Conclusion Proceeding E Book 4A Turky

304 References Andrade, G., M . Mitchell, and E. Stafford, 2001.New Evidence and Perspectives on Mergers, Journal of Economic Perspectives 152, 103-120. Asquith, P. 1983, Merger Bids, Uncertainty, and Stockholder Return, Journal of Financial Economics 11,51-84. Cornett, M. and H. Tehranian, 1992. Change in corporate performance associated with bank acquisitions. Journal of Financial Economics 31, 211-234. Healy, P. M., K. G. Palepu and S. Ruback, 1992. Does Corporate Perfomance Improve after Mergers, Journal of Financial Economics 312, 135-175. Herman, E. and L.Lowenstein. 1988. The Efficiency Effect of Hostile Takeovers, in J. C. Coffee, Jr.; L. Lowenstein; and S. Rose-Ackerman; eds., Knights, Raiders, and Targets: The Impact of the Hostile Takeover 211-240. Oxford University Press, New York, NY . Inoue, K. 2002. Nihon no MA ni okeru torihikikeitai to kabuki kouka Stock reaction to MA announcement and form of transaction. Keieizaimukenkyu 22 2, 107-120 in Japanese. Jensen, M.C.and R. S. Ruback, 1983. The Market for Corporate Control: The Scientific Evidence, Journal of Financial Economics 11,5-11. Muramatsu, S. 1986, Zaimu deta niyoru gappei kouka no bunseki An analysis on effects of merger using financial data. Kigyoukaikei 38, 60-69 in Japanese. Odagiri, H.and T. Hase, 1989. Are Mergers and Acquisitions going to be popular in Japan too? International Journal of Industrial Organization 7, 49-72. Pettway, R. H. and T. Yamada, 1986. Mergers in Japan and Their Impact upon Stockholders ‘ Wealth, Financial Management 15, 43-52. Ravenscraft, D. J. and F. M. Scherer, The Profitability of Mergers, International Journal of Industrial Organization 71, 101-116. Smith, A. 1990, Corporate Ownership Structure and Perfomance: The Case of management buyouts, Journal of Financial Economics 27,143-164. Usui, A. 2001, Kabunushikachi to MA Shareholder value and MA, in Usui, A; eds., Value keiei to MA toushi Value Accounting and MA Investment. Chuo Keizaisha, Tokyo in Japanese. 305 Table 3.1 Sample description Panel A: Year 1986 1987 1990 1992 1993 1994 1995 1996 1997 1998 1 1 1 5 4 5 6 4 7 14 1999 2000 2001 2002 2003 2004 11986-99 22000-04 Total 25 14 14 14 22 8 73 72 145 Panel B: Industrial distribution of acquiring target firms 1 1986-1999 Carmaker 3 1 Ceramics 6 6 Chemistry 4 5 Communication Construction 3 3 Electronics 6 4 Food 2 1 Machine 6 4 Manufacture 1 1 Medicine 2 2 Nonferrous metal 2 3 Oil 1 1 Precision instrument 1 1 Pulp 5 5 RailroadBus 2 Real estate 3 Retail 5 7 Rubber 1 Steel 3 2 Textile 3 1 Trading 8 13 Transportation machine 2 Transportation air Transportation marine 3 3 Service 6 6 Total 73 74 2 2000-2004 Carmaker 3 Ceramics 3 4 Chemistry 4 3 Communication 1 1 Construction 11 14 Electronics 5 4 Food 3 3 Machine 7 4 Manufacture Medicine Nonferrous metal 5 5 Oil 1 1 Precision instrument 1 1 Pulp 1 1 RailroadBus Real estate 2 Retail 3 3 Rubber 1 1 Steel 2 Textile Trading 14 14 Transportation machine Transportation air 2 1 Transportation marine Service 8 12 Total 72 77 306 Table 3.2 Financial performance unadjusted 1 Mergers conducted from 1986 to 1999 2 Mergers conducted from 2000 to 2004 Pre-merger a Post-merger b Pre-merger a Post-merger b ROA return on assets 4.389 2.694 4.322 3.126 3.942 3.336 4.330 4.947 ROE return on equity 2.096 9.590 0.556 9.358 -0.200 10.365 2.030 12.302 OCF operating cash flow 4.182 3.084 4.405 3.510 4.990 4.414 5.178 5.655 Sales growth rate 3.831 8.833 5.873 10.021 0.058 9.066 5.430 8.016 Cost of goods sold ratio 75.78 16.815 77.593 11.062 77.529 15.482 76.606 15.973 Labor cost to sales ratio 4.478 6.184 5.558 4.725 9.355 7.869 8.451 7.389 Tobin‘s q – 96.732 17.260 – 109.670 19.764 Standard deviations in parentheses. a Pre-merger performance: the mean of performance during years -3 to -1. b Post-merger performance: the mean of performance during years +1 to +3. 