Anti-corruption campaign in China: good news or bad news for firm value?

This article investigates the effects of an anti-corruption campaign on firm value by testing market reactions to the investigation of top local officials during the recent anti-corruption campaign in China. We find that the anti-corruption events are more likely to be bad news for the market values of local state-owned enterprises (SOEs) but good news for the market values of non-SOEs less dependent on political connections. Besides, anti-corruption events are also more likely to be bad news for firms in regulated industries or low-marketization regions but good news for firms in nonregulated industries or high-marketization regions.     

EMU-related news and financial markets in the Czech Republic,Hungary and Poland

We analyse the impact of news on five financial markets in the Czech Republic, Hungary and Poland using a newly constructed data set in a Generalized Autoregressive Conditional Heteroscedastic (GARCH) framework. Macroeconomic shocks (on Gross Domestic Product (GDP), inflation rate, current account and trade balance) are constructed as deviations from expected values. Economic and Monetary Union (EMU)-related political and fiscal news is captured as news dummies. Macroeconomic shocks significantly affect short-term interest rates and, to a lesser extent, other financial variables. Political and fiscal news has an impact on long-term bond yields and exchange rates. News displayed prominently in our media sources has a greater impact on financial markets than other news and, in addition, the sources of news themselves matter. We also discover asymmetric effects of news within markets. Finally, using a pooled GARCH model we find that macroeconomic shocks have the strongest impact on financial markets in Hungary, while political news has the largest influence in both Hungary and Poland.     

Corporate social irresponsibility,CEO overconfidence,and stock price crash risk

This study examines whether and how corporate social irresponsibility (CSI) influences stock price crash risk for firms with overconfident CEOs. We find that the positive association between CEO overconfidence and stock price crash risk as shown in prior studies is significantly weakened when firms have higher CSI concerns. As a result, our intriguing findings demonstrate that investors are less surprised at the negative news hoarded by overconfident CEOs of CSI firms, possibly because they are already aware of and have previously reacted to the socially irresponsible behavior in their daily operations.     

Firm-specific information and systemic risk

Although there is substantial literature linking news to the asset return volatility of a single asset, little attention has been paid to how news influences the relationships between firms. This paper addresses this issue by examining how firm-specific scheduled and unscheduled news arrivals influence the systemic risk of individual firms based on a sample of 47 US financial institutions. Whereas negative surprises from scheduled news announcements and a higher rate of unscheduled news both increase the systemic risk of a firm, positive news surprises decrease this systemic risk. In addition, negative scheduled news and a higher rate of unscheduled news across the sector increases the total connectedness or systemic risk across the sector as a whole. These effects are magnified when the market is already in distress. The results indicate that regulators should consider more than volatility and pay attention to the news flow when monitoring systemic risk.     

上市公司并购的短期和长期股价表现

本文以1998～2002年发生于我国证券市场的1415起并购事件为研究样本，考察了收购公司的短期和长期股价表现。结果表明：并购在短期内给收购公司带来了显著的超常收益，但长期内则使得收购公司股东遭受了显著的财富损失；收购公司的股价表现随公司的规模、财务杠杆、管理能力和政府关联程度的不同而变化，无论是短期内还是长期内市场都更认可小规模和低财务杠杆公司的并购；本文还发现，在对收购公司股价表现影响方面，政府关联和管理能力之间存在显著的替代关系。     

Information advantage,short sales,and stock returns: Evidence from short selling reform in China

We study short selling around earnings announcements and examine the potential sources of their information. Using unique daily aggregate short selling transactions in China, we find that short sellers significantly increase (decrease) their short positions before negative (positive) earnings surprise. In addition, abnormal high short selling is significantly associated with negative post-earnings announcement stock returns. The findings suggest that short sellers, on average, are informed and sophisticated traders and they can exploit profitable opportunities contained in earnings announcements. Finally, we find that stocks with poor governance or more insiders have higher (lower) abnormal short selling in negative (positive) earnings surprise, indicating private information leakage from firms with weak governance; which is consistent with the tipping argument. Our findings have important policy implications for capital market regulation in China.     

