISSN: 2073-0438 8, no. 4 (December 9, 2014): 34–45. http://dx.doi.org/10.17323/j.jcfr.2073-0438.8.4.2014.34-45.
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Svetlana A. Grigorieva National Research University The Higher School of Economics grigorievasa@mail.ru
The topic devoted to cross-border M&A performance has received wide attention in academic literature.Most existing studies examine wealth effects of international M&As in developed countries. Wecontribute to existing research by examining the market reaction to the announcements of M&As initiatedby companies from BRICS countries over 2000–2012. We assess the long-term performance ofM&A deals along with the short-term one and provide a copmarative analysis of company wealth gainsin cross-border and domestic M&As. Based on the sample of 117 cross-border deals and 247 domesticM&As we find that the stock market reacts favorably and statistically significant to the announcementsof domestic deals in the short run. Returns to foreign acquirer shareholders are also positive and statisticallysignificant. Comparing the effects of M&As on firm value in the short term for foreign anddomestic acquisitions we reveal that the latter outperform the cross-border M&As. Our analysis basedon the buy-and-hold abnormal return method shows the opposite result. We also find that the crossborderM&A deals increase the downside risk level of acquirers in the long term. According to ouranalysis, the key determinants of short- and long-term performance of M&A deals are the acquirer’sFCFF, percentage change in the acquiring country’s exchange rate against the target country currencyduring the acquisition year, and the level of international diversification of acquirers.
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Dogru, Tarik, Aysa Erdogan, and Murat Kizildag. "Marriott Starwood merger: what did we learn from a financial standpoint?" Journal of Hospitality and Tourism Insights 1, no. 2 (May 14, 2018): 121–36. http://dx.doi.org/10.1108/jhti-10-2017-0009.
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Purpose The purpose of this paper is to measure and observe stock market and investor reactions (benchmark adjusted cumulative abnormal returns (CARs)) to the announcement of Marriott’s acquisition of Starwood and related merger and acquisition (M&A) news and related activities over a two-year period. Design/methodology/approach Empirical models and quantifications were developed and tested through event study analysis to test the Marriot-Starwood M&A news and related activities and to observe the abnormal stock return patterns. Several data sources were employed including Factiva by Dow Jones, Wall Street Newspaper, CRSP/COMPUSTAT merged files, and ValueLine Research. Findings This paper provides financial insights and outcomes of pre-, during, and post-Marriot-Starwood merger. While equity returns to Starwood were mostly flat, Marriott experienced negative returns around the acquisition announcement and anytime a news article appears following the announcement. However, performance proxies showed that Marriott’s shareholders gained superior buy and hold returns following the acquisition in the long run. Research limitations/implications Short-term event study methodology might be less than perfect in examining the stock returns to acquisitions. Therefore, future research is encouraged to test and observe Marriot-Starwood merger using longer time periods with predictive analysis to check the further usability of the results. Practical implications The study’s findings practically signal that overreaction in the short term is followed by a correction with an improvement in returns and sales performance of Marriot. In the majority of the acquisitions, integration process is not planned until after the acquisition announcement or the deal completion. Originality/value This paper contributes to the existing literature by demonstrating the financial issues, challenges, and outcomes of the biggest merger in the history of the global lodging industry.
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Killins, Robert, and Peter V. Egly. "The long-run performance of US firms pursuing IPOs in foreign markets." Review of Accounting and Finance 17, no. 1 (February 12, 2018): 58–77. http://dx.doi.org/10.1108/raf-04-2016-0059.
