Relationship between Trading Volume and Cost of Capital in Listed Companies in the Stock Exchange of Thailand
Article Sidebar
Main Article Content
บทคัดย่อ
Objective of independent study is to study the behavior of trading volume around the earning announcement and the relationship between trading volume and capital costs of companies in the Stock Exchange of Thailand. The Event Study found that during the pre-announcement, trading volume decreased by an average of 0.69% (cumulative volume decreased by an average of 3.07%) and a significant increase of 29.70% (cumulative volume increased by 38.27 percent) during the announcement date. With the greatest increment at the time T = 1 and 0, respectively. The next part, the correlation test found that the difference between the abnormal volume before and after (DIFF) was used to represent the information asymmetry. It correlates with cost of capital in the negative way. That means if the DIFF is greater, the cost of capital will be lower.
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
References
Admati, A. R. and Pfleiderer, P. (1988). A theory of intraday patterns: Volume and price variability. The review of financial studies, 1(1), 3-40.
Affleck-Graves, J., Callahan, C. M. and Chipalkatti, N. (2002). Earnings predictability, information asymmetry, and market liquidity. Journal of Accounting Research, 40(3), 561-583.
Armstrong, C. S., Core, J. E., Taylor, D. J. and Verrecchia, R. E. (2011). When does information asymmetry affect the cost of capital?. Journal of Accounting Research, 49(1), 1-40.
Atapolpitak, N. (2016). Corporate governance and cost of capital: An empirical study of firms listed in The Stock Exchange of Thailand. Independent Study, M.S., Thammasat University, Bangkok.
Bamber, L. S., Barron, O. E. and Stevens, D. E. (2011). Trading volume around earnings announcements and other financial reports: Theory, empirical evidence, and directions for future research. Contemporary Accounting Research, 28(2), 431-471.
Barakat, A., Chernobai, A. and Wahrenburg, M. (2014). Information asymmetry around operational risk announcements. Journal of Banking & Finance, 48, 152-179.
Barron, O. E., Harris, D. G. and Stanford, M. (2005). Evidence that investors trade on private event-period information around earnings announcements. The Accounting Review, 80(2), 403–421.
Basu, S., Duong, T. X., Markov, S. and Tan, E. J. (2013). How important are earnings announcements as an information source?. European Accounting Review, 22(2), 221-256.
Beaver, W. H. (1968). The information content of annual earnings announcements. Journal of accounting research, 6, 67-92.
Bharath, S. T., Pasquariello, P. and Wu, G. (2009). Does asymmetric information drive capital structure decisions ?. The review of financial studies, 22(8), 3211-3243.
Botosan, C. A., Plumlee, M. A. and Xie, Y. (2004). The role of information precision in determining the cost of equity capital. Review of Accounting Studies, 9(2-3), 233-259.
Boujelbene, Y. and Besbes, L. (2012). The determinants of information asymmetry between managers and investors: a study on panel data. IBIMA Business Review, 2012, 1-11.
Bowman, R. G. (1979). The theoretical relationship between systematic risk and financial (accounting) variables. The Journal of Finance, 34(3), 617-630.
Brailsford, T. J. (1996). The empirical relationship between trading volume, returns and volatility. Accounting & Finance, 36(1), 89-111.
Brown, S., Hillegeist, S. A. and Lo, K. (2009). The effect of earnings surprises on information asymmetry. Journal of Accounting and Economics, 47(3), 208-225.
Campbell, J. Y., Grossman, S. J. and Wang, J. (1993). Trading volume and serial correlation in stock returns. The Quarterly Journal of Economics, 108(4), 905-939.
Chae, J. (2005). Trading volume, information asymmetry, and timing information. The Journal of Finance, 60(1), 413-442.
Chen, G. M., Firth, M. and Rui, O. M. (2001). The dynamic relation between stock returns, trading volume, and volatility. Financial Review, 36(3), 153-174.
Chandrapala, P. (2011). The relationship between trading volume and stock returns. Journal of Competitiveness, 3(3), 41-49.
Chincarini, L. B., Kim, D. and Moneta, F. (2020). Beta, Firm Age, and Estimation Risk. Journal of Empirical Finance, 58, 50-74.
Cready, W. and D. Hurtt. (2002). Assessing investor response to information events using return and volume metrics. The Accounting Review, 77(4), 891–909.
Dejbordin, N. (2017). Trading strategy based on intraday abnormal volume in The Stock Exchange of Thailand. Master Thesis, M.S., Chulalongkorn University, Bangkok.
