We investigate regulations intended to stop managers from privately disclosing corporate information to analysts in a setting with enhanced potential to isolate regulatory effects: the European Union (EU) Market Abuse Directive (MAD), a common regulation implemented by member states with varying sanctions and enforcement resources. Following the implementation of MAD in a country, analyst forecasts become more accurate, with relatively little of the effect attributable to increased voluntary public disclosure by covered firms. The effect of MAD on analyst accuracy is stronger in countries with more stringent enforcement and sanction systems. Although the improvement in accuracy is associated with the implementation of MAD alone, stock prices do not respond more strongly to analyst forecast releases until after market-trading enforcement improves under subsequent EU legislation (MiFID).

We analyze acquirer wealth effects using a comprehensive sample of government asset sale announcements in 123 countries around the world in 1984–2009. Overall, we find positive abnormal returns to acquirers of state-owned assets. Returns are greater when the acquirer is domestic, when the sale occurs in a developing nation, and when the acquirer itself is not a former state-owned enterprise. Buyers of bailed-out firms experience average abnormal returns of 3.16%, compared to 0.70% for all other government sales. Our results suggest that the market favors acquirers that benefit from divesting governments driven by economic nationalism rather than sale revenue maximization.

We find that winning bidders in FDIC failed bank auctions from 2008 to 2013 experience substantial positive abnormal stock returns. Returns are inversely related to bid amounts after controlling for bid determinants, consistent with wealth transfers from the FDIC providing implicit subsidies to acquirers. The results challenge arguments that wealth transfers in earlier crises stemmed from since-eliminated bidding restrictions, but support the prediction of cash-in-the-market pricing theory that during crises, resolution through acquisition requires subsidization. Winning bid amounts are related to proxies for cash-in-the-market pricing. FDIC loss sharing, not widely used before the recent failure wave, is an important influence on bids.

We report simulations of one-, three-, and five-year abnormal buy-and-hold stock return tests. Using benchmark portfolios purged of new-listings and rebalancing biases, we find severe misspecification of most tests, due in part to skewness. Control-firm matching also results in misspecification, particularly in large samples. We document a negative relation between skewness bias and sample size, and an overlapping-horizons bias. Both biases become more severe as the holding period lengthens. The biases interact such that tests can be well-specified in one situation but not another. A two groups test using winsorized abnormal returns yields correct specification and considerable power in many situations.

We examine the effects of thin trading on the specification of event study tests. Simulations of upper and lower tail tests are reported with and without variance increases on the event date across levels of trading volume. The traditional standardized test is misspecified for thinly traded samples. If return variance is unlikely to increase, then Corrado's rank test provides the best specification and power. With variance increases, the rank test is misspecified. The Boehmer et al. standardized cross-sectional test (Event-study methodology under conditions of event-induced variance, Journal of Financial Economics 30, pp. 253–272) is properly specified, but not powerful, for upper-tailed tests. Lower-tailed alternative hypotheses can best be evaluated using the generalized sign test.

We provide the first simulation evidence of event-study test performance in multi-country non-US samples. The nonparametric rank and generalized sign tests are more powerful than two common parametric tests, especially in multi-day windows. The two nonparametric tests are mostly well specified, but neither is perfectly specified in all situations. The parametric standardized cross-sectional test can provide a useful robustness check but is less powerful than the nonparametric tests and rejects too often in single-market samples and when firm-specific events affect the market index. Local-currency market-model abnormal returns using national market indexes are sufficient.

Ofer and Natarajan (1987) report negative, statistically significant cumulative average abnormal returns over five years following convertible bond calls. We show that these results are obtained only if returns preceding the call dates are used for market model parameter estimation. Returns preceding calls tend to be positive and unusually large. This means that predicted post-call returns, based on pre-call parameter estimates, are biased upward. Consequently, the corresponding abnormal returns are biased downward. We also discuss a corrected test statistic. We conclude that the evidence does not indicate market inefficiency in the stock price reaction to convertible calls.

Average common stock price responses to convertible preferred stock calls are significantly negative only when firms employ underwriters to assure conversion. Previous work reports similar results for convertible bond calls; we find that the stock price reaction does not depend upon the type of convertible security being called. The results support the idea that managers are more likely to have calls underwritten the more unfavorable their private information about firm value.

Common-stock prices fall a statistically significant 2 percent in response to underwritten convertible debt call announcements. We find that the significant negative price reaction is confined to underwritten calls — stock-price responses to non-underwritten calls average an insignificant −0.84 percent. The results support the idea that managers are more likely to use underwriters the more unfavorable the information they possess about future firm cash flows. An agency cost interpretation of underwritten calls is also consistent with the results, but is not supported by management ownership and corporate liquidity evidence.