307 Table 4.1 Cumulative abnormal returns for acquiring firms Trading day 1 Mergers conducted from 1986 to 1999 2 Mergers conducted from 2000 to 2004 3 Mean difference 1 - 2 Panel A: Abnormal returns -5 -0.3071 -1.461 0.1461 0.466 -0.4532 -1.203 -4 -0.2280 -0.741 -0.2963 -0.886 0.0684 0.150 -3 0.1874 0.649 0.6055 1.623 -0.4180 -0.887 -2 0.0056 0.020 0.6486 1.490 -0.6430 -1.251 -1 0.5340 1.478 1.1115 2.685 -0.5775 -1.052 -0.4458 -0.703 2.0870 2.494 -2.5328 -2.417 +1 -0.7727 -1.480 -0.9217 -1.604 0.1490 0.192 +2 -0.4530 -1.772 -1.4989 -4.023 1.0459 2.320 +3 -0.4835 -2.059 -0.5839 -1.652 0.1004 0.237 +4 0.0144 0.045 0.3751 0.873 -0.3608 -0.675 +5 -0.2419 -0.788 -0.0291 -0.075 -0.2129 -0.429 Panel B: Cumulative abnormal returns CAR [-1,+1] -0.6845 -0.721 2.2768 1.772 -2.9613 -1.857 CAR [-5,+5] -2.1905 -2.023 1.6439 1.412 -3.8345 -2.412 CAR [-10,+10] -1.4126 -1.161 1.2911 1.004 -2.7037 -1.528 t-statistics in parentheses. , , indicates significance at the 0.10, 0.05, and 0.01 levels, respectively. 308 Table 4.2 Cumulative abnormal returns for target firms Trading day 1 Mergers conducted from 1986 to 1999 2 Mergers conducted from 2000 to 2004 3 Mean difference 1 - 2 Panel A: Abnormal returns -5 -0.1282 -0.432 0.2227 0.642 -0.3508 -0.765 -4 0.5110 1.133 0.4766 1.301 0.0343 0.059 -3 0.6596 1.418 0.4790 0.906 0.1806 0.255 -2 -0.1595 -0.262 0.9967 1.795 -1.1562 -1.405 -1 0.4529 0.865 1.5533 2.637 -1.1004 -1.391 -1.0827 -0.949 3.6098 3.244 -4.6925 -2.945 +1 -2.1977 -1.502 -1.0296 -1.024 -1.1681 -0.664 +2 0.2373 0.225 -2.4585 -3.586 2.6958 2.166 +3 -0.0093 -0.016 -0.3250 -0.253 0.3157 0.220 +4 -0.3289 -0.638 -0.3234 -0.660 -0.0055 -0.008 +5 0.9364 1.158 -0.2868 -0.768 1.2232 1.397 Panel B: Cumulative abnormal returns CAR [-1,+1] -2.8275 -1.528 4.1334 2.811 -6.9610 -2.961 CAR [-5,+5] -1.1092 -0.536 2.9147 1.376 -4.0239 -1.357 CAR [-10,+10] -1.1104 -0.494 3.7085 1.770 -4.8189 -1.569 t-statistics in parentheses. , , indicates significance at the 0.10, 0.05, and 0.01 levels, respectively. 309 Table 4.3 Industry-adjusted financial performances 1 Mergers conducted from 1987 to 1999 2 Mergers conducted from 2000 to 2004 g Difference of merger effect c – f Index a Premerger b Postmerger c merger effect d Premerger e Postmerger f merger effect ROA -0.2689 -0.701 0.2473 0.611 0.5162 1.452 0.1877 0.452 -0.3536 -0.672 -0.5413 -1.116 1.0575 1.793 ROE -1.1445 -0.896 1.5869 0.933 2.7314 1.245 0.8604 0.586 -3.8418 -2.128 -4.7022 -2.303 7.4336 2.436 OCF -0.3746 -0.922 0.0813 0.197 0.4559 1.308 0.8126 1.610 0.0873 0.145 -0.7254 -1.387 1.1812 1.931 Sales growth rate -3.3307 -2.126 -0.1761 0.113 3.2487 1.586 -6.4076 -3.739 -17.9311 -3.928 -10.5766 -2.113 13.8253 2.751 Cost of goods sold ratio 1.8325 1.372 1.9556 1.347 0.1231 0.218 0.8009 0.482 0.5346 0.293 -0.2663 -0.447 0.3895 0.473 Labor cost to sales ratio -5.9889 -7.618 -5.7376 -7.782 0.2514 0.391 -2.1463 -2.570 -2.3668 -2.830 -0.2205 -0.382 0.4719 0.539 Tobin‘s q – 96.7320 – -3.2680 -1.595 – 109.6700 – 9.6700 3.914 -12.9380 -4.060 t-statistics in parentheses. , , indicates significance at the 0.10, 0.05, and 0.01 levels, respectively. 