Decline In Market Value Research Articles

Environment and value Does drinking water quality affect house prices?

This research paper investigates the effect of drinking water quality on property values in Charlesbourg, a major municipality (70,000 inhabitants) of the Quebec City region where repeated water‐related health problems were experienced in 1990 and 1991. In this paper, 807 bungalow sales are sampled from the data bank of the Quebec Urban Community (QUC) Appraisal Division, and environmental information pertaining to local drinking water quality levels supplements data on physical, neighbourhood and access attributes. Our findings indicate that water‐related health hazards exert a detrimental and measurable impact on higher property values, with the average duration of the warning period per sector clearly emerging as the dominant factor. More precisely, market segmentation suggests that the higher the price of the property, the sharper the decline in market value because of this factor. In the current case study, the most severely affected properties of the upper third segment of the market experienced drops in value ranging from 5.2 to 10.3 percent of mean sale price.

Defense Procurement Fraud, Penalties, and Contractor Influence

Press reports of investigations of fraud, indictments, and suspensions in military procurement are associated with significantly negative average abnormal returns in the stocks of affected firms. Abnormal stock returns are significantly less negative, however, for firms ranking among the top 100 defense contractors than for unranked contractors, even after one controls for firm size, the frauds' characteristics, and the firm's recidivism. Unranked contractors are penalized heavily for procurment frauds, experiencing both a decline in market value and a subsequent loss in government‐derived revenues. Furthermore, these losses are related to the percentage of the firm's revenues that derive from government contracts. Influential contractors, in contrast, are penalized lightly, experiencing negligible changes in share value and government contract revenue.

Expectations about Real Returns

In this article, the authors provide empirical evidence concerning real returns for stocks and bonds in order to consider their impact on spending rules for large portfolios. Their analysis of the data supports the argument that 5% (or higher) real returns are not sustainable in the long run. Therefore, an endowment fund that is invested in equities, spends 5% a year, and earns the real return on stocks will, in all likelihood, see its market value decline below the beginning value at some point, absent new contributions. The actual record, shown in the article from probability standpoint, could lead institutional investors in particular to reformulate their expectations about real returns, and may also influence individual investors9 expectations about future real returns.

Defense Procurement Fraud, Penalties, and Contractor Influence

Press reports of military procurement fraud investigations, indictments, and suspensions are associated with significantly negative average abnormal returns in the stocks of affected firms. Abnormal stock returns are significantly less negative, however, for firms ranking among the Top 100 defense contractors than for unranked contractors, even after controlling for firm size, the fraud's characteristics, and the firm's recidivism. Unranked contractors are penalized heavily for procurement frauds, experiencing both a decline in market value and a subsequent loss in government-derived revenues. Furthermore, these losses are related to the percentage of the firm's revenues that derive from government contracts. Influential contractors, in contrast, are penalized lightly, experiencing negligible changes in share value and government contract revenue.

The Effect of Financial Statement Classification of Hybrid Financial Instruments on Financial Analysts' Stock Price Judgments

This paper investigates whether the balance sheet classification of financial instruments that include attributes of both debt and equity (i.e., hybrid financial instruments) affects the stock price judgments of buy-side financial analysts. Financial economics research documents that, on average, firms announcing an offering of additional common equity securities experience a decline in the market value of their outstanding common stock. In contrast, firms financing with straight debt generally do not experience a decline in common stock market value (see Smith [1986] for a summary). Psychology research suggests that, when making

Intra- and Interindustry Effects of Bank Securities Market Activities: The Case of Discount Brokerage

Despite substantial debate, there has been little empirical analysis of the economic arguments concerning commercial bank expansion into securities activities. This paper uses the stock price response of commercial banking firms and securities firms to examine the risk and return effects of the announcement of bank entry into one such activity, discount brokerage. Our findings indicate that, while bank profitability and risk were largely unaffected by such entry, securities firms experienced a significant decline in market value. These results indicate that the objection of the securities industry to bank discount brokerage expansion was largely self-motivated and that bank safety and soundness would not be imperiled by such expansions.