Stock Prices Of Firms Research Articles

Identifying the volatility spillover risks between crude oil prices and China's clean energy market

<abstract><p>Since the COVID-19 outbreak, the global economy has been hit hard, and the development of renewable energy and energy transitions has become a common choice for all countries. The development of clean energy firms has become a hot topic of discussion among scholars, and the relationship between the stock prices of clean energy firms and the international crude oil market has attracted more attention. In this paper, we analyze the volatility connectedness between crude oil and Chinese clean energy firms from 2016 to 2022 by building time-varying vector autoregressive models with stochastic volatility components and time-varying spillover index and dynamic conditional correlation GARCH models. The results of the shock effects analysis show that international crude oil volatility had a significant short-term positive impact on Chinese clean energy firms during the COVID-19 outbreak period. Regarding spillover analysis, firms with large total market capitalization tended to be the senders of volatility spillovers, while smaller firms were likely to be the recipients. In terms of dynamic correlation analysis, the correlation between international crude oil and each clean energy firm was found to be volatile, and the dynamic correlation coefficient tended to reach its highest point during the COVID-19 outbreak. Meanwhile, from the optimal portfolio weighting analysis, it is clear that all optimal weights of international crude oil and medium clean energy firms will increase during an epidemic outbreak, and that more assets should be invested in clean energy firms.</p></abstract>

Capital structure and stock price of non-financial firms listed in Viet Nam

The aim of our paper is to consider the non-linear effect of the capital structure represented by debt ratio on stock prices of non-financial firms listed in Vietnam. The research sample in this paper is 458 firms, which was selected by the purposive sampling method. The research data has been extracted from audited financial statements of the firms at the end of every year over the period from 2015 to 2019 and processed correspondingly with stock price statistics from FiinPro Data. According to the panel data of our paper, we used Pooled Ordinary Least Squares (POLS), Fixed Effects Model (FEM) and Random Effects Model (REM), but we only selected FEM after using Redundant Fixed Effects test, Breusch-Pagan test and Hausman test. However, the Wald test’s result showed that the heteroscedasticity does exist in the model; therefore, we adjusted by using Generalized Least Squares (GLS) method. The final estimation results based on GLS show that capital structure has a positive effect on stock price within a limit of debt ratio and will have a negative effect when this limit has been exceeded. This implies that capital structure has an inverted-U-shaped effect on stock price, and we identify the debt ratio threshold of capital structure of 22.07%. The findings are expected to provide useful information for financial managers when making financing decisions with the expectation of maximizing shareholder value and also for investors when analyzing and investing in stocks. The limitations of this research are that the research sample does not include all non-financial firms listed in Vietnam and the research model has not considered the moderating or intervening relationship between factors; according to that, future studies may consider these.

Do Blockchain Stocks Exhibit More Herding Behaviour than Traditional Stocks?

While the volatile behaviour of cryptocurrency is extensively studied, the stock market’s blockchain sector, which has not been given much attention in the academic world, operates very differently from traditional stock industries. The paper hypothesizes that blockchain stocks exhibit more herding behaviour than traditional stocks and uses quantitative data analysis techniques to study it. The automotive industry is taken as a representative of traditional stocks. Cross-Sectional Absolute Deviation, the academic standard for herding behaviour, is used as the primary comparative measure between blockchain and automotive stocks. It reveals that blockchain industry has significant herding, while rational pricing mechanisms prevail in the automotive industry. Supporting this conclusion, a correlation matrix of stock prices of small market capitalisation firms in each industry is constructed, analysing how closely stock price movements in an industry are related. The correlation coefficient for blockchain stocks is 20% higher than the coefficient for automotive stocks. This indicates that blockchain stocks likely exhibit higher levels of herding. The impact of social media on stock price movements in the two industries is analysed by conducting a correlation study between Google Trends data for industry-related keywords and individual stock returns. The blockchain industry saw a significantly higher correlation, likely suggesting that social media has a stronger influence on blockchain stock price movements. Finally, the paper provides possible explanations for why herding behaviour is more prominent in the blockchain stocks compared to traditional stocks. These include absence of traditional stock valuation metrics, lack of financial knowledge and role of social media.

