Kartick Gupta

The performance of entrepreneurial companies post-listing on the New Zealand Stock Exchange

The paper reports an investigation of the returns obtained on a listed portfolio of entrepreneurial companies comparing these with a portfolio of listed small businesses and the stock market overall. The initial findings produce counter-intuitive results in that the returns on the portfolio of entrepreneurial companies appear to be less than those for other small companies and for the market overall. Further, initial public offerings of entrepreneurial companies appear to be overpriced and suffer a price decline post-listing that takes approximately a year and a half to recover. An implication of such results is that money will not flow to the entrepreneurial firms, which may have unfavourable longer-term consequences for economic growth. Various government polices are directed towards achieving sustainable economic growth through the smaller business sector and encouraging these businesses to expand and list on the stock exchange. The overpricing of IPOs and lower returns are not likely to encourage investor support for the entrepreneurial companies, making it difficult for these policies to succeed.

Applicability of Contrarian Strategy in the Bombay Stock Exchange

The application of contrarian strategies in the Bombay Stock Exchange (BSE) are examined in this paper, shedding further light on competing explanations underlying this anomaly. Three specific issues are investigated using several models. First, can a trader book a profit by employing a contrarian strategy? The test portfolio earned a contrarian profit of 74.40 per cent above the market return. Second, risk differences between Winner and Loser portfolios are found to be an independent phenomenon. Third, the size of the firm appears to play a vital role in explaining the overreaction hypothesis.

Profitability of momentum returns under alternative approaches

Purpose - The analysis aims to explore how momentum return changes with alternative computational methods and the extent to which the portfolio structure is important in the momentum context. Design/methodology/approach - The focus reflected in the prior research emphasises the method used by Jegadeesh and Titman and various extensions to test whether momentum returns exist. This study uses alternative methods of buying previous Winners and short-selling previous Losers to determine if this significantly changes the returns. Findings - The current study clarifies the impact of several contributory factors that impact upon estimated momentum returns. The large sample of cleaned data upon which this study is based provides a higher degree of confidence that the findings are sound and not just a statistical anomaly. Practical implications - The research is important from a practitioner perspective as details of momentum return are presented for each country using different methods, providing information regarding the most profitable country in which to invest and whether the momentum return is sustainable under different formative approaches. Originality/value - One of the important contributions of this study is a detailed empirical analysis, presenting results in a global context rather than on a single country basis.

Individual and Institutional Informed Trading in Competing Firms Around Earnings Announcements

This study investigates individual and institutional trading in competing firms around earnings announcements. We find individual and institutional informed trading in competing firms, which is dominant prior to earnings announcements. Magnitude of institutional (individual) net order flow coefficient decreases (increases) with lag length, suggesting that institutional trading captures information faster than individual trading. Individual net order flow transmit information cross-stock when competitor is a small firm while institutional net order flow conveys information cross-stock irrespective of firm size. Our results are informative for regulators regarding insider trading laws and provide insights for market participants in understanding individual and institutional trading impact on cross-stock price discovery process.

The Impact of Timing of the Release of Firm-Specific Announcements on Trade Initiation

This paper investigates trade initiation activities ‘immediately’ before and after earnings and takeover ‘day’ announcements. We find that investors’ initiate buy and sell (buy or sell) trades immediately before (after) earnings and takeover day announcements. High volatility and more prominent effective spread before ‘overnight’ announcements indicate active informed trading, showing evidence of information leakage. Similarly, high volatility and less prominent effective spread before day announcements exhibit more active uninformed trading. Overall, private information (Differential information) is the likely motive for trade initiation before overnight announcements (day announcements). We suggest that day announcements are more effective than overnight announcements in controlling information leakage. Our results complement prior literature on effectiveness of continuous disclosure on the ASX.

Product Market Competition and Corporate Environmental Performance

Abstract In this chapter, we study the impact of product market competition on a companys environment performance. We empirically examine the validity of two alternate views of corporate social responsibility (CSR) in the context of product market competition. In the first view, labeled as the “strategic view” managers engage in CSR to enhance firm value. In this view, CSR is the source of firm level competitiveness. A firm may go “green” to pursue strategies such as product differentiation, product innovation, to access certain markets or achieve resource reduction. The alternate “altruistic view” posits that firms may be willing to give up profits for the sake of society. This study constructs firm-level environmental performance measures using Asset4 database from 2004 to 2012. Industry concentration is measured by Herfindahl–Hirschman index using Worldscope and Orbis database. Our empirical results using a cross-country sample of 18,854 firm-year observations from 69 countries show that the industry competitiveness is negatively related to CSR supporting the altruistic view.

Is Corporate Governance Relevant During the Financial Crisis? Cross-Country Evidence

We study the impact of internal corporate governance on performance during the current financial crisis using a comprehensive cross-country sample of 4046 publicly traded non-financial firms from 23 countries. Using a broad-based index of corporate governance quality, we find that well-governed firms do not outperform poorly governed firms. We explore two plausible explanations for the lack of significant impact of corporate governance quality on performance. First, we examine whether cross-country differences in institutional development have an impact on the effect of corporate governance on performance. Second, we investigate whether a narrowing down of the informationally efficient segment of the market during the crisis can explain the results. We do not find support for either of these conjectures. Our work suggests that existing corporate governance arrangements do not go far enough in mitigating steep declines in performance during the global financial crisis.