Finnish stock market reaction to quarterly earnings announcements

This thesis examines the stock market reactions to quarterly earnings announcements. The study covers the OMX Helsinki 25 index companies for the years 2007–2010. The stock market response to quarterly earnings announcements is tested by employing the event study –methodology and daily stock returns of Finnish listed companies. The thesis provides evidence that stock prices react to earnings announcements that exceed or fall below analyst forecasts. The most liquid stocks earn higher returns around positive earnings news than less traded stocks, which supports the evidence from previous studies. This thesis finds evidence for the authorization to sell stocks short reducing the post–earnings announcement drift induced by negative earnings news. In addition, the market’s reaction to earnings announcements seems to quicken during economic turmoil.

Stock Price Reactions on M&A, Dividends and Game Releases. Evidence from Gaming Industry.

A rapidly growing gaming industry, which specializes on PC, console, online and other games, attracts attention of investors and analysts, who try to understand what drives changes of the gaming industry companies’ stock prices. This master thesis shows the evidence that, besides long-established types of events (M&A and dividend payments), the companies’ stock price changes depend on industry-specific events. I analyzed specific for gaming industry events - game releases with respect to its subdivisions: new games-sequels, games ratings and subdivision according to a developer of a game (self-developed by publisher or outsourced). The master thesis analyzes stock prices of 55 companies from gaming industry from all over the world. The research period covers 5 year, spreading from April 2008 to April 2013. Executed with an event study method, results of the research show that all the analyzed events types have significant influence on the stock prices of the gaming industry companies. The current master thesis suggests that acquisitions in the industry affect positively bidders’ and targets’ stock prices. Mergers events cause positive stock price reactions as well. But dividends payments and game releases events influence negatively on the stock prices. Game releases’ effect is up to -2.2% of cumulative average abnormal return (CAAR) drop during the first ten days after the game releases. Having researched different kinds of events and identified the direction of their impact, the current paper can be of high value for investors, seeking profits in the gaming industry, and other interested parties.

Toimintolaskennan hyödyntäminen kalustealan yrityksessä

Tämän tutkimuksen tavoitteena oli laatia kohdeyrityksen käyttöön toimintolaskentamalli, joka käsittää yrityksen kahden tehtaan kaikki tuotantolinjat. Toimintolaskennan ohella tarkasteltiin myös kapeikkoajattelun tuomia näkökulmia yrityksen toiminnan kannattavuuden analysointiin. Tutkimuksen kohdeyritys toimii kiintokalustealalla ja sijoittuu kooltaan PK-luokkaan. Diplomityö koostuu kahdesta osasta; kirjallisuuden pohjalta laaditusta teoriatutkimuksesta sekä teorian pohjalta konstruktiivisesti muodostetusta empiirisestä osuudesta, jossa rakennetaan toimintolaskentamalli kohdeyrityksen käyttöön. Tutkimuksen teoriaosa käsittelee erityisesti toimintolaskennan rakennetta sekä laskentamallin luomista. Lisäksi teoriaosassa käsitellään myös kapeikkoajattelun mukaiset laskentamallit yrityksen toiminnan kannattavuuteen. Empiirisessä osassa laaditaan teoriaan perustuva toimintolaskentamalli yrityksen tuotantolinjoista. Tutkimuksen tuloksena laadittu yrityksen tietojärjestelmistä saatuihin tietoihin pohjautuva laskentamalli käsittää tuotantotoiminnan resurssit, resurssiajurit, toiminnot, toimintoajurit sekä laskentamallin laskentakohteet. Laskentamalli huomioi myös kapeikkoajattelun näkökulmat kapeikon hyödyntämisen maksimoinnista. Yritys voi käyttää laadittua laskentamallia toiminnan analysointiin kannattavuutta tuote-, tuoteryhmä-, toiminto-, tuotantolinja-, asiakas-, ja asiakasryhmätasoilla. Tulosten pohjalta voidaan päätellä toimintolaskennan ja kapeikkolaskennan tuovan käyttökelpoisia tuloksia, joita voidaan käyttää toiminnan tehostamisessa ja tuotehinnoittelussa päätöksenteon tukena.