The effect of credit rating downgrades along the supply chain

PurposeThis study aims to examine the information transfer effects of customers’ credit rating downgrades on supplier firms.Design/methodology/approachIn this study, the authors use suppliers’ cumulative abnormal returns around customers’ credit rating downgrade events to identify how shocks to customer credit impact supplier equity prices. The authors also incorporate ordinary least squares and weighted least squares regressions regression analysis of the determinants of supplier market response to customer downgrades.FindingsThe authors find that customer credit rating downgrades present significant negative shocks to the stock prices of supplier firms. Moreover, the authors show that the information transfer effects are determined by both firm- and industry-level factors, including the market anticipation of downgrades, the strength of the customer–supplier linkage, the industry rivals’ reactions to the downgrades and investor attention. The authors also find that the likelihood that a supplier will receive a rating downgrade is significantly higher following its primary customer firm’s downgrade.Originality/valueTo the best of the authors’ knowledge, this paper is the first to explore the information transfer effects of credit rating downgrades on primary stakeholders within the supply chain. The authors document that customer–supplier networks have valuable implications for the spillover effect across debt and equity holders. Information about customers’ financial stress is incorporated into suppliers’ equity prices outside of the context of customer bankruptcy.

Does preventive regulation reduce stock price synchronicity? Evidence from Chinese annual report comment letters

Based on a sample of Chinese A-share listed firms from 2015 to 2018, this paper studies the impact of annual report comment letters (ARCLs) on firm stock price synchronicity. We find that after firms receive ARCLs, their stock price synchronicity decreases. Moreover, the longer the ARCLs and the more negative the ARCLs’ tone, the lower the resulting stock price synchronicity. The mechanism test shows that after firms receive ARCLs, the firms’ information disclosure increases in quantity and quality, external media attention increases, and the firms’ governance improves, reducing their stock price synchronicity. Further research shows that this negative association is more significant in firms with higher information asymmetry. This paper shows that the ARCL, an innovative application of the capital market supervision philosophy, is conducive to improving the quality of listed firms and to the healthy development of the capital market.

Direct and Indirect Effects of Cash Dividend Policies on Firms’ Capital Accumulation in Selected Developed Markets

The effects of cash dividend policies on the capital accumulation of non-bank firms operating in The United States (S&P 500), The United Kingdom (FTSE 100), Japan (Nikkei 225), and France (CAC 40) have been investigated in this study. The dataset used in the study consists of annual observations between 2010 and 2015. Also, the data were retrieved from the Thomson Reuters database. The system in GMM is employed in the econometric estimations in this paper. “Total effect” of cash dividend policies on capital accumulation has been bisected as “direct” and “indirect” effects. In this study, we call the effect of the cash dividend policies on investments via financial and liquidity constraints as “direct effect” and the effect of the policies on the accumulation via market value and business reputation as “indirect effect”. Obtained results show that the indirect effect is positive, whereas the direct effect is negative. However , the magnitude of the direct effect is larger than that of the indirect. Therefore , the total effect of cash dividend policies on the accumulation of capital and investments is negative. The fact that movements in stock prices of firms have an effect on the capital accumulation has shown that the financial markets could affect real economic variables. Also, the results that the cash dividend policies positively affect the market value of firms are mounting evidence to the validity of Signalling and Information Content Approach and Bird in Hand Theory. 

Corporate lobbying and the value of firms: The case of defense firms and the 9/11 terrorist attacks

AbstractWe examine the stock prices of defense firms surrounding the reopening of markets after the September 11, 2001 terrorist attacks. The cumulative abnormal returns for defense firms increased dramatically in response to the attacks, which is arguably explained by the expectation of impending military conflict and the possibility of new defense spending. Perhaps more interestingly, a substantial amount of the variation in the price response across defense firms is driven by whether or not the firm had established political connections through lobbying activities or political action committee contributions before the attacks. These findings seem to support the notion that market participants perceived that defense firms with political connections were more likely to secure future military contracts.

Does policy uncertainty predict the death of M&A deals?

