Market Response Research Articles

Analysis of the Psychological Characteristics of the Audience in Contemporary Chinese Theater Space

Since the beginning of 2023, the number of theatre performances in China has increased year by year, and a new round of " theatre defense war " is about to be opened. Whether the operators can keep up with the favorable policies, take advantage of the wind, grasp the new market competition situation, and make timely market response has become a key factor. This paper focuses on the current audience viewing psychology dimension for data sampling and analysis, in order to put forward constructive suggestions. The purpose of this project research is based on the current situation investigation and data analysis, so that the theater can better optimize management in the future. By analyzing the audience 's views and opinions on the theater, it helps the theater to make more realistic changes.

Analysis of virtual power plants participating in the optimization operation of the electricity-carbon joint market based on the EEMD–IBA–Markov chain

To enhance the utilization of clean energy sources, such as wind power and photovoltaic within virtual power plants, and mitigate carbon emissions, this paper proposes a virtual power plant participation in the electricity carbon joint market optimization operation model based on ensemble empirical mode decomposition–improved bat algorithm (IBA)–Markov chain new energy output prediction. First, complementary set empirical mode decomposition is performed on historical data to construct a Markov chain based wind power and photovoltaic prediction model optimized by IBA. Second, this prediction model is used to predict the daily generation power of wind power and photovoltaic power. Finally, with the optimization goals of maximizing the benefits and minimizing the carbon costs of virtual power plants, a virtual power plant system participating in the electricity carbon joint market model based on wind power and photovoltaic output prediction results is constructed. At the same time, demand response factors are introduced and solved using the NSGA-II algorithm. Taking a certain park as an example for simulation analysis, the research results show that the combined effect of carbon market and demand response can achieve 99.82% of new energy consumption in virtual power plants without significantly reducing profits, basically achieving complete new energy consumption, demonstrating the effectiveness of the proposed model in this paper.

Do Climate-Related Risks Perception Drive Corporate Green and Low-Carbon Transformation? Evidence from Listed Companies in China

ABSTRACT The extreme weather and climate occur frequently attracted high attention from society, which brings high uncertainty risks to enterprises. This study uses a fixed effects model to investigate the impact of corporate climate-related risk perceptions on their behavior. We found that increased climate-related risk perception catalyzes corporate green and low-carbon transitions (GLCT). From the perspectives of internal governance and external supervision, it is found that executive risk aversion, government environmental regulation, and investor attention can all contribute to the positive impact of climate-related risk perception on GLCT. Additionally, corporate climate-related risk perceptions can contribute to transition outcomes and lead to favorable capital market responses by improving GLCT actions, and that the contribution of climate-related risk perceptions to GLCT is stronger among non-state-owned enterprises and high-polluting industries. This study provides strategic insights for organizations to effectively manage climate risk.

The Interweaving of Artificial Intelligence in the Fashion Industry

Artificial intelligence has become a revolutionary power in the fashion industry by reshaping the brand Artificial intelligence (AI) has emerged as a transformative force within the fashion industry, reshaping brand-consumer interactions, optimizing operations, and driving innovative product offerings. This research endeavours to explore the multifaceted role of Al in the fashion sector, delving into its meaning, diverse applications, benefits, drawbacks, and ethical considerations. The involvement of Al is manifested through a comprehensive analysis, encompassing virtual try-ons, customer service chatbots, predictive analysis, design assistance tools, and gauging customer satisfaction and market response based on these features. By leveraging Al technologies, fashion brands can enhance customer engagement, streamline operations, and deliver personalized experiences tailored to individual preferences. Moreover, the research underscores the advantages of Al adoption, including improved decision-making, expedited results, and precise design assistance, which collectively contribute to enhanced efficiency and competitiveness within the industry. However, it also highlights legitimate concerns surrounding data privacy, algorithmic bias, and the potential for job displacement resulting from increased automation. Ethical considerations play a pivotal role in the discourse surrounding Al deployment in the fashion industry. The study emphasizes the significance of addressing labour displacement issues, advocating for accountable, transparent, and fair Al practices, particularly in data collection for market response and consumer preferences. Striking a balance between technological advancement and ethical responsibility is imperative to ensure the equitable and sustainable interest of Al within the fashion landscape. Looking ahead, the research outlines future trends and advancements in Al-driven personalized styling recommendations, sustainable practices, and creativity in fashion. It advocates for a responsible Al deployment framework, which prioritizes the harmonious collaboration of humanity and technology, thereby fostering a balanced and inclusive fashion ecosystem that embraces innovation while safeguarding ethical principles. By embracing responsible Al practices, the fashion industry can harness the transformative potential of Al to drive positive change, foster creativity, and meet evolving consumer demands in an ethically conscious manner.

