Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: zz-x2580
Industrial Marketing Management
How to apply the event study methodology in STATA: An overview and a step-by-step guide
for authors
A R T I C L E I N F O
Keywords
Event study
Research methodology
Corporate announcement
Covid-19
STATA commands
A B S T R A C T
The event study methodology, which is gaining recognition in the business and marketing disciplines, is a
technique used to capture the impact of significant events and announcements at the firm level and country level.
Originating from the finance and economics disciplines, and being widely used in the finance literature, the
method has recently attracted the attention of business and marketing researchers, particularly in the aftermath
of Covid-19, which has adversely affected all kinds of businesses across the world. The event study methodology
can be implemented to measure the impact of a major corporate announcement (e.g. new product development)
or a significant event on corporate financial performance, profitability, and market valuation over a specific
event window, such as a few days (a short window) or a few years (a long window). In this article, we provide a
detailed explanation of the step-by-step procedure for implementing the event study methodology in STATA,
using Covid-19-related death announcements from the United States, France, Spain, Italy, China, and the United
Kingdom. We also provide STATA commands that can be used by researchers when implementing the event
study methodology.
1. Introduction
The classical event study methodology (hereafter ‘ESM’) is rooted in
finance, and its basic premise is based on the fundamental view that
capital markets reflect publicly available information on the firms’ stock
prices. Thus, the ESM measures the effects of particular corporate events
on a firm’s prospects and stock price movements by calculating the
abnormal returns. However, the ESM is rarely used outside the ac-
counting and finance disciplines. In view of this observation, the present
article extends the previous methodological papers published in the
Industrial Marketing Management journal (e.g. Ullah, Akhtar, & Zae-
farian, 2018; Ullah, Zaefarian, & Ullah, 2020; Lim, Ahmed, & Ali, 2019).
The purposes of the present article are twofold: (a) to provide an over-
view of the ESM as applied within the business-to-business (B2B) mar-
keting literature; and (b) to equip non-specialists with an understanding
of the ESM and its application in marketing research by providing a step-
by-step guidance on how to apply the method.
In the marketing discipline and at the micro level, ESM-related
corporate events might include firm announcements about new prod-
uct launches, mergers and acquisitions, new market entries, etc. or an-
nouncements made by other entities, such as governments, regulatory
bodies, and competitors (Sorescu, Warren, & Ertekin, 2017). A fine
example of a macro-level event in recent times is the Covid-19 global
pandemic, which has adversely affected many businesses around the
world. Business researchers need to understand the short-term and long-
term impact of major events, including macro-level events (e.g. Covid-
19) and micro-level (firm-specific) events.
A close analysis of recent articles in the Industrial Marketing Man-
agement journal reveals that authors have predominantly used survey-
based econometrics, time series, cross-sectional and panel data, quali-
tative interviews, case study methodologies, and standard regression
estimations to evaluate the relationships between variables of interest.
However, the field of business marketing could significantly benefit
from the application of the ESM. This approach enables researchers to
more accurately capture the financial impacts of firm-specific marketing
initiatives than conventional customer-oriented measures, such as
satisfaction. In addition, event studies are based on ‘objective’ forward-
looking financial market data that is free from the influence of man-
agers, as opposed to ‘subjective’ performance measures, which are prone
to biases that stem from management perceptions.
The ESM offers several advantages to researchers, including, firstly,
the ability to examine the impact of specific events on corporate
financial performance (Brown & Warner, 1980). In this regard, scholars
can empirically isolate and measure the impact of various events,
whether internal (e.g. new product announcements, major R&D in-
vestment announcements, appointments of senior executives, dividend
announcements, corporate press releases, etc.) or external (e.g. entries of
direct competitors, introductions of new laws, etc.), on the firm(s) under
observation (Lubatkin & Shrieves, 1986; de Mortanges & Rad, 1998;
Delattre, 2007; Sorescu et al., 2017). Secondly, by focusing on stock
prices, the ESM provides both an objective measure of firm performance
(Fama, Fisher, Jensen, & Roll, 1969) and an unambiguous assessment of
the impact of different corporate events on shareholder value (McWil-
liams & Siegel, 1997). Lastly, the ESM is a versatile analytical technique
Contents lists available at ScienceDirect
Industrial Marketing Management
journal homepage: www.elsevier.com/locate/indmarman
https://doi.org/10.1016/j.indmarman.2021.02.004
Industrial Marketing Management 99 (2021) A1–A12
A2
that permits authors to estimate the impact of corporate announcements
and events over short (Cowan, 1992) or long event windows (Brown &
Warner, 1985). The ESM thus makes it possible for researchers to un-
derstand the impact of specific corporate events on stock prices, market
valuation, and profitability over time periods ranging from just a few
days to several years.
