A guide to using event study methods in multi-country settings

• Published in: Strategic management journal Vol. 25; no. 7; pp. 655 - 668
• Main Author: Park, Namgyoo K.
• Format: Journal Article
• Language: English
• Published: Chichester, UK John Wiley & Sons, Ltd 01-07-2004; John Wiley and Sons; Wiley Periodicals Inc
• Subjects: Abnormal returns; Business structures; Capital assets; Corporate strategies; Cross-national analysis; Dow Jones averages; Enterprises; Financial performance; firm value; Foreign exchange rates; global event studies; Impact analysis; International alliances; International finance; Joint ventures; Management; Manycountries; measurement issues; Methodology; Methods; Modeling; News media; Prices; Rates of return; Research methods; Researchers; Securities markets; Stock exchanges; Stock market indices; Stock markets; Stock prices; strategic actions; Strategic management; Strategic planning; Studies; world market model
• ISSN: 0143-2095; 1097-0266
• DOI: 10.1002/smj.399

While the event study method has made significant contributions to strategic management research, most event study research published in management journals has analyzed the financial implications of corporate announcements in a single country. This study discusses solutions to methodological challenges that emerge when applying the event study method to multiple countries. Specifically, this study develops the world market model, illustrating how to simultaneously assess the financial impact of strategic actions in multiple countries. These challenges and solutions are illustrated by an example of a multi-country event study analyzing 241 international alliance announcements of 23 firms in 16 countries. The findings show that the use of the single country market model in a multi-country event study is likely to overestimate changes in firm value, demonstrating the need for this world market model.