The Use of Nervous System Drugs and the Risk of Fractures in Old Adults

Hermostoon vaikuttavien lääkkeiden käyttö on yleistä iäkkäässä väestössä. Erityisen yleistä käyttö on pitkäaikaisessa laitoshoidossa asuvilla iäkkäillä. Hermostoon vaikuttavien lääkkeiden haittavaikutuksia on tutkittu paljon, ja useat hermostoon vaikuttavat lääkeaineryhmät on tunnistettu murtumien riskitekijöiksi. Aikaisemmin ei ole kuitenkaan tutkittu usean hermostoon vaikuttavan lääkkeen yhteiskäytön yhteyksiä murtuman riskiin 65 vuotta täyttäneillä. Väitöskirjatutkimuksessa havaittiin, että usean hermostoon vaikuttavan lääkeaineen yhtäaikainen käyttö oli hyvin yleistä Porin kaupunginsairaalan viidellä pitkäaikaisen laitoshoidon osastolla (n = 154) vuosien 2004 ja 2005 vaihteessa. Kolmasosa tutkituista käytti säännöllisesti kolmea tai useampaa hermostoon vaikuttavaa lääkettä samanaikaisesti. Kun huomioitiin myös tarvittaessa otettavat lääkkeet, vastaava luku oli 53 %. Tutkimuksessa havaittiin myös viitteitä lääkkeiden epäasianmukaisesta käytöstä, kun potilaiden käyttämiä lääkkeitä verrattiin heidän kognitiiviseen ja fyysiseen suorituskyynsä sekä asetettuihin diagnooseihin. Liedon kunnassa 1990-luvulla toteutettuun väestöpohjaiseen Liedon Iäkkäät -seurantatutkimukseen osallistui 1177 lietolaista 65 vuotta täyttänyttä. Lääkitystietoja sekä seuranta-aikana tapahtuneita murtumia analysoimalla havaittiin, että kahden tai useamman bentsodiatsepiinin sekä kahden tai useamman psykoosilääkkeen käyttö oli yhteydessä murtuman riskiin 65 vuotta täyttäneillä miehillä. Opioidin ja psykoosilääkkeen yhteiskäyttö sekä opioidin ja bentsodiatsepiinin yhteiskäyttö oli yhteydessä iäkkäiden miesten murtuman riskiin. Naisilla vastaavia tilastollisesti merkitseviä yhteyksiä ei havaittu. Väitöskirjatutkimuksen uusin osa-aineisto perustui Porissa vuosina 2009–2010 toteutetun Satauni-tutkimuksen aineistoon. Tutkimuksessa osoitettiin 89 potilaan aineistossa, että hallittu, yhden kuukauden aikana lääkärin ja hoitajan tuella toteutettu bentsodiatsepiinivieroitus paransi merkitsevästi 55 vuotta täyttäneiden naisten käden puristusvoimaa kuuden kuukauden seuranta-aikana. Vastaavaa yhteyttä ei havaittu miehillä. Bentsodiatsepiinivieroituksella ei ollut yhteyttä osallistujien tasapainotestin tulosten paranemiseen kuuden kuukauden seurantaaikana. Murtumilla on vakavia seurauksia sekä yksilötasolla että yhteiskunnallisesti iäkkäässä väestössä. Murtumien ehkäisy on hyvin tärkeää. Siinä tulee kiinnittää huomiota potilaan käyttämään lääkitykseen ja arvioida erityisesti usean hermostoon vaikuttavan lääkkeen yhteiskäytön tarpeellisuutta.

