Date of Award
Doctor of Philosophy
The dissertation consists of two essays. The first essay examines the information contents of after-hours earnings announcements. The study investigates the after-hours trading (AHT) activities, price contribution and price discovery following the quarterly earnings announcements released outside of the normal trading hours. We hypothesize that trading activity and price discovery on the announcement days are higher than non-announcement days during the same AHT periods. Similarly, the price discovery on earnings announcement days is expected to be higher than that of the non-announcements days during the same AHT periods. For a sample of S&P500 stocks from 2004-2008, we find that despite lower volume, trading activities after hours are heightened on days with earnings announcements. A significant portion of price change and price discovery occurs immediately after the earnings releases during the before market open or after market close sessions. Prices in AHT show relatively large degree of informational efficiency, further demonstrating the importance of the price discovery in AHT as these prices are not likely to be all driven by noise trading.The second essay is related to the impact of low cost carriers (LCCs) announcement on the legacy airlines. The successful emergence of low cost carriers (LCCs) is an important structural and financial development in the airline industry. Oligopoly structure, entry barriers, and high fixed costs make the industry highly susceptible to competitive and network expansion impacts of LCC entry. We hypothesize that LCC entry not only increases competition in the industry but also expands the number of airline travellers. As a result, the level of competition should have a negative effect on the returns of legacy airlines while network expansion should have a positive effect. We conduct event studies and regression analysis to explore the impacts of LCC entry on legacy airline stock prices. As a surprising result, positive stock returns are observed, which we interpret as the spillover effects of network expansion. Thus, economies of scope from increased passengers and connectivity increase the revenues of legacy airlines to sufficiently offset the LCC competitive threats.
dissertation or thesis originally submitted to the local University of Memphis Electronic Theses & dissertation (ETD) Repository.
Likitapiwat, Tanakorn, "Two Essays in Finance" (2010). Electronic Theses and Dissertations. 53.