TRADING FLOORS AUTOMATION AND STOCK MARKET EFFICIENCY DURING EQUITY ISSUES ANNOUNCEMENTS IN NIGERIA

Authors

  • Mohammed Ibrahim Ahmadu Bello University, Zaria

DOI:

https://doi.org/10.57233/gujaf.v1i1.22

Keywords:

Automation, Market efficiency, , Seasoned equity offerings, , Event studies

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.

Author Biography

Mohammed Ibrahim, Ahmadu Bello University, Zaria

Department of Banking and Finance
ABU Business School
Ahmadu Bello University, Zaria, Nigeria

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Published

2020-04-20

How to Cite

Mohammed, I. (2020). TRADING FLOORS AUTOMATION AND STOCK MARKET EFFICIENCY DURING EQUITY ISSUES ANNOUNCEMENTS IN NIGERIA. Gusau Journal of Accounting and Finance, 1(1), 21. https://doi.org/10.57233/gujaf.v1i1.22

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