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ÖgeEmbedded information content in bonus and rights issue announcements for selected stock exchange markets(Graduate School, 2021-07-14) Işıker, Murat ; Taş, Oktay ; 403132004 ; Management ; İşletmeThe purpose of the dissertation is fourfold: First, to measure market anomaly around the bonus and rights issue announcements for selected stock exchange markets for 2010-2019. Second, to identify the motives behind the market anomaly by using issue characteristics and firm-specific factors. Third, to analyse the long-run operational performance of capital-raising firms via bonus and rights issues. Fourth, to provide policy implications to the regulatory bodies and market participants that will help to reduce the level of market inefficiency. Market reactions are calculated using event study methodology in three aspects. We analyse post and pre-announcement periods to measure event-induced anomaly and possible information leakage, respectively. Moreover, we aim to compute the magnitude of the total market anomaly around the event days by covering both periods. The market model is applied as the primary tool for expected return calculations. Since a daily time frame is preferred, the estimation period covers a trading year return data prior to the event. The main analysis surrounds the period ten days before and after the event. We also use shorter periods to control possible confounding event effects. For the multi-country level analysis, after measuring the market reaction for each country, we perform a multivariate linear regression analysis to explore the possible factors that cause the market anomaly. We use firm-specific variables as well as issue type characteristics for this purpose. Finally, we investigate the long-run operational performance of the issuers, which covers three years before and after the event. For Turkey specific analysis, we use hand-collected data derived from the Public Disclosure Platform of Turkey (PDP) to obtain announcement dates as well as other details specified within the announcement. These details convey embedded information content that is not available on other platforms. Thus, we create sub-groups using these details to reveal if any hidden factor can explain the variations on stock returns during bonus and rights issue announcements. These sub-groups are compared using one-way ANOVA and independent two-sample t-tests. We also use post-hoc tests for further examination. Our findings provide evidence regarding a positive market anomaly around bonus issue announcements in different magnitudes for all sample countries. The information leakage effect, which occurs before the announcement, is detected for all countries except Taiwan. However, the post-announcement market anomaly is valid only for India, Pakistan and Turkey. Regression findings show that issue size is the primary determinant of the abnormal returns, while the firm size and dividend yield are found significant in some cases. Profitability and leverage level indicators cannot explain the variation in abnormal returns. Moreover, long-run performance analysis results indicate that profitability after the event quarter has a downward trend, which means that the signalling assumption does not hold for the sample countries. Investment expenditures are stable generally, while there is a slightly positive trend after the event quarter for Thailand and Turkey. Turkey-specific analysis results show that when internal resources are distributed as bonus shares, the market reaction is higher than those distributed from last year's net income. In addition, internal resources sub-groups also have different characteristics. The market reaction is higher for inflation adjustment on equity group than other in-ternal resource groups. Nonetheless, the largest sized issue group, which contains issues over 75%, cause the highest abnormal returns, while a market anomaly is not detected for the smallest sized issues. Last but not least, the announcement effect regarding the initial bonus issues differs from the subsequent ones. We cannot docu-ment any significant differences among the groups that are formed according to in-dustrial classification, the timing of the issue and market sentiment. Finally, although we observe a liquidity improvement after the bonus issue, the change is not signifi-cant. The fourth chapter includes analyses on the effect of rights issue announcements. Our findings signify the presence of information asymmetry and agency problem for rights issuer firms. Also, the pecking order theory holds for most countries. Unlike the bonus issue case, we show that shareholders do not perceive these announce-ments as favourable in all countries except for Brazil and the UK. The worst perfor-mance is detected in Turkey by -5% within two days. The information leakage effect is weak for the rights issue case, which is found only in the UK. Regression findings indicate that discount rate, idiosyncratic risk level and low-growth indicator are nega-tively, and market sentiment is positively related to abnormal returns for the pooled data. Similarly, the country-specific regressions show that the discount rate is nega-tively associated with abnormal returns in all countries except for Thailand. In addi-tion, Pre-announcement returns affect market reaction positively in Turkey. Finally, the long-run analysis indicates that firms mostly used raised funds to cut their debt burden right after the event quarter. However, the debt level continues to deteriorate afterwards in all countries except France and the UK. In general, the right issues do not improve the firm's profitability, while weak and temporary investment expendi-tures are detected in Germany and Thailand. The fifth chapter provides empirical findings of Turkey-specific analysis. Take-up rate is detected 95% on average, while Turkish firms raised more than 25 billion TRY in ten years via rights issues. We document significant different market reactions for private placement (by 3%) and pure rights issue announcements (by -6%) for the (0,5) event window. We assert that the shareholder approval requirement is the major de-terminant for the difference. Also, when bonus shares are used simultaneously with rights issues, the market reaction becomes positive. On the other hand, market reac-tion is more adverse for higher-sized issues than lower-sized ones. Results fail to show a difference among groups formed according to commitment type, the use of proceeds, issue sequence and industrial classification. The dissertation is novel in examining several emerging markets, particularly regard-ing the short-run announcement effect and long-run operational performance of bo-nus issuing firms. Also, originality can be attributed to the rights issue case, where we compare several developed and developing countries together by using multiple fac-tors, including firm and issue-specific characteristics. Finally, it is the first study for Turkey that examines the detailed information retrieved from bonus and rights issue announcements to identify country-specific determinants of market anomaly by using hand-collected data.
