Investment opportunities and market reaction to capital expenditure decisions

In this study, we argue that share price reaction to a firm's capital expenditure decisions depends critically on the market's assessment of the quality of its investment opportunities. We postulate that announcements of increases (decreases) in capital expenditures positively (negatively) affect the stock prices of firms with valuable investment opportunities. Contrarily, we predict that announcements of increases (decreases) in capital spending negatively (positively) affect the share prices of firms without such opportunities. Our empirical results are generally consistent with these predictions. Overall, empirical evidence supports our conjecture that it is the quality of the firm's investment opportunities rather than its industry affiliation which determines the share price reaction to its capital expenditure decisions.     

Accounting research and policy making

This paper discusses the role of research information in policy making, describes some instances in which that information played an important role, and concludes with observations about ways to develop enhanced relationships between researchers and policy makers.     

Corporate capital expenditure decisions and the market value of the firm

This paper is an ‘event-time’ study of the common stock prices of a sample of 658 corporations around the dates on which they publicly announced their future capital expenditure plans. For industrial firms, announcements of increases (decreases) in planned capital expenditures are associated with significant positive (negative) excess stock returns. For public utility firm, neither increases nor decreases in planned capital expenditures are associated with significant excess stock returns. We interpret the evidence as being consistent with the hypothesis that managers seek to maximize the market value of the firm in making their corporate capital expenditure decisions.     

Dividend policy under conditions of capital market and signaling equilibria

This article develops a generalized capital asset pricing model with dividend signaling under the assumption of asymmetric information between corporate insiders and outside investors. The generalized capital asset pricing model is derived under reasonably plausible conditions that are sufficient for the existence of dividends. The model provides a theoretical framework for testing the effect of dividends on equity price and returns. Further, if dividends serve as a credible signal and the cost of signaling is positive, paying higher dividends results in higher systematic risk.     

Accounting for decisions and decisions for accounting

Behavioral decision theory (BDT) is concerned with “accounting for decisions”. The development of this interdisciplinary field is traced from the appearance of several key publications in the 1950s to the present. Whereas the 1960s saw increasing theoretical and empirical work, the field really started to flourish in the 1970s with the appearance of the review by Slovic & Lichtenstein (Organizational Behavior and Human Performance, pp. 549–744, 1971), and key papers on probabilistic judgment (Tversky & Kahneman, Science, pp. 1124–1131, 1974), and choice (Kahneman & Tversky, Econometrica, pp. 263–291, 1979). From the early 1980s to the present, BDT has seen considerable consolidation and expansion and its influence now permeates many fields of enquiry. After this brief history, eight major ideas or findings are discussed. These are: (1) that judgment can be modeled; (2) bounded rationality; (3) to understand decision making, understanding the task is more important than understanding the people; (4) levels of aspiration/reference points; (5) use of heuristic rules; (6) the importance of adding; (7) search for confirmation; and (8) thought as construction. Next, comments are addressed to differences between BDT and problem solving/cognitive science. It is argued that whereas many substantive differences are artificial, two distinct communities of researchers do exist. This is followed by a discussion of some major shortcomings currently facing BDT that include questions about the robustness of findings as well as overconcern with a few specific, “paradoxial” results. On the other hand, there are many interesting issues that BDT could address and several specific suggestions are made. Moreover, these issues represent opportunities for accounting research and several are enumerated. Finally, BDT presents “decisions for accounting” in the sense that scarce resources need to be allocated to different types of research that could illuminate accounting issues. The argument is made that BDT is one research metaphor or paradigm that has proved useful in accounting and that should be supported. Such support, however, may mean that some researchers may work on issues that, at first blush, might seem distant from accounting per se.     

Stock market,capital flow and output: some analytical and policy perspectives

The article will theoretically examine how financial opening up can influence the real sector under alternative exchange rate regimes. We will show that private capital flows can produce favourable macroeconomic outcomes through an adjustment in stock market valuation and wealth effect induced by a change in asset prices. What we choose for analytical purpose is an effective demand framework, which can apply to a large class of emerging market economies.     

An intervention analysis for the relationship between capital expenditure decisions and the market value of firms

This article is meant to explore the relationship between corporate capital expenditure decisions and the market value of firms using the intervention technique. The article shows that deep cuts in capital expenditures may, for sink-hole type projects, provide a positive signal to the marketplace. For non-sink-hole type projects, our findings are not quite consistent with those reported in McConnell and Muscarella (1985).     

Simple theories for complex processes: Accounting policy and the market for myopia

The tendency to use simplified models to capture and predict complex phenomena in the social sciences is discussed and criticized by examining a paper on policymaking, Watts and Zimmerman's “Demand for and Supply of Accounting Theories: The Market for Excuses.” Criticism of the paper takes three forms: 1) the methodology and testability is shown to be suspect; 2) the applicability of the evidence cited to the propositions stated is questioned; 3) contrary evidence is given to rebut the theory.     

