This study examines the impact of reducing tick size and, in particular decimalization on stock splits. Based on previous studies, this study examines hypotheses in the following three areas: first, market reaction around stock split announcement and ex-dates, second, the effect of tick size on liquidity after stock split ex-dates, and third, the effect of tick size on return volatility after stock split ex-dates. The impact of tick size on market reaction around split announcement and ex-dates is measured by abnormal returns and buy and hold abnormal returns (BHARs). Also, this study investigates the long term impact of decimalization on market reaction for small, medium, and large firms for the three different tick size periods. The effect of tick size on liquidity after stock split ex-dates is measured by turnover, relative bid ask spread, and market maker count. The effect of tick size on return volatility around stock split announcement and ex-dates is measured by return standard deviation. Also, this study investigates the long term impact of decimalization on volatility after split ex-dates for small, medium, and large firms for three different tick size periods.

In this study, I examine whether firms hire new CFOs with improved qualifications following a financial reporting failure and subsequently experiencing CFO turnover. Prior literature provides evidence that restating firms attempt to take remedial actions to restore their credibility and reputation. This study extends prior literature by testing whether the decision to hire a new CFO is a valued remedial action for restating firms. The empirical results show that restating firms are more likely to hire new CFOs with more accounting expertise and from external sources than non-restating firms are. The market reacts more favorably when restating firms hire a CFO with more relevant accounting expertise than the incumbent CFO. I also find that the improved qualifications of the new CFO mitigate the information risk generated by the restatement. This study contributes to the literature with the assertion that accounting expertise is a valuable attribute that firms consider when making hiring decisions for CFOs, especially those firms that issued a restatement. The results imply that replacing CFOs is a valued remedial action for restating firms. The improved qualifications of the new CFOs improve the information environment for restating firms and reduce perceived risk from investors.

I examine the market reaction to the announcement of FFO by REITs using abnormal trading volume as a gauge of investors’ reaction. I also address the question of whether FFO provides more useful information to investors than net income. Lastly, I examine whether the quality of private information among traders prior to the announcement of FFO affects the level of abnormal trading volume. Using three different specifications, I find that even though the announcement of FFO leads to abnormal trading, there is no association between the level of abnormal trading volume and the size of the surprise contained in the FFO announcement. I also find, using abnormal returns as a measure of investor response, that FFO explains significantly more variance in abnormal returns than net income suggesting that FFO provides more useful information than net income. Lastly, I use the proportion of institutional holdings as a proxy for the number of informed traders to predict the amount of abnormal trading volume. I find no significant relation between abnormal trading volume and the proportion of institutional holdings. However, when I break down institutional ownership into two broad classifications, I find that the level of abnormal trading volume is significantly positively related to the holdings by mutual funds and investment advisors but negatively related to the holdings of other institutions (pension funds &.endowments, banks and insurance companies). This raises questions of whether the use of an aggregate measure of institutional ownership is appropriate in studies that examine the effect of institutional holdings.

This dissertation examines how the stock market reacts to announcements of introduction of co-branded new products. Despite the apparent enthusiasm of practitioners towards co-branding--the practice of using two established brand names on the same product--, there is a dearth of research on if and how co-branding can be effectively leveraged to significantly increase the value added of new products. Whether greater financial rewards accrue to the manufacturer of the co-branded product (i.e. the primary brand parent) or to the partner firm that lends its brand to the co-branded product (i.e. the secondary brand parent), and how these rewards may differ depending on the characteristics of the co-branded product itself are yet unanswered questions. Using data from the consumer packaged goods industry, I empirically examine the extent to which co-branding increases the market value of the parent firms and analyze the determinants of the magnitude of increase in market value for both firms involved in the co-branding alliance. I present empirical evidence in support of a positive stock market reaction to the introduction of co-branded new products and find that this reaction is greater, on average, than the market reaction to the introduction of single-branded new products. I also show that the consistency between the brand images of the two products, the innovativeness of the product, and the exclusivity of the co-branding relationship significantly impact the market?s reaction to the announcement of new co-branded products. Moreover, these effects manifest both in the short term (i.e., at the time of the announcement) and over a longer time window (i.e., during the year following the announcement). Furthermore, I find that not all types of co-branding partnerships are equal. Composite co-branding (where both brands bring a substantive contribution to the formulation of the new product) results in higher financial rewards to the partners compared to ingredient and endorsement partnerships. The findings provide important managerial guidelines for increasing firm value through co-branding partnerships.

No description available.

I investigate the stock market's reaction to events related to the Public Company Accounting Oversight Board's (PCAOB) development and enactment of Auditing Standard No. 5 (AS 5). The change from Auditing Standard No. 2 (AS 2) to AS 5 was debated in the business press at length. The PCAOB stated that the goal of AS 5 was to reduce the prohibitive costs of the Sarbanes-Oxley Act of 2002 - Section 404 and AS 2 (Krishnan et al. 2008) while maintaining the effectiveness of the internal control audits required by those policies. However, there was concern that internal control audit quality would decrease under AS 5. My study examines how investors perceived this change by considering stock market reaction around 10 event dates related to PCAOB and Securities and Exchange Commission (SEC) actions with regard to the development and enactment of AS 5. I find evidence that the market's reaction to key AS 5 events was significantly negative, which is consistent with investors perceiving AS 5 as a significant decrease in internal control audit quality. I also study these investor reactions cross-sectionally to further examine the two potential effects of AS 5 (decrease in compliance costs and decrease in internal control audit quality) and how they relate to firm characteristics (size, complexity, litigation risk, and fraud risk). I find evidence consistent with my main finding: investors' perceived increase in information risk under AS 5 is apparent when considering firm characteristics. Finally, I consider ex-post financial reporting quality under AS 5 and find no significant change in financial reporting quality compared to under AS 2. This study contributes to accounting research by being the first to study the stock market's perception of this significant policy change archivally and the first to consider the effectiveness of AS 5 with regard to financial reporting quality.

