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(2009)ThesisThis thesis examines the relationship between tax-loss selling (TLS), where investors with taxable gains sell stocks that have declined in value just before the fiscal year-end to generate offsetting tax losses, and managers’ incentives to influence stock prices, either through increased disclosure or by engaging in upwards earnings management. Firms whose stock prices represent greater potential tax losses in investors’ portfolios at year-end are predicted to increase their disclosure level in June to prevent further share price falls due to TLS, and have higher levels of accruals. Using the number of discretionary, market-sensitive news releases in the Signal G announcement database to measure disclosure frequency, this thesis finds that, for a sample of 14,713 firm-year observations drawn from all ASX firms for the years 1994 to 2007, stocks with larger negative returns have higher disclosure in June, after controlling for size, performance, risk and external financing dependence. This is particularly true of small mining and exploration companies that are more reliant on voluntary disclosure as a vehicle for lowering information asymmetry. This increased disclosure does not appear to contribute to the higher July returns earned by stocks that experienced significant TLS in June. Disclosure frequency is negatively associated with the magnitude of operating and total accruals, suggesting that earnings management is less likely for firms with higher disclosure. There is also evidence that smaller firms with poor stock price performance have higher levels of operating accruals and thus may be more likely to engage in earnings management.
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(2007)ThesisThis thesis investigates the impact of the reform of the split share structure on the Chinese capital market. It adopts an event study methodology to examine the share price performance around the announcements of the reform and its predicted determinants, the type and level of consideration by using a sample of the top 300 companies listed in the combined Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE). I find the three-day cumulative abnormal returns (CAR) to be negative and significant around government announcement of the reform on 29 April 2005, but the three-day CAR around company s announcement of the reform to be positive and significant. I attribute this change of sentiment by the market to the release of information about the reform process concerning features such as type and level of consideration. I also regress the company s CAR on the type and level of consideration and find evidence to suggest that type of consideration matters, where investors prefer payment of shares from capital reserves or retained profits, cash, warrants or any combination of these methods as opposed to payment of shares from non-tradable shareholders. However, I observe no relation between level of consideration and CAR. I interpret this reaction to be that investors perceive that the consideration level is fair and reasonable based on the company s financial and operating conditions. These results imply that the reform of the split share structure exerts a positive impact on a company s share price and the extent of impact is a function of the type of consideration.