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1 – 10 of over 8000Victoria C. Edgar, Niamh M. Brennan and Sean Bradley Power
Taking a communication perspective, the paper explores management's rhetoric in profit warnings, whose sole purpose is to disclose unexpected bad news.
Abstract
Purpose
Taking a communication perspective, the paper explores management's rhetoric in profit warnings, whose sole purpose is to disclose unexpected bad news.
Design/methodology/approach
Adopting a close-reading approach to text analysis, the authors analyse three profit warnings of the now-collapsed Carillion, contrasting the rhetoric with contemporaneous investor conference calls to discuss the profit warnings and board minutes recording boardroom discussions of the case company's precarious financial circumstances. The analysis applies an Aristotelian framework, focussing on logos (appealing to logic and reason), ethos (appealing to authority) and pathos (appealing to emotion) to examine how Carillion's board and management used language to persuade shareholders concerning the company's adverse circumstances.
Findings
As non-routine communications, the language in profit warnings displays and mimics characteristics of routine communications by appealing primarily to logos (logic and reason). The rhetorical profiles of investor conference calls and board meeting minutes differ from profit warnings, suggesting a different version of the story behind the scenes. The authors frame the three profit warnings as representing three stages of communication as follows: denial, defiance and desperation and, for our case company, ultimately, culminating in defeat.
Research limitations/implications
The research is limited to the study of profit warnings in one case company.
Originality/value
The paper views profit warnings as a communication artefact and examines the rhetoric in these corporate documents to elucidate their key features. The paper provides novel insights into the role of profit warnings as a corporate communication vehicle/genre delivering bad news.
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Bank profit warnings represent a milder form of negative news than a bank failure. Yet, they may contain signals about a bank or its rivals because the information is transmitted…
Abstract
Bank profit warnings represent a milder form of negative news than a bank failure. Yet, they may contain signals about a bank or its rivals because the information is transmitted when the bank believes that the market is overly optimistic about its future earnings. Thus, the profit warning serves as a means by which insiders of the bank can reduce the asymmetric information between the bank’s insiders and its investors. We find that banks experience negative valuation effects in response to their profit warnings. The banks’ profit warnings result in significant negative valuation effects for its corresponding rival banks, which implies that the warning carries valuable information about banking industry conditions. However, the effects on rivals are attenuated since the passage of Regulation Fair Disclosure (RFD). This implies that investors may be relying on more transparent sources of information about individual banks rather than relying on one bank’s warning as a signal about other banks. Furthermore, bank regulations may allow for more transparent communication by banks than that of nonbank firms.
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Güler Aras and Banu Yobaş
The governance of capital market institutions did not receive much interest compared to their banking sector counterparts, partly due to their different ownership structures…
Abstract
The governance of capital market institutions did not receive much interest compared to their banking sector counterparts, partly due to their different ownership structures. Recent trends; increased competition, technological advances, structural changes, globalization, all had their share of impact on governance systems of capital markets institutions particularly on exchanges. Corporate governance of non-financial firms and capital markets institutions differ in several ways. Firstly the role of risk management differs since they may impose systemic risks to the financial system. Secondly well-implemented governance structures and processes are required but are not sufficient in capital markets since there are several conflicts of interests to be addressed. Therefore whether and how effectively they function is what matters. Thirdly the governance structures of such institutions exhibit different effectiveness on their decisions.The governance of FIs in capital markets is discussed in terms of board structure and management, risk governance, supervisors, shareholders, executive compensation, role of regulators, authorities and values and culture. The role of stock exchanges in corporate governance are discussed separately in terms of implementing corporate governance codes, demutualisation and its impact on regulations, transparency and accountability issues and the effects of M&As among exchanges. Market needs strong analytical tools and reliable benchmarks to assess governance risk. The corporate control and the regulation of the institutions by the exchanges when the corporations (regulated) are the competitors of the exchanges (regulators) or owned by the stockholders of the exchanges must be addressed. The risk of regulatory arbitrage, calls for the need of harmonisation among regulators. Better regulation of FIs and greater global coordination among regulators are seen as the most two important issues to prevent another crisis.
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The management of multiple organizational identities is an important issue in contemporary organizations. However, relatively few researchers have examined how organizations and…
Abstract
The management of multiple organizational identities is an important issue in contemporary organizations. However, relatively few researchers have examined how organizations and their leaders control or cope with this ambiguity. This paper contributes with an empirical description of a Chief Executive Officer’s (CEO’s) efforts to handle multiple identities. It is based on a case study of a corporate consulting unit with dual organizational identities – a staff identity and an external consultant identity. The paper shows that the CEO’s rhetoric focuses on creating an identity hierarchy, highlighting the identity of external consultant. The distinctiveness of this identity, in comparison to the parent organization, is emphasized by using the IT consulting industry as a prototype for the self‐categorization of Telco Consulting. In combination with the secondary staff identity, a loosely coupled relation to the parent organization is constructed. One conclusion that may be drawn from the study is that the two identities emerge in part through the effects of internal contrasting.
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Adel Almasarwah, Mohammad Almaharmeh, Ahmed M. Al Omush and Adel Sarea
This study investigates the nature of the association between profit warnings and stock price informativeness in the context of Jordan as an emerging country.
