Eventful Non-Events: Distinguishing an Event from a Non-Event in Event Studies

Abstract

Not all interesting events can be subjected to event studies. In this note, we take the example of event studies related corporate political activity to point out some events which though interesting cannot be used for event studies. Event studies in corporate political activity literature study stock market reaction to events such as election results, political parties suddenly coming into power, and ex-employees of a firm getting political positions. I assert that inference drawn in such studies is tautological. I point out an implicit assumption of event studies being violated in these studies. Event studies in this area not suffering from this problem are also pointed out.