Higher Stock Returns Research Articles

Pension funding and the cross section of stock returns - The case of Germany

We re-examine the relation between the funding of corporate pension plans and a cross-section of stock returns. In Germany, we observe an increasing funding of historically unfunded pension plans. Firms may freely choose to underfund or not even fund pension plans at all. We find that lower funding levels are related to higher unexpected future earnings and higher stock returns. In Germany, firms with lower pension funding levels perform better than expected by the capital market in contrast to the United States and the United Kingdom. The capital market's underreaction to the earnings announcements of firms with highly underfunded pension plans compared to firms with well-funded plans is higher for short- and long-time horizons. The underreaction is substantially lower for firms with more investor attention and less pension plan and firm opacity.

Business Analysis of Toyota Based on Enterprise Value Multiple and PEST Analysis

Toyota is a long-established automobile manufacturing company with both a broad market and abundant economic activities. This paper conducts a business analysis of the Toyota company by analyzing the accounting statements and financial data of Toyota company for sales, profitability, and stock value. Overall, Toyota has an advantageous position in terms of sales compared to other competitor companies and also in terms of profitability by analyzing the marginal net profit, it is concluded that Toyota's profitability is in the middle to upper level compared to other competitors. In the stock value analysis, by comparing the enterprise value multiple and the price-to-earnings ratio analysis, it is concluded that Toyota has the highest price-to-earnings ratio compared to other competitors, thus concluding that Toyota has a high stock return and a rich investment value. This research paper provides relevant business analysis for major companies in the automotive manufacturing industry for the last two years, reflecting the business conditions of different companies and the future prospects of Toyota.

The Effect of Financial Ratio and Exchange Rate on Stock Return

This study aims to test whether there is a relationship between financial ratios and the exchange rate on stock returns. Data taken from IDX is a transportation sub-sector company during 2017- 2019. Analysis was performed using multiple linear regression analysis. The results of this study indicate that financial ratios such as Return on Assets and Debt to Equity Ratio have a positive impact on stock returns. The Exchange Rate variable has a negative impact on Stock Return. Meanwhile, the Current Ratio and Price Earnings Ratio do not contribute to an increase or decrease in Stock Returns. The implications of this study indicate that this research can be used as a reference that profitability can be used as a guide for investors in investing their funds. In addition, the current ratio cannot be used as a reference that a company with a high current ratio will also have a high stock return

Corporate immunity during crises and pandemics: does ESG matter? Literature review and future prospects

PurposeThis research aims at synthesizing the existing body of literature on the role of environmental, social and governance (ESG) during the Covid-19 global pandemic, identifying the research agenda and perspectives on the role of ESG during times of economic turbulences and pointing to gaps and future research directions in this area.Design/methodology/approachA literature review of academic articles that focus on the role of ESG investments during the Covid-19 pandemic is conducted. These studies are identified based on searching/containing the keywords “ESG”, “Corporate Social Responsibility (CSR)”, “Sustainability” and “Sustainable Finance” in combination with one or more of the following terms: “Covid-19”, “Pandemic” “and Crisis”. Then, the authors explore the key directions/themes in these papers, and highlight the main gaps and areas that are evolving as future research opportunities.FindingsThe empirical findings provide overall compelling evidence in support of the role of ESG during times of crisis, especially when it comes to stock risk and volatility. For example, several studies report that ESG stocks are associated with superior stock performance (higher stock returns and firm value) during the pandemic, while other studies report that ESG act as a risk protection tool during times of crisis, as they document that ESG stocks are associated with lower volatility and lower downside risk during the Covid-19 crisis.Originality/valueTo the best of the authors knowledge, no review of the literature on the role that ESG plays during crises and pandemics has been conducted before. Thus, it fulfills this research gap in the literature.