The Benefits and Costs of Employee Stock Ownership Plans in China

ABSTRACTResearch IssueWe investigate the deliberations of controlling shareholders in assessing the trade‐offs between costs and benefits preceding the adoption of an Employee Stock Ownership Plan (ESOP). Furthermore, we explore the market responses to ESOP announcements and their associations with the private benefits of control. Moreover, our study delves into the modifications in private benefits of control, changes in employment dynamics, and subsequent operating performance subsequent to the implementation of ESOPs.Research InsightsWe conduct our research employing a comprehensive dataset encompassing the adoptions of ESOPs within publicly listed Chinese companies during the period spanning from 2014 to 2020. Our empirical findings reveal that firms characterized by diminished private benefits of control, as indicated by a reduced wedge between control rights and cash flow rights, as well as a lower frequency of related party transactions, are more inclined to consider the adoption of ESOPs, especially when the potential for productivity gains is substantial. These firms also elicit more positive market reactions upon the announcement of their ESOP initiatives. While ESOPs do lead to heightened productivity, the overall enhancement in operating performance remains relatively modest due to the significant cost burden imposed on shareholders by the large unearned employee compensation. Our results suggest that controlling shareholders who partake in fewer private benefits of control are more inclined to forego these entitlements in favor of embracing ESOPs as a strategic mechanism for realizing productivity gains. However, it is imperative to acknowledge that such gains may be considerably offset by substantial increases in employee compensation expenses. Despite the prevalence of short‐lived features in Chinese practice, we lack substantial evidence supporting their inhibitory effects on the increased monitoring and productivity following ESOP adoption.Academic ImplicationsThis study provides a comprehensive examination of recent ESOPs in the Chinese context, offering insights into the regulatory complexities within the largest emerging market. The research contributes to the existing literature by unveiling the intricate relationship between private benefits of control and the decision to adopt ESOPs, as well as their subsequent implications. Notably, our findings, particularly the observed neutral impact on operating performance, augment the ongoing discourse surrounding the efficacy of ESOPs in augmenting shareholder value.Policy ImplicationsThis research introduces ESOPs as an innovative mechanism for mitigating private benefits of control, particularly in the context of emerging markets where controlling shareholders tend to accrue significant private benefits of control. The incorporation of performance‐related criteria within the ESOP framework serves as a means to effectively manage the additional compensation associated with these plans, thereby enhancing their overall efficacy.

Optimizing Energy Arbitrage: Benchmark Models for LFP Battery Dynamic Activation Costs in Reactive Balancing Market

This study introduces a novel benchmark model for lithium iron phosphate (LFP) batteries in reactive energy imbalance markets, filling a notable gap by incorporating comprehensive operational parameters and market dynamics that are overlooked by conventional models. Addressing the absence of a holistic benchmark for energy-storage systems in electricity markets, this research focuses on the integration of LFP batteries, considering their unique characteristics and market responsiveness. Regression and regularization techniques, coupled with temporal cross-validation, were employed to ensure model robustness and accuracy in predicting energy trading outcomes. This methodological approach allows for a nuanced analysis of battery degradation, power capacity, energy content, and real-time market prices. The model, validated using Belgium’s system imbalance market data from the 2020–2023 period, incorporates both capital and operational expenditures to assess the economic and operational viability of LFP battery energy-storage systems (BESSs). The findings reveal that considering a broader range of operational parameters in energy arbitrage, beyond just the usual energy prices and round-trip efficiency, significantly influences the cost-effectiveness and performance benchmarking of energy storage solutions. This paper advocates for the strategic use of LFP batteries in energy markets, highlighting their potential to enhance grid stability and energy trading profitability. The proposed benchmark model serves as a critical tool for energy traders, providing a detailed framework for informed decision making in the evolving landscape of energy storage technologies.

