Firm Characteristics, Return Predictability, and Long-Run Abnormal Returns in Global Stock Markets

115 Pages Posted: 10 Aug 2022 Last revised: 6 Mar 2024

See all articles by Hendrik Bessembinder

Hendrik Bessembinder

W.P. Carey School of Business

Michael J. Cooper

University of Utah - David Eccles School of Business

Wei Jiao

Rutgers University

Feng Zhang

Southern Methodist University (SMU) - Finance Department

Date Written: June 22, 2023

Abstract

We conduct the most comprehensive examination of returns to non-U.S. firms following corporate events to date, documenting apparently abnormal returns in the wake of initial and secondary stock offerings, stock repurchases, dividend initiations, stock splits, and merger announcements. These abnormal returns are substantially explained by benchmark returns that are based on the relation between returns and characteristics estimated for all firms in the country, implying that no firm- or event-specific explanations are required. However, the ability of firm characteristics to explain post-event returns does not reflect that characteristics can predict firms’ exposures to latent risk factors. Our findings suggest that conclusions previously drawn from long-horizon event studies, particularly regarding abnormal returns and their implications for managerial, investor behavior, and corporate finance theories, may need reevaluation.

Keywords: international, firm characteristics, abnormal returns, covariance risk, corporate events

JEL Classification: G14, G30

Suggested Citation

Bessembinder, Hendrik (Hank) and Cooper, Michael J. and Jiao, Wei and Zhang, Feng, Firm Characteristics, Return Predictability, and Long-Run Abnormal Returns in Global Stock Markets (June 22, 2023). SMU Cox School of Business Research Paper No. 22-18, Available at SSRN: https://ssrn.com/abstract=4181881 or http://dx.doi.org/10.2139/ssrn.4181881

Hendrik (Hank) Bessembinder

W.P. Carey School of Business ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

HOME PAGE: http://isearch.asu.edu/profile/2717225

Michael J. Cooper

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

Wei Jiao

Rutgers University

NJ
United States

Feng Zhang (Contact Author)

Southern Methodist University (SMU) - Finance Department ( email )

SMU Cox School of Business
6212 Bishop Blvd
Dallas, TX 75275
United States

HOME PAGE: http://https://sites.google.com/view/fengzhangfin

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