IDEAS home Printed from https://ideas.repec.org/a/eee/finana/v82y2022ics1057521922001703.html
   My bibliography  Save this article

Beyond the blockchain announcement: Signaling credibility and market reaction

Author

Listed:
  • Chen, Ka-Hin
  • Lai, Tze Leung
  • Liu, Qingfu
  • Wang, Chuanjie

Abstract

We study how signaling credibility of firms' announcements affects market reactions with the blockchain announcements as the research object. The blockchain announcements have led to a significantly positive increase in the value of listed firms since blockchain technology was valued in China. We find that high-tech firms with more technological attributes and reserves could be seen as more credible and trigger more significant stock returns than non-high-tech firms. In addition, state-owned high-tech firms with normal financial status and voluntary disclosure would augment such signaling credibility. In general, the results support that corporate announcements' signaling credibility is vital for market reaction.

Suggested Citation

  • Chen, Ka-Hin & Lai, Tze Leung & Liu, Qingfu & Wang, Chuanjie, 2022. "Beyond the blockchain announcement: Signaling credibility and market reaction," International Review of Financial Analysis, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:finana:v:82:y:2022:i:c:s1057521922001703
    DOI: 10.1016/j.irfa.2022.102209
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1057521922001703
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.irfa.2022.102209?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jonathan Chiu & Thorsten V Koeppl, 2019. "Blockchain-Based Settlement for Asset Trading," The Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 1716-1753.
    2. Bosman, Ronald & Kräussl, Roman & Mirgorodskaya, Elizaveta, 2017. "Modifier words in the financial press and investor expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 138(C), pages 85-98.
    3. Ota, Koji & Kawase, Hironori & Lau, David, 2019. "Does reputation matter? Evidence from share repurchases," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 287-306.
    4. Levi, Shai & Zhang, Xiao-Jun, 2015. "Asymmetric decrease in liquidity trading before earnings announcements and the announcement return premium," Journal of Financial Economics, Elsevier, vol. 118(2), pages 383-398.
    5. Pevzner, Mikhail & Xie, Fei & Xin, Xiangang, 2015. "When firms talk, do investors listen? The role of trust in stock market reactions to corporate earnings announcements," Journal of Financial Economics, Elsevier, vol. 117(1), pages 190-223.
    6. Michael Hurd & Maarten Van Rooij & Joachim Winter, 2011. "Stock market expectations of Dutch households," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(3), pages 416-436, April.
    7. Itay Goldstein & Wei Jiang & G Andrew Karolyi, 2019. "To FinTech and Beyond," The Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 1647-1661.
    8. Ulrike Malmendier & Enrico Moretti & Florian S Peters, 2018. "Winning by Losing: Evidence on the Long-run Effects of Mergers," The Review of Financial Studies, Society for Financial Studies, vol. 31(8), pages 3212-3264.
    9. Birru, Justin & Wang, Baolian, 2016. "Nominal price illusion," Journal of Financial Economics, Elsevier, vol. 119(3), pages 578-598.
    10. Hirshleifer, David & Teoh, Siew Hong, 2003. "Limited attention, information disclosure, and financial reporting," Journal of Accounting and Economics, Elsevier, vol. 36(1-3), pages 337-386, December.
    11. Mark A Chen & Qinxi Wu & Baozhong Yang, 2019. "How Valuable Is FinTech Innovation?," The Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 2062-2106.
    12. István Ábel & Pierre L. Siklos & István P. Székely, 1998. "Money and Finance in the Transition to a Market Economy," Books, Edward Elgar Publishing, number 830.
    13. Price, S. McKay & Doran, James S. & Peterson, David R. & Bliss, Barbara A., 2012. "Earnings conference calls and stock returns: The incremental informativeness of textual tone," Journal of Banking & Finance, Elsevier, vol. 36(4), pages 992-1011.
    14. Child, Travers Barclay & Massoud, Nadia & Schabus, Mario & Zhou, Yifan, 2021. "Surprise election for Trump connections," Journal of Financial Economics, Elsevier, vol. 140(2), pages 676-697.
    15. David M. Frankel, 2008. "Adaptive Expectations And Stock Market Crashes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(2), pages 595-619, May.