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ÖgeInvestor sentiment: From global to local(Graduate School, 2023-07-05) Salur, Bayram Veli ; Ekinci, Cumhur ; 403142003 ; Business AdministrationLimits to arbitrage and biases of investors have challenged efficient market hypothesis (EMH) and have given room for investor sentiment in explaining stock market returns. Accordingly, investor sentiment has gained strong traction in the last 20 years and become one of the leading research topics in "Behavioral Finance" literature. Many articles have exceeded 1,000 citation threshold (some have exceeded even 10,000 threshold). This dissertation starts investigating investor sentiment from a global perspective and gravitates towards an emerging market (Turkey) with different hypotheses. This dissertation has three main parts. First, this study focuses on investor sentiment and its explanatory power in anomaly returns in a global context. The findings indicate that investor sentiment's power in explaining anomalies might be universal, however changes based on anomalies. Moreover, the explanatory power of sentiment changes when the size factor is controlled. In other words, the impact of sentiment on returns is related to market capitalization of stocks. For example, sentiment can explain investment anomaly in the US market. However, when separately analyzed, one might notice that this is rather the case for small stocks but not for large stocks. This first part of the dissertation has several implications. First, preference for indirect sentiment indicators over direct ones may improve prediction models both in academia and practice. Secondly, asset managers who follow factor-investing strategies can consider the impact of the size factor. For instance, for book-to-market strategy, selecting larger stocks when sentiment is expected to advance might result in higher returns. On the other hand, the opposite method of trading is valid for investment strategy. The first part of the dissertation offers new ground for anomaly research by fixing the stock characteristics when analyzing the effect of sentiment. Additionally, creating pure anomaly returns from combination portfolios is a new practice that could potentially gain traction. Secondly, this dissertation gravitates toward an emerging market (Turkey) and investigates whether excess stock market returns are related to individual and institutional sentiment. In detail, individual investor sentiment is examined by using fund flows and institutional sentiment is examined by using stock intensity of funds (in other words, asset allocation abilities are tested). Results indicate that flows to mutual funds exhibit no relationship with the stock market returns. Hence, unlike the US market, individual investor sentiment is not related to stock returns in Turkey. In turn, stock intensity of mutual (pension) funds is positively related (unrelated) with excess returns. The predictive power of sentiment indicators is not strong. Some differences between mutual and pension funds can be attributed to the relative asset allocation performance of fund managers and the fee structure in the industry. Third, this dissertation investigates the relationship between asset managers' stock selections and investor sentiment indicators. The findings indicate that stock selections of asset managers are related to sentiment indicators. When sentiment rises, asset managers are inclined to invest in stocks with lower size, lower volatility, lower dividend yield and higher momentum. Yet, characteristics of stocks (size, volatility, price-to-earnings ratio, momentum etc.) in mutual funds are not significantly related to stock returns. Herding and lack of stock selection skills may be the reason behind this result. Another finding is that stocks prone to sentiment changes have higher size, and that strategy of going long with low sentiment prone stocks and going short with high sentiment prone stocks do not yield significant return, hence such a strategy is not an anomaly.