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The purpose of this study is to examine the valuation effects of multinationality in Korean firms and to identify the role of multinationality in internalization theory. We hypothesize that the market positively values the multinational activities of Korean firms, which are operating in a small open economy in which firms have strong motivations for internationalization. We use Ohlson's (1995, Contemporary Accounting Research, 11, 661) value model and document the positive effect for multinational firms compared to domestic firms, as well as the positive effect of multinationality on firm value. These results are robust across studies, as indicated by Tobin's q measure, as well as across years. We also hypothesize that multinationality mediates or moderates the relationship between intangibility and firm value that is proposed in internalization theory. We do not find supporting evidence for a mediated influence of intangibility through multinationality on firm value nor for a moderated influence of intangibility on firm value. We find that multinationality and intangibility directly and independently influence firm value, without any interference from each other. These results are also robust across studies, as indicated by Tobin's q measure. Finally, we find that multinationality in Korean firms has never lost its importance, even during the global financial crisis in the year 2008.

Using a sample of 3,688 mergers and acquisitions over the period of 1992 to 2005, we find that post-merger equity risk declines roughly 18% in the year after the announcement. We find that post-merger equity risk is negatively related to the sensitivity of CEO wealth to stock return volatility (vega). The negative relation between vega and equity risk over the post-merger period is concentrated in CEOs with high proportions of options and options that are more in-the-money. The reduction in post-merger equity risk is accomplished through both industrial diversification and reduced business segment focus, with the probability of industrial diversification decreasing in vega. In addition, we find that the decline in post-merger equity risk results in a significant decrease in shareholder wealth. This decrease is concentrated among firms with CEOs having the highest delta and the highest delta and vega, with the effect of vega also conditional on option ownership characteristics. Our results suggest that the increased convexity provided by option-based compensation does not necessarily increase risk-taking behavior by CEOs.

The literature shows that insider trading activities and dividends contain information content and serve as signals to firm value. If insider return is a proxy for information asymmetry, we should expect a positive relation between dividends and insider returns. Using a sample of unambiguous (good and bad) news concerning earnings and dividend announcements from Hong Kong firms, we show that information asymmetry is stronger for bad news firms with insider sales than good news firms with insider purchases. In addition, we improve the methodology of Khang and King [Khang, K., & King, T. H. D. (2006). Does dividend policy relate to cross-sectional variation in information asymmetry? Evidence from returns to insider trades. Financial Management , 35, 71–94] and provide evidence that dividend is a credible signal for measuring information asymmetry.

Whether equity-based compensation and equity ownership align the interests of managers with stockholders is an important question in finance. Early studies found an inverted U-shaped relation between managerial ownership and firm value, but later studies using firm fixed effects found no relation. Managerial ownership levels change very slowly over time which may mask an ownership effect on firm value when using a fixed effect model. This is due to a much smaller within firm variation than between firm variation. We demonstrate that using pay-performance semi-elasticity, rather than pay-performance sensitivity as a measure of managerial ownership incentives, results in meaningful variation within firm over time. The greater within firm variation increases the power to detect a relation between managerial ownership and firm value with fixed effect regressions. As in the early research on this issue, we find a significant inverted U-shaped relation between managerial ownership and Tobin's Q in fixed effects regressions and after controlling for endogeneity with both two-stage and three-stage least squares regressions. Our results are consistent with incentive alignment at low levels and risk aversion at high levels of managerial ownership.

In relay succession, boards add the Chair title to successful CEOs, creating duality. Sometimes boards by-pass relay succession and appoint an individual directly into the dual position. We propose that this will occur when there is the need for an unambiguous leader and when the appointee has greater bargaining power. We show that following the firing of the predecessor, when the successor is an outsider, and when the successor is not the designated heir, the incidence of simultaneous dual appointments increases. We also find that executives appointed into the dual positions are older than those appointed only as a CEO.

We relate impression and earnings management to the field of ethnostatistics, the study of how statistics are produced and managed. By further linking impression management and agency theory, we show that earnings management may exacerbate agency problems. We hypothesize that earnings-increasing earnings management occurs more frequently following duality-creating successions than otherwise. A dual CEO/Chair would have greater authority to control the impression the company wants to make with its financial reports and may also be operating with greater expectations to produce positive results. Using a sample of 173 duality-creating succession announcements and 112 non-duality creating succession announcements, we find empirical results consistent with this hypothesis.

