THE DAYLIGHT SAVING TIME ANOMALY IN STOCK RETURNS: FACT OR FICTION?

Stock market returns in 22 markets around the world show no evidence of a daylight saving time effect. Returns on the days following a switch from or to daylight saving time do not behave any differently from stock market returns on any other day of the week or month. These results reject earlier conclusions in the literature—based on less data—that investors’ mood changes induced by changes in sleep patterns significantly affect stock returns.     

DO INSTITUTIONAL INVESTORS IN THE UK ADOPT A DUAL STRATEGY FOR MANAGING FOREIGN EXCHANGE RISK?

In recent years, the gradual increase in international portfolio diversification within the UK institutional investment community has led to a growing need to manage foreign exchange (FX) risk. This paper reports on the findings of a postal questionnaire survey relating to FX risk management practices in UK institutional investment organisations. The findings demonstrate an increasing awareness of the FX risk management problem and indicate that UK investment institutions actively manage FX risk within their investment portfolios. The paper also focuses on the interesting question of whether UK institutional investors manage their own portfolio's FX risk, simultaneously concerning themselves with their investee companies’ FX risk management practices. Overall, the findings indicate that institutional investors adopt adual strategyfor managing FX risk; not only managing their own FX risk, but also requiring that their investee companies manage FX risk. There is also evidence to suggest that the institutional investors require their investee companies to disclose information relating to their FX risk management policies.     

HOW DID THE FINANCIAL CRISIS AFFECT SMALL-BUSINESS LENDING IN THE UNITED STATES?

We analyze changes in lending by U.S. banks to businesses from 1994 to 2011. We find that lending to businesses, and in particular to small businesses, declined precipitously following onset of the financial crisis. We also examine the relative changes in business lending by banks that did, and did not, receive Troubled Asset Relief Program (TARP) funds from the U.S. Treasury, and find that banks receiving capital injections from the TARP failed to increase their small-business lending. Finally, we find strong and significant positive relations of both bank capital adequacy and profitability with small-business lending.     

“GETTING BY” AND “GETTING ON” IN SERVICE WORK: LESSONS FOR THE FUTURE OF ACCOUNTING?

The use of educated labour which can multi-task, make decisions and act responsibly facilitates the real subsumption of labour. By presenting data from an ethnographic study of students working in unskilled service jobs in the UK, we show that such workers are not subsumed totally but exhibit a resistant medium by extending their own frontiers of control and developing self-help policies. As many accounting students will have worked in the kinds of jobs reflected in our study, these experiences have important implications for the future of accounting in the USA and elsewhere where work within and outside the profession has been deskilled and educated labour is increasingly used to undertake lower skilled work     

THE INTRA-INDUSTRY EFFECTS OF OPEN MARKET SHARE REPURCHASES: CONTAGION OR COMPETITIVE?

We examine the extent to which announcements of open market share repurchase programs affect the valuation of competing firms in the same industry. On average, although firms announcing open market share repurchase programs experience a significantly positive stock price reaction at announcement, portfolios of rival firms in the same industry experience a significant and contemporaneous negative stock price reaction. This suggests that perceived changes in the competitive positions of the repurchasing firms occur at the expense of rival firms and dominate any signals of favorable industry conditions. Thus, the competitive intra-industry effects of open market repurchases outweigh any contagion effects. In addition, cross-sectional tests indicate that these competitive effects are more pronounced in industries characterized by a lower degree of competition and less correlation between the stock returns of the repurchasing firm and its rivals.     

DOES SPEED MATTER? THE ROLE OF HIGH-FREQUENCY TRADING FOR ORDER BOOK RESILIENCY

We analyze limit order book resiliency following liquidity shocks initiated by large market orders. Based on a unique data set, we investigate whether high-frequency traders are involved in replenishing the order book. Therefore, we relate the net liquidity provision of high-frequency traders, algorithmic traders, and human traders around these market impact events to order book resiliency. Although all groups of traders react, our results show that only high-frequency traders reduce the spread within the first seconds after the market impact event. Order book depth replenishment, however, takes significantly longer and is mainly accomplished by human traders’ liquidity provision.     

