The Journal of Finance

Inference in Long‐Horizon Event Studies: A Bayesian Approach with Application to Initial Public Offerings

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00279

Alon Brav

Statistical inference in long‐horizon event studies has been hampered by the fact that abnormal returns are neither normally distributed nor independent. This study presents a new approach to inference that overcomes these difficulties and dominates other popular testing methods. I illustrate the use of the methodology by examining the long‐horizon returns of initial public offerings (IPOs). I find that the Fama and French (1993) three‐factor model is inconsistent with the observed long‐horizon price performance of these IPOs, whereas a characteristic‐based model cannot be rejected.

An Empirical Analysis of Analysts' Target Prices: Short‐term Informativeness and Long‐term Dynamics

Published: 09/11/2003   |   DOI: 10.1111/1540-6261.00593

Alon Brav, Reuven Lehavy

Using a large database of analysts' target prices issued over the period 1997–1999, we examine short‐term market reactions to target price revisions and long‐term comovement of target and stock prices. We find a significant market reaction to the information contained in analysts' target prices, both unconditionally and conditional on contemporaneously issued stock recommendation and earnings forecast revisions. Using a cointegration approach, we analyze the long‐term behavior of market and target prices. We find that, on average, the one‐year‐ahead target price is 28 percent higher than the current market price.

Myth or Reality? The Long‐Run Underperformance of Initial Public Offerings: Evidence from Venture and Nonventure Capital‐Backed Companies

Published: 04/18/2012   |   DOI: 10.1111/j.1540-6261.1997.tb02742.x

ALON BRAV, PAUL A. GOMPERS

We investigate the long‐run underperformance of recent initial public offering (IPO) firms in a sample of 934 venture‐backed IPOs from 1972–1992 and 3,407 nonventure‐backed IPOs from 1975–1992. We find that venture‐backed IPOs outperform non‐venture‐backed IPOs using equal weighted returns. Value weighting significantly reduces performance differences and substantially reduces underperformance for nonventure‐backed IPOs. In tests using several comparable benchmarks and the Fama‐French (1993) three factor asset pricing model, venture‐backed companies do not significantly underperform, while the smallest nonventure‐backed firms do. Underperformance, however, is not an IPO effect. Similar size and book‐to‐market firms that have not issued equity perform as poorly as IPOs.

Hedge Fund Activism, Corporate Governance, and Firm Performance

Published: 07/19/2008   |   DOI: 10.1111/j.1540-6261.2008.01373.x

ALON BRAV, WEI JIANG, FRANK PARTNOY, RANDALL THOMAS

Using a large hand‐collected data set from 2001 to 2006, we find that activist hedge funds in the United States propose strategic, operational, and financial remedies and attain success or partial success in two‐thirds of the cases. Hedge funds seldom seek control and in most cases are nonconfrontational. The abnormal return around the announcement of activism is approximately 7%, with no reversal during the subsequent year. Target firms experience increases in payout, operating performance, and higher CEO turnover after activism. Our analysis provides important new evidence on the mechanisms and effects of informed shareholder monitoring.