Using data from 35 futures options markets from eight separate exchanges, we test how well the implied volatilities (IVs) embedded in option prices predict subsequently realized volatility (RV) in the underlying futures. We find that for this broad array of futures options, IV performs well in a relative sense. For a large majority of the commodities studied, the implieds outperform historical volatility (HV) as a predictor of the subsequently RV in the underlying futures prices over the remaining life of the option. Indeed, in most markets examined, regardless of whether it is modeled as a simple moving average or in a GARCH framework, HV contains no economically significant predictive information beyond what is already incorporated in IV. These findings add to previous research that has focused on currency and crude oil futures by extending the analysis into a very broad array of contracts and exchanges. Our results are consistent with the hypothesis that futures options markets in general, with their minimal trading frictions, are efficient.

This paper examines the effects of board composition and ownership structure in the valuation of target firms in cancelled mergers. These results find no significant association between board composition and shareholder wealth. On the contrary, when a merger is cancelled by the target firm, abnormal returns surrounding the announcement are negatively related to share ownership by inside directors. In addition, we find the likelihood that the target firm is subsequently taken over depends largely on two factors: stock ownership by inside directors and the presence of multiple bids. These results suggest a strong association between ownership structure and the valuation of target firms in cancelled mergers.

Although scholars have studied outside executive succession for decades, there is still no clear definition of the term “outsider”. We focus on a new dimension of outsiderness, the industrial background of executives hired from outside the firm into a CEO position. This paper examines the antecedents of boards' decisions on the industry origin of outside successors as well as the short-term stock market response. We find that firms with more independent boards and with blockholders owning large amounts of stock are more likely to hire industry unrelated successors. However, the board's decision does not strictly follow the rhetoric of stockholder's interests. The stock market reacts more positively to outside CEO succession announcements when the CEO comes from an industry related firm. These findings support our theoretical arguments that the boards of directors may use a logic or rule of appropriateness in deciding the industrial origin of outside successors.

Prior research has documented that volatility in financial asset markets is most directly related to trading rather than calendar days, and that there is an inverse asymmetric relation between volatility and returns in both stocks and long-term bonds. We examine these relations in 37 futures options markets representing a wide variety of asset types. Using futures prices and implied volatilities from this extensive array of markets, we confirm that in all of them, save one, market volatility is more directly related to trading days. However, the nature of the association between implied volatility and underlying asset returns varies greatly across asset categories and across exchanges. Thus, we show that findings from equity markets apparently are not generalizable to other asset classes.

In this note we respond to Harris and Helfat's (1998) reinterpretation of the results in Worrell, Nemec, and Davidson (1997). Harris and Helfat argued that the negative stock market response associated with plurality announcements could be the result of inadequate corporate succession planning rather than with the agency cost explanation. Our results, here, show that duality and plurality announcements do not hurt shareholder wealth as long as there is an heir apparent and, therefore, are more consistent with the succession planning explanation than with agency theory. Copyright © 2001 John Wiley & Sons, Ltd.

This study examines the performance of filter and dual moving-average crossover trading rules applied to Nasdaq stocks. We find that trading rules conditioned on a stock's past price history perform poorly, but those based on past movements in the overall Nasdaq Index tend to earn statistically significant abnormal returns. Since there is a high level of transaction costs in this market, these abnormal returns are generally not economically significant. However, there are indications that pursuing some of these strategies can be worthwhile in carefully selected subsets of stocks.

In response to Harris and Helfat's commentary on our article, ‘One hat too many: Key executive plurality and shareholder wealth,’ we suggest that their arguments are quite plausible, but we believe further empirical tests are needed. These proposed tests are described in our response. © 1998 John Wiley & Sons, Ltd.

Tracing backward the career paths of the key executives of Business Week’s 1990 listing of the 1000 most valuable publicly held companies, we empirically examined the impact of announced changes in key executive plurality on stockholder returns. We found the more complete the position consolidation, the more negative were the shareholder responses. To attempt to gain further understanding, the additional variables of executive’s origin, the size of the board of directors of the firm, the proportion of outsiders on the board, and prior firm performance were examined. © 1997 by John Wiley & Sons, Ltd.