310 Table 4.4 Relationship between cumulative abnormal returns for acquiring firms and changes in performance Panel A: 1 Mergers conducted from 1986 to 1999 ROA ROE OCF Tobin ‘s q Negative Positive Sum Negative Positive Sum Negative Positive Sum Negative Positive Sum CAR [-1,+1] Negative 1414.5 1716.5 31 1411.4 1416.6 28 1314.0 1817.0 31 1821.3 1814.7 36 Positive 1514.5 1616.5 31 1012.6 2118.4 31 1514.0 1617.0 31 2420.7 1114.3 35 Sum 29 33 62 24 35 59 28 34 62 42 29 71 Statistic χ 2 =0.065 d.f.1 χ 2 =1.919 d.f.1 χ 2 =0.261 d.f.1 χ 2 =2.533 d.f.1 CAR [-5,+5] Negative 1715.9 1718.1 34 1312.6 1818.4 31 1615.4 1818.6 34 2423.7 1616.3 40 Positive 1213.1 1614.9 28 1111.4 1716.6 28 1212.6 1615.4 28 1818.3 1312.7 31 Sum 29 33 62 24 35 59 28 34 62 42 29 71 Statistic χ 2 =0.315 d.f.1 χ 2 =0.043 d.f.1 χ 2 =0.109 d.f.1 χ 2 =0.027 d.f.1 Panel B: 2 Mergers conducted from 2000 to 2004 CAR [-1,+1] Negative 1212.5 1312.5 25 1314.5 119.5 24 1213.0 1312.0 25 910.4 2018.6 29 Positive 1413.5 1313.5 27 1614.5 89.5 24 1514.0 1213.0 27 1412.6 2122.4 35 Sum 26 26 52 29 19 48 27 25 52 23 41 64 Statistic χ 2 =0.077 d.f.1 χ 2 =0.784 d.f.1 χ 2 =0.297 d.f.1 χ 2 =0.554 d.f.1 CAR [-5,+5] Negative 1112.5 1412.5 25 1114.5 139.5 24 1113.0 1412.0 25 910.1 1917.9 28 Positive 1513.5 1213.5 27 1814.5 69.5 24 1614.0 1113.0 27 1412.9 2223.1 36 Sum 26 26 52 29 19 48 27 25 52 23 41 64 Statistic χ 2 =0.693 d.f.1 χ 2 =4.269 d.f.1 χ 2 =1.211 d.f.1 χ 2 =0.311 d.f.1 Expected values in parentheses. , , indicates significance at the 0.10, 0.05, and 0.01 levels, respectively. 311 IMPACT OF QUARTERLY DISCLOSURE ON INFORMATION ASYMMETRY: EVIDENCE FROM TOKYO STOCK EXCHANGE FIRMS Keiichi Kubota, Chuo University Kazuyuki Suda, Waseda University Hitoshi Takehara, Waseda University Abstract We investigate whether quarterly disclosure reporting requirements issued by the Tokyo Stock Exchange on April 1, 2004, the related Financial Instruments and Exchange Act of Japan, and the new quarterly accounting standards helped reduce the degree of private information-based trade for listed stocks utilizing the PIN variable proposed by Easley et al. 1996, 2002. We find that it is indeed the case and that there are significant differences between firms which issued quarterly reports by abiding by the exchange rule and firms which did not. We find that such a difference is strongly related to the differences in the estimated liquidity measures of these stocks. Our paper sheds light on the distribution of private information in the Japanese stock market after the disclosure rule is introduced, which is a new finding. JEL Classifications: G14, G15, C13 Keywords: Quarterly Disclosure, Asymmetric Information-Based Trade

1. Introduction

Next to the abundant evidence on asset pricing for U.S. data, there is a large amount of empirical evidence on Japanese stock market and financial data. As far as the authors are aware, however, there is no study that investigates the role of interim financial disclosure in stock price discovery processes using microstructure data. In a recent review article, O‘Hara β00γ emphasizes the importance of exploring the price discovery process before investigating the asset pricing framework. The studies by Easley et al. 1996, 2002 are examples which explore this price discovery process using tick-by-tick U.S. data. They estimate the so- called ―PIN‖ variable, which is a variable related to the probability of information-based trades among all trades. The Tokyo Stock Exchange requires disclosure of quarterly financial reports since fiscal year 2003 for firms whose stocks are listed in its first and second sections. This requirement, however, is without enforceable penalty even if firms choose not to disclose. Moreover, the new accounting quarterly disclosure standards established March 14, 2007, along with the new Financial Instruments and Exchange