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Purpose The purpose of this paper is to investigate the long-run performance of a unique set of US domiciled firms that have bypassed the US capital markets in pursuit of their initial public offering (IPO) overseas. Additionally, this paper then tests the popular underwriter prestige impact and the window of opportunity hypothesis on this unique subset of IPOs. Design/methodology/approach Using a sample of foreign and purely domestic IPOs made by US firms from 2000 to 2011, this study investigates the long-term performance, one-, two- and three-year by using two measures (buy-and-hold return and cumulative abnormal returns) to test the long-run returns of newly listed companies. Finally, the research incorporates both the traditional matching methodology (issue year and size) along with propensity score matching methodology. Findings FIPOs of US companies underperform DIPOs and their matched DIPOs; furthermore, FIPOs underperform the index of the two listing countries they use the most (UK and Canada). Although the choice of a reputable underwriter mitigates underperformance, the choice of listing in a foreign country only may be a result of possible high valuations accorded by foreign investors who buy US-listed companies on the domestic exchange possibly for reducing exchange rate risk and gaining US diversification without incurring additional costs. It is, thus, possible that US companies that undertake Foreign IPOs not only escape potentially higher Security and Exchange Commission regulations and disclosure but also benefit from higher valuations in the foreign markets. Originality/value To the best of the authors’ knowledge, this is the first study to investigate the long-term performance of US firms bypassing the US capital markets in pursuit of their initial equity offering elsewhere. Caglio et al. (2016) investigated why firms decide to pursue such equity raising activity but fail to investigate the firms’ actual performance after issuing equity. This research fills such a gap in the literature and is important for both academics and practitioners. Practitioners can use this information in assessing the quality of such investments in the long-run, and firms can use such information when determining the different options of issuing equity. Further, regulators should be aware of the implications that increased regulations have on capital raising activities in their domestic market.
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Sarma, S. N. "Stock Market Seasonality in an Emerging Market." Vikalpa: The Journal for Decision Makers 29, no. 3 (July 2004): 35–42. http://dx.doi.org/10.1177/0256090920040303.
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The objective of this paper is to explore the day-of-the-week effect on the Indian stock market returns in the post-reform era. Till the late seventies, empirical studies provided ample evidence as to the informational efficiency of the capital markets advocating futility of information in consistently generating abnormal returns. However, later studies identified certain anomalies in the efficient market postulate. One major anomaly brought forth was the calendar-related abnormal rates of return. Various studies in this domain empirically demonstrated, through parametric and non-parametric tests on the stock returns data, that turn of the year, month, week, and holidays have consistently generated abnormal equity returns in both the developed and emerging markets unrelated to the attendant risks. Studies on the Indian stock markets' calendar anomalies, especially in the post-reform era, are very few. In an attempt to fill this gap, this study explores the Indian stock market's efficiency in the 'weak form' in the context of calendar anomalies, especially in respect of the weekend effect. Daily returns generated by the SENSEX, NATEX, and BSE200 during January 1st 1996 to August 10th 2002 comprising a total of 1,667 observations for each of the indices are considered for testing the seasonality. While most of the studies have considered the returns of one of the major indices based on the closing values, this study examines the multiple indices for possible seasonality. An analysis of returns' pattern of multiple indices is helpful in identifying the presence or otherwise of the stock market seasonality associated with various portfolios and for testing the efficacy of investment game based on the observed patterns of the returns. This study employed the daily mean index value for generating the daily returns to relax the implied assumption of the earlier studies — by considering the closing values of the indices — that trading is done at the closing values. A non-parametric test — Kruskall-Wallis test using 'H' statistic — is employed for testing the seasonality in the Indian stock market returns. The null hypothesis tested is that there are no differences in the mean daily returns across the weekdays. The major findings of the study are as follows: The Indian stock markets do manifest seasonality in their returns' pattern. The Monday-Tuesday, Monday-Friday, and Wednesday-Friday sets have positive deviations for all the indices. The Monday-Friday set for all the indices has the highest positive deviation thereby indicating the presence of opportunity to make consistent abnormal returns through a trading strategy of buying on Mondays and selling on Fridays. The above-mentioned active strategy is found to be beneficial in case of SENSEX The above-mentioned active strategy is found to be beneficial in case of SENSEX alone during the study period while for the others — NATEX and BSE200 — a passive ‘buy and hold’ strategy is more effective. The study concludes that the observed patterns are useful in timing the deals thereby exploring the opportunity of exploiting the observed regularities in the Indian stock market returns.
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Woo, Won-Seok, Suhyun Cho, Kyung-Hee Park, and Jinho Byun. "Excess offer premium and acquirers’ performance." Studies in Economics and Finance 35, no. 3 (August 6, 2018): 407–25. http://dx.doi.org/10.1108/sef-06-2016-0135.
