1. What is the most powerful driver of stock prices on the Nairobi Securities Exchange?
(a) Earnings
(b) Dividends
(c) Book value
2. Which discretionary disclosure variable has the greatest effect on press coverage?
(a) Press release timing (morning/evening)
(b) Choice of newswire service
(c) Offering multiple company contacts in the release
3. Why do analysts strive to meet privately with management?
4. Which corporate information event is most likely to trigger an analyst report?
(a) Release of financial disclosures
(b) News flow related to corporate management
(c) Corporate strategy
(d) Business activity
(e) Operating environment
5. Which chief executive is more likely to issue voluntary earnings forecasts?
(a) A 47-year-old woman
(b) A 62-year-old man
Answers
(one point for each correct response)
1: B Dividends best explain stock price, according to a study published in the journal Advances in Management & Applied Economics – and almost all Kenyan companies offer them.
2: A Researchers at Harvard and the University of Southern California say disclosing in the evening reduces the probability of newspaper coverage from 20 percent to 9 percent and reduces newswire coverage from 95 percent to 89 percent. While offering more company press contacts is associated with greater coverage, it doesn’t seem to causally affect coverage from release to release. Finally, the investigators find no support – ‘despite advertised claims to the contrary’ – that particular press wire services garner greater press coverage for companies that use their service.
3: These days, requests for management face time are most likely an effort to develop better relations aimed at fostering the analyst’s ability to arrange corporate access for investors, according to Eugene Soltes, assistant professor of business administration at Harvard University. His research finds no compelling evidence that, on average, private interaction improves the quality of quarterly earnings forecasts. At the same time, the more often an analyst meets privately with management, the more likely his or her firm is to host a corporate access event.
4: A Analyzing 3,035 sell-side analyst reports on companies listed in the Dow Jones Euro STOXX 50, researchers at the University of Giessen in Germany find financial news triggers 56 percent of all reports. Still, they note the substantial effect non-financial information has in prompting analyst attention. Information regarding corporate management (including forward-looking statements made by managers) triggers 10.5 percent of reports, strategy-related news flow 12.5 percent, business activity 11.7 percent and non-company-specific operating environment information almost 7 percent.
5: A Researchers at the University of Texas at Dallas report young CEOs are roughly 36 percent more likely to provide earnings forecasts than older ones, while female CEOs are more likely to provide them than their male counterparts (41.7 percent vs 25.3 percent). The investigators argue that the labor market’s perception about a young CEO’s uncertain talent leads to a stronger desire to establish a good reputation by issuing more voluntary earnings forecasts, particularly when the news is positive. They also suggest negative, stereotype-based expectations against female chief executives leads these CEOs to issue more earnings forecasts regardless of whether the news is positive or negative.
How did you do?
1-2: Consider remedial IR.
3-4: Note that CIRI now offers audio webcasts of its professional development events.
5: Your evident skill set suggests you would be a great mentor for the ‘1-2’ crowd.
