Event Study Methodology: An Overview and Special Considerations for African Markets

Purpose To explain for doctoral students and new faculty, the appropriate techniques for using event study methods while identifying problems that make the method difficult for use in the context of African markets. Methodology/approach We review the finance and strategy literature on event studies, provide an illustrative example of the technique, summarize the prior use of the method in research using African samples, and indicate remedies for problems encountered when using the technique in African markets. Findings We find limited use of the technique in African markets due to limited data availability which is attributable to problems of infrequent trading, thin markets, and inadequate access to free data. Research limitations Our review of the literature on event studies using African data is limited to English-language journals and sources accessible through our library research databases. Practical implications More often, researchers will need to use nonparametric techniques to evaluate market responses for companies in or events affecting the African markets. Originality/value of the chapter We make a contribution with this chapter by giving a more detailed description of event study methods and by identifying solutions to problems in using the technique in African markets.