Handbook of Corporate Finance Empirical Corporate Finance Volume 1

350 B.E. Eckbo et al.

Ta b l e 2 0
Monthly abnormal equal-weighted portfolio return (αp) following public (SDOs) and private (PPDs) offerings
of straight debt, 1980–2000

αp RM SMB HML UMD LMH R^2

A. Sample of 4,546 SDOs by industrial issuers

− 0. 16 ( 0. 116 ) 1. 12 ( 0. 000 ) 0. 10 ( 0. 100 ) 0. 43 ( 0. 000 ) 0.887
0. 04 ( 0. 674 ) 1. 05 ( 0. 000 ) 0. 06 ( 0. 217 ) 0. 42 ( 0. 000 ) − 0. 13 ( 0. 000 ) − 0. 16 ( 0. 018 ) 0.906

B. Sample of 12,191 SDOs by banks and financial firms

0. 04 ( 0. 820 ) 1. 32 ( 0. 000 ) − 0. 05 ( 0. 469 ) 0. 68 ( 0. 000 ) 0.798

0. 21 ( 0. 233 ) 1. 28 ( 0. 000 ) − 0. 07 ( 0. 354 ) 0. 66 ( 0. 000 ) − 0. 13 ( 0. 009 ) − 0. 08 ( 0. 486 ) 0.807

C. Sample of 1,710 SDOs by public utilities

− 0. 03 ( 0. 865 ) 0. 65 ( 0. 000 ) − 0. 11 ( 0. 093 ) 0. 70 ( 0. 000 ) 0.444
− 0. 18 ( 0. 387 ) 0. 79 ( 0. 000 ) 0. 02 ( 0. 796 ) 0. 64 ( 0. 000 ) − 0. 01 ( 0. 774 ) 0. 43 ( 0. 001 ) 0.472

D. Sample of 4,730 PPDs by industrial issuers

− 0. 29 ( 0. 021 ) 1. 18 ( 0. 000 ) 0. 48 ( 0. 000 ) 0. 43 ( 0. 000 ) 0.887
0. 06 ( 0. 654 ) 1. 04 ( 0. 000 ) 0. 40 ( 0. 000 ) 0. 42 ( 0. 000 ) − 0. 21 ( 0. 000 ) − 0. 31 ( 0. 000 ) 0.931

E. Sample of 3,931 PPDs by banks and financial firms

− 0. 08 ( 0. 691 ) 1. 44 ( 0. 000 ) 0. 28 ( 0. 004 ) 0. 65 ( 0. 000 ) 0.770
0. 13 ( 0. 543 ) 1. 32 ( 0. 000 ) 0. 19 ( 0. 057 ) 0. 67 ( 0. 000 ) − 0. 07 ( 0. 165 ) − 0. 33 ( 0. 030 ) 0.780

F. Sample of 923 PPDs by public utilities

− 0. 29 ( 0. 021 ) 1. 18 ( 0. 000 ) 0. 48 ( 0. 000 ) 0. 43 ( 0. 000 ) 0.887
− 0. 24 ( 0. 319 ) 0. 80 ( 0. 000 ) 0. 05 ( 0. 529 ) 0. 66 ( 0. 000 ) − 0. 03 ( 0. 708 ) 0. 28 ( 0. 052 ) 0.444

Starting in February 1980, a firm is added to the portfolio in the month following the month of the SDO
and held for the minimum of five years and its delisting date. The SDO sampling stops in 12/2000 while the
abnormal return estimation ends in December 2002. Abnormal returns are estimated using the following asset
pricing model:

rpt=αp+β 1 RM+β 2 SMBt+β 3 HMLt+β 4 UMD+β 5 LMH+et

whererptis the portfolio excess return, RM is the excess return on the CRSP value weighted market index,
SMB and HML are theFama and French (1993)size and book-to-market factors, UMD is a momentum factor
constructed as the returns difference between the one-third highest and the one-third lowest CRSP performers
over the past 12 months, and LMH is theEckbo and Norli (2005)turnover factor (a portfolio long in low-
turnover stocks and short in high-turnover stocks). The coefficients are estimated using OLS. Standard errors
are computed using the heteroskedasticity consistent estimator ofWhite (1980). The numbers in parentheses
arep-values.R^2 is the adjustedR-squared.

5.4. Robustness issues

The matched-firm technique discussed above uses firm characteristics (size and B/M)
to adjust for priced risks, while the factor regression approach uses a set of prespeci-