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Event Study Methodology (event + study_methodology)
Selected AbstractsAlternative event study methodology for detecting dividend signals in the context of joint dividend and earnings announcementsACCOUNTING & FINANCE, Issue 2 2009Warwick Anderson C51; D46; G14; N27 Abstract Friction models are used to examine the market reaction to the simultaneous disclosure of earnings and dividends in a thin-trading environment. Friction modelling, a procedure using maximum likelihood estimation, can be used to replace both the market model and restricted least-squares regression in event studies where there are two quantifiable variables and a number of possible interaction effects associated with the news that constitutes the study's event. The results indicate that the dividend signal can be separated from the earnings signal. [source] The Stock Market Reaction to the Enron-Andersen Affair in SpainINTERNATIONAL JOURNAL OF AUDITING, Issue 1 2006Cristina de Fuentes Barbera This paper investigates whether listed Spanish companies audited by Andersen have suffered any negative economic impact due to the scandal surrounding Andersen's work in Enron Corporation. To that end, we have measured the economic consequences, if any, of Andersen's loss of reputation by examining the reaction in terms of movements in the stock prices of its client companies using an event study methodology. We have analysed abnormal returns on the stock prices of all firms listed in the Spanish Interconnected Market around two event dates: the date of Andersen's public admission that it had destroyed significant financial documents related to Enron Corp. and the date Dynegy Inc. announced the withdrawal of its takeover offer. The results of our empirical analysis do not support the hypothesis that companies audited by Andersen suffered any significant drop in stock price as a result of the scandal affecting their auditor. [source] Reactions of the International Stock Exchange to Company Employment Announcements: Redundancies and New JobsJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 9-10 2002Nick CollettArticle first published online: 3 MAR 200 This paper is the first to look directly at the reaction of the London market to company announcements of changes to employee count. Using event study methodology, we examine market reactions to 54 redundancy announcements during the period 1990,1999 and 52 announcements of new jobs during the period 1993,1999. In line with previous US studies we find that market reaction, measured by cumulative abnormal returns, is negative before the day of redundancy announcement. The actual redundancy announcement is greeted positively by the market when measured in terms of the mean, but negatively when measured in terms of the median. Thus, in a minority of cases the announcements are seen as value enhancing. The market reacts positively before new job announcements and this positive reaction is highly significant when the announcement is made. The results suggest that new job announcements contain value,relevant information for the market. Potential causal factors other than announcement size are not significant. [source] The Moderating Effect of CEO Power on the Board Composition,Firm Performance Relationship*JOURNAL OF MANAGEMENT STUDIES, Issue 8 2007James G. Combs abstract Prior studies of the relationship between the composition of boards of directors and firm performance offer equivocal results. Drawing on agency and power circulation theories, we attempt to reduce this equivocality by asserting that CEO power moderates the relationship. Specifically, an outside director dominated board is needed to check a powerful CEO, but monitoring by other executives provides sufficient constraints on CEOs with low power. We used event study methodology to test the effects of the interaction between board composition and CEO power on stock market reaction to 73 unexpected CEO deaths. We found support for our theorizing among two of three sources of CEO power. Thus, although regulatory trends increasingly support outside director dominated boards, our findings indicate that this may not always benefit shareholders and that CEO power should be considered when constructing boards. [source] Linking Product Development Outcomes to Market Valuation of the Firm: The Case of the U.S. Pharmaceutical Industry,THE JOURNAL OF PRODUCT INNOVATION MANAGEMENT, Issue 5 2004Anurag Sharma The purpose of this research was to examine empirically the effects of new product development outcomes on overall firm performance. To do so, first product development and finance literature were connected to develop three testable hypotheses. Next, an event study was conducted in order to explore whether the changes in the stock market valuation of firms are influenced by the outcomes of efforts to develop new products. The pharmaceutical industry was chosen as the empirical context for the present study's analysis largely because the gate-keeping role played by the Food and Drug Administration (FDA) provides a specific event date on which to focus the event study methodology. As such, this study's events were dates of public announcements of the FDA decisions to approve or to reject the New Drug Applications submitted by the sponsoring firms. Consistent with the efficient market hypothesis, this study's results show that market valuations are responsive strongly and cleanly to the success or failure of new product development efforts. Hence, one of this study's key results suggests that financial markets may be attuned sharply to product development outcomes in publicly traded firms. This study also finds that financial market losses from