Research indicates that at the time of a takeover announcement, target firm shareholders receiving cash earn larger abnormal returns than those receiving stock. Our work confirms that cash targets receive larger direct payments from bidders and that the size of target firm abnormal returns is related to the relative size of this direct payment. Once we control for the size of the payment, however, we find the target firm abnormal returns to be unrelated to the payment method. Thus the relationship between payment method and target firm abnormal returns is indirect. This finding is important because it casts doubt on the signaling (asymmetric information) hypothesis. That is, cash offers do not seem to be valued by the market as a means of reducing this uncertainty. Something else, such as the tax implication differences between cash and stock offers, drives cash target firms to demand larger payments from bidding firms.

In this paper, the authors test Peltzman's [19] buffering hypothesis—whether regulatory environment impacts systematic risk for regulated electric utilities. The paper differs from previous research in that an exogenously defined measure of regulatory environment, a large sample, and a method that controls for time-series and crosssectional autocorrelation are used. The results are consistent with the buffering hypothesis but only in years of increasing input factor prices for the utilities. Using causality tests, the results also show that it is the regulatory environment that influences systematic risk and not vice versa.

The evidence in this paper supports the hypothesis that the previously documented stock price reversal following a tender offer announcement is consistent with a price pressure caused by a temporary shift in the security's demand curve. The authors came to this conclusion by redocumenting the price reversal, by finding an increase in trading volume around the tender offer announcement and expiration, by showing the increase in volume to be larger than expected from only an information effect, and by showing that short selling activity increases after the announcement and before the expiration of the tender offer.

This paper examines the return of the original class of common stock around the announcement of the creation of a second class of stock. As in previous studies, this one finds a generally ambiguous market reaction on the first public announcement. However, this paper offers new evidence that both the voting rights and the compensation for loss of voting rights are important determinants of the market's reaction. Specifically, it demonstrates that a second class stock issue that contains no compensation for the lost voting rights results in negative returns. When the original stockholders are compensated for lost voting rights, they experience positive abnormal returns.

This paper examines the stock market reaction to announcements that utilities are converting to utility holding companies. There are negative abnormal returns associated with these announcements. Holding companies permit these utilities to diversify beyond the utility industry, and the announcements of their formation may signal the market of their intentions to diversify. The negative abnormal returns associated with these announcements and the negative abnormal returns associated with subsequent announcements of acquisitions are consistent with other research showing that diversifying bidders lose more (or gain less) than non-diversifying bidders.

Extending the work of Davidson and Worrell (1988), we further investigate the stock market's reaction to announced corporate illegalities. We examine a sample of 535 announcements of corporate crime and obtain an overall insignificant stock market reaction. However, when the sample is divided by type of crime, we find that the stock market reacts significantly to announcements of bribery, tax evasion, and violations of government contracts. We also find a significantly negative reaction to announcements of corporate crime when the company had been previously accused of other illegal activity. For companies accused of crime in the 1970s, 51% of them were accused again in the 1980s.

This study examines shareholder reactions to the announcements of OSHA penalties in the press over the years 1979-89. The analysis demonstrates that investors react negatively to the announced sanctions over the time interval immediately surrounding the announcement day. The decreases in the values of the subject firms are, however, found to be unrelated to the relative size of the penalty, to the number of non-record-keeping violations, and to whether the penalties were attributable to employee injury or death. The findings suggest that for the stockholders the nature of the announced OSHA sanctions is largely irrelevant, and they further point toward a reassessment of the assumed deterrent impact of the penalities.

