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Firm characteristics and long-run stock returns after corporate events

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  • Bessembinder, Hendrik
  • Zhang, Feng

Abstract

The well-documented abnormal long-run buy-and-hold returns to firms issuing equity in initial public offerings and seasoned equity offerings, firms bidding in mergers, and firms initiating dividends can be attributed to imperfect control-firm matching. In addition to firm size and market-to-book ratio, event firms on average differ from control firms in terms of idiosyncratic volatility, liquidity, return momentum, and capital investment, each of which also explains returns. We propose a simple regression-based approach to control for differences in firm characteristics across event and control firms, and we show that long-run abnormal returns do not differ significantly from zero for event firms in the 1980 to 2005 period. The returns to event firms are, therefore, consistent with patterns known to exist for the broad stock market and do not require event-specific explanations.

Suggested Citation

  • Bessembinder, Hendrik & Zhang, Feng, 2013. "Firm characteristics and long-run stock returns after corporate events," Journal of Financial Economics, Elsevier, vol. 109(1), pages 83-102.
  • Handle: RePEc:eee:jfinec:v:109:y:2013:i:1:p:83-102
    DOI: 10.1016/j.jfineco.2013.02.009
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Sloan, Richard G. & You, Haifeng, 2015. "Wealth transfers via equity transactions," Journal of Financial Economics, Elsevier, vol. 118(1), pages 93-112.
    2. Amor, Salma Ben & Kooli, Maher, 2016. "Do acquisitions affect IPO long-run performance? Evidence from single vs. multiple acquirers," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 40(C), pages 63-79.
    3. Lee, Bong Soo & Mauck, Nathan, 2016. "Dividend initiations, increases and idiosyncratic volatility," Journal of Corporate Finance, Elsevier, vol. 40(C), pages 47-60.
    4. repec:eee:quaeco:v:65:y:2017:i:c:p:168-181 is not listed on IDEAS
    5. repec:eee:corfin:v:44:y:2017:i:c:p:73-98 is not listed on IDEAS
    6. repec:kap:rqfnac:v:49:y:2017:i:1:d:10.1007_s11156-016-0587-8 is not listed on IDEAS
    7. repec:bla:acctfi:v:57:y:2017:i:3:p:855-877 is not listed on IDEAS
    8. repec:eee:jbfina:v:86:y:2018:i:c:p:240-258 is not listed on IDEAS
    9. repec:eee:corfin:v:46:y:2017:i:c:p:121-138 is not listed on IDEAS
    10. Hoechle, Daniel & Karthaus, Larissa & Schmid, Markus, 2017. "The Long-Term Performance of IPO’s, Revisited," Working Papers on Finance 1706, University of St. Gallen, School of Finance.
    11. Lin, Ji-Chai & Stephens, Clifford P. & Wu, YiLin, 2014. "Limited attention, share repurchases, and takeover risk," Journal of Banking & Finance, Elsevier, vol. 42(C), pages 283-301.

    More about this item

    Keywords

    Firm characteristics; Long-run stock returns; BHARs; Wealth relative; Calendar time portfolio method;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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