Firm Returns Research Articles

The return response on gold and crude oil during global geopolitical issues

The geopolitical issues together with the COVID-19 pandemic in earlier of 2022 triggered instability in the world economy. The objective of this study is to analyze the correlation and response of the returns of firms in the energy sector to changes in gold and crude oil prices. The observed data is drawn over the period June 2021 to June 2022 on the monthly basis for 68 listed firms in the energy sector, gold prices, and crude oil prices. This study finds that the changes in gold returns tend not to affect the changes in returns of firms in the energy sector. Reversely, the changes in returns of crude oil significantly affect the changes in returns of firms in the energy sector.

Social media managers’ customer orientation, service climate and social media followers’ willingness to pay: moderated mediation model with triadic data

PurposeThis paper aims to examine the relationship between the interaction of the social media manager’s customer orientation and the service climate perceived by supervisors, on the customer’s perception of brand authenticity and, through it, on the willingness to pay a price premium.Design/methodology/approachThis study uses triadic data from 200 social media followers, 20 social media managers and 20 supervisors from a range of industries.FindingsThe findings show that the customer orientation of the brand social media managers interacts with their work context to influence social media followers’ perceptions of brand authenticity, and ultimately, their willingness to pay a premium price. Finally, product involvement moderates the relationship between brand authenticity and willingness to pay a premium price.Research limitations/implicationsThis study shows how and when the disposition of brand social media managers affects the attitudes and intentions of the social media followers. Further research should continue this novel line of research and explore in greater depth the impact of social media managers and their environments.Practical implicationsSocial media managers’ values should fit those of their organization. This organization-person fit reflects on social media and improves social media followers’ perceptions of brand authenticity and, consequently, their willingness to pay a premium price.Originality/valueLeveraging participation in social media is currently a key issue for firms. However, the internal determinants of successful social media usage have received limited attention from researchers. Therefore, this research contributes to the social media literature by suggesting the need to consider the characteristics of social media managers and their context to promote the outcomes of social media usage, specifically brand authenticity and willingness to pay a premium price.

Pricing contingent convertibles with idiosyncratic risk

AbstractWe consider capital structure including equity, straight bonds (SBs), and contingent convertibles (CoCos) for nonfinancial firms. We price equity and CoCos by a utility‐based method. We show that benefits from issuing CoCos increase dramatically with idiosyncratic risk and risk aversion. The firm value is concave in CoCos' conversion ratio and the optimal conversion ratio increases with risk aversion and idiosyncratic risk. If risk aversion is sufficiently high, shareholders' risk‐shifting incentives disappear, and the firm issues less CoCos and equity and more SBs as idiosyncratic risk rises. The higher the idiosyncratic risk or risk aversion, the higher the leverage.

Long-run Stock Return of IPO Firms in India: Examining Investment and Profitability Hypothesis

The finance literature has analysed several aspects of the IPO market, namely, hot issue market, initial under-pricing, and long-run underperformance. Among them, findings of long-run underperformance are particularly significant as it indicates that investors incur losses on a perpetual basis by investing in a portfolio of IPO firms. According to the OECD (2019) , during 2009–2019, the number of IPO issuances by non-financial firms in India were the third-highest globally. In the case of India, only a few studies have investigated the long-run performance of IPO firms. Accordingly, the present study fills a void in this arena. The study, along with the conventional event study techniques, deploys the Fama-French Five-Factor model for analysis of long-run underperformance. The study estimates investment and profitbility factors for India following the methodology illustrated by Fama-French (2015) . The study finds that long-run underperformance by the IPO firms is not absolute but specific to the sample and methodology used for analysis. It also finds that underperformance is prevalent in high IPO volume years. The regression results for IPO firms as portfolios in the capital asset pricing framework do not show any long-run underperformance. This finding supports the conclusion that the long-run underperformance by IPOs reported in the previous studies results suffers from sample and methodology bias. The analyses in the five-factor framework show the plausibility of higher investment by IPO firms resulting in lower market return. IPO firms make above-industry-average capital expenditure, and their profitability converges with the industry after issue.

