Zealand Stock Exchange Research Articles

Retail investors, COVID and the quality of the New Zealand Stock Exchange

In this article, we investigate the impact of the influx of retail investors during the COVID-19 lockdowns on the New Zealand Stock Exchange on the efficiency of the market. On one hand, these investors bring added liquidity to the market, which generally improves market efficiency, and on the other hand, many of these investors were inexperienced retail traders who are often viewed as noise traders harming market efficiency. This natural experiment allows us to investigate the impact of retail investors. Using a sample of 99 New Zealand Exchange listed companies, we collect intraday price and quote data from 1 January 2019 to 24 March 2021. We compute a range of market quality measures across three categories: trading costs, price efficiency and speed of information incorporation. Our results clearly indicate that the influx of retail investors has reduced market quality; in particular, we observe more price predictability and information being impounded into prices more slowly. JEL Classification: C10, G14, G20

Behavior Among Stock Price, Financial Performance, and Financial Distress Evidence from the Australian and New Zealand Stock Exchanges

Objective: The main objective of this study is to investigate the behavior among stock price, financial performance, and financial distress in Australian and New Zealand Stock Exchanges. Similar studies have been done on United States and European markets, but none on Australian and New Zealand Stock Exchanges. Our finding suggested that PE Ratio is not a reliable measure of financial performance in Australian and New Zealand Stock Exchanges. Method: Altman’s Z-score is applied to reflect the financial distress of the large listed firms in Australian Stock Exchange and New Zealand Stock Exchange while expected return on total investment minus the market premium, which is associated with the overall risk of a firm, is used as a proxy to stock price performance. In addition, this study also investigates the various effects on profitability, financial leverage, liquidity, growth, and size factors on stock performance. Results: Regression models are applied to investigate the stock performance upon independent variables’ effects. Results of the study show that all selected variables are reliable to use to measure performance, except P/E ratio. Moreover, Z-score, current ratio, P/E ratio, and ROE generally have significant positive relationship with stock price performance, while total assets, in general, have significant negative relationship with stock price performance. Conclusion: This paper has a potential to contribute in knowledge of stock price and financial performance. It also examines financial distress of the market. The objective of the study is to examine the dynamics of stock prices using market value ratios and financial performance using financial ratios under financial distress of selective countries particularly. Using the empirical data from listed companies from the stock exchanges, this study determines the stock performance in a unique way with the combination of market value ratios and financial ratios.

Use of visuals in sustainability reporting by New Zealand Stock Exchange (NZX) listed companies: an impression management perspective

PurposeThe purpose of this research is to investigate the use of visuals in communicating symbolic sustainability information by the New Zealand Stock Exchange (NZX) listed companies through their standalone sustainability reports.Design/methodology/approachUsing the impression management theoretical framework and Barthes' conceptions of denotation and connotation, the study seeks to examine the way visuals, such as photos, tables and figures, are used to convey symbolic sustainability messages and information. The content analysis method was used to analyse 1,064 visuals from 20 New Zealand Stock Exchange listed companies' standalone sustainability reports for 2017.FindingsThe authors observe variations in the use of visuals to convey messages about sustainability and the appeal of these visuals to readers in the process of creating a symbolic sustainability message. While photos focus on emotions as their main method of impression management, tables and figures focus on the logical link between readers and a positive sustainability message.Research limitations/implicationsThe study adds to the impression management theory work that companies use a combination of photos, tables and figures in communicating symbolic positive sustainability messages. The insights inform the corporate culture of the use of visuals and the effect of future reporting practices regarding sustainability information in New Zealand and globally.Originality/valueUnlike other studies on sustainability reporting, we contend that a company uses a combination of visuals to create impressions that include not only positive but also negative and neutral sustainability messages.

The impact of upstairs trading on market quality: evidence from a highly segmented market*

Using data on over 18 million trades from the New Zealand Stock Exchange (NZX), this paper examines how market segmentation affects overall market quality in a market that until recently had no restrictions on trading outside the central limit order book (LOB). We find that upstairs trading results in lower transaction costs, larger trade size and lower volatility. A newly implemented minimum size requirement for trades in the upstairs market has the desired outcome and further lowers transaction costs and volatility due to reduced market segmentation. The results suggest that a functional upstairs market can have a positive impact on market quality if well-designed.

