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This thesis investigates the impact of terrorist attacks on equity financial markets. It employs traditional event study approaches to identify and measure stock market reactions to terrorist attacks in New York on September 11, 2001, and subsequent terrorist attacks in Madrid, London and Bali. Three studies are presented. The first study investigates the impact of September 11 on the tenant firms within the World Trade Centre. The second study investigates industry effects following the Madrid and London bombings. The third study undertakes a sensitivity analysis to different event study techniques over the various terrorist attacks. The results from the three studies suggest that equity markets can remain efficient in the wake of terrorist events. Terrorist events can trigger large abnormal movement in both equity prices and volume traded. These price and volume effects are influenced by industry effects. Terrorism has a differential impact on stock markets and industry portfolios within stock markets. The detailed analysis presented in this thesis can be used to exploit that industry effect and can be employed to guide diversification strategies that could minimize terrorist risk through industry diversification. The thesis has also evaluated alternative event study methods and produced a critical analysis of event study methodology. It shows clearly that methodological choices can and do significantly influence results. The thesis contributes to eliminating some uncertainty about the markets response to terrorist events, and identifies opportunities for reducing terrorist risk in stock markets.

This dissertation utilizes the event study methodology from the modern theory of finance to examine corporate name changes (CNCs). Data sources include press releases and articles announcing CNCs compiled by Lexis Nexis, annual reports collected from the SEC File microfiche database compiled by Q-Data and the EDGAR database compiled online by Mergent, and the Center for Research on Stock Prices and COMPUSTAT compiled by Wharton Research Data Services. These data sources are used to answer three primary research questions. First, what is the effect of a CNC related to a change in corporate image, as opposed to a change in corporate entity (e.g., acquisition), on a firm’s stock price? Second, what is the effect of a major change versus a minor change to the corporate name during a CNC related to a change in corporate image? Third, what is the effect of a non-brand name altering CNC versus a brand name altering CNC on a firm’s stock price? This dissertation makes its primary contribution to the study of CNCs by finding that CNCs related to a change in corporate image will have a positive impact on stock price whereas CNCs related to a change in corporate entity will not. Moreover, it finds that major changes to the corporate name during CNCs related to a change in corporate image will have a positive impact on a firm’s stock price whereas minor changes to the corporate name during CNCs related to a change in corporate image will not. Finally, it is the first study to examine the effect of CNCs on firms’ brand names and finds that non-brand name altering CNCs related to a change in corporate image will have a positive impact on a firm’s stock price whereas brand name altering CNCs related to a change in corporate image will not.

This dissertation utilizes the event study methodology from the modern theory of finance to examine corporate name changes (CNCs). Data sources include press releases and articles announcing CNCs compiled by Lexis Nexis, annual reports collected from the SEC File microfiche database compiled by Q-Data and the EDGAR database compiled online by Mergent, and the Center for Research on Stock Prices and COMPUSTAT compiled by Wharton Research Data Services. These data sources are used to answer three primary research questions. First, what is the effect of a CNC related to a change in corporate image, as opposed to a change in corporate entity (e.g., acquisition), on a firm’s stock price? Second, what is the effect of a major change versus a minor change to the corporate name during a CNC related to a change in corporate image? Third, what is the effect of a non-brand name altering CNC versus a brand name altering CNC on a firm’s stock price? This dissertation makes its primary contribution to the study of CNCs by finding that CNCs related to a change in corporate image will have a positive impact on stock price whereas CNCs related to a change in corporate entity will not. Moreover, it finds that major changes to the corporate name during CNCs related to a change in corporate image will have a positive impact on a firm’s stock price whereas minor changes to the corporate name during CNCs related to a change in corporate image will not. Finally, it is the first study to examine the effect of CNCs on firms’ brand names and finds that non-brand name altering CNCs related to a change in corporate image will have a positive impact on a firm’s stock price whereas brand name altering CNCs related to a change in corporate image will not.

This study aims to establish if a relationship between the investor sentiment generated from social media posts, such as Tweets, and the return on securities exists. If a relationship exists, one would be able to obtain an informational advantage from public information and outperform the market on a risk-adjusted basis. This would give the “outsider” information processed the predictive power of insider information, hence the title of the paper. The study makes use of Bloomberg's social activity data, which through natural language processing, allows for investor sentiment to be obtained by analysing a combination of Twitter and Stock Twits posts. This paper makes use of a three-prong approach, firstly examining if investor sentiment is a predictor of next-day returns. Next, an event study methodology is used to examine the optimal holding period, which can further be expanded to test market efficiency. Lastly, this paper considers the asymmetric risk aversion as outlined by Kahneman and Tversky (1979). Results show that there is little to no correlation between sentiment and next day returns. There is evidence for a multi-day holding period being optimal but statistically insignificant and there is no evidence found for asymmetric risk aversion.