Voluntary Disclosure and Stock Market Return of Non-Financial Firms Listed on the Nairobi Securities Exchange

Voluntary disclosure is empowering the public to get more informed about the company and portrays how the organization wants the outsiders to perceive it in their decision-making process. Voluntary disclosure provides information beyond the compliance requirement by the law. This study examined the effect of voluntary disclosure on stock market return of non-financial firms listed on the Nairobi Securities Exchange. The study adopted positivism as data collection and hypothesis development and testing was achieved. The study used quantitative research design to correlate study variables using mathematical analysis methods. The correlation results indicated that voluntary disclosure portrayed a positive association to stock market return. Regression of coefficients of the static model results indicate that voluntary disclosure and stock market return of non-financial firms listed on the Nairobi securities exchange is positively and significantly related. The results implied that there exist a positive and significant relationship between voluntary disclosure on stock market return since their coefficient values were positive. The regression coefficients result of lagged stock market return and stock market return was positively and significantly related. The regression of coefficients results indicate that voluntary disclosure and stock market return is positively and significantly related. The study concluded that voluntary disclosure has a positive and significant effect on stock market return in non-financial firms on the Nairobi securities exchange. Therefore, voluntary disclosure was found to play a significant role in the stock market performance that generated return predictability. These results imply that when more information is disclosed about the firm then the market generating excess returns. Voluntary disclosure of information could facilitate the public to be more confident in the company. The study also shows that voluntary disclosure is relatively correlated with stock returns over time. The study recommends that by taking the voluntary disclosure into account as a significant determinant of stock market volatility in asset price models, investors can enhance their stock returns. The results can also help policymakers’ efforts to stabilize stock market volatility and uncertainty in order to protect investors’ wealth and attract more investors. Keywords: Voluntary Disclosure, Stock Market Return & Non-Financial Firms

The market values of Chinese energy firms during COVID-19 pandemic

This paper studies the impact of coronavirus disease 2019 (COVID-19) on Chinese energy firms’ market values by using event study approach. First, we find that the cumulative abnormal return (CAR) of energy firms significantly decreases 2.7–10.6% on average due to the negative shock of COVID-19 on energy market. Second, we present that Corporate Social Responsibility (CSR) performance could significantly reduce the negative market reaction of energy firms during COVID-19. Finally, in using the intervention policy of various cities as exogenous shocks, we provide evidence that stock returns of energy firms significantly increase after cities where firms located in issued lockdown policies.

What drives enterprise asset-backed securitization in China?

ABSTRACT Using transaction-level data on enterprise asset-backed securities (ABS), we investigate the relationship between ABS issuance, interest savings, and firm characteristics in China. About half of the ABS deals were issued by small and medium-sized enterprises (SMEs), and around 70% of the issues carry a coupon rate lower than the average interest rate on bank loans. Firms issue more ABS when the interest savings are high, or when they face more restricted access to credit. Private firms are most responsive to the benefits provided by the enterprise ABS market compared to state-owned enterprises and foreign companies.

The influence of the crude oil and the gold on energy sector returns

Oil and gold are the most essential commodities in the business world. During the Covid-19 pandemic, the price of gold tended to be stable and the price of crude oil, on the other hand, tended to increase. The objective of this study is to analyze the effect of crude oil returns and gold returns on the returns of firms especially in the energy sector during 8 June 2020 to 4 June 2021. This study finds that only crude oil returns significantly and positively impact the returns of the firms in the energy sector.

Premature R&D alliance termination and shareholder returns: Evidence from the biopharmaceutical industry

AbstractPrior research has highlighted the performance implications of R&D alliances for innovation outcomes and the financial returns of firms. However, research on R&D alliances has yet to offer insights into how the premature termination of such alliances, before fulfilling their predetermined innovation objectives, affects the shareholder returns of the firm. Applying transaction cost economics (TCE) theory and real options (RO) logic to a post‐formation alliance setting, we posit that premature termination of R&D alliances prompts relative volatility in investors' prospective benefits and risks. Employing an event study analysis method and using a sample of 116 premature alliance termination announcements in the biopharmaceutical industry, we observe an average negative abnormal stock return of 3.21% for focal firms. Further, our analyses reveal that investors respond even more adversely to alliances terminated unilaterally by the partner of the focal firm in which they invested than those terminated through mutual agreements or by the focal firm itself. Also, we find that alliance duration from formation to termination mitigates the negative effect of termination on shareholder returns.