WHO WINS IN LARGE STOCK BUYBACKS – THOSE WHO SELL OR THOSE WHO HOLD?

Both fixed-price and dutch auction repurchases offer large premiums over current values to tendering shareholders. And, because announcements of such offers are generally accompanied by significant increases in stock prices, economists view selftender offers as mechanisms for signaling undervaluation. Using samples of fixed-price and dutch auction self-tender offers from the 1980s, this study attempts to answer the following questions: Are non-tendering shareholders fully compensated for the premium wealth transfer by the increase in the intrinsic value of their shares? Since fixed-price offers feature larger premiums, are they accompanied by larger increases in intrinsic value (or do insiders have a tendency to “overpay” in fixed-price offers)? Is the premium wealth transfer a big component of the returns to the two shareholder groups—and what percentage of firm value does the transfer represent? The findings of this study, unlike those reported by earlier research, suggest that the two types of offers generate roughly the same total returns (about 10–11%, on average, during the offering period) to shareholders who do not tender. Fixed-price offers involve considerably larger premiums (over the new, “full-information” price) and wealth transfers than dutch auctions. Reflecting the higher premiums, shareholders tendering into fixed-price offers receive higher returns than those tendering into dutch auctions (13.8% vs. 11.3% during the announcement period). But while fixed-price offers involve a considerably larger wealth transfer from non-tendering to tendering shareholders, fixed-price repurchases compensate the non-tendering shareholders for the larger wealth transfer with larger increases in “intrinsic value,” thus generating the same total return as dutch auctions. Moreover, despite the large premiums offered in both types of offers, the wealth transfer implicit in the premium represents a small cost (less than 1% in fixed-price offers, and less than 0.1% in dutch auctions) to non-tendering shareholders.     

ARE THE STRUCTURAL CHANGES IN MUTUAL FUNDS INVESTING DRIVING THE U.S. STOCK MARKET TO ITS CURRENT LEVELS?

We examine the long-run equilibrium relation between the net flow of funds into equity mutual funds and the S&P 500 index. Applying the Engle and Granger error correction methodology followed by a state space procedure, we find that the levels of the stock market are influenced by the net flow of funds into equity mutual funds. Our findings indicate that the U.S. equity market appears to be rationally adjusting to a structural change in the behavior of the U.S. investing public.     

ARE WATCH PROCEDURES A CRITICAL INFORMATIONAL EVENT IN THE CREDIT RATINGS PROCESS? AN EMPIRICAL INVESTIGATION

The Boot, Milbourn, and Schmeits (2006) model (Boot model) predicts certain credit rating events are likely to be more informative than others and that credit watch procedures are an important driver of such differences. We test the core empirical predictions of their model. Our sample comprises U.S. corporate issuer credit ratings provided by Moody's, 1990–2006. Our findings fail to uncover compelling evidence for the empirical predictions of the Boot model in relation to the role of watch procedures as coordinating mechanisms. Rather, our findings are more supportive of the view that rating agencies are always at an informational advantage relative to investors.     

WHY DO STOCK PRICES DECLINE IN RESPONSE TO EMPLOYEE LAYOFFS? UK EVIDENCE FROM THE 2008 GLOBAL FINANCIAL CRISIS

Employee layoff decisions made during adverse economic conditions are expected to signal poor investment opportunities, but layoffs undertaken during prosperous markets should be efficiency enhancing. We examine layoffs during the global financial crisis of 2008 and compare this with an earlier period of economic prosperity. We find a positive market reaction to layoffs during rising financial markets but stock price declines following employee layoffs during the 2008 financial crisis. These price effects occur irrespective of the stated reason for the layoff and the industry of the announcing firm, and are mirrored in our robustness test of an earlier period.