product development failures were much larger in magnitude than financial market gains from product development successes,indicating an asymmetry in the response of financial markets to the success and failure of new product development efforts. Hence, another implication of this study's results is that managers should factor in a substantial risk premium when considering substantial new development projects. The present study's results also imply that managers should refrain from hyping new products and perhaps even should restrain the enthusiasm that the financial community may build before the product fully is developed. The effect on firm value is severe when expectations about an anticipated new product are not fulfilled. Managers in effect should take care to build reasonable and realistic expectations about potential new products. [source] On the Performance of Airlines and Airplane Manufacturers Following Aviation DisastersCANADIAN JOURNAL OF ADMINISTRATIVE SCIENCES, Issue 1 2005Thomas John Walker Our study examines the impact of aviation disasters on the short- and long-term performance of airlines and airplane manufacturers. We employ a sample of 138 aviation disasters involving airplanes operated by publicly traded U.S. carriers between July 1962 and December 2003. We use event study methodology to measure the abnormal performance of airlines and airplane manufacturers to these disasters. In addition, we employ a series of univariate tests and regression analysis to determine the factors that drive the abnormal returns for the firms in our sample. We observe that airlines experience an average stock price drop of 2.8% within one trading day after the corresponding news announcement, while airplane manufacturers experience a stock price drop of only 0.8% during that time period. The magnitude of the initial price decline appears to be driven by various characteristics of both the firm and the accident itself. We observe that airlines' abnormal performance is negatively related to firm size and the number of fatalities resulting from the accident. In addition, we observe that disasters that occurred in the U.S. and disasters caused by criminal activity (in particular the 9/11 terrorist attacks) cause significantly larger stock price drops in the days following the event. Similar dependencies can be observed for airplane manufacturers. Résumé La présente étude examine l'incidence des catastrophes aériennes sur la performance à court et à long terme des compagnies aériennes et des constructeurs d'avions. Elle se sert d'un échantillon de 138 catastrophes aériennes survenues entre juillet 1962 et décembre 2003, impliquant des appareils exploités par des transporteurs aériens des États-Unis, cotés en bourse. La méthodologie de l'étude de cas est utilisée pour mesurer la performance anormale des lignes aériennes et des constructeurs d'avions, à la suite de catastrophes aériennes. L'étude essaie de déterminer les facteurs qui régissent la performance anormale des entreprises à partir d'une série de tests à une variable et de l'analyse de régression. Elle montre que le cours des actions des lignes aériennes fléchit en moyenne de 2,8% en une journée de bourse après l'annonce d'une catastrophe, tandis que le cours des actions des constructeurs d'avions n'enregistre qu'une baisse de 0,8% durant la même période. L'ampleur du déclin initial des cours semble être déterminée par diverses caractéristiques de l'entreprise ainsi que par l'accident même. La performance anormale des lignes aériennes est en relation négative avec la taille de l'entreprise et le nombre de décès résultant de l'accident. En outre, les catastrophes survenues aux États-Unis (ou dans son espace aérien) et les catastrophes résultant d'actes criminels (en particulier les attaques terroristes du 11 septembre) ont provoqué des chutes des cours beaucoup plus marquées dans les jours suivant l'événement. Les interdépendances relevées touchent également les constructeurs d'avions. [source] The effect of additions to or deletions from the TSE 300 Index on Canadian share pricesCANADIAN JOURNAL OF ECONOMICS, Issue 2 2000Isidore Masse In this paper we examine shares that have been added to or deleted from the TSE 300 Index to determine whether abnormal price movements have occurred. We apply the dummy variable approach to event study methodology and adjust the estimated standard errors for arbitrary heteroscedasticity and clustering of events. We also use a non-parametric method of inference. Like authors of U.S. studies, we find that the market reacts positively to inclusion and negatively to deletion, albeit not significantly in the latter case. The information content of inclusion does not account for the entire share price response, lending support to the hypothesis of increased purchases by index funds. JEL Classification: G14 Ce texte examine les titres qui ont été ajoutés ou soustraits de l'indice TSE 300 pour déterminer si des mouvements anormaux de prix s'en sont suivis. On utilise l'approche des variables fictives dans le cadre d'une méthodologie qui étudie l'impact d'événements, et on ajuste les erreurs standards pour tenir compte de l'hétéroskédasticité arbitraire et de l'agglomération d'événements. On utilise aussi une méthode non-paramétrique d'inférence. Comme dans des études américaines du même type, on découvre que les marché réagit positivement à l'inclusion et négativement à la soustraction d'un titre, mais que l'effet n'est pas significatif dans ce dernier cas. Le contenu informationnel de l'inclusion n'explique pas entièrement le mouvement dans le prix du titre, ce qui apporte un support à l'hypothèse de l'impact des achats accrus par des fonds indexés. [source] | ||||||||||