The effect of voluntary and mandatory corporate social responsibility disclosure on firm profitability: Evidence from China

We examine the association between a firm's profitability and its voluntary and mandatory CSR disclosures. We find both voluntary and mandatory CSR disclosure has a negative effect on the firm's profitability and voluntary CSR disclosure has a stronger negative effect than mandatory CSR disclosure. In addition, for firms with better corporate governance and better financial condition, the negative effect of voluntary disclosure on profitability weakens. We believe the firms voluntarily disclosing CSR are eager to attract more long-term investors, so they spend more on CSR activities and lower their profitability. We also find that firm with voluntary CSR disclosure attracts more institutional investors, has higher stock return, and raises more debt.

Boardroom racial diversity: Evidence from the Black Lives Matter protests

AbstractResearch Question/IssueThis paper provides evidence that the Black Lives Matter (BLM) protests that followed the killing of George Floyd on May 25, 2020, brought immediate changes to the US corporate boards.Research Findings/InsightsUsing a sample of S&P 500 index companies, we find that companies with higher representation of Black directors are associated with higher stock returns during the mass BLM protests. Within 1 year after the BLM protests, 10.7% of the sample firms hired at least one Black director (compared to having no Black representation on the board before the protests), and 31% of the newly appointed directors were Black. We find that companies typically add new diverse directors by increasing the board size, but there is no evidence of negative value effect or decreasing director quality.Theoretical/Academic ImplicationsWe have observed increased disclosures of racial equity topics in the proxy statements, as well as significant increase of Black director representation in the boards. In the meantime, we do not find any valuation or stock performance effects related to boardroom racial diversity 1 year after the BLM protests.Practitioner/Policy ImplicationsMass protests play an important role in shaping corporate governance responses. The finding that racial diversity can be increased at an unprecedented speed without loss in value is consistent with the view that a boost in boardroom diversity is possible under strong multichannel pressure from investors, consumers, employees, and regulators.

PENGARUH LIKUIDITAS TERHADAP RETURN SAHAM DENGAN PROFITABILITAS SEBAGAI VARIABEL INTERVENING PADA PERUSAHAAN TECHNOLOGY YANG TERDAFTAR DI BURSA EFEK INDONESIA PERIODE TAHUN 2016-2020

Stock return is the value obtained as a result of investment activities. The expected return is in the form of dividends for stock investments and interest income for investments in debt securities. The existence of a fairly high stock return will attract more investors to buy the stock. The purpose of this study was to determine the effect of liquidity on stock returns through profitability as an intervening variable in technology companies listed on the Stock Exchange for the period 2016-2022. The method used in this study is a descriptive and quantitative method. The population of this study are technology companies listed on the Indonesia Stock Exchange. The sampling technique was determined by purposive sampling method.
 The results of the direct influence hypothesis test using the Smart PLS 3.0 application, show that liquidity has a positive but not significant effect on profitability, liquidity has a significant negative effect on stock returns, profitability has a positive significant effect on stock returns, liquidity has a positive but not significant effect on stock returns through profitability.

The Performance of Environmental and Social Activities in a Crisis

The financial crisis induced by covid-19 pandemic presents a unique exogenous setting to test the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP). We analyze this relationship in the travel and leisure industry, being the most affected during this period, using both stock returns and risk measures. Consistent with stakeholder salience theory, our results suggest that the effect of CSR activities on financial performance depends on the salience of the stakeholders involved. Firms that invest more in activities that benefit the most salient stakeholders (i.e., customers and the environment) have higher stock returns and lower idiosyncratic risk. On the contrary, pre-crisis investments in human rights actions and community engagement are negatively related to firm value. Moreover, we find a concave relationship between CSR and CFP suggesting an optimal level of CSR. These two results provide an explanation for the mixed findings in the literature, in fact, when we exclude the two hypotheses of a contingent and non-linear relationship, we find a neutral relationship, consistent with recent articles