    16. Baranchuk, Nina & Rebello, Michael J., 2018. "Spillovers from good-news and other bankruptcies: Real effects and price responses," Journal of Financial Economics, Elsevier, vol. 129(2), pages 228-249.
    17. Acemoglu, Daron & Johnson, Simon & Kermani, Amir & Kwak, James & Mitton, Todd, 2016. "The value of connections in turbulent times: Evidence from the United States," Journal of Financial Economics, Elsevier, vol. 121(2), pages 368-391.
    18. Paul C. Tetlock & Maytal Saar‐Tsechansky & Sofus Macskassy, 2008. "More Than Words: Quantifying Language to Measure Firms' Fundamentals," Journal of Finance, American Finance Association, vol. 63(3), pages 1437-1467, June.
    19. Fu, Renhui & Kraft, Arthur & Zhang, Huai, 2012. "Financial reporting frequency, information asymmetry, and the cost of equity," Journal of Accounting and Economics, Elsevier, vol. 54(2), pages 132-149.
    20. Peng, Lin & Xiong, Wei, 2006. "Investor attention, overconfidence and category learning," Journal of Financial Economics, Elsevier, vol. 80(3), pages 563-602, June.
    21. Lin William Cong & Zhiguo He, 2019. "Blockchain Disruption and Smart Contracts," The Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 1754-1797.
    22. Barberis, Nicholas & Shleifer, Andrei & Vishny, Robert, 1998. "A model of investor sentiment," Journal of Financial Economics, Elsevier, vol. 49(3), pages 307-343, September.
    23. Fama, Eugene F. & French, Kenneth R., 2015. "A five-factor asset pricing model," Journal of Financial Economics, Elsevier, vol. 116(1), pages 1-22.
    24. Barber, Brad M. & Lyon, John D., 1997. "Detecting long-run abnormal stock returns: The empirical power and specification of test statistics," Journal of Financial Economics, Elsevier, vol. 43(3), pages 341-372, March.
    25. Diamond, Douglas W & Verrecchia, Robert E, 1991. "Disclosure, Liquidity, and the Cost of Capital," Journal of Finance, American Finance Association, vol. 46(4), pages 1325-1359, September.
    26. Hwang, Soosung & Keswani, Aneel & Shackleton, Mark B., 2008. "Surprise vs anticipated information announcements: Are prices affected differently? An investigation in the context of stock splits," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 643-653, May.
    27. Sudarshan Jayaraman & Joanna Shuang Wu & Wei Jiang, 2020. "Should I Stay or Should I Grow? Using Voluntary Disclosure to Elicit Market Feedback," The Review of Financial Studies, Society for Financial Studies, vol. 33(8), pages 3854-3888.
    28. Goldstein, Itay & Yang, Liyan, 2019. "Good disclosure, bad disclosure," Journal of Financial Economics, Elsevier, vol. 131(1), pages 118-138.
    29. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2008. "Trusting the Stock Market," Journal of Finance, American Finance Association, vol. 63(6), pages 2557-2600, December.
    30. Akyildirim, Erdinc & Corbet, Shaen & Sensoy, Ahmet & Yarovaya, Larisa, 2020. "The impact of blockchain related name changes on corporate performance," Journal of Corporate Finance, Elsevier, vol. 65(C).
    31. Stephanie F. Cheng & Gus De Franco & Haibo Jiang & Pengkai Lin, 2019. "Riding the Blockchain Mania: Public Firms’ Speculative 8-K Disclosures," Management Science, INFORMS, vol. 65(12), pages 5901-5913, December.
    32. Fahad Saleh & Wei Jiang, 2021. "Blockchain without Waste: Proof-of-Stake [Proof of Work vs Proof of Stake]," The Review of Financial Studies, Society for Financial Studies, vol. 34(3), pages 1156-1190.
    33. Sebahattin Demirkan & Irem Demirkan & Andrew McKee, 2020. "Blockchain technology in the future of business cyber security and accounting," Journal of Management Analytics, Taylor & Francis Journals, vol. 7(2), pages 189-208, April.
    34. Jennifer Francis & Dhananjay Nanda & Per Olsson, 2008. "Voluntary Disclosure, Earnings Quality, and Cost of Capital," Journal of Accounting Research, Wiley Blackwell, vol. 46(1), pages 53-99, March.
    35. Richard Whitaker, 1999. "The early stages of financial distress," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 23(2), pages 123-132, June.
    36. Michael J. Cooper & Orlin Dimitrov & P. Raghavendra Rau, 2001. "A Rose.com by Any Other Name," Journal of Finance, American Finance Association, vol. 56(6), pages 2371-2388, December.
    37. Campbell, John Y. & Lo, Andrew W. & MacKinlay, A. Craig & Whitelaw, Robert F., 1998. "The Econometrics Of Financial Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 2(4), pages 559-562, December.
