Bruce Burton

Evidence on the Irish stock market's reaction to dividend announcements

This study investigates the manner in which the Irish stock market responds to company announcements about dividend payments. In particular, the paper examines whether the predictions of the ‘signalling’ hypothesis hold or if more recent findings (which suggest that there is little value-relevant information contained in dividend changes) better characterize the Irish market. Data were obtained for a sample of 50 companies whose shares were traded on the Dublin Stock Exchange from 1987 to 2001. Abnormal returns were then calculated for the whole sample and for various dividend–earnings change combinations. The results suggest that dividend announcements are important for Irish investors, but earnings signals appear to have a stronger impact on equity values.

The Determinants of Credit Ratings in the United Kingdom Insurance Industry

This paper examines the determinants of external credit ratings attained by insurance firms in the United Kingdom (UK) and of the likelihood that insurers will have such an assessment. Using panel data relating to A.M. Best-rated and Standard and Poors (S&P)-rated insurers over the period 1993-1997, a trichotomous logit model and an ordered probit model with sample selection are employed to show that the factors which influence the likelihood of having external credit assessments not only vary between the two agencies but also differ from those which determine the ratings themselves. Our results are shown to be of potential interest to participants in the insurance industry and policy-makers alike. Copyright Blackwell Publishers Ltd, 2002.

Frameworks Underpinning Corporate Governance: Evidence on Ugandan Perceptions

The evidence indicates that attempts to improve governance standards in a particular nation require more than the simple publication of codes of best practice. Root and branch changes in a wide-range of contextual factors, including at political and cultural levels, are required to provide the conditions in which meaningful improvements in corporate governance will occur. The results suggest that corporate governance standards in developing countries may appear on paper to be broadly similar to those in developed countries. However, a widespread perception exists that Ugandan frameworks are not yet strong enough to support what might normally be considered to be good practice. Sound corporate governance is seen as being a multi-faceted notion, with a range of political and social frameworks requiring strengthening before meaningful improvements can be made. The findings suggest that pervasive corruption and weaknesses in underlying frameworks have hampered attempts to improve practice. The results indicate that the mere emergence of detailed governance codes in developing countries does not necessarily mean that de facto practices will improve. This paper sets out to investigate perceptions about corporate governance practices in the developing African nation of Uganda. The study employs interview and questionnaire analysis to examine the part played by a range of factors in supporting effective governance.

Analysis of the overreaction effect in the Chinese stock market

Several recent studies have examined whether the main Chinese stock markets in Shanghai and Shenzhen are weak-form efficient. A consistent feature of the findings is that the pricing of foreign-owned B shares is more predictable than domestically-owned A shares. However, none of the earlier investigations examine the overreaction effect, one of the most commonly-employed tests of weak-form efficiency in developed stock markets. The present study therefore reports the results of such an analysis for a sample of more than 300 Chinese shares over a six-year period beginning in August 1994. In contrast to earlier evidence, the article finds that the overreaction effect is most pronounced in the market for A shares, suggesting that the normal impression of greater efficiency in the pricing of Chinese-owned equities may be open to further challenge and debate.

The impact of corporate growth opportunities on the market response to new equity announcements

In this paper we present novel evidence on the stock market reaction to new equity issues in the UK. Using a sample of 116 announcements made during the period 1989–1991 we find evidence of significantly negative market reactions to such news, consistent in both sign and magnitude with earlier US results. We proceed to examine the role of growth opportunities, proxied for by accounting growth, in affecting cross-sectional variation within the negative share price response and provide evidence that, while income growth in particular does have some bearing on announcement period price adjustments, this relationship is not monotonic and appears to be driven by a subset of the worst-performing firms for whom the market reaction to equity issues is especially unfavourable.

Does the issue method influence the market reaction to seasoned equity offer announcements

The evidence in this note indicates that the average stock market reaction to news of ordinary equity issues by quoted companies may depend on the share issue method employed. Using a sample of announcements made in the UK between 1989 and 1991 we find that the market response is significantly negative when the disclosure relates to a rights issue, but that there are no significant share price changes when announcements about equity placings and open offers take place. This result appears to be inconsistent with the theoretical analysis contained in Myers and Majluf (Journal of Financial Economics, 13, 1984).

Efficiency and risk in commercial banking: empirical evidence from East Asian countries

This paper analyses the effects of off-balance sheet (OBS) activities and various types of risks on the cost and profit efficiencies of banks in seven East Asian countries between 2001 and 2008. Cost and profit efficiency scores are estimated using the data envelopment analysis approach. The results of this analysis are then used to identify the impact of OBS activities and risk exposures on cost and profit efficiencies using a Tobit regression. Bank insolvency risk (as measured by z-scores) is positively related to profit efficiency, while interest sensitivity, size, equity to total assets and OBS exposures all impact on cost efficiency. The analysis of the impact of input and output slacks illustrates that in around 1 in 5 cases banks’ cost efficiency can be improved by adjusting the former variables, whereas in only around 1 in 100 cases a similar outcome is possible for profit efficiency.

Practitioners’ Perspectives on the IPO Process and the Perils of Flotation

Abstract A substantive literature examines the short- and long-run performance of share returns following an Initial Public Offering (IPO). However, the related issue of why companies seek to raise money through an IPO, or the factors that are important in this equity-issuing process, have attracted very little academic attention. The current paper seeks to redress this imbalance by investigating attitudes to these issues in the UK using two research methods: (i) a detailed questionnaire survey of companies that have recently undertaken an IPO; and (ii) interviews with managers and advisers who have been involved in the IPO process.

Evidence on the nature, extent and determinants of disclosures in Libyan banks’ annual reports

Purpose – The paper aims to investigate disclosure practices in the annual reports of Libyan banks in the run‐up to the opening of the nations first stock exchange. Banks dominate this embryonic market but very little research has examined the extent (or determinants) of transparency achieved by these firms, an issue argued by Stiglitz and others to be crucial in the post‐crisis era. Currently, no detailed evidence of disclosure practices prior to the launch of the exchange exists, making an accurate assessment of the markets impact in this area impossible; the present study therefore contributes in this regard as well.Design/methodology/approach – The study employs two main methods: a disclosure index‐based analysis of mandatory and overall disclosure levels; and panel regression analysis of the determinants of the overall disclosure levels.Findings – The results suggest that while many items are disclosed on a regular basis, on average barely more than half of all possible items appear in the annual r...

Qualitative research in finance – pedigree and renaissance

Purpose - This paper sets out the reasons for putting together a special issue of the Design/methodology/approach - The approach adopted in this paper involves discussing the use of qualitative research in finance in previous years, focussing in particular on the pedigree of such analyses and describing the renaissance experienced by this type of work in recent years. The four empirical articles contained in the issue are then set in the context of this overview. Findings - The paper makes clear the need for more research of a qualitative nature in finance, and illustrates that the recent renaissance in such work reflects the pedigree of the approach the ability of the methodology to generate novel and important empirical insights. Originality/value - The paper explains the role of qualitative finance work in complementing – rather than replacing – conventional quantitative research and highlights some of the key areas and ways in which such analyses are likely to prove fruitful.