In the B2B marketing research published in the Industrial Marketing
Management journal, only a handful of studies have applied the ESM.
These studies have used the ESM to assess the impact of various firm-
level announcements, such as: (a) assessing the impact of announce-
ments of additional internet-based channels of distribution (i.e. eChan-
nels) on the economic value added (EVA) and market value added
(MVA) (Cheng, Tsao, Tsai, & Tu, 2007); (b) assessing the impact of
merger announcements on marketing performance (Rahman & Lamb-
kin, 2015); (c) evaluating the impact of media announcements relating
to firms’ outsourcing on abnormal stock returns (Lee & Kim, 2010); (d)
assessing market reactions to brand alliance announcements (Cao &
Yan, 2017); (e) examining the impact of marketing alliance announce-
ments on the focal firm’s abnormal stock returns (Oh, Lee, & Kim, 2018);
(f) evaluating the impact of CEO endorsements (measured by the pres-
ence of a CEO quotation in a press release) of sales and marketing
leaders on firm performance (Vaid & Ahearne, 2018); and (g) measuring
the impact of announcements of new executives taking up marketing
and sales positions (Vaid, Ahearne, & Krause, 2020). The growing
number of B2B studies that used ESM in recent years signals the rele-
vance of this methodology for business marketing research. Neverthe-
less, very few scholars have attempted to introduce the ESM to the
marketing and business research communities. Sorescu et al. (2017)
carried out a comprehensive literature review on the ESM, and they offer
a good conceptual understanding of how the ESM can be implemented in
marketing research. We extend the work of Sorescu et al. (2017) by
introducing specific STATA commands that can be used when applying
the ESM in different research settings.
We identify the steps that can be used by researchers to implement
the ESM, and we demonstrate STATA commands that can be used by
researchers to compute the abnormal returns before and after the event
date. We also discuss various aspects of STATA codes that can be used to
determine the event window. The commands reported in this paper can
be applied to assess the impact of different firm-level and other macro-
level events on corporate performance.
Accordingly, we focus on the Covid-19 outbreak as a major macro-
economic event and demonstrate how to statistically capture the
impact of such an event on major markets around the world. The Covid-
19 outbreak serves as a useful reference point in this ESM paper, as it is a
significant event that has had a considerable impact on the performance
of businesses around the globe. Covid-19 has resulted in high volatility
in the financial and commodity markets on a scale that has not been
witnessed in recent history (Wigglesworth, 2020). The strict population
lockdowns introduced by many governments around the world have
also had unimaginable consequences for the consumer markets. Many
businesses, ranging from small retail enterprises to large high-street
stores, have experienced sudden losses of market shares (Romei,
2020). Millions of people have been put out of work whilst many busi-
nesses have undergone temporary or permanent closure, severely
threatening the survival of many economies (Carlsson-Szlezak, Reeves,
& Swartz, 2020; Gopinath, 2020). These consequences of the Covid-19
crisis make the ESM even more relevant in current marketing research.
Previously, the ESM has been more widely used in accounting and
finance research to examine the impact of various events on corporate
stock prices (e.g. Binder, 1998; Boyd, Chandy, & Cunha, 2010; Corrado,
2011; Ball & Brown, 2013). Although the use of the ESM in marketing
research has increased over the years (Beckers, van Doorn, & Verhoef,
2017), it is still conspicuously low when compared with the fields of
accounting, finance, and management (Sorescu et al., 2017; Das,
McNeil, Pouder, & Daly, 2020). In this regard, the objective of the
present paper is to encourage marketing researchers to consider
applying the ESM to analyse how various firm performance measures (e.
g. revenue, profitability, and customer perceptions) are impacted by
firm-level events such as news of R&D investment, new product releases,
or even company branding. We attempt to do this by providing readers
with a step-by-step account of the procedure to follow when conducting
ESM research. For demonstration purposes, we utilise a sample of 18
major global companies. These companies are drawn from six countries
that comprise some of the largest economies in the world: China, Italy,
Spain, France, the United Kingdom (UK), and the United States (US).
