Firm Price Research Articles

Peers’ media coverage releases and investor heterogeneity

PurposeThis study aims to examine the behaviour of institutional and retail investors in response to news about industry leaders (peer firms) and to determine its impact on the stock prices of other firms (focal firms) within the same industry.Design/methodology/approachThe study investigates the impact of peer news on investor behaviour of Chinese A-shares listed on the Shanghai and Shenzhen Stock Exchanges from 2010 to 2019. The media coverage of industry leaders is sourced from prominent Chinese online financial outlets and the Chinese Financial Press. Support vector machine is applied to identify the positive, neutral and negative news within the articles. The study uses event study and logistic regression to examine the effects of peer news on focal firms’ investor behaviour.FindingsThe results show that both good and bad news about leaders cause peers’ stock prices to increase initially, but then reverse within one quarter. Further analysis reveals that when leaders’ shares receive positive news coverage, institutional investors tend to exert excessive abnormal buying pressure on peers’ shares, resulting in overreactions. Conversely, retail investors do not actively trade on peers on leaders’ news day due to limited attention. In addition, the study shows that short-selling constraint inhibits bad news from reflecting in the stock prices.Originality/valueThe study highlights differences in investor behaviour. The finding that institutional investors tend to overreact more to peer firms’ news when focal firms are smaller and have a lower frequency of information disclosure supports the salient theory. This is consistent with the previous framework that suggests overreaction is more pronounced when it is difficult to combine external sources of information to evaluate the focal firms. In contrast, retail investors do not engage in active trading on peers on leaders’ news day due to the limited attention theory.

The stock price of European insurance companies: What is the role of ESG factors?

The study investigates the effect of environmental, social, and governance (ESG) ratings on the stock price of European insurance companies using the event study methodology. ESG ratings play an important role in the pricing of insurance firms, and an upgrade results in a stock price increase, while a downgrade leads to a decrease. The market is particularly responsive to ESG rating upgrades and downgrades during the Pre-Paris period, suggesting that ESG ratings can have a significant impact on the equilibrium and efficiency of the stock market. ESG factors are important in investment decision-making and in promoting sustainable business practices.

Cursed Consumers and the Effectiveness of Consumer Protection Policies*

We model firms' quality disclosure and pricing in the presence of cursed consumers, who fail to be sufficiently skeptical about undisclosed quality. We show that cursed consumers are exploited in duopoly if firms are vertically differentiated, if there are few cursed consumers, and if average product quality is high. Three common consumer protection policies that work under monopoly, that is, mandatory disclosure, third party disclosure and consumer education, may all increase exploitation and decrease welfare. Even where these policies improve welfare, they often lead to a reduction in consumer surplus. Our conclusions hold in extensions with endogenous quality and horizontal differentiation.

Airline Disasters and the Performance of Tourism and Hospitality Stocks

Prior research examines the link between the airline industry and the tourism industry and shows that the robustness of tourism is heavily dependent upon air transport. To further document the strength of this link, this study examines the impact of major airline disasters on the stock prices of US tourism and hospitality firms. Results show that, relative to the rest of the market, the stock prices of tourism and hospitality firms markedly decrease following major airline crashes. The negative stock price reaction is the most pronounced when examining the September 11, 2001 (9/11) terrorist attacks. However, when excluding this particular event, results continue to show that the stock returns for tourism and hospitality firms are significantly negative surrounding other large-scale airline disasters. Consistent with the existing literature that highlights the association between air transport and the tourism industry, the conclusions from this study seem to indicate that the value of tourism and hospitality firms is particularly sensitive to airline disasters.

Do analysts anchor on public signals in forecasting the target price of disruptive technology firms?

Public signals serve as an anchor for higher order beliefs when forecasting stock price, a target that is determined by the average beliefs of investors. We predict that the anchoring effect is particularly strong when forecasting the stock price of disruptive technology firms, a fundamentally ambiguous target. Consistent with this prediction, we find that analysts’ price forecasts revisions are more responsive to earnings news for disruptive than non-disruptive technology firms. In contrast, this differential responsiveness does not exist for earnings forecasts, as earnings realizations do not depend on the average beliefs of investors.

Stock Price Reaction to Impromptu Managerial Soft Information in Conference Calls

We examine managerial behavior during conference calls vis-à-vis the informational impact on firm stock prices. Implementing an unsupervised machine learning algorithm, we document statistically and economically meaningful relationships between impromptu soft information divulged during calls and stock prices. Managers who choose to divulge more impromptu soft information in the Q&A session experience improved liquidity and less volatility, accompanied with lower abnormal returns. Conditioned on earnings surprise, large positive-surprise impromptu soft information results in larger returns and positive drift, indicating that investors do not completely trust the positive signal initially, with confidence growing over time evidenced as prices adjust to equilibrium.

