The IR papers: an academic look at the capital markets

Nov 01, 2009
<p>A roundup of the world's recent output of IR-related academic research</p>


  • Asians don’t invest in Asia, it seems. During 2006 investment in countries within the region accounted for only 10 percent of local portfolio holdings. A study in the journal Asian Economics Papers points to the lack of liquidity in Asian markets as a key reason. Researchers remain puzzled as to why Asian investors should value liquidity more highly than investors elsewhere, howe
  • Stock markets can be fickle about innovation announcements. In a paper published in the British Journal of Management, researchers found Taiwanese firms with greater family control had significantly more negative reactions to ‘innovation’. Institutional ownership eased the effect.
  • Singaporean investors usually welcome the appointment of women directors, especially as independent directors. Less welcome, however, is when women assume the chief executive role, according to researchers.
  • A report in this summer’s Lahore Journal of Economics concludes that good corporate governance reduces a company’s cost of equity. The same results transpired for a set of Spanish companies, according to a study funded by the Spanish Ministry of Science and Innovation. And we thought good corporate governance enhanced valuation only by inhibiting insider expropriation.
  • Spanish investors virtually ignore news about corporate sustainability and social responsibility. Researchers at Universitat Jaume I in Castellon found that, in the short term, investors don’t consider these news items relevant, nor does such news affect stock price.
  • Investors in the Bahrain Stock Exchange say corporate financial statements are their top information source. According to a survey of more than 300 individual investors, quibbles remain about the relative importance of the cash flow vs income statements.
  • Significant IT failures regularly strike modern companies; now we know just how much such glitches can diminish stock prices. Sampling 200 newspaper reports on publicly traded companies over 10 years, an international group of researchers found IT failures result in a 2 percent average cumulative abnormal drop in stock prices over a two-day window. Serial offenders get hit harder, as do companies involved in implementation failures.
  • A recent study casts doubt on existing evidence that sex hormones play an important part in economic behavior, such as risk taking. Swedish researchers (who else?) gave estrogen, testosterone and a placebo to 200 post-menopausal women for four weeks. The subjects then participated in a series of economic experiments with real monetary payoffs that measure altruism, reciprocal fairness, trust, trustworthiness and risk attitudes. Hormones, the scientists discovered, have no effect on any of those behaviors.
  • A stack of studies shows smoking bans have no adverse effect on the revenue, profit or employment of hospitality industry firms. Yet a new review of the Indian hospitality business in the BE Journal of Economic Analysis & Policy reveals significant stock price drops after smoking-ban announcements. Clearly, the evidence is still inconclusive.
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