Using a sample of 678 property portfolio changes (acquisitions, dispositions and joint ventures) of U.S. REITs during the period 1990 to 2009, I investigate the issue of what drives the property sector focus of REITs. Geltner and Miller (2001) argue that investors prefer to make their own diversification decisions using narrowly focused REITs as an explanation for the lack of diversification. On the basis of their argument, I develop and examine the research question of how investors react to a change in a REIT’s property type focus. I find a significantly negative market reaction to acquisition and acquisitional JV events that decrease property-type focus. However, I do not find consistent supporting evidence that dispositional events, including property sales and dispositional JVs which increase property-type focus, yield significantly positive abnormal returns. Only in the limited case of other property-type dispositional JVs do I find a statistically significant positive market reaction relative to those derived from the dispositional events that do not change the property-type focus on the basis of a difference test. In terms of the results of cross-sectional OLS regressions, I also find strong evidence of a diversification discount derived from acquisitional events that decrease the property-type focus of a REIT regardless of the sample period and the type of property portfolio change. However, I do not find evidence of a wealth benefit received by dispositional events which increase the property-type focus. In addition, I find that the deal size of the property portfolio change relative to the size of the firm and the number of security analysts following the firm are both significant variables that affect the abnormal returns upon the announcement of a property portfolio change. I also find no evidence to support the idea that the diversification discount comes from endogeneity as argued by Villanova (2004).

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The thesis presents three studies that focus on the wealth effects of hybrid securities namely: convertible bonds and warrant-bonds. The wealth effects of these hybrid securities are investigated through both meta-analysis and event-studies. Chapter 2 incorporates a review of the literature on wealth effects associated with the announcement of convertible bonds and warrant-bond loans. The findings of 35 event studies, which include 84 sub-samples and 6,310 announcements, are analysed using meta-analysis. A mean cumulative abnormal return of 1.14% for convertible bonds compared with 0.02% for warrant-bonds are observed, the significant difference confirming a relative advantage for warrant-bonds. Abnormal returns for hybrid securities issued in the United States are significantly more negative than for those issued in other countries. In addition, issuing hybrid securities to refund debt does not seem to be favoured by investors. Finally, several factors identified as important by theory or in prior research are not significant within the cross-study models, suggesting that more evidence is needed to confirm whether they are robust. Chapter 3 presents a study that examines the market reaction to hybrid security announcements in an emerging country, specifically Malaysia, from January 1996 to December 2009. The results indicate that announcements of the intention to issue convertible bonds in Malaysia are associated with significantly negative abnormal returns of 1.10% (significant at the 10% level) on the event window of (-1, 1). On the other hand, announcements of the intention to issue warrant-bonds document significantly positive abnormal returns of 2.25% (significant at the 10% level) on the same event window. The ‘univariate’ test confirms that the wealth effects associated with the announcement of the intention to issue warrant-bonds is larger (i.e., more positive) than convertible bonds in line with few studies in different markets: Japan (Kang, Kim, Park, and Stulz, 1995), the Netherlands (De Roon and Veld, 1998), and German (Gebhardt, 2001). Non-significant abnormal returns of 0.81% and 0.23% on the event window ( 1, 1) are reported for announcements of hybrid securities by means of private placements and rights offerings, respectively, contradict with the ‘certification hypothesis’ of Hertzel and Smith (1993), and ‘signalling hypothesis’ of Heinkel and Schwartz (1986). This chapter also finds that there is no support for ‘information-signalling’ hypothesis (Ross, 1977), as non-significant abnormal returns are observed in the event window ( 1, 1) for announcements of hybrid securities for all purposes of offering (i.e., debt restructuring, mergers and acquisitions, capital expenditure, and working capital). These findings also highlight that listed firms in Malaysia with high risk uncertainty contribute to more negative abnormal returns in comparison to lower risk uncertainty firms, which contradicts with the ‘risk uncertainty hypothesis’. The final study presented in this thesis, Chapter 4, considers the wealth effects of hybrid security announcements in a developed country, the United Kingdom. This third study investigates the wealth effects of announcements of the intention to issue convertible bonds in the UK market over a period from January 1990 until July 2010. The study period also allows for an investigation on the market reaction to announcements of convertible bonds during the financial crisis that started in August 2007. Using the standard event study methodology, a negative abnormal return of 1.75% (significant at the 5% level) on the two-day event window is reported, confirming the findings of previous UK studies (Abyhankar and Dunning, 1999, and Wolf et al., 1999) which are also in line with studies performed using data from other countries such as US, Canada, Australia, and others. There are no significant differences between the results of the sub-samples before and during the financial crisis, suggesting that the economic conditions do not influence the market response. The results of the event study and the multivariate analysis in this chapter are consistent with the ‘market timing hypothesis’ implying that managers in the UK announce their intention to issue convertible bonds after a period of good stock price performance.

In a crisis managers are confronted with a dilemma between an ethical responsibility to respond to victims and their fiduciary responsibility to protect shareholder’s wealth. This study provides empirical evidence that a company apology made during a crisis can have a positive or negative effect on stock price depending on the level of responsibility for a crisis born by the firm. We use Coombs’ (2007) Situational Crisis Communication Theory to classify crises and appropriate re-sponse type for 235 unique crises between 1983 and 2013. We use event study methodology to study the effect of an apology on returns. The results show that managers apologizing to those affected for a victim or accidental crisis jeopardize shareholder wealth; however offering an apology for a preventable crisis offsets this negative effect.