The impact of intellectual capital and managerial ability on the financial performance: an analysis on infrastructure, utilities and transportation companies in indonesia

Intellectual capital is an intangible asset that is strategically owned by a firm in the expansion of a knowledge-based economy. Intangible assets require a favorable disclosure to afford value to the firm financial performance. This research aims to analyze the effect of the added value of intellectual capital, intellectual capital disclosure (ICD), and managerial ability on the firm financial performance. This research uses data from infrastructure companies, utilities, and transportation in Indonesia for the 2017-2020 period. The number of samples used in the research were 30 firms per year, so the total obtained 120 samples of the firm. The data was processed using the Stata 16 version application. The research results showed, that the variables researched such as the added value of intellectual capital (M-VAIC), IC disclosure (Intellectual Capital Disclosure-ICD) and managerial ability (MA) insignificantly affect the financial performance that measured with ROA, ROE, net profit margin-NPM, tobinsQ, and firm return.

Underpricing and aftermarket performance of IPOs during the Covid-19 period: Evidence from Istanbul stock exchange

The effect of uncertainty on IPO underpricing, short-term performance after IPO, and hot-and-cold-IPO market cycles have received a great deal of attention in the literature. This study revisits these issues of IPO activities under the Covid-19 pandemic with a focus on the Turkish IPO market. Measuring the underpricing and aftermarket performance of IPOs based on the cumulative abnormal returns of the first, second, third, fourth, fifth, tenth, and twenty-first days, we examine how underpricing and aftermarket performances are influenced by Covid-19 and some uncertainty proxies, such as some company characteristics (age, total assets), offering characteristics (gross proceeds, IPO price risk), and aftermarket variables (first-day trading volume, standard deviation of stock prices after the IPO) after controlling for firm, industry and market level variables (first-day trading value, the portion of the firm offered to public, price-earnings ratio, dummy variables for technology, manufacturing, and financial institutions sectors, standard deviation of a market index, moving average return of a market index). The study documents that while an IPO launched during the Covid-19 period has larger underpricing, an average IPO firm that is older, has more assets, generates larger proceeds, trades more on its first day of trading, is expected to fluctuate less after the IPO has a smaller underpricing at its initial public offering. Empirical results show that short-term market-adjusted abnormal returns of IPO firms during the pandemic are much larger than those before the pandemic.

Can sports-based corporate social responsibility performance reflect firms' market values and risks? Intertemporal evidence from Taiwan iSports corporate award-winning firms

PurposeWith the growing popularity of sports in Taiwan, the Sports Administration under the Ministry of Education introduced the Taiwan iSports Corporate Award campaign. This emphasised sports for employees and assisted in developing and supporting corporate social responsibility (CSR) activities in the sports industry through collaboration with firms, thereby enhancing their corporate image, facilitating the recruitment of high-quality employees and highlighting healthy human resources and brand value. Can sports-based CSR performance reflect firms' market values and reduce their market risks? This study regards Taiwan iSports Corporate Award announcements as important sports-based CSR disclosures and incorporates financial econometrics to examine the relationship between the announcement of sports-based CSR performance and firms' market values and risks.Design/methodology/approachAn event study is conducted to clarify the reactions of the Taiwan iSports Corporate Award announcement event on the abnormal returns of award-winning firms during the 2016–2021 period, and a regression discontinuity design (RDD) model is employed to verify the robustness of the empirical results using the event study method.FindingsTaiwan iSports Corporate Award announcements are not significantly reflected in the positive abnormal returns of award-winning firms. No causal relationship is found between the two. However, there are signs of relatively less systematic risks when investing in award-winning firms than in the market.Originality/valueThis study provides empirical evidence and managerial implications for Taiwan iSports Corporate Award-winning firms. It effectively enables business operators, sponsors or investors to understand the reactions of announcing sports-based CSR performance on the financial market and provides references for corporate organizations' CSR and sustainable development.