Heterogeneity effect of positive and negative jumps on the realized volatility: Evidence from China

The existing literature overlooks the different responses of the stock market to jump risk during high and low volatility periods. We examine the impact of positive and negative jumps on China's composite index and sector index volatilities across various volatility regimes from January 4, 2010 to June 30, 2023 based on 5-min high-frequency data and quantile regression. The results indicate that the asymmetry of positive and negative jumps in the emerging sectors is not significant in the high quantiles, but is significant in the middle and low quantiles, compared with the composite index and traditional sectors. The volatility change driven by the negative jump of most emerging sectors indices exhibits a clear ‘J’ shaped distribution. Moreover, COVID-19 has weakened the positive relationship between negative jumps and volatility in traditional sectors. This work alerts risk managers to focus on negative jump risks when markets are in periods of high volatility.

Stock market response to natural disasters: Does corporate sustainability performance make difference?

This study aims to examine the short-term price reactions of the stocks listed on Borsa Istanbul (BIST) after the severe earthquake of February 6, 2023, that happened in the southeastern region of Türkiye covering 11 provinces and causing more than 50,000 fatalities. Using a sample of 450 companies listed on the BIST All Index, this study estimates the abnormal returns (ARs) of stocks by employing an event study methodology. Using BIST 100 companies as a sub-sample, this study also explores whether sustainability performance creates resilience against downside risk after the earthquake. The results of the market model and the mean-adjusted model show that on the event day, most of the sectors had negative and significant ARs, while only the non-metal mineral products had positive and significant ARs. Most of the sectors continued to decline in the following 10 days except basic metal and non-metal mineral products sectors. The telecommunications sector was the most negatively affected sector in both models after the event day as it has underperformed in ensuring uninterrupted access to communication. The findings also indicate that firms in the financial sector that have higher sustainability performance are more resilient in responding to the disaster.

The Information Content of Stock Splits: In the Context of Stock Splits Concurrently Announced with Earnings

This paper examines the market responses to concurrent earnings and stock split announcements for evidence on the information content of stock splits. The majority of stock split research excludes splits announced with other information events due to confounding issues. However, it is difficult to extract the information content of splits by merely focusing on the standalone split announcement because stock splits are devoid of any information regarding firms’ future cash flows. This study explicitly considers how a stock split is evaluated in conjunction with current earnings. This study shows that the market reacts more positively to earnings news concurrently announced with stock splits, consistent with the idea that splits are favorable news. Furthermore, this study finds that stock returns of concurrent split–earnings announcers exhibit a greater association with future cash flows, suggesting that investors should value stock splits favorably for more persistent earnings ahead.

Exploring the connections: Dividend announcements, stock market returns, and major sporting events

AbstractThis study conducts a detailed investigation into the interplay between major sporting events, specifically the ICC Cricket World Cups and FIFA Football World Cups, and their potential impact on the relationship between dividend announcements and stock market returns. Beyond the customary exploration of investor sentiment and its connection to stock market returns, our research thoroughly examines the effects of these significant sports events on the stock market's reaction to dividend announcements. Drawing on extensive FTSE 350 index data spanning January 1990 to December 2021, we employ event study methodology as the primary analytical framework. To bolster the reliability of our findings, we apply the Generalized Method of Moments (GMM) estimation method, addressing potential endogeneity concerns. Our results uncover a distinct pattern—the stock market exhibits a less favourable response to dividend increases announced following England's victories in major sporting events, such as the FIFA Football World Cup and ICC Cricket World Cup, compared to instances where they faced defeat. Additionally, we observe a more negative market response to dividend decreases announced following England's losses in these pivotal sporting events, as opposed to England emerging victorious in these key contests. This research contributes valuable insights into the intricate relationship between sports passion and market dynamics, offering implications for both scholarly discourse and investment strategy formulation.

