TRADING FLOORS AUTOMATION AND STOCK MARKET EFFICIENCY DURING EQUITY ISSUES ANNOUNCEMENTS IN NIGERIA
Journal Title: Gusau Journal of Accounting and Finance - Year 2020, Vol 1, Issue 1
Abstract
This paper examines effect of the automation of trading platforms on the reaction of the Nigerian stock market to Seasoned Equity Offerings (SEOs) announcements. The study utilized a sample of 86 SEO announcements between July 1995 and December 2019, out of which 27 were made before the automation of trading floors in 1999 and 59 after automation. To investigate reaction of the Nigerian stock market SEOs announcements, the standard event study methodology was employed, and the market model was utilized as the benchmark model for computing returns. On the other hand, effect of automation announcement was examined using difference test for abnormal return. In line with extant empirical evidence, the paper found negative and statistically significant announcement day abnormal returns -3.33% and -2.91% for the pre-automation and postautomation periods respectively. However, t-statistic of -0.26 was not significant at any of the conventional levels. The paper thus concluded that the negative reaction of the Nigerian stock market to SEO announcements is consistent with the notion that investors perceived the announcing firms as overvalued. it was found that the effect automation. It was also concluded that automation did not have significant effect on the market’s reaction to SEO announcements in Nigeria. The paper recommended adequate disclosure of the intended use of proceeds from the SEO prior to the announcement. It was also recommended that the automated trading platforms and other market infrastructure should be constantly upgraded to enhance prompt information dissemination to all market participants.
Authors and Affiliations
Ibrahim Mohammed
Keywords
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