This study expands on previous research regarding the effect of CEO performance on firm value. An event study is conducted using a market model of CEO successions and daily returns in order to generate predicted returns. Two separate regressions are run using a 3 day and 5 day event window respectively. The results of the regressions are using to compare abnormal returns between industries and market capitalization. While some daily abnormal returns are statistically significant, cross-sectional analysis of CAR are for the most part not significant. Further study is needed in order to come to a stronger conclusion.

Interorganizational alliances are widely recognized as critical to product innovation. A notable trend is the rapid growth of new product development (NPD) alliances between large, well-established firms and small, growing firms. This dissertation is comprised of two studies on the formation and termination of asymmetric new product development alliances. In study one I examine the factors that drive the changes in shareholder values of the partner firms. I develop and empirically test a model of short-term changes in shareholder values of larger and smaller firms involved in NPD alliances, using the event study methodology on data covering 167 asymmetric alliances in the information technology and communication industries. The model accounts for selection correction, potential cross-correlation across the residuals from the models of firm value changes for the larger and smaller firms, and unobserved heterogeneity. The results suggest that both the partners experience significant short-term financial gains, but there are considerable asymmetries between the larger and smaller firms with regard to the effects of alliance, partner and firm characteristics on the gains of the partner firms. The findings of this study have important implications for managers of both large and small firms. In study two I develop and test a framework of the determinants of new product alliance (NPA) terminations. The hypotheses for study two are tested on a unique database comprised of 401 new product alliances involving 24 pharmaceutical firms during 1990-2005. NPA terminations are modeled using Cox’s proportional hazard specification that accounts for the unobserved heterogeneity of firms with multiple NPAs, competing risks and ties among NPA duration times. The results suggest that NPA terminations are not made in isolation but are influenced by composition of the firm’s portfolio. The results also suggest that NPA terminations are predicted to a great extent by competition between alliances (i.e., product market rivalry) and competition within alliances (i.e., partner value). The findings of this study have important implications for managing a portfolio of new product partnerships.

Syftet med den här magisteruppsatsen är att undersöka hur tillkännagivandet av företags-förvärv påverkar aktieavkastningen på ett uppköpande bolaget. Testet är begränsat till före-tag som enbart är listade på Stockholmsbörsen under perioden 1996 till 2005. För att testa onormal avkastning användes marknads modellen. Resultatet visade att tillkännagivandet av företagsförvärv har en signifikant effekt på avkastningen för aktien för det bolag som ska förvärva. Majoriteten av uppköpande bolag upplevde en negativ onormal avkastning under test perioden (100 dagar före tillkännagivandet och 100 dagar efter). / The purpose of this master’s thesis is to examine the effect a corporate takeover an-nouncement has on share prices for acquiring companies. The test will only involve com-panies listed on the Stockholm Stock Exchange during the period 1996 to 2005. To test the effect an announcement has, abnormal return for a period before and after the takeover announcement was calculated. The findings from the testing showed that takeover an-nouncements have a significantly impact on shareholder return. The majority of acquirers in the sample had negative average abnormal returns during the event period (100 days prior to the announcement and 100 day after).

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The credit rating industry is a global industry with only three major actors, Moody’s, Standard & Poor’s and Fitch Ratings. The “big three” control the majority of the credit rating market and have powers, in the form of credit rating issuances, which they use to influence financial markets worldwide. Ever since their involvement in the fall of corporate giants in early 2000 and the financial crisis of 2008, the power and influence of the credit rating agencies, as well as questions regarding conflict of interest and transparency, have been a hot topic of debate.   The impact of credit ratings can be seen across multiple markets; however the focus of this study is on the stock market where every day investors can be affected. As Moody’s is one of the three largest CRAs in the world and is present worldwide, we apply their credit ratings when investigating the impact. Due to different characteristics of large and small markets, and since the US market is well studied; this study is conducted on the Swedish market. Thus, the aim of our study is to investigate the impact credit ratings from Moody’s have on the Swedish stock market and also, give a perspective on how the financial crisis of 2008 influences the potential impact.   We apply an event study method to isolate the events and measure the abnormal returns. To estimate the expected market return we use the market model on estimation periods of 60 to 120 days. The sample contains 71 individual credit rating changes from 17 firms listed on the Stockholm Stock Exchange and considers all uncontaminated credit rating changes issued by Moody’s on the Swedish market during the time period of 1990 to 2012.   Empirical evidence showed that the Swedish stock market is susceptible to Moody’s negative credit ratings but almost unaffected by the positive credit ratings. These findings are in line with previous research of Holthausen & Leftwich (1986) amongst others. Still, the effects discovered were not prolonged and no clear difference in impact was found after 2008.