Work from Home and Productivity: Evidence from Personnel and Analytics Data on Information Technology Professionals

We study employee productivity before and during the working-from-home period of the COVID-19 pandemic, using personnel and analytics data from over 10,000 skilled professionals at an Indian technology company. Hours worked increased, output declined slightly, and productivity fell 8%–19%. We then analyze determinants of productivity changes. An important source is higher communication costs. Time spent on coordination activities and meetings increased, while uninterrupted work hours shrank considerably. Employees networked with fewer individuals and business units inside and outside the firm and had fewer one-to-one meetings with supervisors. The findings suggest key issues for firms in implementing remote work.

Good growth, bad growth: Market reaction to capital raising for REIT expansion

When a firm issues security to finance its growth, how does the market react and do investors differentiate between good and bad growth? By manually reading the intended use of proceeds of each security offering of U.S. REITs during 2000–2020, we classify whether the proceeds are used for expansionary or other purposes and analyze whether security offerings that are used to finance sub-optimal growth matter for shareholders' wealth. Adopting an event study method, we find that the expansionary use of proceeds does not affect shareholders' wealth following a debt offering announcement. However, when we distinguish good growth from bad growth, we find that debt financing used for good growth is associated with an increase in shareholders' wealth (+1.734% abnormal return in the 5-day event window) and debt financing used for bad growth is associated with a decrease in shareholders' wealth (−0.563% abnormal return in the 5-day event window). For equity offering announcements, on average, neither the expansionary use of proceeds nor the nature of growth significantly affects shareholder wealth.

Digitalization and third-party logistics performance: exploring the roles of customer collaboration and government support

PurposeThe authors investigate how logistics digitalization affects two types of third-party logistics (3PL) performance: financial performance and service performance. In particular, the authors explore the mediating role of customer collaboration between logistics digitalization and firm performance based on organizational information processing theory and examine the moderating role of government support.Design/methodology/approachThe authors use an SPSS macro program (PROCESS regression analysis) to analyze survey data from 235 3PL firms in China. The mediation model, moderation model and moderated mediation model are tested.FindingsThe empirical results show that in the new age of digitalization transformation, logistics digitalization positively affects 3PL's financial performance and service performance by strengthening customer collaboration. Additionally, government support amplifies the positive effect of customer collaboration on service performance but not financial performance. The moderated mediation test further indicates that government support strengthens the positive indirect effect of digitalization on service performance through customer collaboration.Originality/valueThis study offers empirical insights into the growing body of 3PL literature, and the findings contribute to the theoretical and practical understanding of the emerging research topic of digital transformation (DT) and sustainability issues in 3PL firms.