Current Ratio, Debt to Equity Ratio, dan Return on Asset terhadap Return Saham

This study aims to determine the effect of Current Ratio, Debt to Equity Ratio, and Return On Assets on Stock Returns in telecommunication services sub-sector companies listed on the Indonesia Stock Exchange in 2017-2021. This research method is descriptive quantitative. This data source uses secondary data in the form of financial statements from each of the telecommunications services sub-sector companies from 2017-2021. The method used in this study is multiple linear regression using the EVIEWS 9 application. The results show, Current Ratio (CR) has a positive and insignificant effect on stock returns, Debt to Equity Ratio (DER) has a negative and insignificant effect on stock returns, and Return on Assets (ROA) has a negative and insignificant effect on Stock Return. Conclusions, a) the size of the Current Ratio does not necessarily produce a high return, b) the company experiences a decrease in the value of the company if there is an increase in debt in the company; c) changes in the value of return on assets will give a negative contribution to stock returns. However, if ROA increases, the company will get a low share return contribution or vice versa, a smaller change in the value of return on assets will have an impact on higher stock returns.
 Keywords: Current Ratio, Debt to Equity Ratio, Return on Assets, Stock Return

Auditor pricing of abnormal income from sales of available for sale securities: evidence from the banking industry

We examine the relationship between abnormal income from sales of available for sale (AFS) securities and bank external auditor fees. Prior research finds that income from sales of AFS securities is used to achieve financial and regulatory reporting objectives, helpful in predicting future bank income, and assigned a persistent valuation multiple by investors. Building on prior research that suggests real activities management leads to negative outcomes, we predict and find that auditors respond to abnormal income from AFS securities sales with increases in audit fees and the effect is stronger among high risk (i.e. higher stock return and earnings volatility) banks relative to low risk banks. In additional analyses concerning a bank’s limited flexibility to achieve regulatory capital objectives through managing loan loss provisions, we find evidence of higher audit fees for banks with low regulatory capital and aggressive income-increasing AFS security sales. Among other robustness tests, we find higher audit fees as abnormal income from sales of AFS securities increases among banks with liquidity concerns and those approaching failure. Our findings suggest that auditors interpret abnormal income from AFS securities sales as an indicator of increased client business risk.

PENGARUH EARNING PER SHARE, DEBT TO EQUITY RATIO, DAN INFLATION RATE TERHADAP RETURN SAHAM PADA PERUSAHAAN PROPERTY DAN REAL ESTATE

The average stock return in 2017-2019 decreased and was followed by a decrease in the average Earning Per Share in 2016 and 2018. These results prove that changes in stock returns will be followed by changes in Earning Per Share in the same direction. Earnings Per Share with stock returns has a unidirectional relationship, therefore if you want to produce high stock returns, you need to pay attention to the Earning Per Share value. This study aims to analyze the partial and simultaneous effect of Per Share (EPS), Debt to Equity Ratio (DER) and Inflation Rate variables on stock returns in property and real estate sub-sector companies listed on the Indonesia Stock Exchange for the 2015-2019 period. . The research method is quantitative with purposive sampling technique. The results of this study show that in property and real estate companies for the 2015-2019 period the Earning Per Share variable has an effect on Stock Return, while the Debt to Equity Ratio and Inflation Rate partially have no effect on Stock Return, , and simultaneously Earning Per Share (EPS). , Debt to Equity Ratio (DER) and Inflation Rate have a significant effect on stock returns

Does higher investments necessarily reduce stock returns?

Previous studies find corporate investments negatively predict firm performance and stock returns. Using data from the Chinese A-share stock market, we find firms that substantially increase their investments have higher, rather than lower, subsequent stock returns. Such effect persists after controlling for important price factors such as size, value, momentum and turnover. Further analysis shows that this effect is more pronounced among large, low BM, profitable firms and stocks in high-growth industries. We offer a unified explanation for the contradictory findings: The correlation between investment and stock returns depends on whether return to capital is decreasing or increasing. Moreover, we find evidence of increasing returns to capital in last two decades in China with abundant investment opportunities, which implies more investment leads to higher rather than lower profits and consequently higher stock returns.

