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Digest Finance

Event study methodology in M&A research

Vol. 26, Iss. 1, MARCH 2021

Received: 20 February 2021

Received in revised form: 1 March 2021

Accepted: 15 March 2021

Available online: 30 March 2021


JEL Classification: G14, G34

Pages: 4Ц25


Veronika S. VINOGRADOVA National Research University Higher School of Economics (HSE University), Moscow, Russian Federation


Subject. The article presents the basic principles of the event research methodology, which is one of the most popular empirical tools in corporate finance, and mergers and acquisitions.
Objectives. The article introduces the main methodologies for calculating expected and abnormal returns, the main approaches for testing abnormal returns and measuring the statistical significance of the results, and it also notes the advantages and limitations of the methodology.
Methods. Based on a content analysis of the top classical works in event analysis, the main algorithm and research approaches of the method are presented. The basic concept has been expanded taking into account the results of modern work aimed at improving the methodology. The applicability of the method and its relevance were verified based on the analysis of spotlight publications for 2015Ц2020.
Results. The article provides a review of the latest developments in M&A research. It highlights the main modern trends in the application of the event analysis method. The methodology is shown to be easy to use, with market data used for analysis available in major financial databases. This allows for empirical research with a large sample of securities. In addition, stock prices reflect the direct expectations of investors and best reflect the value created by the event when compared to financial statement analyses that are often misstated.
Conclusions and Relevance. It is concluded that the event analysis method remains the key methodology in the field of mergers and acquisitions and is actively used by researchers. Improved econometric approaches allow for increased statistical significance and more accurate results.

Keywords: event study, empirical capital market research, stock returns, corporate finance, M&A


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