Glasgow climate pact and the global clean energy index constituent stocks

PurposeThis study examined the impact of the Glasgow Climate Pact on the abnormal returns of global clean energy stocks. Further, this study examines which country-specific and firm-specific variables drive the cumulative abnormal returns (CARs) of clean energy stocks.Design/methodology/approachThe authors used the event study method and cross-sectional multivariate regression model. The clean energy stocks in this study are limited to 81 constituent firms of the S&P Global Clean Energy Index across 17 nations. The final sample includes 80 firms and the sample period ranges from January 26, 2021, to December 07, 2021.FindingsThe study finds that the Glasgow Climate Pact negatively affects the stock returns of clean energy firms. Moreover, the climate change performance index (CCPI) positively impacts cumulative abnormal returns (CARs), signifying that clean energy investors react positively to firms in nations with good CCPI scores. The environmental, social and governance (ESG) measure for the shorter window (−1, +1) exhibited a negative relationship with CARs. The firm-specific variables (BTM, stock liquidity, size and past returns) exhibit a negative relationship with CARs in different event windows.Research limitations/implicationsThe authors use the CCPI as a proxy for the stringency of environmental policies in any nation. The authors extend the existing literature by employing firm-specific variables and supporting previous findings. Their findings have policy implications for clean energy investors, policymakers and other market participants.Practical implicationsClimate risks impact the global financial market, so the findings have implications for global regulatory bodies. Currently, there are bankruptcy cases due to climate risks. Because financial markets must play a critical role in shifting the economy toward a green one, regulators can use the cross-sectional drivers of this study to shape policy. It is also critical for regulators to reduce stock price volatility in the event of the implementation of environmental regulations and improve environmental disclosures by publicly traded companies. Furthermore, governments are interested in researching the effects of environmental regulations to protect stakeholders' interests. These regulations significantly impact emerging markets because they lack the same solid institutional frameworks as developed markets.Originality/valueThe authors provide evidence that firms with better ESG scores and larger firm sizes have experienced fewer abnormal returns, as these firms have stable financial and non-financial fundamentals. This timely study on the ongoing regulatory shift in environmental policy will help investors, policymakers, firms and other stakeholders make relevant decisions.

Product Market Competition, Labor Mobility, and the Cross-Section of Stock Returns

Abstract This paper explores the impact of product market competition on the positive relation between labor mobility (LM) and future returns. We develop a production-based model and formalize the intuition that low exposure to systematic risk in a concentrated industry limits LM’s amplifying effect on operating leverage. Therefore, the model predicts a stronger positive relation between LM and expected returns for firms in competitive industries. Consistent with the model’s prediction, we empirically find that LM predicts returns only among firms in competitive industries. This evidence suggests that the intensity of competition in firms’ product market potentially drives the positive LM-return relation. (JEL G12, G14, J69) Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

The effect of audit quality as a moderator on the relationship between financial performance indicators and the stock return

This study investigates how audit quality moderates the effect of financial performance indicators on the stock returns of Amman Stock Exchange-listed firms (ASE). The panel data analysis selected the data of 95 ASE-listed firms from 2013 through 2021. This analysis demonstrates a significant inverse relationship between a company's book value and its stock returns. A statistically negative relationship was observed between cash flow, dividends per share, and stock return. The empirical results of this study confirm the moderating influence of audit quality in the relationship between financial performance and stock return. Firstly, auditor's fees have a significant impact on the relationship between firm stock returns and EPS, BV, DPS, and cash flows (CFO). The size of the auditing firm moderates the relationship between company stock returns and EPS, DPS, and the CFO, but not with book value (BV). The auditor's opinion moderates the relationship between business stock returns and EPS, BV, and DPS but not the relationship between firm stock returns and cash flows (CFO). The study suggests that regulatory bodies like the Companies Control Department (CCD) and ASE should make sure that local audit firms in Jordan improve their audit quality to be on par with the Big 4 audit firms in order to improve their financial performance measures and stock returns.

The Impact of ESG Scores on Corporate Performance - A-Share Banks and Securities Firms

Globally, companies are increasingly paying attention to the impact of environmental, social and governance (ESGs) on corporate performance. The objective of the study is to the impact of ESG scores of third-party institutions on the performance of Banks and Securities Firms. Based on the data of A-share banks and securities firms with complete ESG scores from Bloomberg 2011-2021, 19 listed banks and securities firms were selected. A linear regression of their return on assets, E, S, G, and ESG scores, and corporate performance is conducted to analyze which specific factor scores have the most direct impact on the corporate performance of securities firms, and thus help them to better implement ESG strategies. The results of the study revealed that the scores of G factors have the most direct impact on the corporate performance of banks and securities firms, and that securities firms need to improve the scores of G factors faster to achieve higher corporate performance. Therefore, information disclosure, as a part of corporate governance, should also be on the agenda when it is in line with the excess returns of securities firms.

The Added Bonus of Foreign Investments: Global Mutual Funds and Multinational Firm Returns

The Added Bonus of Foreign Investments: Global Mutual Funds and Multinational Firm Returns