Browsing by Author "Mohamed, Abdulkadir"
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Item Open Access The association between earnings forecast in IPO prospectuses and earnings management: An empirical analysis(Elsevier, 2017-09-01) Buchner, Axel; Mohamed, Abdulkadir; Saadouni, BrahimThis paper examines the level of earnings management for large IPOs that provide earnings forecasts and those that do not provide forecasts in the IPO prospectus. Using a sample f 368 IPO firms listed on the London Stock Exchange between 1985 and 2012, we find that the level of earnings management is lower for IPOs that provided earnings forecasts, than for those which did not provide a forecast. This evidence is robust, controlling for endogeneity and sample selection. Further tests reveal that IPOs that provide forecasts outperform their counterparts in the long run, using various long term performance measures. Overall, our results suggest that earnings forecasts at the time of listing convey useful information to investors on the quality of the company listing in the market.Item Open Access Diversification, risk, and returns in venture capital(Elsevier, 2017-06-09) Buchner, Axel; Mohamed, Abdulkadir; Schwienbacher, ArminWe explore an alternative, finance theory-based explanation for the documented positive relationship between fund diversification (or lack of fund specialization) and performance in venture capital (VC). Our proposed “Risk Hypothesis” posits that the expected negative impact of diversification on fund risk induces fund managers to endogenously select riskier investments, which in turn leads to higher performance of more diversified funds. While other channels may also be at play, we provide results that support this hypothesis for an international sample of VC funds. However, this effect is weakened when expertise is limited. The study offers implications of how VC fund managers' investment decisions are influenced by strategic portfolio considerations, which in turn affect which innovative ventures receive funding.Item Open Access The impact of institutional investors on firms’ performance in the context of financialization(Wiley, 2019-11-04) Alexiou, Constantinos; Mohamed, Abdulkadir; Nellis, Joseph G.This paper investigates the impact of U.K. institutional holdings on the financialization process. Using panel data analysis, we find that their holdings have a positive impact on the financialization. Investigating the source of this impact, we find that their portfolio companies outperform their peers matched by industry and size. Together, these findings suggest that institutional investors add value to the capital market and play an instrumental role in shaping the financialization process. Granger's causality test reveals that institutional holdings Granger cause financialization process, and the relationship is one‐way direction.Item Open Access IPOs and SEOs real investments and market timing: emerging market evidence(Elsevier, 2016-05-30) Wadhwa, K.; Reddy, V. N.; Goyal, A.; Mohamed, AbdulkadirThis study uses market-to-book ratio decomposition to examine whether firms that issue equity through initial public offerings or seasoned equity offerings exploit mispricing because of investor enthusiasm or to finance growth opportunities. We find strong evidence that, on average, firms do not issue mispriced stocks to exploit investors but, rather, to finance their investment opportunities in the form of real assets, inventory, and capital expenses. Firms that issue overvalued stocks with the view to increase their cash holdings experience poor long-run performance. Overall, our results show that stock mispricing drives equity offerings through IPOs and SEOs. Nonetheless, high transparency and balanced regulation in the marketplace deter issuing firms from investing their proceeds in non-value-creating activities. This evidence is robust to alternative measures of valuation and long-run performance.Item Open Access Price reaction of ethically screened stocks: a study of the Dow Jones Islamic Market World Index(Springer, 2016-11-26) Mazouz, Khelifa; Mohamed, Abdulkadir; Saadouni, BrahimThis paper investigates the short-term effects on the price of the ethically screened stocks of the Dow Jones Islamic Market World Index (DJIMWI) quarterly revisions. Using a sample of 8250 stocks from May 1999 through June 2012, we find a significant price reaction of the ethically screened stocks following additions and deletions. The results show that additions (deletions) from emerging stock markets tend to experience a greater and significantly positive (negative) price response than additions (deletions) from the developed markets. Further tests reveal that the price reactions following DJIMWI revisions are likely to be driven by shifts in investor sentiment rather than changes in firm fundamentals.Item Open Access Stock return comovement around the Dow Jones Islamic Market World Index revisions(Elsevier, 2016-05-18) Mazouz, Khelifa; Mohamed, Abdulkadir; Saadouni, BrahimWe examine patterns of comovement in stock returns around the Dow Jones Islamic Market World Index (DJIMWI) quarterly revision events. Our analysis is based on a sample of 8250 companies from eighteen countries during the period May 1999–June 2012. We find that a stock’s comovement with the DJIMWI increases when it joins and decreases when it leaves the index. We also find that the comovement of newly added (deleted) stocks with the existing DJIMWI constituents increases (declines) during periods of high trading activity and during the month of Ramadan. Further tests reveal that changes in the fundamentals have no impact on the comovements of added and deleted stocks. Overall, our results indicate that stock returns respond to the emotional state of investors around information-free events.Item Open Access Underwriters' allocation with and without discretionary power: Evidence from the Hong Kong IPO market(Elsevier, 2017-01-03) Mazouz, K.; Mohamed, Abdulkadir; Saadouni, B.; Yin, S.This study uses a unique and extensive data set from the Hong Kong IPO market to examine the theory of adverse selection under two distinct regulatory regimes in relation to underwriters' discretionary power in IPO share allocation. Consistent with Rock's (1986) theory of adverse selection in the IPO market, we show that, prior to the introduction of the clawback provision; retail (uninformed) investors were allocated more of the overpriced offerings and less of the underpriced issues. However, after the provision is implemented, retail investors have been allocated significantly more of the underpriced offerings and less of the overpriced ones. Overall, we find that allocation-adjusted initial returns for the retail investors are lower (higher) than the risk-free rate pre- (post-) clawback provision. These findings imply that the mandatory clawback provision has enhanced the fairness in IPO share allocations among different investor groups and has reduced the winner's curse in the IPO market.