Event studies: A methodology review

Originally developed as a statistical tool for empirical research in accounting and finance, event studies have since migrated to other disciplines as well, including economics, history, law, management, marketing, and political science. Despite the elegant simplicity of a standard event study, variations in methodology and their relative merits continue to attract attention in the literature. This paper reviews some of the fundamental topics in short‐term event study methodology, with an attempt to add new perspectives to some pressing topics.     

Japanese stock market reaction to announcements of news affecting auditors’ reputation: The case of the Olympus fraud

The revelation of accounting fraud by the Olympus Corporation gave rise to shareholder allegations of audit failure against Olympus’ auditors—Ernst & Young ShinNihon LLC and KPMG AZSA LLC—in 2011. In this study, we investigate whether the auditors’ affiliation with Olympus contributes to divergent perceptions of audit quality in the event of news announcements affecting the reputation of Olympus’ auditors. First, we use a nonparametric generalized rank event study methodology on 918 sample firms from the First Section of the Tokyo Stock Exchange (TSE) to observe Japanese investors’ perceptions of auditor reputation as proxied by abnormal returns. Second, we perform a multivariate linear regression on firms’ abnormal returns after controlling for firm-specific variables. We find that Japanese investors do not respond to negative or neutral reputational information arising from news announcements concerning Olympus’ auditors for firms affiliated and not affiliated with those auditors. In the absence of legal penalties imposed on Olympus’ auditors, we argue that Japanese investors consider the Olympus fraud case as an expected occurrence of audit failure due to a lack of evidence suggesting systematic audit failure on the part of Olympus’ auditors and an expectation of lower audit quality in the Japanese capital market. As a result, Japanese investors do not consider news announcements affecting the Olympus auditors’ reputation as sufficient evidence to change their prior expectation regarding the reputations of the audit firms affiliated with the Olympus fraud case.     

The effect of customer service on retailers’ shareholder wealth: The role of availability and reputation cues

Retailer customer service has been shown to lead to increases in consumer attraction and retention, but what is less apparent is whether shareholders are fully rewarded for retailers’ customer service efforts. Results from an event study on 48 retailer announcements of customer service strategies indicate that customer service increases retailer market values by 1.09 percent on average. The magnitude of this abnormal return suggests that customer service is one of the more effective ways for firms to create shareholder wealth. Further, analysis of the abnormal returns suggests that the shareholder value created by the retailer's customer service is affected by the heuristics and cues used to judge the likelihood of service delivery. Consistent with the availability heuristic, we find that services that are difficult to bring to mind and non-vivid services create significantly less shareholder value. Results further show that the retailer's reputation can also significantly inhibit the customer service's shareholder wealth creation.     

An analysis of the behavior of mature black-owned commercial banks

Accounting and statistical techniques are used to compare the behavior of a sample of mature black-owned banks with that of a matched set of nonminority-owned banks. The black banks are generally less profitable. The major reasons for this lower profitability include more liquid asset portfolios at the black banks, higher operating costs on liabilities, and higher rates of loan loss. Higher loan loss rates appear to be the single most important factor, with losses on real estate and possibly commercial and industrial loans probably being the most serious continuing sources of loan losses.     

传媒经济视角下的娱乐国学的成因及影响分析

在中国,精神需求的产品—娱乐国学中关于中国传统文化题材的作品越来越多,对国民经济产生重要影响。本文从传媒经济的视角对娱乐国学产生和发展原因、经济价值、对于传媒经济的影响进行了分析。     

Alternative event study methodology for detecting dividend signals in the context of joint dividend and earnings announcements

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.     

Complex event processing in enterprise information systems based on RFID

Enterprises have to be increasingly agile and responsive to address the challenges posed by the fast moving market. With the software architecture evolving into service-oriented architecture (SOA), and the adoption of radio frequency identification (RFID), event processing can fit well in enterprise information systems in terms of facilitation of event aggregation into high level actionable information, and event response to improve the responsiveness. To make it more applicable, the architecture of event processing in enterprise information systems is proposed; event meta model and context serve as the solid basis for event processing; the rules, operators and keys of complex event processing are defined. Especially, workflow model is firstly used to extract complex event pattern. We have implemented the event processing mechanism in enterprise information systems based on RFID, including the architecture, data structures, optimization strategies and algorithm. The performance evaluations show that the method is effective in terms of scalability and the capability of event processing. Complex event processing can improve operational performance and discover more actionable information, which is justified by application. Finally, lessons learned from the application are presented.     

Segmentation by motivation for rural tourism activities in The Gambia

In The Gambia, as in many other African countries, rural areas rarely profit from the turnover earned in the country's tourism sector. In academic and political literature, however, rural tourism is frequently identified as a diversification strategy that may trigger local economic development in remote communities. To promote rural tourism development, further knowledge is required to understand why tourists are motivated to engage in distinct tourism market segments. In this study, survey data was collected from 450 tourists in The Gambia using a self-administered questionnaire. The questionnaire was constructed to identify the key characteristics and motivations of tourists so that the significant market segments could be categorized and the (latent) tourist demand for rural tourism activities could be gauged. This study identified four distinct segments of tourists in The Gambia: heritage & nature seekers, multi-experiences seekers, multi-experiences & beach seekers, and sun & beach seekers. Drawing on our key findings, we conclude by identifying a development path that could diversify Gambia's tourism sector. The development path would also include event-based rural tourism initiatives that align with the motivations of the identified market segments and may additionally benefit rural communities by reducing economic leakage rates.     

The effects of social ratings on firm value

This paper examines, in a short-term perspective, the effects of Vigeo social ratings announcements on the firm's shareholder value. From an event study on a large sample of European firms, we show that the announcement of ratings generates a strong positive stock market reaction regardless of whether the rating is good or bad. This finding underlines the relevance of ratings and reveals the value effects of corporate social responsibility (CSR). We also find that the overall rating has no impact on shareholders’ wealth. We highlight that specific CSR dimensions drive the value effects. Some are value enhancing and others value destroying. Our study complements the literature on the complex links between socially responsible practices and firm value. It gives arguments to measure properly the benefits and risks associated with non-financial factors, and to integrate them into asset pricing models and allocation processes.     

A structural event study for M&As: an application in corporate governance

We apply structural event study methodology in the context of corporate governance to account for the interaction of two merger and acquisition (M&A) effects: synergy (total value) and dominance (bargaining power). The interaction of these effects simultaneously determines the parties’ abnormal returns. We posit that M&A synergy effects correspond to changes in agency costs between target’s management and target’s shareholders, while the dominance effects correspond to the balance of power between acquirer and target during negotiations. Our structural estimates suggest that more stable or entrenched directors generate higher value during normal operations but are softer negotiators when their firm becomes an acquisition target.