The impact of the 2004 bank capital announcement on the Nigerian stock market

Purpose - This paper aims to investigate the impact of the introduction of the 2004 bank capital requirements on the quoted stock prices on the Nigerian stock market. Design/methodology/approach - Using monthly data over the period January 1986 to December 2006, residual analysis methodology was used to investigate stock price reaction to the 2004 bank capital requirements on the Nigerian stock market. Findings - The results show that the introduction of the 2004 bank capital requirements has a positive impact on quoted securities on the Nigerian stock market. This is reflected in positive abnormal returns from the Nigerian stock market when trading is based on the information from the 2004 bank capital requirements. The results are unaffected by the choice of model. This lends support for the work of Olowe that the Nigerian stock market is inefficient in the semi-strong form. Originality/value - This study provides evidence on the stock price reaction to the introduction of the 2004 bank capital requirements on the Nigerian stock market. The result will have implications for the semi-strong form efficiency of the Nigerian stock market.

[1]  C. Campbell,et al.  Measuring security price performance using daily NASDAQ returns , 1993 .

[2]  A. Serra.  Event Study Tests: A Brief Survey , 2007 .

[3]  R. Pettit,et al.  DIVIDEND ANNOUNCEMENTS, SECURITY PERFORMANCE, AND CAPITAL MARKET EFFICIENCY , 1972 .

[4]  Myron S. Scholes.  The Market for Securities: Substitution Versus Price Pressure and the Effects of Information on Share Prices , 1972 .

[5]  K. C. Kang,et al.  The Semi-strong Efficiency of the Australian Share Market , 1993 .

[6]  J. Woolridge.  Ex‐Date Stock Price Adjustment to Stock Dividends: A Note , 1983 .

[7]  J. Cable,et al.  Modelling normal returns in event studies: a model-selection approach and pilot study , 1999 .

[8]  A. R. Olowe.  Stock splits and the efficiency of the Nigerian stock market , 1998 .

[9]  Eva Liljeblom.  The Informational Impact of Announcements of Stock Dividends and Stock Splits , 1989 .

[10]  R. Pettit.  The Impact of Dividend and Earnings Announcements: A Reconciliation , 1976 .

[11]  Yan-Leung Cheung,et al.  The pricing of risky assets in two emerging Asian markets—Korea and Taiwan , 1993 .

[12]  Alan Kraus,et al.  PRICE IMPACTS OF BLOCK TRADING ON THE NEW YORK STOCK EXCHANGE , 1972 .

[13]  Sheridan Titman,et al.  The Cross-Section of Expected REIT Returns , 2003 .

[14]  Stephen J. Brown,et al.  Derived factors in event studies , 1985 .

[15]  J. Patell.  CORPORATE FORECASTS OF EARNINGS PER SHARE AND STOCK-PRICE BEHAVIOR - EMPIRICAL TESTS , 1976 .

[16]  James A. Brickley.  Shareholder wealth, information signaling and the specially designated dividend: An empirical study☆ , 1983 .

[17]  Jerold B. Warner,et al.  Using daily stock returns: The case of event studies , 1985 .

[18]  Paul A. Gompers,et al.  Myth or Reality? The Long-Run Underperformance of Initial Public Offerings: Evidence from Venture and Nonventure Capital-Backed Companies , 1997 .

[19]  R. A. Olowe.  Weak Form Efficiency of the Nigerian Stock Market: Further Evidence , 1999 .

[20]  N. Strong,et al.  MODELLING ABNORMAL RETURNS: A REVIEW ARTICLE , 1992 .

[21]  F. Eugene.  FAMA, . Market efficiency, long-term returns, and behavioral finance, Journal of Financial Economics . , 1998 .

[22]  Myron S. Scholes,et al.  Estimating betas from nonsynchronous data , 1977 .

[23]  Ross L. Watts,et al.  The information content of dividends , 1973 .

[24]  S. P. Kothari,et al.  Econometrics of Event Studies , 2007 .

[25]  Tim Loughran,et al.  Uniformly Least Powerful Tests of Market Efficiency , 1999 .

[26]  T. E. Dielman,et al.  DIVIDEND AND EARNINGS ANNOUNCEMENTS AND STOCKHOLDERS' RETURNS: FURTHER EMPIRICAL EVIDENCE , 1988 .

[27]  Matthew J. Higgins,et al.  The outsourcing of R&D through acquisitions in the pharmaceutical industry , 2006 .

[28]  Sunil S. Poshakwale,et al.  Evidence on Weak Form Efficiency and Day of the Week Effect in the Indian Stock Market , 1996 .

[29]  Richard Roll,et al.  A Critique of the Asset Pricing Theory''s Tests: Part I , 1977 .

[30]  John P. Dickinson,et al.  Market efficiency in developing countries: a case study of the nairobi stock exchange , 1994 .

[31]  R. Ball,et al.  An empirical evaluation of accounting income numbers , 1968 .

[32]  R. Ho,et al.  Seasonal pattern in volatility in Asian stock markets , 1994 .

[33]  J. Aharony,et al.  Quarterly Dividend and Earnings Announcements and Stockholders' Returns: An Empirical Analysis , 1980 .

[34]  G. Mandelker.  Risk and return: The case of merging firms , 1974 .

[35]  Rakesh Gupta,et al.  Weak Form Efficiency In Indian Stock Markets , 2011 .

[36]  Ming-Shiun Pan,et al.  International Stock Market Efficiency and Integration: A Study of Eighteen Nations , 1997 .

[37]  M. Brenner.  The Sensitivity of the Efficient Market Hypothesis to Alternative Specifications of the Market Model , 1979 .

[38]  C. Corrado.  A nonparametric test for abnormal security-price performance in event studies , 1989 .

[39]  Kenneth M. Eades.  Empirical Evidence on Dividends as a Signal of Firm Value , 1982, Journal of Financial and Quantitative Analysis.

[40]  P. Marsh.  Equity Rights Issues and the Efficiency of the UK Stock Market , 1979 .

[41]  Mark M. Carhart.  On Persistence in Mutual Fund Performance , 1997 .

[42]  F. Reilly,et al.  Short-Run Profits from Stock Splits , 1981 .

[43]  Jerold B. Warner,et al.  MEASURING SECURITY PRICE PERFORMANCE , 1980 .

[44]  Ekkehart Boehmer,et al.  Event-study methodology under conditions of event-induced variance , 1991 .

[45]  Hemang Desai,et al.  Firm performance and focus: long-run stock market performance following spinoffs , 1999 .

[46]  A. Kalay,et al.  Predictable events and excess returns: The case of dividend announcements , 1985 .

[47]  E. Fama,et al.  Common risk factors in the returns on stocks and bonds , 1993 .

[48]  R. Ball.  Changes In Accounting Techniques And Stock Prices , 1972 .

[49]  Takeover Bids and Capital Market Efficiency , 2007 .

[50]  E. Fama,et al.  The Cross‐Section of Expected Stock Returns , 1992 .

[51]  E. Fama,et al.  The Adjustment of Stock Prices to New Information , 1969 .

[52]  A. Serra.  Dual Listings on International Exchanges: The Case of Emerging Markets' Stocks , 1999 .

[53]  P. Asquith,et al.  The Impact of Initiating Dividend Payments on Shareholders' Wealth , 1983 .

[54]  Sheridan Titman,et al.  The Valuation Effects of Stock Splits and Stock Dividends , 1984 .

[55]  Tomaso Duso,et al.  Is the Event Study Methodology Useful for Merger Analysis? A Comparison of Stock Market and Accounting Data , 2007 .