Our evidence on the stock price reaction to the announcement of short-term executive compensation plan adoption indicates that: (1) significantly positive abnormal returns occur in the month of announcement and in the four months before the bonus plan adoption, and (2) significantly positive abnormal returns occur 10 months after the adoption announcement, returns that are associated with positive unexpected earnings. This result conflicts with semi-strong market efficiency and indicates the existence of a trading rule based on the news of bonus plan adoption.

This paper examines differences in stock price reactions following voluntary capital injections by commercial banks and involuntary capital injections required to meet regulatory capital requirements. Empirical tests document that stock price declines associated with voluntary common stock issues are significantly greater than those associated with involuntary common stock injections, consistent with Ross (1977). Empirical test also confirm that for both voluntary and involuntary stock issuances, the abnormal stock price reaction is negatively related to the relative size of the offering and positively related to managerial ownership prior to the security issue, although these relationships are stronger for voluntary issues.

This paper examines the post-acquisition performance of large bank mergers between 1982 and 1987. On the whole, the merged banks outperform the banking industry. Their better performance appears to result from improvements in the ability to attract loans and deposits, in employee productivity, and in profitable asset growth. Further, we find a significant correlation between announcement-period abnormal stock returns and the various performance measures, showing that market participants are able to identify in advance the improved performance associated with bank acquisitions.

Hassan Tehranian, Billy P. Helms, An Empirical Comparison of Stochastic Dominance among Lognormal Prospects, The Journal of Financial and Quantitative Analysis, Vol. 17, No. 2 (Jun., 1982), pp. 217-226

This study examines the impact on equity prices of nine pronouncements related to the proposed accounting for nonpension postretirement benefits. Compared to a control group, the experiment firms exhibit significant negative abnormal returns around the issuance of the Exposure Draft on nonpension postretirement benefits. The negative abnormal returns are most pronounced for firms with few retirees relative to current employees, firms with high debt ratios, small firms, and firms currently reporting these benefits on the pay-as-you-go basis. These results are consistent with the contracting cost hypotheses.