Market Giants vs. Dwarfs: New Zealand’s Perspective on Environmental Reporting

This paper examines New Zealand listed firms’ compliance with Global Reporting Initiative-environmental reporting standards (GRI 300) and the impact of environmental reporting determinants on the level of sustainability reporting. The author collected data from annual and sustainability reports of the top and bottom 30 firms listed on the New Zealand Stock Exchange (NZX). The author then conducted content analysis to measure the extent of each firm’s environmental reporting score. The study findings indicate that large firms report only one-thirds of the relevant information, whereas small firms neither adopt international reporting frameworks nor report on the environment. Additionally, we found that firm size and profitability are positively associated with the extent of environmental reporting in New Zealand, whereas industry-specific differences play a minor role. This study further finds that firms, which explicitly referred to the “Global Reporting Initiatives” or “GRI” terms in their annual or sustainability reports, outperformed in environmental reporting compared with those that did not. This study uses GRI 300 standards to assess the level of environmental reporting of each firm. Finally, the study compares environmental reporting practices between top and bottom-listed firms in New Zealand. The findings emphasize the desirability of making the environment reporting mandatory in all companies to ensure the New Zealand Government’s latest enforcement of climate risk reporting.

A snapshot of sustainability assurance market in New Zealand

PurposeThis study aims to provide a snapshot of voluntary sustainability assurance in New Zealand (NZ) in 2020. we assess the frequency of different assurance elements and discuss aspects of current practices that potentially contribute to the audit expectation gap. we also test whether the determinants of voluntary sustainability assurance in NZ are consistent with international findings.Design/methodology/approachFor 118 companies listed on the New Zealand Stock Exchange in 2020, we hand collected data on whether sustainability information was assured, subject matter assured, assurance level, outcome, provider, disclosure of detailed procedures, standard referenced and criteria applied. we then examine the influences of voluntary sustainability assurance using both univariate and regression analysis.FindingsApproximately 20% of listed companies that disclosed sustainability information provide a sustainability assurance report, indicating low levels of assurance compared to international practices. we note that the presence of different forms of assurance and certification, placement of sustainability information before financial statements and the associated audit report and mixture of assurance levels potentially contribute to the audit expectation gap. Further, voluntary sustainability assurance practices are diverse, and there are notable differences between Big Four accounting firms and other providers in terms of assurance level and standard referenced. Consistent with prior studies, we find size and industry classification as two main drivers of voluntary sustainability assurance.Originality/valueWe contribute NZ-specific insights to the sustainability assurance literature. The findings on voluntary sustainability assurance practices and reflection on the audit expectation gap are timely and relevant to the new climate-related disclosure mandate and pending assurance requirements.

COVID-19 and CSR disclosure: evidence from New Zealand

PurposeStakeholders' uncertainty about firms' value drives their urge to get information, as well as managerial disclosure choices. In this study, the authors examine whether and how an important source of uncertainty – the recent COVID-19 pandemic's effect on corporate social responsibility (CSR) disclosure – is beyond managerial and stakeholders' control.Design/methodology/approachThe authors develop a novel construct for daily CSR disclosure by employing computer-aided text analysis (CATA) on the press releases issued by 125 New Zealand Stock Exchange (NZX) listed from 28 February 2020 to 31 December 2020. To capture COVID-19 intensity, the authors use the growth rate of the population-adjusted cumulative sum of confirmed cases in New Zealand on a specific day. To examine the association between the COVID-19 outbreak and companies' CSR disclosure, the authors employed ordinary least squares (OLS) regression by clustering standard error at the firm level.FindingsThe authors find a one standard deviation increase in the COVID-19 outbreak leads to a 28% increase in such disclosures. These results remained robust to a series of sensitivity tests and continue to hold after accounting for potential endogeneity concerns. In the channel analysis, the study demonstrates that the positive relationship between COVID-19 and CSR disclosure is more pronounced in the presence of a well-structured board (i.e. a large, more independent board and with a higher proportion of women on it). In further analysis, the authors find the documented relationship varies over the pandemic's life cycle and is moderated by government stringency response, peer CSR pressure and media coverage.Originality/valueThis paper is the first study that contributes to the scant literature examining the impact of the COVID-19 outbreak on CSR disclosure. Prior research either investigates the relationship of the CSR-stock return during the COVID-19 market crisis or examines the relationship between corporate characteristics including the quality of financial information and the reactions of stock returns during COVID-19. The authors extend such studies by providing empirical evidence that managers respond to COVID-19 by increasing CSR disclosure.