Irtoamispäivän kurssilaskusuhteet, epänormaalit tuotot sekä epänormaalit kaupankäyntivolyymit vuosina 2005-2013

Tutkielman tavoitteena on tutkia osingon irtoamispäivän tapahtumia OMX Helsinki 25:n yrityksillä vuosina 2005–2013. Vallitsevan käsityksen mukaan osakkeen hinta laskee irtoamispäivänä osingon verran +/- markkinoiden yleisestä hintamuutoksesta johtuva nousu/lasku. Käsitystä on pyritty murtamaan vuosien saatossa neljän eri teorian avulla, jotka ovat veroasiakaskuntateoria, lyhytaikaisen vaihdon hypoteesi, dynaaminen malli sekä mikrorakenneteoria. Osingon irtoamispäivää tarkastellaan kolmen eri tutkimuksen avulla ja saatuja tuloksia verrataan teoriaan sekä aikaisempiin löydöksiin. Tutkimusosuudet ovat kurssilaskusuhteet, epänormaalit tuotot sekä epänormaalit kaupankäyntivolyymit. Kurssilaskusuhdetta tarkastellaan vertaamalla cum-päivän ja irtoamispäivän osakkeiden hintojen erotusta maksetun osingon määrään. Epänormaaleja tuottoja ja epänormaaleja kaupankäyntivolyymejä tarkastellaan tapahtumatutkimus-menetelmällä viisi päivää ennen ja viisi päivää jälkeen osingon irtoamisen. Kurssilaskusuhteet olivat eri tavoilla laskettuina 77 – 94 %. Irtoamispäivän ympärillä oli havaittavissa 1,5 %:n negatiivisia epänormaaleja tuottoja. Epänormaalit kaupankäyntivolyymit kasvoivat tasaisesti lähestyttäessä irtoamispäivää ja olivat voimakkaimmillaan irtoamispäivänä. Irtoamispäivän jälkeen kaupankäyntivolyymit palautuivat hiljalleen normaalille tasolle. Tulokset vastaavat aikaisempia löydöksiä kurssilaskusuhteita ja epänormaaleja volyymejä tarkasteltaessa, mutta eroavat epänormaaleissa tuotoissa.

Stock Market reaction to the CSR announcements of American fast food companies

The purpose of this study is to examine whether Corporate Social Responsibility (CSR) announcements of the three biggest American fast food companies (McDonald’s, YUM! Brands and Wendy’s) have any effect on their stock returns as well as on the returns of the industry index (Dow Jones Restaurants and Bars). The time period under consideration starts on 1st of May 2001 and ends on 17th of October 2013. The stock market reaction is tested with an event study utilizing CAPM. The research employs the daily stock returns of the companies, the index and the benchmarks (NASDAQ and NYSE). The test of combined announcements did not reveal any significant effect on the index and McDonald’s. However the stock returns of Wendy’s and YUM! Brands reacted negatively. Moreover, the company level analyses showed that to their own CSR releases McDonald’s stock returns respond positively, YUM! Brands reacts negatively and Wendy’s does not have any reaction. Plus, it was found that the competitors of the announcing company tend to react negatively to all the events. Furthermore, the division of the events into sustainability categories showed statistically significant negative reaction from the Index, McDonald’s and YUM! Brands towards social announcements. At the same time only the index was positively affected by to the economic and environmental CSR news releases.

The Effect of Plant Closures on Market Value: Empirical Evidence from Pulp and Paper Industry 2004-2012

The aim of this study was to research how plant closure announcements affect the market value of the largest pulp and paper industry companies in the world. Also the effect of announcements on competitors was researched and whether the location of plants, timing, reasons for the closures, and characteristics of the closing firms and competitors have an impact on the results. The overall sample included 57 events in the years 2004-2012 and event study was used as a research method. Main theories were signaling theory and spillover effect. According to empirical results, investors consider plant closure announcements as a positive signal for market value. The spillover effect on competitors was, on average, positive and characteristics of the firms and closures had an effect on the results. Furthermore, the market generally predicted the closures and overreacted to them on the announcement day and after it. It is possible for corporate management and investors to learn from the results and use them as support for their decision making.

Foreign Direct Investment and Shareholder Wealth Gains: Evidence from Finnish FDI in China

In Finnish discourse, “The China Effect” refers to the surge of offshoring activities by Western companies to China during the past couple of decades. Inspired by event studies concerning announcements of foreign direct investment, this thesis investigates the market’s reaction to Finnish companies’ announcement of FDI targeting the People’s Republic of China. Standard event study methodology is applied to 135 announcements related to subsidiaries, joint ventures and acquisitions between 1997 and 2014. The data is checked for contamination by unrelated coinciding events and outliers. A positive average abnormal return is found to take place on the date of the announcement. Additionally, the abnormal returns are found to exist only for projects announced before 2008, and only when the investment project is new, as opposed to investments made to extend previously established projects. Ownership arrangement and the novelty of facilities do not influence the market’s reaction towards the investment announcement.

