Question 13 On November 11, Thorogood Enterprises announced that the public and acrimonious battle with its current CEO had been resolved. Under the terms of the deal, the CEO would step down from his position immediately. In exchange, he was given a generous severance package. Below are the calculations for the cumulative abnormal return (CAR) around this announcement, assuming that the company has an expected return equal to the market return. We consider the CARs on Day +1 and Day +2.
Note: Day 0 is the day when the news announcement was made.
Date Market Return (%) Company Return (%)
Nov 7 -0.5 0.4
Nov 8 -0.3 0.4
Nov 9 -0.2 -0.3
Nov 10 -0.6 -0.5
Nov 11 1.3 1.1
Nov 14 -0.1 1.8
Nov 15 0.1 0.1
Nov 16 0.9 0.7
Nov 17 -0.2 0.3
Nov 18 -0.2 0.0
Nov 21 0.3 0.2
