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Danling Jiang - One of the best experts on this subject based on the ideXlab platform.
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the preholiday corporate Announcement Effect
2019Co-Authors: Don M Autore, Danling JiangAbstract:Abstract We find that investors react more favorably to corporate Announcements of share repurchases, SEOs, earnings, dividend changes, and acquisitions if the Announcement is made immediately prior to or on holidays. These Announcements are associated with more positive reactions for favorable events and less negative reactions for unfavorable events. This Effect is robust to controls for market conditions and a selection bias, is accompanied by subsequent reversals, and is present in several international markets. Our findings suggest that predictable individual mood changes can cause biases in market reactions to firm-specific news.
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the preholiday corporate Announcement Effect
2017Co-Authors: Don M Autore, Danling JiangAbstract:We find that investors react more favorably to Announcements of share repurchases, SEOs, acquisitions, and earnings if the Announcement is made immediately prior to or on holidays. Preholiday corporate Announcements are associated with more positive reactions for favorable events and less negative reactions for unfavorable events. We provide direct evidence pointing to an optimistic preholiday mood as the root cause of abnormally high reactions to preholiday corporate Announcements. The results are not driven by aggregate market performance, limited attention, or a selection bias. Our findings suggest that individuals’ anticipation of holidays prompts investors to view firm-specific news through rose-colored glasses.
Oscar Jorda - One of the best experts on this subject based on the ideXlab platform.
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the Announcement Effect evidence from open market desk data
2005Co-Authors: Selva Demiralp, Oscar JordaAbstract:A paper summarizing the contents of the conference volume "Financial Innovation and Monetary Transmission," sponsored by the Federal Reserve Bank of New York.
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the Announcement Effect evidence from open market desk data
2003Co-Authors: Oscar Jorda, Selva Demiralp, Holly Liu, Jeffrey R WilliamsAbstract:This paper investigates the ability of the Federal Reserve to manipulate the overnight rate without open market operations (which Demiralp and Jorda (2000) term the Announcement Effect), using high-frequency, open-market-desk data. Using similar data, Hamilton (1997) takes advantage of forecast errors in the Treasury balance to compute the elasticity of the federal funds rate to these errors and thus to obtain a measure of the liquidity Effect. Similarly, one can view daily deviations of the federal funds rate from target as forecast errors in the reserve need (see Taylor, 2000). By analyzing the manner and the type of operation the Fed uses to maintain the federal funds rate close to its targeted value and by observing the pattern of operations on the days surrounding a change in this target, we provide evidence of the Announcement Effect. Furthermore, we show that the discipline of the FOMC schedule dictates, not only the process of expectations formation in the overnight rate, but also the price adjustment process of term rates.
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the Announcement Effect evidence from open market desk data session 1 the reserves market
2002Co-Authors: Selva Demiralp, Oscar JordaAbstract:I. INTRODUCTION The textbook view of the monetary transmission mechanism rests on the central bank's ability to manipulate the overnight interest rate by controlling the reserve supply, followed by a rational-expectations mechanism that ensures that movements in the overnight rate reverberate into longer maturity rates. However, while few dispute the fact that the central bank controls the overnight rate Effectively, the notion that it does so via a liquidity Effect and the nature of term structure relationships needs to be reexamined. Modern central banking is generally characterized by public Announcements of an interest rate target, such as the federal funds rate target in the United States. In some cases, central banks (such as the Bank of Australia and the Bank of England) also disclose an inflation target, while in extreme cases, the banks (such as the Reserve Bank of New Zealand) disclose the parameters of the policy reaction function. These actions constitute a significant departure from traditional central banking. It is natural to question why central banks have abandoned their once-secretive behavior in favor of public disclosures of policy moves. Likely reasons include the desire for better and more precise control of the overnight rate, and, more important, enhanced communication of future policy moves--in essence, the Holy Grail of controlling long rates by also manipulating expectations. This paper investigates these issues as they relate to the U.S. Federal Reserve. In particular, we focus on how the Federal Reserve's 1994 policy change--by which it began announcing the target level for the federal funds rate--had an impact on the liquidity Effect and the manner in which the central bank uses open market operations to control the federal funds market. We also examine what Effect this policy change may have had on the behavior of the term structure. Prior to the Federal Reserve's Federal Open Market Committee (FOMC) meeting in February 1994, monetary policy objectives for the federal funds rate and the outcome of the FOMC meeting itself had been confidential and had never been