    38. Kearney, Colm & Liu, Sha, 2014. "Textual sentiment in finance: A survey of methods and models," International Review of Financial Analysis, Elsevier, vol. 33(C), pages 171-185.
    39. Brad M. Barber & Terrance Odean, 2008. "All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors," The Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 785-818, April.
    40. Tunyi, Abongeh A., 2021. "Revisiting acquirer returns: Evidence from unanticipated deals," Journal of Corporate Finance, Elsevier, vol. 66(C).
    41. Corbet, Shaen & Lucey, Brian & Urquhart, Andrew & Yarovaya, Larisa, 2019. "Cryptocurrencies as a financial asset: A systematic analysis," International Review of Financial Analysis, Elsevier, vol. 62(C), pages 182-199.
    42. Cahill, Daniel & G. Baur, Dirk & (Frank) Liu, Zhangxin & W. Yang, Joey, 2020. "I am a blockchain too: How does the market respond to companies’ interest in blockchain?," Journal of Banking & Finance, Elsevier, vol. 113(C).
    43. Clark, Truman A & Weinstein, Mark I, 1983. "The Behavior of the Common Stock of Bankrupt Firms," Journal of Finance, American Finance Association, vol. 38(2), pages 489-504, May.
    44. Hughes, Patricia J., 1986. "Signalling by direct disclosure under asymmetric information," Journal of Accounting and Economics, Elsevier, vol. 8(2), pages 119-142, June.
    45. Chong-En Bai & Jiangyong Lu & Zhigang Tao, 2006. "The Multitask Theory of State Enterprise Reform: Empirical Evidence from China," American Economic Review, American Economic Association, vol. 96(2), pages 353-357, May.
    46. Michael W. Keran, 1971. "Expectations, money, and the stock market," Review, Federal Reserve Bank of St. Louis, vol. 53(Jan), pages 16-31.
    47. Barber, Brad M. & De George, Emmanuel T. & Lehavy, Reuven & Trueman, Brett, 2013. "The earnings announcement premium around the globe," Journal of Financial Economics, Elsevier, vol. 108(1), pages 118-138.
    48. Gao, Haoyu & Ru, Hong & Tang, Dragon Yongjun, 2021. "Subnational debt of China: The politics-finance nexus," Journal of Financial Economics, Elsevier, vol. 141(3), pages 881-895.
    49. Don M. Autore & Nicholas Clarke & Danling Jiang, 2021. "Blockchain speculation or value creation? Evidence from corporate investments," Financial Management, Financial Management Association International, vol. 50(3), pages 727-746, September.
    50. Bradshaw, Mark & Liao, Guanmin & Ma, Mark (Shuai), 2019. "Agency costs and tax planning when the government is a major Shareholder," Journal of Accounting and Economics, Elsevier, vol. 67(2), pages 255-277.
    51. Phillip C. Stocken, 2000. "Credibility of Voluntary Disclosure," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 359-374, Summer.
    52. Fuxiu Jiang & Kenneth A Kim, 2020. "Corporate Governance in China: A Survey [The role of boards of directors in corporate governance: a conceptual framework and survey]," Review of Finance, European Finance Association, vol. 24(4), pages 733-772.
    53. Tim Loughran & Bill Mcdonald, 2011. "When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10‐Ks," Journal of Finance, American Finance Association, vol. 66(1), pages 35-65, February.
    54. Pavel Savor & Mungo Wilson, 2016. "Earnings Announcements and Systematic Risk," Journal of Finance, American Finance Association, vol. 71(1), pages 83-138, February.
    55. Jie Gan & Yan Guo & Chenggang Xu, 2018. "Decentralized Privatization and Change of Control Rights in China," The Review of Financial Studies, Society for Financial Studies, vol. 31(10), pages 3854-3894.
    56. Kang, Jun-Koo & Park, James L., 2021. "Private Placements of Equity and Firm Value: Value Enhancing or Value Destroying?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 56(6), pages 2072-2102, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jungmi Park & Yoojin Shin, 2022. "Corporate Sustainability and Market Response According to the Name Change Strategy: Focusing on Korean IT Industry Firms," Sustainability, MDPI, vol. 14(19), pages 1-15, September.
    2. André D. Gimenes & Jéfferson A. Colombo & Imran Yousaf, 2023. "Store of value or speculative investment? Market reaction to corporate announcements of cryptocurrency acquisition," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-31, December.
