Shock events: The impact of news media and communication strategies on listed companies’ share price
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Author(s)Paola FandellaLink to ORCID Index: https://orcid.org/0000-0002-3494-9172
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Guido CeccarossiLink to ORCID Index: https://orcid.org/0000-0002-3227-6074
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Davide Attinà
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DOIhttp://dx.doi.org/10.21511/imfi.19(1).2022.26
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Article InfoVolume 19 2022, Issue #1, pp. 334-349
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- 665 Views
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333 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Academics studied the theory of a company’s communication when it is involved into a crisis but they were less concerned about the impact of the communication on a listed company’s share price, especially when it resulted from a shock event. There is a lack of information about the role played by news media. The aim of this paper is to investigate if in cases of shock events (i) a company’s response strategy has a different effect on shareholders, observing the effect on share prices, and (ii) how the news media can affect the value change. Using the event study methodology, the Cumulative Abnormal Return of companies’ share prices involved in shock events was calculated. Statistics show a best effect of an accommodative response than a defensive strategy in cases of scandals and product recalls. There is no valuable impact of company communication in cases of incidents. With news media variable, the results show a worsening effect with bad news and a mitigating effect with good news. It was proved that the impact of a response strategy is surpassed by news media. When there is absolute certainty of guilt for a given situation, it is more convenient for management to apologize, and when there is no certainty, there was no substantial difference, because in the mind of an investor the focus shifts to the event itself. The news media has been shown to have a huge impact on investor perception, even more so than a company’s best response strategy.
- Keywords
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JEL Classification (Paper profile tab)G14, G41
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References37
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Tables12
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Figures0
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- Table 1. All cases, CAR7. Descriptive statistics and statistical tests
- Table 2. Incidents
- Table 3. Scandals
- Table 4. Product recall
- Table 5. All cases, CAR7
- Table 6. Comparison between group couples
- Table A1. Incidents. Shock event descriptions
- Table A2. Incidents. Shock event announcement sources
- Table A3. Scandals. Shock event descriptions
- Table A4. Scandals. Shock event announcement sources
- Table A5. Product recall. Shock event descriptions
- Table A6. Product recall. Shock event announcement sources
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The impact of the COVID-19 outbreak on the Indian stock market – A sectoral analysis
Rahul Kumar ,
Prince Bhatia ,
Deeksha Gupta
doi: http://dx.doi.org/10.21511/imfi.18(3).2021.28
Investment Management and Financial Innovations Volume 18, 2021 Issue #3 pp. 334-346 Views: 7543 Downloads: 3531 TO CITE АНОТАЦІЯThis paper aims to examine the impact of the COVID-19 outbreak on Indian firms listed on the NSE and analyze its impact on various sectors. In addition, a sub-sample analysis based on market capitalization was performed to understand the effect of size during extreme events. The sample consisted of 1,335 firms listed on the NSE India. A standard event study outlined by Brown and Warner (1985) was employed to analyze the price impact on the COVID-19 outbreak. The event windows from -10 days to +10 days were selected. The estimation window is 250 days. The Nifty 50 has been chosen as a proxy for market return. The sample firms witnessed a negative impact of the COVID-19 outbreak with a negative CAAR in different event windows. In addition, various sectors are classified according their responsiveness towards the COVID-19 outbreak into three groups: highly negatively affected, moderately negatively affected, and slightly negatively affected. The paper also points out that the pandemic substantially affects the above-median market capitalized firms than the below-median market capitalized firms, which contradicts the size effect phenomenon. The results assist shareholders in managing their portfolios and mitigate the systematic risk of their investments during extreme events such as a pandemic, wars, and others. This study is the first comprehensive analysis of the impact of the COVID-19 outbreak on different sectors in India. It is also the first study to investigate the size effect anomalies during extreme events.
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New market reforms and stock exchange liquidity: the case of Kuwait
Amani kh. Bouresli ,
Fayez A. Abdulsalam
doi: http://dx.doi.org/10.21511/imfi.16(1).2019.04
Investment Management and Financial Innovations Volume 16, 2019 Issue #1 pp. 46-64 Views: 1888 Downloads: 192 TO CITE АНОТАЦІЯIn developing markets, new regulations are imposed to protect investors, to assure fairness and to enhance trust through controlling all types of market abuse. In addition, these regulations are imposed to enhance the overall market performance and efficiency. Market liquidity is one of the main pillars used to measure market overall performance. In this paper, the authors attempt to analyze market liquidity before and after the passage of the Capital Market Authority Law of 2010 (CMA), aimed at enhancing investors’ confidence and reinforcing better disclosure quality and accountability for Kuwait public companies. By introducing six liquidity measures that captures market depth, turnover, and volatility, the authors documented highly significant deterioration in all the measures following the CMA Law with more profound effect on smaller firms. The researchers concluded that overstated regulations in developing markets, in spite of its goal of improving market overall performance, structure, enhancing investors’ protection, and market integrity, can have an adverse effect on market efficiency.
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The impact of ESG inclusion on price, liquidity and financial performance of Indian stocks: Evidence from stocks listed in BSE and NSE ESG indices
Suresha B. ,
Srinidhi V. R. ,
Dippi Verma ,
Manu K. S. ,
Krishna T. A.
doi: http://dx.doi.org/10.21511/imfi.19(4).2022.04
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 40-50 Views: 1141 Downloads: 311 TO CITE АНОТАЦІЯIn recent years, investors have perceived that Environmental, Social, and Governance (ESG) practices significantly increase the value of companies’ stocks. This study investigates the impact of ESG inclusion on the price, liquidity and financial performance of stocks listed in the Indian ESG indices. Two major Indian benchmark ESG Indices, the BSE100 ESG and Nifty 100 ESG, were considered for the study. A total sample of 64 firms from the BSE100 ESG index and 86 firms from the Nifty100 ESG index were selected. The market model of the event study methodology was employed to measure AAR and CAAR and to demonstrate the effect before and after the inclusion of the stocks in the ESG indices. The empirical results show a highly significant negative AAR on the announcement day, i.e., on (day = 0) for BSE100 ESG index stocks and an insignificant positive AAR for Nifty100 ESG index stocks. In addition, the results also document a significant negative CAAR for BSE 100 ESG stocks and a positive insignificant CAAR for Nifty100 ESG stocks. Moreover, the liquidity test results revealed a considerable liquidity enhancement in the stocks posts their inclusion in the BSE100 ESG. At the same time, there were no significant changes in the liquidity ratio of stocks after being included in the Nifty100 ESG index. This study concludes that there will be a substantial improvement in the companies’ financial performance as indicated by EPS and market capitalization after their inclusion in the ESG indices.
