Template-Type: ReDIF-Article 1.0 Author-Name: Qi Sun Title: STOCK PRICE DISCOVERY IN EARNINGS SEASON Abstract: This study investigates whether the timing of earnings announcement in earnings season affects stock price discovery process. This paper documents that market reaction is more favorable for earnings announcements made at the beginning of earnings season (timing effect). Price reaction on earnings announcement dates and post-announcement price drift are significantly stronger for positive earnings surprises released at the beginning of earnings season. Negative earnings surprises announced at the end of earnings season have the most pronounced post-announcement price decline. The timing effect associated with positive earnings surprises is consistent with industry information transfer theory. The timing effect associated with negative earnings surprise is mainly driven by market penalty on companies’ strategic delay of bad news announcements Classification-JEL: G12, G14, G30 Keywords: Market Reaction to Earnings News; Timing of Earnings Announcement Journal: The International Journal of Business and Finance Research Pages: 1-15 Volume: 9 Issue: 5 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n5-2015/IJBFR-V9N5-2015-1.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:5:p:1-15 Template-Type: ReDIF-Article 1.0 Author-Name: Han-Ching Huang Author-Name: Yong-Chern Su Author-Name: Sheng-Jung Wu Title: BANK STOCK AND OPTION TRANSMISSIONS IN FINANCIAL CRISIS Abstract: We investigate bank stock and option transmissions during the financial crisis in 2008. Contemporaneous and lagged-one stock order imbalances have a significant impact on option returns. A time-varying GARCH model is employed to confirm the results. We develop an imbalance-based call (put) trading strategy that buys the call (put) if the previous day’s stock imbalance is positive, and sells the stock if the previous day’s stock imbalance is negative. The empirical results do not show a positive premium, which implies market efficiency between option and stock markets in financial crisis Classification-JEL: G01, G14, G21 Keywords: Order Imbalance, Market Efficiency, Investment Bank, Commercial Bank, Financial Crisis, Option Journal: The International Journal of Business and Finance Research Pages: 17-23 Volume: 9 Issue: 5 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n5-2015/IJBFR-V9N5-2015-2.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:5:p:17-23 Template-Type: ReDIF-Article 1.0 Author-Name: Zhiqiang Lu Author-Name: Sarath Abeysekera Author-Name: Hongyu Li Title: EXECUTIVE COMPENSATION STICKINESS AND PEER GROUP BENCHMARKS: EVIDENCE FROM CHINESE FIRMS Abstract: This paper examines the phenomenon and effect of peer group on executive compensation stickiness in China's listed firms. We find there has been substantial growth in executive compensation in the past 10 years. Consistent with agency theory, executive compensation is positively related to firm performance. However, pay-for-performance sensitivity is asymmetric, and it is lower when firm performance declines suggesting that there is a characteristic of executive compensation stickiness in Chinese firms. Further, we test the effect of peer group on compensation stickiness. We find that the characteristic of compensation stickiness only exists in the firms whose executive compensation is lower than the compensation of peer group. The evidence suggests that compensation stickiness is an important mechanism to provide retention incentives to firm managers, rather than an agency problem in Chinese firms Classification-JEL: G34 Keywords: Corporate Governance, Pay-For-Performance Sensitivity, Peer Group, Compensation Stickiness Journal: The International Journal of Business and Finance Research Pages: 25-36 Volume: 9 Issue: 5 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n5-2015/IJBFR-V9N5-2015-3.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:5:p:25-36 Template-Type: ReDIF-Article 1.0 Author-Name: Nicholas Apergis Author-Name: Christis Hassapis Author-Name: Christina Christou Author-Name: Steve Johnson Title: INTERNATIONAL EARNINGS TO PRICE RATIO CONVERGENCE: EVIDENCE FROM THE EUROPEAN UNION Abstract: This paper investigates whether any pattern of convergence of international earnings-to-price ratios that exist for a sample of 19 European Union (EU) countries over the period 1994-2012 can be detected through the methodology of Phillips and Sul (2007). This methodology is based on a general form of a nonlinear time varying factor model and allows for cross sectional heterogeneity as well as for different transitional time paths towards equilibrium. The results show that such a convergence is not present. Next, the study aims at detecting any potential factors supporting the pattern of divergence. The empirical findings reveal that such divergence patterns mainly reflect divergence in economic factors Classification-JEL: G10, C23 Keywords: Earnings-Price Ratios; Club Convergence; Clustering Procedure; European Markets Journal: The International Journal of Business and Finance Research Pages: 37-55 Volume: 9 Issue: 5 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n5-2015/IJBFR-V9N5-2015-4.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:5:p:37-55 Template-Type: ReDIF-Article 1.0 Author-Name: Daniel Folkinshteyn Author-Name: Gulser Meric Author-Name: Ilhan Meric Title: INVESTOR REACTION IN STOCK MARKET CRASHES AND POST-CRASH MARKET REVERSALS Abstract: We study investor overreaction using data for five major stock market crashes during the 1987-2008 period. We find some evidence of investor overreaction in all five stock market crashes. The prices of stocks investors bid down more than the average during crashes tend to increase more than the average in post-crash market reversals. In line with CAPM, we find that high beta stocks lose more value in crashes and gain more value in post-crash market reversals relative to low beta stocks. We further find that smaller firms and those with a low market-to-book ratio lose more value in stock market crashes. However, they do not gain more value in post-crash market reversals, implying that investor reaction against these firms in stock market crashes is not an overreaction. In examining industry-specific behavior, our results indicate that investors overbid down the prices of high-tech stocks in the 1997 crash and manufacturing stocks in the 2008 crash relative to other stocks. However, the prices of stocks in these industries increased more than other stocks in the post-crash market reversals, implying investor overreaction for these industries in these stock market crashes Classification-JEL: G00, G01, G10, G14 Keywords: Stock Market Crash, Post-Crash Market Reversal, Determinants of Stock Returns, Investor Overreaction Journal: The International Journal of Business and Finance Research Pages: 57-70 Volume: 9 Issue: 5 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n5-2015/IJBFR-V9N5-2015-5.