    3. Haji Suleman Ali & Feiyan Jia & Zhiyuan Lou & Jingui Xie, 2023. "Effect of blockchain technology initiatives on firms’ market value," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-35, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cahill, Daniel & G. Baur, Dirk & (Frank) Liu, Zhangxin & W. Yang, Joey, 2020. "I am a blockchain too: How does the market respond to companies’ interest in blockchain?," Journal of Banking & Finance, Elsevier, vol. 113(C).
    2. Tom Marty & Bruce Vanstone & Tobias Hahn, 2020. "News media analytics in finance: a survey," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(2), pages 1385-1434, June.
    3. Liu, Sha & Han, Jingguang, 2020. "Media tone and expected stock returns," International Review of Financial Analysis, Elsevier, vol. 70(C).
    4. Akyildirim, Erdinc & Corbet, Shaen & Sensoy, Ahmet & Yarovaya, Larisa, 2020. "The impact of blockchain related name changes on corporate performance," Journal of Corporate Finance, Elsevier, vol. 65(C).
    5. Ahmad, Khurshid & Han, JingGuang & Hutson, Elaine & Kearney, Colm & Liu, Sha, 2016. "Media-expressed negative tone and firm-level stock returns," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 152-172.
    6. Blankespoor, Elizabeth & deHaan, Ed & Marinovic, Iván, 2020. "Disclosure processing costs, investors’ information choice, and equity market outcomes: A review," Journal of Accounting and Economics, Elsevier, vol. 70(2).
    7. Jing Jian Xiao & Chunsheng Tao, 2020. "Consumer finance/household finance: the definition and scope," China Finance Review International, Emerald Group Publishing Limited, vol. 11(1), pages 1-25, June.
    8. Aharon, David Y. & Demir, Ender & Siev, Smadar, 2022. "Real returns from unreal world? Market reaction to Metaverse disclosures," Research in International Business and Finance, Elsevier, vol. 63(C).
    9. David Hirshleife, 2015. "Behavioral Finance," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 133-159, December.
    10. Cahill, Daniel & Liu, Zhangxin (Frank), 2021. "Limitations of imitation: Lessons from another Bitcoin copycat," Journal of Corporate Finance, Elsevier, vol. 69(C).
    11. Bongini, Paola & Osborne, Francesco & Pedrazzoli, Alessia & Rossolini, Monica, 2022. "A topic modelling analysis of white papers in security token offerings: Which topic matters for funding?," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    12. Guo, Chunying & Yang, Baochen & Fan, Ying, 2022. "Does mandatory CSR disclosure improve stock price informativeness? Evidence from China," Research in International Business and Finance, Elsevier, vol. 62(C).
    13. Atilgan, Yigit & Bali, Turan G. & Demirtas, K. Ozgur & Gunaydin, A. Doruk, 2020. "Left-tail momentum: Underreaction to bad news, costly arbitrage and equity returns," Journal of Financial Economics, Elsevier, vol. 135(3), pages 725-753.
    14. Iatridis, George Emmanuel, 2016. "Financial reporting language in financial statements: Does pessimism restrict the potential for managerial opportunism?," International Review of Financial Analysis, Elsevier, vol. 45(C), pages 1-17.
    15. Andrew Ferguson & Tom Scott & Neil Fargher, 2016. "The determinants and market reaction to Open Briefings: an investor relations option and evidence on the effectiveness of disclosure," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 56(3), pages 803-843, September.
    16. Yu, Miao & Hu, Xiaolu & Zhong, Angel, 2023. "Trade links and return predictability: The Australian evidence," Pacific-Basin Finance Journal, Elsevier, vol. 78(C).
    17. Bonsall, Samuel B. & Green, Jeremiah & Muller, Karl A., 2020. "Market uncertainty and the importance of media coverage at earnings announcements," Journal of Accounting and Economics, Elsevier, vol. 69(1).
    18. Cioroianu, Iulia & Corbet, Shaen & Larkin, Charles, 2021. "The differential impact of corporate blockchain-development as conditioned by sentiment and financial desperation," Journal of Corporate Finance, Elsevier, vol. 66(C).
    19. Du, Qianqian & Liang, Dawei & Chen, Zilin & Tu, Jun, 2022. "Concept links and return momentum," Journal of Banking & Finance, Elsevier, vol. 134(C).
    20. Yan Luo & Linying Zhou, 2020. "Textual tone in corporate financial disclosures: a survey of the literature," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 17(2), pages 101-110, September.

    More about this item

    Keywords

    Blockchain announcement; Signaling credibility; Event study; Market reaction;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:82:y:2022:i:c:s1057521922001703. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620166 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.