Profit warning and its association with stock price informativeness: experimental analysis

Abstract

Purpose This study investigates the nature of the association between profit warnings and stock price informativeness in the context of Jordan as an emerging country. Design/methodology/approach The authors used a large panel data set that related to stock price synchronicity and profit warnings percentages on the Amman Stock Exchange for the period spanning 2007–2018. Robust regression was used as a parametric test. This enabled us to obtain stronger results that fall in line with our prediction that a profit warning encourages firm investors to collect and process more firm-specific information than common market information. Findings Our findings show a significant positive effect of profit warnings on the amount of firm-specific information incorporated into stock price, which means that the greater the percentage of profit warnings the more likely that more firm-specific information will be incorporated in stock price synchronicity. In addition, corporate governance characteristics (moderating variables) significantly increase the level of the relationship between profit warnings and stock price synchronicity. Practical implications Our study results could be useful to investors, senior managers, and regulators in Jordanian firms, particularly in relation to decisions about enhancing the quality of financial statements. In addition, our results provide new evidence about the consequences of earnings announcements for information content and the informativeness of stock prices. Our methodology and evaluation of profit warnings may also demonstrate useful evidence for future researchers on profit warnings and stock price informativeness in developing economies, especially given that such evidence is scarce in developing economies. Originality/value This research is the first study of its kind on emerging markets, particularly in the Middle East. Moreover, entering the corporate governance variables as moderating variables to the robust regression was found to be more powerful than other regressions.

Corporate governance: association the spots between institutional enhancement, organisational modification and earnings quality

“…As documented by Almasarwah et al (2021), Almasarwah et al (2020), Almasarwah (2019) and Andreas (2017), earnings management was anticipated to be meaningfully associated with the control variables. Regardless, the authors were deliberate in attempting to increase the results’ accuracy as much as possible by adding a wealth of extra criteria to the adopted method (panel data – and, indeed, this appeared to be effective, as the final results saw more heterogeneity, more detailed and concise information, enhanced diversity and lessened multicollinearity between the variables.…”

Pengaruh Kurs terhadap Inflasi dan Harga Saham: Studi Kasus di Bank BTN

“…Umar et al (2020) dalam penelitiannya tidak menemukan bukti yang konsisten untuk hipotesis decoupling ekuitas Islam dan konvensional dalam hal kapasitas lindung nilai inflasi mereka, namun, mereka mendokumentasikan bahwa indeks ekuitas Islam tertentu dapat digunakan untuk secara efektif melakukan lindung nilai terhadap risiko inflasi. Almasarwah et al (2020) menunjukkan pengaruh positif yang signifikan dari profit warnings terhadap jumlah informasi spesifik perusahaan yang dimasukkan ke dalam harga saham, yang berarti semakin besar persentase profit warnings, semakin besar kemungkinan bahwa lebih banyak informasi spesifik perusahaan akan dimasukkan dalam sinkronisitas harga saham, dan selain itu, karakteristik corporate governance (variabel moderasi) secara signifikan meningkatkan tingkat hubungan antara peringatan laba dan sinkronisitas harga saham. Chen et al (2018) dalam penelitiannya menunjukkan bahwa informasi volume pasar saham berguna untuk prediksi volatilitas harga saham dan informasi volume pasar pertukaran mempengaruhi return saham dan hubungan harga-volume, yang dicapai secara tidak langsung melalui modal bersih ke pasar saham.…”

الدور التأثيري لدقة توقعات الأرباح كمتغير وسيط في العلاقة بين لزوجة التكاليف والمحتوى المعلوماتي لأسعار الأسهم: دليل تطبيقي من البيئة المصرية

“…‫المحاسبية‬ ‫األدبيات‬ ‫وتركز‬ (e.g., Chen et al, 2010;Guenther et al, 2014;Banker et al, 2018;Reimer, 2019;Cannon et al, 2020;Agarwal, 2022 (Anderson et al, 2003;Guenther et al, 2014;Banker et al, 2018;Reimer, 2019) ، ‫وتلعب‬ ‫في‬ ً ‫حاسما‬ ً ‫دورا‬ ً ‫أيضا‬ ‫اإلدارية‬ ‫التوقعات‬ ‫تكاليف‬ ‫نظرية‬ ‫التعديل‬ Chen et al, 2019;Hartlieb, 2023 (Anderson et al, 2003;Guenther et al, 2014;Costa and Habib, 2021) . ‫توصلت‬ ‫التي‬ ‫التجريبية‬ ‫الدراسات‬ ‫نتائج‬ ‫مع‬ ‫النتائج‬ ‫هذه‬ ‫وتتماشى‬ ‫الشركات‬ ‫حوكمة‬ ‫آليات‬ ‫أن‬ ‫إلى‬ (Chen et al, 2012;Ezat, 2014;Loy and Hartlieb, 2021 ‫المستقبلية‬ ‫األرباح‬ ‫بشأن‬ ‫السوق‬ ‫في‬ ‫المشاركين‬ ‫توقعات‬ (Lyimo & Pradesh, 2014;Lee, 2018;Todea, 2018;Choi et al, 2019;Almasarwah et al, 2020;Rasheed & Kouser, 2020;Abedifar et al, 2021;Li & Sun, 2023;Zhang et al, 2023) . (Collins et al, 1994;Gelb & Zarowin, 2002;Lundholm & Myers, 2002;Lee, 2018; (Collins et al, 1994;Lundholm & Myers, 2002;Haw et al, 2012;Agnes Cheng & Li, 2014;Choi et al, 2019) .…”