ANNOUNCEMENT EFFECTS BY INDUSTRY GROUP 197
In Table 8.2, event-period CAPEs are generally negative and statistically sig-
nificant at the 1% level for the n = 27 sample of simple goodwill write-off
announcements. Simple goodwill write-off announcements lead to a relatively
large and statistically significant stock-price reaction (event-period return)
of 2.23% (t = 2.31) using the market-model approach, 2.48% (t = 2.51)
using the mean-adjusted approach, and 2.83% (t = 2.93) using the market-
adjusted approach. On average, the stock-price reaction to simple goodwill write-
off announcements is somewhat smaller than the effect when such
announcements are accompanied by the contemporaneous disclosure of other
important information.
For n = 53 goodwill write-offs tied to the announcement of other important
information, large and statistically significant stock-price reactions are noted using
the market-model approach (3.30%, t = 4.48), the mean-adjusted approach
(3.73%, t = 4.90), and the market-adjusted approach (3.86%, t = 5.17). Table
8.2 shows that while n = 13 companies making goodwill write-off announcements
also report positive earnings, many more report operating losses (n = 21) or other
information (n = 19) regarded as negative by investors, such as the sale of a division,
corporate restructuring, plant closures, etc. For n = 13 goodwill write-off announce-
ments by companies with positive operating earnings, the stock-price reaction
appears immaterial using the market-model approach (1.82%, t = 1.69), the mean-
adjusted approach (1.76%, t = 1.61), and the market-adjusted approach (1.57%,
t = 1.46). For n = 21 goodwill write-offs announced by firms with operating losses,
large and statistically significant stock-price reactions are noted using the market-
model approach (6.86%, t = 4.63), the mean-adjusted approach (7.45%,
t = 4.82), and the market-adjusted approach (7.69%, t = 5.07). For n = 19 good-
will write-offs tied to the announcement of other miscellaneous corporate restructur-
ing information, material and statistically significant stock-price reactions are noted
using the market-model approach (2.91%, t = 2.91), the mean-adjusted approach
(3.43%, t = 3.35), and the market-adjusted approach (3.42%, t = 3.42).
These results are also important because they confirm the stock market
importance of goodwill write-off decisions, despite the fact that such
announcements are often messy in the sense of being accompanied by contem-
poraneous disclosures. Like findings reported by Docking, Hirschey, and Jones
(1997), these results suggest that investors interpret important corporate
announcements, such as goodwill write-off decisions, within the context of
other company information.
VIII. ANNOUNCEMENT EFFECTS BY INDUSTRY GROUP
Table 8.1 shows that the majority of announcements concerning goodwill write-
off decisions are made by manufacturing companies, with a significant represen-
tation of firms from the Industrial and Commercial Machinery industry group
(SIC = 35). It therefore seems worth asking if the valuation effects described

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