Problems and Solutions in Conducting Event Studies

Henderson, Glenn V.

doi:10.2307/253304

Cited by 154 publications

(79 citation statements)

References 58 publications

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“…First, both of the standard approaches find low levels of significance for day(-1) abnormal returns in our sample of 132 acquiring banks, while EVARCH, which generalizes the approach to allow for event-induced parameter shifts, shifting (and in our case, larger) variances, and firm-specific event periods, finds none. The importance of this discrepancy is debatable, and fits well with the simpler methods' reputation for robustness in detecting 24 abnormal returns (e.g., Warner (1980, 1985) and Henderson (1990)). However, the evidence from our sample highlights the fact that for marginally significant results, the traditional models incorrectly reject the null hypothesis of no significant abnormal returns.…”

Section: Discussionmentioning

confidence: 65%

“…Warner (1980, 1985), Malatesta (1986) and Henderson (1990) all have established the simpler 3 methods' reputation for robustness. None of these papers, however, has explored the implications of relaxing the implicit restrictions that our method permits.…”

Section: Researchers Implicitly Acknowledge This By Providing Resultsmentioning

confidence: 99%

“…Although many researchers have challenged traditional approaches on various grounds, empirical evidence in several studies (e.g. Warner (1980, 1985), Malatesta (1986) and Henderson (1990)) has concluded that the event-study approach is quite robust for detecting abnormal mean returns.…”

Section: Introductionmentioning

confidence: 99%

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A Generalized Method for Detecting Abnormal Returns and Changes in Systematic Risk

DeGennaro

Cyree

2001

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: The authors generalize traditional event-study techniques to allow for event-induced parameter shifts, shifting variances, and firm-specific event periods. Their method, which nests traditional methods, also permits systematic risk to change gradually during the event period and exit the period at higher or lower levels. The authors use their approach to study 132 banks that acquired other institutions between 1989 and 1995. The authors find a significant change in the systematic risk of the acquiring firms, significant ARCH effects, and an event period that ends before the date of the announcement. None of these results is detectable using conventional methods. These results imply that (1) event studies that cannot account for information leakage may be biased, and (2) changes in systematic risk can occur in the absence of abnormal returns, and (3) regulators, investors and bank managers must evaluate each acquisition on its own merits; reliance on averages can mask important distinctions across acquisitions. Terms of use: Documents inJEL classification: G14, G21, G34

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Section: Discussionmentioning

confidence: 65%

Section: Researchers Implicitly Acknowledge This By Providing Resultsmentioning

confidence: 99%

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A Generalized Method for Detecting Abnormal Returns and Changes in Systematic Risk

DeGennaro

Cyree

2001

SSRN Journal

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“…The use of event studies has since been utilized by a wide range of disciplines as well, includingeconomics, history, law, management, marketing (Henderson Jr, 1990;McWilliams & McWilliams, 2000;Corrado, 2011).…”

Section: Event Study Methodologymentioning

confidence: 99%

“…Compares the abnormal returns across firms and/or industries, and across time 5. Tests the aggregated returns to determine whether the abnormal returns are statistically significant (Henderson Jr, 1990). …”

Section: Event Study Methodologymentioning

confidence: 99%

Creating or destroying value through mergers and acquisitions: A marketing perspective

Rahman

2015

Industrial Marketing Management

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The world has witnessed a major wave of mergers and acquisitions (M&A) through the 1990s and up to 2007.A majority of these M&A deals are horizontal, involving the purchase of another company in the same industry. Such acquisitions imply a motivation to increase revenues by expanding market scope and/or market share, and/or by adding new products to the portfolio. They also suggest a pursuit of cost efficiencies in various aspects of operations. Whether these benefits are actually realised is an empirical question that has attractedresearch in several disciplines, including economics, finance and accounting. By now, there is a large body of research evidence to indicate that M&As have a poor record of success, with the main beneficiaries being the sellers who reap a one-off gain from the premium paid to acquire their firm.The objective of this dissertation was to examine post-merger performance from a marketing perspective, a topic that has not been explored thus far. This study followed a multi-stage approach; in the first stage an exploratory case study was conducted to identify the parameters of the research problem and to develop a set of hypotheses. Following this, a quantitative study of a sample of M&A transactions was carried out to test these hypotheses.The exploratory case study was based on Tata Motors, an Indian company which acquired Jaguar and Land Rover from Ford Motors. This case investigation based on both primary data collected through in-depth interview and a wide spectrum of secondary sources, showed that the acquisition had a significantly positive impact on Tata Motors' marketing performance, with sales volume and revenue growing significantly in the post-acquisition years. However, these sales increases came at a high cost; the company invested a huge amount in new product development and marketing communications, with the result that profit performance was negatively affected in the three years post-merger. Profit margins increased, however, in the seventh year 2014, suggesting that the reduction post-merger may have been a temporary effect.The quantitative study was based on a sample of forty-five M&A deals involving ninety US companies.This longitudinal study examined performance over six years, three before the merger, and three yearsafter the merger. Four analytical toolswere used:a paired sample t-test, an analysis of effect size, an analysis of covariance (ANCOVA), and regression analysis, to examine post-merger performance. The results of both raw data and log-transformeddata analyses showed that sales revenue increased significantlyin the post-merger years compared to the pre-merger years. Moreover, the combined companies reduced their marketing and selling costs in proportion to sales revenue. However, there was asignificant reduction in profit as measured by return on sales (ROS).Combining the findings from both the qualitative and quantitative studies, we concluded that post-merger marketing performance improved, i.e. sales revenue and cost of marketing and selling, but...

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Market supervisor monetary penalties for non‐compliance with informational requirements: Do investors care?

Kurek,

Górowski

2024

Int. J Fin Econ

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This study measures and differentiates investors' responses to market supervisors' monetary penalties for non‐compliance with informational requirements for the capital market in Poland, broken down by the type of distorted information and the form of a breach. An event study was conducted to measure the information content of monetary penalties. We used a market model and tested the significance of abnormal daily returns using both parametric and non‐parametric tests. Cross‐sectional analyses were conducted to measure the determinants of market reactions. We employed two novel classifications of non‐compliance: by the type of distorted information (financial reporting information and other information) and by the form of a breach (failing to provide information and providing erroneous information). We contribute to the literature by finding that investors react negatively to monetary penalties imposed on companies for non‐compliance with financial reporting information requirements, whereas they do not react to such penalties for non‐compliance with other information requirements. We incorporate original variables that explain the magnitude of the market reaction and find that (i) the longer the distance between the breach and penalty imposition, the weaker the market reaction, and (ii) the greater the monetary penalty, the stronger the market reaction. We also find that both forms of breach lead to similar negative market reactions.

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Problems and Solutions in Conducting Event Studies

Cited by 154 publications

References 58 publications

A Generalized Method for Detecting Abnormal Returns and Changes in Systematic Risk

A Generalized Method for Detecting Abnormal Returns and Changes in Systematic Risk

Creating or destroying value through mergers and acquisitions: A marketing perspective

Market supervisor monetary penalties for non‐compliance with informational requirements: Do investors care?

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