9 research outputs found
IFRS 9 implementation and bank risk
Get PDFIn this paper, we investigate the impact of IFRS 9 – Financial instruments on bank risk. Using a sample of 666 banks across 61 countries for the period 2016–2019, we find a decrease in bank risk following the implementation of IFRS 9. This implies that the forward-looking loan loss provisioning, mandated under IFRS 9, facilitates a reduction in bank risk. We find this effect to be more pronounced for riskier banks, suggesting that the implementation of IFRS 9 is a sign of effective regulation for banks rather than a manifestation of regulatory overreach. We also find the effect to be greater for banks in countries with stronger accounting regulatory enforcement and high banking supervision intensity. Overall, our results, which are robust to different estimation techniques, including multi-level hierarchical regressions and entropy balancing estimations, show that increased transparency and timely recognition under IFRS 9 reduce bank risk
Employees’ reviews and stock price informativeness
Get PDFWe investigate the relationship between employee reviews and stock price informativeness. Using a sample of US firms, we find that firms with higher employee satisfaction are associated with greater stock price informativeness in terms of idiosyncratic volatility. We find this result to be more pronounced for firms that have a greater reliance on human capital assets. Overall, our study suggests that employee reviews have implications for financial markets
Stock return synchronicity, earnings informativeness, and institutional development : evidence from African markets
Get PDFThis thesis contains the outcome of three separate but interrelated empirical analyses
on stock return synchronicity, earnings informativeness and institutional development
in a sample of African markets.
The first analysis investigates the level and determinants of stock return
synchronicity. Some recent studies have provided a theoretical argument that contrary
to conventional wisdom, stock return synchronicity can be high in a strong information
environment as market participants are less surprised about the occurrence of future
events arising out of having more available information. This may therefore imply that
stock return synchronicity can be conversely low in a relatively weaker information
environment. The first empirical analysis of the thesis tests this conjecture using a total
of 616 firms across five African countries (Botswana, Ghana, Kenya, Nigeria and
South Africa) over the 2005-2015 period. The main measure of stock return
synchronicity used is the R2
from a market model regression of individual stock returns
on the returns of a corresponding market index. The findings show that on average,
firms in African markets do not exhibit high levels of stock return synchronicity,
providing support for the view that stock return synchronicity can be low in markets
with relatively weak transparency and conversely high in strong information
environments. In regression analysis, the main driver of stock return synchronicity,
however, is firm size, whilst contrary to some previous studies, ownership structure
has no impact. These results are robust to different measures of stock return
synchronicity that include both a lagged market index and a world market index. They
are also robust to different estimation techniques including Fama-Macbeth regressions
and ordered probit regressions.
The second empirical analysis of this thesis investigates the informativeness of
earnings announcements in African stock markets and examines whether conditional
on the level of stock return synchronicity, market reactions to earnings announcements
are influenced by firm fundamentals or trading frequency. This chapter uses a set of
1762 annual earnings announcements across 369 firms from three countries (Kenya,
Nigeria and South Africa) over the 2005-2015 period. In univariate analysis, the main
measure of earnings informativeness is Normalised Volatility, which divides volatility
during a 21-day event window by volatility in a period of 120 days outside of the event
window. Normalised volatility indicates that earnings announcements are informative across the sample. The results are driven by less frequently-traded stocks (stocks which
experience price changes of between 50% to 74% of trading days in the previous year),
although informativeness is also present for highly traded stocks (stocks which
experience price changes in at least 75% of trading days in the previous year).
Informativeness manifests more clearly at announcement and in the postannouncement window, and there is little evidence of leakage. Cross-sectional tests,
using regression analysis, provide evidence of an effect of both earnings fundamentals
and investor behaviour on stock returns around earnings announcements.