announced. (1) After the policy change occurred, and inspired by similar developments in other central banks, Demiralp and Jorda (2000), Guthrie and Wright (2000), Taylor (2001), Thornton (2001), and Woodford (2000) began to investigate a central bank's ability to control the overnight rate--not merely through traditional open market operations, but by Effectively communicating the desired level of the overnight rate and standing ready to enforce that level. As Meulendyke (1998) observes, "the [federal funds] rate has tended to move to the new preferred level as soon as the banks know the intended rate." In this paper, we term this method of controlling the overnight rate the Announcement Effect (following Demiralp and Jorda [2000]); this Effect differs from the conventional liquidity Effect in that the volume of open market operations required to signal the new target level is substantially smaller because of expectations. The strategy we pursue to investigate the Announcement Effect consists of using two types of controls. The first is to analyze the data with two primary subsamples: one predating and the other postdating the 1994 policy change. The second is to compare, within a subsample, the pattern of open market operations surrounding days in which the target was changed relative to the rest of the subsample. Most of the time, open market operations conducted by the Trading Desk of the Federal Reserve Bank of New York ("the Desk") are designed to accommodate variations in the reserve needs that stem from a variety of factors, such as changes in currency holdings, float, and large Treasury balances; to manage currency in circulation; and to accommodate other variations in the supply of reserves. Based on a particular type of variation (unexpectedly large Treasury balances), Hamilton (1997) calculates the interest rate elasticity to an unanticipated shortfall in reserves. …
Abdulganiyu Braimah - One of the best experts on this subject based on the ideXlab platform.
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corporate governance and agency behaviour methodological analysis of the Announcement Effect of corporate governance failures on nigerian stock market prices
2015Co-Authors: Eseoghene Joseph Idolor, Abdulganiyu BraimahAbstract:IntroductionSince the seminal work of Jensen and Meckling1 in proposing a theory of the firm based upon conflicts of interest between various contracting parties namely shareholders, corporate managers and debt holders - - a vast literature has been developed in explaining both the nature of these conflicts, and means by which they may be resolved. Finance theory has developed both theoretically and empirically to allow a fuller investigation of the problems caused by divergences of interest between shareholders and corporate managers, and to fully summarise all the research that has been conducted in this field would be almost impossible. Indeed much of the empirical literature has tended to resolve this conflicts within the framework of corporate governance and agency theory; and there is as yet no consensus on the most Effective mechanism to make managers act in the best interest of shareholders2.In a corporation, the shareholders are the principals and the managers are the agents working on behalf of, and for the interests of, the principals. In agency theory, a well developed market for corporate controls is assumed to be non-existent, thus leading to firm or market failures, non existence of markets, moral hazard, asymmetric information, incomplete contracts and adverse selection among others. Also various corporate governance mechanisms have been advocated which include monitoring by financial institutions, prudent market competition, executive compensation, debt, developing an Effective board of directors, markets for corporate control, and concentrated holdings (Bonazzi and Islam3). This study adopts the position that developing an Effective board of directors and stringent controls (and reaction) of shareholders and prospective investors remains an important and feasible option for an optimal corporate governance mechanism. This position can be defended on the premise that the efficiency of stock.Sixteen years after the Lagos Stock Exchange commenced operations in 1961 it was re-designated the Nigerian Stock Exchange (NSE) in 1977. Branches were established in eight locations - - Lagos, Kaduna, Port Harcourt, Kano, Ibadan, Onitsha, Abuja and Benin*. The Securities and Exchange Commission (SEC) was established to protect investors and promote capital market growth and development in the country. It is the apex regulatory organ of the Nigerian Capital Market. Formerly called the Capital Issues Committee and later the Capital Issues Commission (Capital Issue Decree No. 14 of 1973), SEC was established under the SEC Decree No. 71 of 1979 amended in 1988, 1999 and recently in 2004.Operational Performance of the Nigerian Capital MarketThe total number of listed securities (comprising government stock, industrial loans and equities) increased from 9 in 1961 to 52 in 1971 and 71 in 1978. It also increased from 157 in 1980 to 276 in 1994, but declined to 260 in 2000 then increased again to 277 in 2004, with an average annual growth rate of 17 per cent for the entire period. The total number of listed firms stood at 214 in 2005**. However, as at December 31st, 2012 the NSE had 258 listed securities which predominantly consists of 198 ordinary stocks; with a total market capitalization of about N-8.9 trillion (U.S. $57 billion).NSE has continued to undertake policies to reduce information asymmetry and transaction costs to facilitate the use of the market by the private sector to raise funds. For example on 27th April 1999, NSE transited from the call-over trading system to the automated trading system (ATS). An electronic-business (e-business) platform was commissioned in July 2003. The approach makes it possible for investors in the Nigerian stock market to access the markets requires that investors and shareholders will react (either positively or negatively) to favourable or unfavourable information emanating from firms in which they have interest in, or in which they are shareholders. …