Modeling capital structure decisions in a transition market: empirical analysis of firms in Egypt

It has been realized that none of the three basic theories of capital structure presents a complete answer to the actual determinants of corporate financing decisions. This study attempts to model the practice of capital structure decisions according to the basic premises of each theory of capital structure: trade-off theory, pecking-order theory and free cash flow theory. The methodology addresses modeling long-term and short-term debt financing decisions based on ten different statistical criteria using data from Egypt stock market. The empirical evidence indicates that four models of corporate financing are influenced by the trade-off theory relatively. The contributions of this paper are as follows. First, this study offers a more refined and comprehensive methodology for modeling firms’ capital structure decisions. Second, the results of this study compare to those of previous studies of other developing countries and thus add an element of external validity. Mohamed A. Ismail is currently working as a consultant for the Information and Decision Support Center (IDSC), the Egyptian Cabinet-Egypt. He would like to acknowledge the financial support provided by the IDSC.     

Shareholder litigation rights and capital structure decisions

We exploit the staggered adoption of the universal demand (UD) laws across U.S. states, which impedes shareholder rights to initiate derivative lawsuits, as a quasi-natural experiment to examine the relation between shareholder litigation rights and firm capital structures. We find that weaker shareholder litigation rights due to the UD laws adoption lead to higher financial leverage, which enhances firm value. Furthermore, the positive relation between the UD laws adoption and financial leverage is more pronounced for firms exposed to higher shareholder litigation risk ex ante or financially constrained firms. Our evidence is consistent with lower shareholder litigation threats motivating firms to increase financial leverage.     

资本市场的悲剧

资本市场的悲剧不在于狼的凶残,资本市场的悲剧在于羊的天真：羊居然以为自己可以与狼去斗法,与狼去博弈,结果悲剧便发生了     

Credit cycles and capital flows: Effectiveness of the macroprudential policy framework in emerging market economies

I assess the effectiveness of macroprudential policy tools in containing credit cycles per se or the impact of portfolio inflows on the cycles in major emerging market economies. The results show that borrower-based tools, measures with a domestic focus, and domestic reserve requirements are particularly effective. The findings are, in most cases, stronger for the recent period during which most of the macroprudential actions are undertaken, and generally hold for alternative definitions of credit cycle, the monetary policy stance, and portfolio inflows. Weaker results emerge for financial-institutions-based or foreign-currency related macroprudential tools.     

浅析房地产业的"资本市场抢占"

2006年房地产业的资本市场表现 在过去的一年里,虽然经历着持续性的"政策调控严冬",中国房地产企业在资本市场上的表现仍然非常抢眼.A股市场再融资和IPO大门的重新开启对于处在行业调控之中的房地产企业来说,无疑是几年来最令人兴奋的契机.IPO、定向增发、借壳上市、债券融资,资本市场为房地产企业提供了多样化的选择.截至到2006年底,房地产企业通过资本市场已累计融资接近300亿元人民币.包括保利地产、北辰实业、世贸地产、绿城中国等在内的6家公司在A股或港股市场上成功首发,总筹集资金超过200亿元;栖霞建设等上市公司以"地产+定向增发"的融资模式,筹集资金近30亿元;此外地产类上市公司配股募集资金近27亿元;华侨城、浦东金桥、亿城股份等上市公司以发行债券方式融资约20亿元.除此之外,约有30多家房地产上市公司通过买壳、资产置换的方式实现上市.     

Introducing International Accounting Standards to an emerging capital market: relative familiarity and language effect in Egypt

The purpose of this study is to assess the effect of relative familiarity and language accessibility on the International Accounting Standards (IASs) disclosures when IASs are first introduced in an emerging capital market. The study focuses on the annual reports of listed non-financial companies in Egypt when IASs were first introduced. The method used applies a disclosure index measurement to a sample of listed company annual reports and evaluates relative compliance with IASs in relation to corporate characteristics. The results show that for relatively less familiar requirements of IASs, the extent of compliance is related to the type of audit firm used and to the presence of a specific statement of compliance with IASs. A lower degree of compliance with less familiar IASs disclosure is observed consistently across a range of company characteristics. Consideration of agency theory and capital need theory would lead to prior expectation of a distinction in disclosure practices between different categories of companies. The results were, therefore, counterintuitive to expectations where the regulations were unfamiliar or not available in the native language, indicating that new variables have to be considered and additional theoretical explanations have to be found in future disclosure studies on emerging capital markets.     

Dissent in monetary policy decisions

Voting records indicate that dissents in monetary policy committees are frequent and predictability regressions show that they help forecast future policy decisions. This paper develops a model of consensual collective decision-making and dissent, and estimates it using individual voting data from the Bank of England and the Riksbank. Regressions based on artificial data simulated from the model show that decision-making frictions help account for the predictive power of current dissents.     

Federal open market committee structure and decisions

This paper examines the dissents of Federal Open Market Committee members regarding the domestic monetary policy directive. It shows that, on balance, governors appointed by Democratic U.S. presidents dissented significantly on the easier side, while governors appointed by Republican U.S. presidents dissented significantly on the tighter side. The pattern of dissents for the Reserve Bank presidents was like that of Republican appointees to the Board of Governors. The Bank presidents' voting did not reflect regional points of view. Furthermore, the timing of the dissents by both the governors and presidents did not seem to be associated with the onset of Congressional or presidential elections.     

资本市场的似是而非

资本市场充满荒诞,充满了似是而非的概念和说法,资本市场到底是什么性质？资本市场是否具有赌场的性质？如果是,在多大程度上具有此性质？华尔街券商以及华尔街券商的同类是否有准黑社会组织的性质？在资本市场这样事关民族兴亡的重大问题上,我们为什么不能跳出华尔街的定向思维？