The third and final empirical analysis examines the impact of two institutional
factors— the mandatory adoption of IFRS and the perceptions of corruption, on the
market reactions earnings informativeness within the same period of 2005-2015. The
first part of the analysis tests whether earnings became more informative following the
mandatory adoption of IFRS. This analysis is restricted to only Nigeria and South
Africa as Kenya adopted the use of IFRS prior to the start of the sample period of this
study. The second part of this analysis tests the impact of the perception of corruption
on earnings informativeness in a sample made of firms from Kenya, Nigeria and South
Africa. Both univariate and regression results show that the mandatory adoption of
IFRS did not lead to significant improvement in earnings informativeness. This finding
is consistent with the view that the improvement in accounting standards must be
accompanied by effective mechanisms of enforcement in order to realise their capital
market benefits. However, with respect to corruption, there is a significant negative
impact on earnings informativeness in terms of abnormal trading volume. Overall the
findings in this chapter point to the growing importance of how the institutional
environment can have capital market implications for firms. Therefore, more work
needs to be done to strengthen the institutional framework in order to further enhance
the price-discovery process in these markets.Accountancy, Economics and Finance Department, Heriot-Watt University Scholarshi
Corporate carbon footprint and market valuation of restructuring announcements
Get PDFThe call for greener and more sustainable corporate practices triggered a surge in corporate restructuring. In this study, we investigate the impact of carbon emissions on the market reaction to announcements of corporate restructuring activities. Using a sample of US firms, we find that investors discount the value of corporate restructuring announcements when firms have higher levels of carbon emissions. Our results indicate that emissions are negatively associated with cumulative abnormal returns (CAR), cumulative total returns (CTR), and buy and hold abnormal returns (BHAR) around announcements. This effect is more pronounced for firms with a lower risk of bankruptcy, those financially constrained, and those with lower growth opportunities. We also find that high emissions at announcements are negatively associated with post-restructuring financial and market performance. Overall, our results highlight the growing implications of firm-level carbon emissions for corporate market valuations, especially amongst firms undertaking restructuring
Corporate carbon footprint and market valuation of restructuring announcements
Get PDFThe call for greener and more sustainable corporate practices triggered a surge in corporate restructuring. In this study, we investigate the impact of carbon emissions on the market reaction to announcements of corporate restructuring activities. Using a sample of US firms, we find that investors discount the value of corporate restructuring announcements when firms have higher levels of carbon emissions. Our results indicate that emissions are negatively associated with cumulative abnormal returns (CAR), cumulative total returns (CTR), and buy and hold abnormal returns (BHAR) around announcements. This effect is more pronounced for firms with a lower risk of bankruptcy, those financially constrained, and those with lower growth opportunities. We also find that high emissions at announcements are negatively associated with post-restructuring financial and market performance. Overall, our results highlight the growing implications of firm-level carbon emissions for corporate market valuations, especially amongst firms undertaking restructuring
Blockchain technology and environmental efficiency: evidence from US-listed firms
Get PDFIn this paper, we examine the relationship between the adoption of blockchain technology and environmental efficiency using a sample of U.S. firms over the 2015-2019 period. Our results show that the adoption of blockchain technology is positively and significantly associated with environmental efficiency, suggesting that the use of Blockchain improves environmental sustainability. In further analyses, we find that the relationship between Blockchain and environmental efficiency is more pronounced for firms in the financial and technological industries. Our findings are also robust to other methods that control for endogeneity, including the difference in difference regressions and Propensity Score Matching. Overall, we provide empirical evidence that can incentivize business leaders and policymakers to adopt innovative technologies such as Blockchain
Third-party auditor liability risk and trade credit policies
Get PDFWe investigate the effect of Third-Party Auditor Liability (TPAL) risk on firms’ trade credit policies. Exploiting the staggered state-level changes to TPAL in the US as a quasi-natural experiment, we find that firms in states with a higher risk of TPAL increase their use of trade credit. This relationship is more pronounced for firms with a more enhanced information environment, those with greater financial constraints, and those whose auditors are more exposed to litigation risk. Overall, our findings provide evidence of how TPAL affects firms’ short-term financing needs
CEO power and firm decarbonisation efforts
Get PDFUsing a global sample of 899 firms from 26 countries for the period 2000 to 2021, this study investigates the effect of CEO power on firms' decarbonisation efforts. We find that firms with higher levels of CEO power are associated with lower carbon emissions. Further analysis indicates that nationally diverse boards and older board members amplify the negative relationship between CEO power and carbon emissions. Similarly, powerful CEOs with high academic qualifications aggressively pursue corporate decarbonisation. The impact of CEO power on decarbonisation is more noticeable in carbon-intensive industries. Lastly, we document that climate legislation can be catalytic for decarbonisation
