The Adjustment of Stock Prices to New Information

Fama, Eugene F.; Fisher, Lawrence; Jensen, Michael C.; Roll, Richard

doi:10.2307/2525569

Cited by 3,084 publications

(1,341 citation statements)

References 8 publications

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“…Event study analysis [88][89][90] is a statistical technique aimed at determining if an event affects the returns of specific securities in a time period called an event window. Initially, event studies were very simple from a statistical perspective [91].…”

Section: Event Study Analysismentioning

confidence: 99%

Corporate Disclosure, Materiality, and Integrated Report: An Event Study Analysis

2017

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Within the extensive literature investigating the impacts of corporate disclosure in supporting the sustainable growth of an organization, few studies have included in the analysis the materiality issue referred to the information being disclosed. This article aims to address this gap, exploring the effect produced on capital markets by the publication of a recent corporate reporting tool, Integrated Report (IR). The features of this tool are that it aims to represent the multidimensional impact of the organization's activity and assumes materiality as a guiding principle of the report drafting. Adopting the event study methodology associated with a statistical significance test for categorical data, our results verify that an organization's release of IR is able to produce a statistically significant impact on the related share prices. Moreover, the term "integrated" assigned to the reports plays a significant role in the impact on capital markets. Our findings have beneficial implications for both researchers and practitioners, adding new evidence for the IR usefulness as a corporate disclosure tool and the effect of an organization's decision to disclose material information.

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Section: Event Study Analysismentioning

confidence: 99%

Corporate Disclosure, Materiality, and Integrated Report: An Event Study Analysis

2017

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“…Ball and Brown, 1968;Beaver, 1968;Fama et al, 1969). The major weakness of these early studies was their inability to isolate the effects of earnings changes from other information releases, due in part, to the use of monthly and weekly data.…”

Section: Brief Review Of Relevant Literaturementioning

confidence: 99%

Stock Price Response to Earnings Announcements: Evidence From the Nigerian Stock Market

Afego

2013

Journal of African Business

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This paper examines the stock market reaction to annual earnings information releases using data on the Nigerian Stock Exchange. Using the event study method, the speed of reaction of the market to annual earnings information releases for a sample of 16 firms listed on the exchange is tested. Significant abnormal price reactions around earnings announcements suggest the earnings announcements contain value-relevant information. We find that the magnitude of the cumulative abnormal returns is dominated by significant reactions 20 days before the earnings release date which suggests that a portion of the market reaction may be due to private acquisition and, possibly, abuse of information by insiders. The persistent downward drift of the cumulative abnormal returns, 20 days after the announcement, is inconsistent with the efficient markets hypothesis, and therefore suggests that the Nigerian stock market does not efficiently adjust to earnings information for the sample firms within the study period.

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“…Following the seminal articles by Ball and Brown (1968) and Fama et al (1969) event studies have become one of the widely used empirical techniques to detect abnormal price changes in financial assets in the time period around various events. Event methodology enables to assess if there are any abnormal returns earned by the investors due to these events.…”

Section: Event Study Methodsologymentioning

confidence: 99%

Signaling mechanism of corporate payout policy: A case of Indian firms

Anwar¹,

Singh²,

Jain³

2016

10.5267/j.ac

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Historically, cash dividends are the most important form of payout policy; however, they have been losing popularity relative to share repurchases. This paper examines the signaling effect of the payout decisions namely, cash dividends and share repurchases by BSE 500 index companies. It attempts to uncover the underlying forces behind the firm's choices of payout policy in the Indian context. Using the standard 'Event Standard Methodology', a strong case of positive signaling is reported in case of repurchase announcements vis-a-vis cash dividend announcements. It is observed that cash dividends are not perceived by investors as positive signals as they prefer their earnings to be retained by the companies for growth prospects. In case of share repurchases, the existence of undervaluation, signaling and wealth transfer hypotheses is reported, consistent with the fact the share repurchases are welcomed by the Indian companies. The results would provide insights into the economics of the choice between cash dividends versus share repurchases as payout mechanism adopted by the sample companies. The findings would also be useful to the academia as well as industry in understanding the payout practice and the extent to which the Indian managers use the assumptions, models and decision rules regarding payout.

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The Adjustment of Stock Prices to New Information

Cited by 3,084 publications

References 8 publications

Corporate Disclosure, Materiality, and Integrated Report: An Event Study Analysis

Corporate Disclosure, Materiality, and Integrated Report: An Event Study Analysis

Stock Price Response to Earnings Announcements: Evidence From the Nigerian Stock Market

Signaling mechanism of corporate payout policy: A case of Indian firms

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