Managerial decisions and long-term stock price performance

A rapidly growing literature claims to reject the efficient market hypothes is by producing large estimates of long-term abnormal returns following maj or corporate events. The preferred methodology in this literature is to cal culate average multiyear buy-and-hold abnormal returns and conduct inferenc es via a bootstrapping procedure. We show that this methodology is severely flawed because it assumes independence of multiyear abnormal returns for e vent firms, producing test statistics that are up to four times too large. After accounting for the positive crosscorrelations of event-firm abnormal returns, we find virtually no evidence of reliable abnormal performance for our samples.