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corporate governance and agency behaviour methodological analysis of the Announcement Effect of corporate governance failures on nigerian stock market prices
2015Co-Authors: Eseoghene Joseph Idolor, Abdulganiyu BraimahAbstract:The Effect of corporate governance failure and agency behaviour on stock market prices has long been of great interest to financial economists, behavioural scientists and capital market researchers. Yet there is to date no consensus over what constitutes an Effective governance mechanism that induces agents or managers to consistently act in the interest of share value optimization, neither is there a consensus on the immediate Effect of corporate governance failures on stock market prices. In this research study, an in-depth investigation of the Announcement Effect of corporate governance failures of some highly rated Nigerian commercial/deposit money banks, publicly announced by the Central Bank of Nigeria, is undertaken. To this end a sample of seven highly rated conventional deposit money banks in Nigeria, whose chief executive officers (along with other top management staff and executive directors) were sacked by the Central Bank of Nigeria (CBN) for committing corporate governance malfeasance; against the CBN code of corporate governance were identified and examined. Using event study methodology, the mean abnormal returns and cumulative mean abnormal returns for the seven banks ranging from thirty seven (37) days before and after the Announcement date were determined. Empirical results from our findings indicate that the stock market is informationally efficient in Nigeria and that investors do react to Announcement of corporate governance failure. The study therefore recommends the strengthening and strict enforcement of corporate governance codes in Nigerian banks.
Peter F Pope - One of the best experts on this subject based on the ideXlab platform.
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post earnings Announcement drift
1996Co-Authors: Stephen J Brown, Peter F PopeAbstract:The predictability of abnormal returns based on information contained in past earnings Announcements is an anomaly that is statistically and economically significant. Neither is it illusory, nor is it an artifact of the experimental design. It may be a result of market inefficiency. Our results cannot rule out this explanation. However, we find that earnings change numbers are associated with the probability that firms leave the sample through acquisition, bankruptcy or for other reasons, or are not included in the sample in the first place. Moreover, we find that the magnitude of the post-earnings Announcement Effect is correlated with factors that proxy for the ex ante probability of the firm surviving to be part of the earnings surprise sample. It also appears to be related to determinants of the bid-ask spread.
Ron Giammarino - One of the best experts on this subject based on the ideXlab platform.
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corporate investment and asset price dynamics implications for seo event studies and long run performance
2006Co-Authors: Murray Carlson, Adlai J Fisher, Ron GiammarinoAbstract:We present a rational theory of SEOs that explains a pre-issuance price run-up, a negative Announcement Effect, and long-run post-issuance underperformance. When SEOs finance investment in a real options framework, expected returns decrease endogenously because growth options are converted into assets in place. Regardless of their risk, the new assets are less risky than the options they replace. Although both size and book-to-market Effects are present, standard matching procedures fail to fully capture the dynamics of risk and expected return. We calibrate the model and show that it closely matches the primary features of SEO return dynamics. THE ATYPICAL STOCK MARKET PERFORMANCE of public firms that issue seasoned equity raises an important challenge for financial theory. Summarizing an extensive empirical literature,1 Ritter (2003) reports average stock market returns of 72% in the year prior to a seasoned equity offering (SEO), an Announcement Effect of -2%, and five-year post-issuance abnormal returns of about -30% relative to seemingly reasonable benchmarks. A comprehensive explanation
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corporate investment and asset price dynamics implications for seo event studies and long run performance
2004Co-Authors: Murray Carlson, Adlai J Fisher, Ron GiammarinoAbstract:We present a rational theory of return behavior around seasoned equity offerings, including a pre-issuance price runup, negative Announcement Effect, and long-run post-issuance underperformance. The main result uses real option principles to relate SEO's to an endogenous decrease in expected returns. Equity issues are associated with firm expansions. When firms invest, they convert growth options to assets in place. Even when the new assets are risky, they will be less risky than the options they replace. Although both size and book-to-market Effects are present in our model, standard matching procedures fail to capture the dynamics of risk and expected return. We calibrate the model, and show that it gives a close match to the primary empirical moments.