Earnings response coefficients of OECD banks: Tests extended to include bank risk factors

Mohamed Ariff, Cheng Fan Fah, Soh Wei Ni

Research output: Contribution to journalArticleResearchpeer-review

3 Citations (Scopus)

Abstract

We investigate two issues: Do share prices of banks in European markets respond to unexpected accounting earnings disclosures? Are share prices as well as unexpected earnings changes correlated with bank-relevant risk factors? Results reveal that bank share prices respond to unexpected earnings changes at the time of accounting reports in the same manner as the shares of the more widely-researched non-bank firms. Apart from finding significant earnings response coefficients in eight countries, we find that credit risk, price risk, exchange rate risk, and solvency risk are significantly correlated with share price changes. Third, three bank risk factors are significantly correlated with unexpected earnings changes. These results are obtained after corrections for several statistical and econometric problems so our reported parameters are robust, certainly more so than in earlier studies using ordinary least square regressions. These new findings extend earnings response literature to several banking sectors, and also identify bank's key risk factors.

Original languageEnglish
Pages (from-to)97-107
Number of pages11
JournalAdvances in Accounting
Volume29
Issue number1
DOIs
Publication statusPublished - Jun 2013

Fingerprint

Share prices
Earnings response coefficients
Bank risk
Risk factors
Earnings changes
Solvency
Econometrics
Banking sector
Price changes
Ordinary least squares
Disclosure
Exchange rate risk
Credit risk
Price risk
Accounting earnings

Cite this

Ariff, Mohamed ; Fah, Cheng Fan ; Ni, Soh Wei. / Earnings response coefficients of OECD banks : Tests extended to include bank risk factors. In: Advances in Accounting. 2013 ; Vol. 29, No. 1. pp. 97-107.
@article{73b71f2f19394ff8a55edb1052ffa470,
title = "Earnings response coefficients of OECD banks: Tests extended to include bank risk factors",
abstract = "We investigate two issues: Do share prices of banks in European markets respond to unexpected accounting earnings disclosures? Are share prices as well as unexpected earnings changes correlated with bank-relevant risk factors? Results reveal that bank share prices respond to unexpected earnings changes at the time of accounting reports in the same manner as the shares of the more widely-researched non-bank firms. Apart from finding significant earnings response coefficients in eight countries, we find that credit risk, price risk, exchange rate risk, and solvency risk are significantly correlated with share price changes. Third, three bank risk factors are significantly correlated with unexpected earnings changes. These results are obtained after corrections for several statistical and econometric problems so our reported parameters are robust, certainly more so than in earlier studies using ordinary least square regressions. These new findings extend earnings response literature to several banking sectors, and also identify bank's key risk factors.",
author = "Mohamed Ariff and Fah, {Cheng Fan} and Ni, {Soh Wei}",
year = "2013",
month = "6",
doi = "10.1016/j.adiac.2013.03.003",
language = "English",
volume = "29",
pages = "97--107",
journal = "Advances in Accounting",
issn = "0882-6110",
publisher = "JAI Press",
number = "1",

}

Earnings response coefficients of OECD banks : Tests extended to include bank risk factors. / Ariff, Mohamed; Fah, Cheng Fan; Ni, Soh Wei.

In: Advances in Accounting, Vol. 29, No. 1, 06.2013, p. 97-107.

Research output: Contribution to journalArticleResearchpeer-review

TY - JOUR

T1 - Earnings response coefficients of OECD banks

T2 - Tests extended to include bank risk factors

AU - Ariff, Mohamed

AU - Fah, Cheng Fan

AU - Ni, Soh Wei

PY - 2013/6

Y1 - 2013/6

N2 - We investigate two issues: Do share prices of banks in European markets respond to unexpected accounting earnings disclosures? Are share prices as well as unexpected earnings changes correlated with bank-relevant risk factors? Results reveal that bank share prices respond to unexpected earnings changes at the time of accounting reports in the same manner as the shares of the more widely-researched non-bank firms. Apart from finding significant earnings response coefficients in eight countries, we find that credit risk, price risk, exchange rate risk, and solvency risk are significantly correlated with share price changes. Third, three bank risk factors are significantly correlated with unexpected earnings changes. These results are obtained after corrections for several statistical and econometric problems so our reported parameters are robust, certainly more so than in earlier studies using ordinary least square regressions. These new findings extend earnings response literature to several banking sectors, and also identify bank's key risk factors.

AB - We investigate two issues: Do share prices of banks in European markets respond to unexpected accounting earnings disclosures? Are share prices as well as unexpected earnings changes correlated with bank-relevant risk factors? Results reveal that bank share prices respond to unexpected earnings changes at the time of accounting reports in the same manner as the shares of the more widely-researched non-bank firms. Apart from finding significant earnings response coefficients in eight countries, we find that credit risk, price risk, exchange rate risk, and solvency risk are significantly correlated with share price changes. Third, three bank risk factors are significantly correlated with unexpected earnings changes. These results are obtained after corrections for several statistical and econometric problems so our reported parameters are robust, certainly more so than in earlier studies using ordinary least square regressions. These new findings extend earnings response literature to several banking sectors, and also identify bank's key risk factors.

UR - http://www.scopus.com/inward/record.url?scp=84878129416&partnerID=8YFLogxK

U2 - 10.1016/j.adiac.2013.03.003

DO - 10.1016/j.adiac.2013.03.003

M3 - Article

VL - 29

SP - 97

EP - 107

JO - Advances in Accounting

JF - Advances in Accounting

SN - 0882-6110

IS - 1

ER -