Event study methodologies and the size effect

Dimson, Elroy; Marsh, Paul

doi:10.1016/0304-405x(86)90008-5

Cited by 237 publications

(108 citation statements)

References 52 publications

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“…However, none of the adjusted sell CARs are significant under any strategy. In common with Dimson and Marsh (1986) therefore, we find that the size and beta control model has a powerful role in explaining apparently large and significant CARs.…”

supporting

confidence: 67%

“…It may be argued that such an allowance is implicit in the estimate of αj, and that no further allowance needs to be made. However, such an approach results in bias "because of exclusion period problems, variability and/or seasonality in the size effect, or non-stationarity in event security sizes" [Dimson and Marsh (1986) The autocorrelation was a statistically insignificant -0.012 over the sample period.…”

mentioning

confidence: 99%

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UK Directors' Trading: The Impact of Dealings in Smaller Firms

Gregory

Matatko

Tonks

et al. 1994

The Economic Journal

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This paper reassesses the UK results of significant abnormal returns from directors' trading for a new sample of directors ' trades 1984-1986, and finds that abnormal returns tend to be concentrated in smaller firms. When an appropriate benchmark portfolio is used, it is found that the significance of the abnormal returns is substantially reduced, with the implication that directors' trading does not yield particularly high profits to either the directors themselves or to an outside investor mimicking those trades. 4 I IntroductionRecent studies by King and Röell (1988) and Pope, Morris and Peel (1990) have presented evidence, based on UK share price data, of the returns realised on securities following notification of a director's share dealing. These follow a sequence of studies 1 based on US data, which have examined the impact of `insider dealing' on share prices. Attention has focused particularly on whether non-insiders, observing only a notification of an insider trade, can still generate a positive abnormal return. In this paper we follow Seyhun (1986) and see whether these abnormal returns are related to firm size. We then attempt to discover whether the reported excess returns earned from following directors' trades can be explained by the size effect, under which small firms perform differently from their larger counterparts [Fama and French (1992)].In the next section we review details of the definition of directors' dealing, and Section III then summarises the findings of previous work in this area. Section IV describes the dataset used in this study, which is taken from the Stock Exchange reports of directors' trading in their own

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supporting

confidence: 67%

mentioning

confidence: 99%

UK Directors' Trading: The Impact of Dealings in Smaller Firms

Gregory

Matatko

Tonks

et al. 1994

The Economic Journal

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“…The firm with the median value of operating cash flow return is then selected as the industry median control firm. Our second benchmark also controls for firm size as well as pre-M&A performance (Dimson & Marsh, 1986;Ghosh, 2001). To construct industry, size and pre-M&A performance benchmarks, we first group firms by industry.…”

Section: Performance Benchmarksmentioning

confidence: 99%

Long-term performance of mergers and acquisitions in ASEAN countries

Rao‐Nicholson

Salaber

Cao

2016

Research in International Business and Finance

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The study looks at mergers and acquisitions (M&As) in ASEAN countries and examines the post-M&A performance using data from 2001 to 2012. The industry-adjusted operating performance tends to decline in the 3 years following an M&A. Yet, the results suggest that M&As completed during the financial crisis are more profitable than those implemented before and/or after the crisis. We argue that this is mainly due to the synergies created between the firms' resources during the crisis which augur well for firms' economic performance. We find that, during the crisis, certain characteristics of the firms like the relative size of the target, cross-border nature of deals, acquirer's cash reserves and friendly nature of deals are important determinants of long-term post-M&A operating performance.However, for M&As during the crisis, there appears to be no relationship between performance and firms' characteristics linked to M&A activity such as payment method, industry relatedness and percentage of target's share acquired.

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“…However, [2] simple market model prediction error adjustment was used to adjust the abnormal returns and to control for possible thin trading. The time-varying size effect of [45], [46] and [2] in prediction errors was used to adjust the abnormal returns.…”

Section: At a Given Date E(rit) = The Expected Return Of Firm I At Thmentioning

confidence: 99%

Do Board Characteristics Matter to Insider Timing and Profitability in the US Market?

Kiwia¹

2017

JFE

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In this paper I analyze the relationship between insider trading and corporate governance characteristics.Despite, the widely held view that insider trading significantly affects stock prices; little is known about what causes such market inefficiency and whether firm characteristics matters. This paper focuses on the impact of board structure towards insider trading and stock price efficiency. Using an event study methodology, this paper analyzes the influence of different board characteristics on insider profits as measured by share price abnormal returns. It also uses purchase ratio as a proxy for insider trading activities. Findings suggest that higher board independence, small board size and high debt levels have a significant influence towards reducing insider profits. The trading activities of insiders appear to have no significant relationship to the corporate governance characteristics of the firm. The overall results suggest that good governance reduces insider abnormal profits and increase stock price efficiency. With regards to insider trading activities we found little evidence suggesting corporate governance impact insider trading associated with future cash-flows. The study uses a sample of 250 firms from S&P 500 Index from 2000 to 2005.

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Event study methodologies and the size effect

Cited by 237 publications

References 52 publications

UK Directors' Trading: The Impact of Dealings in Smaller Firms

UK Directors' Trading: The Impact of Dealings in Smaller Firms

Long-term performance of mergers and acquisitions in ASEAN countries

Do Board Characteristics Matter to Insider Timing and Profitability in the US Market?

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