Pengaruh Profitabilitas, Solvabilitas dan Rasio Pasar terhadap Harga Saham pada Perusahaan Perbankan yang Terdaftar di Bursa Efek Indonesia Periode 2018-2021

When it comes to a country's economic development and stability, banking, the beating heart of the global economy, plays a crucial role. Therefore, many existing and potential investors are attracted to invest in this industry. But before jumping into the capital market, investors need to pay attention to several factors, including a thorough examination of the company's financial statements. This study will examine the relationship between profitability, solvency, and market ratios seen in banking businesses' financial statements and stock prices. Purposive sampling was utilized to acquire data from 47 of the financial institutions included in the IDX for the years 2018-2021. The hypotheses were evaluated by a battery of tests employing linear regression analysis. Hypothesis testing reveals that profitability, solvency, and market ratios all have an impact on the stock prices of Indonesia Stock Exchange-listed banking businesses from 2018 to 2021. (simultaneously). Then, throughout the 2018-2021 time, the market ratio to stock prices of IDX-listed banking firms has a positive and substantial influence on stock prices, while the profitability and solvency of IDX-listed banking companies have a negative and large effect on stock prices.

Development and validation of the nomogram to predict the risk of hospital drug shortages: A prediction model.

Reasons for drug shortages are multi-factorial, and patients are greatly injured. So we needed to reduce the frequency and risk of drug shortages in hospitals. At present, the risk of drug shortages in medical institutions rarely used prediction models. To this end, we attempted to proactively predict the risk of drug shortages in hospital drug procurement to make further decisions or implement interventions. The aim of this study is to establish a nomogram to show the risk of drug shortages. We collated data obtained using the centralized procurement platform of Hebei Province and defined independent and dependent variables to be included in the model. The data were divided into a training set and a validation set according to 7:3. Univariate and multivariate logistic regression were used to determine independent risk factors, and discrimination (using the receiver operating characteristic curve), calibration (Hosmer-Lemeshow test), and decision curve analysis were validated. As a result, volume-based procurement, therapeutic class, dosage form, distribution firm, take orders, order date, and unit price were regarded as independent risk factors for drug shortages. In the training (AUC = 0.707) and validation (AUC = 0.688) sets, the nomogram exhibited a sufficient level of discrimination. The model can predict the risk of drug shortages in the hospital drug purchase process. The application of this model will help optimize the management of drug shortages in hospitals.

Fundamentals, real-time uncertainty and CDS index spreads

The high level of economic uncertainty linked to the pace of the recovery process can persist after a crisis and has implications for the market pricing of firms’ credit risk reflected in credit default swap (CDS) spreads. This paper examines the role of key proxies for the economic state and its real-time uncertainty in determining Northern American CDX index spreads. Focusing on the recovery period following the 2007–2009 global financial crisis, we find that measures of economic output, employment, inflation, and economic uncertainty, all significantly influence CDX spreads, beyond the impact of conventional determinants. Furthermore, our results provide evidence that the sensitivity of investment-grade and high-yield CDX differs across economic aspects. Moreover, our out-of-sample predictive analysis identifies indicators and uncertainty measures with significant predictive content for quarter-ahead CDX spreads. Taken together, our findings indicate that academic modelers and practitioners employing more accurate representations of the macroeconomy in CDS modeling and analysis can improve upon the models that rely solely on the typically employed economic output variables or on broad data aggregation.

Does green activity impact stock price crash risk? The role of climate risk

We investigate the effect of corporate green activity on the stock price crash risk. Using 2,222 US companies from 2002 to 2021, we find solid evidence that green activity is significantly related to lower firms’ price crash risk. Economically, a firm's price crash risk is reduced by 31.8% - 42.9% for participating in green activities. Moreover, the empirical results show that this negative effect is more substantial during high-climate risk periods. Our findings remain unchanged after controlling for endogeneity issues and several robustness tests.

THE ROLE OF FINANCIAL ATTRIBUTES OF PROFITABLE FIRMS ON STOCK PERFORMANCE IN PAKISTAN

The study in hand endeavored to determine how financial characteristics of profitable firms directly affect their share prices on the stock market. For this purpose, we have used data from 2000 to 2018 and want to know, whether these financial attributes, i.e., ROE, ROA, P/E ratio, PM, size, and leverage, are directly involved with the stock prices of the profitable firms. However, the panel data approach was utilized to analyze the data. The results categorically showed that a firm's financial attributes have a linear relationship with its stock returns on stock market. This result also indicated that the equity holders of those firms of market investors follow direction of equity prices for future return because, as the price equity of the profitable firms increases, they invest more for high discounting’s in market because of the linear relationship between firms financial attributes and their stock prices. more over this results also explained that the efficiency of PSX can be improved by by improving financial knowledge of market arbitrageurs. The results provide signifncant information in reaching the decision as well as recommending some suggestions to stakeholders, policy-makers along with future researchers to revisit their decisions regarding ctock performance in Pakistan.

