Long-term abnormal returns following selected corporate events

A large body of finance literature documents long-term abnormal returns following corporate events. The existence of long-term abnormal returns suggests inefficiency of capital markets and was soon challenged by defenders of the efficient market hypothesis on methodological grounds. Reflecting this debate, Christian Fölster performs a comprehensive analysis of the long-term share price performance around initial public offerings (IPOs), seasoned equity offerings (SEOs) and share repurchase announcements in Germany and measures long-term performance in the two debated methodologies: event time and calendar time. While Christian Fölster can identify abnormal returns for IPOs and SEOs when measuring in event time, these results are not robust enough to support a switch to calendar time methodology. For share repurchases, Fölster cannot find any evidence of long-term abnormal returns in the German data, neither when he applies the event-time methodology nor when applying the calendar-time approach. Overall, the evidence on long-term performance following IPOs, SEOs, and share repurchase announcements is, thus, not sufficient to reject the hypothesis of market efficiency for Germany.