Product market competition, idiosyncratic and systematic volatility

Abdoh, Hussein; Varela, Oscar

doi:10.1016/j.jcorpfin.2017.02.009

Cited by 57 publications

(32 citation statements)

References 38 publications

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“…In this paper, with a sample of the Chinese stock market for the period from 2007 to 2016, our empirical results show that, total leverage is negatively correlated with stock price synchronicity, the same result is found for operating and financing leverage. These findings are consistent with current studies [9][10][11][12], which coincides with our expectation. Since leverage partially represents firm's financial situation, which reveals corporate private information, as a result, firm's stock price synchronicity decreases with leverage.…”

Section: Introductionsupporting

confidence: 94%

“…Industries adopting more intensively information technology exhibit higher firm-specific performance heterogeneity [8]. In terms of macroeconomic factors, product market competition can increase idiosyncratic risk [11]. it is also shown that there is an increasing trend for idiosyncratic volatility [40].…”

Section: Stock Price Synchronicitymentioning

confidence: 99%

“…Findings show that the relationship does not exist when investigating the effect of largest shareholders [ 5 – 7 ]. When taking the production market competition into account, it is shown that a significant relation between leverage and stock price synchronicity, that is, a larger leverage increases idiosyncratic risk [ 11 ]. Another definition of leverage is the ratio of long-term (or short-term plus long-term) debt to total assets.…”

Section: Literature Reviewmentioning

confidence: 99%

“…As considering the information technology innovation, in the subsample containing younger firms which are less than eight years, it is proved that higher leverage will lower idiosyncratic risk [8]. Opposite results claim that higher leverage incorporates more firm-specific information, then increases idiosyncratic risk [9][10][11][12].…”

Section: Introductionmentioning

confidence: 97%

“…This non-consensus may be caused by two reasons. First, in the studies of stock price synchronicity, two different measures of leverage are employed: The book value of total liabilities divided by total assets [ 5 – 7 , 11 ]. and the ratio of long-term (or short-term plus long-term) debt to total assets [ 8 – 10 , 12 ].…”

Section: Introductionmentioning

confidence: 99%

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Leverage structure and stock price synchronicity: Evidence from China

Zhang

Zhou

2020

PLoS ONE

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This paper investigate the impact of leverage structure on stock price synchronicity. To better understand the mechanism of the impact of leverage, we break leverage into operating leverage and financing leverage. This breakdown reveals the impact of different component of leverage. Moreover, in this paper, we employ the quantile regression model to investigate the impact of leverage on different level of stock price synchronicity, which provides us a more comprehensive picture. Our empirical results show, operating and financing leverage have negative impact on stock price synchronicity. Moreover, the higher the stock price synchronicity becomes, the higher this impact is. Furthermore, the marginal effect of financing leverage will be attenuated as the profitability of firms becomes higher, but the interaction effect doesn't exist for operating leverage. On the contrary, the marginal effect of financing leverage will be enhanced as the market capitalization of firms becomes larger, again, it doesn't exist for operating leverage. Finally, as firms are state-owned, the marginal effect of both operating and financing leverage will be higher.

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Section: Introductionsupporting

confidence: 94%

Section: Stock Price Synchronicitymentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 97%

Section: Introductionmentioning

confidence: 99%

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Leverage structure and stock price synchronicity: Evidence from China

Zhang

Zhou

2020

PLoS ONE

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How uncertainty can determine corporate ESG performance?

Bin‐Feng,

Mirza,

Ahsan

et al. 2023

Corp Soc Responsibility Env

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Using Sino‐Securities Environmental, social, and governance (ESG) ratings data, we examine how environmental uncertainty affects the ESG performance of Chinese A‐share non‐financial listed firms from 2008 to 2020. Our findings show that environmental uncertainty harms corporate ESG performance. In particular, when environmental uncertainty increases, a firm's ESG score and ESG ratings decline due to factors such as financial constraints and industry competition. We argue that as the environmental risk premium rises, it increases the real options value of postponing sustainable investment for a firm. Consequently, the firms tend to cut down their ESG investment by weighing the long‐term benefits and short‐term direct costs. The value of real options changes with the investment opportunities available to the firms and the financing constraints and competitive pressure changes the size of investment opportunities. We argue that higher financing constraints and industry competition restrict available investment opportunities and dilute the negative impact of environmental uncertainty on corporate ESG performance. These results add to the existing literature investigating the impact of uncertainty on corporate ESG performance and offer insights to regulators and enterprise managers. These results are robust to alternate proxies of ESG performance and alternate regression techniques.

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Managerial ability and idiosyncratic volatility

Tong

Wang

2020

Int. J Fin Econ

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This paper investigates the impact of managerial ability on idiosyncratic volatility from the perspective of corporate information. Using the companies listed on the Shenzhen A-share Main Board from 2003 through 2017, we test the relationship between managerial ability and the quality of information disclosure. We further explore the internal mechanism by which managerial ability impacts on idiosyncratic volatility. The empirical results show that competent managers reduce idiosyncratic volatility by improving corporate transparency. In other words, corporate transparency plays an intermediary role. Competent managers disclose higher quality information. In turn, reputable management and high-quality company information attract more attention and information mining. This improves corporate transparency, which can reduce arbitrage space and alleviate the idiosyncratic volatility of the stock price. Our main findings survive a series of robustness tests including an alternative measure of managerial ability, the application of a 2SLS regression and so on.

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Product market competition, idiosyncratic and systematic volatility

Cited by 57 publications

References 38 publications

Leverage structure and stock price synchronicity: Evidence from China

Leverage structure and stock price synchronicity: Evidence from China

How uncertainty can determine corporate ESG performance?

Managerial ability and idiosyncratic volatility

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