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PurposeThis paper aims to investigate the causes of mergers and acquisitions (M&A) deals that acquiring firms pay excess premium beyond the market-expected level and examine the relation between the announcement return and long-term performance of the acquiring firms.Design/methodology/approachBased on a sample of 1,767 US firms’ M&A deals from 2000 to 2014, the authors use the expectation model used by Ang and Ismail (2015) to measure normal offer premium in an M&A deal. They conduct the standard event study methodology to observe the market reaction for acquiring companies on the announcement day. Buy-and-hold abnormal returns are used for the main explanatory variable so as to find the impact of the premium paid on the long-term performance of the acquirer.FindingsFirst, acquiring firms are faced with negative market returns when acquiring firms pay excess premiums. Second, poor long-term performance of the acquiring firms is observed if acquiring firms pay excess premium. Finally, the negative relation between excess premium and acquiring firms’ long-term performance weakens, as the sample period becomes longer.Research limitations/implicationsThe hypotheses and results of the empirical study are as follows. First, the acquirer’s market reaction on the announcement day is negative when it pays an excess offer premium. This is because the market perceives the premium to be greater than the value of the deal, which damages the value of the market, as it is not perceived as a proxy for future synergy. Second, the acquirer’s long-term performance is low when it pays the excess offer premium. It is the same result as the acquirer’s market reaction on the announcement day. This shows that the excess premium does not result in either a short-term positive reaction or a long-term profit for the acquiring shareholders. However, it is found that the relationship between the excess premium and the long-term performance of the acquirer decreases with time. This is because the long-term performance of the acquirer is more affected by management and other events after the deal.Originality/valueThe authors divide the total premium paid into the normal offer premium and the excess premium, and their focus is on the excess premium part. The main contribution of this paper is that it analyzes how the excess premium affects the market reaction on the announcement day and the long-term performance of acquiring firms.
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Arora, Nischay, and Balwinder Singh. "The long-run performance of SME IPOs in India: empirical evidence from Indian stock market." Journal of Asia Business Studies ahead-of-print, ahead-of-print (June 15, 2020). http://dx.doi.org/10.1108/jabs-10-2019-0305.
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Purpose The purpose of this paper is to study the pattern of long-run performance of small and medium enterprises (SMEs) initial public offerings (IPOs) and examine the firm- and issue-related determinants of long-run performance of SME IPOs in India. Design/methodology/approach The 3 6, 9 and 12 months share returns of Indian SME IPOs is studied using event time methodologies, i.e. buy and hold returns, cumulative abnormal returns and wealth relatives on a sample of 375 SME IPOs issued during February 2012 to May 2018. Additionally, ordinary least square regression has been used to investigate the determinants of long-run performance of SME IPOs on a reduced sample of 104 because of non-availability of price observations. Findings The findings reveal that Indian SME IPOs exhibit long-run overperformance contradicting the international evidences of underperformance, and this overperformance is significantly evident using buy and hold abnormal return (BHAR). Furthermore, based on the divergence of opinion hypothesis, fads theory and windows of opportunity hypothesis, the results reveal that on one hand, issue size and oversubscription negatively affect BHAR, while on the other hand, auditor reputation, underwriter reputation, hot market, underpricing, inverse of issue price, profits prior to listing positively affect long-run performance. However, firm age, firm size, debt equity ratio, volatility and long-run performance computed through BHAR lacks significant relationship. Research limitations/implications The study relied on event time methodology of measuring aftermarket performance of one year because of the limited availability of price offerings. Hence, the study could be extended to analyze aftermarket returns over a period of three to five years to enable reaching the vivid conclusions. Calendar time methodology may also be used to compute abnormal returns. Practical implications The results based on the study provides an implication to the investors by providing them an opportunity to bank higher long-run returns by engaging in active and timely trading strategies. Nevertheless, the results also show that investors should be cautioned while taking investment decisions. Originality/value The study contributes to rising body of international literature by analyzing the larger and recent sample of IPOs issued from 2012 to 2018 listed on SME exchange.
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Ma, Qingzhong, David A. Whidbee, and Wei Zhang. "Limits of arbitrage and mispricing: evidence from mergers and acquisitions." Review of Behavioral Finance ahead-of-print, ahead-of-print (September 8, 2021). http://dx.doi.org/10.1108/rbf-01-2021-0005.
