Learning from Variation in Abnormal Returns in Litigation Event Studies: The Case of Trial Verdicts in Medical Products Mass Torts

2011 ◽  
Author(s):  
Steven Garber ◽  
Ying Liu
Keyword(s):  
Abnormal Returns ◽  
Event Studies ◽  
Medical Products ◽  
Mass Torts

The Moderating Effect of Context on the Market Reaction to IT Investments

2006 ◽  
Vol 20 (1) ◽  
pp. 19-44 ◽  
Author(s):  
Wonseok Oh ◽  
Joung W. Ki m ◽  
Vernon J. Richardson
Keyword(s):  
Market Reaction ◽  
Abnormal Returns ◽  
Interaction Effects ◽  
Asset Specificity ◽  
Event Studies ◽  
Growth Potential ◽  
It Investment ◽  
It Investments ◽  
Strategic Role ◽  
Main Effects

This paper examines the moderating effects of firm and IT characteristics on the market reaction to IT investment announcements. A special emphasis has been placed on the potential interaction effects of these two types of variables, since the previous event studies have paid limited attention to the possibility that they interact and jointly alter investors' perceptions in relation to IT investment announcements. Very recently, several authors have noted the importance of interaction effects on theory development for IS research. Their assessments are particularly relevant to IT-value event studies, since the market reaction to IT investment announcements involves a complex process shaped by the interaction of firm and IT characteristics. Based on the previous studies in IS, finance, and accounting, a firm's growth potential and uncertainty are used as proxies to represent firm characteristics, while IT strategic role and asset-specificity of IT are chosen as the variables reflecting IT characteristics. Three other variables (discloser information, firm size, and industry) are included to control for their effects. We develop eight hypotheses based on the examinations of the main and interaction effects of firm and IT characteristic variables on the shareholder's reaction to IT investment announcements. The results of the main effects indicate that a firm's growth prospects, uncertainty, the strategic role of IT, and discloser information are significantly related to cumulative abnormal returns (CARs), while no significant effect was observed for asset-specificity of IT resources. Interestingly, however, interaction effects reveal that the stock market reacts with a discount to announcements of IT investments that are characterized as highly asset-specific in the presence of uncertainty. In addition, the market reacts more favorably to investments with a transformational IT strategic role when the firm faces greater uncertainty. One of our main contributions in this study is to provide a finer level of granularity with regard to the market reaction to IT investments by considering the interaction as well as the main effects of firm and IT characteristics.

Event Studies in Logistics Research

2018 ◽  
pp. 231-259
Author(s):  
Lincoln C. Wood
Keyword(s):  
Supply Chain ◽  
Event Study ◽  
Abnormal Returns ◽  
Event Studies ◽  
Research Articles ◽  
Management Research ◽  
Cross Sectional ◽  
Design Considerations ◽  
Managerial Decisions ◽  
Event Study Method

The event study method allows researchers to examine the importance of an event to firms based on the magnitude and direction of abnormal returns, and then use these results in a cross-sectional regression to understand which managerial decisions may affect these outcomes. While the method has been heavily used in some disciplines, in-management research and logistics research, in particular, the method remains little used and is often used with little thought to key assumptions and design considerations. This chapter aims to provide an overview of the method for logistics and supply chain researchers with a focus on developing the capability to design an effective study and to evaluate research articles to determine possible weaknesses.

scholarly journals International Real Estate Review

2020 ◽  
Vol 23 (1) ◽  
pp. 37-63
Author(s):  
Helen X. H. Bao ◽  
◽  
Adam Brady ◽  
Ziyou Wang ◽  
◽  
...  
Keyword(s):  
Real Estate ◽  
Statistical Significance ◽  
Abnormal Returns ◽  
Event Studies ◽  
Market Force ◽  
The Real ◽  
The Real Estate ◽  
Pricing Efficiency ◽  
Set Up ◽  
The Impact

We use the reclassification of the real estate stocks in the S&P 500 from the Financials sector as a natural experiment to test the co-existence of both market force and behavioural biases. By performing event studies on real estate investment trusts (REITs) included in the S&P 400, S&P 500, and S&P 600 indices on both the announcement and implementation dates, we investigate the impact of the reclassification of the real estate stocks in the S&P 500 from the Financials sector to the newly created Real Estate sector under the Global Industry Classification Standard (GICS) system. We set up four hypotheses to test if the identified reclassification effect is due to improved pricing efficiency or bounded rationality. The event studies confirm the presence of abnormal returns during the announcement of the new sector and the S&P implementation. The reclassification effect is the largest for large-cap real estate stocks that are included in the S&P 500 index. These abnormal returns are robust to various measures of statistical significance and variation of event windows. The creation of a real estate category in the GICS improves the pricing efficiency of real estate stocks, but also triggers framing effects among investors. The market is under the influence of both rational and irrational forces.