Stock returns in the time of COVID-19 pandemic

ABSTRACT This paper investigates the dependence between COVID-19 shocks and stock market returns for seven countries: Canada, China, France, Germany, South Korea, the UK and the US. Using a quantile-on-quantile (QQ) regression analysis, we find that all stock markets responded to COVID-19 shocks mostly negatively. However, we also observe instances where an increase in the number of COVID-19 confirmed cases resulted in higher stock returns. This unexpected positive dependence captures the much debated stock market-real economy disconnect at the time of the onset of the COVID-19 pandemic. Furthermore, although stock markets’ responses to both the global and the country-specific COVID-19 shocks are similar across countries, substantial differences also exist. In particular, stock markets in the US and China differed in their responses to the global COVID-19 shocks, with a higher degree of heterogeneity observed for the Chinese market. Finally, Asian markets reacted differently to country-specific COVID-19 shocks when compared to the US market. This finding could be explained by the fact that investors in the US stock markets may form their expectations mostly from the US COVID-19 shock, while investors in Asian countries, including China, may value more the information transmitted through the global COVID-19 shock.

PENGARUH EARNING DAN DIVIDEN TERHADAP HARGA SAHAM (STUDY KASUS PADA SUBSEKTOR TEKSTIL DAN GARMEN)

<em>If a company has a high stock return, the higher the probability of earning the profit. High stock returns are referred to as Earning Per Share (EPS). The stock price will also increase due to an increase and offer of a share. Companies must strive to provide high dividend profits so that the company's share price also increases. If it cannot offer significant dividends, the stock price may decline on the contrary. In the F-test, the significance value is 0.000. A deal that shows < 0.05 means that the hypothesis accepted a significant influence between EPS and stock dividends on the company's stock price in the textile and garment sub-sector for 2016 to 2020. And on the T-test, the results of the significant number are < from 0, 05 are 0.04 and 0.05. it concluded that in the T-test, the test result rejected H1, and H2 was accepted. Then the final result shows that there is no significant effect between Earning Per Share and Dividend per share on stock prices.</em>

Winning the Australasian Reporting Awards: An analysis of accounting and economic outcomes

Despite the intuition that winning reporting awards should be primarily based on reporting quality, we find no evidence that Australian Securities Exchange (ASX)-listed firms winning the Australasian Reporting Awards (ARA) over the period 2003–2016 exhibit higher financial reporting quality. However, we find that winning reporting awards is associated with higher annual report readability. Next, firms winning the ARA neither show superior future accounting performance nor higher market valuation. We also find that investors are not compensated with higher stock returns. Taken together, our findings suggest that the criteria applied to decide the ARA winners capture higher levels of readability but do not correlate with common academic signals of financial reporting quality. Users of the ARA outcomes should also be cautious with the immediate interpretation that the ARA are reliable signals of superior corporate performance. JEL Classification: D82, L15, M41

Modeling innovation efficiency, its micro-level drivers, and its impact on stock returns

Motivated by the COVID-19 pandemic and ensuing challenges to human and economic welfare, this research seeks to evaluate innovation efficiency, its micro-level drivers, and its impact on stock returns. This study considers innovation-related activities during two growth phases experienced by 138 listed pharmaceutical manufacturing companies in China: research and development (R&D) and marketing. A dynamic two-phase network data envelopment analysis (DEA) model measured R&D efficiency, marketing efficiency, and dynamic integrated innovation efficiency. A projection difference analysis was presented to offer a feasible solution to address inefficient companies. Then, panel regression methods were adopted to examine micro-level drivers of innovation efficiency. Additionally, a portfolio formation test was used to investigate innovation efficiency as a characteristic impacting stock returns. The results indicate that the listed companies are generally innovation inefficient. Only two are DEA innovation efficient. Low marketing and R&D efficiencies are impeding innovation efficiency amelioration, with the most losses attributed to the marketing phase. Most companies lack good conditions for R&D and the commercialization of scientific and technological breakthroughs. Institutional investors and financial analysts' coverage have a positive and significant impact on innovation efficiency. Foreign institutional ownership and stock market overvaluation impact listed companies with high innovation efficiency positively. There is a negative and significant effect of size on innovation efficiency. However, growth in pharmaceutical manufacturing company size positively influences innovation efficiency at higher levels. The portfolio formation test results reveal that investors consider companies with high innovation efficiency as high-profile targets that provide high stock returns. The findings of this study offer stakeholders avenues to shape the initiation, process, and outcome of innovation.