Application of Dynamic Structural Model to Identify Factors That Influence Capital Adjustments in The National Manufacturing Industry

This research aims to determine the costs of capital adjustments and company dynamics. Company panels comprise the database. The main advantage of analyzing the nature of adjustment costs at the plant level is that the data contain information for purchases and sales of capital goods. Panel data, including information from many plants and long periods, allows for a more comprehensive analysis of firms' investment behavior in the face of capital adjustment costs. The estimation results allow for the recovery of companies' frictions in adjusting their capital stock. The estimation results for capital adjustment costs are consistent with other studies using similar methodologies. Estimates show that there are significant, unchangeable fixed costs, as well as moderate quadratic costs. Researchers then use the estimated parameters in a counterfactual simulation to analyze the impact of a decline in average firm profitability on the labor market. The results show a significant labor market response to the shock, with the transition to the new stable state being slow and taking several years to complete the adjustment. The simulations highlight the importance of not only modeling capital mobility but also considering and estimating its frictions to evaluate the impact of policies or shocks on the economy. The mobility and capital adjustment costs influence the speed of the economy's adjustment to shocks and their effects on factor allocation and remuneration in the short and long term.

Stock Market Response to Meteorological Disaster Risk: From Liquidity Perspective

Stock Market Response to Meteorological Disaster Risk: From Liquidity Perspective

Herding and reverse herding in US housing markets: new evidence from a metropolitan-level analysis

ABSTRACT This study is the first to examine herding and reverse herding in US metropolitan housing markets based on Zillow ZIP-level house price indices. Reverse herding is found to be more prevalent than herding, which differs markedly from equity markets and outcomes derived from less granular house price indices. The results suggest that the interaction between price appreciation and overconfidence may drive reverse herding. Also, herding and reverse herding show strong dependency on market conditions. Wide spatial and temporal variation in herding and reverse herding suggests the importance of local characteristics as determinants of the rationality of market responses.

Dividend cuts and a firm's investment opportunity set

AbstractThis paper re‐examines corporate dividend payout policy by focusing on how investors evaluate dividend cuts. Our focus is to understand why despite the documented on average negative market response, many dividend‐cutting firms experience a positive market response. We juxtapose a well‐established literature on corporate payout policies with the literature on the role of prior information in investor evaluation of newly arrived information and document that the market responds positively to dividend cuts when firms have positive investment opportunity sets. Our results support the primary thesis that not all dividend cuts are bad news—it depends. We validate this result by documenting that firms cutting dividends in the presence of investment opportunities do make significant investments such as capital expenditures and merger and acquisition activities in future years. Furthermore, we also find that future operating profitability is higher for dividend‐cutting firms with relatively higher investment opportunities. We also document that among dividend‐cutting firms, there is a statistically significant difference in the buy‐and‐hold returns for up to 2 years, between firms with high versus low investment opportunities. This provides support for the economic significance of our results. These results provide new evidence on how investors interpret corporate payout policies to distinguish among dividend cuts.

Does legal justice promote stakeholder justice? Evidence from a judicial reform in China

This paper investigates how judicial quality affects corporate social responsibility (CSR) performance. Employing a difference-in-differences model based on the establishment of circuit courts in China and a sample of Chinese A-share listed firms from 2010 to 2020, we find that enhanced judicial quality improves firms' CSR performance. Further analysis shows that CSR helps reduce the incidence and expense of lawsuits and financial constraints arising after the circuit court establishment and mitigates negative market responses toward lawsuit announcements. This suggests that CSR has strategic value against lawsuits and firms' incentives to reduce litigation costs, financial constraints, and adverse market reactions are the potential mechanisms. The effect of judicial quality on CSR performance is more pronounced for firms with greater ex-ante litigation risk, lower ex-ante CSR awareness, and close to circuit courts. Overall, this study highlights a novel externality of the judiciary and suggests that legal justice can promote stakeholder justice.

Is the market biased in M&A, dividend payment, and share repurchase events?