The Impact of Acquisitions on Share Pricing and Long Term Performance – Empirical Evidence from the Global Automotive Industry

Automotive industry has faced intense consolidation pressure, which has lead to increasing number of M&As. However, empirical evidence has given controversial results suggesting that most of M&As are value destructive for acquiring companies and for acquiring companies’ shareholders. The objective of this master’s thesis is to examine how acquiring companies’ shareholders react to acquisition announcement and is the reaction in line with the long-term performance. This study uses empirical evidence from automotive industry, which has been characterized as an industry that holds large amount of vertical and horizontal synergies. Transaction data consists of 65 acquisitions made by publicly listed companies between 2008-2010. The short-term impact is tested by applying event study methodology while the long term operative performance is examined with accounting study methodology. The event study results indicate that during the three days after acquisition (t= 0-2), the acquiring firms’ stocks generate an abnormal return of 1.22% on average across all acquisitions. When long term performance is studied it is evident that acquiring companies perform better than the industry median pre- and post-transaction but there is no statistically significant evidence that the performance has increased. The only performance ratio indicating statistically significant decrease is Return on Equity (ROE). On long-term horizontal acquisitions seem to outperform conglomerate ones but otherwise deal characteristics do not have any statistically significant impact.

Information Content of Bank Credit Rating Changes: Evidence from Europe

This thesis examines the short-term impact of credit rating announcements on daily stock returns of 41 European banks indexed in STOXX Europe 600 Banks. The time period of this study is 2002–2015 and the ratings represent long-term issuer ratings provided by S&P, Moody’s and Fitch. Bank ratings are significant for a bank’s operation costs so it is interesting to investigate how investors react to changes in creditworthiness. The study objective is achieved by conducting an event study. The event study is extended with a cross-sectional linear regression to investigate other potential determinants surrounding rating changes. The research hypotheses and the motivation for additional tests are derived from prior research. The main hypotheses are formed to explore whether rating changes have an effect on stock returns, when this possible reaction occurs and whether it is asymmetric between upgrades and downgrades. The findings provide evidence that rating announcements have an impact on stock returns in the context of European banks. The results also support the existence of an asymmetry in capital market reaction to rating upgrades and downgrades. The rating downgrades are associated with statistically significant negative abnormal returns on the event day although the reaction is rather modest. No statistically significant reaction is found associated with the rating upgrades on the event day. These results hold true with both rating changes and rating watches. No anticipation is observed in the case of rating changes but there is a statistically significant cumulative negative (positive) price reaction occurring before the event day for negative (positive) watch announcements. The regression provides evidence that the stock price reaction is stronger for rating downgrades occurring within below investment grade class compared with investment grade class. This is intuitive as investors are more concerned about their investments in lower-rated companies. Besides, the price reaction of larger banks is more mitigated compared with smaller banks in the case of rating downgrades. The reason for this may be that larger banks are usually more widely followed by the public. However, the study results may also provide evidence of the existence of the so-called “too big to fail” subsidy that dampens the negative returns of larger banks.

The Reflections of Strategic Orientation on profitability - A resource-based study in pulp and paper industry

Tutkielman tavoitteena oli analysoida erilaisia strategisia orientaatioita sellu- ja paperiteollisuudessa. Sellu- ja paperiteollisuus on kohtaamassa strategisia haasteita, jotka ulottuvat syvälle sen rakenteisiin. Yritykset ovat valinneet erilaisia lähestymistapoja organisoidessaan tuotantoa ja kansainvälistä arvoketjuaan tässä muuttuvassa ympäristössä. Tutkimukseen valittiin 30 suurinta sellu- ja paperiteollisuudessa toimivaa yritystä ja mahdollisia syitä kannattavuuseroihin yritysten välillä analysoitiin. Yritysten strategista orientaatiota tarkasteltiin vertailemalla muun muassa seuraavia tekijöitä: vertikaalinen integraatioaste, tuotevalikoiman laajuus, tuotantokapasiteetin levinneisyys ja tuotantokapasiteetin ikä. Kannattavuutta mitattiin erilaisilla talouden tunnusluvuilla (liikevoitto, oman pääoman tuotto-%, koko pääoman tuotto-%). Tulosten mukaan yrityksiä voidaan ryhmitellä strategisen orientaation perusteella ja ryhmien välillä on kannattavuuseroja.

