33.1 Review of Event Studies Across Disciplines
Event studies have been applied extensively in management, marketing, and finance to assess how different corporate and external events influence shareholder value.
33.1.1 Finance Applications
- (Fama et al. 1969): Stock split.
33.1.2 Management Applications
- (McWilliams and Siegel 1997): Comprehensive review of event studies in management research.
33.1.3 Marketing Applications
Event studies are useful in marketing for evaluating the effects of firm decisions (e.g., advertising campaigns, brand changes) and non-firm-initiated activities (e.g., regulatory decisions, third-party reviews).
33.1.3.1 Firm-Initiated Activities
| Event Type | Studies |
|---|---|
| Corporate Changes | (Horsky and Swyngedouw 1987) (name change), (Kalaignanam and Bahadir 2013) (corporate brand change) |
| New Product Strategies | (Chaney, Devinney, and Winer 1991) (new product announcements), (Raassens, Wuyts, and Geyskens 2012) (outsourcing product development), (Sood and Tellis 2009) (innovation payoff), (Borah and Tellis 2014) (make, buy or ally for innovations), (Fang, Lee, and Yang 2015) (co-development agreements) |
| Brand & Marketing Strategies | (Lane and Jacobson 1995) (brand extensions), (Wiles, Morgan, and Rego 2012) (brand acquisition) |
| Advertising & Promotions | (Wiles et al. 2010) (deceptive advertising), (Cornwell, Pruitt, and Clark 2005) (sponsorship announcements) |
| Strategic Alliances | (Houston and Johnson 2000) (joint ventures), (Fang, Lee, and Yang 2015) (co-development agreements), (A. B. Sorescu, Chandy, and Prabhu 2007) (M&A), (Homburg, Vollmayr, and Hahn 2014) (channel expansions) |
| Entertainment & Celebrity Endorsements | (Agrawal and Kamakura 1995) (celebrity endorsements), (Elberse 2007) (casting announcements), (Wiles and Danielova 2009) (product placement in movies), (Joshi and Hanssens 2009) (movie releases), (Karniouchina, Uslay, and Erenburg 2011) (product placement), (Mazodier and Rezaee 2013) (sports annoucements) |
33.1.3.2 Non-Firm-Initiated Activities
Event studies are also used to examine the impact of external events on firm value, including regulatory decisions, media coverage, economic shocks, and unexpected crises.
| Event Type | Studies |
|---|---|
| Regulatory Decisions | (A. B. Sorescu, Chandy, and Prabhu 2003) (FDA approvals), (R. S. Rao, Chandy, and Prabhu 2008) (FDA approvals), (Tipton, Bharadwaj, and Robertson 2009) (deceptive advertising regulation) |
| Media Coverage & Consumer Reactions | (Jacobson and Mizik 2009) (customer satisfaction score release), (Y. Chen, Liu, and Zhang 2012) (third-party movie reviews), (Tellis and Johnson 2007) (quality reviews by Walter Mossberg) |
| Economic & Market Shocks | (Gielens et al. 2008) (Walmart’s entry into the UK), (Xiong and Bharadwaj 2013) (asymmetric news impact), (Pandey, Shanahan, and Hansen 2005) (diversity elite list) |
| Consumer & Industry Recognitions | (Balasubramanian, Mathur, and Thakur 2005) (high-quality achievements), (Fornell et al. 2006) (customer satisfaction), (Ittner, Larcker, and Taylor 2009) (customer satisfaction) |
| Financial & Market Reactions | (Boyd and Spekman 2008) (indirect ties), (Karniouchina, Moore, and Cooney 2009) (Mad Money with Jim Cramer), (Bhagat, Bizjak, and Coles 1998) (litigation) |
| Product & Service Failures | (Y. Chen, Ganesan, and Liu 2009) (product recalls), (Gao et al. 2015) (product recalls), (Malhotra and Kubowicz Malhotra 2011) (data breach) |
Event studies can be extended to new types of events, such as:
Advertising Campaigns – How do major ad campaigns affect stock prices?
Market Entry – Does entering a new market increase firm value?
Product Failures & Recalls – How do recalls affect brand equity?
Patent Announcements – Do new patents generate abnormal returns?
References
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Balasubramanian, Siva K, Ike Mathur, and Ramendra Thakur. 2005. “The Impact of High-Quality Firm Achievements on Shareholder Value: Focus on Malcolm Baldrige and JD Power and Associates Awards.” Journal of the Academy of Marketing Science 33 (4): 413–22.