PurposeThis paper aims to investigate an interesting yet mostly ignored distinction within external CEO successions: outside successors who have previous CEO experience and those who do not. It examines stock market reaction, compensation and firm performance prior and post‐succession.Design/methodology/approachThe authors used an event study, “Patell Z‐statistic” and “Rank Z‐statistic” to test cumulative abnormal return before and after the successions. They also used probit and OLS regressions to examine firm performance and CEO compensation prior and post‐succession.FindingsThe authors find that the stock market reacts positively to the hiring of an outsider who is an exCEO. Compared with firms that hire non‐exCEOs, firms that hire exCEOs had higher debt ratios and greater bankruptcy chances pre‐succession, but post‐succession, these firms still have worse financial performances. Non‐exCEOs come from better performing firms than exCEOs. There is no consistently significant difference in compensation between an exCEO and a non‐exCEO, though the compensation for both increases significantly from that of the predecessors and that of their previous positions.Research limitations/implicationsFuture research could focus on the cost‐benefit tradeoff of hiring an exCEO. It would be interesting to examine the role of the board of directors in assessing this cost‐benefit tradeoff and determining the optimal choice for the firm. An important aspect that has not been sufficiently examined in the literature is the CEO fit. Hiring an exCEO may not always be the right choice for the firm. Another area for future research could examine how the post‐succession performance is affected by exCEO tenure in previous CEO position(s) and whether the exCEO worked in several industries or in the same industry.Practical implicationsThis paper also has implications for the board of directors. There seems to be a negative transfer of human capital when it comes to hiring exCEOs. The human capital theory suggests that job‐specific experience positively relates to job performance. According to Hamori and Koyuncu, prior CEO experience may “lead to the formation of knowledge corridors and decision‐making templates that make it difficult for individuals to take in inconsistent information or take actions that are different from past ones in a changed context. This, in turn, undermines performance”. Boards of directors should put more effort into considering inside relay successions and should be cautious when hiring an outsider who has prior CEO experience. A best‐of‐both‐worlds scenario may be for boards to hire exCEOs into top executive positions, such as COO and/or president, so as to give them a chance to be groomed for the top position and familiarize themselves with the firm while still benefiting from their prior CEO experience.Originality/valueThere is very little research on the distinction between outside CEOs with previous CEO experience and those with no such experience. This paper tries to shed some light on this important issue in corporate governance in order to explain why boards of directors would hire an outsider with or without previous CEO experience.

Prior research has argued that given the well-documented inverse relationship between firm size and market returns, smaller utilities should be allowed to earn higher accounting rates of return than larger utilities. To test the validity of this argument, this study investigated the relationship between firm size and market returns in the electric utility industry for the period 1962 through 1985 and found no evidence of either a positive or negative size effect. Moreover, although market returns on utility stocks were found to be higher in January than in non-January months, this January effect was found to be unrelated to firm size. In short, this study found no evidence that allowable accounting rates of return should be adjusted by regulatory authorities to reflect a firm's size.

This paper examines the overall wealth effects of selloffs. When sellers and buyers are examined separately, abnormal returns are found around the announcement days. However, a combination of matched-pair buyers and sellers in value-weighted portfolios wipes out these gains. In a sample of 182 selloff portfolios, 93 of them experience positive returns while the remaining 89 cases face negative price reactions. These results cast doubt on the conclusion that selloff activity is generally synergistic. In addition, a large size difference is found between buyers and sellers. Large buyers win more often than small buyers. Small sellers win more often than large sellers. Our results show that when examining selloffs for synergy equally-weighted results can be biased.

By examining only firms that experience net losses and negative cash flows, we are able to analyze a sample of firms that face a discrete refinancing point with no internal equity available, as well as a liquidity mismatch between assets and liabilities. These unique characteristics of our sample allow us to draw conclusions concerning a wide range of corporate financial decisions covering capital structure, dividend policy, and working capital management. We document that widespread changes in leverage are driven mainly by the decline in the book value of equity that occurs with a loss and are consistent with both the pecking order and the static trade-off models. Managers are reluctant to cut dividends, even when faced with seemingly high opportunity costs that sacrifice future productivity. Last, a firm’s liquidity position is managed by shifts between current asset items, as well as an overall change in net working capital.

This paper evaluates the stock market effects of events leading to the passage of the Financial Institutions Reforms, Recovery, and Enforcement Act of 1989. The evidence suggests that the signing of the Act by President Bush produced positive abnormal returns for both banks and S&Ls and that the addition of tougher capital standards produced positive returns for S&Ls. In addition, the Act increased the risk of both banks and S&Ls.

While risk aversion explains individual consumer demand for insurance, it does not explain the corporate demand for insurance. Studies have suggested a variety of incentives that motivate corporations to purchase insurance. We find that the primary motivation for corporate insurance purchases can be explained by the bondholder's me-first rule. In return for insurance, bondholders will charge stockholders a lower cost of debt, thereby increasing firm value.

While research has documented that board of director composition may be important in certain agency-related situations, the impact of board composition on overall financial performance is not at all clear. One problem may be that board of director composition and financial performance are endogenously determined. Using causality tests in panel regressions with three years of data for 130 closed-end mutual funds, we find very limited evidence of endogeneity. We do find that prior financial performance impacts board composition, but the relation depends on how we define board composition. The evidence that board composition influences financial performance is very limited.