The impact of the 2012 NZX listing rule change on board composition and company performance

PurposeThis study aims to examine the impact of December 2012, New Zealand (NZ) stock exchange operator listing rule change that introduced compulsory disclosure about gender diversity on NZ boards.Design/methodology/approachA quasi-natural experiment setting with a clearly identifiable exogenous event.FindingsThe rate of growth in female-held directorships increased significantly after the introduction of the new rule, resulting in, by 2016, the average female board representation being more than double what it had been in 2012. However, this paper finds no relationship between this response and company performance.Research limitations/implicationsThis study cannot attribute causality to the observed jump in female directorships following the 2012 listing rule change due to the absence of a control group of firms not subject to this change.Practical implicationsThe results are consistent with an efficient director appointment process in NZ.Originality/valueLow-key regulatory changes can have a significant impact on company behaviour.

Corporate governance and corporate social responsibility synergies: evidence from New Zealand

PurposeThis paper aims to provide exploratory evidence on corporate governance (CG) and corporate social responsibility (CSR) interfaces. Although there remains a voluminous literature on CG and CSR, very little effort has been put forward to explore the nature of this relationship.Design/methodology/approachUsing interviews with Senior Executives of New Zealand Stock Exchange listed firms, this research assesses CG and CSR practices, identifies barriers for CG and CSR adoption and investigates the nature of the relationship between CG and CSR.FindingsThe results indicate a moderate level of CG and CSR practices, with a lack of resources and cost-time balance as common barriers for CG and CSR adoption. However, despite these barriers, we note that the majority of executives appreciate the increasing convergence between CG and CSR, and believe that a more robust CG framework will lead to more sustainable CSR practices.Originality/valueThese findings have important implications for managers and policymakers interested in understanding the CG-CSR nexus and promoting responsible business practices.

Characteristics of New Zealand dividend omissions and resumptions

PurposeFor firms listed on the New Zealand Stock Exchange, which is a relatively thinly traded market, the purpose of this paper is to examine the nature of stock returns associated with a dividend omission announcement when computations specifically address thin trading, and whether specific firm characteristics affect the likelihood and nature of a dividend omission.Design/methodology/approachFirst, event study analysis is used to check if dividend omissions actually do impact share prices in terms of short-term abnormal returns and longer-term cumulative abnormal returns (CARs) in a thinly traded market. Second, binomial logistic regression analysis is used to determine what, if any, company characteristics are associated with the decision to omit a dividend. Third, multinomial logistic regression analysis is employed to determine what firm characteristics are associated with continuing (or ending) a phase of no dividends before a dividend resumption.FindingsDividend omissions generate immediate negative abnormal returns, and there is a longer-term persistence of negative CARs. The size and duration of these abnormal returns are smaller, but still significant, when thin-market-specific methodology is employed. With respect to firm characteristic, smaller firms, firms with decreased earnings, a higher level of extraordinary charges, greater leverage and firms with a higher book-to-market value are associated with a greater likelihood of making an omission. With respect to the length of time between an omission and resumption of dividend payments, earnings decreases, a higher book-to-market value, a higher level of extraordinary charges and a decrease in firm debt level become significant.Originality/valueThis paper adds value in two dimensions. First, it considers dividend omissions in three different, but inter-connected ways. Second, the use of multinomial logistic regression to examine an aspect of the non-payment hiatus breaks new ground.

Photographs depicting CSR: captured reality or creative illusion?

