Suppose that you have performed an event study to examine whether extra dividend payout affects firm values. After aggregating the abnormal returns, you obtained (1,2)=0.024CAR(s1,s2)=0.024, and ((1,2)=0.0002Var(CAR(s1,s2)=0.0002, where (s1, s2) is from the event window. Can you reject the null hypothesis 0:(1,2)=0H0:CAR(s1,s2)=0 at 10% significance level? What is your conclusion then? The critical values are +-1.65 at 10% significance level.

Select one:

a)

I reject the null hypothesis. I conclude that extra dividend payout affects firm values.

b)

I do not reject the null hypothesis. I conclude that extra dividend payout does not affect firm values.

c)

I reject the null hypothesis. I conclude that extra dividend payout does not affect firm values.

d)

I do not reject the null hypothesis. I conclude that extra dividend payout affects firm values.