Robert M. Conroy

Stock Splits and Information: The Role of Share Price

Managers appear to design stock splits to return the price of the companys shares to the price level achieved after the last split. Reducing the share price below the price achieved in the last split is interpreted by investors and securities analysts as a positive signal.

Introduction to 'Valuation in Emerging Markets'

The purpose of the Batten InstituteyAssociation for Investment Management and Researchy Emerging Markets Review conference was to examine the challenges of valuing assets in emerging markets. These challenges are immensely interesting to practitioners and scholars for many reasons, among them for what they reveal about the differences between emerging markets and developed markets. The colloquium surveyed business and research practices, stimulated critical reflection, and highlighted questions for future research. This article provides an overview of the issues discussed in the conference. 2002 Elsevier Science B.V. All rights reserved.

Fundamental information and share prices in Japan: evidence from earnings surprises and management predictions

Abstract Over the period 1985–1993, company-specific earnings fundamentals play a significant role in the pricing of Japanese equities. Moreover, the information content of management forecasts of future earnings is far larger than that conveyed by announcements of current earnings. Despite this base in fundamentals, the dramatic surge and crash of the Japanese market show a changing role for earnings information. During the market run up, price responses to earnings information are lower. In addition, market reactions to good versus bad news change over time. The patterns are broadly consistent with the view that the Japanese market did pay less attention to earnings fundamentals (and especially to bad news) in the alleged bubble period of the late 1980s.

Informational Differences Between Limit and Market Orders for a Market Maker

Markets for exchange typically evolve over time, and the organized security exchanges in the United States have evolved in such a manner as to give specialists a major role as market makers. Specialists are responsible for maintaining a fair and orderly market in the securities listed on an exchange. They specify prices to reflect supply and demand and adjust these prices in response to shifts in supply and demand.

Published analysts’ earnings forecasts in Japan: how accurate are they?

Abstract This paper examines the accuracy of analysts’ earnings forecasts in Japan and compares the results to those in the U.S. The Japanese forecasts are those reported by Toyo Keizai and the U.S. forecasts are those reported by IBES. Earnings forecasts for Japanese companies are more accurate than for U.S. firms; however, this better accuracy appears to result from Japanese earnings being easier to forecast, rather than from differential ability of analysts. Compared to naive random walk (no change) forecasts, analysts in the U.S. actually appear to provide more improvement in forecast accuracy than do analysts in Japan. This larger improvement in the U.S. may be related to the large number of analysts entering the U.S. consensus forecasts compared to the single analyst forecasts available in Japan.

An Empirical Study of the Effect of Rule 19c-3

THE extent to which all orders for common stocks should be consolidated (that is, sent to a single marketplace) and the effect of consolidation on competition in the securities markets have been the subject of much debate in the past quarter century. This debate has focused on offboard trading restrictions for member firms (for example, New York Stock Exchange [NYSE] Rule 390 and American Stock Exchange [AMEX] Rule 5) and on the institution of appropriate intermarket linkages (for example, the Consolidated Transactions Tape, the Consolidated Quotations System, and the Intermarket Trading system). While the Securities and Exchange Commission (SEC) has attempted to promote competition in the securities markets, the results of its efforts are uncertain. Consequently, the consolidation/fragmentation debate continues. In this article, we examine a very specific case in which the SEC tried to increase the degree of competition in market making. Rule 19c-3 allowed off-board trading of NYSE-listed stocks by exchange members. As we will show, this rule had both beneficial and adverse effects. Section I describes Rule 19c-3, the environment which led to its introduction, and the controversy surrounding it. In Section II, we examine the effect of Rule 19c-3 on over-the-counter (OTC) market-making activity; we find that for about 34 percent of the eligible stocks, the introduction of exchange-member market makers increased the total level and also the continuity of OTC market-making activity. In Section III, we find that Rule 19c-3 has had a statistically significant effect in reducing percentage bidask spreads which, ceteris paribus, is desirable. In Section IV, our analysis shows that Rule 19c-3 has led to an increase in returns variance which, ceteris paribus, is undesirable. Finally, our summary and conclusion are presented in Section V.

Competition and the cost of liquidity to investors

Abstract The Congressional mandate to develop competitive securities markets in the United States has focused attention on the cost of liquidity to investors. Prior studies have emphasized the impact of external competition in the form of competing markets and/ or competing dealers on the bid-ask spread of the dealer. However, the spread of the specialist (dealer) on the NYSE may or may not be observable because of the interaction between public limit orders and the specialists quotes. Our study develops a model of this interaction, and empirically verifies that internal competition in the form of limit orders has an important impact on the cost of liquidity to investors.

Market structure: The specialist as dealer and broker

Abstract Models of a specialists spread-setting behavior have focused on the specialists role as a dealer and have generally not considered competition from limit orders. In this paper, a model of spread-setting behavior is described and used to study the competitive effect of public limit orders and the nature of the relationship between the specialists dual functions as dealer and broker. The analysis indicates that public limit orders are an effective form of competition and that the dual functions of the specialist tend not to be complementary. An expression for the expected market spread is also derived and the impact on the market spread of the specialists spread is discussed. These results have implications for the design of an improved market system.

The Development of General Management Capabilities in a Global World

Many of the graduates of today’s business schools are well prepared to excel in applying the functional knowledge and skill they have acquired. The world needs people who can do this. Yet the business profession expresses a growing need for general managers and leaders, people who can knit together the work of many technicians, who take an enterprise point of view, and who create a whole that is greater than the sum of the parts. As business grows more global in form and content, the need for leaders who can synthesize activities across borders grows more urgent. The gap between what schools produce and what business needs is at the heart of a chorus of criticism of business education.