Purpose The purpose of this study is to uncover the extent of utilisation of photographs depicting corporte social responsibility (CSR) information in corporate annual reports and the possible motives for their use. Design/methodology/approach The study used visual content analysis, based on Banks’ (2001) strategy of “looking through”, “looking at” and “looking behind” photographic images, to examine and analyse 4,933 photographs contained in the 2005, 2010 and 2015 annual reports of 70 companies listed on New Zealand Stock Exchange. The findings were interpreted using the impression management theoretical construct. Findings The findings show a marked increase in the utilisation of photographs for CSR-associated disclosures by the sample companies. Surprisingly, the quantity of photographs depicting environmental performance has declined, whereas those featuring product responsibility have increased significantly. The “messages” encoded in the photographs create idealistic images of the companies being caring and responsible corporate citizens. This suggests that companies are systematically using symbolic presentations such as photographs of children and families for rhetorical impression management. Practical implications The study contributes to a greater understanding of the power of photographs in representing and constructing “reality” of CSR performance. The findings have the potential to inform and assist the promulgation of guidelines for CSR reporting, as well as make users aware that photographs could be exploited as a rhetoric and impression management tool in pursuit of symbolic legitimacy. Originality/value The study develops a structured approach for categorising and analysing CSR-related photographs and adds to the scant literature on the utilisation of photographs as a medium for CSR information dissemination.

CSR Practices among New Zealand Firms: Myth or Reality

Recently, the revised New Zealand Stock Exchange (NZX) Corporate Governance (CG) Code 2017 has given special attention on CSR issues, with an aim to promote Environmental, social and governance (ES...

Diversity in totality: A study of diversity disclosures by New Zealand stock exchange listed companies

This study explores diversity reporting by New Zealand Stock Exchange (NZX) listed companies, arguing that diversity goes beyond gender and includes differences in age, ethnicity, sexuality, religious beliefs and physical disability. We argue that gender diversity and deep diversity elements (race, age, sexual orientation, disabilities, ethnicity) have a synergistic relationship and that gender diversity objectives cannot be achieved without attaining diversity objectives in these other elements and vice versa. Designing a 30-item diversity disclosures index, this study undertakes a content analysis of the diversity-related disclosures made by 152 NZX listed companies. Analysing diversity-related disclosures in annual and sustainability reports, we find that the NZX listed companies predominantly relate diversity only to board gender diversity. Deep diversity elements at all organisational levels, however, do not receive much attention, with a few exceptions. Our results highlight that female representation on organisational boards has a positive impact on overall organisational gender and other diversity aspects and vice versa. The results of an emphasis on the totality of diversity have important implications for boards of directors, corporate managers and regulators interested in improving the corporate governance and diversity practices in New Zealand organisations.

Influence of female board members on financial performance of listed companies in New Zealand

Many governments are under pressure to introduce quotas for women on corporate boards. This paper explores the rationale for quotas. A panel dataset is employed comprising 47 of the 50 companies listed on the New Zealand Stock Exchange (NZSX50) to test the effect of female directors on firm financial performance. First, a Poisson regression model is run to examine selection bias where women select to join firms that perform well financially. Second, a fixed effects model is estimated to explore whether firm financial performances are enhanced by the number of female board directors and their length of service. No evidence is found for self-selection bias. Nor is there evidence to suggest female directors improve financial performance. Equity arguments for quotas are also considered. Very little theoretical or empirical work exists on the equity debate, yet, it has implications for determining quotas and their size. More research is recommended on what constitutes equity.

Influence of female board members on financial performance of listed companies in New Zealand

Many governments are under pressure to introduce quotas for women on corporate boards. This paper explores the rationale for quotas. A panel dataset is employed comprising 47 of the 50 companies listed on the New Zealand Stock Exchange (NZSX50) to test the effect of female directors on firm financial performance. First, a Poisson regression model is run to examine selection bias where women select to join firms that perform well financially. Second, a fixed effects model is estimated to explore whether firm financial performances are enhanced by the number of female board directors and their length of service. No evidence is found for self-selection bias. Nor is there evidence to suggest female directors improve financial performance. Equity arguments for quotas are also considered. Very little theoretical or empirical work exists on the equity debate, yet, it has implications for determining quotas and their size. More research is recommended on what constitutes equity.

Does the design of spot markets matter for the success of futures markets? Evidence from dairy futures

This study provides evidence of the importance of a well‐defined and functioning spot market for the success of the associated futures market. Our analysis of hedging effectiveness and hedge ratio persistence shows that none of the United States (US) spot market indices may be hedged effectively with the Chicago Mercantile Exchange nonfat dry milk futures at short hedging horizons, whereas the New Zealand (NZ) Stock Exchange whole milk powder futures contract is an effective hedge for the Global Dairy Trade spot pricing benchmark. Four important dimensions of spot market design are identified—timeliness, market‐based measurement, forward‐spot separation, and inclusiveness.