The Effect of Social Responsibility on the Credit Rating of Companies due to the Adjusting Role of Low to High Stock Returns

هدف: امروزه شناسایی عوامل مؤثر بر رتبۀاعتباری از نظر مقایسه ریسک اعتباری یک بنگاه اقتصادی با بنگاه‌های اقتصادی دیگر و هم ازنظر رقابت‌پذیری بنگاه اقتصادی، اهمیت ویژه‌ای دارد. این پژوهش با هدف بررسی تأثیر مسئولیت‌پذیری اجتماعی بر رتبه‌بندی اعتباری شرکت‌ها با توجه به نقش تعدیلی نوسان پایین به بالای بازده سهامبه اجرا درآمده است. روش: پژوهش حاضر از لحاظ هدف، از نوع تحقیقات کاربردی است. همچنین در این پژوهش با توجه به نوع داده‌ها و روش‌های تجزیه‌وتحلیل موجود، از روش داده‌های ترکیبی استفاده شده است. روش گردآوری داده‌ها، روش اسناد کاوی و مراجعه به بانک‌های اطلاعاتی؛ و روش تحلیل داده‌ها از نوع استنباطی است. در پژوهش حاضر داده‌های مورد نیاز از نرم‌افزار ره‌آورد نوین، صورت‌های مالی شرکت‌ها و سندکاوی و همچنین سایت کدال استخراج شده است.جامعۀ آماری پژوهش حاضر کلیه شرکت‌های پذیرفته‌شده در بورس اوراق بهادار تهران در بازه زمانی 1389 تا 1398 است. جهت آزمون فرضیه‌های پژوهش از الگوی داده‌های ترکیبی استفاده شد. یافته‌ها:نتایج آزمون فرضیه‌های پژوهش نشان می‌دهد کهمسئولیت‌پذیری اجتماعی، اثر مثبت و معناداری بر رتبه‌بندی اعتباری شرکت دارد. به‌عبارت‌دیگر افزایش سطح اهمیت شرکت به مقوله مسئولیت‌پذیری اجتماعی موجب افزایش رتبۀ اعتباری شرکت نزد اعتباردهندگان می‌گردد. همچنین نتایج پژوهش نشان داد، نوسان پایین به بالای بازده سهام بر رابطه بین مسئولیت‌پذیری اجتماعی با رتبه‌بندی اعتباری شرکت تأثیر منفی و معناداری دارد.بدین ترتیب زمانی که شرکت‌ها نوسان پایین به بالای بازده سهام بالایی داشته باشند، انجام بندهای مسئولیت‌پذیری اجتماعی تأثیر چندانی بر نظر مساعد اعتباردهندگان نخواهد داشت و اعتباردهندگان اقدام به کاهش رتبه اعتباری شرکت‌ها می‌نمایند؛ بنابراین افزایش نوسان پایین به بالای بازده سهام منجر به کم‌رنگ شدن رابطه مسئولیت‌پذیری اجتماعی با رتبه اعتباری شرکت‌ها می‌گردد.نتیجه‌گیری: سرمایه‌گذاران و اعتباردهندگان علاقه دارند به شرکت‌های که ابعاد مختلف مسئولیت‌پذیری اجتماعی را به‌خوبی اجرا می‌نمایند، اهمیت بیشتری می‌دهند. این امر منجر می‌گردد که این شرکت‌ها نزد سرمایه‌گذاران و اعتباردهندگان اعتبار بالاتری به‌واسطه اجرای بندهای مسئولیت‌پذیری اجتماعی بیابند. همچنین با افزایش نوسان پایین به بالای سهام، احتمال بروز ریسک سقوط قیمت سهام نیز افزایش می‌یابد که این امر می‌تواند باعث بدبینی اعتباردهندگان به شرکت نسبت به عدم پرداخت تعهدات مالی‌شان ‌گردد؛ در نتیجه در چنین شرایطی انجام بندهای مسئولیت‌پذیری اجتماعی تأثیر چندانی بر نظر مساعد اعتباردهندگان نخواهد داشت و اعتباردهندگان اقدام به کاهش رتبه اعتباری شرکت‌ها می‌نمایند. سرمایه‌گذاران و اعتباردهندگان با استفاده از نتایج این پژوهش می‌توانند دست به انتخاب شرکت‌های مناسب جهت سرمایه‌گذاری بزنند. همچنین سازمان‌هایی که اقدام به رتبه‌بندی شرکت‌ها می‌کنند می‌توانند از نوسان پایین به بالای بازده سهام و مسئولیت‌پذیری اجتماعی به‌عنوان دو عامل بسیار مهم و تعیین‌کننده در رتبه‌بندی استفاده نمایند.