Supply diversification under random yield: The impact of price postponement

Supply diversification and pricing are two common mechanisms for dealing with supply yield uncertainty. This paper characterizes a firm's pricing and sourcing decisions under supply yield uncertainty, and studies the interplay between the two mechanisms. We compare the optimal sourcing decisions under two distinct pricing schemes: (1) ex ante pricing—the firm simultaneously makes the sales price and sourcing decisions before production takes place; (2) responsive pricing—the pricing decision is postponed until after the production yield realization. Although the firm is better off with responsive pricing, the effect of price postponement on the optimal sourcing decision and the firm's need for supply diversification varies and is influenced by factors such as unit procurement cost, supply portfolio, and supply reliability. For the case of one unreliable supplier, we show that responsive pricing mitigates the overage and underage risks imposed by yield uncertainty, and results in a lower optimal order quantity than that under ex ante pricing when the procurement cost is low, and a higher quantity otherwise. For the case of two unreliable suppliers, we show that responsive pricing promotes supply diversification when the sole‐sourced supplier's reliability is low, and discourages when it is high. By contrast, when the sole‐sourced supplier's reliability is moderate, responsive pricing promotes supply diversification when its unit procurement cost is low and discourages otherwise. The composition of supply portfolio also has a fundamental impact on such strategic interplay: When the supply portfolio consists of one unreliable and one reliable supplier, diversified sourcing is never optimal under ex ante pricing, but may be optimal under responsive pricing. Thus, responsive pricing promotes dual sourcing in this setting. We also conduct comprehensive numerical experiments to both confirm the robustness of the main results and derive additional insights.

ANALISIS PENGARUH PROFITABILITAS, UKURAN PERUSAHAAN, DAN LIKUIDITAS TERHADAP NILAI PERUSAHAAN DENGAN STRUKTUR MODAL SEBAGAI VARIABEL MODERASI

The company value perceived by investors towards the company is often associated with the stock price. The higher of company’s value can increase investor and make good profitability. This study aims to analyze the effect of profitability, firm size, and liquidity on firm value with capital structure as a moderating variable. The population in this study are food and beverage companies listed on the indonesia stock exchange (idx) for 2019-2021. The sample in this company is 84 companies, the sampling method uses purposive sampling. The type of data used is classic asumtion, multiple linear regression, and moderated regression analysis (mra). Hypothesis test using model fitment test and partial test or t test. The results of this study show that partially the variable return on assets has a significant positive effect on price to book value, firm size has an insignificant positive effect on price to book value, and current ratio has a negative but insignificant effect on price to book value. Capital structure cannot moderate the relationship between profitability and price to book value, capital structure cannot moderate the relationship between firm size and price to book value, and capital structure cannot moderate the relationship between current ratio and price to book value.

Equity Valuation of Ferrari under Multiple Valuations

This paper aims at determining the stock price of Ferrari, which is a leading company in the luxury performance car industry, to evaluate if it's overpriced or not and discuss the potential limitations of the valuation method. The valuation is based on multiple valuations. The target share price of Ferrari is calculated using the average P/E ratio after identifying Ferrari's comparable peer group. The paper calculates a share price of $91.98, which is significantly less than its current share price of $196.90, based on the P/E ratio valuation. The outcome suggests that Ferrari was expensive. Ferrari's dominant position within the industry as a whole and the inherent flaws in the valuation mechanism is the key factors influencing this. To have a better understanding of the company itself, more models, such as discounted cash flow valuation, are advised. P/E ratio valuation can be employed as an initial screening technique. This essay offers some insights into Ferrari and the entire high-performance automobile market, which can be helpful when calculating the share prices of top firms like Ferrari.

Initial Evidence on the Market Impact of the iXBRL Adoption

SYNOPSISIn June 2018, the SEC adopted Inline eXtensible Business Reporting Language (iXBRL), which embeds XBRL data into HTML-formatted annual reports to improve the accessibility and usefulness of the information disclosures to investors. This study assesses the effectiveness of iXBRL by examining its impact on informational efficiency and information asymmetry. Using a sample that includes iXBRL voluntary adopters before 2019, we find that iXBRL adoption lowers stock return drift and facilitates information being impounded into firm stock prices following the filing of annual reports. We also find that unlike XBRL, iXBRL reduces information asymmetry in the long run. These findings are consistent with the SEC’s intention of adopting iXBRL to combine human-readable and machine-readable information. Our study provides initial evidence on the effectiveness of iXBRL in communicating information to the external users of annual reports.