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PurposeThis paper examines the extent to which noise demand and limits of arbitrage affect the pricing of acquirer stocks both at the announcement period and over the longer horizon.Design/methodology/approachAn event study approach was adopted to measure announcement-period cumulative abnormal returns. Long-horizon returns are measured using buy-and-hold abnormal returns (BHARs), calendar time portfolios (CTPRs), and subsequent earnings announcement period abnormal returns. Main methodologies include ordinary least squared (OLS) regressions, Logit regressions, and portfolio analysis.Findings(1) Acquirer stocks with high idiosyncratic volatility (the proxy for the security level characteristic most directly associated with limits to arbitrage) earn higher announcement-period abnormal returns. (2) The return pattern reverses over the subsequent longer horizon, resembling news-driven transitory mispricing. (3) The mispricing is greater when deal and firm characteristics exacerbate the limits of arbitrage, and it weakens over time. (4) Transactions by higher idiosyncratic volatility acquirers are more likely to fail.Originality/valueLimits of arbitrage theory have been tested mostly in information-free circumstances. The findings in this paper extend the supporting evidence for limits of arbitrage explaining mispricing beyond the boundaries of information-free circumstances.
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T. Nguyen, Hung, Hang V. D. Pham, and Nguyen Hung. "The Profitability of the Moving Average Strategy in the French Stock Market." Journal of Economics and Development, August 15, 2014, 21–38. http://dx.doi.org/10.33301/2014.16.02.02.
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This paper studies the cross-sectional profitability of moving average timing portfolios in the French stock market over the period from January 1, 1995 to December 31, 2012. The results provide strong evidence that the moving average timing outperforms the buy-and-hold strategy with higher returns and less risk exposure. On average, moving average portfolios generate an abnormal return of 3.72% per annum and always perform better than buy-and-hold benchmark portfolios across different lag length and volatility portfolios. Moreover, our results prevail after we control for transaction costs. Keywords:Technical analysis, moving average, cross-sectional profit
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Rabah Gana, Marjène, and Anis El Ammari. "Long-term performance and transfer of shares on the Tunisian Stock Exchange." Revue Gouvernance 6, no. 1 (March 3, 2017). http://dx.doi.org/10.7202/1039096ar.
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In this study, we examine the long-run performance of a sample of 32 Tunisian crosslisted firms on the Tunisian stock exchange over the period 1992-2006. We use several approaches and conduct robust tests. We observed a strong underperformance of 32 percent over the 36-month period following the listing, when the buy-and-hold abnormal return measure is used. The underperformance is preceded by a positive and significant return of about 20 percent on the first 5 days of listing, which persists for 6 months. We also assess the role of governance variables. The agency theory explains the behaviour of controlling stockholders when transferring stocks. Considering other control variables shows that the hypothesis of the window opportunity explains the underperformance and that the ex-ante uncertainty, measured by the age of the newly listed firm, participate in the deterioration of the long-term stock performance.
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Parisi F., Antonino. Estudios de Administración 10, no. 2 (March 10, 2020): 59. http://dx.doi.org/10.5354/0719-0816.2003.56795.
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This study analyzes the efficiency of some technical analyses's tools more used: moving average 2, 10, 50, 100 and 200 days, momentum of 7 days, %R of 10 days, %K of a day and RSI of 10 days. For it one worked with daily prices series of Dow Jones Industrial Average (DJI) and Nasdaq's stocks, corresponding to period January 02 of 1992 -- July 18 of 2002. The results aim at that the best techniques, for the stocks sample analyzed, are %K and %R. These surpass in yield to the other techniques and to the «buy and hold» strategy, have greater stability on the time, and produces the greater abnormal return, still considering the transaction costs. The yield of %K is significantly greater to the one of the other techniques, as much in the DJI's stocks like of the Nasdaq's stocks. Also it was observed that the moving average of 10, 50, 100 and 200 days, the momentum of 7 days and the RSI are statistically equivalent, as far as yield. The results of the study indicate that the technical analysis would not only allow to increase the yield by means of an active management of the investments, but also to reduce the volatileness of the returns and, consequently, the level of assumed risk.