Abnormal returns before acquisition announcements: evidence from Europe

Acquisition announcements influence the stock price of target firms, providing an opportunity for insiders to obtain significant abnormal returns. We study the presence of positive abnormal returns before the announcement date, in target firms, quoted in Euronext markets (Belgium, France, The Netherlands and Portugal) from 2001 to 2007. We investigate whether the pre-announcement run-up of prices can be explained by rumours in the media and the percentage of capital previously owned by the bidding firm, among other factors. We examine cumulative abnormal returns in an event window of 60 days prior the acquisition announcement, with the event date adjusted for the previous disclosure of news about the acquisition, in the media. We compute a run-up index, and find that there are abnormal positive returns before the announcement date, confirming previous studies. We find that a significant part of the run-up is explained by: (i) market anticipation triggered by legitimate sources of information, namely, rumours in the media about the possibility of an acquisition bid and (ii) the percentage of capital previously owned in the target firm, by the bidding firm.     

Daily market news sentiment and stock prices

In recent years there has been a tremendous growth in readily available news related to traded assets in international financial markets. This financial news is now available through real-time online sources such as Internet news and social media sources. The increase in the availability of financial news and investor’s ease of access to it has a potentially significant impact on market stock price movement as these news items are swiftly transformed into investors sentiment which in turn drives prices. In this study, we use the Thomson Reuters News Analytics (TRNA) data set to construct a series of daily sentiment scores for Dow Jones Industrial Average (DJIA) stock index constituents. We use these daily DJIA market sentiment scores to study the influence of financial news sentiment scores on the stock returns of these constituents using a multi-factor model. We augment the Fama–French three-factor model with the day’s sentiment score along with lagged scores to evaluate the additional effects of financial news sentiment on stock prices in the context of this model using Ordinary Least Square (OLS) and Quantile Regression (QR) to analyse the effect around the tail of the return distribution. We also conduct the analysis using the seven-day simple moving average (SMA) of the scores to account for news released on non-trading days. Our results suggest that even when market factors are taken into account, sentiment scores have a significant effect on Dow Jones constituent returns and that lagged daily sentiment scores are often significant, suggesting that information compounded in these scores is not immediately reflected in security prices and related return series. The results also indicate that the SMA measure does not have a significant effect on the returns. The analysis using Quantile Regression provides evidence that the news has more impact on left tail compared to the right tail of the returns.     

Media Plurality: Private versus Mixed Duopolies

In this paper, we analyze the level of media plurality in a market with two private news firms (private duopoly) and in a market with a private news firm and a public news firm (mixed duopoly). In the private duopoly news firms maximize profits. In the mixed duopoly, the private news firm maximizes profits, while the public news firm maximizes social welfare. We show that, in spite of the public news firm maximizing social welfare, neither media plurality nor social welfare needs to be higher under the mixed duopoly compared with the private duopoly. This will depend on the relation between the costs of adapting news to readers' political preferences, the intensity of the readers' political preferences, and the size of the advertising market.     

ICT and global sourcing – evidence for German manufacturing and service firms

This paper analyses the relevance of information and communication technologies (ICT) for firms’ probability of global sourcing of inputs. Using firm-level data from Germany in 2009, which include mainly small and medium-sized firms, the empirical analysis differentiates between manufacturing and service firms. The results show some differences between the manufacturing and service sector. Controlling for various sources of firm heterogeneity, the global sourcing probability is increasing in the firms’ share of employees with Internet access in the manufacturing sector. E-commerce-intensive firms are more likely to source inputs from abroad but generally, this relationship between e-commerce and global sourcing is only robust in services and much stronger there than in manufacturing. In both sectors, it is strongest in industries with higher upstream industry diversity. Moreover, labour productivity is positively linked to global sourcing. The findings support arguments for the importance of the Internet for global trade.     