Borah, Abhishek, and Gerard J Tellis. 2014. “Make, Buy, or Ally? Choice of and Payoff from Announcements of Alternate Strategies for Innovations.” Marketing Science 33 (1): 114–33.
Boyd, D Eric, Rajesh K Chandy, and Marcus Cunha Jr. 2010. “When Do Chief Marketing Officers Affect Firm Value? A Customer Power Explanation.” Journal of Marketing Research 47 (6): 1162–76.
Boyd, D Eric, and Robert E Spekman. 2008. “The Market Value Impact of Indirect Ties Within Technology Alliances.” Journal of the Academy of Marketing Science 36: 488–500.
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Cornwell, T Bettina, Stephen W Pruitt, and John M Clark. 2005. “The Relationship Between Major-League Sports’ Official Sponsorship Announcements and the Stock Prices of Sponsoring Firms.” Journal of the Academy of Marketing Science 33 (4): 401–12.
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Horsky, Dan, and Patrick Swyngedouw. 1987. “Does It Pay to Change Your Company’s Name? A Stock Market Perspective.” Marketing Science 6 (4): 320–35.
Houston, Mark B, and Shane A Johnson. 2000. “Buyer–Supplier Contracts Versus Joint Ventures: Determinants and Consequences of Transaction Structure.” Journal of Marketing Research 37 (1): 1–15.
Ittner, Christopher, David Larcker, and Daniel Taylor. 2009. “Commentary–the Stock Market’s Pricing of Customer Satisfaction.” Marketing Science 28 (5): 826–35.
Jacobson, Robert, and Natalie Mizik. 2009. “The Financial Markets and Customer Satisfaction: Reexamining Possible Financial Market Mispricing of Customer Satisfaction.” Marketing Science 28 (5): 810–19.
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Malhotra, Arvind, and Claudia Kubowicz Malhotra. 2011. “Evaluating Customer Information Breaches as Service Failures: An Event Study Approach.” Journal of Service Research 14 (1): 44–59.
Mazodier, Marc, and Amir Rezaee. 2013. “Are Sponsorship Announcements Good News for the Shareholders? Evidence from International Stock Exchanges.” Journal of the Academy of Marketing Science 41: 586–600.
McWilliams, Abagail, and Donald Siegel. 1997. “Event Studies in Management Research: Theoretical and Empirical Issues.” Academy of Management Journal 40 (3): 626–57.
Pandey, Vivek K, Kevin J Shanahan, and Scott W Hansen. 2005. “The Relationship Between Shareholder Wealth Effects, Diversity, and Publicity as a Marketing Strategy.” Journal of the Academy of Marketing Science 33: 423–31.
Raassens, Néomie, Stefan Wuyts, and Inge Geyskens. 2012. “The Market Valuation of Outsourcing New Product Development.” Journal of Marketing Research 49 (5): 682–95.
Rao, Raghunath Singh, Rajesh K Chandy, and Jaideep C Prabhu. 2008. “The Fruits of Legitimacy: Why Some New Ventures Gain More from Innovation Than Others.” Journal of Marketing 72 (4): 58–75.
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———. 2007. “Why Some Acquisitions Do Better Than Others: Product Capital as a Driver of Long-Term Stock Returns.” Journal of Marketing Research 44 (1): 57–72.
Tellis, Gerard J, and Joseph Johnson. 2007. “The Value of Quality.” Marketing Science 26 (6): 758–73.
Tipton, Martha Myslinski, Sundar G Bharadwaj, and Diana C Robertson. 2009. “Regulatory Exposure of Deceptive Marketing and Its Impact on Firm Value.” Journal of Marketing 73 (6): 227–43.
Wiles, Michael A, and Anna Danielova. 2009. “The Worth of Product Placement in Successful Films: An Event Study Analysis.” Journal of Marketing 73 (4): 44–63.
Wiles, Michael A, Shailendra P Jain, Saurabh Mishra, and Charles Lindsey. 2010. “Stock Market Response to Regulatory Reports of Deceptive Advertising: The Moderating Effect of Omission Bias and Firm Reputation.” Marketing Science 29 (5): 828–45.
Wiles, Michael A, Neil A Morgan, and Lopo L Rego. 2012. “The Effect of Brand Acquisition and Disposal on Stock Returns.” Journal of Marketing 76 (1): 38–58.
Xiong, Guiyang, and Sundar Bharadwaj. 2013. “Asymmetric Roles of Advertising and Marketing Capability in Financial Returns to News: Turning Bad into Good and Good into Great.” Journal of Marketing Research 50 (6): 706–24.