Mean Abnormal Return Research Articles

The effect of international licensing agreements on domestic shareholder wealth

International licensing enhances shareholder wealth for domestic licensors. Moreover, technology licensors earn greater mean abnormal returns than licensors of other goods and services. Announcement period returns are also inversely related to the fraction of total sales derived from foreign sources. These findings are consistent with the hypotheses that U.S. managers act in shareholders' interests in negotiating licensing contracts and that licensing announcements convey more information about potential investment opportunities abroad for firms with less international exposure. We also find that domestic licensees earn only competitive announcement period returns, but that returns are higher for technology licensees and for licensees with smaller fractions of total sales derived from foreign sources. Thus, both domestic (and by implication foreign) licensors and licensees can benefit from licensing agreements.

Valuation effects of Canadian stock split announcements

The abnormal returns for two types of announcement dates are examined for a large sample of stock splits on the Toronto Stock Exchange (TSE). The mean abnormal return is positive and statistically significant for the split proposal announcement date, and positive and not statistically significant for the split approval date. These findings are not only consistent with those found for stock splits in the United States [Grinblatt, Masulis and Titman (1984)], but are also robust to various thin-trading autocorrelation and heteroscedasticity adjustments, and the exclusion of splitting stocks which are interlisted on non-Canadian stock markets.

The Profitability of Price Fixing: Evidence From Stock Market Reaction to Federal Indictments

The authors estimate the profitability of price fixing by examining the stock price reaction to federal indictments for 127 firms during 1962-1980. They hypothesize that the reaction is composed of expected legal costs, lost monopoly profits, and/or various negative market signal effects. The mean abnormal return over the WSJ indictment announcement date and the day before is a statistically significant --1.08%. This corresponds to a total value loss of $2.18 billion ($1982), of which only about 13% can be attributed to various legal costs (e.g., fines and damages). The $1.89 billion residual might be, in all or part, the present value of monopoly profits lost because of conspiracy dissolution. They test this and other possible explanations, and on balance find support for the lost monopoly profit interpretation. Copyright 1991 by MIT Press.

Editorial collaborators

The abnormal returns for two types of announcement dates are examined for a large sample of stock splits on the Toronto Stock Exchange (TSE). The mean abnormal return is positive and statistically significant for the split proposal announcement date, and positive and not statistically significant for the split approval date. These findings are not only consistent with those found for stock splits in the United States [Grinblatt, Masulis and Titman (1984)], but are also robust to various thin-trading autocorrelation and heteroscedasticity adjustments, and the exclusion of splitting stocks which are interlisted on non-Canadian stock markets.

A Note on the Validity of the WSJ As a Source of "Event" Dates

Many information content studies rely on the Wall Street Journal (WSJ) as the source of the date of the release of particular information to the market. delineation of the exact date of disclosure has gained importance as researchers have started using daily rates of return to evaluate the association of information with market excess returns. It is generally assumed that the WSJ is a reliable source, but there is some uncertainty about the degree of reliability of dates. A recent article by Penman highlighted this uncertainty: The mean abnormal return on day -1, where the largest effect is observed, is .92%. Many forecasts apparently become public on the day before they are reported in the Wall Street Journal.' This uncertainty motivated me to reopen an old data file. reliability of the dates of WSJ articles became a concern of mine in 1973 when I first became interested in this type of research. To satisfy myself about the accuracy of the WSJ as a source of event dates, I requested the public relations offices of 100 companies that were listed on the NYSE to place my name on the mailing list for all of their press releases. Sixty companies honored my request. A checklist was made for all earnings and dividends announcements for which the dates of press