Thomas J. Walker, Dolruedee Thiengtham, Onem Ozocak and Sergey S. Barabanov
The study aims to examine the stock price performance of publicly owned railroad companies following severe railroad accidents that resulted in the loss of human lives and/or…
Abstract
Purpose
The study aims to examine the stock price performance of publicly owned railroad companies following severe railroad accidents that resulted in the loss of human lives and/or hazardous material spills. The focus is on legal liability considerations as one of the primary factors that drives a firm's abnormal performance following a given accident.
Design/methodology/approach
This paper employs a sample of 97 railroad accidents that occurred between January 1967 and December 2006 and involved equipment (tracks and/or locomotives) owned by publicly traded US and Canadian railroad companies. The stock price reaction of the affected firms is examined following these disasters and a series of univariate and multivariate tests is used to investigate whether differences in abnormal returns following a given accident can be related to various factors that characterize the affected firm or the accident it was involved in.
Findings
The results suggest that legal liability considerations are one of the primary factors that determine a company's stock price reaction following a railroad disaster. Specifically, it is observed that firms that are likely to be sued in connection with an accident tend to incur larger stock price losses. On the other hand, it is found that firms that are protected through indemnification agreements suffer only insignificant price declines, even if initial accident reports hold them responsible for causing the accident.
Originality/value
The paper extends the prior literature on the stock market's reaction to firm‐specific catastrophic events. While there are a number of studies that examine the financial consequences of aviation disasters, there is to the authors' knowledge only one prior study that performs a similar analysis for railroad accidents.
Details
Keywords
Kuntara Pukthuanthong, Thomas J. Walker, Dolruedee Nuttanontra Thiengtham and Heng Du
– The purpose of this paper is to examine whether and how family ownership enhances or damages firm value.
Abstract
Purpose
The purpose of this paper is to examine whether and how family ownership enhances or damages firm value.
Design/methodology/approach
The paper studies a sample of Canadian companies listed on the Toronto Stock Exchange (TSX) between 1999 and 2007 and apply multivariate regression with firm value as a dependent variable. The paper measures firm value as Tobin ' s Q and ROA based either on net income or EBITDA. The independent variables include family firm dummy and ownership percentage.
Findings
It is found that control-enhancing mechanisms which are often employed by family companies add value to companies. Furthermore, it is found that agency conflicts between ownership and management are less costly than those between majority and minority shareholders, suggesting that family ownership helps resolve the agency conflicts between ownership and management and in turn enhances firm value. Finally, it is found that family companies with founders as CEOs outperform those with descendants as CEOs.
Research limitations/implications
The paper studies Canadian family firms; as such, the sample size is not relatively large. Nonetheless, the results should be generalized as Canada is one of the largest markets in the world and have high integration with the rest of the world.
Practical implications
The results suggest investors should invest in family ownership firms.
Originality/value
The paper shows whether firm ownership increases firm value and the determinant of family firm value.