Value Event Studies
AbstractThis paper discusses appropriate methodology for measuring the effect of an event on the value of a firm's equity. Th e key points are (1) cumulative abnormal returns do not measure the effect of an event on firm value if there are dividends during the event window; (2) it is generally appropriate to use pre-event parameters of the return-generating process even if the event alters the parameters during the event window, and (3) controlling for fact ors other than the return on the market portfolio improves the power of the estimation. The formula for the effect of an event on the value of a firm when there are dividends during the event window is developed a nd applied to a study of the effect of the Bhopal disaster on the value of Union Carbide. Copyright 1992 by MIT Press.
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Bibliographic InfoArticle provided by MIT Press in its journal Review of Economics & Statistics.
Volume (Year): 74 (1992)
Issue (Month): 4 (November)
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- Capelle-Blancard, Gunther & Laguna, Marie-Aude, 2010.
"How does the stock market respond to chemical disasters?,"
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- James Sfiridis & Alan Gelfand, 2002. "A survey of sampling-based Bayesian analysis of financial data," Applied Mathematical Finance, Taylor & Francis Journals, vol. 9(4), pages 273-291.
- Leszek Czerwonka, 2009. "Changes in share prices as a response to earnings forecasts regarding future real profits," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 56, pages 81-90, November.
- Patrick Richard, 2010. "Financial market instability and CO2 emissions," Cahiers de recherche 10-20, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
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