We test whether the conversion price (ratio) is viewed by the stock market as a credible signal of the firm's future earnings prospects (Kim (1990)) and, subsequently, whether convertible debt serves as backdoor equity financing (Stein (1992)). Examining the conversion price in relation to current stock prices and a priori growth expectations produces an average expected time of less than 1.5 years for convertible bonds to be at-the-money. Thus, as Stein suggests, convertibles appear to be a method of drawing equity into a firm's capital structure. We also find that the size of the firm's announcement period abnormal returns is positively related to the expected time for the convertible to become at-the-money. Given these relationships, we conclude that convertible debt issue announcements, on average, send an equity-like signal to the market.

One of the more controversial aspects of a public utility rate case is the determination of the cost of equity component of the allowed return. In practice, the Capital Asset Pricing Model, CAPM, and the Discounted Cash Flow Model, DCF, are used for this purpose. The difficulties in using the CAPM have been documented elsewhere. This note examines the DCF model. The DCF implicitly assumes that earnings and dividends are growing at a constant rate. When dividend changes are in discrete jumps, the underlying assumptions of the DCF model have been violated. This note derives a DCF model for dividend changes that occur in discrete jumps.

Researchers have debated stock market efficiency for years and have found several apparent anomalies, among them the overreaction investment strategy. In a sample of virtually all AMEX and NYSE stocks over twenty-one years, it is demonstrated that abnormal returns earned in one year are positively related to the abnormal returns earned in the next year. This evidence is contrary to the overreaction investment philosophy.

A State's regulatory climate is an important determinant of utility capital costs and construction expenditures. This paper demonstrates the relationship of public (both proxy and qrassroots) advocacy movements with state regulatory climate and the cost of electricity. The perceived indifference of the utility industry and the regulatory process to public advocacy movements may be exploited by politicians seeking public office on an anti-utility platform. The result can be the weakening of the industry's long-run ability to produce a reliable power supply.

One of the primary reasons previously cited for forming a captive insurance company is tax advantages based on premium deductibility. The IRS ruling in the Carnation Company case was the first time that investors experienced a decisive legal action signaling the possibility that premiums paid to captives might not be tax deductible to the parent company. The purpose of this paper is to determine if the investor's perceived lack of tax deductibility of premiums, based upon the Carnation case, has an impact upon the parent firm's value at time of captive formation. The results indicate that the market placed a high value on the ability of the parent company to deduct for tax purposes the insurance premium paid to its captive. Before the Carnation case there was a positive reaction by the market to captive formation whereas after the Carnation case, there was a negative reaction.

Corporate spinoffs and divestitures cause positive revaluation of the firm by the market. This paper examines a particular kind of spinoff, one of mineral interests into a royalty trust. Royalty trusts are associated with abnormal returns that come from positive market revalution and from special tax incentives inherent to trusts.

Public utility rate cases are economic events because they affect the intrinsic value of the utility. This paper examines the effect of rate cases on public utility stock returns. “Average” rate cases do not appear to affect the utilities' value, but “above-average” and “below-average” settlements cause positive or negative adjustments, respectively.

This paper examines the equity return behavior of firms whose preferred stock ratings have been changed by Standard and Poor's. The evidence indicates that the market anticipates the re-ratings by approximately 40 days for the complete sample. However, the downgrades for the utility subsample do not experience any downward drift before or after the re-rating. In general, these results support the previous findings of Pinches and Singleton (1978) and Weinstein (1977).

This paper analyzes the impact of mergers on the alphas and betas of actual merged firms compared to those of the homemade mergers an investor could have created by buying proportional shares of the two firms. The results provide some evidence of merger synergy. Where alpha and beta shifts were observed, the evidence did not indicate that either the relative size of target firms or concurrent capital structure changes were related to these shifts as current theory suggests. There is weak evidence that nonconglomerate mergers were more frequently synergistic.

The article examines the stock market's reaction to labor management problems and employee strikes. A discussion is presented about various categories of strike costs and cumulative abnormal return...

Determinants of Electric Utility Betas. One important aspect of utility regulation is the estimation of cost of equity capital of the firm. Several techniques have been used to estimate the cost of equity, including the discounted cash flow model and the capital asset pricing model (CAPM). CAPM has its foundations in modern portfolio theory and its application has generated a lot of controversy — both from academia and the professional world. Much of the problem in using CAPM in utility rate cases has centered on the issue of estimating the beta coefficient. Myers (1972) points out that problems exist in the following areas: measurement of beta; stability of beta; and incomplete description of risk and return by CAPM. There is evidence to believe that CAPM is still widely used be expert witnesses to explain risk‐return relationships in utility rate cases (Cooley, 1980).

