Reported corporate misconducts: The impact on the financial markets

This study empirically examines how reported corporate misconducts affect the stock returns of US firms. As the reported misconducts are broadcasted in the newspaper outlets, the cumulative abnormal return (CAR) is -4.1%. Involvement in a reported corporate misconduct gets punished by market participants especially when the act of reported misconduct is blamed on the level of the corporation rather than in involvement of a specific individual, when reported misconducts take place in the home market, and when the linguistic tone used in the newspaper article is negative. Financial penalties imposed, firm size, leverage, revenue growth, and the level of firm foreign exposure are found to have significant impact on the returns during the period of observation. The results suggest that investors recognize the importance to penalize firms in the financial markets when firms act unethically.

Stock price reaction to appointment of a chief health officer during COVID-19

This study examines how appointing a chief health officer (CHO) at the corporate-board level during the COVID-19 outbreak affects the stock returns of US firms. As the COVID-19 progressed, the negative abnormal return (CAR) is -7.5%. In contrast, shares of firms that had appointed a CHO before or during the window surrounding the date of the first reported COVID-19 case (the WHO declaration) exhibited positive CAR of ＋6.29% (＋0.136%). CARs surrounding the exact CHO appointment date once the COVID-19 had already broken out the effect was even stronger, ＋6.91%. Size, leverage, growth, and R&D intensity influence significantly returns during the outbreak.

Stock prices and geographic proximity of information: Evidence from the Ebola outbreak

Behavioral finance studies reveal that investor sentiment affects investment decisions and may therefore affect stock pricing. This paper examines whether the geographic proximity of information disseminated by the 2014-2016 Ebola outbreak events combined with intense media coverage affected stock prices in the U.S. We find that the Ebola outbreak event effect is the strongest for the stocks of companies with exposure of their operations to the West African countries (WAC) and the U.S. and for the events located in the WAC and the U.S. This result suggests that the information about Ebola outbreak events is more relevant for companies that are geographically closer to both the birthplace of the Ebola outbreak events and the financial markets. The results also show that the effect is more pronounced for small and more volatile stocks, stocks of specific industry, and for the stocks exposed to the intense media coverage. The event effect is also followed by the elevated perceived risk; that is, the implied volatility increases after the Ebola outbreak events.