Diamond, D. (1985). Optimal release of information by firms. The Journal of Finance, 40(4), 1071–1094.
Diamond, D. W. and Verrecchia, R. E. (1991). Disclosure, liquidity, and the cost of capital. The Journal of Finance, 46(4), 1325-1359.
Easley, D. and O'hara, M. (2004). Information and the cost of capital. The Journal of Finance, 59(4), 1553-1583.
Garcia, C., Saravia, J. and Yepes, D. (2016). The weighted average cost of capital over the life-cycle of the firm. The Corporate Board: Role, Duties and Composition, 12, 96-103.
Giner, B. and Reverte, C. (2006). The risk-relevance of accounting data: Evidence from the Spanish Stock Market. Journal of International Financial Management & Accounting, 17(3), 175-207.
Gao, W. and Zhu, F. (2015). Information asymmetry and capital structure around the world. Pacific-Basin Finance Journal, 32, 131-159.
Jiang, J. (2008). Beating earnings benchmarks and the cost of debt. The Accounting Review, 83(2), 377-416.
Kim, O. and R, Verrecchia. (1994). Market liquidity and volume around earnings announcements. Journal of Accounting and Economics, 17, 41–67.
Kulvanich, K. (2007). Factor affecting cost of equity capital. Master Thesis, M.Acc., Chulalongkorn University, Bangkok.
Kyle, A. S. (1985). Continuous auctions and insider trading. Econometrica: Journal of the Econometric Society, 53(6), 1315-1335.
Lambert, R. A. and Verrecchia, R. E. (2009). Cost of capital in imperfect competition settings. Workding paper, University of Pennsylvania.
Lambert, R. A., Leuz, C. and Verrecchia, R. E. (2012). Information asymmetry, information precision, and the cost of capital. Review of finance, 16(1), 1-29.
La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R. (2000). Investor protection and corporate governance. Journal of financial economics, 58(1-2), 3-27.
Levi, S. and Zhang, X. J. (2015). Do temporary increases in information asymmetry affect the cost of equity?. Management Science, 61(2), 354-371.
Libby, T., Mathieu, R. and Robb, S. W. (2002). Earnings announcements and information asymmetry: an intra-day analysis. Contemporary Accounting Research, 19(3), 449-472.
Mahajan, S. and Singh, B. (2009). The empirical investigation of relationship between return, volume and volatility dynamics in Indian stock market. Eurasian Journal of Business and Economics, 2(4), 113-137.
Mohamad, N. E. A. B. and Saad, N. B. M. (2012). Cost of Capital-The Effect to Firm Value and Profitability Performance in Malaysia. International Journal of Academic Research in Accounting, Finance and Management Sciences, 2(4), 353-361.
Myers, S. C. and Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of financial economics, 13(2), 187-221.
Nagel, S. (2005). Short sales, institutional investors and the cross-section of stock returns. Journal of Financial Economics, 78(2), 277-309.
Nuengkumphorn, S. (2017). Relationship Between Corporate Social Responsibility Disclosure and Cost of Capital of Companies Listed on The Stock Exchange of Thailand. Independent Study, M.Acc., Chiang Mai University, Chaing Mai.
Shintya, F. (2018). The influence of a sustainability report on the cost of capital. Master Thesis, M.B.A., Radboud University, Nijmegen.
Sukhahuta, D., Lonkani, R., Tangsomchai, C. and Sampet, J. (2018). Effect of Corporate Governance on Relationship between CEO Power and Cost of Debt. BU Academic Review, 17(2), 104-120.
Swanson, Z. L. and Viinanen, V. (2006). Does the Weighted Cost of Capital Associate with Returns on Operating and Financial Assets with Investor Anticipation Or Reaction? [And Do Operating and Financial Assets Have Synergy?]. Academy of Accounting and Financial Studies Journal, 15(3), 1.
Tannirandon, K. (2009). Corporate governance and the cost of capital of the companies listed in The Stock Exchange of Thailand. Master Thesis, M.S., Chulalongkorn University, Bangkok.
Verrecchia, R. (1982). The use of mathematical models in financial accounting. Journal of Accounting Research, 20(1), 1–42.
Verrecchia, R. (2001). Essays on disclosure. Journal of Accounting and Economics, 32(1-3), 97–180.
Zohreh, H. and Bahman, S. (2013). Relationship Between Corporate Social Responsibility and Cost of Capital in Listed Companies in Tehran Stock Exchange. World Applied Sciences Journal, 11(28), 1544-1554.