Managerial Decisions and Long-Term Stock Price Performance

CRSP Working Paper No. 453

57 Pages Posted: 1 Jun 1998  

Mark L. Mitchell

AQR Capital Management, LLC; CNH Partners

Erik Stafford

Harvard Business School - Finance Unit

Date Written: October 1999

Abstract

A rapidly growing literature claims to reject the semi-strong form of the efficient market hypothesis by producing large estimates of long-term abnormal stock price performance subsequent to major corporate events. We re-examine three large samples of major managerial decisions, namely acquisitions, equity issues, and equity repurchases, and find little evidence of reliable long-term abnormal stock price performance for the three samples. The analysis shows (a) cross-sectional dependence of abnormal returns leads to inflated test statistics and (b) estimates of abnormal performance are small, and largely limited to small stocks, after accounting for the known mis-pricings of the model used to generate the results.

JEL Classification: G14, G31, G32, G34

Suggested Citation

Mitchell, Mark L. and Stafford, Erik, Managerial Decisions and Long-Term Stock Price Performance (October 1999). CRSP Working Paper No. 453. Available at SSRN: https://ssrn.com/abstract=94137 or http://dx.doi.org/10.2139/ssrn.94137

Mark L. Mitchell

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

CNH Partners ( email )

Two Greenwich Plaza
1st Floor
Greenwich, CT 06830
United States
(203) 742-3001 (Phone)

Erik Stafford (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-8064 (Phone)
617-496-7357 (Fax)

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