Firm Complexity and Post-Earnings-Announcement Drift

Barinov, Alexander; Park, Shawn Saeyeul; Yıldızhan, Çelim

doi:10.2139/ssrn.2360338

Cited by 18 publications

(26 citation statements)

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“…They document a share price underreaction to information release by the other partners regardless of whether the information is positive or negative. Barinov, Park and Yildizhan (2016) find that the PEAD is stronger for conglomerates than for single-segment firms. Massa and Zaldokas (2016) explore how negative credit event information spreads among unrelated but co-owned firms.…”

Section: Introductionmentioning

confidence: 68%

Are Investors Aware of Ownership Connections?

2018

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We examine the market reactions to earnings announcements by listed firms connected through ownership links. We find that the parents' investors react to all announcements within the group either immediately or with delay, whereas subsidiaries' investors only react to their own firm's announcements, ignoring predictive information released at the parent level. Our findings suggest that multiple announcements within a group lead to enhanced transparency for parents' investors, who benefit from detailed information on the origin of their firm's earnings. In contrast, subsidiaries' investors appear unaware of ownership links, and behave as inattentive investors.

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Section: Introductionmentioning

confidence: 68%

Are Investors Aware of Ownership Connections?

2018

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confidence: 68%

Connected Firms and Investor Myopia

Ginglinger

Hebert

Renneboog³

2017

SSRN Journal

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Abstract. Conglomerates, multinational corporations and business groups are non-exclusive forms of complex firms. Often organized as corporate networks, complex firms control a myriad of firms connected through ownership links. We investigate whether parent-subsidiary links within corporate networks enhance transparency because the investors in a listed parent company and in its listed subsidiary now receive information about these two firms from each these firms. Alternatively, the corporate network complexity could bring about more opacity when investors are unable to detect the connections between the corporate entities. We examine the share price reactions to information releases by various entities of the corporate network. We find that parent's investors benefit from enhanced transparency in case the parent announces surprise earnings first, whereas subsidiaries' investors seem mostly unaware of ownership links and are myopic. JEL Classification: G14, G32Keywords: Ownership structures, corporate complexity, myopia surprise earnings announcements, business groups, conglomerates, inattention, post-earnings announcement drift, market frictions. * Edith Ginglinger is at Université Paris-Dauphine (Place du Maréchal de Lattre de Tassigny, 75775 PARIS Cedex 16, France) Email: edith.ginglinger@dauphine.fr; Camille Hebert is at Université Paris-Dauphine and Tilburg University Email: camille.hebert@dauphine.fr); and Luc Renneboog -the corresponding author -is at Tilburg University (POBox 90153, 5000 LE Tilburg, the Netherlands) Email: Luc.Renneboog@uvt.nl. The authors thank Paul Beaumont, Fabio Braggion, Gilles Chemla, Joost Driessen, Pascal Dumontier, Zsuzsanna Fluck, Alberto Manconi, Roni Michaely, Mario Milone, Ekatarina Neretina, Manju Puri, Emanuele Rizzo, David Robinson, Oliver Spalt, and Cara Vansteenkiste for valuable comments and helpful discussions as well as the participants to seminars at Tilburg University and Université Paris-Dauphine. The second author is grateful to Duke University for its hospitality during a research visit. The authors declare that there are not conflicts of interest. All remaining errors and omissions are our own.

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“…There is not only one form of measurement for the complexity of companies. According to the literature, this can be identified in accordance with various measures, such as the number of segments that the company participates in (Barinov, Park & Yildizhan, 2014;Baysinger & Hoskisson, 1989;Demirkan, Radhakrishnan & Urcan, 2012), geographical complexity (Bushman, Chen, Engel & Smith, 2004;Cetorelli & Goldberg, 2014;Liu & Lai, 2012), complexity of the business (Cetorelli & Goldberg, 2014;Jennings & Tanlu, 2014), industrial complexity (Barinov et al, 2014;Bushman et al, 2004;Farooqi, Harris & Ngo, 2014;Liu & Lai, 2012), and organizational complexity (Farias, 2012;Silva, 2015).…”

Section: Introductionmentioning

confidence: 99%

Accounting conservatism in complex companies

Silva

Ganz

Rohenkohl

et al. 2019

Rev. contab. finanç.

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This study seeks to investigate the influence of the complexity of companies on levels of accounting conservatism. The subject of analysis, accounting conservatism in complex companies, can be considered relevant because it analyzes conservative practices taking into account the organizational context of companies; something that is ignored in other studies that investigate the incentives or determinants of accounting conservatism, at least as far as firm complexity is concerned. The research presents statistical evidence that accounting conservatism varies positively with the information asymmetry caused by specific characteristics of complex environments. On the other hand, when companies present several complex characteristics together, then the trend is one of little adoption of conservatism. In addition, this research brings together evidence that aims to contribute to accounting science by analyzing complex companies and conservatism and not the opportunistic practices observed in previous studies. The sample refers to 110 publicly traded companies from 2010 to 2016. The data collection was carried out using company reports, such as reference forms, registration data, and explanatory notes, as well as the Economatica® database. The data analysis was performed using multiple linear regression and quantile regression. The evidence obtained in the research indicates that accounting conservatism varies according to the information asymmetry caused by complex environments, in which it can present a positive relationship in companies with few characteristics of complexity, or a negative relationship if the company has complexity in several characteristics at the same time. It throws light on the different levels of conservatism observed in companies, which can often be attributed to mechanisms of governance, organizational culture, and accounting standards, among other factors, which are results that may be biased if the company complexity factor is not considered.

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Firm Complexity and Post-Earnings-Announcement Drift

Cited by 18 publications

References 50 publications

Are Investors Aware of Ownership Connections?

Are Investors Aware of Ownership Connections?

Connected Firms and Investor Myopia

Accounting conservatism in complex companies

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