Functional distance and bank loan pricing: Evidence from the opening of high-speed railway in China

Employing the staggered opening of the High-speed railway (HSR) as an exogenous shock, this paper examines the impact of functional distance on bank loan pricing. Based on a unique loan-level dataset from a nationwide state-owned Chinese commercial bank, we find that after the HSR opening, the loan pricing of local private firms decreases significantly. The possible channel is the facilitating of bank's easier access to soft information through the shortening of temporal functional distance. Moreover, the effect of HSR opening is more pronounced when the borrowing firm is difficult to visit or when loan pricing is more sensitive to information. We also find that the HSR opening increases the loan volume for local private firms, while there are no significant changes in loan pricing or loan volume for public firms with HSR opening. Our main conclusion remains valid after considering various robustness and endogeneity issues.

Minimum Wage Increases and Employer Performance: Role of Employer Heterogeneity

Despite a large minimum wage literature that analyzes employee outcomes, there is less evidence on firm performance, prices, and quality. Exploiting staggered changes in U.S. minimum wages during 2000–2008 and census data on more than 29,000 hotel properties, we find that doubling the minimum wage as currently debated would reduce average hotel revenues by 6% per year and their occupancy rates by 3.1%. Responses vary by employer quality and organizational form. Although luxury hotels pass through cost increases to their customers with no impact on their revenues, upscale hotels facing more price-sensitive customers reduce prices but still suffer losses in occupancy rates and revenues as they struggle with preserving the expected quality level. They are also most likely to see quality downgrades from their segment. The lower-end hotels also pass through cost increases to their customers but, unlike luxury hotels, face significant declines in occupancy rates and revenues. Overall, the performance effects of minimum wage increases are nonmonotonic across quality. We also find negative impacts on hotel entry rates, although the performance and entry effects appear to be short lived. Furthermore, the negative effects of minimum wages dominate in states without right-to-work regulation, suggesting the need for a more comprehensive approach to labor market regulation. This paper was accepted by Victoria Ivashina, finance. Funding: M. Ayyagari received financial support from National Science Foundation Research (U.S) [Grant SES-1660755/1660749]. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2022.4650 .

Duopolistic competition and monetary policy

To consider the strategic pricing of duopolistic firms and its implications for monetary policy, this study constructs a tractable duopoly model with price stickiness. Dynamic strategic complementarity, in which an increase in a firm’s price increases the optimal price set by the rival firm in the following periods, increases steady-state price and the real effect of monetary policy. However, when temporary sales arise as a mixed strategy, the real effect of monetary policy decreases considerably.

Consumer loss aversion and scale-dependent psychological switching costs

We consider a model of product differentiation where consumers are uncertain about the qualities and prices of firms' products. They can inspect all products at zero cost. A share of consumers is expectation-based loss averse. For these consumers, buying products of varying quality and price creates disutility from gain-loss sensations. Even at modest degrees of loss aversion they may refrain from inspecting all products and choose an individual default that is strictly dominated in terms of surplus. Firms' strategic behavior exacerbates the scope for this effect. The model generates “scale-dependent psychological switching costs” that increase in the value of the transaction. They imply that making switching easier or costless for consumers would not motivate more switching.

Size, conditional idiosyncratic risk and price momentum: an international study

PurposeThis paper jointly examines how firm size and idiosyncratic risk impact momentum returns.Design/methodology/approachUsing regression analysis, the authors investigate how firm size and idiosyncratic risk impact price momentum. The authors review firm price data in 25 country markets in the Thomson Financial Datastream database from 1979 to 2009.FindingsThis study’s findings suggest price momentum is more significant among stocks with smaller size and higher idiosyncratic risk. The authors find that winner and loser portfolios have significantly smaller size and higher idiosyncratic risk than portfolios in the middle quintiles.Research limitations/implicationsThis study’s results are consistent with the notion that firm size matters in price momentum and mispricing is greatest for small firms because of the greater risk potential to arbitrageurs. In addition, this finding that firms with higher idiosyncratic risk have greater price momentum supports the idea that investors underreact to firm-specific information.Practical implicationsThis work finds evidence that investors underreact to firm-specific information. As such, these findings are of particular interest for investors looking to exploit opportunities for abnormal returns through price momentum trading.Originality/valueThis paper jointly examines the effects of firm size and idiosyncratic risk on momentum returns. This investigation considers these effects in the global markets. This work adds to the research base by illustrating that both winner and loser portfolios have significantly smaller size and higher idiosyncratic risk than portfolios in the middle quintiles. Also unique to this study, the authors capture the time-variation of expected IdioRisk and the asymmetric effects of volatility by using an exponential general autoregressive conditional heteroskedastic (EGARCH) model to calculate conditional idiosyncratic risk.