While the rate of inflation seems to be easing, the interest in its impact on corporate security prices (Feldstein, 1980) and on corporate investment policy (Caks, 1981; Higgins, 1977) has continued. Unlike nonregulated firms, utilities face the added difficulties of regulation-induced inflation penalties and return on equity (ROE) attrition. Table 1 shows that the rate of return authorized by utility commissions exceeds that earned by the utilities. The difference between the ROE authorized and the ROE earned in some cases is an inflation-induced penalty caused by regulatory policies. In particular, the use of historicalcost test years and the use of historical-cost depreciation in the cost-of service adjustment may cause the utility to earn an ROE lower than that specified by the commission. When the market expects this attrition, lower stock prices result. These lower stock prices may be viewed as inflationinduced penalties to public utility stockholders. Unless otherwise noted, inflation is considered to be expected inflation. The inflation-induced penalties discussed here will be the result of this expected inflation. These penalties are well known to people who understand the regulatory process, but have not been incorporated in a systematic framework. Our contribution will be to present a rigorous analysis of these penalties in a systematic valuation framework. In the next section, the topic of regulation is reviewed to permit an understanding of the effects of inflation to be discussed. The third section demonstrates how inflation affects the cost-of-service component and

The Impact of Directors and Officers' Liability Suits on Firm Value ABSTRACT This article examines the effect of D&O lawsuits on firm value. The results indicate that D&O lawsuits have a negative impact on firm value a few days before they appear in the Wall Street Journal. Secondary regression results indicate that the particular reason for a D&O lawsuit has relatively little impact on firm value. Introduction The effects of dividend announcements, changes in accounting procedures, and stock splits have been studied to determine their impact on firm value [1, 6, 11]. Previous studies by Sprecher and Pertl [12] and Davidson, Chandy, and Cross [4] have considered the impact of large pure losses on firm value. The recent increase in both the number and size of directors and officers' (D&O) lawsuits, coupled with the availability and cost problems involved with D&O insurance, makes D&O lawsuits an interesting topic of study. Purpose Stock prices are responsive to many factors that influence investor expectations. Changes in stock prices reflect investors' revisions in earnings expectations, and give an estimate of the impact of the pure loss on firm value. This paper examines the effect of D&O lawsuits on firm value. The hypothesis is that announcements of D&O lawsuits reduce firm value. If that results, stockholders initiating D&O lawsuits may be "shooting themselves in the foot" by lowering their own wealth. Wealth reduction could be offset by the settlement the stockholders receive from the lawsuit. Thus, stockholders initiating lawsuits may suffer only a small reduction in wealth or no reduction at all, depending on the size of the settlement. This study does not cover wealth created by investment such as the purchase of D&O insurance. The effect of a D&O lawsuit on firm value would in all likelihood depend on whether the firm has purchased D&O insurance and/or has agreed to indemnify directors and officers for liability claims and expenses. Information about D&O insurance purchases is strictly proprietary. Thus, one problem with addressing this issue is the availability of data. The size of a D&O lawsuit and the amount of its eventual payout also are not considered in this study. Lack of available public information on the size of lawsuits' eventual settlements and the settlement time lags precluded these factors. Research Methods The event research method is used to determine the wealth effect of D&O lawsuits.(1) In addition an examination of the underlying reasons for D&O suits is conducted. Sample Selection The sample of parent corporations consists of 62 firms reported in The Wall Street Journal as having a D&O lawsuit filed against them between 1980 and 1985. To assure availability of market data and adequacy of trading activity regarding parent firms, it was required that the sued corporation's common stock be listed on the New York Exchange or the American Stock Exchange. The 62 firms represent a broad spectrum of industries. Event Research Method The event-time research method is only briefly described here (see Dodd and Warner [5] for details). The test statistic used is the mean standardized cumulative abnormal return. For security j, the market model is used to calculate the abnormal return, for event day t as follows: (1) [AR.sub.jt] = [R.sub.jt] - ([a.sub.j] + [Beta.sub.j] [R.sub.mt]) where [R.sub.jt] is the rate of return on security j for event day t and [R.sub.mt] is the return on the CRSP value-weighted index on event day t Coefficients [a.sub.j] and [Beta.sub.j] are ordinary least squares estimates for the intercept and slope, respectively, of the market model regression. The OLS parameters were obtained from a regression run over days -291 to -91. The Cumulative Abnormal Return (CAR) from day [T. …