On Disappearing Long-Run Abnormal Returns after Major Corporate Events

November 2018 | Kolari, James W.

Recent studies conjecture that financial market regulation in the early 2000s and academic publications have eliminated long-run abnormal returns after major corporate events. In this paper, we conduct abnormal return tests for large samples of mergers and acquisitions (M&As), initial public offerings (IPOs), seasoned equity offerings (SEOs), dividend initiations, and stock repurchases. We find that abnormal returns present before the 2000s persist after the early 2000s for M&As, SEOs, and stock repurchases. For IPOs and dividend initiations, abnormal returns prior to the 2000s attenuate thereafter but significant abnormal returns are still detected. Further analyses document that event control stocks substantially outperform the aggregate stock market prior to major corporate actions, which helps to explain post-event abnormal return patterns in many cases. We conclude that long-run abnormal returns continue to persist for major corporate events.

Author

Co-author(s)

  • Seppo Pynnonen
  • Ahmet Tuncez

Publication(s)

Management Science

Web Link

https://dx.doi.org/10.2139/ssrn.3264757