Downlistings in European exchange-regulated markets: The role of enforcement

Hitz, Jörg‐Markus; Koch, Stephanie; Moritz, Florian

doi:10.1016/j.jaccpubpol.2020.106735

Cited by 6 publications

(3 citation statements)

References 21 publications

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“…As regards the public enforcement regime in Japan, Zhu (2020) found that market reaction declines as early as the first news that a company is facing a potential financial irregularity problem is announced by a self-reporting press release. On the other hand, in a study on a sample of German companies during the period 2009-2015, Hitz et al (2020) reported that stock market reactions to firms' downlisting announcements are cumulatively more negative for firms that have previously been reprimanded by enforcement institutions.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Although enforcement actions or reprimands do not affect the company directly, they can cause the market to react negatively towards the company when they are made known to the public by the authorities (Embong and Rudzi, 2017). Past studies show that stock prices react negatively to the imposition of enforcement actions (Hitz et al, 2020;Abedifar et al, 2019;Sampath et al, 2018;Voon et al, 2008;Chen, et al, 2005). Although enforcement actions affect both the company and the market in a negative way, they are seen to be the most effective measures by which to protect the interests of all parties involved, especially shareholders (Embong and Rudzi, 2017).…”

Section: Introductionmentioning

confidence: 99%

“…Not only can enforcement action by the authorities affect the company subject to the enforcement, it can also have an impact on the market because it can alter the perceptions and beliefs of investors about the company and the market in general. Hitz et al (2020) note that enforcement actions not only lead to extra costs because companies and managers have to bear the financial commitment to pay the fine but also cause reputation loss among investors and other stakeholders. Moreover, as argued by Sam and Zhang (2020), companies that violate ethical business practices face a decline in stock prices and receive negative reactions from market participants.…”

Section: Introductionmentioning

confidence: 99%

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The effect of the imposition of a public reprimand on the stock price of companies in Malaysia

Zainudin¹,

Hashim²,

Ismail³

2021

JFC

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Purpose This paper aims to examine the effect of the imposition of public reprimands on the underlying stock prices of companies in Malaysia. Design/methodology/approach Data on 148 companies that received public reprimands during the period from 2007 to 2013 were collected from the Bursa Malaysia website to analyse the market reactions to the imposition of public reprimands. Findings Based on a market model of abnormal returns, the empirical result showed that the imposition of a public reprimand had a negative impact on a company’s stock price. Moreover, when a market model of average abnormal returns (AAR) was used, the result indicated that companies that had received a public reprimand had a negative AAR value. Research limitations/implications The findings from this study have implications for shareholders in making their investment decisions because they can switch their investments to other companies and markets after a company in which they are interested or have made an investment has received a public reprimand. Originality/value There is limited research on the imposition of public reprimands and the effect that it has on companies in developing countries. Hence, this study contributes to research in this area by providing evidence on the effect of public reprimand on stock price reactions in the context of a developing country, namely, Malaysia.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The effect of the imposition of a public reprimand on the stock price of companies in Malaysia

Zainudin¹,

Hashim²,

Ismail³

2021

JFC

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Changes in the Perception of Error Announcements from the German Two-Tier Enforcement

Berninger

2024

Schmalenbach J Bus Res

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When the German financial reporting enforcement was introduced in 2004, the legislator chose an innovative approach: He combined a private enforcement institution with a governmental agency while sanctioning was carried out solely by publicly announcing identified accounting errors. Subsequently, investors were confronted with up to then unprecedented ‘error announcements’ from the enforcement system. For a sample of 213 announcements from 2006 to 2019, the paper analyzes the adaptation process of investors to this new information. While significant negative market reactions around the announcement dates can be found for the whole observation period, the results also show that the investors’ views of the error announcements change over time. Especially in the early years, the observed market reactions are strongly linked to the impact of the accounting error on the firm’s financial situation. This link weakens over time and factors related to the nature of the error become more important to investors. In particular, errors that are attributable to the unjustifiable application of professional judgment lead to significantly more negative effects.

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