The Identification of Announcement Windows and Abnormal Return for Turnaround Strategies

• Main Author: 王立苹
• Other Authors: 陳昭宏
• Format: Others
• Language: zh-TW
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/67198117338634756910

碩士 === 義守大學 === 管理科學研究所 === 91 === In order to avoid to failure or bankruptcy, companies used a series of turnaround actions to response the poor performance. Turnaround actions were hoped to influence companies’ value, and change the investors’ expectation. However, the past studies had many opinions about using reduction or extension turnaround actions. For this reason, we used the correct M&M theory to explain the severity of turnaround situations. By this theory, companies used opposite debt policy to maximum the companies’ value under different turnaround situations, and they might influenced the stock price. We used financial distress situations to separate the turnaround situations into two parts. First companies were under turnaround situations, but not yet distressed. Second, companies were under turnaround and distress situations. Therefore the reason of selecting turnaround actions could be explained. So our study used financial distress situations to separate the turnaround situations and then measuring the influence of abnormal stock return for turnaround action announcement in different situations. We use event study methods to understand the relationship between stock prices and the announcement of turnaround events. However, applying event study methods, researchers were usually setting events window subjectively. These measured the event’s effect incorrectly. As if, narrow window was chosen and then it caused incomplete information and conditional heteroscedasticity. On the other hand, a wide window was chosen and then the interesting features of event would be lost by other interfering events. With the concept of structural change, this study discussed the change point and period of events, and adopt a Threshold Autoregressive model to correctly identify the range of events windows. With establishing the window objectively, we completely observed the abnormal return of turnaround events’ announcement. Beside, we used five-factor model to predict and explain the abnormal return. According to our analysis, we find the result as followings：Except the join-venture and M&A had negative abnormal stock return under the turnaround situations not yet distressed and turnaround already distressed situations, others events’ results were matched our expectation under two separate situations. This conclusion was identical with the correct M&M theory. Therefore turnaround strategies should coordination the severity of turnaround situation. When decline softly company should use growth strategies to maximum the company’s value. When decline serious to distress, company should use reduce strategies to maximum the company’s value. This study explores the influence of abnormal stock return for the announcement of turnaround actions and improved the defects of event study method. By measuring the windows of events objectively, we provided the reasonable abnormal return of the events announcement.