Earnings, Size, and Book-to-Market Effects on Banking Stock Returns in Nepal

This study attempts to examine the effect of earnings, size, and book-to-market equity on common stock returns of banking sector firms in Nepal. Using the sample of 21 commercial banks in Nepal consisting of 231 firm-year observations over the 2010-2020 periods and based on the panel data fixed-effect estimation with AR(1) disturbances, the study reveals that earnings and size have significant positive effects on common stock returns of the banking sector in Nepal. However, the study reveals significant negative book-to-market equity effects on cross-sectional banking stock returns in Nepal. The positive earnings effect implies that banks with higher earnings yields have higher stock returns. Similarly, the positive size-effect implies that larger banks outperform the smaller banks in Nepal. Similarly, the negative book-to-market effect on common stock returns observed in this study implies that banks with lower value creation have lower stock returns.

Creditor Control of Corporate Acquisitions

Abstract We examine the impact of creditor control rights on corporate acquisitions. Nearly 75$\%$ of loan agreements include restrictions that limit borrower acquisition decisions throughout the life of the contract. Following a financial covenant violation, creditors use their bargaining power to tighten these restrictions and limit acquisition activity, particularly deals expected to earn negative announcement returns. Firms that do announce an acquisition after violating a financial covenant earn 1.8$\%$ higher stock returns, on average, and do not pursue less risky deals. We conclude that creditors use contractual rights and the renegotiation process to limit value-destroying acquisitions driven by managerial agency problems.

The asymmetric effect of warranty payments on firm value: The moderating role of advertising, R&D, and industry concentration

Changes in firms’ warranty payments are informative signals that enable investors to form timely expectations about potential changes in product quality. The authors’ survey shows that warranty payments affect potential investors’ product quality assessments and stock investment likelihood. Their quantitative analysis reveals an asymmetric stock market reaction: unanticipated increases in warranty payments (which signal quality “losses”) lower stock returns but unanticipated decreases do not affect stock returns. Two important factors moderate this relationship. First, boosting advertising spending attenuates the negative stock return effect of unanticipated increases in warranty payments. Second, unanticipated decreases in warranty payments, which signal quality “gains”, translate into higher stock returns when the industry has become less concentrated. Interestingly, changes in R&D spending do not moderate investors’ response to unanticipated increases or decreases in warranty payments. The authors advise firms to use advertising to lessen the harm from warranty payment increases and to strongly communicate warranty payment decreases in the face of intensified competition. The authors also caution that offering warranties in general does not ensure greater firm value as declining quality firms that myopically offer warranty programs experience lower firm value than those that do not provide warranties.