The influence of corporate financial events on selected JSE-listed companies

S. J. Ferreira, S. Mohlamme, G Van Vuuren and Z. Dickason (Koekemoer)

Cogent Economics & Finance, 2019, vol. 7, issue 1, 1597665

Abstract: In South Africa, corporate finance events receive extensive coverage in the media. However, there are only a few studies examining the behaviour of share prices in response to such events. Using the event study methodology commonly used in corporate finance research, the reaction of a sample of large- and small-cap stocks to selected corporate finance events (such as dividend and earnings announcements, stock splits and accounting policy changes) was analysed. Results show that there is a rapid stock price adjustment immediately post-announcement, but the time taken varies depending on the nature of the event and company size. This may have profound implications on discretionary portfolio management: fund managers should find it beneficial from a diversification standpoint. Exiting from heavy concentrations in large-cap stocks and diversifying into smaller cap stocks could offer the stability of portfolio returns against adverse events like Steinhoff’s accounting fraud.

Date: 2019
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DOI: 10.1080/23322039.2019.1597665

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