Insider trading returns and dividend signals

The literature shows that insider trading activities and dividends contain information content and serve as signals to firm value. If insider return is a proxy for information asymmetry, we should expect a positive relation between dividends and insider returns. Using a sample of unambiguous (good and bad) news concerning earnings and dividend announcements from Hong Kong firms, we show that information asymmetry is stronger for bad news firms with insider sales than good news firms with insider purchases. In addition, we improve the methodology of Khang and King [Khang, K., & King, T. H. D. (2006). Does dividend policy relate to cross-sectional variation in information asymmetry? Evidence from returns to insider trades. Financial Management, 35, 71–94] and provide evidence that dividend is a credible signal for measuring information asymmetry.     

The politics of growth: Can lobbying raise growth and welfare?

We consider a setup where lobbyist firms undertake contributions to an office-motivated policy maker in exchange for profit increasing regulations, in a general equilibrium model of R&D-driven growth. We find that, despite increasing concentration—which leads to higher prices and less varieties—lobbying may stimulate growth and increase welfare by means of an expansion in aggregate demand if its real costs are small. This conclusion is supported by a simple calibration exercise.     

Profitability of corporate social responsibility in network industries

The present paper shows that, when firms compete in a non-cooperative way on the level of corporate social responsibility (CSR) in network industries, the conventional result of the prisoner’s dilemma structure of the game in standard industries—i.e. to have social concerns is the Nash equilibrium, but it is harmful for firms’ profits—vanishes and, for sufficiently intense network externalities, the equilibrium in which both firms have social concerns is more profitable than simple profit-seeking. Moreover, we show that—when firms cooperate in choosing the profit-maximising level of social concerns—a profit-maximising CSR level does exist, provided that network effects are sufficiently strong. Therefore, in network industries, firms may obtain higher profits engaging in—cooperatively as well as non-cooperatively—CSR activities, showing that firms’ social concerns may be motivated by the owners’ selfish behaviour. Finally, a counter-intuitive result as regards consumer’s surplus and social welfare is obtained: those are always higher under competitive than cooperative choice of CSR because the level of CSR activities is higher in the former case. However, given that firms gain their largest profits with the cooperative choice of CSR, a Pareto-superior outcome is not reached.     

How Much do Technological Gap,Firm Size,and Regional Characteristics Matter for the Absorptive Capacity of Italian Enterprises?

The absorptive capacity—the ability of enterprises to efficiently absorb and internalise knowledge from outside sources—represents the link between firms’ capabilities to implement new products and the external stock of technological opportunities, such as those gleamed from Multinational Enterprises (MNEs). This paper explores whether the effect of foreign direct investment (FDI) on the productivity of Italian domestically-owned firms (DOFs) is dependent on their absorptive capacity. In particular, given the peculiar characteristics of the Italian productive system, our analysis focuses on three different dimensions of the absorptive capacity: the size of the technological gap between foreign-owned firms (FOFs) and DOFs, firm size, and the regional distribution of firms. Our findings suggest that technological gap and firm size matter considerably for the spillover effect. Moreover, spillovers exhibit a sub-national dimension present only in the northeastern region of the peninsula.     

News Sentiment: A New Yield Curve Factor

The authors show that sentiments from newspaper articles can explain and predict movements in the term structure of U.S. government bonds. This effect is stronger at the short end of the curve, coinciding with greater volatility and investors' need to continually reassess the Fed's reaction function. Facing such uncertainty, market participants rely on news and sentiment as a central element in their decision-making process. Considering this dependence, the authors propose a new yield curve factor—news sentiment—that is distinct from the 3 established yield curve factors (level, slope, and curvature) as well as from fundamental macroeconomic variables.     