Using a comprehensive sample of U.S. M&A deals from 2000 through 2020, we examine whether the magnitude of policy uncertainty can explain the likelihood of deal cancellation. Consistent with our conjecture, we find that policy uncertainty is a significant predictor of the death of deals. Moreover, we find evidence of a negative association between policy uncertainty and the target firm stock price levels, implying that the market also incorporates the consequences of policy uncertainty into target valuation and bid likelihood outcomes. Altogether, our findings add to the understanding of the interplay between policy uncertainty and external investments through M&A.

Dividend policy and the downside risk in stock prices: evidence from the MENA region

PurposeThe aim of this paper is to document the impact of dividend policies on the downside risk in stock prices.Design/methodology/approachThe authors use the data for non-financial firms from the MENA region to test our arguments by estimating the pooled OLS regressions. The data cover the period between 2010 and 2018.FindingsThis paper shows that firms with higher dividend payouts have significantly lower downside risk in their stock prices than the other firms. The findings of this paper are robust across various proxies of dividend policy and across various sub-samples. This paper contends that lower downside risk associated with the stock prices of firms paying high dividends is due to the fact that these firms have lower agency problems. Lower agency problems reduce the downside risk in stock prices.Originality/valueTo the best of the authors’ knowledge, most of the prior research (covering the MENA region) overlooks the impact of dividend policy on the downside risk in stock prices. This paper fills this gap by documenting the relationship between the two by using the data for firms from the MENA region.

COVID-19 and financial market response in China: Micro evidence and possible mechanisms.

This paper uses event study based on the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model to study the impact of the COVID-19 outbreak on China’s financial market. It finds that the pandemic had an overall significant and negative impact on the stock prices of firms listed on SSE, SZSE and ChiNext. However, such impact appeared to be heterogeneous across industries, affecting listed firms in industries such as pharmaceutical and telecommunications positively, but those in services industries such as accommodation, catering, and commercial services negatively. Apparently, a crisis for some had been an opportunity for others. In addition, this paper seeks to understand the micro mechanism behind the heterogeneity of pandemic shock from the perspective of firms’ financial position. It finds that listed firms with higher debt level were hit harder, whereas those with more net cash flow had displayed higher resilience against the blow of the pandemic. However, the opposite pattern is found among those listed on ChiNext and in industries severely devastated by the pandemic. These findings have policy implications in terms of preventing systemic financial risks and facilitating recovery during pandemic-induced economic downturns. It also helps investor adjust investment strategies, hedge against risks, and secure gains when the market conditions in general are unfavorable.

Market timing in private equity placements: Empirical evidence from China

This paper examines the motivation for private equity placements (PEPs) of listed firms in China. We find that private placement firms are overvalued more than their non-issuing counterparts at announcement and issuance. The result is robust to various measures of mispricing. Additional analyses suggest that the stock prices of private placement firms outperform in the pre-announcement period and underperform in the post-issue period. Considering the widespread practice of discounting privately placed shares, overvaluation over the issuance process helps decrease discounts while increasing the PEPs' attractiveness for investors. Through successful market timing, the shares of private placement firms can be offered at overvalued prices even after considering discounts. Overall, these findings suggest that firms use private equity placements to time the market.

Stock market reactions to voluntary integrated reporting

PurposeThis study aims to examine the impact of voluntary adoption of integrated reporting on the stock prices of firms in Japan.Design/methodology/approachThe event study methodology was used to analyze the stock market reactions to voluntary integrated report (IR) publication. Abnormal returns were estimated for 1,602 observations of 490 firms publishing IRs in Japan using the market model. The t-test, the Boehmer et al., 1991 test and the generalized sign test examined the significance of the cumulative average abnormal returns (CAARs).FindingsThe study reveals that the stock market reacts positively to voluntary IR publication by firms, especially in 2019 and 2015. Additionally, it reveals a tendency for higher CAARs around IR publication dates than around corporate social responsibility report publication dates, especially in 2016 and 2015.Research limitations/implicationsThe limitations of this study include the possibility of self-selection bias and omitted variable bias.Practical implicationsThis study suggests that firms can earn higher abnormal returns in the stock market through environmental, social and governance (ESG) disclosure in IRs, corroborating the recently rising investor interest in voluntary integrated reporting in Japan.Originality/valueThis study contributes to the literature on the value relevance of voluntary adoption of integrated reporting by providing evidence of firms achieving significantly positive abnormal returns around voluntary IR publication dates. There is no published analysis on this topic using multitudes of sample firms using the event study methodology.