Information System ProcessInnovation Adoption, Adaptation, Learning, and Unlearning: A Longitudinal Case Study

This thesis examines the history and evolution of information system process innovation (ISPI) processes (adoption, adaptation, and unlearning) within the information system development (ISD) work in an internal information system (IS) department and in two IS software house organisations in Finland over a 43-year time-period. The study offers insights into influential actors and their dependencies in deciding over ISPIs. The research usesa qualitative research approach, and the research methodology involves the description of the ISPI processes, how the actors searched for ISPIs, and how the relationships between the actors changed over time. The existing theories were evaluated using the conceptual models of the ISPI processes based on the innovationliterature in the IS area. The main focus of the study was to observe changes in the main ISPI processes over time. The main contribution of the thesis is a new theory. The term theory should be understood as 1) a new conceptual framework of the ISPI processes, 2) new ISPI concepts and categories, and the relationships between the ISPI concepts inside the ISPI processes. The study gives a comprehensive and systematic study on the history and evolution of the ISPI processes; reveals the factors that affected ISPI adoption; studies ISPI knowledge acquisition, information transfer, and adaptation mechanisms; and reveals the mechanismsaffecting ISPI unlearning; changes in the ISPI processes; and diverse actors involved in the processes. The results show that both the internal IS department and the two IS software houses sought opportunities to improve their technical skills and career paths and this created an innovative culture. When new technology generations come to the market the platform systems need to be renewed, and therefore the organisations invest in ISPIs in cycles. The extent of internal learning and experiments was higher than the external knowledge acquisition. Until the outsourcing event (1984) the decision-making was centralised and the internalIS department was very influential over ISPIs. After outsourcing, decision-making became distributed between the two IS software houses, the IS client, and itsinternal IT department. The IS client wanted to assure that information systemswould serve the business of the company and thus wanted to co-operate closely with the software organisations.

The effects of productivity on profitability: a case study at firm level using an activity-based costing approach

Productivity and profitability are important concepts and measures describing the performance and success of a firm. We know that increase in productivity decreases the costs per unit produced and leads to better profitability. This common knowledge is not, however, enough in the modern business environment. Productivity improvement is one means among others for increasing the profitability of actions. There are many means to increase productivity. The use of these means presupposes operative decisions and these decisions presuppose informationabout the effects of these means. Productivity improvement actions are in general made at floor level with machines, cells, activities and human beings. Profitability is most meaningful at the level of the whole firm. It has been very difficult or even impossible to analyze closely enough the economical aspects of thechanges at floor level with the traditional costing systems. New ideas in accounting have only recently brought in elements which make it possible to considerthese phenomena where they actually happen. The aim of this study is to supportthe selection of objects to productivity improvement, and to develop a method to analyze the effects of the productivity change in an activity on the profitability of a firm. A framework for systemizing the economical management of productivity improvement is developed in this study. This framework is a systematical way with two stages to analyze the effects of productivity improvement actions inan activity on the profitability of a firm. At the first stage of the framework, a simple selection method which is based on the worth, possibility and the necessity of the improvement actions in each activity is presented. This method is called Urgency Analysis. In the second stage it is analyzed how much a certain change of productivity in an activity affects the profitability of a firm. A theoretical calculation model with which it is possible to analyze the effects of a productivity improvement in monetary values is presented. On the basis of this theoretical model a tool is made for the analysis at the firm level. The usefulness of this framework was empirically tested with the data of the profit center of one medium size Finnish firm which operates in metal industry. It is expressedthat the framework provides valuable information about the economical effects of productivity improvement for supporting the management in their decision making.