International Journal of Finance & Managerial Accounting

International Journal of Finance & Managerial Accounting

The Impact of Option Contract and Embedded Equity Put Option on ‎the Synchronicity of Stock Return/s Considering the Moderating Role of ‎Financial Leverage and Using Difference-in-Difference Approach

Document Type : Original Article

Authors
ALI MEHRNOOSH 1
Ali jafariLarigani 2
Sayyed Hassan Nasl Moosavi 2
1 PhD Candidate in Accounting, Ghaemshahr Branch, Islamic Azad University, Ghaemshahr, Iran
2 Department of Accounting, Ghaemshahr Branch, Islamic Azad University, Ghaemshahr, Iran.
Abstract
Derivative instruments are regarded as a basic need of investors and portfolio ‎managers in the capital market, whereby they can cover their portfolio risk ‎from price fluctuations. Among the derivative instruments, index-based derivative instruments are a ‎type of instruments that allow investors to insure against systemic risk. ‎ This function is particularly necessary for encouraging foreign investors to invest ‎in a highly volatile country. ‎ These functions have been the source of the highly significant trading of these ‎instruments in reputable stock exchanges. ‎ Therefore, this study examines the impact of trading authority and ‎subordinate sales authority on the synchronization of stock returns by ‎considering the moderating role of financial leverage and using the Difference-in-‎Difference approach‏. ‏
A sample of 112 companies from Tehran Stock Exchange was ‎selected using the sampling method.‎ This research was conducted in Tehran Stock Exchange for the period ‎2013-2018.‎ The statistical method used in this research is “Difference-in-Difference”. The results of this study showed that: 1) The decrease in stock price ‎synchronization for companies that issued embedded equity put option was ‎more than the companies that issued options contracts; ‏.‏2) The fall in stock ‎price synchronicity occurs more rapidly in companies that issued ‎embedded equity put options and with higher trading leverage ratios.
Keywords
Derivative Financial Instruments
Contract Option
Embedded equity Put Option
‎Stock Return Syncroncity
Difference-in-Difference Approach
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