Improving Tourism Entrepreneur’s Competition during the COVID 19 Pandemic – A Case Study in Tourism Industry in Vietnam

During the Covid 19 Pandemic, Vietnam tourism entrepreneurs need to develop suitable tourism package and tourism policies, going together with better management of tourism activities and with proper risk management strategies.It is better for tourism company management to estimate effects from macro variables on firm stock price and then they can propose suitable business policies and suggest economic policies for economic growth.Authors mainly use traditional Beta formula and with data collected together with methods of statistics, analysis, synthesis, comparison, then perform OLS regression in order to evaluate quantitative results, both good and bad aspects of impacts of 6 macroeconomic factors on stock price of a study tourism company from 2014-2019. Main results show us that tourism firm Stock price can go up if there is an increase in GDP growth and lending rate and Rf - risk free rate ten a decrease in exchange rate.From that analysis, competitive policy for tourism firms can be recommended and there is the principle that better business management and better risk management will drive better competitiveness of these firms.

ANALYSIS ON FACTORS THAT AFFECT STOCK PRICE: A STUDY ON PROPERTY, REAL ESTATE, AND BUILDING CONSTRUCTION COMPANIES AT INDONESIA STOCK EXCHANGE

Abstract— This study expects to determine the impact of Earnings Per Share (EPS), Current Ratio, Return On Asset (ROA), and Debt to Equity Ratio (DER) towards stock price of property and real estate firms. The samples consist of 37 property, real estate and building construction companies that were listed in Indonesia Stock Exchange period 2017–2019. Samples criteria were: listed on Indonesian Stock Exchange during 2017–2019; did not suspend by Indonesian Stock Exchange; published financial statements during 2017 – 2019; had closing date on December 31th, using Rupiah as reporting currency and published audited financial statement; have positive income; and did not do share splits and stock reverse during 2017 – 2019. The data was analysed by using multiple regression method. The result of this study are: EPS has positive significant impact to stock price, Current Ratio has no positive impact to stock price, while ROA and DER have negative significant impact to stock price. All the independent variables had significant impact on stock price simultaneously.
 
 Keywords: Current Ratio; DER; EPS; ROA; Stock Price

Stock price effects of climate activism: Evidence from the first Global Climate Strike

The first Global Climate Strike on March 15, 2019, represented a historical turning point in climate activism. We investigate the cross-section of stock price reactions to this event for a large sample of European firms. The strike's unanticipated success caused a decrease in the stock prices of carbon-intensive firms. The effect appears to be driven by the increased public attention to climate activism. Furthermore, after the first Global Climate Strike financial analysts downgraded their longer-term earnings forecasts on carbon-intensive firms.

Spillover Effects of Political Connectedness and Corporate Social Responsibility: Evidence From the Trump Administration

This paper does not argue for or against President Trump. Rather, it examines potential spillover from a mutually exclusive choice between political connectedness and corporate social responsibility (CSR). We find that a firm’s investment in political connectedness with Trump (in CSR) causes the stock prices of rival firms to increase (decrease), suggesting spillover. A rational interpretation of the results follows. As human beings, shareholders do value CSR. At the same time, they consider the marginal benefits and marginal costs of each investment type in a given situation and invest accordingly.