Product regulations and persistence of profits: OECD evidence

In competitive markets, profits deviating from the norm will not persist for extended periods. If unimpeded, entry and exit of firms should restore profits to competitive levels. This dynamic process is influenced by regulations that temporarily or permanently impede competition. We study how product market regulations (PMR)—as measured by the OECD—affect competition by their impact on the profit persistence (Wölfl et al. in Ten years of product market reform in OECD countries-insights from a revised PMR indicator, 2009, Product market regulation: extending the analysis beyond OECD countries, 2010). To examine profit dynamics, we follow the methodology developed by Mueller (Economica 44(176):369–380, 1977), which measures both the short run persistence of profits and the long run permanent rents. The method can be used to measure: (1) short run transitory rents; (2) long run permanent rents. To this end we use firm level data from 30 OECD countries over the period 1998–2013. Results show that PMR increase the permanent rents of firms but we find no significant effect on short run profit persistence. We conclude that PMR negatively influence competition and increase permanent rents, resulting in misallocation of resources.     

What does tax aggressiveness signal? Evidence from stock price reactions to news about tax shelter involvement

We study the stock price reaction to news about corporate tax aggressiveness. We find that, on average, a company's stock price declines when there is news about its involvement in tax shelters. We find some limited evidence for cross-sectional variation in the reaction. For example, the reaction is more negative for firms in the retail sector, suggesting that part of the reaction may be a consumer/taxpayer backlash. In addition, the reaction is less negative for firms that are viewed to be generally less tax aggressive, as proxied by the firm's cash effective tax rate. We interpret this as being consistent with the market reacting positively to evidence that a firm is trying to reduce taxes when their financial reports would lead one to believe the firm is not tax aggressive.     

Stock vesting conditions,control benefits and managerial replacement

This article considers the effect of vesting conditions of stock‐based compensation on firms’ decisions to replace managers. I indicate that firms may excessively replace managers with both long‐ and short‐term vested stock‐based compensation, while excessive retention can be caused only by short‐term vested options. If the discount factor is sufficiently small, I also show that short‐term vested stock‐based compensation is the equilibrium contract. The study also has implications for regulations concerning mandatory deferral and clawback of executive pay.     

Technological capabilities accumulation and internationalization strategies of Mexican biotech firms: a multi case study from agro-food & pharma industries

ABSTRACT

In this paper our aim is to analyze the relationship between technological capabilities accumulation of Mexican biotech firms and their different types of internationalization strategies. Because of the determining effect of firms’ capital investment level, we analyzed three groups of firms: start-ups, small and medium-sized firms (SMEs) and multinational firms (MNEs). We made use of a wide range of information: The First Survey of Biotechnology Development Firms in Mexico, the systematization of 20 case studies, interviews with key persons in the industry and public sources. We confirmed the two hypotheses outlined: (i) TCA process does not follow a linear path in Mexican biotech firms and (ii) firms with lower capital investment levels exhibit a lower level of TCA and less complex internationalization strategies; while firms with higher capital investment levels are associated with higher TCA levels and more complex internationalization strategies. Biotechnology requires high levels of capital investment and these to a large extent determine the development and technological capabilities accumulation. Therefore, we suggest that a capitalization program is much needed to foster Mexican biotech firms’ TCA processes and develop internationalization strategies.     

Grant Assistance and Small Firm Development in Northern Ireland and the Republic of Ireland

Small business support is an important element of industrial development policy in both Northern Ireland and the Republic of Ireland. This paper examines the effect of grant support on small business performance from 1991–94. Around 50% of small businesses in Northern Ireland and 30% of small businesses in the Republic of Ireland received financial support over this period. In Northern Ireland, three clusters of assisted companies were identified who received support for marketing, training and capital investments. In the Republic of Ireland, two assisted clusters of firms were identified who received marketing and training grants. In each case, firms in the assisted clusters grew faster, tended to be more profitable, were more active in terms of sales and market development and adopted more ambitious strategic directions than those in the non‐assisted clusters. Selection models are used to explore whether these differences are due to differences in the characteristics of the assisted and non‐assisted groups or can be directly attributed to the effect of government financial support. In the Republic of Ireland there is no evidence of any effective targeting of assistance at better performing firms. In Northern Ireland, there is some evidence that assistance was targeted at firms with higher productivity growth. Grant aid had no effect on either the turnover growth or profitability of small businesses in either area. It did, however, boost employment growth. This is good‐news for job creation but has potentially worrying implications for firms' longer‐term competitive position through its negative effect on productivity.