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:5:p:57-70 Template-Type: ReDIF-Article 1.0 Author-Name: Ikechukwu Kelikume Author-Name: Olaniyi Evans Title: INFLATION TARGETING AS A POSSIBLE MONETARY FRAMEWORK FOR NIGERIA Abstract: One of the issues facing Nigeria today is the choice among two nominal anchors: exchange rate pegging or inflation targeting. The incessant increase in interest rates, exchange rates, money supply and domestic credit have all accumulated, leading to persistent inflation in Nigeria. At this instant, it is pertinent to look for another nominal anchor to keep inflation in check because the present exchange rate pegging seems useless. This groundbreaking study, in an effort to do this, examines inflation targeting as a possible monetary framework for Nigeria, using time series data and with the aid of Granger Causality test and impulse response functions. The empirical results show evidence that inflation is highly sensitive to exchange rate and interest rate while economic growth is highly sensitive to exchange rate and inflation in Nigeria. Further, the causation from real exchange rate to economic growth is stronger than the causation from inflation to economic growth, meaning exchange rate determines economic growth in Nigeria more than inflation does. Therefore, inflation targeting will be less preferable to exchange rate targeting in Nigeria as a policy alternative. This unexpected finding has important implications for monetary policy conduct in Nigeria Classification-JEL: E31, E52, E44, E58 Keywords: Inflation Targeting, Monetary Policy, Inflation Journal: The International Journal of Business and Finance Research Pages: 71-81 Volume: 9 Issue: 5 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n5-2015/IJBFR-V9N5-2015-6.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:5:p:71-81 Template-Type: ReDIF-Article 1.0 Author-Name: Terrance Jalbert Title: CURRENCY-ADJUSTED STOCK INDEX CAUSALITY Abstract: Currency adjusted stock indices consider the impact of both stock value changes and underlying currency value changes on total wealth changes. This paper explores causality and cointegration of currencyadjusted indices using intraday data. This paper examines tick-by-tick data for seven currently available stock indexes, the Philadelphia Housing Index and the Dollar Index for the period 2002-2013. Results show cointegrating relationships between each combination of series examined. The analysis reveals a higher level of causality than found in previous research. The results show bidirectional Granger causality for every index pairwise combination examined Classification-JEL: F15, G11, D14 Keywords: Cointegration, Stock Index, Currency-Adjusted Stock Index, Dow Jones Industrial Average Journal: The International Journal of Business and Finance Research Pages: 83-91 Volume: 9 Issue: 5 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n5-2015/IJBFR-V9N5-2015-7.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:5:p:83-91 Template-Type: ReDIF-Article 1.0 Author-Name: Gerasimos T. Soldatos Author-Name: Erotokritos Varelas Title: ON THE QUANTITY THEORY OF MONEY, CREDIT, AND SEIGNIORAGE Abstract: This paper argues the predictive power of the sectoral approach towards a quantity theory of credit is weak. A quantity theory of commercial-bank-seigniorage approach is proposed in its place. It suggests that the financial system may be held responsible for price and output fluctuations to the extent commercial bank seigniorage alters the stock of money in circulation. If not, the financial sector can become the source of instability by influencing profitability in the real sector through a Goodwin-type interaction. These trends could be countered by an interest rate rule based on deposit habits and on the deposit rate, and supplemented perhaps by a policy of influencing these habits and manipulating the deposit rate Classification-JEL: E3, E4, E5 Keywords: Quantity Theory, Credit Theory, Commercial Bank Seigniorage, Instability Journal: The International Journal of Business and Finance Research Pages: 93-102 Volume: 9 Issue: 5 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n5-2015/IJBFR-V9N5-2015-8.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:5:p:93-102 Template-Type: ReDIF-Article 1.0 Author-Name: Hussein A. Hassan Al-Tamimi Author-Name: Hela Miniaoui Author-Name: Walaa Wahid Elkelish Title: FINANCIAL RISK AND ISLAMIC BANKS’ PERFORMANCE IN THE GULF COOPERATION COUNCIL COUNTRIES Abstract: This study examines the relationship between financial risk and performance of Gulf Cooperation Council Islamic banks and the relative importance of the most common types of risk. The study covers 11 of the 47 Islamic banks of the Gulf Cooperation Council region from 2000 to 2012, based on the availability of data. Data were obtained from the Bankscope database. For bank performance, the two most common measures, ROA and ROE, were alternatively used and for risk measures. Four types of financial risk were used, namely credit risk, liquidity risk, operational risk, and capital risk. Regression analysis indicate there exists a significant negative relationship between the Gulf Cooperation Council Islamic banks’ performance, capital risk and operational risk. The results also confirm a significant negative relationship between Gulf Cooperation Council Islamic banks’ performance. Furthermore, the results indicate that the most important type of risk is capital risk, followed by operational risk Classification-JEL: G20, G21 Keywords: Bank Performance, Financial Risk, Gulf Cooperation Council Islamic Banks Journal: The International Journal of Business and Finance Research Pages: 103-112 Volume: 9 Issue: 5 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n5-2015/IJBFR-V9N5-2015-9.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:5:p:103-112