All Events Induce Variance: Analyzing Abnormal Returns When Effects Vary across Firms

2007 ◽  
Vol 42 (1) ◽  
pp. 229-256 ◽  
Author(s):  
Scott E. Harrington ◽  
David G. Shrider
Keyword(s):  
Least Squares ◽  
Weighted Least Squares ◽  
Abnormal Returns ◽  
Event Studies ◽  
Standard Errors ◽  
Cross Sectional ◽  
Explanatory Variables ◽  
Robust Tests ◽  
Nonzero Mean ◽  
Short Horizon

AbstractWe demonstrate analytically that cross-sectional variation in the effects of events, i.e., in true abnormal returns, necessarily produces event-induced variance increases, biasing popular tests for mean abnormal returns in short-horizon event studies. We show that unexplained cross-sectional variation in true abnormal returns plausibly produces nonproportional heteroskedasticity in cross-sectional regressions, biasing coefficient standard errors for both ordinary and weighted least squares. Simulations highlight the resulting biases, the necessity of using tests robust to cross-sectional variation, and the power of robust tests, including regression-based tests for nonzero mean abnormal returns, which may increase power by conditioning on relevant explanatory variables.

scholarly journals Does social responsibility enhance firm value and return in Brazil?

2013 ◽  
Vol 10 (2) ◽  
pp. 253-257 ◽  
Author(s):  
Andre Carvalhal ◽  
Eduardo Tavares
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Firm Value ◽  
Stock Exchange ◽  
Corporate Sustainability ◽  
Abnormal Returns ◽  
Event Studies ◽  
Sustainability Index ◽  
Panel Regressions ◽  
Corporate Social

This paper analyzes whether corporate social responsibility brings value and enhances returns to shareholders in the Brazilian market. We analyze the companies listed on BM&FBovespa stock exchange using two methodologies (panel regressions and event studies). The results indicate that firms listed in the corporate sustainability index (ISE) of BM&FBovespa have higher price-to-book when compared to companies not listed on ISE. The event study shows that companies that leave ISE show negative abnormal returns. Moreover, firms entering ISE show positive abnormal returns, although results are not statistically significant

Strategic Public Shaming: Evidence from Chinese Antitrust Investigations

2019 ◽  
Vol 237 ◽  
pp. 174-195
Author(s):  
Angela Huyue Zhang
Keyword(s):  
Infant Formula ◽  
Stock Prices ◽  
Media Coverage ◽  
Abnormal Return ◽  
Abnormal Returns ◽  
National Development ◽  
Event Studies ◽  
Cumulative Abnormal Return ◽  
Event Window ◽  
Market Capitalization

AbstractThis article examines strategic public shaming, a novel form of regulatory tactics employed by the National Development and Reform Commission (NDRC) during its enforcement of the Anti-Monopoly Law. Based on analysis of media coverage and interview findings, the study finds that the way that the NDRC disclosed its investigation is highly strategic depending on the firm's co-operative attitude towards the investigation. Event studies further show that the NDRC's proactive disclosure resulted in significantly negative abnormal returns of the stock prices of the firm subject to the disclosure. For instance, Biostime, an infant-formula manufacturer investigated in 2013, experienced −22 per cent cumulative abnormal return in a three-day event window, resulting in a loss of market capitalization that is 27 times the antitrust fine that it ultimately received. The NDRC's strategic public shaming might therefore result in severe market sanctions that deter firms from defying the agency.

scholarly journals The efficiency of the Italian stock exchange: market reaction following changes in recommendations

2008 ◽  
Vol 5 (2) ◽  
pp. 434-448 ◽  
Author(s):  
Enrico Maria Cervellati ◽  
Antonio Carlo Francesco Della Bina ◽  
Pierpaolo Pattitoni
Keyword(s):  
Market Reaction ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Event Studies ◽  
Public Access ◽  
Exchange Market ◽  
Short Term ◽  
The Public ◽  
New Information ◽  
Peculiar Case

The main objective of this paper is to examine the market reaction to the recommendation changes issued by financial analysts. We study the peculiar case of Italy where analysts have to send their reports to the Stock Exchange Commission and the Stock Exchange the same day they give it to their clients. Reports are available on the Stock Exchange website. Our dataset includes about 5,200 reports issued on the 117 IPO firms that went public on the Italian Stock market between 1st January 1998 and 31st December 2003. We calculate abnormal returns and abnormal volumes associated with the dissemination of the reports and perform two short-term event studies: the first associated with the “report date”, the second one with regard to the “public access date”, i.e. when the report is freely and publicly available on the Stock Exchange website. The event study related to the public access date show very different results. We do not find statistically significant average abnormal returns around this date, indicating that the market efficiently does not react to the mere publication of the report on the Stock Exchange website, since prices already included the effect of the recommendation change at the report date, i.e. when the new information was given to analyst’s private clients. It remains to be investigated if the abnormal returns before the report date are due to the effect of news different from the recommendation change or if they show a violation of the Italian regulation.

Pseudo Market Timing: A Reappraisal

2008 ◽  
Vol 43 (3) ◽  
pp. 547-579 ◽  
Author(s):  
Magnus Dahlquist ◽  
Frank de Jong
Keyword(s):  
Market Timing ◽  
Abnormal Returns ◽  
Event Studies ◽  
Going Public ◽  
Equity Issues ◽  
Ex Post ◽  
Long Run ◽  
Ex Ante

AbstractThe average firm going public or issuing new equity underperforms the market in the long run. This underperformance could be related to the endogeneity of the number of new issues if new issues cluster after periods of high abnormal returns on new issues. In such a case, ex post measures of new issue abnormal returns may be negative on average, despite the absence of ex ante abnormal returns. We evaluate this endogeneity problem in event studies of long-run performance. We argue that it is unlikely that the endogeneity of the number of new issues explains the long-run underperformance of equity issues.

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