The limitations of estimating implied densities from option prices

Bakshi et al. (Stock Return Characteristics, Skew Laws, and the Differential Pricing of Individual Equity Options. Rev. Financ. Stud., 2003, 16(1), 101–143) develop a novel method for estimating a stocks's τ-period risk-neutral return moments from option prices. Their result relies on the integration of all OTM calls and puts to find the prices of a quadratic, cubic, and quartic contract; from which risk-neutral estimates of the 2nd, 3rd, and 4th moments are derived. Dennis and Mayhew (Risk-neutral skewness: Evidence from stock options. J. Financ. Quant. Anal., 2002, 37(3), 471–493) point out that error is introduced into the BKM estimation in practice since options do not span a continuum and the range of moneyness and distance between strikes varies across firms and maturities. We use Monte Carlo simulation to show that the standard approach of Dennis and Mayhew (Risk-neutral skewness: Evidence from stock options. J. Financ. Quant. Anal., 2002, 37(3), 471–493) used within Conrad et al. (Ex ante skewness and expected stock returns. J. Finance., 2013, 68(1), 85–124) and other leading empirical works leads to very biased, and in some cases inconsistent, estimates of BKM implied moments. More so, we prove the particularly concerning result that estimation error using the Dennis and Mayhew (Risk-neutral skewness: Evidence from stock options. J. Financ. Quant. Anal., 2002, 37(3), 471–493) methodology increases dramatically when a stock's actual return distribution is non-normal or the firm's stock price is not exactly at-the-money. Fortunately, the 2-step interpolation method developed by DeMiguel et al. (Improving portfolio selection using option-implied volatility and skewness. J. Financ. Quant. Anal., 2013, 48(6), 1813–1845) is largely robust to the estimation errors we document. Based on our simulation results, we recommend the use of the DeMiguel et al. (Improving portfolio selection using option-implied volatility and skewness. J. Financ. Quant. Anal., 2013, 48(6), 1813–1845) methodology to estimate the 3rd and 4th implied moments, and either the DeMiguel et al. (Improving portfolio selection using option-implied volatility and skewness. J. Financ. Quant. Anal., 2013, 48(6), 1813–1845) methodology or the methodology of Fukasawa et al. (Model-free implied volatility: From Surface to Index. Int. J. Theor. Appl. Finance, 2011, 14(4), 433–463) to estimate the 2nd implied moment (implied volatility). In addition, we argue that the economically large and robust results of our MC simulations and brief empirical study indicate that the findings of prior studies which use the estimation methodology of Dennis and Mayhew (Risk-neutral skewness: Evidence from stock options. J. Financ. Quant. Anal., 2002, 37(3), 471–493), followed by Conrad et al. (Ex ante skewness and expected stock returns. J. Finance., 2013, 68(1), 85–124), should be reevaluated.

Stock Price Effects of Climate Activism: Evidence from the First Global Climate Strike

The first Global Climate Strike on March 15, 2019, represented a historical turning point in climate activism. We investigate the cross-section of stock price reactions to this event for a large sample of European firms. The strike's unanticipated success caused a decrease in the stock prices of carbon-intensive firms. The effect appears to be driven by the increased public attention to climate activism. Furthermore, after the first Global Climate Strike financial analysts downgraded their longer-term earnings forecasts on carbon-intensive firms. Keywords: Climate change, climate strikes, stock returns, environmental performance, public attention, earnings forecasts.

Volatility of Stock Prices in Tanzania: Application of Garch Models to Dar Es Salaam Stock Exchange

We use Generalized Autoregressive Conditional Heteroscedasticity (GARCH) models to examine volatility of stock prices for firms listed in the Dar es Salaam Stock Exchange (DSE). In doing so, both symmetric and asymmetric GARCH models are used in this study. The descriptive analysis of the data shows that standard deviation of the series returns is high, indicating a high level of daily fluctuations, and the log value of the mean is close to zero. Our empirical results clearly exhibit evidence of volatility and volatility clustering, a typical feature of financial time series. Moreover, our results indicate that the series are highly leptokurtic, flat tailed and asymmetric consistent with characteristics of financial time series data. Out of all models examined, EGARCH (1,1) and GARCH (1,1) seem to perform plausibly better than others.

Using Social Media to Identify the Effects of Congressional Viewpoints on Asset Prices

This paper examines the extent to which individual politicians affect asset prices using a high-frequency identification approach. We exploit the regular flow of viewpoints contained in a large volume of tweets from members of US Congress. Congressional tweets targeting individual firms are collected and classified based on their tone. Supportive (critical) tweets increase (decrease) stock prices of the targeted firm in minutes around the tweet. The price response persists for several days, during which analysts revise their forecasts about the firm cash flows. Selected politician tweets linked to legislation affect the stock prices of firms in the same industry as the targeted firm. The timeline of politician viewpoints within a particular bill exhibits surges in relevant news that predict roll call votes months before the signing of the bill. We highlight how the social media accounts of politicians are a valuable source of political news.