Accounting and Finance Division Seminar Series
Does the market's prediction affect its reaction to UK listed industrial firms' corporate refocusing announcements?
Dr Chun Yu Mak, University of Birmingham
- From: Wednesday 14 May 2014, 12.30 pm
- To: Wednesday 14 May 2014, 2.30 pm
- Location: DICE Seminar Room 3, Djanogly International Centre (DICE), Nottingham Trent University, City Campus, Clarendon Street, Nottingham, NG1 5JD
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Abstract This seminar investigates whether the market's prediction affects its reaction to UK listed industrial firms' corporate refocusing announcements by examining the association between firms' monthly stock returns, refocusing announcements and investors' predicted probability prior to refocusing announcements. I postulate that the magnitude of investors' predicted probability and managers' strategic timing of refocusing announcements reflect the information asymmetry between them, which could cause variations in the market's reaction to the refocusing announcements.
By developing a binominal logistic model and a new measure of cutoff probability to measure investors' predicted probability, I found that the market's reaction to the refocusing announcements is affected by investors' predicted probability. The results show that the market's reaction to the refocusing announcements is significantly negative for the months with a high investors' predicted probability. However, this negative reaction is changed to positive if managers announce refocusing in the month when investors' predicted probability is high. On the other hand, no significant market reaction is found neither for the months with a low investors' predicted probability, nor firms announce refocusing in the month when investors' predicted probability is low. Investors react significantly negatively if managers did not announce refocusing. There is no difference between refocusing firms and non-refocusing firms when it comes to investors predicting the probability of announcing refocusing in the future.
About the author:
Chun Yu Mak is a lecturer in Accounting and Finance at the Department of Accounting & Finance, Birmingham Business School, the University of Birmingham. He has specialised in Capital Market Based Accounting research and investigates how accounting information disclosure facilitates the valuation of securities of listed industrial firms. This research direction is based on the spectrum of studies surrounding capital market efficiency hypothesis, market anomalies, performance measurement, managers' strategic disclosure behaviours, positive accounting theory, accounting conservatism, International Financial Reporting Standard (IFRS), corporate governance and financial analysts' forecasts and valuations.
His current research interests are:
- Examining how investors' predictions affect their reaction to firms' refocusing announcements; and
- Investigating how financial analysts interpret firms' refocusing announcements via measuring their forecasts around the refocusing announcement year.
Projects that he is currently collaborating with colleagues are:
- The role of accountant in the process of implementing enterprise resources planning system (ERP) in a large Chinese energy enterprise; and
- The challenges and benefits of public sector accounting reforms: a comparative study of Brazil and England.
Please book your place by emailing Don Harradine
Places are limited, so we recommend booking your place on this seminar as early as possible to avoid disappointment.