Unraveling the Impact of Firm Characteristics on Long-Run Abnormal Returns: A Study of U.S. Event Firms

Abstract

This paper examines the effect of seven firm characteristics on abnormal returns following corporate events, including mergers and acquisitions, and initial and seasoned public equity offerings. Using data from U.S. firms between 1980 and 2017, the buy-and-hold abnormal return (BHAR) approach indicates negative abnormal returns after all three events, while the calendar time portfolio (CTP) method fails to detect abnormal returns following two of the events. Employing a refined BHAR method akin to Bessembinder and Zhang (2013), a simple seven-characteristic regression proves that abnormal returns are fully explained by variations in the characteristics of the event firms. Although this bridges the gap between CTP and BHAR, we show that modifications to both approaches affect inferences made regarding long-run abnormal returns.