Companies with excess capital can opt to: pay dividends to shareholders, buy back treasury shares for short-term shareholder benefits, or pursue M&A investments for long-term shareholder returns. Using difference in differences approach of event research methods combined with unique manually collected data sets, this paper investigates the market bias for three events: M&A, share repurchase, and dividend payment. The results show that information was leaked to the outside 1 day before it was officially announced at all events. When observing the company's performance 3 years after the event announcement, we also find that the market reaction is biased in M&A and stock dividend payment events, but accurate in the cash dividend payment and share repurchases. In addition, the market has the strongest and longest reaction to the news of the company buying back shares; has the weakest reaction to the stock dividend payment; has the shortest reaction to cash dividend payment; has a negative reaction to the acquisition company's stock, and has a positive reaction to the target company's stock. Our research has provided empirical evidence on the market response to published information, and supports CEOs make the most accurate choices when the company has an excess cash flow.

Market reaction to responsible production practices adoption: The role of firm size and financial slack

The tension between the costs and benefits of adopting responsible production practices has engendered firms' hesitation about embracing legitimate actions in their business operations. Drawing upon the legitimacy theory and resource-based view, this study delves into the market responses to responsible production practices adoption and the boundary conditions of firm size and financial slack influencing the performance link. Using a dataset comprising 392 manufacturers that adopted responsible production practices between 2016 and 2023; this study employs a short-term event study approach to unveil the positive market value of responsible production practices adoption. Through cross-sectional regression analysis, we discern that firm size and financial slack can strengthen the market value of adopting responsible production practices, especially during the COVID-19 pandemic. The findings offer managerial insights for assisting firms in navigating their journey toward responsible production while safeguarding their firm value.

When local and foreign investors meet the Chinese government's risk perception about COVID-19

This paper explores the nuanced extreme market responses exhibited by segmented domestic and foreign investors in reaction to state media coverage of the COVID-19 pandemic in China’s A-share and H-share markets. Our findings indicate that an extreme increase (or decrease) in this unexpected attention is likely to lead to an extreme increase (or decrease) in stock prices. Domestic investors show increased sensitivity to an abnormal decrease in state media attention, whereas foreign investors are more responsive to an increase in this attention. An extreme unexpected decline in state media coverage of the pandemic significantly influences extreme fluctuations in the A-share market’s trading volume. In contrast, an abnormal increase in state media coverage of the pandemic tends to extremely decrease the H-share market’s trading volume. In the early panic phase, domestic (foreign) investors tend to reach a consensus more on abnormal declines (increases) in state media reports on the pandemic.

Sequential Reporting Bias

ABSTRACT Firms with correlated fundamentals often issue reports sequentially, leading to information spillovers. The theoretical literature has investigated multifirm reporting, but only when firms report simultaneously. We examine the implications of sequential reporting, where firms aim to maximize their market price and can manipulate their reports. The introduction of sequentiality significantly alters the biasing behavior of firms and the resulting informational environment relative to simultaneous reporting. In particular, a lead firm always manipulates more when reports are issued sequentially. Moreover, relative to simultaneous reporting, sequential reporting reduces the overall information available to the market about each firm, resulting in less efficient and less volatile prices. Additionally, we find that stronger correlation in firm fundamentals can amplify the lead firm’s incentive for manipulation under sequentiality, in contrast to simultaneous reporting. We offer further results regarding, for example, market response coefficients, and provide a number of empirical implications. JEL Classifications: C72; D82; D83; G14; M41.

The self-contagion effect of a stock crash on the market response of the auditor’s other client

ABSTRACT This study aims to find out how information regarding a firm’s stock crash affects the stock price of other firms with the same auditor using 3,916 corporations listed in Korean stock market. The result shows that at the time of a stock crash within the industry, information regarding the crash is contagious via the auditor, as the market leverages the information audited for the crashed firm to additionally evaluate the auditor’s other clients within the industry. Moreover, the contagion effect of the crash within the same auditor to other client firms was found to not be related to the information quality of the client firm. When taking out information quality, however, a high positive discretional accruals quality is observed, and the greater the contagion effect of the crash. The results recognize and reflect the future risk of a stock crash for firms with a high amount of positive discretionary accruals due to the opportunistic incentives of managers in the market as well as market participants’ use of crash information audited by the same accounting firm. These results demonstrate that the market appreciates the audit effect on the crash and uses it for actual decision-making.