"We examine whether institutional investors are able to avoid future litigation. Our results show that institutions provide a fiduciary role by decreasing or eliminating their positions in sued firms well before litigation begins. We also find that institutional groups with high monitoring ability (independent investment advisors and mutual funds) are more proactive in their trading behavior than are institutions with low monitoring ability (banks, insurance companies, and unclassified institutions such as endowments, foundations, and self-managed pension funds). We find that percentage changes in institutional ownership are correlated with public information available more than two quarters before litigation." Copyright (c) 2008 Financial Management Association International..
This study uses the tick data for foreign‐currency futures to examine risk–return relationships on macroeconomic announcements. This study—different from previous studies—examines the risk–return relationship by capturing the announcement effect on returns with announcement surprises and on volatilities with announcement dummies simultaneously in a Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model. Strong risk–return relationships are detected for the first min after the announcements. Furthermore, the return–risk tradeoff ratios differ across currencies and across macroeconomic indicators. The same information can be more profitable when acted on the more liquid currency futures. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22: 729–764, 2002
We examine whether underwriters have an information advantage over other institutional investors in new public companies. Focusing on firms targeted by IPO‐related class action litigation and a matched sample of nonsued firms, we find evidence suggesting that lead underwriters retain an information advantage in the firms they take public and that they capitalize on this information by closing out or reducing their holdings in sued firms prior to the eventual litigation date. An examination of analyst opinions suggests that analysts affiliated with lead underwriters are reluctant to reduce their earnings forecasts or downgrade sued firms before the litigation date.
We examine whether underwriters have an information advantage over other institutional investors in new public companies. Focusing on firms targeted by IPO-related class action litigation and a matched sample of nonsued firms, we find evidence suggesting that lead underwriters retain an information advantage in the firms they take public and that they capitalize on this information by closing out or reducing their holdings in sued firms prior to the eventual litigation date. An examination of analyst opinions suggests that analysts affiliated with lead underwriters are reluctant to reduce their earnings forecasts or downgrade sued firms before the litigation date.
PurposeThe study aims to examine the stock price performance of publicly owned railroad companies following severe railroad accidents that resulted in the loss of human lives and/or hazardous material spills. The focus is on legal liability considerations as one of the primary factors that drives a firm's abnormal performance following a given accident.Design/methodology/approachThis paper employs a sample of 97 railroad accidents that occurred between January 1967 and December 2006 and involved equipment (tracks and/or locomotives) owned by publicly traded US and Canadian railroad companies. The stock price reaction of the affected firms is examined following these disasters and a series of univariate and multivariate tests is used to investigate whether differences in abnormal returns following a given accident can be related to various factors that characterize the affected firm or the accident it was involved in.FindingsThe results suggest that legal liability considerations are one of the primary factors that determine a company's stock price reaction following a railroad disaster. Specifically, it is observed that firms that are likely to be sued in connection with an accident tend to incur larger stock price losses. On the other hand, it is found that firms that are protected through indemnification agreements suffer only insignificant price declines, even if initial accident reports hold them responsible for causing the accident.Originality/valueThe paper extends the prior literature on the stock market's reaction to firm‐specific catastrophic events. While there are a number of studies that examine the financial consequences of aviation disasters, there is to the authors' knowledge only one prior study that performs a similar analysis for railroad accidents.
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