Abstract
Purpose
This study investigates the nature of the association between profit warnings and stock price informativeness in the context of Jordan as an emerging country.
Design/methodology/approach
The authors used a large panel data set that related to stock price synchronicity and profit warnings percentages on the Amman Stock Exchange for the period spanning 2007–2018. Robust regression was used as a parametric test. This enabled us to obtain stronger results that fall in line with our prediction that a profit warning encourages firm investors to collect and process more firm-specific information than common market information.
Findings
Our findings show a significant positive effect of profit warnings on the amount of firm-specific information incorporated into stock price, which means that the greater the percentage of profit warnings the more likely that more firm-specific information will be incorporated in stock price synchronicity. In addition, corporate governance characteristics (moderating variables) significantly increase the level of the relationship between profit warnings and stock price synchronicity.
Practical implications
Our study results could be useful to investors, senior managers, and regulators in Jordanian firms, particularly in relation to decisions about enhancing the quality of financial statements. In addition, our results provide new evidence about the consequences of earnings announcements for information content and the informativeness of stock prices. Our methodology and evaluation of profit warnings may also demonstrate useful evidence for future researchers on profit warnings and stock price informativeness in developing economies, especially given that such evidence is scarce in developing economies.
Originality/value
This research is the first study of its kind on emerging markets, particularly in the Middle East. Moreover, entering the corporate governance variables as moderating variables to the robust regression was found to be more powerful than other regressions.
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François Aubert and Waël Louhichi
The purpose of this paper is to report on research concerning financial analysts’ activity surrounding profit warnings issued by listed companies in the four largest European…
Abstract
Purpose
The purpose of this paper is to report on research concerning financial analysts’ activity surrounding profit warnings issued by listed companies in the four largest European stock exchanges (France, Germany, the Netherlands and the UK). The authors address three aspects of analysts’ forecasts: ex-post accuracy of forecasts, earnings forecast revisions, and consensus forecast dispersion. The goal of the analysis is to study the differences between financial analysts’ behavior within different regulatory settings, namely common law vs civil law countries.
Design/methodology/approach
The sample is composed of 1,330 profit warnings issued by listed European firms during the period 2000-2010. The authors apply event study methodology and OLS regressions to highlight the impact of the legal information environment on analysts’ reactions.
Findings
The empirical analysis reveals that analyst activity depends on each country’s legal context factors, such as the legal information environment of the firm and the index of investor protection. Accordingly, the authors show that both a richer legal information environment and stronger country-level investor protection substantially improve analyst accuracy around profit warnings.
Research limitations/implications
The sample is only composed on firms from four European countries owing to a lack of firms from other European countries that disclosed PW during the period 2000-2010. It would be pertinent to conduct future research dealing with an international sample from different continents.
Practical implications
The paper contributes to a deeper understanding of analysts’ reactions to profit warnings. The findings can influence firms’ reporting practices and lead to future regulation policies.
Originality/value
This work is the first to examine the relationship between profit warning releases and the behavior of financial analysts in a pan-European context where there are different institutional levels of investor protection.
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The Howard Shuttering Contractors case throws considerable light on the importance which the tribunals attach to warnings before dismissing an employee. In this case the tribunal…
Abstract
The Howard Shuttering Contractors case throws considerable light on the importance which the tribunals attach to warnings before dismissing an employee. In this case the tribunal took great pains to interpret the intention of the parties to the different site agreements, and it came to the conclusion that the agreed procedure was not followed. One other matter, which must be particularly noted by employers, is that where a final warning is required, this final warning must be “a warning”, and not the actual dismissal. So that where, for example, three warnings are to be given, the third must be a “warning”. It is after the employee has misconducted himself thereafter that the employer may dismiss.
Shengnian Wang, Liang Han and Weiting Gao
This paper aims to make a comparison, different from existing literature solely focusing on voluntary earnings forecasts and ex post earnings surprise, between the effects of…
Abstract
Purpose
This paper aims to make a comparison, different from existing literature solely focusing on voluntary earnings forecasts and ex post earnings surprise, between the effects of mandatory earnings surprise warnings and voluntary information disclosure issued by management teams on financial analysts in terms of the number of followings and the accuracy of earnings forecasts.
Design/methodology/approach
This paper uses panel data analysis with fixed effects on data collected from Chinese public firms between 2006 and 2010. It uses an exogenous regulation enforcement to minimise the endogeneity problem.
Findings
This paper finds that financial analysts are less likely to follow firms which mandatorily issue earnings surprise warnings ex ante than those voluntarily issue earnings forecasts. Moreover, ex post, they issue less accurate and more dispersed forecasts on former firms. The results support Brown et al.’s (2009) finding in the USA and suggest that the earnings surprise warnings affect information asymmetries.
Practical implications
This paper justifies the mandatory earnings surprise warnings policy issued by Chinese Securities Regulatory Commission in 2006.
Originality/value
Mandatory earnings surprise is a unique practical regulation for publicly listed firms in China. This paper, for the first time, provides empirical evaluation on the effectiveness of a mandatory information disclosure policy in China. Consistent with existing literature on information disclosure by public firms in other countries, this paper finds that, in China, voluntary information disclosure captures more private information than mandatory information disclosure on corporate earnings ability.
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