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Measuring the Impact of Corporate Investment Announcements on Share Prices: The Spanish Experience

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  • Esther B. Del Brio
  • Javier Perote
  • Julio Pindado

Abstract

We bring together three disparate strands of literature to develop a comprehensive empirical framework to examine the efficiency of security analysts' earnings forecasts in Singapore. We focus specifically on how the increased uncertainty and the negative market sentiment during the period of the Asian crisis affected the quality of earnings forecasts. While we find no evidence of inefficiencies in the pre‐crisis period, our results suggest that after the onset of the crisis, analysts (1) issued forecasts that were systematically upward biased; (2) did not fully incorporate the (negative) earnings‐related news; and (3) predicted earnings changes which proved too extreme.

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  • Esther B. Del Brio & Javier Perote & Julio Pindado, 2003. "Measuring the Impact of Corporate Investment Announcements on Share Prices: The Spanish Experience," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(5‐6), pages 715-747, June.
    • Handle: RePEc:bla:jbfnac:v:30:y:2003:i:5-6:p:715-747
    DOI: 10.1111/1468-5957.05254
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    Cited by:

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    2. Aloke Ghosh & Doocheol Moon & Kishore Tandon, 2007. "CEO Ownership and Discretionary Investments," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(5‐6), pages 819-839, June.
    3. Mehdi Nekhili & Afifa Wali Siala & Dhikra Chebbi-Nehkili, 2009. "Free Cash Flow, gouvernance et politique financière des entreprises françaises," Revue Finance Contrôle Stratégie, revues.org, vol. 12(1), pages 5-31, March.
    4. narjess BOUABDALLAH & jamel Eddine HENCHIRI, 2020. "L' impact des mécanismes de gouvernance interne sur le risque opérationnel bancaire," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 11(1), pages 151-189, June.
    5. Maria Elisabete Duante Neves, 2017. "Payout and Firm's Catering," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 104-132.
    6. Esther Brio & Javier Perote, 2007. "What Enhances Insider Trading Profitability?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 35(2), pages 173-188, June.
    7. Imad Moosa & Sulaiman Al-Abduljader, 2010. "A test of the news model of stock price determination in an emerging market: the case of Kuwait," Applied Financial Economics, Taylor & Francis Journals, vol. 20(5), pages 397-405.
    8. Julio Pindado & Chabela De La Torre, 2006. "The Role of Investment, Financing and Dividend Decisions in Explaining Corporate Ownership Structure: Empirical Evidence from Spain," European Financial Management, European Financial Management Association, vol. 12(5), pages 661-687, November.
    9. Liang Li, 2012. "How Much Are Resource Projects Worth? A Capital Market Perspective," Economics Discussion / Working Papers 12-13, The University of Western Australia, Department of Economics.
    10. Clara Cardone-Riportella & Myriam García-Olalla, 2021. "Changes to the regulation and the declaration of unfair terms in mortgage agreements: an event study approach to the Spanish Banking Industry," European Journal of Law and Economics, Springer, vol. 51(1), pages 157-181, February.
    11. Belén Díaz Díaz & Rebeca García‐Ramos & Myriam García Olalla, 2020. "Does regulating remuneration affect the market value of European Union banks? Large versus small/medium sized banks," Regulation & Governance, John Wiley & Sons, vol. 14(1), pages 150-164, January.
    12. Lozano, M. Belén & Yaman, Serhat, 2020. "The determinants of cash flow sensitivity of cash: The family ownership effect," Research in International Business and Finance, Elsevier, vol. 53(C).
    13. repec:ers:journl:v:v:y:2017:i:4:p:104-132 is not listed on IDEAS
    14. Saeed Akbar & Syed Zulfiqar Ali Shah & Issedeeq Saadi, 2008. "Stock market reaction to capital expenditure announcements by UK firms," Applied Financial Economics, Taylor & Francis Journals, vol. 18(8), pages 617-627.
    15. Gökberk Can & Samet Günay & Murat Ocak, 2022. "Correction to: How does size affect capital expenditures? Evidence from Borsa Istanbul," SN Business & Economics, Springer, vol. 2(2), pages 1-1, February.
    16. Wi Saeng Kim & Esmeralda Lyn & Tae-Jun Park & Edward Zychowicz, 2005. "The Wealth Effects of Capital Investment Decisions: An Empirical Comparison of Korean "Chaebol" and Non-"Chaebol" Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(5-6), pages 945-971.

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