An Approach to Statistical Inference in Cross-Sectional Models with Security Abnormal Returns As Dependent Variable

Sefcik, Stephan E.; Thompson, Rex

doi:10.2307/2491136

Cited by 248 publications

(177 citation statements)

References 19 publications

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“…We investigate whether the stock price reaction varies cross-sectionally with firms' litigation risk using the weighted portfolio approach developed by Sefcik and Thompson (1986), where the portfolio weight is based on the firm-specific probability of litigation estimated in the previous section.…”

Section: Effect Of Litigation Risk On the Market Reactionmentioning

confidence: 99%

“…The regression variables are defined in Table 2. Sefcik and Thompson (1986) procedure, R mt = equal-weighted market return on day t, and D kt = one for the kth event, and zero otherwise. LITIGATION = estimated litigation probability from the model reported in Table 3.…”

Section: Effect Of Litigation Risk On the Market Reactionmentioning

confidence: 99%

“…To assess the PSLRA's economic impact on firm value, we examine the market response to the President's unexpected veto and the subsequent Congressional override. Our sample consists of 489 firms from three high-technology industries-pharmaceuticals, computer hardware, and computer Sefcik and Thompson (1986) procedure, R mt = equal-weighted market return on day t, and D kt = one for the kth event, and zero otherwise. FRAUD = estimated litigation probability from the model reported in Table 3, less the estimated litigation probability obtained from estimation of a probit model excluding the proxies for meritorious litigation, i.e., CEO Power, Monitoring, Financing, Leverage, the interactions among these terms, and Insider Sales.…”

Section: Summary and Concluding Remarksmentioning

confidence: 99%

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Shareholder Wealth Effects of the Private Securities Litigation Reform Act of 1995

Kasznik²,

2000

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Abstract. This paper investigates the reaction of stock prices to enactment of the Private Securities Litigation Reform Act of 1995 (PSLRA). Based on a sample of 489 high-technology firms, we find that the PSLRA was wealth-increasing, on average, and that the market reaction is more positive for firms at greatest risk of being sued in a securities class action. However, we also show that the PSLRA was less beneficial for firms likely to be the subject of a meritorious lawsuit. Collectively, our evidence implies that shareholders generally benefit from restrictions on private securities litigation, although these benefits are mitigated when other mechanisms for curbing fraudulent activity are inadequate.

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Section: Effect Of Litigation Risk On the Market Reactionmentioning

confidence: 99%

Section: Effect Of Litigation Risk On the Market Reactionmentioning

confidence: 99%

Section: Summary and Concluding Remarksmentioning

confidence: 99%

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Shareholder Wealth Effects of the Private Securities Litigation Reform Act of 1995

Kasznik²,

2000

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“…10 Forbes (2004) alternatively uses a two-stage procedure, where the second-stage uses a weighted estimator, proposed by Sefcik and Thompson (1986), in order to handle efficiently the heteroskedasticity of abnormal returns.…”

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confidence: 99%

Transmission of Sovereign Risk in the Euro Crisis

Brutti

Sauré

2012

SSRN Journal

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We assess the role of financial linkages in the transmission of sovereign risk in the Euro Crisis. Building on the narrative approach by Romer and Romer (1989), we use financial news to identify structural shocks in a vector autoregressive model of daily sovereign CDS premia for eleven European countries. To estimate how these shocks transmit across borders, we use data on cross-country bank exposures to sovereign debt. Our results indicate that exposure to Greek sovereign debt and the debt of Greek banks constitute important transmission channels. All else being equal, the transmission rate to the country with the greatest exposure to Greece (1.22 percent of GDP) has been roughly 46 percent higher than the rate to the country with the least exposure (0.08 percent of GDP).

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“…To investigate whether the impact of Schedule UTP pronouncements is a function of firm characteristics associated with tax aggressiveness (i.e., to test H1a, H2a, H3a), we use the portfolio weighting procedure developed by Sefcik and Thompson (1986) and used extensively in prior literature (e.g., Espahbodi et al 2002;Li et al 2008;Donohoe and McGill 2011). This method accounts for cross-sectional heteroscedasticity and cross-correlation of the residuals likely to occur in the presence of common event dates.…”

Section: Cross-sectional Variation In Stock Price Responsementioning

confidence: 99%

Schedule UTP: Stock Price Reaction and Economic Consequences

2012

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In 2010, the Internal Revenue Service (IRS) announced the requirement to disclose uncertain tax positions (UTP) on a new schedule (Schedule UTP) to be filed with federal corporate income tax returns. Schedule UTP could increase a firm's tax burden by providing a roadmap for the IRS to identify firms' tax-planning strategies. We find that stock returns around the development of Schedule UTP are negative, consistent with investors' concern that Schedule UTP would impose costs on firms. However, we document a significant positive stock price reaction to the release of the final draft of Schedule UTP in which the IRS relaxed many of the controversial provisions of Schedule UTP. Additionally, we find this positive reaction is incrementally larger for more taxaggressive firms. Finally, we find a significant decrease in reported unrecognized tax benefits (UTBs) and additions to UTBs after the adoption of Schedule UTP in 2010.

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An Approach to Statistical Inference in Cross-Sectional Models with Security Abnormal Returns As Dependent Variable

Cited by 248 publications

References 19 publications

Shareholder Wealth Effects of the Private Securities Litigation Reform Act of 1995

Shareholder Wealth Effects of the Private Securities Litigation Reform Act of 1995

Transmission of Sovereign Risk in the Euro Crisis

Schedule UTP: Stock Price Reaction and Economic Consequences

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