Effects of Female Board Representation on the Performance of Listed Companies in New Zealand

This study examines the issue of gender diversity on boards of firms listed on the New Zealand Stock exchange (NZX). New Zealand was chosen because it has one of the lowest rates of women on public-company boards in the western world, according to data from the Institute of Directors. In publicly-listed companies in New Zealand, only 17 percent of the board members were women in 2016. A quantile regression approach is used to capture the impact of female representation at different points of the distributions of the performance measure. Using a sample of New Zealand listed companies (NZX) over the period 2005-2016, this study finds insignificant effect of board gender diversity on firm performance over different points of the conditional distribution, and that this impact mostly is indifferent on the measure of performance considered. This result is robust across econometric model – 2SLS that controls for endogenity. The difference-in-difference model is used to verify the significance of robustness of relationships, considering the gender diversity reporting and the financial crisis as exogenous shocks. This study provides empirical evidence on the economic efficacy of the NZX gender reporting rule. The results of this study would be of interest to policy makers, academicians, and practitioners.

Corporate governance disclosures in the New Zealand agricultural companies

Livestock, agriculture, and horticulture products are essential in the New Zealand economic sustainable development. Consequently performance and governance of active companies in these areas of business are constantly monitored by the public through legislators, stock market, government agencies, and media. Practically corporate governance disclosures are providing essential information for such monitoring and analysis. This paper intention includes critically evaluate corporate governance disclosures of agriculture companies. Implementation of the content analysis methodology enables this research project to present analysis of the level of compliance with the 2004 Corporate Governance Principles and Guidelines that put forwarded by the New Zealand Stock Exchange (governance related disclosure and their non-listed counterpart as expected providing even less disclosure in this area. The financial and governance reports of these companies are suffering from deficient transparency in the area of corporate governance.

Efficiency of Hedging Against Fluctuating Prices of Dairy Products

This paper investigates hedging and cross-hedging internationally traded milk derivative products with internationally traded commodities, recently launched New Zealand dairy futures, New Zealand agricultural products, and mature United States dairy market futures. The contribution of the paper is twofold. First, we show that international dairy commodities are a distinct commodities subgroup, as changes in prices of dairy products are uncorrelated with other worldwide traded commodities. Second, we show that New Zealand Stock Exchange dairy futures are an effective tool for hedging exposure to smaller size trades and may not necessarily be of large positions as required by cooperatives and multinationals

(Clustering in Time Span Decisions: Examining the New Zealand Stock Exchange)

Chinese Abstract: 紐西蘭證券交易所具有二項特徵：第一、紐西蘭市場規模是已開發國家中最小者，第二、發放的股利以紐幣或其他國家貨幣計價。本研究發現，發放紐幣者除息日至發放日間隔天數主要分佈9天與16天（眾數）者。至於發放他國貨幣樣本，主要分佈於23天、30天（眾數）與37天。綜合而言，除息日與發放日間隔天數相對集中於9天、16天、23天、30天與37天之現象，說明七天的週循環效應對人類時間間隔決策造成重要影響；本研究說明，習慣以七天為一單位之決策行為模式，不利於投資人權益。本研究也建議廢除中華民國公司法第165條「除息基準日前五日停止過戶」之規定，以配合電子化制度，而大幅縮短臺灣市場的除息日與發放日間隔天數，嘉惠投資人。English Abstract: The NZX is characterized by two features. First, it is the smallest market among the developed countries. Second, the dividends paid by firms are denominated in either NZD or other currencies. Among the events of dividends denominated in NZD, the two mostly common chosen durations between the ex-dividend and payment dates are 9 and 16 days (the mode). As to another independent sample of non-NZD dividends, the three most commonly chosen durations are 23, 30 (the mode), and 37 days. Consequently, these time spans are clustered around from 7 to 37 days, with gaps of 7 days. We confirm the notion that the number 7 plays a salient role in corporate decisions relating to time spans, due to the significance of the weekly cycle in our lives. This study claims that this behavior paradigm does not benefit investors. We further suggest that the Taiwanese government should abolish Article 165 of the Company Act, which requires that “the shareholders' roster shall not be altered within 5 days prior to the target date fixed by the issuing company for distribution of dividends.” This is to catch up with technological advancements in the modern world and for the benefit of investors.