This article has benefited greatly from thoughtful and constructive input from the Editor, Robert Van Ness, and an anonymous reviewer; and from discussions with many colleagues especially participants at research seminars at the University of Melbourne, the University of New South Wales and VU University in Amsterdam. I also acknowledge the hospitality of VU University's Department of Public Administration & Organization Science during 2008. The usual caveat applies.
An Exploratory Analysis of Factors Influencing Initial Market Response and Media Reports following Shock Corporate Events
Version of Record online: 6 APR 2011
© 2011, The Eastern Finance Association
Volume 46, Issue 2, pages 313–336, May 2011
How to Cite
Coleman, L. (2011), An Exploratory Analysis of Factors Influencing Initial Market Response and Media Reports following Shock Corporate Events. Financial Review, 46: 313–336. doi: 10.1111/j.1540-6288.2011.00301.x
- Issue online: 6 APR 2011
- Version of Record online: 6 APR 2011
- CEO deaths;
- industrial accidents;
- event studies;
- media reports
This article examines market efficiency in a natural environment using minute-by-minute share prices following fatal industrial disasters and sudden CEO deaths, and their subsequent media reports. Prices of affected firms start to react within an hour of shock events and fall by 3%; half this fall is reversed prior to the first media reports with the balance reversed by the next trading day. Spreads behave in similar fashion. This is interpreted as market overreaction as risk-averse investors respond to uncertainty created by the shock; prices return to pre-shock levels once it is clear that the event is to be expected and already built into valuations.