Act of Japan enacted September γ0, β007, require disclosure of quarterly financial statements with auditors‘ reviews from fiscal year April 1, 2008, which has completely changed the previous requirement of semi-annual reporting with certified accountant audits in Japan. In this paper we use daily tick-by-tick data of firms listed on the Tokyo Stock Exchange and investigate the impact of the introduction of this quarterly disclosure requirement by the TSE upon informational asymmetry in the capital market. For this purpose we use the PIN variable proposed by Easley et al. 1996, 2002 and investigate whether this 312 new disclosure requirement helped improve distributions of public information versus private information among all trades in the market. In view of the fact that the majority of countries do not require quarterly reports, including the U.K., France, Germany, Australia, and Hong Kong, this paper gives researchers important insights into the possible impact of new quarterly report requirements on the working of informational efficiency in capital markets. Section 2 raises our motivation with a discussion on related previous studies, and explains the basic model. Section 3 explains the data and reports basic statistics. Section 4 reports our main empirical results and Section 5 concludes. Appendix A explains the PIN model in detail and Appendix B reports the estimation result from Duarte and Young‘s β009 three stage model that allows for systematic information arrival. 2. Our Research Design 2.1 New Quarterly Reporting Regulations in Japan The Tokyo Stock Exchange requires firms listed in its first and second sections to disclose quarterly reports since fiscal year April 1, 2003. Preceding this requirement, the TSE announced in June 2002 that the exchange would begin to ask firms to disclose quarterly reports on a gradual basis, and issued a formal statement that required firms to disclose condensed quarterly reports starting April 1, 2003. Initially, however, there was no legal penalty even if firms chose not to disclose financial statements, and we can safely say that this requirement was not strictly enforceable at that time. With the enactment of the new Financial Instruments and Exchange Act in 2008, a Japanese equivalent of the Sarbanes-Oxley Act, firms have to disclose quarterly financial statements based on new Japanese Accounting Standards. That requirement began with fiscal year April 1, 2008. These quarterly financial statements are published with auditors‘ reviews as in the U.S., and they are substituted for previously reported semi- annual financial statements with certified accountants‘ audits. TABLE 1 ABOUT HERE Table 1 shows the percentage of firms which submitted their quarterly reports to the Tokyo Stock Exchange in the first quarter April to June and the third quarter September to December, starting in fiscal year 2001. More than 90 percent of Japanese firms have a March 31 fiscal year-end, and the quarter starts April 1. During the first few years these firms disclosed on a voluntary basis. 35 The sample in the table is the firms we use for our later statistical tests, and we exclude the firms whose fiscal year-end is other than March 31. The sample also excludes firms whose Amihud 2002 measure could not be computed, which we will use in a later part of this paper. The maximum number of firm observations is 2,127 for the second quarter of 2003 and the minimum is 1,282 for the first quarter of 1998. 35 However, in the new emerging market of the ―Mothers‖ at the Tokyo Stock Exchange, quarterly disclosure was required from November 1999.